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, 2000
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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
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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
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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
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000 (unaudited)
and December 31, 1999
Consolidated Statements of Operations - Three Months
Ended March 31, 2000 and 1999 (unaudited)
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999 (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, 2000, Registrant had cash of
approximately $5,825. 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, 2000, Registrant had restricted cash
of $42,443 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 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.
Since the lenders have agreed either to forebear
from taking any foreclosure action as long as cash flow payments
are made, to accrue all debt service in lieu of payment, or have
(in the case of Third Quarter) not moved to declare a default for
a substantial period of time after the mortgage due date, the
Registrant believes it is appropriate to continue presenting its
financial statements on a going concern basis.
(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 believes that
historical capital expenditure levels are 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 2000, Registrant
recognized net income of $69,238 ($5.90 per limited partnership
unit) compared to a net loss of $216,870 ($18.49 per limited
partnership unit) for the same period in 1999.
Rental income decreased $6,158 from $126,004 in the
first quarter of 1999 to $119,846 in the same period in 2000.
The decrease resulted from a decrease in rental income at the
Smythe Stores Condominium complex, partially offset by an
increase in rental income at both Third Quarter and Wistar Alley.
Rental income decreased at Smythe Stores due to the sale of
condominium units. The increase in rental income at Third
Quarter is due to an increase in average occupancy (94% to 100%)
and at Wistar Alley due to an increase in average rental rates.
Expenses for rental operations increased by $8,213
from $108,958 in the first quarter of 1999 to $117,171 in the
same period in 2000. Expenses for rental operations increased
due to an increase in maintenance expense at Wistar Alley,
partially offset by an decrease in maintenance expense at Smythe
Stores Condominium complex. Maintenance expense increased at
Wistar Alley due to painting of apartment units. The decrease in
maintenance expense at Smythe Stores Condominium complex is the
result of the sale of condominium units.
Interest expense decreased $50,029 from $158,408 in
the first quarter of 1999 to $108,379 in the same period in 2000.
The decrease is due to the sale of the condominium units at the
Smythe Stores the net proceeds of which were used to pay down the
first mortgage.
Income recognized during the first quarter at the
Registrant's three properties was approximately $96,000, compared
to a loss of approximately $190,000 for the same period in 1999.
In the first quarter of 2000, Registrant recognized
a gain of $198,000 at the Smythe Stores Condominium complex
including $19,000 of depreciation expense, compared to a loss of
$91,000 in the first quarter of 1999, including $19,000 of
depreciation expense. Included in income in the first three
months of 2000 is a gain of $39,328 related to the sale of a
condominium unit and an extraordinary gain of $211,136 for the
extinguishment of debt related to the sale. The extraordinary
gain represents the excess of the debt extinguished by the sale
of the condominium unit over the fair market value of the unit.
Overall, exclusive of the gains, the property would have
recognized a loss of $53,000 for the first three months of 2000
compared to a loss of $91,000 for the same period in 1999. The
decrease in the loss from the first quarter of 1999 to the same
period of 2000 is due to a decrease in interest and maintenance
expense partially offset by a decrease in rental income.
Interest expense decreased due to the sale of condominium units
the net proceeds of which were used to pay down the first
mortgage. The decrease in maintenance expense and rental income
is the result of the sale of condominium units.
In the first quarter of 2000, Registrant incurred a
loss of $49,000 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 1999.
The decrease in the loss from the first quarter of 1999 to the
same period in 2000 is the result of an increase in rental income
due to an increase in average occupancy (94% to 100%).
In the first quarter of 2000, Registrant incurred a
loss of $53,000 at Wistar Alley, including $22,000 of
depreciation expense, compared to a loss of $44,000 including
$22,000 of depreciation expense in the first quarter of 1999.
The increase in the loss from the first quarter of 1999 to the
same period in 2000 is due to an increase in maintenance expense
partially offset by an increase in rental income. Maintenance
expense increased due to the painting of apartment units. The
increase in rental income is due to an increase in average rental
rates.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
March 31, 2000 December 31, 1999
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(Unaudited)
Rental properties, at cost:
Land $ 303,353 $ 305,223
Buildings and improvements 4,910,677 5,113,269
Furniture and fixtures 125,077 127,333
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5,339,107 5,545,825
Less - accumulated depreciation (3,044,912) (3,158,976)
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2,294,195 2,386,849
Cash and cash equivalents 5,825 11,813
Restricted cash 42,443 74,163
Accounts receivable 4,941 16,969
Other assets 6,033 1,623
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Total $2,353,437 $2,491,417
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Liabilities and Partners' Equity
Liabilities:
Debt obligations $4,301,775 $4,586,076
Accounts payable:
Trade 614,165 596,181
Related parties 445,434 436,357
Interest payable 1,914,349 1,863,947
Accrued liabilities 6,834 8,619
Tenant security deposits 39,723 38,318
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Total liabilities 7,322,280 7,529,498
Partners' deficit (4,968,843) (5,038,081)
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Total $2,353,437 $2,491,417
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The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
2000 1999
Revenues: ------ ------
Rental income $119,846 $126,004
Gain on sale 39,329 0
Interest income 755 634
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Total revenues 159,930 126,638
Costs and expenses:
Rental operations 117,171 108,958
General and administrative 17,460 17,460
Interest 108,379 158,408
Depreciation and amortization 58,818 58,682
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Total costs and expenses 301,828 343,508
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Loss before extraordinary item (141,898) (216,870)
Extraordinary gain on
extinguishment of debt 211,136 0
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Net income (loss) $ 69,238 ($216,870)
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Net loss per limited partnership unit
Loss before extraordinary item (12.10) (18.49)
Extraordinary gain 18.00 0
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$ 5.90 ($ 18.49)
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The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
2000 1999
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Cash flows from operating activities:
Net income (loss) $ 69,238 ($216,870)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Gain on sale of unit (39,329) 0
Extraordinary gain on extinguishment of debt (211,136) 0
Depreciation and amortization 58,818 58,682
Changes in assets and liabilities:
Decrease in restricted cash 31,720 29,496
Decrease (increase) in accounts receivable 12,028 (559)
Increase in other assets (4,410) 0
Increase in accounts payable - trade 17,984 31,334
Increase in accounts payable -
related parties 9,077 9,076
Increase in interest payable 50,402 89,393
Decrease in accrued liabilities (1,785) (5,800)
Increase in tenant security deposits 1,405 1,225
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Net cash used in operating activities (5,988) (4,023)
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Cash flows from investing activities:
Proceeds from sale of unit 284,302 0
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Net cash provided by investing activities 284,302 0
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Cash flows from financing activities:
Repayment of debt (284,302) 0
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Net cash used in financing activities (284,302) 0
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Decrease in cash and cash equivalents (5,988) (4,023)
Cash and cash equivalents at
beginning of period 11,813 12,884
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Cash and cash equivalents at end of period $ 5,825 $ 8,861
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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 on Form 10-K and notes thereto of the
Registrant for the year ended December 31, 1999.
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 a 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 Number Document
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, 2000.
<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: October 25, 2000 DIVERSIFIED HISTORIC INVESTORS
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By: Diversified Historic Advisors,
General Partner
By: EPK, Inc., Partner
By: /s/ spencer Wertheimer
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SPENCER WERTHEIMER,
President and Treasurer
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