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 33-26385
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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.)
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
$34,302. 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 $85,366 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.
(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. With respect to
Northern Liberty, any development of the remaining lots and building
will require additional funding of capital. The Registrant has not
yet identified any sources for this funding and does not anticipate
being able to do so. While the Registrant will be seeking to sell
this property, the Registrant does not believe that there is an active
market for properties of this sort and accordingly, there can be no
assurance that the property can be sold at a price acceptable to the
Registrant.
(3) Results of Operations
During the first quarter of 1999, Registrant
incurred a loss of $125,494 ($6.96 per limited partnership unit)
compared to $150,494 ($8.35 per limited partnership unit) for the same
period in 1998.
Rental income increased $10,707 from $176,925 in
the first quarter of 1998 to $187,632 in the same period in 1999. The
increase in rental income is the result of an increase in the average
occupancy (89% to 95%) at Flint Goodridge and Robidoux (91% to 100%).
Expenses for rental operations decreased by $8,154
from $89,160 in the first quarter of 1998 to $81,006 in the same
period in 1999 due to a decrease in maintenance and salaries and wages
expense at Flint Goodridge and a decrease in maintenance expense at
Robidoux due to a decrease in the turnover of apartment units. At
Flint Goodridge, maintenance decreased due to deferred maintenance
performed in the first quarter of 1998 that did not recur in the first
quarter of 1999, and salaries and wages expense decreased due to a
decrease in the overtime hours needed at the property.
Losses incurred during the quarter at the
Registrant's properties amounted to $63,000, compared to a loss of
approximately $93,000 for the same period in 1998.
In the first quarter of 1999 Registrant incurred a
loss of $36,000 at Flint Goodridge including $51,000 of depreciation
and amortization expense, compared to a loss of $52,000 in the first
quarter of 1998 including $52,000 of depreciation and amortization
expense. The decrease in the loss from the first quarter of 1998 to
the same quarter of 1999 is the result of an increase in rental income
combined with a decrease in maintenance and salaries and wages
expense. Rental income increased due to an increase in the average
occupancy (89% to 95%). Maintenance expense decreased due to deferred
maintenance performed in the first quarter of 1998 that did not recur
in the first quarter of 1999, and salaries and wages expense decreased
due to a decrease in the overtime hours needed at the property.
In the first quarter of 1999 Registrant incurred a
loss of $27,000 at Robidoux, including $46,000 of depreciation and
amortization expense, compared to a loss of $41,000 including $ 44,000
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
quarter of 1999 is the result of an increase in rental income combined
with a decrease in maintenance expense. Rental income increased due
to an increase in the average occupancy (91% to 100%). Maintenance
expense decreased due to a lower turnover of apartment units.
Summary of Minority Interest Investments
The Registrant owns a minority interest in
Kensington Tower which it accounts for on the equity method. The
Registrant does not include the assets or liabilities of Kensington
Tower in its consolidated financial statements. The following
operating information is provided for the property. In the first
quarter of 1999, Registrant incurred a loss of $8,000 compared to a
loss of $4,000 in the same period of 1998. The increased loss from
the first quarter of 1998 to the same period in 1999 is due to an
overall increase in operating expenses.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
March 31, 1999 December 31, 1998
(Unaudited)
Rental properties, at cost:
Land $ 35,469 $ 35,469
Buildings and improvements 10,562,648 10,562,083
---------- ----------
10,598,117 10,597,552
Less - accumulated depreciatio (3,783,992) (3,676,865)
---------- ----------
6,814,125 6,920,687
Cash and cash equivalents 34,302 8,615
Restricted cash 85,366 116,295
Investment in affiliate 1,375,519 1,383,270
Other assets (net of amortization of
$109,575 and $108,361 at March 31, 1999
and December 31, 1998, respectively) 694,971 691,484
---------- ----------
Total $ 9,004,283 $ 9,120,351
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 3,475,072 $ 3,488,821
Accounts payable:
Trade 845,417 812,312
Related parties 523,649 530,957
Interest payable 32,159 33,886
Tenant security deposits 25,970 26,595
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Total liabilities 4,902,267 4,892,571
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Minority interests 246,156 246,427
Partners' equity 3,855,860 3,981,353
---------- ----------
Total $ 9,004,283 $ 9,120,351
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
(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 $187,632 $176,925
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Total revenues 187,632 176,925
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Costs and expenses:
Rental operations 81,006 89,160
General and administrative 42,000 42,000
Interest 74,300 85,305
Depreciation and amortization 108,340 107,094
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Total costs and expenses 305,646 323,559
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Loss before minority interests and equity
in affiliate (118,014) (146,634)
Minority interests' portion of loss 271 410
Equity in net loss of affiliate (7,751) (4,259)
------- -------
Net loss ($125,494) ($150,483)
======= =======
Net loss per limited partnership unit ($ 6.96) ($ 8.35)
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
(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 ($125,494) ($150,483)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 108,340 107,094
Equity in loss of affiliate 7,751 4,259
Changes in assets and liabilities:
Decrease (increase) decrease in restricted cash 30,929 (72,006)
(Increase) decrease in other assets (4,699) 5,508
Increase in accounts payable - trade 33,105 31,467
(Decrease) increase in accounts payable - related (7,308) 30,900
parties
Decrease in interest payable (1,727) (1,557)
Decrease in tenant security deposits (625) (1,827)
------- --------
Net cash provided by (used in) operating activities 40,272 (46,645)
------- -------
Cash flows from investing activities:
Capital expenditures (565) (9,102)
------- -------
Net cash used in investing activities (565) (9,102)
------- -------
Cash flows from financing activities:
Principal payments (13,749) (21,539)
Minority interest (271) (410)
------- -------
Net cash used in financing activities (14,020) (21,949)
------- -------
Increase (decrease) in cash and cash equivalents 25,687 (77,696)
Cash and cash equivalents at beginning of period 8,615 92,375
------- -------
Cash and cash equivalents at end of period $ 34,302 $ 14,679
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VII
(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, 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 9, 1999 DIVERSIFIED HISTORIC INVESTORS VII
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By: Dover Historic Advisors VII, Inc., General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
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SPENCER WERTHEIMER
President and Treasurer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 34,302
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
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<PP&E> 10,598,117
<DEPRECIATION> 3,783,992
<TOTAL-ASSETS> 9,004,283
<CURRENT-LIABILITIES> 845,417
<BONDS> 3,475,072
0
0
<COMMON> 0
<OTHER-SE> 3,855,860
<TOTAL-LIABILITY-AND-EQUITY> 9,004,283
<SALES> 0
<TOTAL-REVENUES> 187,632
<CGS> 0
<TOTAL-COSTS> 81,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,300
<INCOME-PRETAX> (125,494)
<INCOME-TAX> 0
<INCOME-CONTINUING> (125,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,494)
<EPS-BASIC> (6.96)
<EPS-DILUTED> 0
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