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, 1997
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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 23-24794680
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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
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 - September 30, 1997
(unaudited) and December 31, 1996
Consolidated Statements of Operations - For the Three
Months and Nine Months Ended September 30, 1997 and 1996
(unaudited)
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 1997 and 1996 (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, 1997, Registrant had cash of
$256,417. 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.
As of September 30, 1997, Registrant had restricted
cash of $172,927 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
1997, expenditures for capital items were $15,832 at the Redick Plaza
Hotel and $1,907 at the Lofts at Red Hill.
In October 1996, the Redick Plaza Hotel, was
transferred to 1504 Harney Street Associates ("HSA") a limited
partnership in which the Registrant owns a 99% interest. The property
was transferred so that it would be held by the Registrant in a manner
similar to the other properties held by the Registrant. HSA was
unable to pay the bonds as they became due, and on October 28, 1996,
HSA filed a reorganization petition pursuant to Chapter 11 of the U.S.
Bankruptcy Code as disclosed in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996. In July 1997, the loan was
sold and the bankruptcy dismissed. The Registrant entered into an
agreement with the new holder of the note whereby monthly payments of
interest are to be made to the new note holder in an amount equal to
net operating income.
(3) Results of Operations
During the third quarter of 1997, Registrant
incurred a net loss of $1,347,424 ($119.73 per limited partnership
unit) compared to a net loss of $449,989 ($39.99 per limited
partnership unit) for the same period in 1996. For the first nine
months of 1997, Registrant incurred a loss of $1,975,020 ($175.49 per
limited partnership unit) compared to a net loss of $887,952 ($78.90
per limited partnership unit) for the same period in 1996.
Rental and hotel income combined decreased $194,316
from $700,515 in the third quarter of 1996 to $506,199 in the same
period in 1997. The decrease resulted mainly from a decrease in hotel
income of $89,789 and a decrease of $104,527 in rental income. The
decrease in hotel income is due to a decrease in the average occupancy
(65% to 59%) and a decrease in average room rates ($92.01 to $90.66),
as discussed below. The decrease in rental income is mainly
attributable to the sale of the St. Mary's Market partially offset by
an increase in rental income at the Lofts at Red Hill due to an
increase in the average occupancy (72% to 98%).
Rental and hotel income decreased $973,386 from
$2,530,292 for the first nine months of 1996 to $1,556,906 for the
same period of 1997. This decrease is due to a net decrease of
$642,624 in rental income and a decrease in hotel income of $330,762.
The decrease in hotel income is due to a decrease in the average
occupancy (67% to 58%) partially offset by an increase in the average
room rates ($93.35 to $93.79), as discussed below. The decrease in
rental income is mainly attributable to the sale of the St. Mary's
Market partially offset by an increase in rental income at the Lofts
at Red Hill due to an increase in the average occupancy (76% to 92%).
Expense for rental operations decreased by $124,739
from $159,048 in the third quarter of 1996 to $34,309 in the same
period in 1997 and decreased by $357,811 from $507,107 for the first
nine months of 1996 to $149,296 for the same period in 1997 due to the
sale of St. Mary's Market.
Hotel operations expense decreased $121,063 from
$569,203 in the third quarter of 1996 to $448,140 in the same period
in 1997 due mainly to a decrease in wages and salaries due to a
decrease in overall occupancy.
Hotel operations expense decreased $217,151 from
$1,655,085 for the first nine months of 1996 to $1,437,934 in the same
period in 1997 due mainly to a decrease in management fees (which are
based upon hotel revenues) and a decrease in overall operating
expenses and wages and salaries.
General and administrative expense increased
$721,999 from $24,000 in the third quarter of 1996 to $745,999 in the
same period in 1997 and increased $765,997 from $72,000 for the first
nine months of 1996 to $837,997 for the same period in 1997. The
increase from the third quarter and the first nine months of 1996 to
the same periods in 1997 is the result of administrative fees incurred
in the third quarter of 1997 in connection with the bankruptcy and
subsequent negotiations with the new mortgage holder at the Redick
Plaza Hotel.
Interest expense increased $314,049 from $189,253 in
the third quarter of 1996 to $503,302 in the same period in 1997 and
increased $185,609 from $557,368 for the first nine months of 1996 to
$742,977 for the same period in 1997. The increase in interest
expense is the result of an increase in the interest rate at the
Redick Plaza Hotel partially offset by the sale of the St. Mary's
Market.
Depreciation and amortization expense decreased
$82,472 from $209,222 in the third quarter of 1996 to $126,750 in the
same period in 1997 and decreased $247,416 from $627,668 for the first
nine months of 1996 to $380,252 for the same period in 1997. The
decrease from the first nine months of 1996 to the same period in 1997
is the result of the sale of the St. Mary's Market and loan costs at
the Redick Plaza Hotel becoming fully amortized in November 1996.
Losses incurred during the third quarter at the
Registrant's three properties amounted to $606,000, compared to
approximately $425,000 for the same period in 1996. For the first
nine months of 1997 the Registrant's three properties recognized a
loss of $1,076,000 compared to approximately $815,000 for the same
period in 1996.
In the third quarter of 1997, Registrant
recognized a loss of $596,000 at the Redick Plaza Hotel including
$225,000 of depreciation expense, compared to a loss of $208,000 in
the third quarter of 1996, including $134,000 of depreciation and
amortization expense. The loss from the third quarter of 1996 to the
third quarter of 1997 increased due to a decrease in hotel income and
an increase in interest expense partially offset by a decrease in
wages and salaries and amortization expense. Hotel income decreased
due to a decrease in the average occupancy (65% to 59%) and a decrease
in the average nightly rates ($92.01 to $90.66) resulting from the
opening of a new hotel in the area served by the Registrant and,
accordingly, an increase in competition. Interest expense increased
due to an increase in the interest rate as a result of the default
interest that is charged on the bonds. Wages and salaries decreased
due to the decrease in average occupancy and amortization expense
decreased due to loan costs becoming fully amortized in November 1996.
For the first nine months of 1997, Registrant
recognized a loss of $1,057,000 at the Redick Plaza Hotel including
$337,000 of depreciation expense compared to a loss of $475,000 for
the same period in 1996, including depreciation expense of $402,000.
The loss from the first nine months of 1996 to the same period in 1997
increased due to a decrease in hotel income and an increase in
interest expense partially offset by a decrease in management fees,
wages and salaries, operating expenses and amortization expense.
Hotel income decreased due to a decrease in the average occupancy (67%
to 58%) partially offset by a slight increase in the average nightly
rates ($93.35 to $93.79) resulting from the opening of a new hotel in
the area served by the Registrant and, accordingly, an increase in
competition. Interest expense increased due to an increase in the
interest rate as a result of the default interest charged on the
bonds. Management fees (which are based upon hotel revenues)
decreased due to the decrease in hotel income, and overall operating
expenses decreased due to the decrease in average occupancy. Wages and
salaries decreased due to the decrease in average occupancy and
amortization expense decreased due to loan costs becoming fully
amortized in November 1996.
In the third quarter of 1997, Registrant incurred a
loss of $0 at the St. Mary's Market, compared to a loss of $198,000
including $61,000 of depreciation expense in the second quarter of
1996 and for the first nine months of 1997, Registrant incurred a loss
of $3,000 at the St. Mary's Market, compared to a loss of $308,000 for
the first nine months of 1996, including depreciation expense of
$182,000. The decreased loss for both the third quarter and the first
nine months of 1997 from the same periods in 1996 is the result of the
sale of the property in October 1996.
In the third quarter of 1997, Registrant incurred a
loss of $10,000 at the Lofts at Red Hill, including $14,000 of
depreciation expense, compared to a loss of $19,000 including $14,000
of depreciation expense in the third quarter of 1996 and for the first
nine months of 1997, Registrant incurred a loss of $16,000, including
$43,000 of depreciation expense compared to a loss of $32,000 for the
first nine months of 1996 including depreciation expense of $43,000.
The decrease in the loss from the third quarter and the first nine
months of 1996 to the same periods in 1997 is the result of an
increase in rental income due to an increase in the average occupancy
(72% to 98%) in the third quarter and (76% to 92%) for the first nine
months.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
Assets
September 30, 1997 December 31, 1996
(Unaudited)
Rental properties, at cost:
Land $ 347,955 $ 347,955
Buildings and improvements 10,978,422 10,976,514
Furniture and fixtures 1,174,437 1,158,605
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12,500,814 12,483,074
Less - Accumulated depreciation (5,157,430) (4,777,178)
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7,343,384 7,705,896
Cash and cash equivalents 256,417 1,126,711
Restricted cash 172,927 8,956
Accounts and notes receivable 211,096 172,869
Other assets (net of amortization of
$284,230 and $190,812 at September 30,
1997 and December 31, 1996, respectively) 167,686 31,677
---------- ----------
Total $ 8,151,510 $ 9,046,109
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 6,796,874 $ 6,163,254
Accounts payable:
Trade 404,090 517,295
Related parties 55,000 130,063
Taxes 25,760 44,084
Interest payable 818,169 158,962
Accrued liabilities 77,879 79,243
Tenant security deposits 10,060 14,510
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Total liabilities 8,187,832 7,107,411
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Partners' equity (36,322) 1,938,698
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Total $ 8,151,510 $ 9,046,109
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three months Nine months
ended September 30, ended September 30,
1997 1996 1997 1996
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Revenues:
Rental income $ 32,384 $ 136,911 $ 90,335 $ 732,959
Hotel income 473,815 563,604 1,466,571 1,797,333
Interest income 4,877 222 16,530 984
--------- --------- --------- ---------
Total revenues 511,076 700,737 1,573,436 2,531,276
--------- --------- --------- ---------
Costs and expenses:
Rental operations 34,309 159,048 149,296 507,107
Hotel operations 448,140 569,203 1,437,934 1,655,085
General and administrative 745,999 24,000 837,997 72,000
Interest 503,302 189,253 742,977 557,368
Depreciation and --------- --------- --------- ---------
amortization 126,750 209,222 380,252 627,668
--------- --------- --------- ---------
Total costs and expenses 1,858,500 1,150,726 3,548,456 3,419,228
--------- --------- --------- ---------
Net loss ($1,347,424)($ 449,989) ($1,975,020) ($ 887,952)
========= ========= ========= =========
Net loss per limited partnership
unit ($ 119.73)($ 39.99) ($ 175.49) ($ 78.90)
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Nine months ended
September 30,
1997 1996
Cash flows from operating activities:
Net loss ($1,975,020) ($ 887,952)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 380,252 627,668
Changes in assets and liabilities:
(Increase) decrease in restricted cash (163,971) 89,276
Increase in accounts receivable (38,227) (62,515)
Increase in other assets (136,012) (16,152)
(Decrease) increase in accounts payable - trade (113,205) 359,523
(Decrease) increase in accounts payable - related
parties (75,063) 85,162
Decrease in accounts payable - taxes (18,324) (15,716)
Increase in interest payable 659,207 10,653
(Decrease) increase in accrued liabilities (1,364) 8,657
Decrease in tenant security deposits (4,450) (43,343)
--------- -------
Net cash (used in) provided by operating activities: (1,486,177) 155,261
--------- -------
Cash flows from investing activities:
Capital expenditures (17,740) (151,176)
--------- -------
Net cash used in investing activities: (17,740) (151,176)
--------- -------
Cash flows from financing activities:
Proceeds from debt financings 633,623 0
Principal payments 0 (14,512)
--------- -------
Net cash provided by (used in) financing activities: 633,623 (14,512)
--------- -------
Decrease in cash and cash equivalents (870,294) (10,427)
Cash and cash equivalents at beginning of period 1,126,711 40,854
--------- -------
Cash and cash equivalents at end of period $ 256,417 $ 30,427
========= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 0 $546,714
The accompanying notes are an integral part of these financial statements.
<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, 1996.
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
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, 1997.
<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 14, 1997 DIVERSIFIED HISTORIC INVESTORS V
-----------------
By: Dover Historic Advisors V, General Partner
By: EPK, Inc., Partner
By: /s/ Donna M. Zanghi
----------------------------
DONNA M. ZANGHI,
Vice President and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 256,417
<SECURITIES> 0
<RECEIVABLES> 211,096
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12,500,814
<DEPRECIATION> 5,157,430
<TOTAL-ASSETS> 8,151,510
<CURRENT-LIABILITIES> 484,850
<BONDS> 6,796,874
0
0
<COMMON> 0
<OTHER-SE> (36,322)
<TOTAL-LIABILITY-AND-EQUITY> 8,151,510
<SALES> 0
<TOTAL-REVENUES> 1,573,436
<CGS> 0
<TOTAL-COSTS> 1,587,230
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 742,977
<INCOME-PRETAX> (1,975,020)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,975,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,975,020)
<EPS-PRIMARY> (175.49)
<EPS-DILUTED> 0
</TABLE>
