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, 1998
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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 ___________________
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1609 WALNUT STREET, PHILADELPHIA, PA 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
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, 1998
(unaudited) and December 31, 1997
Consolidated Statements of Operations - For the Three
Months and Nine Months Ended September 30, 1998 and 1997
(unaudited)
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 1998 and 1997 (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, 1998, Registrant had cash of
$18,644. 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, 1998, Registrant had restricted
cash of $478,199 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.
(3) Results of Operations
During the third quarter of 1998, Registrant
incurred a net loss of $510,254 ($45.34 per limited partnership unit)
compared to a net loss of $1,347,424 ($119.73 per limited partnership
unit) for the same period in 1997. For the first nine months of 1998,
Registrant incurred a loss of $1,548,593 ($137.60 per limited
partnership unit) compared to a net loss of $1,975,020 ($175.49 per
limited partnership unit) for the same period in 1997.
Rental and hotel income combined decreased $158,853
from $506,199 in the third quarter of 1997 to $347,346 in the same
period in 1997. $155,624 of the decrease was from hotel income and
there was a $3,229 decrease in rental income. The decrease in hotel
income is due to a decrease in the average occupancy (59% to 48%) and
a decrease in average room rates ($90.66 to $77.20) at the Redick
Plaza Hotel. The occupancy decreased due to the conversion to an
independent hotel from an affiliation with the Radisson chain of
hotels. The decrease in rental income is due to a decrease in the
average occupancy (98% to 84%) at the Lofts at Red Hill.
Rental and hotel income decreased $550,588 from
$1,556,906 for the first nine months of 1997 to $1,006,318 for the
same period of 1998. $553,973 of the decrease was due to hotel income
and there was a $3,385 increase in rental income. The decrease in
hotel income is due to a decrease in the average occupancy (58% to
42%) and a decrease in average room rates ($93.79 to $83.72) at the
Redick Plaza Hotel. The occupancy decreased due to the conversion to
an independent hotel from an affiliation with the Radisson chain of
hotels. The increase in rental income is due to an increase in the
average rental rates at the Lofts at Red Hill.
Expense for rental operations decreased by $8,103
from $34,309 in the third quarter of 1997 to $26,206 in the same
period in 1998 and decreased by $84,584 from $149,296 for the first
nine months of 1997 to $64,712 for the same period in 1998 due to
legal fees incurred in the second quarter of 1997 in connection with
the bankruptcy of the Redick Plaza Hotel that did not recur in 1998.
Hotel operations expense decreased $27,873 from
$448,140 in the third quarter of 1997 to $420,267 in the same period
in 1998 and decreased $175,009 from $1,437,934 for the first nine
months of 1997 to $1,262,925 for the same period in 1998 due to an
overall decrease in operating expenses due to the decrease in
occupancy.
Interest expense decreased $253,626 from $503,302
in the third quarter of 1997 to $249,676 in the same period in 1998
and increased $1,078 from $742,977 for the first nine months of 1997
to $744,055 for the same period in 1998. The decrease in interest
expense from the third quarter of 1997 to the same period in 1998 is
the result of the accrual of default increase in the third quarter of
1997 at the Redick Plaza Hotel in relation to the July 1997
refinancing and an increase in interest expense at the Lofts at Red
Hill due to a new loan.
Depreciation and amortization expense increased
$18,801 from $126,750 in the third quarter of 1997 to $145,551 in the
same period in 1998 and increased $56,403 from $380,252 for the first
nine months of 1997 to $436,655 for the same period in 1998. The
increase is the result of the amortization of loan fees incurred in
July 1997 connection with the refinancing of the Redick Plaza Hotel.
Losses incurred during the third quarter at the
Registrant's properties amounted to $475,000, compared to
approximately $606,000 for the same period in 1997. For the first
nine months of 1998 the Registrant's properties recognized a loss of
$1,445,000 compared to approximately $1,076,000 for the same period in
1997.
In the third quarter of 1998, Registrant recognized
a loss of $452,000 at the Redick Plaza Hotel including $115,000 of
depreciation and amortization expense, compared to a loss of $596,000
in the third quarter of 1997, including $112,000 of depreciation and
amortization expense. The decrease in the loss from the third quarter
of 1997 to the same period in 1998 is the result of a decrease in
interest expense and overall operating expenses partially offset by a
decrease in rental income due to a decrease in average occupancy (59%
to 48%) and a decrease in the average nightly rates ($90.66 to $77.20)
for the quarter and an increase in amortization expense. Interest
expense decreased due to the accrual of default increase at the Redick
Plaza Hotel in relation to the July 1997 refinancing. Operating
expenses decreased due to the decrease in occupancy. Amortization
expense increased due to the amortization of loan fees incurred in
July 1997 in connection with the refinancing of the Redick Plaza
Hotel.
For the first nine months of 1998, incurred a loss
of $1,394,000 at the Redick Plaza Hotel including $345,000 of
depreciation and amortization expense, compared to a loss of
$1,057,000 for the same period in 1997, including depreciation and
amortization expense of $337,000. The increase in the loss from the
first nine months of 1997 to the same period in 1998 is the result of
a decrease in rental income due to a decrease in average occupancy
(58% to 42%) and a decrease in the average nightly rates ($93.79 to
$83.72) combined with an increase in amortization expense partially
offset by an overall decrease in operating expenses. Amortization
expense increased due to the amortization of loan fees incurred in
July 1997 in connection with the refinancing of the Redick Plaza
Hotel. Overall operating expenses decreases due to the decrease in
occupancy.
In the third quarter of 1998, Registrant incurred
a loss of $23,000 at the Lofts at Red Hill, including $15,000 of
depreciation and amortization expense, compared to a loss of $10,000
including $14,000 of depreciation expense in the third quarter of 1997
and for the first nine months of 1998, incurred a loss of $51,000,
including $45,000 of depreciation expense compared to a loss of
$16,000 for the first nine months of 1997 including depreciation
expense of $43,000. The increased loss from the third quarter and the
first nine months of 1998 from the same periods in 1997 is the result
of an increase in interest expense due to the new note placed on the
property in September 1997. The increase in the loss from the first
nine months of 1997 to the same period in 1998 is partially offset by
an increase in rental income due to an increase in the average rental
rates.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
Assets
September 30, 1998 December 31, 1997
(Unaudited)
Rental properties, at cost:
Land $ 347,955 $ 347,955
Buildings and improvements 10,976,514 10,976,514
Furniture and fixtures 1,175,768 1,175,768
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12,500,237 12,500,237
Less - Accumulated depreciation (5,661,417) (5,284,345)
---------- ----------
6,838,820 7,215,892
Cash and cash equivalents 18,644 57,736
Restricted cash 478,199 176,129
Accounts and notes receivable 157,040 117,468
Other assets (net of amortization of
$345,326 and $190,812 at
September 30, 1998 and December
31, 1997, respectively). 367,866 396,949
---------- ----------
Total $ 7,860,569 $ 7,964,174
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 7,508,185 $ 6,804,113
Accounts payable:
Trade 627,251 385,613
Related parties 33,656 55,000
Taxes 95,258 35,123
Interest payable 1,336,469 869,660
Accrued liabilities 72,557 77,899
Tenant security deposits 8,400 9,380
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Total liabilities 9,681,776 8,236,788
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Partners' equity (1,821,207) (272,614)
---------- ----------
Total $ 7,860,569 $ 7,964,174
========== ==========
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, 1998 and 1997
(Unaudited)
Three months Nine months
Ended September 30, Ended September 30,
1998 1997 1998 1997
Revenues:
Rental income $ 29,155 $ 32,384 $ 93,720 $ 90,335
Hotel income 318,191 473,815 912,598 1,466,571
Interest income 99 4,877 1,433 16,530
------- ------- --------- ---------
Total revenues 347,445 511,076 1,007,751 1,573,436
------- ------- --------- ---------
Costs and expenses:
Rental operations 26,206 34,309 64,712 149,296
Hotel operations 420,267 448,140 1,262,925 1,437,934
General and administrative 15,999 745,999 47,997 837,997
Interest 249,676 503,302 744,055 742,977
Depreciation and
Amortization 145,551 126,750 436,655 380,252
------- --------- --------- ---------
Total costs and expenses 857,699 1,858,500 2,556,344 3,548,456
------- --------- --------- ---------
Net loss ($ 510,254)($1,347,424)($1,548,593)($1,975,020)
======== ========= ========= =========
Net loss per limited partnership
unit ($ 45.34)($ 119.73)($ 137.60)($ 175.49)
======== ========= ========= ========
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, 1998 and 1997
(Unaudited)
Nine months ended
September 30,
1998 1997
Cash flows from operating activities:
Net loss ($1,548,593) ($1,975,020)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 436,655 380,252
Changes in assets and liabilities:
Increase in restricted cash (302,070) (163,971)
Increase in accounts receivable (39,572) (38,227)
Increase in other assets (30,499) (136,012)
Increase (decrease) in accounts payable - trade 241,637 (113,205)
Decrease in accounts payable - related parties (21,344) (75,063)
Increase (decrease) in accounts payable - taxes 60,135 (18,324)
Increase in interest payable 466,809 659,207
Decrease in accrued liabilities (980) (1,364)
Decrease in tenant security deposits (5,342) (4,450)
--------- ---------
Net cash used in operating activities: (743,164) (1,486,177)
--------- ---------
Cash flows from investing activities:
Capital expenditures 0 (17,740)
--------- ---------
Net cash used in investing activities: 0 (17,740)
--------- ---------
Cash flows from financing activities:
Proceeds from debt financings 704,072 633,623
Principal payments 0 0
--------- ---------
Net cash provided by financing activities: 704,072 633,623
--------- ---------
Decrease in cash and cash equivalents (39,092) (870,294)
Cash and cash equivalents at beginning of period 57,736 1,126,711
--------- ---------
Cash and cash equivalents at end of period $ 18,644 $ 256,417
========= =========
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 and notes thereto, in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997.
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, 1998.
<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 30, 1998 DIVERSIFIED HISTORIC INVESTORS V
-----------------
By: Dover Historic Advisors V, General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President and Treasurer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,644
<SECURITIES> 0
<RECEIVABLES> 157,040
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12,500,237
<DEPRECIATION> 5,661,417
<TOTAL-ASSETS> 7,860,569
<CURRENT-LIABILITIES> 756,165
<BONDS> 7,508,185
0
0
<COMMON> 0
<OTHER-SE> (1,821,207)
<TOTAL-LIABILITY-AND-EQUITY> 7,860,569
<SALES> 912,598
<TOTAL-REVENUES> 93,720
<CGS> 1,327,637
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744,055
<INCOME-PRETAX> (1,548,593)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,548,593)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,548,593)
<EPS-PRIMARY> (137.60)
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