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 33-11907
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DIVERSIFIED HISTORIC INVESTORS IV
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2440837
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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: 8,285.7 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
----- -----
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 IV ("Registrant") is
a limited partnership formed in 1987 under Pennsylvania law. As
of December 31, 2001, Registrant had outstanding 8,285.7 units of
limited partnership interest (the "Units").
Registrant is presently in its operating stage. It
originally owned three properties or interests therein. One
property has been sold. It currently owns two properties. See
Item 2. Properties, for a description thereof. 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.
The following is a summary of significant
transactions involving the Registrant's interests:
During 1994, the Registrant converted the Henderson
Riverfront Apartments owned by 700 Commerce Mall General
Partnership ("CMGP"), a Louisiana general partnership in which
the Registrant owns a 95% interest, into condominiums and began
offering the units for sale. Because of mortgage underwriting and
banking market conditions, the seller, CMGP, provided financing
for a large percentage of the units sold. As of December 31,
1996, all 61 units had been sold for an aggregate amount of
$6,009,745 ($4,055,459 net of selling expenses and capital
expenditures). The units sold ranged in price from $71,250 to
$127,065. Of the units sold, 46 of the buyers opted for the
seller provided financing with loans ranging from $62,700 to
$181,900 (represents one mortgage secured by two units).
On December 30, 1997, the mortgage loans were sold.
These mortgages were "nonconforming" which means that they could
not be sold on the standard secondary market. However, the
Registrant believed that then current favorable economic
environment provided an unusual opportunity to sell the
mortgages. Any deterioration in the real estate markets or the
interest rate environment would have substantially decreased the
value of the mortgage loans and would have increased the
likelihood of defaults thereunder. The loans were sold for 85.5%
of their aggregate face value. Included in operations in 1997 is
a loss of $448,957 related to the sale of the loans.
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 that 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
either acquired 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. All the properties are held for rental
operations. At this time it is anticipated that the two
remaining properties will continue to be held for this purpose
until such time as real property values in the areas in which
these properties are located begin to increase. At that time,
the Registrant will re-evaluate its investment strategy regarding
the properties.
As of December 31, 2001, Registrant owned two
properties, one each located in North Carolina and Pennsylvania.
In total, the properties contain 22 apartment units. As of
December 31, 2001, 21 of the apartment units were under lease at
monthly rental rates ranging from $500 to $1,095. Rental of the
apartments is not expected to be seasonal. For a further
discussion of the properties, see Item 2. Properties.
The Registrant is affected by and subject to the
general competitive conditions of the residential real estate
industry. As a result of the overbuilding that occurred in the
1980's, the competition for residential tenants in the local
markets where the Registrant's properties are located is
generally strong. The properties held for rental by the
Registrant are located in the Old City Historic District in
Philadelphia, Pennsylvania and Concord, North Carolina. In both
areas there are several similar historically certified
rehabilitated buildings. However, there is no organization which
holds a dominant position in the residential housing market in
either of the geographic areas in which the Registrant's
properties are located. The apartment market remains stable in
both areas and new construction remains virtually nonexistent in
Concord, North Carolina although the availability of favorable
home financing has placed pressure on the rental tenant base. The
Registrant is able to raise rental rates and stay fully occupied
in the Philadelphia property but at the same time, competitive
pressure exists from other buildings in the Old City area and the
emerging Northern Liberties neighborhood.
Registrant has no employees. Registrant's
activities are overseen by Brandywine Construction & Management,
Inc., ("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 December 31, 2001, Registrant owned two
properties, or interests therein, as follows:
a. The Brass Works - consists of 12 apartments located
at 231-237 Race Street, Philadelphia, Pennsylvania. In May 1987,
Registrant acquired and rehabilitated the Property for $1,200,000
($111 per square foot)("sf") funded by its equity contribution.
The property is managed by BCMI. At December 31,
2001, 11 of the apartment units were under lease (99%) with
monthly rents ranging from $650 to $1,095. All leases are
renewable, one-year leases. The occupancy for the previous four
years was 100% for 2000, 100% for 1999, and 100% for 1998. The
monthly rental range was $650 to $925 during 2000, $690 to $875
during 1999, $665 to $815 during 1998, and $665 to $755 during
1997. The monthly rental range increased to its present level due
to the increase in popularity of the Old City neighborhood in
which the property is located, and the sustained ability of the
property to be fully occupied (other than transitory vacancies)
at increasing monthly rental rates. For tax purposes, this
property has a federal tax basis of $1,053,923 and is depreciated
using the straight-line method with a useful life of 27.5 years.
The annual real estate taxes are $9,424.92, which is based on an
assessed value of $115,200 taxed at a rate of $8.264 per $100. No
one tenant occupies ten percent or more of the building. It is
the opinion of the management of the Registrant that the property
is adequately covered by insurance.
b. Locke Mill Plaza - consists of 10 residential
apartment condominium units in a 169 condominium unit project
located on Buffalo Avenue at Union Street in Concord, North
Carolina. In November 1988, Registrant acquired the units for
$665,000 funded by its equity contribution.
The property is managed by BCMI. As of December 31,
2001, 10 units were under lease (100%) with monthly rates ranging
from $500 to $560. All leases are renewable, one-year leases. The
occupancy as of year end for the previous four years was 60% for
2000, 80% for 1999, 100% for 1998, and 89% for 1997. The monthly
rental range has been approximately the same since 1997. For tax
purposes, this property has a federal tax basis of $623,769 and
is depreciated using the straight-line method with a useful life
of 27.5 years. The annual real estate taxes are $2,663.09 which
is based on an assessed value of $475,550 taxed at a rate of $.56
per $100. No one tenant occupies ten percent or more of the
building. It is the opinion of the management of the Registrant
that the property is adequately covered by insurance.
Item 3. Legal Proceedings
a. 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 proceeding.
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 38 units were
sold or exchanged in 2001.
b. As of December 31, 2001, there were 1,009 record
holders of Units.
c. In 2001 and 2000 Registrant made no distributions out of
available cash flow.
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
---- ---- ---- ---- ----
Rental income $203,679 $188,729 $194,123 $190,058 $180,312
Interest
income 8,944 10,061 11,328 35,117 274,358
Net loss (69,298) (86,597) (92,209) (60,005) (541,583)
Net loss per
unit (8.28) (10.35) (11.02) (7.17) (64.71)
Total assets
(net of
depreciation
and
amortization) 1,520,361 1,590,514 1,675,218 2,029,350 4,802,128
Dividends
(distributions) 0 0 276,190 2,529,533 276,190
Item 7. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
(1) Liquidity
At December 31, 2001, Registrant had cash of
approximately $336,033. The Registrant expects that those funds
plus the cash generated from operations at each property will be
sufficient to fund the operating expenses of the properties.
As of December 31, 2001, Registrant had restricted
cash of $25,042 consisting primarily of funds held as security
deposits, replacement reserves, escrows for taxes and insurance.
As a consequence of these restrictions as to use, Registrant does
not deem these funds to be a source of liquidity.
(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 investments for the foreseeable
future.
(3) Results of Operations
During 2001, Registrant incurred a net loss of
$69,298 ($8.28) per limited partnership unit compared to a loss
of $86,597 ($10.35 per limited partnership unit) in 2000 and a
loss of $92,209 ($11.02 per limited partnership unit) in 1999.
Rental income was $203,679 in 2001, $188,729 in 2000
and $194,128 in 1999. The increase from 2000 to 2001 is due to an
increase in average occupancy (71% to 88%) at Locke Mill Plaza
and an increase in average rental rates at the Brass Works. The
decrease from 1999 to 2000 is due to a decrease in rental income
at Locke Mill Plaza due to a decrease in average occupancy (93%
to 71%) partially offset by an increase in rental income at Brass
Works due to an increase in average rental rates.
Interest income was $8,944 in 2001, $10,061 in 2000,
and $11,328 in 1999. The decrease in interest income from 2000 to
2001 is due to decreasing interest rates. The decrease in
interest income from 1999 to 2000 is due to a decrease in the
average invested cash balances.
Rental operation expense was $117,381 in 2001,
$119,337 in 2000 and $129,346 in 1999. The decrease in rental
operation expense from 2000 to 2001 is due to a decrease in
maintenance expense at the Brass Works, offset by an increase in
marketing and leasing expense at the Locke Mill apartments. The
decrease in maintenance expense at the Brass Works is due to a
decrease in apartment preparation expense. The increase in
marketing and leasing expense resulted in the increase in unit
occupancy. The decrease in rental operation expense from 1999 to
2000 is due to a decrease in legal expense. The decrease is due
to the settlement of a tenant claim at the Henderson Apartments
in 1999.
General and administrative expense was $72,000 in
2001, $74,425 in 2000 and $77,000 in 1999. The decreases from
1999 to 2000 and 2000 to 2001 are due to the decrease in fees
paid to the general partner.
During 2001, income of $36,000 was recognized at the
Registrant's three properties compared to $19,000 of income in
2000 and $20,000 of income in 1999. A discussion of property
operations/activities follows:
In 2001, Registrant recognized net income of $0 at
The Henderson Riverfront Apartments compared to net income of $0
in 2000 and a net loss of $5,000 in 1999. The net loss in 1999 is
due to legal expenses for the settlement of a tenant claim in
1999 net of interest income.
In 2001, Registrant recognized net income of $36,000
including $49,000 in depreciation expense at the Brass Works
compared to net income of $21,000, including $49,000 in
depreciation expense in 2000, and net income of $20,000,
including $49,000 depreciation expense in 1999. The increase in
income from 2000 to 2001 is due to an increase in rental income
combined with a decrease in maintenance expense. The increase in
rental income is due to an increase in average rental rates. The
decrease in maintenance expense is due to a decrease in apartment
preparation expense. The increase in income from 1999 to 2000 is
due to an increase in rental income partially offset by increases
in maintenance expense and advertising expense. The increase in
rental income is due to an increase in monthly rental rates. The
increase in advertising is due to an increase in signage and
marketing expenses, and the increase in maintenance expense is
due to nonrecurring repairs at the property.
In 2001, Registrant incurred a loss of $7,000 at
Locke Mill Plaza including $27,000 of depreciation expense
compared to a loss of $9,000 including $27,000 of depreciation
expense in 2000 compared to income of $5,000 including $26,000 of
depreciation expense in 1999. The decrease in loss from 2000 to
2001 is due to an increase in rental income, partially offset by
an increase in marketing and leasing expense. The increase in
rental income is due to an increase in average occupancy (71% to
88%). The increase in marketing and leasing expense resulted in
the increase in unit occupancy. The decrease from 1999 to 2000 is
due to the decrease in rental income due to a decrease in average
occupancy (93% to 71%).
Item 7A. 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 Regulation S-K.
Independent Auditor's Report
To the Partners of
Diversified Historic Investors IV
We have audited the accompanying consolidated balance sheet of
Diversified Historic Investors IV (a Pennsylvania Limited
Partnership) and subsidiaries as of December 31, 2001 and 2000
and the related statements of operations and 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 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 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 IV 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 of America.
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 beginning on page 19 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.
Gross, Kreger & Passio
Philadelphia, Pennsylvania
March 19, 2002
DIVERSIFIED HISTORIC INVESTORS IV
(a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 2001 and
2000 10
Consolidated Statements of Operations for the Years
Ended December 31, 2001, 2000, and 1999 11
Consolidated Statements of Changes in Partners'
Equity for the Years Ended December 31, 2001, 2000,
and 1999 12
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2001, 2000, and 1999 13
Notes to consolidated financial statements 14-17
Financial statement schedules:
Schedule XI - Real Estate and Accumulated 19
Depreciation
Notes to Schedule XI 20
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 IV
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
Assets
2001 2000
---- ----
Rental properties at cost:
Land $ 74,324 $ 74,324
Buildings and improvements 2,246,555 2,246,555
Furniture and fixtures 44,660 29,814
---------- ----------
2,365,539 2,350,693
Less - accumulated depreciation (1,227,712) (1,135,171)
---------- ----------
1,137,827 1,215,522
Cash and cash equivalents 336,033 330,149
Restricted cash 25,042 22,787
Other assets 21,459 22,056
---------- ----------
Total $1,520,361 $1,590,514
========== ==========
Liabilities and Partners' Equity
Liabilities:
Accounts payable - trade $ 16,268 $ 44,679
Other liabilities 28,909 1,378
Tenant security deposits 12,290 12,265
---------- ----------
Total liabilities 57,467 58,322
Partners' equity 1,462,894 1,532,192
---------- ----------
Total $1,520,361 $1,590,514
========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Revenues:
Rental income $203,679 $188,729 $194,123
Interest income 8,944 10,061 11,328
-------- -------- --------
Total revenues 212,623 198,790 205,451
-------- -------- --------
Costs and expenses:
Rental operations 117,380 119,337 129,346
General and administrative 72,000 74,425 77,000
Depreciation and amortization 92,541 91,625 91,314
-------- -------- --------
Total costs and expenses 281,921 285,387 297,660
-------- -------- --------
Net loss ($ 69,298)($ 86,597)($ 92,209)
======== ======== ========
Net loss per limited
partnership unit ($ 8.28)($ 10.35)($ 11.02)
======== ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(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
III(1) (2) Total
-------- -------- -----
Percentage participation in
profit or loss 1% 99% 100%
== === ====
Balance at December 31, 1998 ($427,343) $2,414,531 $1,987,188
Net loss (922) (91,287) (92,209)
Distribution to partners (27,619) (248,571) (276,190)
-------- ---------- ----------
Balance at December 31, 1999 (455,884) 2,074,673 1,618,789
Net loss (866) (85,731) (86,597)
-------- ---------- ----------
Balance at December 31, 2000 (456,750) 1,988,942 1,532,192
Net loss (693) (68,605) (69,298)
-------- ---------- ----------
Balance at December 31, 2001 ($457,443) $1,920,337 $1,462,894
======== ========== ==========
(1) General Partner
(2) 8,285.7 limited partnership units outstanding at December 31,
2001, 2000, and 1999.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Cash flows from operating
activities:
Net loss ($ 69,298) ($ 86,597) ($ 92,209)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 92,541 91,625 91,314
Changes in assets and liabilities:
(Increase) decrease restricted
cash (2,255) 2,382 (1,496)
Decrease (increase) in other
assets 596 (5,044) (9,534)
(Decrease) increase in accounts
payable - trade (28,408) 1,223 12,579
Increase (decrease) in other
liabilities 27,529 (160) 717
Increase in tenant security
deposits 25 830 970
-------- -------- --------
Net cash provided by
operating activities 20,730 4,259 2,341
-------- -------- --------
Cash flows from investing
activities:
Capital expenditures (14,846) 0 (3,760)
-------- -------- --------
Net cash used in investing
activities (14,846) 0 (3,760)
-------- -------- --------
Cash flows from financing
activities:
Distributions to partners 0 0 (276,190)
-------- -------- --------
Net cash used in financing
activities 0 0 (276,190)
-------- -------- --------
Increase (decrease) in cash and
cash equivalents 5,884 4,259 (277,609)
Cash and cash equivalents at
beginning of year 330,149 325,890 603,499
-------- -------- --------
Cash and cash equivalents at end
of year $336,033 $330,149 $325,890
======== ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors IV (the "Partnership") was formed
in January 1987, with Dover Historic Advisors III as the General
Partner and DHP, Inc., (formerly Dover Historic Properties,
Inc.,) as the limited 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 net proceeds from
the sale of limited partnership units. Any rehabilitations
undertaken by the Partnership were done with a view to obtaining
certification of expenditures therefor 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 statements
follows:
1. Principles of Consolidation
The accompanying consolidated financial statements of the
Partnership include the accounts of one subsidiary partnership in
which the Partnership had a controlling interest, with
appropriate elimination of inter-partnership transactions and
balances. 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 the year.
2. Costs of Issuance
Costs incurred in connection with the offering and sale of
limited partnership units were charged against partners' equity
as incurred.
3. 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.
4. Net Loss Per Limited Partnership Unit
The net loss per limited partnership interest (a "Unit") is based
on the weighted average number of limited partnership Units
outstanding during the period (8,285.7 Units in 2001, 2000, and
1999).
5. Income Taxes
Federal and state income taxes are payable by the individual
partners; therefore, no provision or liability for income taxes
is reflected in the financial statements.
6. Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased
with a maturity of less than three months to be cash equivalents.
7. Concentration of Credit Risk
Financial instruments which potentially subject the Partnership
to concentration of credit risk consist principally of cash and
cash equivalents. The Partnership maintains its cash and cash
equivalents in financial institutions insured by the Federal
Deposit Insurance Corporation up to $100,000 per company. At
December 31, 2001, uninsured funds held at one institution are
approximately $202,000.
8. Restricted Cash
Restricted cash includes amounts held for tenant security
deposits, real estate tax reserves and other cash restricted as
to use.
9. Revenue Recognition
Revenues are recognized when rental payments are due on a
straight-line basis. Rental payments received in advance are
deferred until earned.
10. Rental Properties
Rental properties are stated at cost. A provision for impairment
of value is recorded when a decline in the 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 mortgage loan on a
property has significant balloon payments due within the
foreseeable future 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, 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.
11. 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 - 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 dispositions (as defined)
will be distributed to the limited partners up to their original
capital contributions plus an amount equal to six percent of
their original capital contributions per annum on a cumulative
basis, less the sum of all prior distributions to them;
thereafter, after receipt by the General Partner or its
affiliates of any accrued but unpaid real estate brokerage
commissions, the distributable cash will be distributed 15% to
the General Partner and 85% to the limited partners.
Net income or loss from operations of the Partnership is
allocated 1% percent to the General Partner and 99% to the
limited partners.
NOTE D - ACQUISITIONS
The Partnership acquired two properties and one general
partnership interest in a partnership owning a third property
during the period from May 1987 to November 1988, as discussed
below.
In May 1987, the Partnership purchased a three-story building
located in Philadelphia, Pennsylvania consisting of 12 apartment
units. The cost to acquire and rehabilitate this property was
approximately $1,200,000.
In July 1987, the Partnership was admitted, with a 95% general
partnership interest, to a Pennsylvania general partnership which
owned a building located in New Orleans, Louisiana consisting of
61 apartment units, for cash contributions of $4,620,000. As of
December 31, 1996, all of the units were sold. As of December 31,
1997, the mortgages from the seller provided financing in
connection with the sale of the units were sold.
In November 1988, the Partnership purchased 10 condominium units,
in a building located in Concord, North Carolina, for $665,000.
NOTE E - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting
("book") purposes and for income tax ("tax") purposes. A
reconciliation of net loss and partners' equity follows:
For the years ended December 31,
2001 2000 1999
---- ---- ----
Net loss - book ($ 69,298) ($ 86,597) ($ 92,209)
Excess of book over
tax depreciation 20,302 21,726 21,569
Minority interest
(tax only) (372) (339) 238
-------- --------- ---------
Net loss - tax ($ 49,368) ($ 65,210) ($ 70,402)
========= ========= =========
For the years ended December 31,
2001 2000 1999
---- ---- ----
Partners' equity - book $1,462,894 $1,532,192 $1,618,791
Costs of issuance 1,077,141 1,077,141 1,077,141
Cumulative tax over
book loss 274,659 254,730 233,343
---------- ---------- ----------
Partners' equity - tax $2,814,694 $2,864,063 $2,929,275
========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS IV
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
Gross Amount
at which Carried
Initial Cost at December 31,
to Partnership 2001
(b)
Buildings Buildings
and and Accumu-
Descrip- Improve- Improve- lated
tion Land ments Land ments Total Depr.
- ------- ---- --------- ---- -------- ----- -------
(a) (d)(e)
12
apart-
ment
units
in
Phila-
delphia,
PA $54,000 $1,209,858 $54,000 $1,589,153 $1,643,153 $ 864,434
10
apart-
ment
units
in
North
Concord,
NC $20,324 692,522 20,324 702,062 722,386 363,278
------- ---------- ------- ---------- ---------- ----------
$74,324 $1,902,380 $74,324 $2,291,215 $2,365,539 $1,227,712
======= ========== ======= ========== ========== ==========
Date
Descrip- of Date
tion Constr. Acquired
- ------- ------- --------
(a) (a)
12
apart-
ment
units
in
Phila-
delphia,
PA 1988 5/22/87
10
apart-
ment
units
in
North
Concord,
NC 1988 11/30/88
DIVERSIFIED HISTORIC INVESTORS IV
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2001
(A) Each property is a certified historic structure as defined
in the Internal Revenue Code of 1986. The "date of
construction" refers to the period in which the 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
$1,677,692. The depreciable basis of buildings and
improvements is reduced for Federal income tax purposes by
the historic rehabilitation credit obtained.
(D) Reconciliation of land, buildings and improvements:
2001 2000 1999
---- ---- ----
Balance at beginning of year $2,350,693 $2,350,693 $2,346,933
Additions during the year:
Improvements 14,846 0 3,760
---------- ---------- ----------
Balance at end of year $2,365,539 $2,350,693 $2,350,693
========== ========== ==========
Reconciliation of accumulated depreciation:
2001 2000 1999
---- ---- ----
Balance at beginning of year $1,135,171 $1,043,546 $ 952,232
Depreciation expense for the year 92,541 91,625 91,314
---------- ---------- ----------
Balance at end of year $1,227,712 $1,135,171 $1,043,546
========== ========== ==========
(E) See Note B to the consolidated financial statements for
depreciation methods and lives.
Item 9. Changes in and Disagreements with Accountants on
Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
a. Identification of Directors - Registrant has no
directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Dover
Historic Advisors III (DoHA-III), a Pennsylvania general
partnership. The partners of DoHA-III are as follows:
Name Age Position Term of Office Period Served
Name Age Position Term of Office Period Served
- ---- --- -------- -------------- -------------
SWDHA, Inc. -- Partner in DoHA-III No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-III No fixed term Since May 1997
For further description of DoHA-III, 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 property management and
partnership administration firm.
d. Family Relationships. None.
e. Business Experience. DoHA-III is a general
partnership formed in 1987. The partners of DoHA-III are EPK,
Inc. and SWDHA, Inc. EPK, Inc., is managing partner of DoHA III
and is thus responsible for management and control of DoHA III,
which in turn is responsible for the management and control of
the Registrant and has general responsibility and authority for
conducting its operations.
On May 13, 1997, SWDHA, Inc. replaced Gerald Katzoff
and EPK, Inc. replaced DHP, Inc. as partners of DoHA-III.
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, Inc. since
June 14, 1993 and as a Director and Secretary/Treasurer of D,
LTD. She has been associated with DHP, Inc. 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 has also
served as Assistant Secretary and Director of both D, LTD and
DHP, Inc. from January 27, 1993.
Item 11. Executive Compensation
a. Cash Compensation - During 2001, Registrant did not
pay any cash compensation to DoHA-III.
b. Compensation Pursuant to Plans - Registrant has no
plan pursuant to which compensation was paid or distributed, or
is proposed to be paid or distributed in the future, to DoHA-III,
any partner therein, or any person named in paragraph c. of Item
10 of this report.
c. Other Compensation - Compensation not referred to in
paragraph a. or paragraph b. of this Item was not paid or
distributed during 2001 to DoHA-III, 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, DoHA-III is entitled to 10% of
Registrant's distributable cash from operations in each year.
The amount allocable to DoHA-III for 2001, 2000 and 1999 was $0
for both 2000 and 2001, and $27,619 for 1999, respectively.
a. Transactions with Management - Fees paid during 2001
to the general partner were $0.
b. Certain Business Relationships - Registrant has no
directors.
c. Indebtedness of Management - No 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. 1 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, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: May 30, 2003 DIVERSIFIED HISTORIC INVESTORS IV Income Fund
------------ ---------------------------------------------
By: Dover Historic Advisors III,
General Partner
By: EPK, Inc., General Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President
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 Registrant and in the capacities and on the
dates indicated.
Signature Capacity Date
DOVER HISTORIC ADVISORS III General Partner
By: EPK, Inc., General Partner
By: /s/ Spencer Wertheimer May 30, 2003
---------------------- ------------
SPENCER WERTHEIMER,
President
By: /s/ Michele F. Rudoi May 30, 2003
----------------------- ------------
MICHELE F. RUDOI,
Assistant Secretary