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
---------------------------------------
[ ] 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 33-15597
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DIVERSIFIED HISTORIC INVESTORS V
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2479468
- ------------------------------- ------------------------
(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 X No
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - September 30, 1996
(unaudited) and December 31, 1995
Consolidated Statements of Operations - For the Three
Months and Nine Months Ended September 30, 1996 and 1995
(unaudited)
Consolidated Statements of Cash Flows - For the 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 cash of
$30,427. Such funds are expected to be used to pay liabilities and
general and administrative expenses of Registrant, and to fund cash
deficits of the properties. 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
loan modifications with the various lenders in order to remain current
on all obligations. The Registrant is not aware of any additional
sources of liquidity.
On October 10, 1996, one of the Registrant's
Ventures, St. Mary's Market Partnership sold its property to Residence
Inn by Marriott, Inc. The property was sold for $6,270,000. After
payment of the existing first loan balance of $4,432,356 and other
selling costs, the net proceeds of the sale are approximately
$1,171,000
As of September 30, 1996, Registrant had restricted
cash of $151,960 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.
(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. 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. In the first nine months of
1996, expenditures for capital items were $133,305 at the Radisson
Redick (including the purchase of a new limousine) and $17,872 at the
St. Mary's Market.
The Registrant is in the process of negotiating an
agreement to extend the maturity date on the outstanding Radisson
Redick bonds that matured on November 1, 1996. If no agreement can be
reached, it is expected that the property will be foreclosed by the
lender. Should the foreclosure occur, it is not expected to have a
significant impact on the Registrant's liquidity, as the property has
generated little or no cash flow.
(3) Results of Operations
During the third quarter of 1996, Registrant
incurred a net loss of $449,989 ($39.99 per limited partnership unit)
compared to a net loss of $159,956 ($14.21 per limited partnership
unit) for the same period in 1995. For the first nine months of 1996,
Registrant incurred a loss of $887,952 ($78.90 per limited partnership
unit) compared to a net loss of $446,941 ($39.71 per limited
partnership unit) for the same period in 1995.
Rental and hotel income combined decreased $278,735
from $979,250 in the third quarter of 1995 to $700,515 in the same
period in 1996. The decrease resulted mainly from a decrease in hotel
income of $136,226 and a decrease of $142,959 in rental income. The
decrease in hotel income is due to a decrease in the average occupancy
(70% to 65%) and a decrease in average room rates ($96.19 to $92.01),
as discussed below. The decrease in rental income is mainly
attributable to an overall decrease in occupancy at St. Mary's Market
due to the vacating of units as leases expired in anticipation of the
sale of the property.
Rental and hotel income decreased $339,357 from
$2,869,649 for the first nine months of 1995 to $2,530,292 for the
same period of 1996. This decrease is due to a net decrease of
$180,546 in rental income and a decrease in hotel income of $158,811.
The decrease in hotel income is due to a decrease in the average
occupancy (73% to 67%) and a decrease in average room rates ($95.17 to
$93.47), as discussed below. The decrease in rental income is mainly
attributable to an overall decrease in occupancy at St. Mary's Market,
as discussed below, partially offset by an increase in rental income
at the Lofts at Red Hill due to increases in the average rental rates
of the units.
Expense for rental operations decreased by $24,775
from $183,823 in the third quarter of 1995 to $159,048 in the same
period in 1996 and decreased by $39,223 from $546,330 for the first
nine months of 1996 to $507,107 for the same period in 1996 due to an
overall decrease in operating expenses at St. Mary's Market, as
discussed below. Hotel operations expense increased $30,306 from
$538,897 in the third quarter of 1995 to $569,203 in the same period
in 1996 and increased $147,963 from $1,507,122 for the first nine
months of 1995 to $1,655,085 in the same period in 1996 due to an
increase in rooms expense, an increase in professional fees incurred,
and an increase in wages and salaries, as discussed below.
Interest expense increased $3,992 from $185,261 in
the third quarter of 1995 to $189,253 in the same period in 1996 and
decreased $22,694 from $580,062 for the first nine months of 1995 to
$557,368 for the same period in 1996. The decrease from the first
nine months of 1995 to the same period in 1996 is the result of a
decrease in the interest rate on the outstanding bonds with respect to
the Radisson Redick from 5.42% for the first nine months of 1995 to
4.59% in the same period in 1996.
Depreciation and amortization expense increased
$1,650 from $207,572 in the third quarter of 1995 to $209,222 in the
same period in 1996 and increased $16,334 from $611,334 for the first
nine months of 1995 to $627,668 for the same period in 1996. The
increase from the first nine months of 1995 to the same period in 1996
is the result of the amortization of loan costs incurred in connection
with the bond refinancing at Radisson Redick in February 1995.
Losses incurred during the third quarter at the
Registrant's three properties amounted to $425,000, compared to
approximately $135,000 for the same period in 1995. For the first
nine months of 1996 the Registrant's three properties recognized a
loss of $815,000 compared to approximately $374,000 for the same
period in 1995.
In the third quarter of 1996, Registrant recognized
a loss of $208,000 at the Radisson Redick Hotel including $134,000 of
depreciation and amortization expense, compared to a loss of $48,000
in the third quarter of 1995, including $134,000 of depreciation and
amortization expense. The loss from the third quarter of 1995 to the
third quarter of 1996 increased due to an decrease in rooms revenue
and an increase in rooms expense, wages and salaries expense and
professional fees. The decrease in rooms revenue is the result of a
decrease in occupancy (70% to 65%) and a decrease in average room
rates ($96.19 to $92.01) resulting from the opening of a new hotel in
the area served by the Registrant and, accordingly, an increase in
competition. Rooms expense increased due to an increase in
commissions expense in an effort to increase occupancy, professional
fees increased due to fees paid to a consulting firm in an effort to
compete with the new hotel and wages and salaries increased due to
cost of living raises given to employees.
For the first nine months of 1996, Registrant
recognized a loss of $475,000 at the Radisson Redick Hotel including
$402,000 of depreciation and amortization expense compared to a loss
of $190,000 for the same period in 1995, including depreciation
expense of $391,000. The loss from the first nine months of 1995 to
the first nine months of 1996 increased due to a decrease in rooms
revenue combined with an increase in rooms expense, wages and salaries
expense, professional fees and amortization expense partially offset
by a decrease in interest expense. The decrease in rooms revenue is
the result of an decrease in average occupancy (73% to 67%) and a
decrease in average room rates ($95.17 to $93.47) as a result of the
increased competition referred to above. Rooms expense increased due
to an increase in commissions expense in an effort to increase
occupancy and the purchase of new uniforms for the bellman,
professional fees increased due to fees paid to a consulting firm in
an effort to compete with the new hotel and wages and salaries
increased due to cost of living raises given to employees.
Amortization increased due the amortization of loan fees incurred in
connection with the refinancing of the bonds in February 1995.
Interest expense decreased due to a decrease in the interest rate from
an average of 5.42% for the first nine months of 1995 to 4.59% in the
same period in 1996.
In the third quarter of 1996, Registrant incurred a
loss of $198,000 at the St. Mary's Market, including $61,000 of
depreciation expense, compared to a loss of $67,000 including $59,000
of depreciation expense in the second quarter of 1995 and for the
first nine months of 1996, Registrant incurred a loss of $308,000 at
the St. Mary's Market, including $182,000 of depreciation expense,
compared to a loss of $146,000 for the first nine months of 1995,
including depreciation expense of $177,000. The increased loss for
both the third quarter and the first nine months of 1996 from the same
periods in 1995 is the result of a decrease in rental income due to a
decrease in occupancy and an overall decrease in operating expenses.
Occupancy and overall operating expenses decreased due to the vacating
of units as leases expired in anticipation of the sale of the
property.
In the third quarter of 1996, Registrant incurred a
loss of $19,000 at the Lofts at Red Hill, including $14,000 of
depreciation expense, compared to a loss of $20,000 including $14,000
of depreciation expense in the third quarter of 1995. The decrease in
the loss from the third quarter of 1995 to the same period in 1996 is
the result of an overall decrease in operating expenses due to
operational efficiencies achieved at the property.
For the first nine months of 1996, Registrant
incurred a loss of $32,000 at the Lofts at Red Hill, including $43,000
of depreciation expense compared to a loss of $38,000 for the first
nine months of 1995 including depreciation expense of $43,000. The
decrease in the loss from the first nine months of 1995 to the same
period in 1996 is the result of an increase in rental income due to an
increase in the average rental rates of the units and an overall
decrease in operating expenses due to operational efficiencies
achieved at the property
<PAGE>
<TABLE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and December 31, 1995
<CAPTION>
Assets
September 30, 1996 December 31, 1995
(Unaudited)
------------------ -----------------
Rental properties, at cost:
<S> <C> <C>
Land $ 1,133,669 $ 1,133,669
Buildings and improvements 17,040,457 17,022,586
Furniture and fixtures 1,484,672 1,351,367
---------- ----------
19,658,798 19,507,622
Less - Accumulated depreciation (7,039,671) (6,514,441)
---------- ----------
12,619,127 12,993,181
Cash and cash equivalents 30,427 40,854
Restricted cash 151,960 241,236
Accounts and notes receivable 150,162 87,647
Other assets (net of amortization of
$293,250 and $190,812 at September 30,
1996 and December 31, 1995, respectively).
67,081 154,367
---------- ----------
Total $13,018,757 $13,517,285
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $10,422,453 $10,436,965
Accounts payable:
Trade 686,630 327,107
Related parties 98,588 13,426
Taxes 24,608 40,324
Interest payable 17,530 6,877
Accrued liabilities 81,664 73,007
Tenant security deposits 28,813 72,156
---------- ----------
Total liabilities 11,360,286 10,970,862
Partners' equity 1,658,471 2,546,423
---------- ----------
Total $13,018,757 $13,517,285
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
1996 1995 1996 1995
-------- -------- -------- --------
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 136,911 $ 279,870 $ 732,959 $ 913,505
Hotel income 563,604 699,830 1,797,333 1,956,144
Interest income 222 537 984 1,421
------- ------- --------- ---------
Total revenues 700,737 979,787 2,531,276 2,871,070
------- ------- --------- ---------
Costs and expenses:
Rental operations 159,048 183,823 507,107 546,330
Hotel operations 569,203 538,897 1,655,085 1,507,122
General and
administrative 24,000 24,190 72,000 73,163
Interest 189,253 185,261 557,368 580,062
Depreciation and
amortization 209,222 207,572 627,668 611,334
--------- --------- --------- ---------
Total costs and
expenses 1,150,726 1,139,743 3,419,228 3,318,011
--------- --------- --------- ---------
Net loss ($ 449,989) ($ 159,956) ($ 887,952) ($ 446,941)
========= ========= ========= =========
Net loss per limited
partnership unit ($ 39.99) ($ 14.21) ($ 78.90) ($ 39.71)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<CAPTION>
Nine months ended
September 30,
1996 1995
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net loss ($ 887,952) ($ 446,941)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 627,668 611,334
Changes in assets and liabilities:
Decrease (increase) in restricted cash 89,276 (6,611)
Increase in accounts receivable (62,515) (41,079)
Increase in other assets (16,152) (255,240)
Increase in accounts payable - trade 359,523 59,274
Increase in accounts payable - related parties 85,162 9,218
Decrease in accounts payable - taxes (15,716) (13,442)
Increase (decrease) in interest payable 10,653 (35,456)
Increase (decrease) in accrued liabilities 8,657 (19,714)
(Decrease) increase in tenant security deposits (43,343) 3,223
------- --------
Net cash provided by (used in) operating activities: 155,261 (135,434)
------- --------
Cash flows from investing activities:
Capital expenditures (151,176) (60,882)
------- --------
Net cash used in investing activities: (151,176) (60,882)
------- --------
Cash flows from financing activities:
Proceeds from debt financings -0- 221,555
Principal payments (14,512) (79,250)
------- --------
Net cash (used in) provided by financing activities: (14,512) 142,305
------- --------
Decrease in cash and cash equivalents (10,427) (54,011)
Cash and cash equivalents at beginning of period 40,854 84,643
------- --------
Cash and cash equivalents at end of period $ 30,427 $ 30,632
======= ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $546,714 $615,518
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors V (the "Registrant") 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 fiscal 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 5. Other Information
The pro forma financial statements on the following pages
present the impact of the sale of the property owned by St. Mary's
Market Partnership as follows: (1) the pro forma consolidated balance
sheet as of September 30, 1996, and (2) the pro forma consolidated
statements of operations for the year ended December 31, 1995 and the
nine months ended September 30, 1996.
<PAGE>
<TABLE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1996
(Unaudited)
<CAPTION>
Assets
Historical Pro Forma Pro Forma
September 30, 1996 Adjustments September 30, 1996
Rental properties, at cost:
<S> <C> <C>
Land $ 1,133,669 ($ 785,714) $ 347,955
Buildings and improvements 17,040,457 (6,064,761) 10,975,696
Furniture and fixtures 1,484,672 (395,571) 1,089,101
---------- ---------- ----------
19,658,798 (7,246,046) 12,412,752
Less - Accumulated depreciation (7,039,671) 2,410,639 (4,629,032)
---------- ---------- ----------
12,619,127 (4,835,407) 7,783,720
Cash and cash equivalents 30,427 (12,360) 18,067
Restricted cash 151,960 (144,148) 7,812
Accounts and notes receivable 150,162 (21,646) 128,516
Other assets 67,081 (20,872) 46,209
---------- ---------- ---------
Total $13,018,757 ($ 5,034,433) $ 7,984,324
========= ========== =========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $10,422,453 ($4,192,329) $6,230,124
Accounts payable:
Trade 686,630 (119,084) 567,546
Related parties 98,588 (77,244) 21,344
Taxes 24,608 0 24,608
Interest payable 17,530 0 17,530
Accrued liabilities 81,664 (66,871) 14,793
Tenant security deposits 28,813 (21,333) 7,480
---------- --------- ---------
Total Liabilities 11,360,286 ( 4,476,861) 6,883,425
Partners' equity 1,658,471 (557,572) 1,100,899
---------- --------- ---------
Total $13,018,757 ($ 5,034,433) $ 7,984,324
========== ========= =========
</TABLE>
<PAGE>
<TABLE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
<CAPTION>
Historical Pro Forma Pro Forma
December 31, 1995 Adjustments December 31, 1995
(Unaudited) (Unaudited)
----------------- ----------- -----------------
Revenues:
<S> <C> <C> <C>
Rental income $1,205,122 ($1,106,724) $ 98,398
Hotel income 2,548,434 0 2,548,434
Interest income 4,576 (4,155) 421
--------- --------- -----------
Total revenues 3,758,132 (1,110,879) 2,647,253
--------- --------- -----------
Costs and expenses:
Rental operations 746,877 (634,352) 112,525
Hotel operations 2,036,995 0 2,036,995
General and administrative 96,000 0 96,000
Interest 765,349 (439,344) 326,005
Depreciation and amortization 825,509 (242,482) 583,027
--------- --------- ---------
Total costs and expenses 4,470,730 (1,316,178) 3,154,552
--------- --------- ---------
Net loss ($ 712,598) $ 205,299 ($ 507,299)
========= ========= =========
Net loss per limited partnership ($ 63.32) $ 18.24 ($ 45.08)
unit
</TABLE>
<PAGE>
<TABLE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1996
(Unaudited)
<CAPTION>
Historical Pro Forma Pro Forma
September 30, 1996 Adjustments September 30, 1996
------------------ ----------- ------------------
Revenues:
<S> <C> <C> <C>
Rental income $ 732,959 ($661,153) $ 71,806
Hotel income 1,797,333 0 1,797,333
Interest income 984 (909) 75
--------- ------- ---------
Total revenues 2,531,276 (662,062) 1,859,214
--------- ------- ---------
Costs and expenses:
Rental operations 507,107 (446,048) 61,059
Hotel operations 1,655,085 0 1,655,085
General and administrative 72,000 0 72,000
Interest 557,368 (342,233) 215,135
Depreciation and amortization 627,668 (181,861) 445,807
--------- ------- ---------
Total costs and expenses 3,419,228 (970,142) 2,449,086
--------- ------- ---------
Net loss ($ 887,952) $ 308,080 ($ 589,872)
======== ======== ========
Net loss per limited partnership
unit ($ 78.90) $ 26.49 ($ 52.41)
</TABLE>
<PAGE>
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 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: November 1, 1996 DIVERSIFIED HISTORIC INVESTORS V
By: Dover Historic Advisors V,
General Partner
By: DHP, Inc., Partner
By: /s/ Donna M. Zanghi
DONNA M. ZANGHI,
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 30,427
<SECURITIES> 0
<RECEIVABLES> 150,162
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,658,798
<DEPRECIATION> 7,039,671
<TOTAL-ASSETS> 13,018,757
<CURRENT-LIABILITIES> 809,826
<BONDS> 10,422,453
0
0
<COMMON> 0
<OTHER-SE> 1,658,471
<TOTAL-LIABILITY-AND-EQUITY> 13,018,757
<SALES> 0
<TOTAL-REVENUES> 2,531,276
<CGS> 0
<TOTAL-COSTS> 2,162,192
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 557,368
<INCOME-PRETAX> (887,952)
<INCOME-TAX> 0
<INCOME-CONTINUING> (887,952)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (887,952)
<EPS-PRIMARY> (78.90)
<EPS-DILUTED> 0
</TABLE>
