UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
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[ ] 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 0-14934
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DIVERSIFIED HISTORIC INVESTORS
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2312037
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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)557-9800
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act: 11,609.6 Units
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UNITS OF LIMITED PARTNERSHIP INTEREST
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(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of Units held by non-affiliates of the
Registrant: Not Applicable*
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* Securities not quoted in any trading market to Registrant's
knowledge.
PART I
Item 1. Business
a. General Development of Business
Diversified Historic Investors ("Registrant") is a
limited partnership formed in 1984 under Pennsylvania law. As of
December 31, 2001, Registrant had outstanding 11,609.6 units of
limited partnership interest (the "Units").
Registrant is presently in its operating stage. It
originally owned eight properties or interests therein. Partial
or complete interests in six properties have been lost through
foreclosure. See Item 2. Properties, for a description thereof.
It currently owns two properties and a portion of its original
interest in one property. For a discussion of the operations of
the Registrant, See Part II, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
b. Financial Information about Industry Segments
The Registrant operates in one industry segment.
c. Narrative Description of Business
Registrant is in the business of operating, holding,
selling, exchanging and otherwise dealing in and with real
properties containing improvements which are "Certified Historic
Structures," as such term is defined in the Internal Revenue Code
(the "Code"), for use as apartments, offices, hotels and
commercial spaces, or any combination thereof, or low income
housing eligible for the tax credit provided by Section 42 of the
Code, and such other uses as the Registrant's general partner may
deem appropriate.
Since the Registrant's inception, all the properties
acquired either by the Registrant, or the subsidiary partnerships
in which it has an interest, have been rehabilitated and
certified as historic structures and have received the related
investment tax credit. Each of the three properties currently
owned by the Registrant is held for rental operations. At this
time it is anticipated that all the properties will continue to
be held for this purpose. At such time as real property values
begin to increase, the Registrant will re-evaluate its investment
strategy regarding the properties.
As of December 31, 2001, Registrant owned three
properties located in Pennsylvania. In total, the three
properties contain 37 apartment units and 6,187 square feet
("sf") of commercial space. As of December 31, 2001, 35 of the
apartment units were under lease at monthly rental rates ranging
from $795 to $1,650. In addition, all of the commercial space
was under lease at annual rates ranging from $10.00 to $14.70 per
square foot. Rental of the apartments and commercial space is
not expected to be seasonal. For further discussion of the
properties, see Item 2. Properties.
The Registrant is affected by and subject to the
general competitive conditions of the residential and commercial
real estate industries. The properties currently owned by the
Registrant are all located in the Old City Historic District in
Philadelphia, Pennsylvania in which there are several similar
historically certified rehabilitated buildings. The Registrant's
main competitor in this market is Historic Landmarks for Living,
which owns several similar residential buildings in the District.
The District has recently re-emerged as a popular place to live
for young professionals and has created a demand for the
apartment units owned by the Registrant.
Registrant has no employees. Registrant's activities
are overseen by Brandywine Construction & Management, Inc.,
hereafter known as "BCMI", a real estate management firm.
d. Financial Information About Foreign and Domestic
Operations
and Export Sales.
See Item 8. Financial Statements and Supplementary
Data.
Item 2. Properties
As of the date hereof, Registrant owned three
properties or interests therein. A summary description of each
property held at December 31, 2001 is given below.
a. The Smythe Stores Condominium Complex - consists of
five adjoining buildings located at 101-111 Arch Street, in the
Old City Historic District of Philadelphia, Pennsylvania. In
November 1984, the Registrant acquired 20 residential units of
the complex's 49 units as the 100% equity owner of these units.
The acquisition and rehabilitation cost was $4,056,375 ($171 per
sf) funded by an equity contribution and a series of condominium
mortgages with an original combined principal balance of
$2,440,000. The combined principal balance at December 31, 2001
is $1,646,311. Each mortgage bears interest at 12%. Scheduled
interest payments were made through April 1, 1988. At that time,
due to insufficient cash flow, the Registrant ceased making
payments. In 1990, the lender was placed in receivership by the
Resolution Trust Corporation ("RTC"). The two entities which
purchased the mortgages from the RTC each filed complaints for
foreclosure due to nonpayment. Foreclosure proceedings on nine
units were filed in the Court of Common Pleas, Philadelphia
County in the matter of Bruin Holdings, Inc. ("Bruin") v.
Diversified Historic Investors and foreclosure proceedings on
eleven units were filed in the Court of Common Pleas,
Philadelphia County in the matter of EMC Mortgage Corporation
("EMC") v. Diversified Historic Investors. In March 1996, the
Bruin cases were settled and the nine mortgages were sold. The
Registrant entered into an agreement with the new holder of the
mortgages whereby monthly payments of interest are to be made in
an amount equal to net operating income. In December 1996, the
eleven units associated with the EMC cases were foreclosed by the
lender. During 2000, two units were sold at sales prices of
$284,302, and $426,639, respectively. During 2001, one unit was
sold at a sales price of $324,959. The net proceeds of each sale
were used to pay accrued interest due on the mortgages.
The remaining three units are managed by BCMI. As
of December 31, 2001, the three apartment units were under lease
(100%) at monthly rental rates ranging from $1,340 to $1,650.
All leases are renewable, one-year leases. The occupancy at the
end of the previous four years was 75% for 2000, 67% for 1999,
100% for 1998, and 96% for 1997. The monthly rental range at the
end of the previous four years was $1,170 to $1,575 in 2000, $865
to $1,500 for 1999, $825 to 1,390 for 1998, and $715 to $1,350
for 1997. For tax purposes, this property has a federal tax basis
of $624,655 and is depreciated using the straight-line method
with a useful life of 27.5 years. The annual real estate taxes
are $3,827, which is based on an assessed value of $46,304 taxed
at a rate of $8.264 per $100. It is the opinion of the
management of the Registrant that the property is adequately
covered by insurance.
b. The Third Quarter Apartments - consists of 16
apartments and 1,000 square feet of commercial space located in
the District at 47 North Third Street Philadelphia, Pennsylvania.
In November 1984, the Registrant acquired the building and is the
100% equity owner of the property. The property was acquired and
rehabilitated for $1,725,000 ($102 per sf), funded by an equity
contribution and two mortgage loans of $860,000 and $140,000. On
June 1, 1993, the first mortgage was modified. The terms of the
modification included the addition of all accrued and unpaid
interest to the principal balance, changing the due date to
October 1999 and revising the payment terms. In October 1998,
the due date was extended to October 2003. The new payment terms
required monthly payments of interest equal to net operating
income, with a minimum of $6,833 per month. The property made
payments of at least the minimum in order to keep the loan
current. In December of 2001, the loan was sold. The terms of the
loan were modified to include the addition of $112,672 of accrued
and unpaid interest to the principal balance. The first mortgage
has a principal balance at December 31, 2001 of $1,329,979 and
bears interest at 12%. The second note has a principal balance
of $218,049, bears interest at 15%, and was due in 1992. In
1991, the Registrant stopped making scheduled mortgage payments.
No notice of default has yet been received from the lender.
The Third Quarter Apartments is managed by BCMI. As
of December 31, 2000, 14 units were under lease (88%) at monthly
rental rates ranging from $795 to $1,550 and one commercial unit,
which has 1,000 square feet of commercial space was under lease
(100%) at an annual rental rate of $14.70 per square foot. All
residential leases are renewable, one-year leases. The
residential occupancy at year end for the previous four years was
100% for 2000, 100% for 1999, 94% for 1998, and 88% for 1997.
The monthly rental range at the end of the previous four years
was $715 to $1,285 for 2000, $675 to $1,200 for 1999, $635 to
$1,100 for 1998, and $625 to $1,030 for 1997. The occupancy for
the commercial space at the end of the previous four years has
been 100% for 2000, 100% for 1999, 100% for 1998, and 58% for
1997. The range for annual rent was $13.50 per sf for 2000,
$11.16 per sf for 1999, $11.16 per sf for 1998, and $8.40 per sf
for 1997. The commercial lease at Third Quarter expires in
December 2004. For tax purposes, this property has a federal tax
basis of $1,658,895 and is depreciated using the straight-line
method with a useful life of 27.5 years. The annual real estate
taxes are $17,279, which is based on an assessed value of
$211,200 taxed at a rate of $8.181 per $100. It is the opinion
of the management of the Registrant that the property is
adequately covered by insurance.
c. Wistar Alley - located in the District at 30-32
North Third Street, in Philadelphia, Pennsylvania, consists of
two adjoining buildings, which contain 18 residential units and
5,187 sf of commercial area. The Registrant acquired the
buildings in December 1984 and is the 100% equity owner of the
property. The property was acquired and rehabilitated for
$2,230,000 ($101 per sf), funded by an equity contribution and
three mortgage loans aggregating $1,400,000. On June 1, 1993,
the first mortgage was modified. The terms of the modification
included the addition of all accrued and unpaid interest to the
principal balance, changing the due date to October 1998 and
revising the payment terms. In October 1998, the due date was
extended to October 2003. The new payment terms required monthly
payments of interest equal to net operating income, with a
minimum of $9,000 per month. The property made payments of at
least the minimum amount in order to keep the loan current. In
December of 2001, the loan was sold. The first mortgage has a
principal balance at December 31, 2001 of $1,554,817 and bears
interest at 2 1/2% over the Federal Home Bank Board Cost of Funds
Index with a maximum of 14 1/2% and a minimum of 8 1/2%. The
rate was 8 1/2% at December 31, 2001. The second note has a
principal balance at December 31, 2001 of $380,114 and bears
interest at 15%. Both principal and interest are due at the
earlier of the sale of the property or the year 2009.
Wistar Alley is managed by BCMI. As of December 31,
2001, 18 residential units were under lease (100%) at monthly
rents ranging from $840 to $1,625 and 5,187 square feet of
commercial space was under lease (100%) at annual rental rates
ranging from $10.00 to $11.67 per sf. All residential leases are
renewable, one-year leases. The residential occupancy at the end
of the previous four years was 100% for 2000, 100% for 1999, 94%
for 1998, and 90% for 1997. The monthly rental range at the end
of the previous four years was $785 to $1,450 in 2000, $740 to
$1,350 for 1999, $730 to $1,125 for 1998, and $650 to $1,100 for
1997. The commercial occupancy at the end of each of the previous
four years was 100%. The average annual rental rate at the end
of the previous four years was $7.07 to $11.33 per sf in 2000,
$7.07 to $11.00 per sf in 1999, $6.64 to $10.46 per sf in 1998,
and $6.00 to $13.85 per sf for 1997. The two commercial leases
expire in May and July of 2002.
For tax purposes, this property has federal tax basis
of $1,992,884 and is depreciated using the straight-line method
with a useful life of 27.5 years. The annual real estate taxes
are $22,908, which is based on an assessed value of $280,000
taxed at a rate of $8.181 per $100. It is the opinion of the
management of the Registrant that the property is adequately
covered by insurance.
Item 3. Legal Proceedings
To the best of its knowledge, Registrant is not a 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 fiscal years covered
by this report to a vote of security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
a. There is no established public trading market for
the Units. Registrant does not anticipate any such market will
develop. Trading in the Units occurs solely through private
transactions. The Registrant is not aware of the prices at which
trades occur. Registrant's records indicate that 32 Units of
record were sold or exchanged in 2001.
b. As of December 31, 2001, there were 1,236 record
holders of Units.
c. Registrant did not declare any cash dividends in
2001 or 2000.
Item 6. Selected Financial Data
The following selected financial data are for the five
years ended December 31, 2001. The data should be read in
conjunction with the consolidated financial statements included
elsewhere herein. This data is not covered by the independent
auditors' report.
2001 2000 1999 1998 1997
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Rental
income $ 537,373 $ 493,215 $ 494,852 $ 486,864 $ 420,903
Interest
income 1,425 1,349 1,557 1,569 620
Net (loss)
income (244,012) (22,275) 396,475 (736,581) (810,675)
Net (loss)
income per (20.81) (1.90) 33.81 (62.81) (69.13)
unit
Total assets
(net of
depreciation
and
amortization)1,975,797 2,209,406 2,491,417 2,984,193 3,185,727
Debt
obligations 5,146,354 5,045,411 4,586,076 5,879,538 5,877,215
Note: See Part II, Item 7.3 Results of Operations for a
discussion of factors which materially affect the comparability
of the information reflected in the above table.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(1) Liquidity
At December 31, 2001, Registrant had cash of
$12,266. 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 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 December 31, 2001, Registrant had restricted
cash of $81,478 consisting primarily of funds held as security
deposits and escrows for taxes. As a consequence of these
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 five properties
and a portion of a sixth property, due to the properties'
inability to generate sufficient cash flow to pay their operating
expenses and debt service. The Registrant has first mortgages in
place on each of its remaining properties that are 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, to pay
debt service on the past-due subordinate mortgage with respect to
the Third Quarter, or to pay any debt service on the two accrual
mortgages with respect to Wistar Alley.
It is the Registrant's intention to continue to hold
the properties until they can no longer meet debt service
requirements (or with respect to Third Quarter and Wistar Alley,
the lenders seeks payment on the past due mortgages) 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.
Since the lenders have agreed either to forebear
from taking any foreclosure action as long as cash flow payments
are made, to accrue all debt service in lieu of payment, or have
not moved to declare a default (in the case of Third Quarter) for
a substantial period of time after the mortgage due date, the
Registrant believes it is appropriate to continue presenting its
financial statements on a going concern basis.
(2) Capital Resources
Any capital expenditures needed are generally
replacement items and are funded out of cash from operations or
replacement reserves, if any. The 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. If the need for capital expenditures does arise, the
first mortgage holder for Third Quarter, Wistar Alley and Smythe
Stores has agreed to fund capital expenditures. There were no
funds accrued in 2001 for capital expenditures.
(3) Results of Operations
During 2001, Registrant incurred a net loss of
$244,012 ($20.81 per limited partnership unit) compared to a net
loss of $22,275 ($1.90 per limited partnership unit) in 2000,
compared to a net income of $396,475 ($38.81 per limited
partnership unit) in 1999.
Rental income was $537,373 in 2001, $493,215 in
2000, and $494,852 in 1999. The increase from 2000 to 2001 is
the result of an increase in average occupancy at Smythe Stores
(76% to 86%) and Wistar Alley (95% to 98%) and an increase in
average rental rates at Smythe Stores, Wistar Alley, and Third
Quarter. The increase was partially offset by the sale of one
condominium unit during 2001 at Smythe Stores. Rental income
decreased from 1999 to 2000 due to the sale of two condominium
units during 2000, and three condominium units in 1999 at Smythe
Stores. The decrease was partially offset by rental income
increases at Third Quarter and Wistar Alley. Rental income at
Third Quarter increased due to an increase in average occupancy
(96% to 98%) and an increase in the average rental rates. Rental
income at Wistar Alley increased due to an increase in the
average rental rates.
Rental operations expense was $309,362 in 2001,
$297,687 in 2000, and $269,895 in 1999. The increase from 2000 to
2001 is due to an increase in rental operations expense at Third
Quarter, partially offset by a decrease in tax expense at Smythe
Stores. The increase in rental operations expense at Third
Quarter is due to an increase in maintenance expense and
marketing and leasing expense, partially offset by a decrease in
utility expense. The decrease at Smythe Stores is due to a
decrease in tax and insurance expense. The increase from 1999 to
2000 is due to an increase in rental operations expense at Third
Quarter and Wistar Alley, offset by a decrease in rental
operations expense at Smythe Stores. The increase in rental
operations expense at Third Quarter is due to an increase in
maintenance expense and accounting expense. The increase in
maintenance expense is due to an increase in apartment
preparation expense and the increase in accounting expense is due
to prior year invoices paid during 2000. The increase in rental
operating expense at Wistar Alley is due to an increase in
maintenance expense and leasing commissions expense. The decrease
at Smythe Stores is a result of the sale of two condominium units
in 2000 and three condominium units in 1999.
Interest expense was $518,788 in 2001, $627,735 in
2000, and $567,159 in 1999. The decrease in interest expense from
2000 to 2001 is due to a decrease in interest expense at Smythe
Stores, Third Quarter, and Wistar Alley. The decrease in interest
expense at Smythe Stores is due to the extinguishment of debt due
to the sale of one condominium unit in 2001. The increase in
interest expense from 1999 to 2000 is due to a reclassification
by the mortgage lender at Smythe Stores. The principal balances
previously written off due to the sale of condominium units at
Smythe Stores were reclassified to accrued and unpaid interest in
accordance with the terms of the mortgage. The restoration of
the principal balance resulted in additional interest expense
being accrued in 2000 on the principal balance.
General and administrative expense was $0 in 2001,
$0 in 2000, and $69,840 in 1999. The Registrant ceased accruing
partnership administration fees in 2000. The cash flow and debt
of the Registrant make it unlikely that these fees will be paid.
In 2001, a loss of approximately $193,345 was
incurred at the Registrant's three properties compared to income
of approximately $19,000 in 2000 and income of approximately
$516,000 in 1999. Included in the loss for 2001 is a gain due to
the sale of a unit of approximately $28,000 and an extraordinary
gain of $215,000 due to the extinguishment of debt. Included in
income for 2000 and 1999 are gains due to the sale of units of
approximately $140,000 and $103,000, respectively and
extraordinary gains due to the extinguishment of debt related to
those sales of approximately $505,000 and $939,000, respectively.
A discussion of property operations/activities follows:
In 2001, Registrant recognized income of
approximately $26,000 at the Smythe Stores Condominium complex
including $30,000 of depreciation expense compared to income of
$246,000 including $75,000 of depreciation expense in 2000,
compared to income of $755,000 including $75,000 of depreciation
expense in 1999. Included in income for 2001 are a gain and an
extraordinary gain of $28,000 and $215,000, respectively. The
gain is related to the sale of a condominium unit and the
extraordinary gain is for the extinguishment of debt related to
that sale. The extraordinary gain represents the excess of the
debt extinguished by the sale of the condominium units over the
fair market value of the units. Included in income for 2000 and
1999 are gains of $140,000 and $103,000, respectively related to
the sale of condominium units and extraordinary gains of
approximately $505,000 and $939,000, respectively for the
extinguishment of debt related to those sales. Exclusive of the
gains, the property would have incurred a loss of approximately
$217,000 for 2001 compared to a loss of approximately $396,000 in
2000, compared to a loss of approximately $287,000 in 1999. The
decrease in the loss from 2000 to 2001 is a result of an increase
in rental income, a decrease in tax expense, and a decrease in
mortgage interest expense. The increase in rental income is due
to an increase in average occupancy (76% to 86%) and the decrease
in tax expense is due to a decrease in the Philadelphia Net
Profits Tax. The decrease in mortgage interest expense in 2001 is
due to the extinguishment of debt due to the sale of one
condominium unit. The increase in the loss from 1999 to 2000 is
the result of a decrease in rental income and an increase in
rental operations expense including professional fees, taxes, and
an increase in interest expense. The decrease in rental income
is due to the sale of the two condominium units in 2000.
On June 30, 1992 DHP, Inc., assigned to D, LTD (its
parent) a note receivable from the Registrant in the amount of
$127,418 which bears interest at 10% with the entire principal
and accrued interest due on June 30, 1997. On October 8, 1993 D,
LTD obtained a judgment in the amount of $156,873 on this note in
Common Pleas Court for Philadelphia County, Pennsylvania. The
judgment accrues interest at 15%. Interest accrued was $6,713
during both 2000 and 2001. Payments on the judgment are to be
made from available cash flow from any of the three properties
and before any distribution can be made to the Registrant's
limited partners. The balance of the note at December 31, 2001
was $92,258.
In 2001, Registrant incurred a loss of $148,000 at
the Third Quarter Apartments including $77,000 of depreciation
and amortization expense compared to a loss of $131,000 including
$74,000 of depreciation and amortization expense in 2000 and a
loss of $144,000 including $72,000 of depreciation and
amortization expense in 1999. The increase in loss from 2000 to
2001 is due to an increase in rental operations expense including
increases in maintenance and cleaning services, apartment
preparation expenses, and deferred maintenance expenses from
prior years incurred in 2001. The loss was partially offset by an
increase in rental income due to an increase in monthly rental
rates and a decrease in interest expense. The decrease in the
loss from 1999 to 2000 is the result of an increase in rental
income due to an increase in the average occupancy (96% to 98%)
and an increase in the average rental rates partially offset by
an increase in rental operations expense including management
fees due to the increase in rent.
In 2001, Registrant incurred a loss of approximately
$79,000 at Wistar Alley including $91,000 of depreciation and
amortization expense compared to a loss of $98,000 including
$87,000 of depreciation and amortization expense in 2000 and a
loss of $95,000 including $88,000 of depreciation and
amortization expense in 1999. The decrease in loss from 2000 to
2001 is the result of an increase in rental income and a decrease
in rental operations expense including a decrease in utility
expense partially offset by an increase in maintenance expense.
The increase in rental income is due to an increase in average
occupancy (95% to 98%). The decrease in utility expense in 2001
is due to overestimated water and sewage expenses by the utility
authority in 2000. The increase in maintenance expense is due to
prior year's deferred maintenance costs incurred in 2001. The
increase in the loss from 1999 to 2000 is the result of an
increase in rental operations expense including maintenance
expense. Maintenance expense increased due to an increase in the
turnover of apartment units.
Item7A. Quantitative and Qualitative Disclosures about Market
Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
Registrant is not required to furnish the supplementary
financial information referred to in Item 302 of Regulations S-K.
Independent Auditor's Report
To the Partners of
Diversified Historic Investors
We have audited the accompanying consolidated balance sheet of
Diversified Historic Investors (a Pennsylvania Limited
Partnership) and subsidiaries as of December 31, 2001 and 2000
and the related statements of operations, changes in partners'
equity and cash flows for the years ended December 31, 2001, 2000
and 1999. These consolidated financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Diversified Historic Investors as of December 31,
2001 and 2000, and the results of operations and cash flows for
the years ended December 31, 2001, 2000 and 1999, in conformity
with accounting principles generally accepted in the United
States.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Schedule of
Real Estate and Accumulated Depreciation on page 24 is presented
for the purposes of additional analysis and is not a required
part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic
financial statements taken as a whole.
The accompanying financial statements have been prepared assuming
that the partnership will continue as a going concern. In recent
years, the partnership had incurred significant losses from
operations, which raise substantial doubt about its ability to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
Gross, Kreger & Passio, L.L.C.
Philadelphia, Pennsylvania
May 16, 2002
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 2001 and 13
2000
Consolidated Statements of Operations for the Years
Ended December 31, 2001, 2000, and 1999 14
Consolidated Statements of Changes in Partners'
Equity for the Years Ended December 31, 2001, 2000, 15
and 1999
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2001, 2000, and 1999 16
Notes to consolidated financial statements 17-24
Financial statement schedules:
Schedule XI - Real Estate and Accumulated
Depreciation 26
Notes to Schedule XI 27
All other schedules are omitted because they are not applicable
or the required information is shown in the consolidated
financial statements or notes thereto.
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
Assets
2001 2000
---- ----
Rental properties at cost:
Land $ 299,612 $ 301,483
Buildings and improvements 4,506,943 4,709,536
Furniture and fixtures 174,029 138,632
---------- ----------
4,980,584 5,149,651
Less - accumulated depreciation (3,113,769) (3,044,292)
---------- ----------
1,866,815 2,105,359
Cash and cash equivalents 12,266 8,872
Restricted cash 81,478 83,662
Accounts receivable 12,230 7,083
Other assets (net of accumulated
amortization of $33,536 and
$32,113) 3,007 4,430
---------- ----------
Total $1,975,796 $2,209,406
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $5,146,354 $5,045,411
Accounts payable:
Trade 394,991 609,438
Related parties 509,975 473,166
Interest payable 1,181,241 1,090,869
Tenant security deposits 44,740 42,108
Other liabilities 2,863 8,770
---------- ----------
Total liabilities 7,280,164 7,269,762
Partners' deficit (5,304,368) (5,060,356)
---------- ----------
Total $1,975,796 $2,209,406
========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Revenues:
Rental income $ 537,373 $ 493,215 $ 494,852
Gain on sale 27,811 139,632 102,626
Interest income 1,425 1,349 1,557
---------- ---------- ----------
Total revenues 566,609 634,196 599,035
Costs and expenses:
Rental operations 309,362 297,686 269,895
General and administrative 0 0 69,840
Interest 518,788 627,735 567,159
Depreciation and amortization 197,456 235,688 234,999
---------- ---------- ----------
Total costs and expenses 1,025,606 1,161,109 1,141,893
Loss before extraordinary item (458,997) (526,913) (542,858)
Extraordinary gain on
extinguishment of debt 214,985 504,638 939,333
---------- ---------- ----------
Net (loss) income ($ 244,012)($ 22,275)($ 396,475)
========== ========== ==========
Net loss per limited partnership
unit:
Loss before extraordinary item ($ 39.14)($ 44.93)($ 46.29)
Extraordinary gain 18.33 43.03 80.10
---------- ---------- ----------
($ 20. 81)($ 1.90)($ 33.81)
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 2001, 2000 and 1999
Dover
Historic Limited
Advisors Partners
(1) (2) Total
-------- -------- -----
Percentage participation in
profit or loss 1% 99% 100%
== === ====
Balance at December 31, 1998 ($146,211) ($5,288,345) ($5,434,556)
Net income 3,965 392,510 396,475
-------- ---------- ----------
Balance at December 31, 1999 (142,246) (4,895,835) (5,038,081)
Net loss (223) (22,052) (22,275)
-------- ---------- ----------
Balance at December 31, 2000 (142,469) (4,917,887) (5,060,356)
Net loss (2,440) (241,572) (244,012)
-------- ---------- ----------
Balance at December 31, 2001 ($144,909) ($5,159,459) ($5,304,368)
======== ========== ==========
(1) General Partner.
(2) 11,609.6 limited partnership units outstanding at December
31, 2001, 2000, and 1999.
The accompanying notes are an integral part of theses financial statements.
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Cash flows from operating
activities:
Net income (loss) ($244,012) ($ 22,275) $ 396,475
Adjustments to reconcile net loss
to net cash (used in) provided
by operating activities:
Gain on sale of units (27,811) (139,632) (102,626)
Extraordinary gain on
extinguishment of debt (214,985) (504,638) (939,333)
Depreciation and amortization 197,456 235,688 234,999
Changes in assets and liabilities:
Decrease (increase) in restricted
cash 2,184 (9,499) (723)
(Increase) decrease in accounts
receivable (5,147) 9,885 (187)
Increase in other assets 0 (4,410) (1,623)
(Decrease) increase in accounts
payable - trade (214,447) 13,257 88,657
Increase in accounts payable -
related parties 36,809 36,809 36,809
Increase in interest payable 269,579 389,325 290,149
Increase (decrease) in tenant
security deposits 2,632 3,790 (5,680)
(Decrease) increase in other
liabilities (5,907) 153 (5,724)
-------- -------- ----------
Net cash (used in)
provided by operating
activities (203,649) 8,453 (8,807)
-------- -------- ----------
Cash flows from investing
activities:
Proceeds from the sale of units 324,959 710,941 1,301,921
Capital expenditures (39,652) (21,264) (502)
-------- -------- ----------
Net cash provided by
investing activities 285,307 689,677 1,301,419
-------- -------- ----------
Cash flows from financing
activities:
Repayment of borrowings (324,959) (710,941) (1,301,921)
Borrowings under debt
obligations 246,695 9,870 8,238
-------- -------- ----------
Net cash used in financing
activities (78,264) (701,071) (1,293,683)
-------- -------- ----------
Increase (decrease) in cash and
cash equivalents 3,394 (2,941) (1,071)
Cash and cash equivalents at
beginning of year 8,872 11,813 12,884
-------- --------- ----------
Cash and cash equivalents at
end of year $ 12,266 $ 8,872 $ 11,813
======== ========= ==========
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the year for
interest $481,979 $203,600 $ 277,010
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors (the "Partnership") was formed in
March 1984, with Diversified Historic Advisors as the General
Partner. Upon the admission of additional limited partners, the
initial limited partner withdrew.
The Partnership was formed to acquire, rehabilitate, and manage
real properties which are certified historic structures as
defined in the Internal Revenue Code (the "Code"), or which were
eligible for designation as such, utilizing the mortgage
financing and the net proceeds from the sale of limited
partnership units. Any rehabilitation undertaken by the
Partnership was done with a view to obtaining certification of
expenditures therefore as "qualified rehabilitation expenditures"
as defined in the Code.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the
preparation of the accompanying consolidated financial statement
follows:
1. Principles of Consolidation
These financial statements reflect all adjustments (consisting
only of normal recurring adjustments) which, in the opinion of
the Partnership's General Partner, are necessary for a fair
statement of the results for those years.
2. Depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Buildings and improvements
are depreciated over 25 years and furniture and fixtures over
five years.
3. Costs of Issuance
Costs incurred in connection with the offering and sale of
limited partnership units were charged against partners' equity
as incurred.
4. Cash and Cash Equivalents
The Partnership considers all highly liquid instruments purchased
with a maturity of less than three months to be cash equivalents.
5. Net Income or Loss Per Limited Partnership Unit
The net income or loss per limited partnership unit is based on
the weighted average number of limited partnership units
outstanding during the period (11,609.6 in 2001, 2000, and 1999).
6. Income Taxes
Income taxes or credits resulting from earnings or losses are
payable by or accrue to the benefits of the partners;
accordingly, no provision has been made for income taxes in these
financial statements.
7. Restricted Cash
Restricted cash includes amounts held for tenant security
deposits and real estate tax reserves.
8. Revenue Recognition
Revenues are recognized when rental payments are due on a
straight-line basis. Rental payments received in advance are
deferred until earned.
9. Rental Properties
Rental properties are stated at cost. A provision for impairment
of value is recorded when a decline in value of a property is
determined to be other than temporary as a result of one or more
of the following: (1) a property is offered for sale at a price
below its current carrying value, (2) a property has significant
balloon payments due within the foreseeable future for which the
Partnership does not have the resources to meet, and anticipates
it will be unable to obtain replacement financing or debt
modification sufficient to allow it to continue to hold the
property over a reasonable period of time, (3) a property has
been, and is expected to continue, generating significant
operating deficits and the Partnership is unable or unwilling to
sustain such deficits and has been unable to, or anticipates it
will be unable to, obtain debt modification, financing or
refinancing sufficient to allow it to continue to hold the
property for a reasonable period of time or, (4) a property's
value has declined based on management's expectations with
respect to projected future operational cash flows and prevailing
economic conditions. An impairment loss is indicated when the
undiscounted sum of estimated future cash flows from an asset,
including estimated sales proceeds, and assuming a reasonable
period of ownership up to 5 years, is less than the carrying
amount of the asset. The impairment loss is measured as the
difference between the estimated fair value and the carrying
amount of the asset. In the absence of the above circumstances,
properties and improvements are stated at cost. An analysis is
done on an annual basis at December 31 of each year.
10. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
NOTE C - GOING CONCERN
In recent years the Partnership has realized significant losses,
including the foreclosure of five properties and a portion of a
sixth property, due to the properties' inability to generate
sufficient cash flow to pay their operating expenses and debt
service. The Partnership has first mortgages in place on each of
its remaining properties that are 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 Partnership to pay its general and
administrative expenses, to pay debt service on the past-due
subordinate mortgage with respect to the Third Quarter or to pay
any debt service on the two accrual mortgages with respect to
Wistar Alley.
It is the Partnership's intention to continue to hold the
properties until they can no longer meet debt service
requirements (or with respect to Third Quarter and Wistar Alley,
the lender seeks payment on the past due mortgage) 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.
Since the lenders have agreed either to forebear from taking any
foreclosure action as long as cash flow payments are made, to
accrue all debt service in lieu of payment, or have (in the case
of Third Quarter) not moved to declare a default for a
substantial period of time after the mortgage due date, the
Partnership believes it is appropriate to continue presenting the
financial statements on a going concern basis.
NOTE D - PARTNERSHIP AGREEMENT
The significant terms of the amended and restated Agreement of
Limited Partnership (the "Agreement"), as they relate to the
financial statements, follow:
The Agreement provides that, beginning with the date of the
admission of subscribers as limited partners, all distributable
cash from operations (as defined) will be distributed 90% to the
limited partners and 10% to the General Partner.
All distributable cash from sales or refinancing will be
distributed to the limited partners in an amount equal to their
Original Capital Contribution plus an amount equal to 6% of their
Original Capital Contribution per annum on a cumulative basis
less the sum of all prior distributions and, thereafter, after
receipt by certain affiliates of the General Partner of their
subordinated real estate commissions, the limited partners will
receive 85% of cash from sales or refinancings.
Net income or loss from operations of the Partnership is
allocated 1% to the General Partner and 99% to the Limited
Partners.
NOTE E - ACQUISITIONS
The Partnership acquired six properties and two general or
limited partnership interests during the period November 1984 to
December 1986, as discussed below.
In November 1984, the Partnership purchased 20 residential
apartments located in Philadelphia, Pennsylvania for $4,056,475.
The lender on eleven of the apartments foreclosed in December
1996. In 1999, the Partnership sold three of the apartment
units, and in 2000, the Partnership sold two of the apartment
units.
In November 1984, the Partnership purchased a building located in
Philadelphia, Pennsylvania, consisting of 17 units, for
$1,725,000.
In December 1984, the Partnership purchased two adjoining
buildings located in Philadelphia, Pennsylvania, consisting of 18
residential units and 4,500 square feet of commercial space, for
$405,000.
In December 1984, the Partnership purchased a four-story building
located in Philadelphia, Pennsylvania, consisting of 22,200
square feet of commercial space, for $465,000. The lender on the
property foreclosed in 1992.
In December 1984, the Partnership acquired a building located in
Philadelphia, Pennsylvania, consisting of 14 residential units,
for $160,000. The lender on the property foreclosed in 1993.
In February 1985, the Partnership was admitted, with a 99%
general partner interest, to a Pennsylvania general partnership,
which owned 21 residential units located in East Greenwich, Rhode
Island, for a cash capital contribution of $3,600,000. The
lender on the property foreclosed in 1993.
In June 1985, the Partnership was admitted, with a 99.5% general
partner interest, to a Pennsylvania general partnership which
owned a building consisting of 50 residential units located in
Reading, Pennsylvania, for a cash capital contribution of
$2,650,000. The lender on the property foreclosed in 1995.
In December 1986, the Partnership acquired a building located in
Savannah, Georgia, consisting of 13 apartments and 7,820 square
feet of commercial space, for $812,916. The lender on the
property foreclosed in 1993.
NOTE F- DEBT OBLIGATIONS
Debt obligations are as follows:
December 31,
2001 2000
---- ----
Mortgage loans, interest accrues at 12%, $1,646,311 $1,792,063
interest only payable monthly to the
extent of net operating income; principal
due 2015; collateralized by the related
rental properties
Mortgage loan, interest accrues at 12%, 1,329,979 1,217,307
interest only payable monthly to the
extent of net operating income with a
minimum of $6,833; principal due October
31, 2003; collateralized by the related
rental property
Mortgage loan, interest at 15%, payable 138,444 138,444
in equal monthly installments of $1,770
(including interest); due in 1992;
collateralized by the related rental
property [A]
Mortgage loan, interest accrues at 2 1/2% 1,554,817 1,420,794
over the Federal Home Bank Board Cost of
Funds Index with a maximum of 14 1/2% and
a minimum of 8 1/2%; therefore 8 1/2% at
December 31, 2001 and 2000, interest only
payable monthly to the extent of net
operating income with a minimum of
$9,000; principal due October 31, 2003;
collateralized by the related rental
property
Notes payable, interest at 11%; payable 380,114 380,114
monthly, based on the lesser of 75% of
cash flow from the operation of the
properties or certain stated amounts;
principal and all accrued interest is due
at the earlier of sale of the related
properties or 2009; collateralized by the
related rental property [B]
Notes payable, interest at prime plus 1 1/2 96,689 96,689
(6.25% and 11% at December 31, 2001 and --------- ---------
2000, respectively); principal and
interest due upon sale of the related
property; collateralized by the related
rental property[C]
$5,146,354 $5,045,411
========== ==========
(A) In 1991, the Partnership stopped making scheduled mortgage
payments. No notice of default has yet been received from the
lender. The interest in arrears amounts to $218,049 at December
31, 2001, which includes $20,767 for each of 2001, 2000 and 1999.
(B) Interest is no longer being accrued on these notes, since
the first mortgage is a cash flow mortgage and is not being
serviced to the extent of total interest due. The interest
in arrears amounts to $439,032 at December 31, 2001, which
includes $41,813 for each of 2001, 2000 and 1999.
(C) This note represents amounts owed to developers pursuant to
negative cash flow guarantees. Interest is no longer being
accrued on the remaining note, since the first mortgage is a
cash flow mortgage and is not being serviced to the extent
of total interest due. The interest in arrears amounts to
$98,089 at December 31, 2001 which includes $11,044 in 2001
and 2000, and $9,501 in 1999.
Approximate maturities of the mortgage loan obligations at
December 31, 2001, for each of the succeeding five years are
as follows:
2002 $ 138,444
2003 0
2004 2,884,796
2005 0
2006 0
Thereafter 2,123,114
----------
$5,146,354
==========
NOTE G - TRANSACTIONS WITH RELATED PARTIES
On June 30, 1992 DHP, Inc., assigned to D, LTD (its parent) a
note receivable from the Partnership in the amount of $127,418
which bears interest at 10% with the entire principal and accrued
interest due on June 30, 1997. On October 8, 1993 D, LTD
obtained a judgment in the amount of $156,873 on this note in
Common Pleas Court for Philadelphia County, Pennsylvania. The
judgment accrues interest at 15%. Interest accrued was $6,713
during both 2000 and 2001. Payments on the judgment are to be
made from available cash flow and before any distribution can be
made to the Partnership's limited partners. The balance of the
note at December 31, 2001 is $92,258.
NOTE H - EXTRAORDINARY GAIN
During 2001, the Partnership sold one condominium unit at the
Smythe Stores condominium complex. In connection with those
sales, $214,985 of debt was extinguished. During 2000, the
Partnership sold two condominium units at the Smythe Stores
condominium complex. In connection with those sales, $504,638 of
debt was extinguished. The extraordinary gain represents the
excess of the debt extinguished over the fair market value of the
units.
NOTE I - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting
("book") purposes and for income tax ("tax") purposes.
Reconciliations of net loss and partners' equity follow:
For the Years Ended December 31,
2001 2000 1999
---- ---- ----
Net (loss) income book ($ 244,012) ($ 22,275) $ 396,475
Excess of book over tax
depreciation 40,254 38,311 19,626
Difference between book and tax
basis of units sold 57,039 0 105,234
Other (4) (1,852) 0
---------- ---------- ----------
Net income (loss) - tax ($ 146,723) $ 14,184 $ 521,335
========== ========== ==========
Partners' deficit - book ($5,304,368) ($5,060,356) ($5,038,081)
Costs of issuance 1,393,762 1,393,762 1,393,762
Cumulative tax under book loss (459,702) (556,992) (593,451)
---------- ---------- ----------
Partners' deficit - tax ($4,370,308) ($4,223,586) ($4,237,770)
========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
Cost
Capitalized
Initial Cost Subsequent
to Partnership to
(b) Acquisition
Buildings
and Date Date
Encum- Improve- Improve- of Acquir-
Description brances Land ments ments Constr. ed
- ----------- ------- ---- --------- -------- ------ -------
(a) (g) (a)(d)
3 condominium
apartment
units in ($106,626)
Philadelphia, (h)
PA $1,646,311 $ 5,612 $ 624,655 $179,567 1984 11/9/84
16 apartment
units
and 1 unit
[1,000 S.F.]
of
commercial
space in
Philadelphia,
PA 1,468,423 120,000 1,744,097 5,502 1984 11/14/84
18 apartment
units
and 5,188
square feet
of
commercial
space
in (45,079)
Philadelphia, (h) 1984-
PA 2,031,620 174,000 2,188,961 89,894 1985 12/14/84
---------- -------- ---------- --------
TOTAL $5,146,354 $299,612 $4,557,713 $123,258
========== ======== ========== ========
Gross Amount at which Carried
at December 31, 2001
Buildings
and
Improve- Accumulated
Description Land ments Total Depreciation
- ----------- ---- --------- ----- ------------
(c)(e) (e)(f)
4
condominium
apartment
units in
Philadelphia,
PA $ 5,612 $ 697,596 $ 703,208 $ 393,976
16 apartment
units
and 1 unit
[1,000 S.F.]
of
commercial
space in
Philadelphia,
PA 120,000 1,749,599 1,869,599 1,228,910
18 apartment
units
and 5,188
square feet
of
commercial
space
in
Philadelphia,
PA 174,000 2,233,776 2,407,776 1,490,883
-------- ---------- ---------- ----------
TOTAL $299,612 $4,680,971 $4,980,583 $3,113,769
======== ========== ========== ==========
DIVERSIFIED HISTORIC INVESTORS
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2001
(A) All properties are certified historic structures as defined
in the Internal Revenue Code, or are eligible for
designation as such. The "date of construction" refers to
the period in which such properties were rehabilitated.
(B) Includes development/rehabilitation costs incurred pursuant
to development agreements entered into when the properties
were acquired.
(C) The aggregate cost of real estate owned at December 31,
2001, for Federal income tax purposes is approximately
$4,276,434. The depreciable basis of buildings and
improvements is reduced for Federal income tax purposes by
the investment tax credit and the historic rehabilitation
credit obtained.
(D) Development /rehabilitation was completed during 1986.
(E) Reconciliation of real estate:
2001 2000 1999
---- ---- ----
Balance at beginning of year $5,149,651 $5,545,825 $6,171,259
Additions during the year:
Improvements 39,652 21,264 502
---------- ---------- ----------
5,189,303 5,567,089 6,171,761
Deductions during the year:
Retirements (208,719) (417,438) (625,936)
---------- ---------- ----------
Balance at end of year $4,980,584 $5,149,651 $5,545,825
========== ========== ==========
Reconciliation of accumulated depreciation:
2001 2000 1999
---- ---- ----
Balance at beginning of year $3,044,292 $3,158,976 $3,290,172
Depreciation expense for the year 196,034 234,084 234,999
Retirements (126,557) (348,768) (366,195)
---------- ---------- ----------
Balance at end of year $3,113,769 $3,044,292 $3,158,976
========== ========== ==========
(F) See Note B to the financial statements for depreciation
method and lives.
(G) See Note F to the financial statements for further
information.
(H) In connection with the purchase of certain of the
properties, the sellers agreed to reimburse the Partnership
for cash flow deficits, as defined, of these properties.
Such reimbursements were treated as a reduction of amounts
allocated to the buildings and improvements account.
Item 9. Changes in and Disagreements with Accountants on
Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
a. Identification of Directors - Registrant has no
directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Diversified
Historic Advisors (DHA), a Pennsylvania general partnership. The
partners of DHA are as follows:
Name Age Position Term of Office Period Served
- ---- --- -------- -------------- -------------
SWDHA, Inc. -- Partner in DoHA-II No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-II No fixed term Since May 1997
For further description of DHA, see paragraph e. of
this Item. There is no arrangement or understanding between
either person named above and any other person pursuant to which
any person was or is to be selected as an officer.
c. Identification of Certain Significant Employees.
Registrant has no employees. Its administrative and operational
functions are carried out by a separate property management and
partnership administration firm engaged by the Registrant.
d. Family Relationships. None.
e. Business Experience. DHA is a general partnership
formed in March 1984. The General Partner is responsible for the
management and control of the Registrant's affairs and has
general responsibility and authority in conducting its
operations.
On May 13, 1997, SWDHA, Inc. replaced Gerald Katzoff and
EPK, Inc. replaced Diversified Historic Properties, Inc. ("DHP")
as partners of DHA. Spencer Wertheimer, the President of SWDHA,
Inc., is an attorney with extensive experience in real estate
activities and ventures.
EPK, Inc. is a Delaware corporation formed for the
purpose of managing properties or interests therein. EPK, Inc.
is a wholly-owned subsidiary of D, LTD, an entity formed in 1985
to act as the holding company for various corporations engaged in
the development and management of historically certified
properties and conventional real estate as well as a provider of
financial (non-banking) services.
The officers and directors of EPK, Inc. are described
below.
Spencer Wertheimer was appointed on May 13, 1997 as
President, Treasurer and sole Director of EPK, Inc. Mr.
Wertheimer is an attorney with extensive experience in real
estate activities and ventures.
Donna M. Zanghi (age 44) was appointed on May 13, 1997
as Vice President and Secretary of EPK, Inc. Ms. Zanghi
previously served as Secretary and Treasurer of DHP since June
14, 1993 and as a Director and Secretary/Treasurer of D, LTD.
She was associated with DHP and its affiliates since 1984 except
for the period from December 1986 to June 1989 and the period
from November 1, 1992 to June 14, 1993.
Michele F. Rudoi (age 36) was appointed on May 13, 1997
as Assistant Secretary of EPK, Inc. Ms. Rudoi previously served
as Assistant Secretary and Director of both D, LTD and DHP since
January 27, 1993.
Item 11. Executive Compensation
a. Cash Compensation - During 2001 Registrant paid no
cash compensation to DHA, any partner therein or any person named
in paragraph c. of Item 10.
b. Compensation Pursuant to Plans - Registrant has no
plan pursuant to which compensation was paid or distributed
during 2001, or is proposed to be paid or distributed in the
future, to DHA, any partner therein, or any person named in
paragraph c. of Item 10 of this report.
c. Other Compensation - No compensation, not referred
to in paragraph a. or paragraph b. of this Item, was paid or
distributed during 2001 to DHA, any partner therein, or any
person named in paragraph c. of Item 10.
d. Compensation of Directors - Registrant has no
directors.
e. Termination of Employment and Change of Control
Arrangement - Registrant has no compensatory plan or arrangement,
with respect to any individual, which results or will result from
the resignation or retirement of any individual, or any
termination of such individual's employment with Registrant or
from a change in control of Registrant or a change in such
individual's responsibilities following such a change in control.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
a. Security Ownership of Certain Beneficial Owners - No
person is known to Registrant to be the beneficial owner of more
than five percent of the issued and outstanding Units.
b. Security Ownership of Management - No equity
securities of Registrant are beneficially owned by any person
named in paragraph c. of Item 10.
c. Changes in Control - Registrant does not know of any
arrangement, the operation of which may at a subsequent date
result in a change in control of Registrant.
Item 13. Certain Relationships and Related Transactions
Pursuant to Registrant's Amended and Restated Agreement
of Limited Partnership, DHA is entitled to 10% of Registrant's
distributable cash from operations in each year. There was no
such share allocable to DHA for fiscal years 1999 through 2001.
a. Certain Business Relationships - Registrant has no
directors.
b. Indebtedness of Management - No executive officer or
significant employee of Registrant, Registrant's general partner
(or any employee thereof), or any affiliate of any such person,
is or has at any time been indebted to Registrant.
PART IV
Item 14. (A) Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
1. Financial Statements:
a. Consolidated Balance Sheets at December 31, 2001 and 2000.
b. Consolidated Statements of Operations for the Years Ended
December 31, 2001, 2000 and 1999.
c. Consolidated Statements of Changes in Partners' Equity for
the Years Ended December 31, 2001, 2000 and 1999.
d. Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999.
e. Notes to consolidated financial statements.
2. Financial statement schedules:
a. Schedule XI- Real Estate and Accumulated Depreciation.
b. Notes to Schedule XI.
3. Exhibits:
(a) Exhibit Number 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 of this
Form 10-K.
(b) Reports on Form 8-K:
No reports were
filed on Form 8-K during the quarter ended
December 31, 2001.
(c) Exhibits:
See Item 14(A)(3) above
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DIVERSIFIED HISTORIC INVESTORS
Date: May 28, 2003 By: Diversified Historic Advisors,
------------ General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi
----------------------
MICHELE F. RUDOI,
Assistant Secretary
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Capacity Date
--------- -------- ----
DIVERSIFIED HISTORIC ADVISORS General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer May 28, 2003
---------------------- ------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi May 28, 2003
---------------------- ------------
MICHELE F. RUDOI,
Assistant Secretary