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 March 31, 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
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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
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - March 31, 1996 (unaudited) and December
31, 1995
Consolidated Statements of Operations - Three Months Ended March 31,
1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows - Three Months Ended March 31,
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 March 31, 1996, Registrant had cash of $73,533. 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 March 31, 1996, Registrant had restricted cash of $246,421
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 firs 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.
(3) Results of Operations
During the first quarter of 1996, Registrant incurred a net loss of
$664,716 ($25.85 per limited partnership unit) compared to a net loss of
$469,762 ($18.26 per limited partnership unit) for the same period in 1995.
Rental income increased $26,125 from $637,530 in the first quarter of
1995 to $663,655 in the same period in 1996. The increase in the first quarter
of 1996 from the same period in 1995 is due to increases in rental income at
Strehlow Terrace and Canal House, partially offset by a decrease at Firehouse
Square. Rental income increased at Strehlow Terrace due to a rental increase
received from the Omaha Housing Authority retroactive to the years 1989-1994 and
increased at Canal House due to an increase in the average occupancy (83% to
93%) while rental income decreased at Firehouse Square due to a decrease in the
average occupancy (73% to 64%).
Expenses for rental operations increased by $186,339 from $326,337 in
the first quarter of 1995 to $512,676 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 wages and salaries expense at
Locke Mill due to a change in management companies in September 1995, partially
offset by an overall decrease in operating expenses due to operational
efficiencies achieved at Roseland and Mater Dolorosa.
Depreciation and amortization expense decreased $17,472 from $361,519
in the first quarter of 1995 to $344,047 in the same period in 1996. The
decrease is due to a decrease at Canal House partially offset by increases at
Locke Mill. Depreciation decreased at Canal House 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.
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<PAGE>
Interest expense increased by $32,914 from $348,531 in the first
quarter of 1995 to $381,445 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.
Losses incurred during the quarter at the Registrant's properties
amounted to $580,000, compared to a loss of approximately $385,000 for the same
period in 1995.
In the first quarter of 1996, Registrant incurred a loss of $119,000 at
Locke Mill Plaza including $59,000 of depreciation and amortization expense,
compared to a loss of $47,000 in the first quarter of 1995, including $55,000 of
depreciation and amortization expense. The increased loss from the first quarter
of 1995 to the same quarter of 1996 is the result of an increase in interest,
wages and salaries, and depreciation and amortization expense. 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 wages and salaries
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.
In the first quarter of 1996, Registrant incurred a loss of $17,000 at
Roseland including $18,000 of depreciation, compared to a loss of $18,000
including $18,000 of depreciation in the first quarter of 1995. The decrease in
the loss from the first quarter of 1995 to the same period in 1996 results from
an overall decrease in operating expenses due to operational efficiencies
achieved at the property.
In the first quarter of 1996, Registrant incurred a loss of $147,000 at
Firehouse House including $64,000 of depreciation and amortization expense,
compared to a loss of $100,000 including $62,000 of depreciation and
amortization expense in the first quarter of 1995. The increase in the loss from
the first quarter 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 (73% to 64%) 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 fourth
quarter of 1995.
In the first quarter of 1996, Registrant recognized income of $2,000 at
Mater Dolorosa including $32,000 of depreciation and amortization expense,
compared to a loss of $2,000 including $32,000 of depreciation and amortization
expense in the first quarter of 1995. The decrease in the loss from the first
quarter of 1995 to the same period in 1996 is due to an overall decrease in
operating expenses due to operational efficiencies achieved at the property.
In the first quarter of 1996, Registrant incurred a loss of $14,000 at
Strehlow Terrace including $57,000 of depreciation expense, compared to a loss
of $61,000 including $64,000 of depreciation expense in the first quarter of
1995. The decrease in the loss from the first quarter of 1995 to the same period
in 1996 is due to an increase in rental income. Rental income increased due to a
lump sum payments of rental increases received from the Omaha Housing Authority
retroactive to the years 1989-1994.
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<PAGE>
In the first quarter of 1996, Registrant incurred a loss of $285,000 at
Canal House including $91,000 of depreciation, compared to a loss of $157,000
including $111,000 of depreciation in the first quarter of 1995. The increase in
the loss from the first quarter of 1995 to the same period in 1996 is due to an
increase in legal fees and interest expense partially offset by an increase in
rental income due to higher average occupancy (83% to 93%) and a decrease in
depreciation expense. Legal fees increased due to fees incurred in connection
with the restructuring of the debt while interest expense increased due to a
higher principal balance upon which interest is accrued. Depreciation decreased
due to fact that the personal property became fully depreciated in 1995.
In the first quarter of 1996, Registrant incurred a loss of $5,000 at
Saunders Apartments compared to a loss of $6,000 in the first quarter 1995.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
March 31, 1996 December 31, 1995
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(Unaudited)
Rental properties, at cost:
Land $ 1,081,164 $ 1,081,164
Buildings and improvements 33,478,900 33,462,131
Furniture and fixtures 1,068,784 1,068,784
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35,628,848 35,612,079
Less - Accumulated depreciation (9,937,818) (9,605,719)
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25,691,030 26,006,360
Cash and cash equivalents 73,533 72,395
Restricted cash 246,421 297,751
Investment in affiliate 39,397 44,572
Other assets (net of amortization of
$366,806 and $354,858 at March 31,
1996 and December 31, 1995,
respectively)
357,554 346,643
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Total $ 26,407,935 $ 26,767,721
============ ============
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 19,240,805 $ 19,141,915
Accounts payable:
Trade 752,102 675,141
Taxes 49,414 49,414
Related parties 297,081 296,166
Other 43,843 39,310
Interest payable 789,166 654,897
Tenant security deposits 130,673 141,310
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Total liabilities 21,303,084 20,998,153
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Partners' equity 5,104,851 5,769,568
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Total $ 26,407,935 $ 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 Ended March 31, 1996 and 1995
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
1996 1995
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Revenues:
Rental income $ 663,655 $ 637,530
Interest income 359 776
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Total revenues 664,014 638,306
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Costs and expenses:
Rental operations 512,676 326,337
General and administrative 60,255 66,000
Interest 406,576 348,531
Depreciation and amortization 344,047 361,519
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Total costs and expenses 1,323,554 1,102,387
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Loss before equity in affiliate: (659,541) (464,081)
Equity in net loss of affiliate (5,175) (5,681)
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Net loss ($ 664,716) ($ 469,762)
=========== ===========
Net loss per limited partnership unit:
Loss before equity in affiliate ($ 25.65) ($ 18.04)
Equity in net loss of affiliate (.20) (.22)
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($ 25.85) ($ 18.26)
=========== ===========
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 Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three months ended
March 31,
1996 1995
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Cash flows from operating activities:
Net loss ($664,716) ($469,762)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 344,047 361,519
Equity in loss of affiliate 5,175 5,681
Changes in assets and liabilities:
Decrease in restricted cash 51,330 39,247
Increase in other assets (22,860) (10,642)
Increase in accounts payable - trade 76,961 54,742
Increase (decrease) in accounts payable -
related parties 915 (399)
Increase (decrease) in accounts payable -
other 4,533 (1,157)
Increase in interest payable 134,269 42,014
Decrease in tenant security deposits (10,637) (1,837)
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Net cash (used in) provided by operating activities (80,983) 19,406
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Cash flows from investing activities:
Capital expenditures (16,769) (1,852)
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Net cash used in investing activities (16,769) (1,852)
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Cash flows from financing activities:
Proceeds from debt financing 127,455 -0-
Principal payments (28,565) (30,706)
Net cash provided by (used in) financing activities 98,890 (30,706)
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Increase (decrease) in cash and cash equivalents 1,138 (13,152)
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Cash and cash equivalents at beginning of period 72,395 59,176
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Cash and cash equivalents at end of period $ 73,533 $ 46,024
========= =========
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 March 31,
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: July 24, 1996 DIVERSIFIED HISTORIC INVESTORS VI
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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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<NAME> DIVERSIFIED HISTORIC INVESTORS VI
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 73,533
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 357,554
<PP&E> 35,628,848
<DEPRECIATION> 9,937,818
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<CURRENT-LIABILITIES> 1,142,440
<BONDS> 19,240,805
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<COMMON> 0
<OTHER-SE> 5,104,851
<TOTAL-LIABILITY-AND-EQUITY> 26,407,935
<SALES> 0
<TOTAL-REVENUES> 664,014
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 406,576
<INCOME-PRETAX> (664,716)
<INCOME-TAX> 0
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