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, 1996
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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 33-11907
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DIVERSIFIED HISTORIC INVESTORS IV
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2440837
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Suite 500, 1521 Locust Street, Philadelphia, PA 19102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 735-5001
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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 ___ No _X_
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - March 31, 1996 (unaudited) and
December 31, 1995
Consolidated Statements of Operations - Three Months Ended March
31, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows - Three Months Ended March
31, 1996 and 1995 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of March 31, 1996, Registrant had total unrestricted cash
of $169,462. This balance is comprised of $3,869 held by the Registrant and
$165,593 which is held by the properties in which the Registrant holds a
majority interest. The Registrant expects that the $165,593 plus the cash
generated from operations at each property and sales of the units at Commerce
Mall General Partnership ("CMGP") will be sufficient to fund the operating
expenses of the properties. The Registrant is not aware of any additional
sources of liquidity.
As of March 31, 1996, Registrant had restricted cash of
$262,783 consisting primarily of funds held as security deposits, replacement
reserves and escrows for taxes and insurance. As a consequence of the
restrictions as to use, Registrant does not deem these funds to be a source of
liquidity.
During 1994, the Registrant converted the property
(Henderson Riverfront Apartments) owned by 700 Commerce Mall General
Partnership, a Louisiana general partnership in which the Registrant owns a 95%
interest, into condominiums ("the Units") and began offering the Units for sale.
As of March 31, 1996, 39 of the 61 units have been sold with 6 sales occurring
in the first quarter of 1996.
Historic Restoration Inc. ("HRI"), the Registrant's
co-general partner in CMGP, is to be paid a 10% conversion fee (the "Conversion
fee") on the sale of any Unit at or above the agreed-upon sales price. Such fee
is payable upon the closing of the sale of each Unit, provided that the
Conversion Fee from the sale of the first 30 units shall be deferred and paid as
follows:
(i) $125,000 at the closing of the 31st unit
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(ii) the remaining portion (the "Remainder") at the rate
of 5% of the Remainder at the closing of the sale
of each of the 42nd through the 61st Units
In October 1995, the 31st unit was sold and the $125,000 was earned by HRI of
which $100,000 has been paid to HRI. The remaining $228,422 related to the sale
of the first 31 units is included in restricted cash. The conversion fee from
the sale of unit 39 is included in accounts payable - related party as of March
31, 1996 along with $25,000 from the first 31 units which has not yet been paid
to HRI. In addition, HRI will be paid a selling commission equal to 3.5% of the
selling price of each Unit. Commissions paid to HRI during the first quarters of
1996 and 1995 were $18,916 and $15,698, respectively.
(2) Capital Resources
Due to the relatively recent rehabilitations of the
properties, any capital expenditures needed are generally replacement items and
are funded out of cash from operations or replacement reserves, if any. At the
Henderson Apartments, funds will be necessary during the selling period for
improvements and repairs to common areas, individual unit upgrades, marketing,
selling costs and fees. During the first quarter of 1996 and 1995, these
expenses were approximately $25,983 and $38,158, respectively, and were funded
by sales proceeds. It is anticipated that any additional funds needed will be
available from the proceeds of sales. Other than the above, the Registrant is
not aware of any factors which would cause historical capital expenditure 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.
(3) Results of Operations
During the first quarter of 1996, Registrant recognized
income of $5,992 ($.72 per limited partnership unit) compared to income of
$120,881 ($14.44 per limited partnership unit) for the same period in 1995.
Rental income decreased $48,542 from $114,024 in the first
quarter of 1995 to $65,482 in the same period in 1996. The decrease in rental
income is the result of a decrease in rental income at Henderson due to the sale
of Units, partially offset by an increase at the Brass Works due to an increase
in average occupancy.
Interest income increased $34,192 from $21,458 in the first
quarter of 1995 to $55,650 in the same period in 1996. The increase is the
result of increase in interest earned on notes receivable.
Expense for rental operations decreased by $9,119 from
$98,859 in the first quarter of 1995 to $89,740 in the same period in 1996. The
increase is the result of an increase in commissions and wages and salaries at
Locke Mill due to a change in the management company in September 1996, an
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<PAGE>
increase in commissions at Brass Works due to the increase in average occupancy
at the property and an increase in marketing expenses at the Henderson due to
the sale of Units.
Expense for general and administrative expenses increased by
$20,000 from $27,000 in the first quarter of 1996 to $47,000 in the same period
in 1996. The increase is due to General Partner fees paid in the first quarter
of 1996. None were paid in the first quarter of 1995.
Depreciation and amortization expense decreased $5,889 from
$43,110 in the first quarter of 1995 to $37,221 in the same period in 1996. The
decrease is due to the sale of Units at Henderson resulting in a lower balance
on which depreciation is calculated.
Income recognized during the quarter at the Registrant's
three properties amounted to $37,000, compared to income of approximately
$148,000 for the same period in 1995. Included in income in the first quarter of
1996 and 1995 are extraordinary gains of $59,000 and $154,000, respectively,
related to the sale of Units.
In the first quarter of 1996, Registrant recognized income
of $51,000 at The Henderson Apartments including $15,000 of depreciation,
compared to income of $158,000 in the first quarter of 1995, including $25,000
of depreciation expense. Included in income in the first quarter of 1996 and
1995 are extraordinary gains of $59,000 and $154,000, respectively, related to
the sale of Units. Overall, exclusive of the gain resulting from the sale of
Units, the property would have recognized a loss of $8,000 in the first quarter
of 1996 compared to income of $4,000 in the same period on 1995. The decrease in
net income is a result of a decrease in rental income and an increase in
marketing expenses partially offset by an increase in interest income. The
decrease in rental income and the increase in marketing expenses is due to the
sale of Units The increase in interest income is the result of increase in
interest earned on the notes receivable.
In the first quarter of 1996, Registrant incurred a loss of
$12,000 at the Brass Works, including $12,000 of depreciation expense, compared
to a loss of $15,000 including $12,000 of depreciation expense in the first
quarter of 1995. The decrease in the loss is due to an increase in average
occupancy partially offset by an increase in commissions due to the increase in
occupancy. Registrant anticipates that operating results in the following
quarters will be similar to those experienced in the first quarter of 1996.
In the first quarter of 1996, Registrant incurred a loss of
$2,000 at the Locke Mill Plaza, including $6,000 of depreciation expense,
compared to income of $5,000 including $6,000 of depreciation expense in the
first quarter of 1995. The decrease in net income is the result of an increase
in commissions and wages and salaries due to a change in the management company
in September 1995. Registrant anticipates that operating results in the
following quarters will be comparable to those experienced in the first quarter
of 1996.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
---------------------------------------------
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
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Assets
------
March 31, 1996 December 31, 1995
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(Unaudited)
Rental properties, at cost:
Land $ 244,979 $ 297,724
Buildings and improvements 3,745,639 4,246,803
Furniture and fixtures 21,000 21,000
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4,011,618 4,565,527
Less - Accumulated depreciation (1,178,920) (1,285,912)
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2,832,698 3,279,615
Cash and cash equivalents 169,462 346,511
Restricted cash 262,783 366,524
Notes receivable 2,405,481 2,099,457
Other assets 194,723 3,331
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Total $ 5,865,147 $ 6,095,438
=========== ===========
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Accounts payable:
Trade 24,607 244,984
Related parties 46,825 59,725
Deferred income 81,777 81,777
Tenant security deposits 10,083 13,093
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Total liabilities 163,292 399,579
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Partners' equity 5,701,855 5,695,859
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Total $ 5,865,147 $ 6,095,438
=========== ===========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
---------------------------------------------
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
1996 1995
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Revenues:
Rental income $ 65,482 $114,024
Gain on sale of units 58,821 154,368
Interest income 55,650 21,458
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Total revenues 179,953 289,850
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Costs and expenses:
Rental operations 89,740 98,859
General and administrative 47,000 27,000
Depreciation and amortization 37,221 43,110
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Total costs and expenses 173,961 168,969
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Net income $ 5,992 $120,881
======== ========
Net income per limited partnership unit $ .72 $ 14.44
======== ========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
---------------------------------------------
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three months ended
March 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 5,992 $ 120,881
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on sale of units (58,821) (154,368)
Depreciation and amortization 37,221 43,110
Changes in assets and liabilities:
Decrease (increase) in restricted cash 103,741 (14,465)
(Increase) decrease in other assets (191,392) 20,705
Decrease in accounts payable - trade (220,377) (305,674)
Decrease in accounts payable - related parties (12,900) (2,606)
(Decrease) increase in tenant security deposits (3,010) 4,627
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Net cash used in operating activities (339,546) (287,790)
--------- ---------
Cash flows from investing activities:
Capital expenditures (25,983) (17,484)
Decrease in notes receivable 93,376 4,125
Proceed from sale of units 95,104 141,799
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Net cash provided by investing activities 162,497 128,440
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Cash flows from financing activities:
Distributions to partners -0- (291,206)
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Net cash used in financing activities -0- (291,206)
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Decrease in cash and cash equivalents (177,049) (450,556)
Cash and cash equivalents at beginning of period 346,511 651,279
--------- ---------
Cash and cash equivalents at end of period $ 169,462 $ 200,723
========= =========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
---------------------------------------------
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified Historic
Investors IV Income Fund (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, 1995.
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.
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<PAGE>
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 Number Document
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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, 1996.
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<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 26, 1996 DIVERSIFIED HISTORIC INVESTORS IV Income Fund
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By: Dover Historic Advisors III, General Partner
By: /s/ Gerald Katzoff
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GERALD KATZOFF,
Partner
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810623
<NAME> DHI IV
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 169,462
<SECURITIES> 0
<RECEIVABLES> 2,405,481
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 457,506
<PP&E> 4,011,618
<DEPRECIATION> 1,178,920
<TOTAL-ASSETS> 5,865,147
<CURRENT-LIABILITIES> 163,292
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,701,855
<TOTAL-LIABILITY-AND-EQUITY> 5,865,147
<SALES> 0
<TOTAL-REVENUES> 179,953
<CGS> 0
<TOTAL-COSTS> 136,740
<OTHER-EXPENSES> 37,221
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,992
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,992
<EPS-PRIMARY> .72
<EPS-DILUTED> 0
</TABLE>
