SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/ x /Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 [Fee Required] for the fiscal year ended December 31, 1998.
or / /Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
____________ to _____________.
Commission File No. 33-26038.
DSI REALTY INCOME FUND XI, a California Limited Partnership
(Exact name of Registrant as specified in governing instruments)
__________California_________________________33-0324161_______
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification
number)
6700 E. Pacific Coast Hwy., Long Beach, California 90803
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code-(562)493-8881
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units.
Indicate by check mark, whether the Registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes_X___. No_____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. /x/
The Registrant is a limited partnership and there is no voting stock. All units
of limited partnership are owned by non-affiliates of the Registrant. All units
sold to date were sold at $500.00 per unit.
DOCUMENTS INCORPORATED BY REFERENCE
Item 8. Registrant's Financial Statements for its fiscal year ended December 31,
1998, incorporated by reference to Form 10-K, Part II.
Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 1998, incorporated by reference to Form 10-K, Part III.
Item 12. Registration Statement on Form S-11, as amended, previously filed with
the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended, incorporated by reference to Form 10-K, Part III.
Item 13. Registrant's financial statements for its fiscal year ended December
31, 1998, together with report of independent public accountants,
incorporated by reference to Form 10-K, Part III.
PART I
Item l. BUSINESS
Registrant (the "Partnership") is a publicly held limited partnership
organized under the California Uniform Limited Partnership Act pursuant to
Agreement of Limited Partnership (the "Agreement") dated December 7, 1988. The
General Partners are DSI Properties, Inc., a California corporation, ROBERT J.
CONWAY and JOSEPH W. CONWAY. The General Partners are affiliates of the Selling
Agent, Diversified Securities, Inc., a wholly-owned subsidiary of DSI Financial,
Inc. The General Partners provide similar services to other partnerships.
The Partnerships's public offering was completed on February 12, 1991, with
20,000 Units ($10,000,000) of limited partnership interests having been
subscribed for. The General Partners have retained a l% interest in all profits,
losses and distributions (subject to certain conditions) without making any
capital contributions to the Partnership. The General Partners are not required
to make any contributions to capital in the future. The General Partners and the
Partnership have obtained a ruling from the Internal Revenue Service, that under
present provisions of the Internal Revenue Code, current Treasury Regulations
thereunder and the interpretations thereof by the Service and the courts, the
Partnership should be treated for federal income tax purposes as a partnership
and not as an association, which is taxable as a corporation. Such ruling was
based upon certain representations contained in the ruling request.
The Partnership is engaged in the business of investing in and operating
mini-storage facilities with the primary objectives of generating, for its
partners, cash flow, capital appreciation of its properties and obtaining
federal income tax deductions in order to shelter a portion of cash distributed
from taxation. The Partnership has interests in joint ventures which purchased
four mini-storage facilities. See discussion under Item 2 - Properties for
further information.
The Partnership does not intend to sell additional limited partnership
interests in the future. The term of the Partnership is fifty years, however, it
is anticipated that all properties will be sold and/or refinanced prior thereto.
The Partnership is intended to be self-liquidating and it is not anticipated
that proceeds from the sale or refinancing of its operating properties will be
reinvested. The Registrant has no full time employees other than on-site
managers at each mini-storage facility. However, the Partnership shares the
expenses of one or more employees with its various affiliated Limited
Partnerships. The general management and supervision of the business and affairs
of the Registrant is vested exclusively in the General Partners. Limited
Partners have no right to participate in the management or conduct of the
Registrant's business and affairs. An independent management company has been
retained to provide day-to-day management services with respect to all of the
Partnership's investment properties.
The average occupancy levels for each of the Partnership's four properties
for the years ended December 31, 1998 and December 31, 1997 were as follows:
Location of Property Average Occupancy Average Occupancy
for the Level for the
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
Whittier, CA(1) 91% 88%
Bloomingdale, IL(2) 87% 83%
Edgewater, NJ(3) 86% 87%
Sterling Heights, MI(4) 84% 81%
(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.
The business in which the Partnership is engaged is highly competitive.
Each of its mini-storage facilities is located in or near a major urban area,
and accordingly, will compete with a significant number of individuals and
organizations with respect to both the purchase and sale of its properties and
for rentals.
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. LEGAL PROCEEDINGS
Registrant is not a party to any material pending proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
Registrant, a publicly-held limited partnership, had approximately 542
Limited Partners at December 31, 1998. 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 $13.75 per Limited Partnership Unit were
declared and paid each quarter for the year ended December 31, 1998 and $10.00
per Limited Partnership Unit were declared and paid each quarter for the
year ended December 31, 1997 and $8.75 per Limited Partnership Unit for the
year ended December 31, 1996. It is Registrant's expectations that
distributions will continue to be paid in the future.
Item 6. SELECTED FINANCIAL DATA
DSI REALTY INCOME FUND XI
(A California Real Estate Limited Partnership)
- ----------------------------------------------
SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
REVENUES $1,990,616 $1,903,385 $1,829,360 $1,710,104 $1,596,378
EXPENSES 1,108,711 1,115,758 1,068,283 1,072,358 1,003,797
MINORITY INTEREST
IN EARNINGS OF
REAL ESTATE JOINT
VENTURE (179,154) (171,956) (168,304) (142,554) (134,982)
--------- --------- --------- --------- ---------
NET INCOME $ 702,751 $ 615,671 $ 592,773 $ 495,192 $ 457,599
========= ========= ========= ========= =========
TOTAL ASSETS $6,152,614 $6,517,581 $6,709,600 $6,913,137 $7,236,568
========== ========== ========== ========== ==========
NET CASH
PROVIDED BY
OPERATING
ACTIVITIES $1,212,360 $1,095,449 $1,097,502 $ 950,492 $ 897,978
========= ========== ========== ========= =========
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 34.79 $ 30.48 $ 29.34 $ 24.51 $ 22.65
======== ========= ======== ======== ========
CASH
DISTRIBUTIONS
PER $500
LIMITED
PARTNERSHIP
UNIT $ 55.00 $ 40.00 $ 40.00 $ 40.00 $ 35.00
======== ======== ======== ======== ========
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, 1998.
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, 1997, were: Bloomingdale 85%, Edgewater Park 79%, Whittier 88%
and Sterling Heights 78%.
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Total revenues increased from $1,903,385 in 1997 to $1,990,616 in 1998 and
total expenses decreased from $1,115,758 to $1,108,711 contributing to an
increase in net income from $615,671 to $702,751. Rental revenues increased
to $1,971,279 in 1998 from $1,887,384 in 1997. The approximately $83,900
(4.4%) increase in rental revenues can be attributed to a combination of higher
occupancy and unit rental rates as average occupancy levels increased from 84.6%
for the year ended December 31, 1997 to 87.0% for 1998. Operating expenses
decreased approximately $38,200 (6.8%) primarily as a result of decreases in
yellow pages advertising costs, repairs and maintenance, salaries and wages
and worker's compensation insurance expenses partially offset by increases
in real estate tax and office expenses. General and administrative expenses
remained constant. Incentive management fees, which are based on distributions
paid to limited partners, increased as a result of the increase in distributions
to limited partners. Property management fees, which are computed as a
percentage of rental revenues, increased approximately $6,200 (6.6%).
1997 COMPARED TO 1996
Total revenues increased from $1,829,360 in 1996 to $1,903,385 in 1997 and
total expenses increased from $1,068,283 to $1,115,758 contributing to an
increase in net income from $592,773 to $615,671. Rental revenues increased
to $1,887,384 in 1997 from $1,818,065 in 1996. The approximately $69,300
(3.8%) increase in rental revenues can be attributed to higher unit rental
rates as average occupancy levels decreased from 86.8% for the year ended
December 31, 1996 to 84.6% for 1997. Operating expenses increased
approximately $44,400 (8.6%) primarily as a result of increases in yellow pages
advertising costs, repairs and maintenance, real estate tax expense, salaries
and wages, fire and liability insurance and office expenses. General and
administrative expenses increased approximately $6,000 (9.5%) as a result of
relatively insignificant fluctuations in various expense accounts. Incentive
management fee remained constant. Property management fees, which are computed
as a percentage of rental revenues, increased approximately $2,900 (3.2%).
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased by approximately $116,900
(10.7%) primarily as a result of the increase in net income and customer
deposits and other liabilities. Net cash provided by operating activities
decreased by approximately $2,000 (0.2%) in 1997 as compared to 1996 primarily
as a result of the decrease in depreciation and increase in other assets
partially offset by the increase in net income.
Cash flows used in financing activities consisted of cash distributions to
partners in 1998, 1997 and 1996. Additionally, cash distributions were paid to
the minority interests in the real estate joint ventures in 1998, 1997, and
1996. In December 1996, 1997 and 1998, the General Partners declared and paid
a special distribution equal to 1%, 1% and 3% respectively of capital
contributed by the limited partners. The General Partners determined that
effective with the first quarter 1998 distribution, which was paid on April 15,
1998, distributions to limited partners would be increased to an amount which
yields an 8% annual return on the capital contributed by the limited partners
from an annual return of 7% paid in the prior year.
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. 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 Year 2000 issue refers to the inability of certain computer systems to
recognize a date using "00" as the Year 2000. The Partnership has implemented
a Year 2000 program, which has three phases: (1) identification;
(2) remediation; and (3) testing and verification. The Partnership, as well
as the property management company and the Partnership's warehouse facilities
have completed those phases. Computer programs have been upgraded and tested
to function properly with respect to the dates in the Year 2000 and thereafter.
Year 2000 compliance costs are nominal and have been expensed in the regular
course of business. The Partnership provides no assurances that third-party
suppliers and customers will be compliant. Nevertheless, the Partnership does
not believe that the Year 2000 issue will have a material effect on its
financial condition or results of operations.
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. 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. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
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, 1998, Messrs. Robert J.
Conway and Joseph W. Conway, each of whom own approximately 48.4% 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 65 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 69 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 75 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. 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, 1998, 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. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of the December 31, 1998, 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. 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, 1998, attached hereto as Exhibit
l and incorporated herein by this reference.
PART IV
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, 1998, 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, 1998.
(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 31, 1999
ROBERT J. CONWAY (President,
Chief Executive Officer, Chief
Financial Officer and Director)
By_______________________________ Dated: March 31, 1999
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 31, 1999
ROBERT J. CONWAY (President,
Chief Executive Officer, Chief
Financial Officer and Director)
By______________________________ Dated: March 31, 1999
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, 1998, 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, 1998
- --------------------------------------------------------------------------------
1998 1997 1996 1995 1994
REVENUES $1,990,616 $1,903,385 $1,829,360 $1,710,104 $1,596,378
EXPENSES 1,108,711 1,115,758 1,068,283 1,072,358 1,003,797
---------- ---------- ---------- ---------- ----------
MINORITY INTERESTS
IN EARNINGS OF REAL
ESTATE JOINT
VENTURES (179,154) (171,956) (168,304) (142,554) (134,982)
---------- ---------- ---------- ---------- ---------
NET INCOME $ 702,751 $ 615,671 $ 592,773 $ 495,192 $ 457,599
========== ========== ========== ========== ==========
TOTAL ASSETS $6,152,614 $6,517,581 $6,709,600 $6,913,137 $7,236,568
========== ========== ========== ========== ==========
NET CASH PROVIDED BY
OPERATING ACTIVITIES $1,212,360 $1,095,449 $1,097,502 $ 950,492 $ 897,978
========== ========== ========== ========== ==========
NET INCOME PER
LIMITED
PARTNERSHIP UNIT $ 34.79 $ 30.48 $ 29.34 $ 24.51 $ 22.65
========== ========== ========== ========== ==========
CASH DISTRIBUTIONS
PER $500 LIMITED
PARTNERSHIP UNIT $ 55.00 $ 40.00 $ 40.00 $ 40.00 $ 35.00
========== ========== ========== ========== ==========
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, 1998.
Operating Partners'
Results Equity
Per financial statements $ 702,751 $ 5,851,555
Excess book depreciation 111,025 942,094
Deferred rental revenues 5,492 49,987
Accrued distributions to partners 202,020
Accrued incentive management fees 443,214
Acquisition costs capitalized
for tax purposes 1,033,227
----------- -----------
Per Partnership income tax return $ 819,268 $ 8,522,097
=========== ===========
Net Taxable income per $500 limited
partnership unit $ 40.96
===========
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 F-1
Consolidated Balance Sheets at December 31, 1998 and 1997 F-2
Consolidated Statements of Income for the Three
Years Ended December 31, 1998 F-3
Consolidated Statements of Changes in Partners' Equity for
the Three Years Ended December 31, 1998 F-4
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1998 F-5
Notes to Consolidated Financial Statements F-6
SUPPLEMENTAL SCHEDULE:
Independent Auditors' Report F-8
Schedule XI - Real Estate and Accumulated Depreciation F-9
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, 1998 and 1997, and the related statements of income, changes in partners'
equity (deficit), and cash flows for each of the three years in the period ended
December 31, 1998. 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,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
February 5, 1999
Deloitte Touche LLP
Long Beach, California
DSI REALTY INCOME FUND XI
(A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
ASSETS 1998 1997
CASH AND CASH EQUIVALENTS $ 393,912 $ 500,351
PROPERTY, net (Notes 1, 2 and 3) 5,720,848 5,986,304
OTHER ASSETS (Note 2) 37,854 30,926
----------- -----------
TOTAL $ 6,152,614 $ 6,517,581
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Distribution due partners (Note 4) $ 202,020 $ 176,768
Property management
fees payable (Note 1) 8,105 7,456
Other liabilities 90,934 73,442
----------- ----------
Total liabilities 301,059 257,666
----------- ----------
PARTNERS' EQUITY (Notes 2 and 4):
General partners (31,151) (27,068)
Limited partners (20,000 limited
partnership units outstanding
at December 31, 1998 and 1997) 5,882,706 6,286,983
------------ -----------
Total partners' equity 5,851,555 6,259,915
------------ -----------
TOTAL $ 6,152,614 $ 6,517,581
============ ===========
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, 1998
- --------------------------------------------------------------------------------
1998 1997 1996
REVENUES:
Rental revenues $1,971,279 $1,887,384 $1,818,065
Interest income 19,337 16,001 11,295
---------- ---------- ----------
Total revenues 1,990,616 1,903,385 1,829,360
---------- ---------- ----------
EXPENSES:
Depreciation (Note 2) 319,242 318,792 324,654
Operating 523,038 561,243 516,812
General and administrative 67,918 69,195 63,187
General partners' incentive
management fee (Note 4) 98,511 72,727 72,727
Property management fees (Note 1) 100,002 93,801 90,903
---------- ---------- ----------
Total expenses 1,108,711 1,115,758 1,068,283
---------- ---------- ----------
INCOME BEFORE MINORITY INTERESTS
IN INCOME OF REAL ESTATE
JOINT VENTURES 881,005 787,627 761,077
MINORITY INTERESTS IN INCOME OF
REAL ESTATE JOINT VENTURES
(Note 1) (179,154) (171,956) (168,304)
---------- ---------- ----------
NET INCOME $ 702,751 $ 615,671 $ 592,773
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
Limited partners $ 695,723 $ 609,514 $ 586,845
General partners 7,028 6,157 5,928
---------- ---------- ----------
TOTAL $ 702,751 $ 615,671 $ 592,773
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT (Notes 2 and 4) $ 34.79 $ 30.48 $ 29.34
========== ========== ==========
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, 1998
- --------------------------------------------------------------------------------
General Limited
Partners Partners Total
BALANCE AT JANUARY 1, 1996 ($22,992) $ 6,690,624 $ 6,667,632
Net income 5,928 586,845 592,773
Distributions (8,081) (800,000) (808,081)
------- ----------- -----------
BALANCE AT DECEMBER 31, 1996 $(25,145) $6,477,469 $6,452,324
Net income 6,157 609,514 615,671
Distributions (8,080) (800,000) (808,080)
------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 $(27,068) $ 6,286,983 $ 6,259,915
Net income 7,028 695,723 702,751
Distributions (11,111) (1,100,000) (1,111,111)
------- ----------- -----------
$(31,151) $ 5,882,706 $ 5,851,555
======== =========== ===========
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, 1998
- --------------------------------------------------------------------------------
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 702,751 $ 615,671 $ 592,773
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 319,242 318,792 324,654
Minority interests in income
of real estate joint ventures 179,154 171,956 168,304
Changes in assets and liabilities:
Other assets (6,928) (11,360)
Incentive management fee payable
Property management fees payable 649 331 338
Other liabilities 17,492 59 11,433
---------- ----------- ----------
Net cash provided by operating
activities 1,212,360 1,095,449 1,097,502
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (1,085,859) (808,080) (808,081)
Distributions paid to minority inter-
ests in real estate joint ventures (179,154) (171,956) (168,304)
----------- ----------- ----------
Net cash used in
financing activities (1,265,013) (980,036) (976,385)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to property (53,786) (13,634)
----------- ----------- -----------
NET DECREASE (INCREASE) IN CASH AND
CASH EQUIVALENTS (106,439) 115,413 107,483
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 500,351 384,938 277,455
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 393,912 $ 500,351 $ 384,938
=========== =========== ===========
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, 1998
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 as of December 31, 1998, 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 December 7, 1986 under the California Uniform Limited Partnership
Act for the primary purpose of acquiring and operating real estate.
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 Sterling Heights Mini, each a California Limited Partnership and
an affiliate of 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 1998, 1997 and 1996. 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 pre-
determined formula, of the net proceeds from the sale of the properties.
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.
Property and Depreciation - Property is recorded at cost and consists
primarily of mini-storage facilities. Depreciation is provided for using
the straight-line method over an estimated useful life of 20 years.
Building improvements are depreciated over a five year period.
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. The net difference between the bases
of the Partnership's asset and liabilities for federal income tax purposes
and as reported for financial statement purposes is $2,670,542.
Revenues - Rental revenue is recognized using the accrual method based
on contractual amounts provided for in the lease agreements, which
approximates recognition on a straight-line basis. The term of the lease
agreements is usually less than one year.
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 1998, 1997 and 1996).
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires the Partnership's
management 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.
Impairment of Long-Lived Assets - The Company regularly reviews long-
lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. If
the sum of the expected future cash flow is less than the carrying amount
of the asset, the Company recognized an impairment. No impairment
losses were required in 1998, 1997 or 1996.
Fair Value of Financial Instruments - The Company's financial instruments
consist primarily of cash, receivables, accounts payable and accrued
liabilities. The carrying values of all financial instruments are
representative of their fair values due to their short-term maturities.
Concentrations of Credit Risk - Financial instruments that potentially
subject the Partnership to concentrations of crediot risk consist
primarily of cash equivalents and rent receivables. The Partnership
places its cash equivalents with high credit quality institutions.
3. PROPERTY
At December 31, 1998 and 1997, the total cost of property and accumulated
depreciation are as follows:
1996 1995
Land $ 1,894,250 $ 1,894,250
Buildings 6,481,935 6,428,149
----------- -----------
Total 8,376,185 8,322,399
Less accumulated depreciation (2,655,337) (2,336,095)
----------- ----------
Property, net $ 5,720,848 $ 5,986,304
=========== ===========
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.
In addition, 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.
5. BUSINESS SEGMENT INFORMATION
The following disclosure about segment reporting of the Partnership is
made in accordance with the requirements of SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. The Partnership
operates under a single segment; storage facility operations, under which
the Partnership rents its storage facilities to its customers on a need
basis and charges rent on a predetermined rate.
DSI REALTY INCOME FUND XI
(A California Real Estate Limited Partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------
Costs Capitalized
Initial Cost to Subsequent to Gross Amount at Which Carried
Partnership Acquisition at Close of Period
------------------- ----------------- -----------------------------
Buildings Buildings Date
and Improve- Carrying and Accum. of Date
Description Encumbrances Land Improvements ments Costs Land Improvements Total Deprec. Const. Acq. Life
MINI-U-STORAGE
Whittier, CA None $845,000 $1,969,083 $ 5,131 $845,000 $1,974,214 $2,819,214 $628,797 04/90 03/90 20 Yrs
Edgewater, NJ None 191,250 2,358,780 44,706 191,250 2,403,486 2,594,736 984,822 06/89 09/90 20 Yrs
Bloomingdale, IL None 442,000 1,579,879 10,524 442,000 1,590,403 2,032,403 177,399 07/88 01/91 20 Yrs
Sterling Heights, MI None 416,000 467,979 45,853 416,000 513,832 929,832 864,319 06/77 07/91 20 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$1,894,250 $6,375,721 $106,214 $1,894,250 $6,481,935 $ 8,376,185*$2,655,337
========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated
at Cost Depreciation
Balance at January 1, 1995 $ 8,308,765 $1,692,649
Additions 13,634 324,654
----------- ----------
Balance at December 31, 1996 $ 8,322,399 $2,017,303
Additions 318,792
----------- ----------
Balance at December 31, 1997 $ 8,322,399 $2,336,095
Additions 53,786 319,242
----------- ----------
Balance at December 31, 1998 $ 8,376,185 $2,655,337
=========== ==========
EXHIBIT 2
March 31, 1999
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,
1998 and 1997, 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, 1998
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, 1998 and December 31, 1997 were as follows:
Location of Property Average Occupancy Average Occupancy
Levels for the Levels for the
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
Whittier, CA(1) 91% 88%
Bloomingdale, IL(2) 87% 83%
Edgewater, NJ(3) 86% 87%
Sterling Heights, MI(4) 84% 81%
(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
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 (562) 493-3022.
If you would like a copy of the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1998, 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