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 September 30, 1998
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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 33-33093
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DIVERSIFIED HISTORIC INVESTORS 1990
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2604695
- ------------------------------- ------------------
(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 - September 30, 1998
(unaudited) and December 31, 1997
Consolidated Statements of Operations - Three Months and
Nine Months Ended September 30, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 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 September 30, 1998, Registrant had cash of
$50,192. Such funds are expected to be used to pay liabilities 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 September 30, 1998, Registrant had
restricted cash of $97,135 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.
At the present time, all three properties are able
to pay their operating expenses and debt service, but 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 third quarter of 1998, Registrant
incurred a net loss of $77,887 ($15.33 per limited partnership unit)
compared to a net loss of $130,435 ($25.64 per limited partnership
unit) for the same period in 1997. For the first nine months of 1998,
the Registrant incurred a net loss of $273,036 ($53.72 per limited
partnership unit) compared to a net loss of $333,893 ($65.65 per
limited partnership unit) for the same period in 1997.
Rental income increased $11,053 from $263,186 in
the third quarter of 1997 to $274,239 in the same period in 1998 due
to an increase in rental income at The Bakery Apartments and Shockoe
Hearth Apartments. The increase at both The Bakery Apartments and
Shockoe Hearth Apartments is due to an increase in the average rental
rates of the residential units.
Rental income increased $10,871 from $808,545 for
the first nine months of 1997 to $819,416 for the same period in 1998
due to an increase in rental income at Shockoe Hearth Apartments due
to an increase in the average rental rates of the residential units.
Expenses for rental operations decreased by
$22,323 from $140,377 in the third quarter of 1997 to $118,054 in the
same period in 1998 due to a decrease in utilities and bad debt
expense at Jefferson Seymour and a decrease in wages and salaries
expense at the Bakery Apartments. At Jefferson Seymour, utility
expense decreased due to a decrease in the consumption levels at the
property and bad debt expense decreased due to the write-off of tenant
receivables in the third quarter of 1997. At the Bakery Apartments,
wages and salaries expense decreased due to the replacement of
employees with contracted security service.
Expenses for rental operations decreased $5,589
from $381,387 for the first nine months of 1997 to $376,976 for the
same period in 1998 due to a decrease in wages and salaries and
corporate apartment expense at the Bakery Apartments combined with a
decrease in utilities expense and bad debt expense at Jefferson
Seymour partially offset by an increase in maintenance expense at the
Bakery Apartments. At the Bakery Apartments, wages and salaries
expense decreased due to the replacement of employees with contracted
security service and corporate apartment expense decreased due to the
decrease in the rental of the corporate apartments. At Jefferson
Seymour, utility expense decreased due to a decrease in the
consumption levels at the property and bad debt expense decreased due
to the write-off of tenant receivables in the third quarter of 1997
which did not recur in the third quarter of 1998. Maintenance expense
increased as a result of repairs to the roof in the first quarter of
1998.
Interest expense decreased $20,688 from $134,697
in the third quarter of 1997 to $114,009 in the same period of 1998
and decreased $31,248 from $391,725 in the first nine months of 1997
to $360,477 in the same period of 1998 mainly due to a refinancing of
the first mortgage at Shockoe Hearth Apartments in May 1998 which
lowered the interest rate from 10% to 8%.
Depreciation and amortization expense decreased
$4,697 from $123,555 in the third quarter of 1997 to $118,858 in the
same period in 1998 and decreased $16,322 from $369,888 for the first
nine months of 1997 to $353,566 in the same period in 1998 due to
certain assets becoming fully depreciated at The Bakery Apartments and
organizational fees becoming fully amortized in the first quarter of
1998 at Jefferson Seymour.
Losses incurred during the second quarter at the
Registrant's three properties amounted to $69,000, compared to a loss
of approximately $128,000 for the same period in 1997. For the first
nine months of 1998, the Registrant's properties recognized a loss of
$251,000, compared to approximately $312,000 for the same period in
1997.
In the third quarter of 1998, Registrant incurred
a loss of $29,000 at Jefferson Seymour, including $30,000 of
depreciation and amortization expense, compared to a loss of $43,000
in the third quarter of 1997, including $32,000 of depreciation and
amortization, and for the first nine months of 1998, incurred a loss
of $90,000, including $91,000 of depreciation and amortization
expense, compared to a loss of $124,000, including $96,000 of
depreciation and amortization expense for the first nine months of
1997. The decreases in the losses from the third quarter and the
first nine months of 1997 to the same periods in 1998 is the result of
a decrease in utility, amortization and bad debt expense. Utility
expense decreased due to a decrease in the consumption levels at the
property and amortization expense decreased due to the fact that
organization costs became fully amortized in January 1998. Bad debt
expense decreased due to a write-off of tenant receivables in the
third quarter of 1997 that did not recur in 1998.
In the third quarter of 1998, Registrant incurred
a loss of $3,000 at Shockoe Hearth, including $27,000 of depreciation
and amortization expense, compared to a loss of $27,000 including
$25,000 of depreciation and amortization expense for the same period
in 1997 and for the first nine months of 1998, Registrant incurred a
loss of $43,000, including $76,000 of depreciation and amortization
expense, compared to a loss of $65,000, including $75,000 of
depreciation and amortization expense for the same period in 1997.
The decrease in the losses for both the third quarter and the first
nine months of 1997 to the same periods in 1998 is mainly result of an
increase in rental income combined with a decrease in interest
expense. Rental income increased due to an increase in the average
rental rates of apartment units. Interest expense decreased due to a
refinancing of the first mortgage in May 1998 which lowered the
interest rate from 10% to 8%.
In the third quarter of 1998, the Bakery
Apartments incurred a loss of $37,000 including $56,000 of
depreciation and amortization expense compared to a loss of $58,000
including $60,000 of depreciation and amortization expense for the
same period in 1997. The decrease in the loss from the third quarter
of 1997 to the same period in 1998 is due to an increase in rental
income and a decrease in wages and salaries and depreciation expense.
Rental income increased due to an increase in the average rental rates
of the apartment units. Wages and salaries expense decreased due to
the replacement of employees with contracted security service.
Depreciation expense decreased to personal property becoming fully
depreciated.
For the first nine months of 1998, the Bakery
Apartments incurred a loss of $118,000, including $167,000 of
depreciation and amortization expense compared to a loss of $123,000,
including $180,000 of depreciation and amortization expense for the
same period in 1997. The increase in the loss from the first nine
months of 1997 to the same period in 1998 is due to a decrease in
wages and salaries, depreciation and corporate apartment expense
partially offset by an increase in maintenance expense. Wages and
salaries expense decreased due to the replacement of employees with
contracted security service. Corporate apartment expense decreased
due to a decrease in the rental of the corporate apartments and
depreciation expense decreased to personal property becoming fully
depreciated. Maintenance expense increased as a result of repairs to
the roof in the first quarter of 1998.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS 1990
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
September 30, 1998 December 31, 1997
(Unaudited)
Rental properties, at cost:
Land $ 248,856 $ 248,856
Buildings and improvements 10,921,590 10,915,625
Furniture and fixtures 155,592 155,592
---------- ----------
11,326,038 11,320,073
Less - Accumulated depreciation (3,525,762) (3,195,801)
---------- ----------
7,800,276 8,124,272
Cash and cash equivalents 49,504 28,549
Restricted cash 98,881 95,609
Accounts receivable 25,349 24,505
Other assets (net of amortization of
$288,658 and $265,054 at September 30,
1998 and December 31, 1997, respectively) 116,219 79,944
---------- ----------
Total $ 8,090,229 $ 8,352,879
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 6,192,738 $ 6,085,969
Accounts payable:
Trade 502,020 579,708
Related parties 192,796 192,796
Interest payable 137,517 125,670
Tenant security deposits 65,386 61,038
Other liabilities 37,525 37,864
---------- ----------
Total liabilities 7,127,982 7,083,045
---------- ----------
Minority interests 409,909 444,459
Partners' equity 552,338 825,375
---------- ----------
Total $ 8,090,229 $ 8,352,879
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS 1990
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three months Nine months
Ended September 30, Ended September 30,
1998 1997 1998 1998
Revenues:
Rental income $274,239 $263,186 $819,416 $808,545
Interest income 0 36 17 182
------- ------- --------- ---------
Total revenues 274,239 263,222 819,433 808,727
------- ------- --------- ---------
Costs and expenses:
Rental operations 118,054 140,377 376,976 381,387
General and administrative 12,000 12,000 36,000 36,000
Interest 114,009 134,697 360,477 391,725
Depreciation and amortization 118,858 123,555 353,566 369,888
------- ------- --------- ---------
Total costs and expenses 362,921 410,629 1,127,019 1,179,000
------- ------- --------- ---------
Loss before minority interests (88,682) (147,407) (307,586) (370,273)
Minority interests' portion of loss 10,795 16,972 34,550 36,380
------- ------- --------- ---------
Net loss ($ 77,887) ($130,435) ($273,036) ($333,893)
======= ======= ======= =======
Net loss per limited partnership unit:
Loss before minority interests ($ 17.46) ($ 28.98) ($ 60.52) ($ 72.80)
Minority interests 2.13 3.34 6.80 7.15
------- ------- ------- -------
($ 15.33) ($ 25.64) ($ 53.72) ($ 65.65)
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS 1990
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Nine months ended
September 30,
1998 1997
Cash flows from operating activities:
Net loss ($273,036) ($333,893)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 353,566 369,888
Minority interest (34,550) (45,572)
Changes in assets and liabilities:
Increase in restricted cash (3,272) (19,260)
(Increase) decrease in accounts receivable (844) 8,731
Increase in other assets (59,192) (25,151)
(Decrease) increase in accounts payable - trade (77,689) 45,299
Increase in accounts payable - related parties 0 44,000
Increase in interest payable 11,847 20,810
Increase (decrease) in other liabilities 4,348 (6,877)
Decrease in security deposits (339) (7,523)
------- -------
Net cash (used in) provided by operating activities (79,161) 50,452
------- -------
Cash flows from investing activities:
Capital expenditures (5,965) (15,524)
------- -------
Net cash used in investing activities (5,965) (15,524)
------- -------
Cash flows from financing activities:
Proceeds from debt financing 168,699 0
Principal payments (61,930) (47,549)
------- -------
Net cash provided by (used in) financing activities 106,769 (47,549)
------- -------
Increase (decrease) in cash and cash equivalents 21,643 (12,621)
Cash and cash equivalents at beginning of period 28,549 33,160
------- -------
Cash and cash equivalents at end of period $ 50,192 $ 20,539
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS 1990
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors 1990 (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 and
notes thereto, in the Registrant's Annual Report on Form 10-K 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
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 September 30, 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: November 30, 1998 DIVERSIFIED HISTORIC INVESTORS 1990
-----------------
By: Dover Historic Advisors 1990, General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
-----------------------
SPENCER WERTHEIMER
President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 49,504
<SECURITIES> 0
<RECEIVABLES> 25,349
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,326,038
<DEPRECIATION> 3,525,762
<TOTAL-ASSETS> 8,090,229
<CURRENT-LIABILITIES> 694,816
<BONDS> 6,192,738
0
0
<COMMON> 0
<OTHER-SE> 552,338
<TOTAL-LIABILITY-AND-EQUITY> 8,090,229
<SALES> 0
<TOTAL-REVENUES> 819,433
<CGS> 376,976
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360,477
<INCOME-PRETAX> (273,036)
<INCOME-TAX> 0
<INCOME-CONTINUING> (273,036)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (273,036)
<EPS-PRIMARY> (53.72)
<EPS-DILUTED> 0
</TABLE>
