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 June 30, 1996
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[ ] 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
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(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
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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 __X__ No____
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30, 1996 (unaudited) and December
31, 1995
Consolidated Statements of Operations - For the Three Months and Six
Months Ended June 30, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows - For the Six Months Ended June
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 June 30, 1996, Registrant had cash of $36,653. 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.
In May 1996, one of the Registrant's Ventures, St. Mary's Market
Partnership executed a purchase contract to sell its property to Residence Inn
by Marriott, Inc. The projected net proceeds of the sale available to the
Registrant will be approximately $1,095,000.
As of June 30, 1996, Registrant had restricted cash of $215,853
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 six months of 1996, expenditures for
capital items were $72,907 at the Radisson Redick (including the purchase of a
new limousine) and $14,780 at the St. Mary's Market.
2
<PAGE>
The Registrant will seek to refinance the outstanding Radisson Redick
bonds which are scheduled to mature on November 1, 1996. There can be no
assurances that such financing will be available and, if not, the property will
be marketed for sale.
(3) Results of Operations
During the second quarter of 1996, Registrant incurred a net loss of
$254,172 ($22.58 per limited partnership unit) compared to a net loss of $86,750
($7.71 per limited partnership unit) for the same period in 1995. For the first
six months of 1996, Registrant incurred a loss of $437,963 ($38.91 per limited
partnership unit) compared to a net loss of $286,985 ($25.50 per limited
partnership unit) for the same period in 1995.
Rental and hotel income combined decreased $98,678 from $997,666 in the
second quarter of 1995 to $898,987 in the same period in 1996. The decrease
resulted mainly from a decrease in hotel income of $49,989 and a decrease of
$48,690 in rental income. The decrease in hotel income is due to a decrease in
the average occupancy (95% to 72%) and a decrease in average room rates ($95.71
to $94.50). The decrease in rental income is mainly attributable to an overall
decrease in occupancy (100% to 86%) at St. Mary's Market due to the vacating of
units as leases expire in anticipation of the sale of the property partially
offset by an increase at the Red Hill due to increases in the average rental
rates of the units.
Rental and hotel income decreased $60,622 from $1,890,399 for the first
six months of 1995 to $1,829,777 for the same period of 1996. This decrease is
due to a net decrease of $37,587 in rental income and a decrease in hotel income
of $23,035. The decrease in hotel income is due to a decrease in the average
occupancy (91% to 80%) and a decrease in average room rates ($94.80 to $93.96).
The decrease in rental income is mainly attributable to an overall decrease in
occupancy (99% to 77%) at St. Mary's Market 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 $2,870 from $180,248 in the
second quarter of 1995 to $177,378 in the same period in 1996 and decreased by
$14,449 from $362,508 for the first six months of 1996 to $348,059 for the same
period in 1996 due to higher operating expenses at St. Mary's Market including
an overall decrease in operating expenses partially offset by an increase in
wages and salaries. Hotel operations expense increased $81,848 from $476,175 in
the second quarter of 1995 to $558,023 in the same period in 1996 due to an
increase in rooms expense, an increase in professional fees incurred and wages
and salaries increased due to cost of living raises given to employees.
3
<PAGE>
Interest expense decreased $12,137 from $197,053 in the second quarter
of 1995 to $184,916 in the same period in 1996 and decreased $26,686 from
$394,801 for the first six months of 1995 to $368,115 for the same period in
1996. The decrease in interest expense is the result of a decrease in the
interest rate at the Radisson Redick from 5.11% in the second quarter of 1995 to
4.31% in 1996 and from 5.81% for the first six months of 1995 to 4.58% in the
same period in 1996.
Depreciation and amortization expense increased $1,651 from $207,572 in
the second quarter of 1995 to $209,223 in the same period in 1996 and increased
$14,684 from $403,762 for the first six months of 1995 to $418,446 for the same
period in 1996. The increase 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 second quarter at the Registrant's three
properties amounted to $230,000, compared to approximately $62,000 for the same
period in 1995. For the first six months of 1996 the Registrant's three
properties recognized a loss of $390,000 compared to approximately $238,000 for
the same period in 1995.
In the second quarter of 1996, Registrant recognized a loss of $125,000
at the Radisson Redick Hotel including $134,000 of depreciation and amortization
expense, compared to a loss of $5,000 in the second quarter of 1995, including
$134,000 of depreciation and amortization expense. The loss from the second
quarter of 1995 to the second quarter of 1996 increased due to an decrease in
rooms revenue and an increase in rooms expense, wages and salaries expense and
professional fees partially offset by a decrease in interest expense. The
decrease in rooms revenue is the result of a decrease in occupancy (95% to 72%)
and a decrease in average room rates ($95.71 to $93.68) 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 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. Interest
expense decreased due to a decrease in the interest rate from an average of
5.11% in the second quarter of 1995 to 4.31% in the same period in 1996.
For the first six months of 1996, Registrant recognized a loss of
$267,000 at the Radisson Redick Hotel including $268,312 of depreciation and
amortization expense compared to a loss of $142,000 for the same period in 1995,
including depreciation expense of $257,000. The loss from the first six months
of 1995 to the first six 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 (91% to 80%) and a decrease in average room rates ($94.80 to
$93.96) 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,
4
<PAGE>
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 5.81% for the first six months of 1995 to 4.58% in the same period in
1996.
In the second quarter of 1996, Registrant incurred a loss of $97,000 at
the St. Mary's Market, including $61,000 of depreciation expense, compared to a
loss of $47,000 including $59,000 of depreciation expense in the second quarter
of 1995 and for the first six months of 1996, Registrant incurred a loss of
$110,000 at the St. Mary's Market, including $121,000 of depreciation expense,
compared to a loss of $79,000 for the first six months of 1995, including
depreciation expense of $118,000. The increased loss for both the second quarter
and the first six months of 1996 from the same periods in 1995 is due to a
decrease in rental income due to a decrease in occupancy in both the second
quarter (99% to 77%) and the first six months (100% to 86%) and an overall
decrease in operating expenses partially offset by an increase in wages and
salaries. Occupancy and overall operating expenses decreased due to the vacating
of units as leases expire in anticipation of the sale of the property. Wages and
salaries increased due to a reallocation of the expense by the management
company.
In the second quarter of 1996, Registrant incurred a loss of $8,000 at
the Lofts at Red Hill, including $14,000 of depreciation expense, compared to a
loss of $10,000 including $14,000 of depreciation expense in the second quarter
of 1995 and for the first six months of 1996, Registrant incurred a loss of
$13,000 at the Lofts at Red Hill, including $29,000 of depreciation expense
compared to a loss of $17,000 for the first six months of 1995 including
depreciation expense of $29,000. The decreased loss from the second quarter and
the first six months of 1996 from the same periods in 1995 is the result of
increases in rental income due to increases in the average rental rates of the
units.
5
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
Assets
June 30, 1996 December 31, 1995
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(Unaudited)
Rental properties, at cost:
Land $ 1,133,669 $ 1,133,669
Buildings and improvements 17,037,365 17,022,586
Furniture and fixtures 1,424,275 1,351,367
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19,595,309 19,507,622
Less - Accumulated depreciation (6,864,595) (6,514,441)
------------ ------------
12,730,714 12,993,181
Cash and cash equivalents 36,653 40,854
Restricted cash 215,853 241,236
Accounts and notes receivable 178,190 87,647
Other assets (net of amortization of
$259,104 and $190,812 at June 30,
1996 and December 31, 1995,
respectively) 93,853 154,367
------------ ------------
Total $ 13,255,263 $ 13,517,285
============ ============
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 10,427,290 $ 10,436,965
Accounts payable:
Trade 472,461 327,107
Related parties 35,535 13,426
Taxes 49,949 40,324
Interest payable 13,979 6,877
Accrued liabilities 85,227 73,007
Tenant security deposits 62,362 72,156
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Total liabilities 11,146,803 10,970,862
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Partners' equity 2,108,460 2,546,423
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Total $ 13,255,263 $ 13,517,285
============ ============
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1996 and 1995
(Unaudited)
Three months Six months
ended June 30, ended June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenues:
Rental income $ 257,674 $ 306,364 $ 596,048 $ 633,635
Hotel income 641,313 691,302 1,233,729 1,256,764
Interest income 380 519 762 884
----------- ----------- ----------- -----------
Total revenues 899,367 998,185 1,830,539 1,891,283
----------- ----------- ----------- -----------
Costs and expenses:
Rental operations 177,378 180,248 348,059 362,508
Hotel operations 558,023 476,175 1,085,882 968,224
General and
administrative 24,000 23,887 48,000 48,973
Interest 184,916 197,053 368,115 394,801
Depreciation and
amortization 209,223 207,572 418,446 403,762
----------- ----------- ----------- -----------
Total costs and
expenses 1,153,540 1,084,935 2,268,502 2,178,268
----------- ----------- ----------- -----------
Net loss ($ 254,172) ($ 86,750) ($ 437,963) ($ 286,985)
=========== =========== =========== ===========
Net loss per limited
partnership unit ($ 22.58) ($ 7.71) ($ 38.91) ($ 25.50)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
Six months ended
June 30,
1996 1995
---------- ----------
Cash flows from operating activities:
Net loss ($437,963) ($286,985)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 418,446 403,762
Changes in assets and liabilities:
Decrease (increase) in restricted cash 25,383 (14,081)
Increase in accounts receivable (90,543) (22,072)
Increase in other assets (8,778) (252,244)
Increase in accounts payable - trade 145,354 29,677
Increase in accounts payable - related parties 22,109 18,483
Increase in accounts payable - taxes 9,625 11,802
Increase (decrease) in interest payable 7,102 (38,781)
Increase (decrease) in accrued liabilities 12,220 (29,329)
Decrease in tenant security deposits (9,794) (3,245)
--------- ---------
Net cash provided by (used in) operating activities: 93,161 (183,013)
--------- ---------
Cash flows from investing activities:
Capital expenditures (87,687) -0-
--------- ---------
Net cash used in investing activities: (87,687) -0-
--------- ---------
Cash flows from financing activities:
Proceeds from debt financings -0- 221,555
Principal payments (9,675) (63,862)
--------- ---------
Net cash (used in) provided by financing activities: (9,675) 157,693
--------- ---------
Decrease in cash and cash equivalents (4,201) (25,320)
Cash and cash equivalents at beginning of period 40,854 84,643
--------- ---------
Cash and cash equivalents at end of period $ 36,653 $ 59,323
========= =========
The accompanying notes are an integral part of these financial statements.
8
<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.
9
<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
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
June 30, 1996.
10
<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: July 26, 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
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 36,653
<SECURITIES> 0
<RECEIVABLES> 178,190
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,853
<PP&E> 19,595,309
<DEPRECIATION> 6,864,595
<TOTAL-ASSETS> 13,255,263
<CURRENT-LIABILITIES> 577,945
<BONDS> 10,427,290
0
0
<COMMON> 0
<OTHER-SE> 2,108,460
<TOTAL-LIABILITY-AND-EQUITY> 13,255,263
<SALES> 0
<TOTAL-REVENUES> 1,830,539
<CGS> 0
<TOTAL-COSTS> 1,481,941
<OTHER-EXPENSES> 418,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 368,115
<INCOME-PRETAX> (437,963)
<INCOME-TAX> 0
<INCOME-CONTINUING> (437,963)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (437,963)
<EPS-PRIMARY> (38.91)
<EPS-DILUTED> 0.00
</TABLE>
