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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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 33-19811
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DIVERSIFIED HISTORIC INVESTORS VI
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2492210
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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 _____ No __ X__
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30, 1996 (unaudited) and
December 31, 1995
Consolidated Statements of Operations - Three Months and Six Months
Ended June 30, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows - Three Months and 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 $40,800. Such
funds are expected to be used to pay the liabilities 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 June 30, 1996, Registrant had restricted cash of
$331,044 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.
In recent years the Registrant has realized significant
losses, including the foreclosure of one property. At the present time, all
remaining properties are able to pay their operating expenses and debt service;
however, at three of the seven properties, the mortgages are basically
"cash-flow" mortgages, requiring all available cash after payment of operating
expenses to be paid to the first mortgage holder. Therefore, it is unlikely that
any cash will be available to the Registrant to pay its general and
administrative expenses.
It is the Registrant's intention to continue to hold the
properties until they can no longer meet the debt service requirements and the
properties are foreclosed, or the market value of the properties increases to a
point where they can be sold at a price which is sufficient to repay the
underlying indebtedness (principal plus accrued interest).
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<PAGE>
(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.
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 April 1996 the Registrant refinanced $3,215,000 of the
first mortgage on Canal House. The refinancing has an interest rate of 8.75% and
is payable in monthly installments of $25,300 and is due in April 2003.
In August 1996, the Registrant refinanced the first mortgage
on Roseland. The refinancing was in the amount of $370,000, is due in August
2006 and has a variable interest rate beginning with 8.25% for the first year
and thereafter adjusting every 12 months to a rate which is 2.25 basis points
over the 1-year Treasury Constant Maturities with a floor of 8% and a ceiling of
10%.
(3) Results of Operations
During the second quarter of 1996, Registrant incurred a net
loss of $480,196 ($18.67 per limited partnership unit) compared to a net loss of
$428,270 ($16.66 per limited partnership unit) for the same period in 1995. For
the first six months of 1996, the Registrant incurred a net loss of $1,144,911
($44.52 per limited partnership unit) compared to a net loss of $898,032 ($34.92
per limited partnership unit) for the same period in 1995.
Rental income increased $19,755 from $615,946 in the second
quarter of 1995 to $635,701 in the same period in 1996. The increase in the
second quarter of 1996 from the same period in 1995 is due to increases in
rental income at Locke Mill, Firehouse Square and Canal House. Rental income
increased at Locke Mill and Firehouse Square due to increases in the average
rental rates and increased at Canal House due to an increase in the average
occupancy (88% to 94%).
Rental income increased $45,880 from $1,253,476 in the first
six months of 1995 to $1,299,356 in the same period in 1996. The increase from
the first six months of 1996 from the same period in 1995 is due to increases in
rental income at Locke Mill, Strehlow Terrace and Canal House, partially offset
by a decrease at Firehouse Square. Rental income increased at Locke Mill due to
an increase in the average rental rates and at Strehlow Terrace due to a
one-time, lump sum payment for rental increases received from the Omaha Housing
Authority retroactive to the years 1989-1994. The increase at Canal House is due
to an increase in the average occupancy (85% to 94%) while rental income
decreased at Firehouse Square due to a decrease in the average occupancy (84% to
80%).
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<PAGE>
Expenses for rental operations increased by $43,758 from
$256,345 in the second quarter of 1995 to $300,103 in the same period in 1996.
The increase is mainly the result of an increase in commissions expense at Locke
Mill and Canal House, an increase in wages and salaries expense at Mater
Dolorosa due to cost of living increases given to employees, and an overall
increase in operating expenses at Roseland. Commissions expense increased at
Locke Mill due to a change in management companies in September 1995 and
increased at Canal House due to the renewal of one of the commercial leases in
the second quarter.
Expenses for rental operations increased $230,097 from
$582,682 in the first six months of 1995 to $812,779 in the same period in 1996.
The increase is mainly the result of legal fees incurred in connection with the
restructuring of the debt at Canal House and an increase in commissions expense
at Locke Mill and Canal House, partially offset by an overall decrease in
operating expenses due to operational efficiencies achieved at Mater Dolorosa.
Commissions expense increased at Locke Mill due to a change in management
companies in September 1995 and increased at Canal House due to the renewal of
one of the commercial leases in the second quarter.
Depreciation and amortization expense decreased $16,051 from
$361,520 in the second quarter of 1995 to $345,469 in the same period in 1996
and decreased $33,523 from $723,039 in the first six months of 1995 to $689,516
in the same period in 1996. The decrease is due to decreases at Canal House and
Strehlow Terrace partially offset by an increase at Locke Mill. Depreciation
decreased at Canal House and Strehlow Terrace due to fact that the personal
property became fully depreciated in the first quarter of 1995. Depreciation and
amortization increased at Locke Mill due to the increase in fixed assets
resulting from the loan restructuring (as disclosed in the 1995 Form 10-K) and
the amortization of loan fees paid in connection with the restructuring. Also,
in the first six months of 1996 as compared to the same period in 1995,
amortization expense at Firehouse Square increased due to the amortization of
leasing commissions on leases executed in the second quarter of 1995.
Interest expense increased by $50,298 from $356,692 in the
second quarter of 1995 to $406,990 in the same period in 1996 and increased
$108,343 from $705,223 in the first six months of 1995 to $813,566 in the same
period in 1996. The increase is due to increases in the principal balances of
the notes at both Canal House and Locke Mill upon which interest is accrued (as
disclosed in the 1995 Form 10-K).
Losses incurred during the quarter at the Registrant's
properties amounted to $401,000, compared to a loss of approximately $349,000
for the same period in 1995. For the first six months of 1996 the Registrant's
properties recognized a loss of $986,000 compared to approximately $739,000 for
the same period in 1995.
In the second quarter of 1996, Registrant incurred a loss of
$113,000 at Locke Mill Plaza including $66,000 of depreciation and amortization
expense, compared to a loss of $57,000 in the second quarter of 1995, including
$55,000 of depreciation expense; for the first six months of 1996, the
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<PAGE>
Registrant incurred a loss of $232,000 including $125,000 of depreciation and
amortization expense, compared to a loss $104,000 for the same period in 1995,
including $110,000 of depreciation expense. The increased loss from the second
quarter and the first six months of 1995 to the same periods in 1996 is the
result of an increase in interest, commissions, and depreciation and
amortization expense partially offset by an increase in rental income. Interest
expense increased due to a higher debt balance and an increase in the interest
rate with respect to the financing secured by the property while commissions
increased due to a change in management companies in September 1995.
Depreciation and amortization increased due to the increase in fixed assets
resulting from the loan restructuring (as disclosed in the 1995 Form 10-K) and
the amortization of loan fees paid in connection with the restructuring. Rental
income increased due to an increase in the average rental rates.
In the second quarter of 1996, Registrant incurred a loss of
$26,000 at Roseland including $18,000 of depreciation expense, compared to a
loss of $21,000 including $18,000 of depreciation in the second quarter of 1995;
for the first six months of 1996, the Registrant incurred a loss of $43,000
including $36,000 of depreciation expense, compared to a loss $39,000 for the
same period in 1995, including $36,000 of depreciation expense. The increase in
the loss from the second quarter and the first six months of 1995 to the same
period in 1996 results from normal inflationary increases in operating expenses
at the property.
In the second quarter of 1996, Registrant incurred a loss of
$139,000 at Firehouse House including $55,000 of depreciation and amortization
expense, compared to a loss of $150,000 including $62,000 of depreciation and
amortization expense in the first quarter of 1995. The decrease in the loss from
the second quarter of 1995 to the same period in 1996 is mainly due to an
increase in rental income due to increases in the average rental rate.
For the first six months of 1996, the Registrant incurred a
loss of $286,000 at Firehouse Square including $119,000 of depreciation and
amortization expense, compared to a loss $250,000 for the same period in 1995,
including $124,000 of depreciation and amortization expense. The increase in the
loss from the first six months of 1995 to the same period in 1996 is due to a
decrease in rental income and an increase in amortization expense. Rental income
decreased due to a decrease in the average occupancy (84% to 80%) due to the
loss of tenants through non-renewal of their leases while amortization expense
increased due to the amortization of leasing commissions on leases executed in
the second quarter of 1995.
In the second quarter of 1996, Registrant incurred a loss of
$5,000 at Mater Dolorosa including $33,000 of depreciation and amortization
expense, compared to a loss of $3,000 including $33,000 of depreciation and
amortization expense in the first quarter of 1995. The increase in the loss from
the second quarter of 1995 to the same period in 1996 is due to an increase in
wages and salaries expense due to cost of living increases given to employees.
-5-
<PAGE>
For the first six months of 1996, the Registrant incurred a
loss of $3,000 at Mater Dolorosa including $65,000 of depreciation and
amortization expense, compared to a loss $5,000 for the same period in 1995,
including $65,000 of depreciation and amortization expense. The decrease in the
loss from the first six months of 1996 to the same period in 1996 is due to
operational efficiencies achieved at the property.
In the second quarter of 1996, Registrant incurred a loss of
$58,000 at Strehlow Terrace including $56,000 of depreciation expense, compared
to a loss of $63,000 including $63,000 of depreciation expense in the second
quarter of 1995. The decrease in the loss from the second quarter of 1995 to the
same period of 1996 is due to a decrease in depreciation expense as personal
property became fully depreciated in 1995.
For the first six months of 1996, the Registrant incurred a
loss of $72,000 at Strehlow Terrace including $113,000 of depreciation expense,
compared to a loss $124,000 for the same period in 1995, including $127,000 of
depreciation and amortization expense. The decrease in the loss from the first
six months of 1995 to the same period in 1996 is due to an increase in rental
income and a decrease in depreciation expense. Rental income increased due to a
one-time lump sum payment for rental increases received in the first quarter of
1996 from the Omaha Housing Authority retroactive to the years 1989-1994.
Depreciation decreased due to the fact that all personal property became fully
depreciated in 1995.
In the second quarter of 1996, Registrant incurred a loss of
$56,000 at Canal House including $92,000 of depreciation expense, compared to a
loss of $49,000 including $110,000 of depreciation expense in the second quarter
of 1995. The increase in the loss from the second quarter of 1995 to the same
period in 1996 is due to an increase in interest and commissions expense
partially offset by an increase in rental income due to higher average occupancy
(88% to 94%) and a decrease in depreciation expense. Interest expense increased
due to a higher principal balance upon which interest is accrued. Commissions
expense increased due to the renewal of one of the commercial leases at the
property in the second quarter and depreciation expense decreased due to fact
that the personal property became fully depreciated in 1995.
For the first six months of 1996, the Registrant incurred a
loss of $341,000 at Canal House including $183,000 of depreciation and
amortization expense, compared to a loss $206,000 for the same period in 1995,
including $221,000 of depreciation expense. The increase in the loss from the
first six months of 1995 to the same period in 1996 is due to an increase in
legal fees, interest and commissions expense partially offset by an increase in
rental income due to higher average occupancy (85% to 94%) and a decrease in
depreciation expense. Legal fees increased due to fees incurred in the first
quarter in connection with the restructuring of the debt while interest expense
increased due to a higher principal balance upon which interest is accrued.
Commissions expense increased due to the renewal of one of the commercial leases
at the property in the second quarter. Depreciation expense decreased due to
fact that the personal property became fully depreciated in 1995.
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<PAGE>
In the second quarter of 1996, Registrant incurred a loss of
$4,000 at Saunders Apartments compared to a loss of $6,000 in the second quarter
of 1995. For the first six months of 1996, the Registrant incurred a loss of
$9,000 at Saunders Apartments compared to a loss $11,000 for the same period in
1995. The Registrant accounts for this investment on the equity method and the
decrease in the loss is due to an increase in rental income due to an increase
in the average rental rates,
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
---------------------------------
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
Assets
------
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
Rental properties, at cost:
Land $ 1,081,164 $ 1,081,164
Buildings and improvements 33,481,720 33,462,131
Furniture and fixtures 1,068,784 1,068,784
------------ ------------
35,631,668 35,612,079
Less - Accumulated depreciation (10,269,916) (9,605,719)
------------ ------------
25,361,752 26,006,360
Cash and cash equivalents 40,800 72,395
Restricted cash 331,044 297,751
Investment in affiliate 35,783 44,572
Other assets (net of amortization of
$380,176 and $354,858 at March 31, 1996
and December 31, 1995, respectively) 400,684 346,643
------------ ------------
Total $ 26,170,063 $ 26,767,721
============ ============
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Debt obligations $ 19,372,038 $ 19,141,915
Accounts payable:
Trade 775,083 675,141
Taxes 49,414 49,414
Related parties 254,674 296,166
Other 34,851 39,310
Interest payable 920,513 654,897
Tenant security deposits 138,832 141,310
------------ ------------
Total liabilities 21,545,405 20,998,153
------------ ------------
Partners' equity 4,624,658 5,769,568
------------ ------------
Total $ 26,170,063 $ 26,767,721
============ ============
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
---------------------------------
(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 $ 635,701 $ 615,946 $ 1,299,356 $ 1,253,476
Interest income 289 658 648 1,434
----------- ----------- ----------- -----------
Total revenues 635,990 616,604 1,300,004 1,254,910
----------- ----------- ----------- -----------
Costs and expenses:
Rental operations 300,103 256,345 812,779 582,682
General and
administrative 60,010 64,779 120,265 130,779
Interest 406,990 356,692 813,566 705,223
Depreciation and
amortization 345,469 361,520 689,516 723,039
----------- ----------- ----------- -----------
Total costs and
expenses 1,112,572 1,039,336 2,436,126 2,141,723
----------- ----------- ----------- -----------
Loss before equity in
affiliate (476,582) (422,732) (1,136,122) (886,813)
Equity in net loss of
affiliate (3,614) (5,538) (8,789) (11,219)
----------- ----------- ----------- -----------
Net loss ($ 480,196) ($ 428,270) ($1,144,911) ($ 898,032)
=========== =========== =========== ===========
Net loss per limited
partnership unit
Loss before equity in
affiliate ($ 18.53) ($ 16.44) ($ 44.18) ($ 34.48)
Equity in net loss of
affiliate (.14) (.22) (.34) (.44)
----------- ----------- ----------- -----------
($ 18.67) ($ 16.66) ($ 44.52) ($ 34.92)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
---------------------------------
(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 ($1,144,911) ($ 898,032)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 689,516 723,039
Equity in loss of affiliate 8,789 11,219
Changes in assets and liabilities:
(Increase) decrease in restricted cash (33,293) 15,504
Increase in other assets (79,359) (8,740)
Increase in accounts payable - trade 99,942 99,592
Decrease in accounts payable - related parties (41,492) (399)
Decrease in accounts payable - other (4,459) (1,875)
Increase in interest payable 265,616 118,569
(Increase) decrease in tenant security deposits (2,478) 2,461
----------- -----------
Net cash (used in) provided by operating activities (242,129) 65,088
----------- -----------
Cash flows from investing activities:
Capital expenditures (19,589) (69,840)
----------- -----------
Net cash used in investing activities (19,589) (69,840)
----------- -----------
Cash flows from financing activities:
Proceeds from debt financing 286,786 66,140
Principal payments (56,663) (58,563)
----------- -----------
Net cash provided by financing activities 230,123 7,577
----------- -----------
(Decrease) increase in cash and cash equivalents (31,595) 2,825
----------- -----------
Cash and cash equivalents at beginning of period 72,395 59,176
----------- -----------
Cash and cash equivalents at end of period $ 40,800 $ 62,001
=========== ===========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
---------------------------------
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified Historic
Investors VI (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.
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<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.
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<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: August 6, 1996 DIVERSIFIED HISTORIC INVESTORS VI
--------------
By: Dover Historic Advisors VI, General Partner
By: DHP, Inc., Partner
By: /s/ Donna M. Zanghi
-------------------------------
DONNA M. ZANGHI,
Secretary and Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000828604
<NAME> DHI VI
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 40,800
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 400,684
<PP&E> 35,631,668
<DEPRECIATION> 10,269,916
<TOTAL-ASSETS> 26,170,063
<CURRENT-LIABILITIES> 1,114,022
<BONDS> 19,372,038
0
0
<COMMON> 0
<OTHER-SE> 4,624,658
<TOTAL-LIABILITY-AND-EQUITY> 26,170,063
<SALES> 0
<TOTAL-REVENUES> 1,300,004
<CGS> 0
<TOTAL-COSTS> 933,044
<OTHER-EXPENSES> 689,516
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 813,566
<INCOME-PRETAX> (1,144,911)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,144,911)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,144,911)
<EPS-PRIMARY> (44.52)
<EPS-DILUTED> 0.00
</TABLE>
