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, 1998
---------------------------------------
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
-----------------------------------------------
DIVERSIFIED HISTORIC INVESTORS VI
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2492210
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1609 Walnut Street, Philadelphia, PA 19103
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
N/A
- ----------------------------------------------------------------------
(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 - March 31, 1998 (unaudited)
and December 31, 1997
Consolidated Statements of Operations - Three Months
Ended March 31, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 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 March 31, 1998, Registrant had cash of
$27,275. 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, 1998, Registrant had restricted
cash of $256,398 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 two properties. At
the present time, all remaining properties are able to pay their
operating expenses and debt service; however, at two of the six
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).
(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.
(3) Results of Operations
During the first quarter of 1998, Registrant
incurred a net loss of $476,706 ($18.54 per limited partnership unit)
compared to a net loss of $1,151,017 ($44.76 per limited partnership
unit) for the same period in 1997. Included in the first quarter of
1997 loss is $769,620 of extraordinary loss relating to the
foreclosure of Locke Mill.
Rental income decreased $82,327 from $654,242 in
the first quarter of 1997 to $571,915 in the same period in 1998. The
decrease in the first quarter of 1998 from the same period in 1997 is
due to the foreclosure of Locke Mill partially offset by increases at
Canal House, Firehouse Square, Roseland and Strehlow Terrace. Rental
income at Canal House, Roseland and Strehlow Terrace increased due to
increases in the average rental rates. The increase at Firehouse
Square was due to an increase in the average occupancy (81% to 100%).
Other income decreased $205,643 in the first quarter of
1997 to $0 in the same period in 1998. The decrease from the first
quarter of 1997 to the same period in 1998 is due to the sale of the
interest in Strehlow Terrace Apartments Limited Partnership in the
first quarter of 1997, as referred to in the Form 10-K for the year
ended December 31, 1997.
Expenses for rental operations decreased by
$48,772 from $395,467 in the first quarter of 1997 to $346,695 in the
same period in 1998. The decrease is mainly the result of the
foreclosure of Locke Mill combined with a decrease in bad debt expense
resulting from the write-off in the first quarter of 1997 of tenant
receivables that were deemed uncollectible at Mater Dolorosa partially
offset by increases in maintenance expense at Canal House and Strehlow
Terrace. At Canal House, maintenance expense increased due to an
increase in apartment preparation expense due a higher turnover of
apartment units and, at Strehlow Terrace, maintenance expense
increased due to deferred maintenance performed in the first quarter
of 1998
Depreciation and amortization expense decreased
$63,829 from $352,910 in the first quarter of 1997 to $289,081 in the
same period in 1998. The decrease is mainly due to the foreclosure of
Locke Mill partially offset by an increase in amortization expense at
Firehouse Square due to the amortization of leasing commissions
incurred during 1997.
Interest expense decreased $77,973 from $427,864
in the first quarter of 1997 to $349,891 in the same period in 1998.
The decrease is mainly due to the foreclosure of Locke Mill partially
offset by increases at Canal House and Firehouse Square due to
increases in the average principal balance of the loans upon which
interest is calculated due to advances made by the mortgage holder.
Losses incurred during the quarter at the
Registrant's properties amounted to $394,000 compared to a loss of
approximately $1,236,000 for the same period in 1997.
In the first quarter of 1998, Registrant incurred
a loss of $0 at Locke Mill Plaza, compared to a loss of $852,000 in
the first quarter of 1997, including $63,000 of depreciation and
amortization expense. The first quarter of 1997 loss without the
effect of the foreclosure would have been $118,000. The decreased
loss from the first quarter of 1997 to the same period in 1998 is the
result of the foreclosure of the property by the lender on March 31,
1997.
In the first quarter of 1998, Registrant incurred
a loss of $11,000 at Roseland including $17,000 of depreciation
expense, compared to a loss of $17,000 including $18,000 of
depreciation expense. The decrease in the loss from the first quarter
of 1997 to the same period in 1998 is mainly the result of an increase
in rental income due to an increase in the average rental rates.
In the first quarter of 1998, Registrant incurred
a loss of $136,000 at Firehouse House including $70,000 of
depreciation and amortization expense, compared to a loss of $134,000
including $63,000 of depreciation and amortization expense in the
first quarter of 1997. The increase in the loss from the first
quarter of 1997 to the same period in 1998 is due to an increase in
interest and amortization expense partially offset by an increase in
rental income. Interest expense increased due to an increase in the
average principal balance of the loan upon which interest is
calculated. Amortization expense increased due to the amortization of
leasing commissions incurred during 1997. Rental income increased due
to an increase in the average occupancy (81% to 100%).
In the first quarter of 1998, Registrant incurred
a loss of $14,000 at Mater Dolorosa including $32,000 of depreciation
and amortization expense, compared to a loss of $24,000 including
$32,000 of depreciation and amortization expense in the first quarter
of 1997. The decrease in the loss from the first quarter of 1997 to
the same period in 1998 is due to a decrease in bad debt expense
resulting from the write-off in the first quarter of 1997 of tenant
receivables that were deemed uncollectible.
In the first quarter of 1998, Registrant incurred
a loss of $54,000 at Strehlow Terrace including $58,000 of
depreciation expense, compared to a loss of $57,000 including $57,000
of depreciation expense in the first quarter of 1997. The decrease in
the loss from the first quarter of 1997 to the same period in 1998 is
due to an increase in rental income due to an increase in the average
rental rates partially offset by an increase in maintenance expense
due to deferred maintenance performed in the first quarter of 1998.
In the first quarter of 1998, Registrant incurred
a loss of $179,000 at Canal House including $93,000 of depreciation
and amortization expense, compared to a loss of $152,000 including
$91,000 of depreciation and amortization expense in the first quarter
of 1996. The increase in the loss from the first quarter of 1997 to
the same period in 1998 is due to an increase in interest and
maintenance expense partially offset by an increase in rental income.
Interest expense increased due to a higher principal balance upon
which interest is accrued and maintenance expense increased due to an
increase in apartment preparation expense due a higher turnover of
apartment units. Rental income increased due to an increase in the
average rental rates.
The Registrant owns a minority interest in
Saunders Apartments which it accounts for on the equity method. The
Registrant does not include the assets or liabilities of Saunders
Apartments in its consolidated financial statements. The following
information is provided for the property. In the first quarter of
1998, Registrant incurred a loss of $3,000 at Saunders Apartments
compared to a loss of $4,000 in the first quarter 1997. The decrease
in the loss is due to an increase in rental income due to an increase
in the average rental rates.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
March 31, 1998 December 31, 1997
(Unaudited)
Rental properties, at cost:
Land $ 950,238 $ 950,238
Buildings and improvements 27,139,767 27,138,941
Furniture and fixtures 845,914 845,914
---------- ----------
28,935,919 28,935,093
Less - Accumulated depreciation (10,220,421) (9,949,357)
---------- ---------
18,715,498 18,985,736
Cash and cash equivalents 27,275 23,036
Restricted cash 256,398 334,180
Investment in affiliate 2,461 5,748
Other assets (net of amortization of
$444,536 and $426,518 at March 31, 1998
and December 31, 1997, respectively) 342,484 360,606
---------- ----------
Total $19,344,116 $19,709,306
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $15,418,888 $15,451,686
Accounts payable:
Trade 882,573 872,625
Taxes 20,004 20,004
Related parties 314,384 308,474
Other 14,071 1,026
Interest payable 1,402,533 1,292,641
Tenant security deposits 129,869 124,350
---------- ----------
Total liabilities 18,182,322 18,070,806
---------- ----------
Partners' equity 1,161,794 1,638,500
---------- ----------
Total $19,344,116 $19,709,306
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
1998 1997
Revenues:
Rental income $ 571,915 $ 654,242
Other income 0 205,643
Interest income 333 266
--------- ---------
Total revenues 572,248 860,151
--------- ---------
Costs and expenses:
Rental operations 346,695 395,467
General and administrative 60,000 61,525
Interest 349,891 427,864
Depreciation and amortization 289,081 352,910
--------- ---------
Total costs and expenses 1,045,667 1,237,766
--------- ---------
Loss before equity in affiliate and
extraordinary loss (473,419) (377,615)
Equity in net loss of affiliate (3,287) (3,782)
--------- ----------
Loss before extraordinary loss (476,706) (381,397)
Extraordinary loss 0 (769,620)
--------- ---------
Net loss ($ 476,706) ($1,151,017)
========= =========
Net loss per limited partnership unit:
Loss before equity in affiliate and
extraordinary loss ($ 18.41) ($ 14.68)
Equity in net loss of affiliate (.13) (.15)
--------- ---------
Loss before extraordinary loss (18.54) (14.83)
Extraordinary loss 0 (29.93)
--------- ---------
($ 18.54) ($ 44.76)
========= =========
The accompanying notes are an integral part of these financial statement.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three months ended
March 31,
1998 1997
Cash flows from operating activities:
Net loss ($ 476,706) ($1,151,017)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 289,081 352,910
Equity in loss of affiliate 3,287 3,782
Extraordinary loss 0 769,620
Changes in assets and liabilities:
Decrease in restricted cash 77,782 61,491
Decrease (increase) in other assets 105 (80,400)
Increase (decrease) in accounts payable - trade 9,948 (2,405)
Increase in accounts payable - related parties 13,045 2,997
Increase (decrease) in accounts payable - other 5,910 (28,159)
Increase in interest payable 109,892 91,417
Increase in tenant security deposits 5,519 16,123
--------- ---------
Net cash provided by operating activities 37,863 36,359
--------- ---------
Cash flows from investing activities:
Capital expenditures (826) (6,008)
--------- ---------
Net cash used in investing activities (826) (6,008)
--------- ---------
Cash flows from financing activities:
Proceeds from debt financing 6,831 4,008
Principal payments (39,629) (42,712)
--------- ---------
Net cash used in financing activities (32,798) (38,704)
--------- ---------
Increase (decrease) in cash and cash equivalents 4,239 (8,353)
Cash and cash equivalents at beginning of period 23,036 59,334
--------- ---------
Cash and cash equivalents at end of period $ 27,275 $ 50,981
========= =========
The accompanying notes are an integral part of these financial statements.
<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, 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 March 31, 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: May 29, 1998 DIVERSIFIED HISTORIC INVESTORS VI
By: Dover Historic Advisors VI, Inc., General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 27,275
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,935,919
<DEPRECIATION> 10,220,421
<TOTAL-ASSETS> 19,344,116
<CURRENT-LIABILITIES> 902,577
<BONDS> 15,418,888
0
0
<COMMON> 0
<OTHER-SE> 1,161,794
<TOTAL-LIABILITY-AND-EQUITY> 19,344,116
<SALES> 0
<TOTAL-REVENUES> 572,248
<CGS> 0
<TOTAL-COSTS> 346,695
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 349,891
<INCOME-PRETAX> (476,706)
<INCOME-TAX> 0
<INCOME-CONTINUING> (476,706)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (476,706)
<EPS-PRIMARY> 0
<EPS-DILUTED> (18.54)
</TABLE>
