Item 2. PROPERTIES
Location Size of Net Rentable No. of Completion Parcel Area Rental Date
Whittier, CA(1) 3.92 acres 60,249 513 3/90
Bloomingdale, IL(2) 3.542 acres 60,624 571 1/31/91
Edgewater,NJ(2) 4.118 acres 52,940 447 8/21/90
Sterling Heights, MI(4) 3.76 acres 58,198 515 7/17/91
(1) The Partnership owns a 90% interest in this property. (2) The Partnership owns a 90% interest in this property. (3) The Partnership owns an 85% interest in this property. (4) The Partnership owns a 75% interest in this property.
Item 3.
Item 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending proceedings.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Registrant, a publicly-held limited partnership, had approximately 583 Limited Partners at December 31, 1995. The Registrant completed its public offering of limited partnership Units. There is no public market for the resale of these Units.
Average cash distributions of $10.00 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 1995 and $8.75 per Limited Partnership Unit for the year ended December 31, 1994. It is Registrant's expectations that distributions will continue to be paid in the future.
Item 6.
Item 6. SELECTED FINANCIAL DATA
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) - ----------------------------------------------
SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, AND 1991 - ----------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ----
REVENUES $1,710,104 $1,596,378 $ 973,811 $ 676,810 $ 615,041
EXPENSES 1,072,358 1,003,797 $ 750,453 490,406 $ 409,269
MINORITY INTEREST IN EARNINGS OF REAL ESTATE JOINT VENTURE (142,554) (134,982) -0- (6,624) -0- --------- --------- --------- --------- ---------
NET INCOME $ 495,192 $ 457,599 $ 223,358 $ 179,780 $ 205,772 ========= ========= ========= ========= =========
TOTAL ASSETS $6,913,137 $7,236,568 $7,517,751 $8,031,229 $8,531,949 ========== ========== ========== ========== ==========
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 950,492 $ 897,978 $ 618,343 $ 588,162 $ 494,236 ========= ========== ========== ========= =========
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 24.51 $ 22.65 $ 11.06 $ 8.90 $ 10.20 ======== ========= ======== ======= ========
CASH DISTRIBUTIONS PER $500 LIMITED PARTNERSHIP UNIT $ 40.00 $ 35.00 $ 35.00 $ 35.00 (1) ======== ======== ======== ======= ========
(1) Quarterly cash distributions were $8.75 prorated per quarter based upon the month the Limited Partners were admitted to the Partnership.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of December 31, 1993, the Partnership had purchased a 90% interest in a joint venture that owns a mini-storage facility in Whittier, California, an 85% interest in an operating mini-storage facility in Edgewater Park, New Jersey, a 90% interest in an operating mini-storage facility in Bloomingdale, Illinois and a 75% interest in an operating facility in Sterling Heights, Michigan. Occupancy levels for the Partnership's four mini-storage facilities on December 31, 1995, were: Bloomingdale 88%, Edgewater Park 89%, Whittier 87% and Sterling Heights 83%.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Total revenues increased from $1,596,378 in 1994 to $1,710,104 in 1995 and total expenses increased from $1,003,797 to $1,072,358 contributing to an increase in net income from $457,599 to $495,192. Rental revenues increased to $1,698,994 in 1995 from $1,582,952 in 1994 while guaranteed payments from the seller of the properties decreased from $7,300 to zero over the same periods. These fluctuations were primarily a result of the Edgewater Park and Bloomingdale properties emergence from their initial operating periods in 1993 and Sterling Heights in 1994. Once the properties emerge from their initial operating period, guaranteed payments are no longer received from the seller of the properties, rather, the Partnership begins to recognize the actual operating revenues and expenses of each property (see notes 1 and 2 to financial statements). Operating expenses increased approximately $55,000 primarily as a result of properties emergence from their initial operating periods. General and administrative expenses increased by approximately $4,000 (2.7%) primarily as a result of higher property management fees, which are computed as a percentage of rental revenues. The incentive management fee, which is based on distributions paid to partners, increased approximately $9,000 (14.1%) as a result of the special distribution declared and paid December 15, 1995.
1994 COMPARED TO 1993
Total revenues increased from $973,811 in 1993 to $1,596,378 in 1994 and total expenses increased from $750,453 to $1,003,797 contributing to an increase in net income from $223,358 to $457,599. Rental revenues increased to $1,582,952 in 1994 from $799,523 in 1993 while guaranteed payments from the seller of the properties decreased from $170,323 to $7,300 over the same periods. These fluctuations were primarily a result of the Edgewater Park and Bloomingdale properties emergence from their initial operating periods in 1993 and Sterling Heights in 1994. Once the properties emerge from their initial operating period, guaranteed payments are no longer received from the seller of the properties, rather, the Partnership begins to recognize the actual operating revenues and expenses of each property (see notes 1 and 2 to financial statements). Operating expenses increased approximately $209,000 primarily as a result of properties emergence from their initial operating periods. General and administrative expenses increased by approximately $44,000 (43%) primarily as a result of higher professional and property management fees, which are computed as a percentage of rental revenues.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased by approximately $53,000 in 1995 as compared to 1994 primarily as a result of the increase in net income. Net cash provided by operating activities increased by approximately $280,000 in 1994 as compared to 1993 as a result of the increase in net income which was partially offset by net changes in operating assets and liabilities requiring the use of cash.
Cash flows used in financing activities consisted of cash distributions to partners in 1995, 1994 and 1993. Additionally, cash distributions were paid to the minority interests in the real estate joint ventures in 1995, 1994 and 1993. In December 1995, the General Partners declared and paid a special distribution equal to 1% of capital contributed by the limited partners.
Cash used in investing activities, as set forth in the statement of cash flows, consists of acquisitions of equipment for the Partnership's mini storage facilities in 1994 and 1995. Cash flows provided by investing activities in 1993 consisted solely of the guaranteed payments received from Dahn. In 1993, $100,577 of cash was received as guaranteed payments from the seller of the properties in excess of revenue recognized (see notes 1 and 2 to financial statements). The Partnership has no material commitments for capital expenditures.
The General Partners plan to continue their policy of funding the continuing improvement and maintenance of the Partnership properties with cash generated from operations. The Partnership's financial resources appear to be adequate to meet its needs for the next twelve months.
The General Partners are not aware of any environmental problems which could have a material adverse effect upon the financial position of the Partnership.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto as Exhibit l is the information required to be set forth as item 8, Part II hereof.
Item 9.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER
The General Partners of Registrant are the same as when the Partnership was formed, i.e., DSI Properties, Inc., a California corporation, Robert J. Conway and Joseph W. Conway, brothers. As of December 31, 1995, Messrs. Robert J. Conway and Joseph W. Conway, each of whom own approximately 41.63% of the issued and outstanding capital stock of DSI Financial, Inc., a California corporation, together with Mr. Joseph W. Stok, currently comprise the entire Board of Directors of DSI Properties, Inc.
Mr. Robert J. Conway is 62 years of age and is a licensed California real estate broker, and since 1965 has been President and a member of the Board of Directors of Diversified Securities, Inc., and since 1973 President, Chief Financial Officer and a member of the Board of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Science Degree from Marquette University with majors in Corporate Finance and Real Estate.
Mr. Joseph W. Conway is age 66 and has been Executive Vice President, Treasurer and a member of the Board of Directors of Diversified Securities, Inc. since 1965 and since 1973 the Vice President, Treasurer and member of the Board of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Arts Degree from Loras College with a major in Accounting.
Mr. Joseph W. Stok is age 72 and has been a member of the Board of Directors of DSI Properties, Inc. since 1994, a Vice President of Diversified Securities, Inc. since 1973, and an Account Executive with Diversified Securities, Inc. since 1967.
Item 11.
Item 11. MANAGEMENT REMUNERATION AND TRANSITIONS
The information required to be furnished in Item 11 of Part III is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1995, which together with the report of its independent auditors, Deloitte & Touche LLP, is attached hereto as Exhibit 1 and incorporated herein by this reference. In addition to such information:
(a) No annuity, pension or retirement benefits are proposed to be paid by the Registrant to any of the General Partners or to any officer or director of the corporate General Partner;
(b) No standard or other agreement exists by which directors of the Registrant are compensated;
(c) The Registrant has no plan, nor does the Registrant presently propose a plan, which will result in any remuneration being paid to any officer or director upon termination of employment.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the December 31, 1995, no person of record owns more than 5% of the limited partnership units of the Registrant, nor was any person known by the Registrant to own of record and beneficially, or beneficially only, more than 5% thereof. The balance of the information required to be furnished in Item 12 of Part III is contained in the Registrant's Registration Statement on Form S-11, previously filed pursuant to the Securities Act of 1933, as amended, and which is incorporated herein by this reference.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be furnished in Item 13 of Part III is contained in the Registrant's Financial Statements and Financial Statement Schedule for it fiscal year ended December 31, 1995, attached hereto as Exhibit l and incorporated herein by this reference.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(l) Attached hereto and incorporated herein by this reference as Exhibit l are Registrant's Financial Statements for its fiscal year ended December 31, 1995, together with the reports of its independent auditors, Deloitte, & Touche LLP.
(a)(2) Attached hereto and incorporated herein by this reference as Exhibit 2 is Registrant's Letter to Limited Partners regarding the Annual Report for its fiscal year ended December 31, 1995.
(b) There have been no 8K's filed during the last quarter of the period covered by this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DSI REALTY INCOME FUND XI by: DSI Properties, Inc., a California corporation, as General Partner
By_______________________________ Dated: March 28, 1996 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director)
By_______________________________ Dated: March 28, 1996 JOSEPH W. CONWAY (Executive Vice President and Director)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
DSI REALTY INCOME FUND XI by: DSI Properties, Inc., a California corporation, as General Partner
By_______________________________ Dated: March 28, 1996 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director)
By______________________________ Dated: March 28, 1996 JOSEPH W. CONWAY (Executive Vice President and Director)
DSI REALTY INCOME FUND XI
CROSS REFERENCE SHEET
FORM 1O-K ITEMS TO ANNUAL REPORT
PART I, Item 3. There are no legal proceedings pending or threatened.
PART I, Item 4. Not applicable.
PART II, Item 5. Not applicable.
PART II, Item 6. The information required is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1995, attached as Exhibit l to Form 10-K.
PART II, Item 8. See Exhibit l to Form 10-K filed herewith.
PART II, Item 9. Not applicable.
EXHIBIT l DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
1995 1994 1993 1992 1991
REVENUES $1,710,104 $1,596,378 $ 973,811 $ 676,810 $ 615,041
EXPENSES 1,072,358 1,003,797 750,453 490,406 409,269 ---------- ---------- ---------- ---------- ---------- MINORITY INTERESTS IN EARNINGS OF REAL ESTATE JOINT VENTURES (142,554) (134,982) (6,624) ---------- ---------- ---------- ---------- ----------
NET INCOME $ 495,192 $ 457,599 $ 223,358 $ 179,780 $ 205,772 ========== ========== ========== ========== ========== TOTAL ASSETS $6,913,137 $7,236,568 $7,517,751 $8,031,229 $8,531,949 ========== ========== ========== ========== ========== NET CASH PROVIDED BY OPERATING ACTIVITIES $ 950,492 897,978 $ 618,343 $ 588,162 $ 494,236 ========== ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 24.51 $ 22.65 $ 11.06 $ 8.90 $ 10.20 ========== ========== ========== ========== ========== CASH DISTRIBUTIONS PER $500 LIMITED PARTNERSHIP UNIT $ 40.00 $ 35.00 $ 35.00 $ 35.00 $ (1) ========== ========== ========== ========== ==========
(1) Quarterly cash distributions were $8.75, prorated per quarter based upon the month the limited partners were admitted to the Partnership.
The following are reconciliations between the operating results and partners' equity per the financial statements and the Partnership's income tax return for the year ended December 31, 1995.
Operating Partners' Results Equity
Per financial statements $ 495,192 $ 6,667,632 Excess financial statement depreciation 114,948 604,264 Deferred rental revenues (1,600) 44,500 Accrued incentive management fees 443,214 Capitalization of syndication costs 1,033,223 Accrued partner distributions 176,768 ----------- ----------- Per Partnership income tax return $ 608,540 $ 8,969,601 =========== =========== Net Taxable income per $500 limited partnership unit $ 30.43 ===========
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Income for the Three Years Ended December 31, 1995
Consolidated Statements of Changes in Partners' Equity for the Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995
Notes to Consolidated Financial Statements
SUPPLEMENTAL SCHEDULE:
Independent Auditors' Report
Schedule XI - Real Estate and Accumulated Depreciation
SCHEDULES OMITTED:
Financial statements and schedules not listed above are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements named above, or in the notes thereto.
INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund XI:
We have audited the accompanying balance sheets of DSI Realty Income Fund XI, a California Real Estate Limited Partnership (the "Partnership") as of December 31, 1995 and 1994, and the related statements of income, changes in partners' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of DSI Realty Income Fund XI at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles.
January 31, 1996 Deloitte Touche LLP Long Beach, California
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
ASSETS 1995 1994
CASH AND CASH EQUIVALENTS $ 277,455 $ 299,707
PROPERTY, At cost (net of accumulated depreciation of $1,692,649 in 1995 and $1,369,539 in 1994) (Notes 1, 2 and 3) 6,616,116 6,917,295
OTHER ASSETS (Note 2) 19,566 19,566 ----------- ----------- TOTAL $ 6,913,137 $ 7,236,568 =========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES: Distribution due partners (Note 4) $ 176,768 $ 176,768 Other liabilities 68,737 79,281 ----------- ----------- Total liabilities 245,505 256,049 ----------- ----------- PARTNERS' EQUITY (Notes 2 and 4): General partners (22,992) (19,863) Limited partners (20,000 limited partnership units outstanding at December 31, 1995 and 1994) 6,690,624 7,000,382 ------------ ----------- Total partners' equity 6,667,632 6,980,519 ------------ ----------- TOTAL $ 6,913,137 $ 7,236,568 ============ ===========
See accompanying notes to consolidated financial statements.
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED STATEMENTS OF INCOME THREE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
1995 1994 1993
REVENUES: Rental revenues $1,698,994 $1,582,982 $ 799,523 Interest income 11,110 6,126 3,965 Guaranteed payments from Dahn (Note 1 and 2) 7,300 170,323 ---------- ---------- ---------- Total revenues 1,710,104 1,596,378 973,811 ---------- ---------- ---------- EXPENSES: Depreciation and amortization (Note 2) 323,290 322,792 322,792 Operating expenses 526,171 470,926 261,662 General and administrative 150,170 146,443 102,363 General partners' incentive management fee (Note 4) 72,727 63,636 63,636 ---------- ---------- ---------- Total expenses 1,072,358 1,003,797 750,453 ---------- ---------- ---------- INCOME BEFORE MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES 637,746 592,581 223,358 ---------- ---------- ---------- MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES (Note 1) (142,554) (134,982) ---------- ---------- ---------- NET INCOME $ 495,192 $ 457,599 $ 223,358 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 490,240 $ 453,023 $ 221,124 General partners 4,952 4,576 2,234 ---------- ---------- ---------- TOTAL $ 495,192 $ 457,599 $ 223,358 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 24.51 $ 22.65 $ 11.06 ========== ========== ==========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
General Limited Partners Partners Total
BALANCE AT JANUARY 1, 1993 ($12,531) $ 7,726,235 $ 7,713,704
Net income 2,234 221,124 223,358
Distributions (Note 4) (7,071) (700,000) (707,071) ------- ---------- ---------- BALANCE AT DECEMBER 31, 1993 (17,368) 7,247,359 7,229,991
Net income 4,576 453,023 457,599
Distributions (Note 4) (7,071) (700,000) (707,071) ------- ---------- ----------- BALANCE AT DECEMBER 31, 1994 (19,863) 7,000,382 6,980,519
Net income 4,952 490,240 495,192
Distributions (Note 4) (8,081) (799,998) (808,079) ------- ----------- ----------- BALANCE AT DECEMBER 31, 1995 ($22,992) $ 6,690,624 $ 6,667,632 ======= =========== ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: Interest received $ 11,110 $ 6,126 $ 3,965 Guaranteed payments from Dahn 0 29,100 275,623 Cash received from customers 1,698,994 1,582,952 792,057 Cash paid to suppliers and employees (759,612) (720,200) (453,302) ----------- ----------- ----------- Net cash provided by operating activities 950,492 897,978 618,343 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (808,079) (707,071) (707,071) Distributions paid to minority inter- ests in real estate joint ventures (142,554) (134,982) (6,624) ----------- ----------- ----------- Net cash used in financing activities (950,633) (842,053) (713,695) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES - Guaranteed payments received from Dahn in excess of revenue recognized 100,577 Additions to property (22,111) (16,683) ----------- ----------- ----------- Net cash (used in) provided by investing activities (22,111) (16,683) 100,577 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,252) 39,242 5,225
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 299,707 260,465 255,240 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 277,455 $ 299,707 $ 260,465 =========== =========== =========== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 495,192 $ 457,599 $ 223,358 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 323,290 322,792 322,792 Minority interests in income of real estate joint ventures 142,554 134,982 Changes in assets and liabilities: Guaranteed payments receivable from Dahn 21,800 105,300 Other assets (7,484) (9,966) Incentive management fee payable (63,636) (63,304) Other liabilities (10,544) 31,925 40,163 ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 950,492 $ 897,978 $ 618,343 =========== =========== ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 1995
1. GENERAL
DSI Realty Income Fund XI, a California Real Estate Limited Partnership (the "Partnership"), has three general partners (DSI Properties, Inc., Robert J. Conway and Joseph W. Conway) and limited partners owning 20,000 limited partnership units, which were purchased for $500 a unit. The general partners have made no capital contribution to the Partnership and are not required to make any capital contribution in the future. The Partnership has a maximum life of 50 years and was formed on March 27, 1981 under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The offering of limited partnership units was completed on February 12, 1991.
The Partnership has entered into four joint venture arrangements with affiliates of Dahn Corporation ("Dahn"). The Partnership and its joint venture partners have acquired four mini-storage properties located in Whittier, California; Edgewater, New Jersey; Bloomingdale, Illinois; and Sterling Heights, Michigan. The properties were acquired from Dahn.
Under the terms of the property purchase agreements, the Partnership and its joint venture partners (Whittier Mini, Bloomingdale Mini, Edgewater Mini and Streling Heights Mini, each a California Limited Partnership and an affiliate od Dahn, and hereinafter referred to as the "Joint Venture Partners") own an undivided interest in the mini-storage facilities as follows:
Joint Venture Mini-Storage Property Partnership Partner
Whittier, CA 90% 10% Bloomingdale, IL 90% 10% Edgewater, NJ 85% 15% Sterling Heights, MI 75% 25%
The Joint Venture Partners have made no cash contributions to any of the joint ventures. Rather, each Joint Venture Partner's interest in each respective mini-storage property was obtained in consideration of a reduction in the purchase price of the property by Dahn.
Pursuant to the terms of each joint venture agreement, annual profits (before depreciation) of each joint venture will be allocated to the Joint Venture Partners on the basis of actual distributions received, while annual losses (before depreciation) are to be allocated in proportion to the ownership percentages as specified above. Cash distributions are to be made to each Joint Venture Partner based upon each Joint Venture Partner's ownership percentage. However, the Joint Venture Partners have subordinated their rights to any distributions to the Partnership's receipt of an annual, noncumulative, 8% return (7.75% for the Whittier Mini) from the operation of the joint ventures. Requirements under the subordination agreement were met during 1995. A minority interest in real estate joint venture is recorded to the extent of any distributions due to the Joint Venture partners. The Joint Venture Partners are also entitled to receive a percentage, based upon a predetermined formula, of the net proceeds from the sale of the properties.
The mini-storage facilities are operated by Dahn under various management agreements. In accordance with the agreements, Dahn is to pay all oper- ating expenses through the construction period and an initial operating period. In addition, Dahn is required to make guaranteed payments, as defined, through the same period. The guaranteed payments by Dahn are to be offset by amounts owed to Dahn representing interest earned on the net offering proceeds allocable to the purchase of the property less the cash down payment and progress payments related to each property. The last of the Partnership's properties to emerge from the initial operating period, Sterling Heights did so on January 31, 1994.
Once the construction and initial operating periods of the mini-storage facilities have been completed, the Partnership is required by the agreements to pay Dahn a management fee equal to 5% of gross revenue from operations, as defined.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation - The accompanying finacial statements include the accounts of the Partnership and its joint venture investments. All significant intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents - The Partnership classifies its short-term investments purchased with an original maturity of three months or less as cash equivalents.
Income Taxes - No provision has been made for income taxes in the accompanying financial statements. The taxable income or loss of the Partnership is allocated to each partner in accordance with the terms of the Agreement of Limited Partnership. Each partner's tax status, in turn, determines the appropriate income tax for its allocated share of the Partnership taxable income or loss.
Property and Depreciation - Property is recorded at cost and is comprised primarily of mini-storage facilities. Depreciation is provided for using the straight-line method over an estimated useful life of 20 years for the facilities.
Net Income per Limited Partnership Unit - Net income per limited partnership unit is computed by dividing net income allocated to the limited partners by the weighted average number of limited partnership units outstanding during each period (20,000 in 1995, 1994 and 1993).
Organization Costs - Organization costs have bee capitalized and are being amortized using the straight-line method over a five-year period. Capitalized organization costs are included in other assets in the accompanying balance sheet.
Guaranteed Payments from Dahn - Guaranteed payments expected to be received from Dahn during the initial operating period are accrued and offset against the cost of the related mini-storage property to the extent that such payments are expected to exceed the forcasted operating results of the mini-storage property during the initial operating period.
Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3. PROPERTY
At December 31, 1995 and 1994, the total cost of property and accumulated depreciation are as follows:
1995 1994 Land $ 1,894,250 $ 1,894,250 Buildings 6,414,515 6,392,404 ----------- ----------- Total 8,308,765 8,286,654 Less accumulated depreciation (1,692,649) (1,369,359) ----------- ----------
Property, net $ 6,616,116 $ 6,917,295 =========== ===========
4. ALLOCATION OF PROFITS AND LOSSES
Under the Agreement of Limited Partnership, the general partners are to be allocated 1% of the net profits or losses from operations and the limited partners are to be allocated the balance of the net profits or losses from operations in proportion to their limited partnership interests. The general partners are also entitled to receive a percentage, based on a predetermined formula, of any cash distribution from the sale, other disposition, or refinancing of the project.
The general partners are entitled to receive an incentive management fee for supervising the operations of the Partnership. The fee is equal to 9% per annum of the Partnership distributions made from cash available for distribution from operations, as defined.
INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund XI:
We have audited the financial statements of DSI Realty Income Fund XI (the "Partnership") as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated January 31, 1996; such report is included elsewhere in this Form 10-K. Our audits also included the financial statements schedule of DSI Realty Income Fund XI, listed in Item 14. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statements schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.
January 31, 1996 Deloitte Touche LLP Long Beach, California
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION - --------------------------------------------------------------------------------
Real Estate Accumulated at Cost Depreciation
Balance at January 1, 1993 $ 8,269,971 $ 731,775 Additions 318,792 ----------- ---------- Balance at December 31, 1993 8,269,971 1,050,567 Additions 16,683 318,792 ----------- ---------- Balance at December 31, 1994 8,286,654 1,369,359 Additions 22,111 323,290 ----------- ---------- Balance at December 31, 1995 $ 8,308,765 $1,692,649 =========== ==========
The total cost at the end of the period for Federal income tax purposes was approximately $10,250,000
EXHIBIT 2 March 28, 1996
ANNUAL REPORT TO LIMITED PARTNERS OF
DSI REALTY INCOME FUND XI
Dear Limited Partner:
This report contains the Partnership's balance sheets as of December 31, 1995 and 1994, and the related statements of income, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1995 accompanied by an independent auditors' report. The Partnership owns seven mini-storage facilities, including two in Santa Rosa, California. The Partnership's properties were each purchased for all cash and funded solely from subscriptions for limited partnership interests without the use of mortgage financing.
Your attention is directed to the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations for the General Partners' discussion and analysis of the financial statements and operations of the Partnership.
Average occupancy levels for each of the Partnership's four properties for the years ended December 31, 1995 and December 31, 1994 were as follows:
Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 1995 Dec. 31, 1994
Whittier, CA(1) 87% 89%
Bloomingdale, IL(2) 88% 88%
Edgewater, NJ(3) 89% 91%
Sterling Heights, MI(4) 83% 85% (1) The Partnersip owns a 90% interest in this property. (2) The Partnersip owns a 90% interest in this property (3) The Partnersip owns an 85% interest in this property (4) The Partnersip owns a 75% interest in this property
We will keep you informed of the activities of DSI Realty Income Fund XI as they develop. If you have any questions, please contact us at your convenience at (310) 424-2655. If you would like a copy of the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, which was filed with the Securities and Exchange Commission (which report includes the enclosed Financial Statements), we will forward a copy of the report to you upon written request.
Very truly yours,
DSI REALTY INCOME FUND VI By: DSI Properties, Inc.
By_______________________________ ROBERT J. CONWAY, President