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 September 30, 1996
---------------------------------------
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
-----------------------------------------------
DIVERSIFIED HISTORIC INVESTORS IV
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2440837
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Suite 500, 1521 Locust Street, Philadelphia, PA 19102
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 735-5001
-------------------
N/A
- ----------------------------------------------------------------------
(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 - September 30, 1996
(unaudited) and December 31, 1995
Consolidated Statements of Operations - Three Months and
Nine Months Ended September 30 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 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 September 30, 1996, Registrant had total
unrestricted cash of $64,531. This balance is comprised of $3,504
held by the Registrant and $61,027 which is held by the properties in
which the Registrant holds a majority interest. The Registrant
expects that the $61,027 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 September 30, 1996, Registrant had
restricted cash of $180,098 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 September 30, 1996, 52 of the 61
units have been sold with 6 sales occurring in the third 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 has been deferred and is payable
as follows:
(i) $125,000 at the closing of the sale of
the 31st Unit
(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, accordingly, the $125,000
became due. Of such amount, $100,000 has been paid. In April 1996,
the 42nd Unit was sold, and accordingly, payments with respect to the
Remainder commenced. During the first nine months of 1996, $104,521
of the Remainder has been paid to HRI The $25,000 from the first 31
units which has not yet been paid to HRI is included in accounts
payable - related party. The remaining $127,461 related to the sale
of the first 31 units is included in restricted cash. In addition,
HRI is paid a selling commission equal to 3.5% of the selling price of
each Unit. Commissions paid to HRI during the third quarters of 1996
and 1995 were $18,372 and $11,988, 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 third quarter of 1996 and 1995, these expenses were
approximately $26,724 and $32,994, 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 third quarter of 1996, Registrant
incurred a net loss of $80,322 ($9.60 per limited partnership unit)
compared to income of $17,609 ($2.11 per limited partnership unit) for
the same period in 1995. For the first nine months of 1996, the
Registrant incurred a net loss of $83,536 ($9.98 per limited
partnership unit) compared to income of $181,101 ($21.64 per limited
partnership unit) for the same period in 1995.
Rental income decreased $29,510 from $79,595 in
the third quarter of 1995 to $50,085 in the same period in 1996 and
decreased $123,811 from $293,241 for the first nine months of 1995 to
$169,430 in the same period in 1996. The decrease in rental income
for the third quarter and the first nine months of 1995 from the same
periods in 1995 is mainly the result of a decrease at Henderson due to
the sale of Units. Additionally, rental income increased at Brass
Works for the first nine months of 1996 as compared to the same period
in 1995 due to an increase in average occupancy.
Interest income increased $19,388 from $34,378 in
the third quarter of 1995 to $53,766 in the same period in 1996 and
increased $60,377 from $82,159 for the first nine months 1995 to
$142,536 in the same period in 1996. The increase for both the third
quarter and the first nine months of 1996 from the same periods in
1995 is the result of an increase in interest earned on notes
receivable.
Expense for rental operations decreased by $33,855
from $110,463 in the third quarter of 1995 to $76,608 in the same
period in 1996. The decrease for the third quarter from the same
period in 1995 is the result of an overall decrease in operating
expenses at the Henderson due to the sale of Units partially offset by
an increase in commissions, wages and salaries at Locke Mill and an
increase in maintenance expense at Brass Works, as discussed below.
Expense for rental operations decreased by $8,043
from $281,227 for the first nine months 1995 to $273,184 in the same
period in 1996. The decrease for the first nine months of 1996 from
the same period in 1995 is the result of an overall decrease in
operating expenses at the Henderson due to the sale of Units and a
decrease in maintenance expense at Brass Works partially offset by an
increase in commissions, wages and salaries at Locke Mill, as
discussed below.
General and administrative expenses increased
$20,000 from $81,000 for the first nine months 1995 to $101,000 in the
same period in 1996. The increase is due to fees paid in the first
quarter of 1996 to reimburse the General Partner for certain services
rendered. None were paid in 1995.
Depreciation and amortization expense decreased
$17,712 from $47,821 in the third quarter of 1995 to $30,109 in the
same period in 1996 and decreased $39,292 from $140,906 for the first
nine months 1995 to $101,614 in the same period in 1996. The decrease
for the third quarter and the first nine months of 1996 from the same
periods in 1995 is due to the sale of Units at the Henderson
Apartments resulting in a lower balance on which depreciation is
calculated.
Losses incurred during the quarter at the
Registrant's three properties amounted to $36,000, compared to income
of approximately $53,000 for the same period in 1995. Included in the
third quarter of 1996 and 1995 is a loss of $50,000 and a gain of
$89,000, respectively, related to the sale of Units. For the first
nine months of 1996, the Registrant recognized income of $23,000
compared to approximately $280,000 for the same period in 1995.
Included in income in the first nine months of 1996 and 1995 are gains
of $80,000 and $309,000, respectively, related to the sale of Units
In the third quarter of 1996, Registrant incurred
a loss of $27,000 at The Henderson Apartments including $8,000 of
depreciation expense, compared to income of $57,000 in the third
quarter of 1995, including $21,000 of depreciation expense. Included
in the third quarter of 1996 and 1995 is a loss of $50,000 and a gain
of $89,000, respectively, related to the sale of Units. Overall,
exclusive of the loss or gain resulting from the sale of Units, the
property would have recognized income of $20,000 in the third quarter
of 1996 compared to a loss of $32,000 in the same period on 1995. The
increase in net income is the result of an increase in interest income
and an overall decrease in operating expenses partially offset by a
decrease in rental income and an increase in legal fees. The increase
in interest income is the result of an increase in interest earned on
the notes receivable. The decrease in rental income and operating
expenses and the increase in legal fees is due to the sale of Units.
For the first nine months of 1996, Registrant
recognized income of $45,000 at the Henderson Apartments including
$34,000 of depreciation, compared to income of $301,000 for the same
period of 1995, including $70,000 of depreciation expense. Included
in income for the first nine months of 1996 and 1995 are gains of
$80,000 and $309,000, 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 $35,000 for the first nine
months of 1996 compared to $8,000 in the same period on 1995. The
increase in the loss is the result of a decrease in rental income and
an increase in legal fees partially offset by an increase in interest
income and a decrease in operating expenses. The decrease in rental
income and operating expenses and the increase in legal fees is due to
the sale of Units. The increase in interest income is the result of
an increase in interest earned on the notes receivable.
In the third quarter of 1996, Registrant incurred
a loss of $6,000 at the Brass Works, including $12,000 of depreciation
expense, compared to a loss of $4,000 including $12,000 of
depreciation expense in the first quarter of 1995. The increase in
the loss for the third quarter of 1996 from the same period in 1995 is
due to an increase in maintenance expense due to repairs on the
heating unit in the third quarter of 1996.
For the first nine months of 1996, Registrant
incurred a loss of $17,000 at the Brass Works, including $36,000 of
depreciation expense, compared to a loss of $28,000 for the same
period in 1995, including $36,000 of depreciation expense. The
decrease in the loss for the first nine months of 1996 from the same
period in 1995 is due to increase rental income and a decrease in
maintenance expense. Rental income increased due to an increase in
average occupancy in first nine months (87% to 90%) and maintenance
decreased due to deferred maintenance completed in the second quarter
of 1995.
In the third quarter of 1996, Registrant incurred
a loss of $3,000 at the Locke Mill Plaza, including $6,000 of
depreciation expense, compared to income of $0 including $6,000 of
depreciation expense in the third quarter of 1995 and for the first
nine months of 1996, Registrant incurred a loss of $5,000 including
$19,000 of depreciation expense, compared to income of $7,000 for the
same period in 1995, including $19,000 of depreciation expense. The
decrease in net income for both the third quarter and the first nine
months in 1996 from the same periods in 1995 is the result of an
increase in commissions, wages and salaries due to a change in the
management company in September 1995.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
September 30, 1996 December 31, 1995
(Unaudited)
Rental properties, at cost:
Land $ 148,258 $ 297,724
Buildings and improvements 2,851,472 4,246,803
Furniture and fixtures 21,000 21,000
--------- ---------
3,020,730 4,565,527
Less - Accumulated depreciation (965,857) (1,285,912)
--------- ---------
2,054,873 3,279,615
Cash and cash equivalents 64,531 346,511
Restricted cash 180,098 366,524
Notes receivable 3,153,931 2,099,457
Other assets 29,713 3,331
--------- ---------
Total $ 5,483,146 $ 6,095,438
========= =========
Liabilities and Partners' Equity
Liabilities:
Accounts payable:
Trade 15,694 244,984
Related parties 73,273 59,725
Deferred income 47,089 81,777
Tenant security deposits 8,455 13,093
--------- ---------
Total liabilities 144,511 399,579
--------- ---------
Partners' equity 5,338,635 5,695,859
--------- ---------
Total $ 5,483,146 $ 6,095,438
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Three months Nine months
ended June 30, ended June 30,
1996 1995 1996 1995
Revenues:
Rental income $ 50,085 $ 79,595 $169,430 $293,241
(Loss) gain on sale of
units (50,456) 88,920 80,296 308,834
Interest income 53,766 34,378 142,536 82,159
------- ------- ------- -------
Total revenues 53,395 202,893 392,262 684,234
------- ------- ------- -------
Costs and expenses:
Rental operations 76,608 110,463 273,184 281,227
General and
administrative 27,000 27,000 101,000 81,000
Depreciation and
amortization 30,109 47,821 101,614 140,906
------- ------- ------- -------
Total costs and
expenses 133,717 185,284 475,798 503,133
------- ------- ------- -------
Net (loss) income ($ 80,322) $ 17,609 ($ 83,536) $181,101
======= ======= ======= =======
Net (loss) income per
limited partnership unit ($ 9.60) $ 2.11 ($ 9.98) $ 21.64
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Nine months ended
September 30,
1996 1995
Cash flows from operating activities:
Net (loss) income ($83,536) $ 181,101
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Gain on sale of units (80,296) (308,834)
Depreciation and amortization 101,614 140,906
Changes in assets and liabilities:
Decrease (increase) in restricted cash 186,426 (179,132)
Increase in other assets (26,382) (42,560)
Decrease in accounts payable - trade (229,290) (308,513)
Increase (decrease) in accounts payable-
related parties 13,548 (19,239)
(Decrease) increase in deferred income (34,688) 88,428
Decrease in tenant security deposits (4,638) (4,067)
------- -------
Net cash used in operating activities (158,242) (451,910)
------- -------
Cash flows from investing activities:
Capital expenditures (108,120) (73,097)
Decrease in notes receivable 369,185 13,916
Proceeds from sale of units (111,113) 411,610
------- -------
Net cash provided by investing activities 149,952 352,429
------- -------
Cash flows from financing activities:
Distributions to partners (273,690) (291,206)
------- -------
Net cash used in financing activities (273,690) (291,206)
------- -------
Decrease in cash and cash equivalents (281,980) (390,687)
Cash and cash equivalents at beginning of period 346,511 651,279
------- -------
Cash and cash equivalents at end of period $ 64,531 $ 260,592
======= =======
Supplemental Schedule of Non-Cash Investing Activities:
Net assets transferred $1,395,331 $ 843,441
Notes receivable received from sale of Units 1,609,500 977,525
The accompanying notes are an integral part of these financial statements.
<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.
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 September 30, 1996.
<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: December 16, 1996 DIVERSIFIED HISTORIC INVESTORS IV Income Fund
-------------------
By: Dover Historic Advisors III, General Partner
By: /s/ Gerald Katzoff
------------------
GERALD KATZOFF,
Partner
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810623
<NAME> DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 64,531
<SECURITIES> 0
<RECEIVABLES> 3,153,931
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,713
<PP&E> 3,020,730
<DEPRECIATION> 965,857
<TOTAL-ASSETS> 5,483,146
<CURRENT-LIABILITIES> 88,967
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,338,635
<TOTAL-LIABILITY-AND-EQUITY> 5,483,146
<SALES> 0
<TOTAL-REVENUES> 392,262
<CGS> 0
<TOTAL-COSTS> 273,184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (83,536)
<INCOME-TAX> 0
<INCOME-CONTINUING> (83,536)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,536)
<EPS-PRIMARY> (9.98)
<EPS-DILUTED> 0
</TABLE>