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 _______________________
Commission file number 33-26385
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DIVERSIFIED HISTORIC INVESTORS VII
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2539694
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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 _X_ No ___
<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 $30,607. 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
$83,490 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 due to the property's
inability to generate sufficient cash flow to pay operating expenses and debt
service. At the present time, with the exception of Northern Liberty, the
remaining properties are able to generate enough cash flow to cover their
operating expenses and debt service, but there is no additional cash 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. With respect to Northern Liberty, any development of
the remaining lot and building will require additional funding of capital. The
Registrant has not yet identified any sources for this funding.
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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.
(3) Results of Operations
During the first quarter of 1996, Registrant incurred a net
loss of $165,107 ($9.16 per limited partnership unit) compared to a net loss of
$315,488 ($17.51 per limited partnership unit) for the same period in 1995.
Rental income decreased $132,000 from $300,000 in the first
quarter of 1995 to $168,000 in the same period in 1996. This decrease is mainly
the result of the foreclosure of Shriver Square on March 30, 1995 and a slight
decrease in the rental income at Robidoux, partially offset by a slight increase
in rental income at Flint Goodridge. Although occupancy increased at Robidoux,
rental income decreased due to rental rate tenants replacing lower rental rate
tenants. The increase in rental income at Flint Goodridge is the result of
higher occupancy levels experienced by the property.
Expenses for rental operations decreased by $142,000 from
$230,000 in the first quarter of 1995 to $88,000 in the same period in 1996.
Expenses for rental operations decreased mainly due to the foreclosure of
Shriver Square on March 30, 1995, partially offset by an increase of operating
expenses such as maintenance, utilities, wages, and insurance expense at Flint
Goodridge, and an increase in maintenance expense at Robidoux. Maintenance and
utilities expense at Flint Goodridge increased due to an increase in occupancy
levels, and wages increased due to cost of living raises given to employees.
Higher health and property insurance premiums increased insurance expense.
Robidoux experienced an increase in maintenance expense due to higher occupancy
levels.
Depreciation and amortization expense decreased $67,000 from
$175,000 in the first quarter of 1995 to $108,000 in the same period in 1996.
The decrease is the result of the foreclosure of Shriver Square on March 30,
1995.
Interest expense decreased by $74,000 from $161,000 in the
first quarter of 1995 to $87,000 in the same period in 1996. The decrease is
mainly due to the foreclosure of Shriver Square on March 30, 1995, as well as a
decrease in interest expense at Robidoux due to the reduction of the interest
rate charged on one of the property's loans.
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<PAGE>
Losses incurred during the quarter at the Registrant's three
properties amounted to $103,000, compared to a loss of approximately $251,000
for the same period in 1995.
In the first quarter of 1996, Registrant incurred a loss of
$8,824 at Kensington Tower compared to a loss of $8,537 in the first quarter
1995.
In the first quarter of 1996, Registrant incurred a loss of
$51,000 at Flint Goodridge including $53,000 of depreciation and amortization
expense, compared to a loss of $43,000 in the first quarter of 1995, including
$57,000 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 operating expenses such as maintenance, utilities, wage and insurance expense
partially offset by an increase in rental income. The increase in rental income,
maintenance, and utilities is the result of higher occupancy levels (91% to 95%)
experienced at the property. Wages increased due to cost of living raises given
to employees, and insurance expense increased due to higher premiums charged by
the insurance companies.
In the first quarter of 1996, Registrant incurred a loss of
$51,000 at Robidoux, including $43,000 of depreciation and amortization expense,
compared to a loss of $61,000 including $43,000 of depreciation and amortization
expense in the first quarter of 1995. The decrease in the loss from the first
quarter of 1995 to the first quarter of 1996 is the result of a decrease in
interest expense, partially offset by a decrease in rental income and an
increase in maintenance expense. Interest expense decreased as a result of the
interest rate charged on one of its loans being reduced. Rental income decreased
due to a turnover of higher rental rate tenants to lower rental rate tenants,
and maintenance expense increased due to higher occupancy levels (92% to 100%)
experienced at the property.
In the first quarter of 1996, Registrant incurred a loss of
$0 at Shriver Square, compared to a loss of $147,000 including $61,000 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
the fact that the property was foreclosed by the lender in March 1995.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
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(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
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Assets
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March 31, 1996 December 31, 1995
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(Unaudited)
Rental properties, at cost:
Land $ 35,469 $ 35,469
Buildings and improvements 10,524,109 10,517,258
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10,559,578 10,552,727
Less - Accumulated depreciation (2,512,727) (2,405,790)
------------ ------------
8,046,851 8,146,937
Cash and cash equivalents 30,607 29,942
Restricted cash 79,245 87,909
Investment in affiliate 1,483,955 1,492,779
Other assets (net of amortization of
$93,651 and $92,912 at March 31, 1996
and December 31, 1995, respectively) 436,430 437,376
------------ ------------
Total $ 10,077,088 $ 10,194,943
============ ============
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Debt obligations $ 3,857,012 $ 3,858,348
Accounts payable:
Trade 426,275 380,863
Related parties 104,918 105,369
Interest payable 56,859 53,122
Tenant security deposits 24,163 23,753
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Total liabilities 4,469,227 4,421,455
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Minority interests 251,629 252,148
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Partners' equity 5,356,233 5,521,340
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Total $ 10,077,088 $ 10,194,943
============ ============
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
----------------------------------
(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
---- ----
Revenues:
Rental income $ 168,261 $ 300,170
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Costs and expenses:
Rental operations 87,791 229,984
General and administrative 42,000 42,000
Interest 87,596 161,161
Depreciation and amortization 107,676 175,148
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Total costs and expenses 325,063 608,293
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Loss before minority interests and
equity in affiliate: (156,802) (308,122)
Minority interests' portion of loss 519 1,172
Equity in net loss of affiliate (8,824) (8,537)
--------- ---------
Net loss ($165,107) ($315,488)
========= =========
Net loss per limited partnership unit ($ 9.16) ($ 17.50)
========= =========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
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(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
---- ----
Cash flows from operating activities:
Net loss ($165,107) ($315,488)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 107,676 175,148
Equity in loss of affiliate 8,824 8,537
Changes in assets and liabilities:
Decrease (increase) in restricted cash 8,664 (2,440)
(Increase) decrease in other assets 207 (4,013)
Increase in accounts payable - trade 45,411 85,712
(Decrease) increase in accounts payable - related
parties (451) 17,579
Increase in interest payable 3,737 40,712
Increase in tenant security deposits 410 254
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Net cash provided by operating activities 9,371 6,001
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Cash flows from investing activities:
Capital expenditures (6,853) (5,823)
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Net cash used in investing activities (6,853) (5,823)
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Cash flows from financing activities:
Principal payments (1,334) (5,473)
Minority interest (519) (1,172)
--------- ---------
Net cash used in financing activities (1,853) (6,645)
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Increase (decrease) in cash and cash equivalents 665 (6,467)
--------- ---------
Cash and cash equivalents at beginning of period 29,942 12,909
--------- ---------
Cash and cash equivalents at end of period $ 30,607 $ 6,442
========= =========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
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(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified Historic
Investors VII (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
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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 1, 1996 DIVERSIFIED HISTORIC INVESTORS VII
------------
By: Dover Historic Advisors VII, General Partner
By: Dover Historic Advisors, Inc., Partner
By: /s/ Donna M. Zanghi
--------------------------
DONNA M. ZANGHI
Secretary and Treasurer
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<ARTICLE> 5
<CIK> 0000845029
<NAME> DHI VII
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 30,607
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 436,430
<PP&E> 10,559,578
<DEPRECIATION> 2,512,727
<TOTAL-ASSETS> 10,077,088
<CURRENT-LIABILITIES> 531,193
<BONDS> 3,857,012
0
0
<COMMON> 0
<OTHER-SE> 5,356,233
<TOTAL-LIABILITY-AND-EQUITY> 10,077,088
<SALES> 0
<TOTAL-REVENUES> 168,261
<CGS> 0
<TOTAL-COSTS> 129,791
<OTHER-EXPENSES> 107,676
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,596
<INCOME-PRETAX> (165,107)
<INCOME-TAX> 0
<INCOME-CONTINUING> (165,107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,107)
<EPS-PRIMARY> (9.16)
<EPS-DILUTED> 0
</TABLE>
