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, 1999
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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.)
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 - March 31, 1999 (unaudited)
and December 31, 1998
Consolidated Statements of Operations - Three Months
Ended March 31, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1999 and 1998 (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, 1999, Registrant had cash of
$21,287. 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, 1999, Registrant had restricted
cash of $273,673 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 five
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
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 1999, Registrant
incurred a net loss of $526,867 ($20.49 per limited partnership unit)
compared to a net loss of $476,706 ($18.54 per limited partnership
unit) for the same period in 1998.
Rental income increased $22,752 from $571,915 in the
first quarter of 1998 to $594,667 in the same period in 1999. The
increase in the first quarter of 1999 from the same period in 1998 is
due to an increase in the average rental rates at Canal House,
Firehouse Square, Mater Dolorosa, and Strehlow Terrace.
Expenses for rental operations increased by $9,651
from $346,695 in the first quarter of 1998 to $356,346 in the same
period in 1999. The increase in rental operations expense is due to an
increase in maintenance expense at Canal House, an increase in wages
and salaries at Strehlow Terrace and an increase in maintenance
expense at Roseland partially offset by a decrease in maintenance
expense at Mater Dolorosa. At Canal House and Roseland, the
maintenance expense increased as a result of an increase in apartment
preparation expense due to a higher turnover of apartment units. Wages
and salaries expense at Strehlow Terrace increased due to a change in
the management company. Maintenance expense decreased at Mater
Dolorosa due to deferred maintenance performed in the first quarter of
1998.
Depreciation and amortization expense increased
$64,585 from $289,081 in the first quarter of 1998 to $353,666 in the
same period in 1999. The increase is due to the refinancing at Canal
House in January 1999 which caused a significant increase in
amortization expense. The increase in depreciation and amortization
expense was partially offset by a decrease in amortization expense at
Firehouse Square due to the amortization in 1998 of leasing
commissions for tenants who vacated in the first quarter of 1998 which
was not repeated in the first quarter of 1999.
Interest expense decreased $1,022 from $349,891 in
the first quarter of 1998 to $348,869 in the same period in 1999. The
decrease is the effect of decreases in interest expense at both
Firehouse Square caused by its October 1998 mortgage refinancing and
Mater Dolorosa due to a decrease in the principal balance of the
mortgage loan. The decrease in interest expense is partially offset by
an increase in interest expense at Canal House as a result of its 1999
mortgage refinancing.
Losses incurred during the quarter at the
Registrant's properties amounted to $444,000 compared to a loss of
approximately $394,000 for the same period in 1998.
In the first quarter of 1999, Registrant incurred
a loss of $14,000 at Roseland including $17,000 of depreciation
expense, compared to a loss of $11,000 including $17,000 of
depreciation expense in the first quarter of 1998. The increase in
the loss from the first quarter of 1998 to the same period in 1999 is
mainly the result of an overall increase in maintenance expense
including repairs and painting due to a higher turnover of apartment
units.
In the first quarter of 1999, Registrant incurred
a loss of $108,000 at Firehouse Square including $65,000 of
depreciation and amortization expense, compared to a loss of $136,000
including $70,000 of depreciation and amortization expense in the
first quarter of 1998. The decrease in the loss from the first
quarter of 1998 to the same period in 1999 is due to a decrease in
interest and amortization expense and an increase in rental income.
Interest expense decreased due to refinancing which occurred in
October of 1998 which lowered the overall interest expense.
Amortization expense decreased due to the amortization in 1998 of
leasing commissions for tenants who vacated in 1998 which was not
repeated in 1999. Rental income increased due to an increase in the
average rental rates while the occupancy remained at 100%.
In the first quarter of 1999, Registrant realized
income of $40 at Mater Dolorosa including $32,000 of depreciation and
amortization expense, compared to a loss of $14,000 including $32,000
of depreciation and amortization expense in the first quarter of 1998.
The change from the loss incurred in the first quarter of 1998 to
income earned in the same period in 1999 results from an increase in
rental income due to an increase in average rental rates coupled with
an overall decrease in the operating expenses due to operating
efficiencies at the property and a decrease in interest expense.
Interest expense decreased due to a decrease in the principal balance
of the mortgage loan.
In the first quarter of 1999, Registrant incurred
a loss of $59,000 at Strehlow Terrace including $59,000 of
depreciation expense, compared to a loss of $54,000 including $58,000
of depreciation expense in the first quarter of 1998. The increase in
the loss from the first quarter of 1998 to the same period in 1999 is
due to an increase in wages and salaries expense due to a change in
the management company partially offset by an increase in rental
income due to an increase in the average rental rates.
In the first quarter of 1999, Registrant incurred
a loss of $263,000 at Canal House including $162,000 of depreciation
and amortization expense, compared to a loss of $179,000 including
$93,000 of depreciation and amortization expense in the first quarter
of 1998. The increase in the loss from the first quarter of 1998 to
the same period in 1999 is due to an increase in interest,
amortization 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 due to a refinancing
of the first mortgage in the first quarter of 1999. Maintenance
expense increased due to an increase in apartment preparation expense
resulting from a higher turnover of apartment units. Amortization
expense increased due to the amortization of loan costs incurred in
the refinancing. 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
1999, Registrant incurred a loss of $4,000 at Saunders Apartments
compared to a loss of $3,000 in the first quarter 1998. The increase
in the loss is due to an increase in the various operating expenses.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
March 31, 1999 December 31, 1998
(Unaudited)
Rental properties, at cost:
Land $ 950,238 $ 950,238
Buildings and improvements 27,176,328 27,176,328
Furniture and fixtures 858,106 858,106
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28,984,672 28,984,672
Less - Accumulated depreciation (11,311,181) (11,038,617)
---------- ----------
17,673,491 17,946,055
Cash and cash equivalents 21,287 28,064
Restricted cash 273,673 280,896
Investment in affiliate (12,864) (8,971)
Other assets (net of amortization of
$629,609 and $548,506 at March 31, 1999
and December 31, 1998, respectively) 516,106 632,692
---------- ----------
Total $18,471,693 $18,878,736
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $17,212,343 $17,161,190
Accounts payable:
Trade 1,110,322 1,081,777
Taxes 15,123 20,492
Related parties 396,529 396,529
Other 19,118 27,039
Interest payable 926,975 870,643
Tenant security deposits 126,942 129,858
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Total liabilities 19,807,352 19,687,528
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Partners' equity (1,335,659) (808,792)
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Total $18,471,693 $18,878,736
========== ==========
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, 1999 and 1998
(Unaudited)
Three months Three months
Ended Ended
March 31, March 31,
1999 1998
Revenues:
Rental income $ 594,667 $ 571,915
Interest income 1,240 333
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Total revenues 595,907 572,248
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Costs and expenses:
Rental operations 356,346 346,695
General and administrative 60,000 60,000
Interest 348,869 349,891
Depreciation and amortization 353,666 289,081
--------- ---------
Total costs and expenses 1,118,881 1,045,667
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Loss before equity in affiliate and
extraordinary loss (522,974) (473,419)
Equity in net loss of affiliate (3,893) (3,287)
--------- ---------
Net loss ($ 526,867) ($ 476,706)
========= =========
Net loss per limited partnership unit:
Loss before equity in affiliate ($ 20.34) ($ 18.41)
Equity in net loss of affiliate (.15) (.13)
--------- ---------
($ 20.49) ($ 18.54)
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
Three months ended
March 31,
1999 1998
Cash flows from operating activities:
Net loss ($ 526,867) ($ 476,706)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 353,666 289,081
Equity in loss of affiliate 3,893 3,287
Changes in assets and liabilities:
Decrease in restricted cash 7,223 77,782
Decrease in other assets 35,485 105
Increase in accounts payable - trade 28,544 9,948
Decrease in accounts payable - taxes (5,369) 0
Increase in accounts payable - related parties 0 13,045
(Decrease) increase in accounts payable - other (7,921) 5,910
Increase in interest payable 56,332 109,892
(Decrease) increase in tenant security deposits (2,916) 5,519
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Net cash (used in) provided by operating activities (57,930) 37,863
------- -------
Cash flows from investing activities:
Capital expenditures 0 (826)
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Net cash used in investing activities 0 (826)
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Cash flows from financing activities:
Proceeds from debt financing 88,057 6,831
Principal payments (36,904) (39,629)
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Net cash provided by (used in) financing activities 51,153 (32,798)
------- -------
(Decrease) increase in cash and cash equivalents (6,777) 4,239
Cash and cash equivalents at beginning of period 28,064 23,036
------- -------
Cash and cash equivalents at end of period $ 21,287 $ 27,275
======= =======
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, 1998.
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, 1999.
<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: June 28, 1999 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 21,287
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,984,672
<DEPRECIATION> 11,311,181
<TOTAL-ASSETS> 18,471,693
<CURRENT-LIABILITIES> 1,110,322
<BONDS> 17,212,343
0
0
<COMMON> 0
<OTHER-SE> (1,335,659)
<TOTAL-LIABILITY-AND-EQUITY> 18,471,693
<SALES> 0
<TOTAL-REVENUES> 594,667
<CGS> 0
<TOTAL-COSTS> 356,346
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 348,869
<INCOME-PRETAX> (526,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (526,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (526,867)
<EPS-BASIC> (20.49)
<EPS-DILUTED> 0
</TABLE>
