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 March 31, 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
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2312037
- ------------------------------- -------------------
(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 - March 31, 1999 (unaudited)
and December 31, 1998
Consolidated Statements of Operations - Three Months
Ended March 31, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 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 March 31, 1999, Registrant had cash of
approximately $8,861. 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 March 31, 1999, Registrant had restricted
cash of $43,944 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 first quarter of 1999, Registrant
incurred a net loss of $216,870 ($18.50 per limited partnership unit)
compared to a net loss of $219,378 ($18.71 per limited partnership
unit) for the same period in 1998.
Rental income increased $9,327 from $116,677 in
the first quarter of 1998 to $126,004 in the same period in 1999. The
increase resulted from an increase in rental income at Wistar Alley
due to an increase in average occupancy (94% to 97%), an increase at
Smythe Stores due to an increase in the average occupancy (89% to
100%) and an increase at Third Quarter due to an increase in the
average occupancy (90% to 94%).
Expense for rental operations increased by $7,285
from $101,673 in the first quarter of 1998 to $108,958 in the same
period in 1999. Expenses for rental operations increased due a slight
overall increase in the operating expenses at Third Quarter and an
increase in commissions expense at Wistar Alley due to a higher
turnover of apartment units.
Losses incurred during the quarter at the
Registrant's three properties amounted to $190,000, compared to a loss
of approximately $193,000 for the same period in 1998.
In the first quarter of 1999, Registrant incurred
a loss of $91,000 at the Smythe Stores Condominium complex including
$19,000 of depreciation expense, compared to a loss of $95,000 in the
first quarter of 1998, including $18,000 of depreciation expense. The
decrease in the loss from the first quarter of 1998 to the same period
in 1999 is due to an increase in rental income due to an increase in
the average occupancy (89% to 100%).
In the first quarter of 1999, Registrant incurred
a loss of $55,000 at Third Quarter Apartments, including $18,000 of
depreciation expense, compared to a loss of $55,000 including $18,000
of depreciation expense in the first quarter of 1998. Although there
were no significant changes at the property from the first quarter of
1998 to the same period in 1999, there was an increase in rental
income due to an increase in average occupancy (90% to 94%) offset by
an overall increase in operating expenses.
In the first quarter of 1999, Registrant incurred
a loss of $44,000 at Wistar Alley, including $22,000 of depreciation
expense, compared to a loss of $43,000 including $22,000 of
depreciation expense in the first quarter of 1998. The increase in
the loss from the first quarter of 1998 to the same period in 1999 is
mainly the result of an increase in commission expense offset by an
increase in rental income due to an increase in the average occupancy
(94% to 97%). Commissions expense increased due to a higher turnover
of apartment units.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
March 31, 1999 December 31, 1998
(Unaudited)
Rental properties, at cost:
Land $ 310,833 $ 310,833
Buildings and improvements 5,721,048 5,721,049
Furniture and fixtures 139,377 139,377
--------- ---------
6,171,258 6,171,259
Less - Accumulated depreciation (3,348,854) (3,290,172)
--------- ---------
2,822,404 2,881,087
Cash and cash equivalents 8,861 12,884
Restricted cash 43,944 73,440
Accounts receivable 17,341 16,782
Other assets (net of amortization of
$30,510 at March 31, 1999 and
December 31, 1998) 0 0
--------- ---------
Total $2,892,550 $2,984,193
========= =========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $5,879,538 $5,879,538
Accounts payable:
Trade 538,858 507,524
Related parties 408,624 399,548
Interest payable 1,663,191 1,573,798
Accrued liabilities 8,542 14,343
Tenant security deposits 45,223 43,998
--------- ---------
Total liabilities 8,543,976 8,418,749
--------- ---------
Partners' equity (5,651,426) (5,434,556)
--------- ---------
Total $2,892,550 $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 Ended March 31, 1999 and 1998
(Unaudited)
Three months Three months
Ended Ended
March 31, March 31,
1999 1998
Revenues:
Rental income $ 126,004 $ 116,677
Interest income 634 240
-------- --------
Total revenues 126,638 116,917
-------- --------
Costs and expenses:
Rental operations 108,958 101,673
General and administrative 17,460 17,460
Interest 158,408 159,033
Depreciation and amortization 58,682 58,129
Total costs and expenses 343,508 336,295
-------- --------
Net loss ($ 216,870) ($ 219,378)
======== ========
Net loss per limited partnership unit ($ 18.50) ($ 18.71)
======== ========
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 Three Months Ended March 31, 1999 and 1998
(Unaudited)
Three months ended
March 31,
1999 1998
Cash flows from operating activities:
Net loss ($ 225,742) ($ 219,378)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 58,682 58,129
Changes in assets and liabilities:
Decrease in restricted cash 29,496 24,557
Increase in accounts receivable (559) (1,663)
Increase in accounts payable - trade 40,205 38,013
Increase in accounts payable - related parties 9,076 9,076
Increase in interest payable 89,394 91,238
(Decrease)increase in accrued liabilities (5,800) 2,014
Increase in tenant security deposits 1,225 1,555
-------- --------
Net cash (used in) provided by operating activities (4,023) 3,541
-------- --------
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 0 273
-------- --------
Net cash provided by financing activities 0 273
-------- --------
(Decrease)increase in cash and cash equivalents (4,023) 3,814
Cash and cash equivalents at beginning of period 12,884 710
-------- --------
Cash and cash equivalents at end of period $ 8,861 $ 4,524
======== ========
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 of the
Registrant, and notes thereto, 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 March 31, 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: June 4, 1999 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 8,861
<SECURITIES> 0
<RECEIVABLES> 17,341
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,171,258
<DEPRECIATION> 3,348,854
<TOTAL-ASSETS> 2,892,550
<CURRENT-LIABILITIES> 538,858
<BONDS> 5,879,538
0
0
<COMMON> 0
<OTHER-SE> (5,651,426)
<TOTAL-LIABILITY-AND-EQUITY> 2,892,550
<SALES> 0
<TOTAL-REVENUES> 126,004
<CGS> 0
<TOTAL-COSTS> 108,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 01
<INTEREST-EXPENSE> 158,408
<INCOME-PRETAX> (216,870)
<INCOME-TAX> 0
<INCOME-CONTINUING> (216,870)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (216,870)
<EPS-BASIC> (18.50)
<EPS-DILUTED> 0
</TABLE>
