UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________________
Commission file number 0-14934
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DIVERSIFIED HISTORIC INVESTORS
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2312037
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1609 Walnut Street, Philadelphia, PA 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
N/A
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) 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 such
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
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30, 1999 (unaudited)
and December 31, 1998
Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1999 and 1998 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
At June 30, 1999, Registrant had cash of
approximately $13,446. Cash generated from operations is used
primarily to fund operating expenses and debt service. If cash flow
proves to be insufficient, the Registrant will attempt to negotiate
with the various lenders in order to remain current on all
obligations. The Registrant is not aware of any additional sources of
liquidity.
As of June 30, 1999, Registrant had restricted
cash of $58,404 consisting primarily of funds held as security
deposits, replacement reserves and escrows for taxes. As a
consequence of these restrictions as to use, Registrant does not deem
these funds to be a source of liquidity.
In recent years the Registrant has realized
significant losses, including the foreclosure of five properties and a
portion of a sixth property, due to the properties' inability to
generate sufficient cash flow to pay their operating expenses and debt
service. The Registrant has first mortgages in place in each of its
remaining three properties that are basically "cash-flow" mortgages,
requiring all available cash after payment of operating expenses to be
paid to the first mortgage holder. Therefore it is unlikely that any
cash will be available to the Registrant to pay its general and
administrative expenses, to pay debt service on the past-due
subordinate mortgage with respect to the Third Quarter or to pay any
debt service on the two accrual mortgages with respect to Wistar
Alley.
It is the Registrant's intention to continue to
hold the properties until they can no longer meet the debt service
requirements (or with respect to the Third Quarter and Wistar Alley,
the lender seeks payment on the past due mortgage) and the properties
are foreclosed, or the market value of the properties increases to a
point where they can be sold at a price which is sufficient to repay
the underlying indebtedness.
(2) Capital Resources
Any capital expenditures needed are generally
replacement items and are funded out of cash from operations or
replacement reserves, if any. The Registrant is not aware of any
factors which would cause historical capital expenditures levels not
to be indicative of capital requirements in the future and
accordingly, does not believe that it will have to commit material
resources to capital investment for the foreseeable future. If the
need for capital expenditures does arise, the first mortgage holder
for Third Quarter, Wistar Alley and Smythe Stores has agreed to fund
capital expenditures at terms similar to the first mortgage.
(3) Results of Operations
During the second quarter of 1999, Registrant
recognized net income of $303,094 ($25.85 per limited partnership
unit) compared to a net loss of $176,022 ($15.01 per limited
partnership unit) for the same period in 1998. For the first six
months of 1999, the Registrant recognized income of $86,224 ($7.35 per
limited partnership unit) compared to a net loss of $395,400 ($33.72
per limited partnership unit) for the same period in 1998.
Rental income increased $2,610 from $119,968 in
the second quarter of 1998 to $122,578 in the same period in 1999.
The increase resulted from an increase in rental income due to an
increase in average occupancy at both Third Quarter 92% to 96%) and
Wistar Alley (94% to 95%) and increases in the average rental rates
partially offset by a decrease at Smythe Stores due to a decrease in
the average occupancy (96% to 78%) and the sale of one condominium
unit.
Rental income increased $11,937 from $236,645 for
the first six months of 1998 to $248,582 for the same period in 1999.
The increase resulted from an increase in rental income due to an
increase in average occupancy at both Third Quarter (91% to 95%) and
Wistar Alley (94% to 96%) and increases in the average rental rates.
Expense for rental operations increased by $1,259
from $61,823 in the second quarter of 1998 to $63,082 in the same
period in 1999 and increased by $8,545 from $163,496 for the first six
months of 1998 to $172,041 for the same period in 1999. The increase
in rental operations for both the second quarter of 1999 and the first
six months of 1999 as compared to the same periods in 1998 is due to
increases in management fees, utilities, and commissions at Third
Quarter and an increase in maintenance expense and commissions at
Wistar Alley due to increases in the average occupancy. The increases
are partially offset by a decrease in maintenance and commissions
expense at Smythe Stores due to the sale of the condominium unit.
Interest expense decreased $11,692 from $159,044 in the second
quarter of 1998 to $147,352 in the same period in 1999 and decreased
by $12,317 from $318,077 for the first six months of 1998 to $305,760
for the same period in 1999. The decrease in interest expense is due
to the sale of one condominium unit at Smythe Stores.
Income recognized during the second quarter at the Registrant's
properties amounted to $329,000, compared to a loss of approximately
$150,000 for the same period in 1998. For the first six months of
1999 the Registrant's properties recognized a gain of $139,000
compared to a loss approximately $343,000 for the same period in 1998.
In the second quarter of 1999, Registrant
recognized income of $385,000 at the Smythe Stores Condominium complex
including $18,000 of depreciation expense, compared to a loss of
$91,000 in the second quarter of 1998, including $18,000 of
depreciation expense and for the first six months of 1999, Registrant
recognized income $294,000 including $37,000 of depreciation expense,
compared to a loss of $186,000 for the same period in 1998, including
$37,000 of depreciation expense. Included in income in the second
quarter of 1999 and the first six months of 1999 is a gain of $467,000
related to the sale of a condominium unit. Overall, exclusive of the
gain the property would have recognized a loss of $82,000 for the
second quarter of 1999 compared to a loss of $91,000 in the same
quarter of 1998 and a loss of $173,000 for the first six months of
1999 compared to a loss of $186,000 for the same period in 1998. The
decrease in the loss is a result of a decrease in interest,
maintenance and commissions expense due to the sale of the condominium
unit. The decrease for the second quarter is also due to a decrease
in the rental income due to a decrease in the average occupancy (96%
to 78%).
In the second quarter of 1999, Registrant incurred
a loss of $36,000 at Third Quarter Apartments, including $18,000 of
depreciation expense, compared to a loss of $38,000 including $18,000
of depreciation expense in the second quarter of 1998 and for the
first six months of 1999, Registrant incurred a loss of $91,000,
including $36,000 of depreciation expense, compared to a loss of
$93,000 for the same period in 1998, including $36,000 of depreciation
expense. The decrease in the loss for both the second quarter and the
first six months of 1998 to the same periods in 1999 is the result of
an increase in rental income due to an increase in occupancy (92% to
96%) for the second quarter and (91% to 95%) for the first six months
and an increase in the average rental rates, partially offset by an
overall increase in operating expenses including management fees,
utilities, and commissions due to the increase in average occupancy.
In the second quarter of 1999, Registrant incurred
a loss of $20,000 at Wistar Alley, including $44,000 of depreciation
expense, compared to a loss of $21,000, including $22,000 of
depreciation expense, in the second quarter of 1998. For the first
six months of 1999, Registrant incurred a loss of $64,000, including
$44,000 of depreciation expense, compared to a loss of $64,000,
including $44,000 of depreciation expense, for the same period in
1998. Although there was no significant change overall, rental income
increased due to an increase in occupancy (94% to 95%) for the second
quarter and (94% to 96%) for the first six months and an increase in
the average rental rates. The increase was partially offset by an
increase in operating expenses including maintenance and commissions
expense as a result of the increase in occupancy.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
June 30, 1999 December 31, 1998
(Unaudited)
Rental properties, at cost:
Land $ 308,963 $ 310,833
Buildings and improvements 5,518,456 5,721,049
Furniture and fixtures 135,121 139,377
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5,962,540 6,171,259
Less - Accumulated depreciation (3,287,778) (3,290,172)
--------- ---------
2,674,762 2,881,087
Cash and cash equivalents 13,446 12,884
Restricted cash 58,404 73,440
Accounts receivable 13,039 16,782
Other assets (net of amortization of
$30,510) 0 0
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Total $2,759,651 $2,984,193
========= =========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $5,323,658 $5,879,538
Accounts payable:
Trade 568,674 507,524
Related parties 417,801 399,548
Interest payable 1,738,029 1,573,798
Tenant security deposits 44,948 43,998
Other liabilities 14,873 14,343
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Total liabilities 8,107,983 8,418,749
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Partners' equity (5,348,332) (5,434,556)
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Total $2,759,651 $2,984,193
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1999 and 1998
(Unaudited)
Three months Six months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Revenues:
Rental income $ 122,578 $ 119,968 $ 248,582 $ 236,645
Gain on sale of units 466,918 0 466,918 0
Interest income 173 467 807 707
------- ------- ------- -------
Total revenues 589,669 120,435 716,307 237,352
------- ------- ------- -------
Costs and expenses:
Rental operations 63,082 61,823 172,040 163,496
General and
Administrative 17,460 17,460 34,920 34,920
Interest 147,352 159,044 305,760 318,077
Depreciation and
Amortization 58,681 58,130 117,363 116,259
------- ------- ------- -------
Total costs and
Expenses 286,575 296,457 630,083 632,752
------- ------- ------- -------
Net income (loss) $ 303,094 ($ 176,022) $ 86,224 ($ 395,400)
======= ======= ======= =======
Net income (loss) per
limited partnership unit $ 25.85 ($ 15.01) $ 7.35 ($ 33.72)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
Six months ended
June 30,
1999 1998
Cash flows from operating activities:
Net income (loss) $86,224 ($395,400)
Gain from sale of unit (466,918) 0
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 117,363 116,259
Changes in assets and liabilities:
Decrease in restricted cash 15,036 8,729
Decrease (increase) in accounts receivable 3,742 (1,856)
Increase in accounts payable - trade 61,150 72,222
Increase in accounts payable - related parties 18,253 18,253
Increase in interest payable 164,231 178,768
Increase in accrued liabilities 531 2,513
Increase in tenant security deposits 950 5,325
------- -------
Net cash provided by operating activities 562 4,813
------- -------
Cash flows from investing activities:
Capital expenditures 0 0
------- -------
Net cash used in investing activities 0 0
------- -------
Cash flows from financing activities:
Proceeds from debt financing 0 710
------- -------
Net cash provided by financing activities 0 710
------- -------
Increase in cash and cash equivalents 562 5,523
Cash and cash equivalents at beginning of period 12,884 710
------- -------
Cash and cash equivalents at end of period $ 13,446 $ 6,233
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors (the "Registrant") and related notes have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying
consolidated financial statements and related notes should be read in
conjunction with the audited financial statements in Form 10-K and
notes thereto, in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not party
to, nor is any of its property the subject of, any pending material
legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter covered by
this report to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Document
Number
3 Registrant's Amended and Restated Certificate
of Limited Partnership and Agreement of
Limited Partnership, previously filed as part
of Amendment No. 2 of Registrant's
Registration Statement on Form S-11, are
incorporated herein by reference.
21 Subsidiaries of the Registrant are listed in
Item 2. Properties on Form 10-K, previously
filed and incorporated herein by reference.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the
quarter ended June 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: August 25, 1998 DIVERSIFIED HISTORIC INVESTORS
---------------
By: Diversified Historic Advisors, General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President
and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,446
<SECURITIES> 0
<RECEIVABLES> 13,039
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,962,540
<DEPRECIATION> 3,287,778
<TOTAL-ASSETS> 2,759,651
<CURRENT-LIABILITIES> 568,674
<BONDS> 5,323,658
0
0
<COMMON> 0
<OTHER-SE> (5,348,332)
<TOTAL-LIABILITY-AND-EQUITY> 2,759,651
<SALES> 0
<TOTAL-REVENUES> 122,578
<CGS> 63,082
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,352
<INCOME-PRETAX> 303,094
<INCOME-TAX> 0
<INCOME-CONTINUING> 303,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,094
<EPS-BASIC> 0
<EPS-DILUTED> 25.85
</TABLE>
