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 33-15597
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DIVERSIFIED HISTORIC INVESTORS V
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2479468
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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: 11,142 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 V ("Registrant") is
a limited partnership formed in 1987 under Pennsylvania law. As
of December 31, 2001, Registrant had outstanding 11,142 units of
limited partnership interest (the "Units").
Registrant is currently in its operating stage.
It originally owned three properties or interests therein. In
October 1996, its interest in one property was sold and effective
as of January 1999, its interest in another was foreclosed. It
currently owns one property. 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.
b. Financial Information about Industry Segments
The Registrant operates in one industry segment.
c. Narrative Description of the 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 investment 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
partnership in which it has an interest, have been rehabilitated
and certified as historic structures and have received the
related investment tax credit. The Registrant's remaining
property is being held for rental operations. At this time it is
anticipated that this property will continue to be held for that
purpose. At such time as real property values in the area in
which the property is located begin to increase, the Registrant
will re-evaluate its investment strategy regarding the property.
As of December 31, 2001, Registrant owned one
property, located in Pennsylvania. The property contains 21
apartment units. As of December 31, 2001, 18 of the apartment
units were under lease at monthly rental rates ranging from $415
to $665. For a further discussion of the property, 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
market where the Registrant's residential property is located is
generally strong. As a result, the Registrant is forced to keep
its rent levels competitively low in order to maintain moderate
to high occupancy levels. The residential property currently
owned by the Registrant is located in a suburb of Philadelphia,
Pennsylvania in which there are several similar historically
certified rehabilitated buildings. The Registrant's main
competitors in this market are organizations that own similar
residential buildings. In this area, the apartment market
remains stable and new construction remains virtually nonexistent
although the availability of favorable home financing has placed
pressure on the rental tenant base.
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 the date hereof, Registrant owned one
property. A summary description of that property is given below.
The Lofts at Red Hill is a historically certified,
four-story former factory located at 350 Main Street, Red Hill
Borough, Pennsylvania. In December 1987, the Registrant acquired
the building and is the 100% equity owner of this property. The
property was rehabilitated as a 21-unit rental residential
complex. The acquisition and rehabilitation price of this
property was approximately $1,350,000 ($81 per square foot)
("sf"). In September 1997, a mortgage was placed on the property
in the amount of $400,000 (principal balance of $459,699 at
December 31, 2001). The proceeds from the mortgage were utilized
to satisfy certain outstanding liabilities of the Registrant. The
note accrues interest at 14% and is payable at 10%, with the
entire principal balance and accrued interest due October 1,
2002. The note is current, as payments in excess of interest at
10% are being made. The Registrant intends to renew this
mortgage at the same or better terms with the current lender or
refinance it in the open market.
The property is managed by BCMI. As of December
31, 2001, 18 apartment units were under lease (85%) at monthly
rental rates ranging from $415 to $665. All leases are
renewable, one-year leases. The occupancy as of year end for the
previous four years was 85% for 2000, 86% for 1999, 76% for 1998,
and 92% for 1997. The monthly rental range has been
approximately the same since 1997. For federal income tax
purposes, this property has a basis of $1,469,408 and is
depreciated using the straight-line method with a useful life of
27.5 years. The annual real estate taxes are $15,529 based on an
assessed value of $803,520 taxed at a rate of $19.721 per $1,000
of assessed value. 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
To the best of its knowledge, as of December 31, 2001,
Registrant was not a party to, nor was its property the subject
of, any pending material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were 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 76 units were
sold or exchanged of record in 2001.
b. As of December 31, 2001, there were 1,354 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
---- ---- ---- ---- ----
Rental income $133,688 $ 133,925 $ 110,807 $ 121,383 $ 20,685
Hotel income 0 0 18,181 1,131,690 1,755,787
Interest income 5,478 305 2,746 2,295 17,449
Net (loss)
income (135,310) (132,797) 3,630,276 (2,777,858)(2,211,312)
Net (loss)
income per Unit (12.02) (11.80) 322.56 (246.82) (196.48)
Total assets
(net of
depreciation and
amortization) 954,952 1,065,966 1,179,580 6,764,832 7,964,174
Debt obligations 459,699 429,645 417,399 7,566,974 6,804,113
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(1) Liquidity
As of December 31, 2001, Registrant had cash of
$4,974. Such funds are expected to be used to pay liabilities and
general and administrative expenses of Registrant, and to fund
cash deficits of the property. Cash generated from operations is
used primarily to fund operating expenses and debt service. If
cash flow proves to be insufficient, the Registrant will attempt
to negotiate loan modifications with the lender 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 $118,001 consisting primarily of funds held as security
deposits and escrows for real estate taxes. 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 investment for the foreseeable
future.
(3) Results of Operations
During 2001, Registrant incurred a net loss of
$135,310 ($12.02 per limited partnership unit) compared to a net
loss of $132,797 ($11.80 per limited partnership unit) in 2000
and a net income of $3,630,276 ($322.56 per limited partnership
unit) in 1999.
Rental income was $133,688 in 2001, $133,925 in
2000, and $110,807 in 1999. The increase in rental income from
1999 to 2000 is due to an increase in average occupancy (82% to
90%) at the Lofts at Red Hill.
Hotel income was $0 in both 2000 and 2001, and
$18,181 in 1999. The decrease in hotel income from 1999 to 2001
is due to the foreclosure of the Redick Plaza Hotel effective as
of January 1999.
Rental operations expense was $87,042 in 2001,
$83,724 in 2000, and $81,554 in 1999. The increase from 2000 to
2001 is due to an increase in commission expense, partially
offset by a decrease in maintenance expense. The increase in
commission expense is due to an increase in the turnover of
apartment units. The decrease in maintenance expense is due to a
decrease in painting expense and cleaning service expense. The
increase from 1999 to 2000 is due to an increase in maintenance
expense at the Lofts at Red Hill due to painting and plumbing
repairs made at the property throughout the year.
Hotel operations expense was $0 in both 2000 and
2001, and $96,318 in 1999. The decrease from 1999 to 2001 is due
to the foreclosure of the Redick Plaza Hotel effective as of
January 1999.
General and administrative expense was $0 in both
2000 and 2001, and $75,646 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.
Interest expense was $63,854 in 2001, $60,246 in
2000, and $100,735 in 1999. The increase in interest expense from
2000 to 2001 is due to an increase in the principal balance of
the loan on which the interest is calculated. The decrease in
interest expense from 1999 to 2000 is due to the foreclosure of
the Redick Plaza Hotel effective as of January 1999.
Depreciation and amortization expense was $123,580
in 2001, $123,057 in 2000, and $141,961 in 1999. The increase
from 2000 to 2001 is due to additional capital improvements made
at the property during 2001. The decrease from 1999 to 2000 is
due to the foreclosure of the Redick Plaza Hotel effective as of
January 1999.
Effective as of January 1999 the Redick Plaza
Hotel was foreclosed by the second mortgage lender, with the
consent of the first mortgage lender, by recordation of a deed in
lieu of foreclosure. The deed was recorded in June 1999 to be
effective as of January 15, 1999. As a result, the Registrant
realized an extraordinary gain on forgiveness of indebtedness in
the amount of $3,994,755, which is the difference between the
debt of the hotel and the net book value of its assets.
During the year, a net loss of approximately
$72,000 was incurred at the Registrant's remaining property
compared to net loss of approximately $71,000 in 2000 and net
income of $3,765,000 in 1999. Included in income for 1999 is
extraordinary income of $3,994,755 related to the foreclosure of
the Redick Plaza Hotel effective as of January 1999. A
discussion of property operations/activities follows.
In 2001, Registrant incurred a net loss of $72,000
at the Lofts at Red Hill including $62,000 of depreciation and
amortization expense compared to a net loss of $71,000 including
$61,000 of depreciation and amortization expense in 2000, and a
net loss of $90,000 including $61,000 of depreciation and
amortization expense in 1999. The increase in net loss from 2000
to 2001 is due to the increase in leasing commission expense and
interest expense, partially offset by a decrease in maintenance
expense. The increase in leasing commission expense is due to the
increase in the turnover of apartment units and the increase in
interest expense is due to an increase in the principal balance
of the loan on which the interest is calculated. The decrease in
maintenance expense is due to a decrease in painting expense and
cleaning service expense. The decrease in net loss from 1999 to
2000 is due to an increase in rental income and a decrease in
rental operations expense. The increase in rental income is due
to an increase in average occupancy (82% to 90%). The decrease in
rental operations expense is due to a decrease in legal and
accounting fees.
In 1999, Registrant recognized income of
$3,855,000 at the Redick Plaza Hotel, including $19,000 of
depreciation and amortization expense. Included in income for
1999 is extraordinary income of $3,995,000 related to the
foreclosure of the Redick Plaza Hotel effective as of January
1999.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk
Not applicable.
Item 8. Financial Statement 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
Diversified Historic Investors V
We have audited the accompanying consolidated balance sheet of
Diversified Historic Investors V (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 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 V 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 on page 20 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 has 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
March 26, 2002
DIVERSIFIED HISTORIC INVESTORS V
(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 14-18
Financial statement schedules:
Schedule XI - Real Estate and Accumulated 20
Depreciation
Notes to Schedule XI 21
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 V
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
Assets
2001 2000
Rental properties at cost:
Land $ 61,046 $ 61,046
Buildings and improvements 1,445,431 1,445,431
Furniture and fixtures 92,107 89,316
---------- ----------
1,598,584 1,595,793
Less - accumulated depreciation (828,871) (769,734)
---------- ----------
769,713 826,059
Cash and cash equivalents 4,974 7,545
Restricted cash 118,001 112,630
Accounts and notes receivable 13,930 6,954
Other assets (net of amortization
of $289,362 and $224,919,
respectively) 48,334 112,778
---------- ----------
Total $ 954,952 $1,065,966
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 459,699 $ 429,645
Accounts payable:
Trade 127,132 115,800
Related parties 33,656 33,656
Taxes 0 17,332
Other liabilities 13,564 12,811
Tenant security deposits 9,205 9,715
---------- ----------
Total liabilities 643,256 618,959
Partners' equity 311,696 447,007
---------- ----------
Total $ 954,952 $1,065,966
========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Revenues:
Rental income $133,688 $133,925 $ 110,807
Hotel income 0 0 18,181
Interest income 5,478 305 2,746
-------- -------- ----------
Total revenues 139,166 134,230 131,734
-------- -------- ----------
Costs and expenses:
Rental operations 87,042 83,724 81,554
Hotel operations 0 0 96,317
General and administrative 0 0 75,646
Interest 63,854 60,246 100,735
Depreciation and
amortization 123,580 123,057 141,961
-------- -------- ----------
Total costs and expenses 274,476 267,027 496,213
-------- -------- ----------
Loss before extraordinary item (135,310) (132,797) (364,479)
Extraordinary gain on
extinguishment of debt 0 0 3,994,755
-------- -------- ----------
Net (loss) income ($135,310)($132,797)($3,630,276)
======== ======== ==========
Net (loss) income per limited
partnership unit:
Loss before
extraordinary item ($ 12.02)($ 11.80) ($ 32.39)
Extraordinary item 0 0 354.95
-------- -------- ---------
($ 12.02)($ 11.80) $ 322.56
======== ======== =========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(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
V (1) (2) Total
-------- -------- -----
Percentage participation in
profit or loss 1% 99% 100%
== === ====
Balance at December 31, 1998 ($199,658) ($2,850,814) ($3,050,472)
Net income 36,303 3,593,973 3,630,276
-------- ---------- ----------
Balance at December 31, 1999 (163,355) 743,159 579,804
Net loss (1,328) (131,469) (132,797)
-------- ---------- ----------
Balance at December 31, 2000 (164,683) 611,690 447,007
Net loss (1,353) (133,957) (135,310)
-------- ---------- ----------
Balance at December 31, 2001 ($166,036) $ 477,733 $ 311,697
======== ========== ==========
(1) General Partner.
(2) 11,142 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 V
(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) income ($135,310) ($132,797) $3,630,276
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 123,580 123,057 141,961
Extraordinary gain on
extinguishment of debt 0 0 (3,994,755)
Changes in assets and liabilities:
(Increase) decrease in
restricted cash (5,371) 3,409 (3,612)
Increase in accounts and notes
receivable (6,977) (6,804) (90)
Increase in accounts payable -
trade 11,332 4,276 114,167
(Decrease) increase in
accounts payable - taxes (17,332) 3,639 57,756
Increase in interest payable 0 0 42,320
Increase (decrease) in
accrued liabilities 753 (1,350) 153
(Decrease) increase in
tenant security deposits (510) 371 1,199
-------- -------- ----------
Net cash used in operating
activites (29,835) (6,199) (10,625)
-------- -------- ----------
Cash flows from investing
activities:
Capital expenditures (2,790) (2,453) (1,420)
-------- -------- ----------
Net cash used in investing
activities (2,790) (2,453) (1,420)
-------- -------- ----------
Cash flows from financing
activities:
Proceeds from debt financings 30,054 12,246 10,414
Repayments of debt financings 0 0 (8,404)
-------- -------- ----------
Net cash provided by
financing activities 30,054 12,246 2,010
-------- -------- ----------
(Decrease) increase in cash and (2,571) 3,594 (10,035)
cash equivalents
Cash and cash equivalents at
beginning of year 7,545 3,951 13,986
-------- --------- -----------
Cash and cash equivalents at end
of year $ 4,974 $ 7,545 $ 3,951
======== ========= ===========
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year
for interest $ 48,000 $ 48,000 $ 48,000
The accompanying notes are an integral part of these financial statments.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors V (the "Partnership") is a
Pennsylvania limited partnership formed in July 1987 to acquire,
rehabilitate, renovate, manage, operate, hold, sell, exchange,
and otherwise deal in and with real properties containing
improvements which are certified historic structures, as defined
in the Internal Revenue Code (the "Code"), or which were eligible
for designation as such, and to engage in any and all activities
related or incidental thereto. Any rehabilitations undertaken by
the Partnership were done with a view to obtaining certification
of expenditures 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 financial statements include the accounts of the
Partnership and a subsidiary partnership, 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 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. Net Loss Per Limited Partnership Unit
The net loss per limited partnership unit is based on the
weighted average number of limited partnership units outstanding
(11,142 in 2001, 2000, and 1999).
4. Income Taxes
Income taxes or credits resulting from earnings or losses are
payable by or accrue to the benefit of the partners; accordingly,
no provision has been made for income taxes in these financial
statements.
5. Cash and Cash Equivalents
The Partnership considers all highly liquid instruments purchased
with a maturity of less than three months to be cash equivalents.
6. Restricted Cash
Restricted cash includes amounts held for tenant security
deposits and real estate tax reserves.
7. Revenue Recognition
Revenues are recognized when rental payments are due on a
straight-line basis. Rental payments received in advance are
deferred until earned.
8. Deferred Expenses
Loan fees have been incurred with respect to certain loans. Such
fees were deferred and are being amortized over the term of the
related loans.
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, 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 of each year.
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
1. Capital Contributions
The Partnership offered investors limited partnership units at
$1,000 per unit; the minimum purchase per investor was three
units. A total of 11,142 limited partnership units were sold.
After payment of costs of issuance as provided for in the
Agreement and the withdrawal of the initial limited partner,
initial Partnership capital was $9,722,760 from limited partners
and $9,900 from the General Partner.
2. Distributions from Operations
The Agreement provides that, beginning with the date of the
admission of the additional limited partners, all distributable
cash from operations (as defined) will be distributed 99% to the
limited partners and 1% to the General Partner. The General
Partner also receives an incentive management fee equal to 4% of
available cash (as defined).
All distributable cash from sales or dispositions will be
distributed to the limited partners in an amount equal to their
adjusted invested capital plus an amount equal to the greater of
an 8.5% cumulative, non-compounded annual return on the average
after-credit invested capital or a 6% cumulative, non-compounded
annual return on average adjusted invested capital, less amounts
previously distributed. Thereafter, after receipt by the General
Partner or its affiliates of any accrued but unpaid real estate
brokerage commissions, the balance will be distributed 15% to the
General Partner and 85% to the limited partners.
3. Allocation of Net Income and Net Losses from Operations
Net income and net loss (as defined) will be allocated 99% to the
limited partners and 1% to the General Partner with certain
exceptions as defined in the Agreement.
The Agreement provides that the fiscal year of the Partnership
will be the calendar year and that the partnership shall continue
until December 31, 2037, unless sooner terminated upon the
occurrence of certain events.
NOTE D - ACQUISITIONS
The Partnership acquired two properties and a general partnership
interest in a partnership, which acquired a property in December
1987, as discussed below.
The Partnership purchased a four-story building located in
Pennsylvania for an acquisition and rehabilitation price of
$1,325,000.
The Partnership purchased an 89-room hotel located in Nebraska.
The acquisition and rehabilitation price of this property was
$9,500,000. This property was foreclosed effective as of January
1999.
The Partnership was admitted, with a 95% general partner
interest, to a Pennsylvania limited partnership, which owned a
building located in Louisiana consisting of 105 residential
apartment units and 6,900 square feet of commercial space, for a
cash contribution of $3,450,000. This property was sold in
October 1996.
NOTE E- DEBT OBLIGATIONS
Debt obligations consist of the
following:
December 31,
2001 2000
---- ----
Note payable, interest accrues at 14% and $459,699 $429,645
is payable at 10%; principal due October -------- --------
1, 2002.
Annual principal payments of debt obligations are as follows:
Year ending December 31,
2001 $ 0
2002 459,699
2003 0
2004 0
2005 0
--------
$459,699
========
NOTE F - TRANSACTIONS WITH RELATED PARTIES
Included in Accounts Payable - Related Parties was $33,656 at
December 31, 2001 and 2000 owed to the co-general partner in the
partnership referred to in Note D, for amounts owed in connection
with the sale of such partnership's property.
NOTE G - EXTRAORDINARY GAIN
Effective as of January 1999, the Redick Plaza Hotel was
foreclosed by the second mortgage lender, with the consent of the
first mortgage lender, by recordation of deed in lieu of
foreclosure. As a result, the Registrant realized an
extraordinary gain on forgiveness of indebtedness in the amount
of $3,994,755, which is the difference between the debt of the
hotel and the net book value of its assets.
NOTE H - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting
("book") purposes and for income tax ("tax") purposes. A
reconciliation of the results of operations follows:
For the Years Ended December 31,
2001 2000 1999
---- ---- ----
Net income (loss) - book ($ 135,310)($ 132,797) $3,630,276
Excess of book over tax
depreciation 9,130 4,609 6,033
Minority interest - tax only 0 0 (17,168)
Other 2,333 0 0
Extraordinary gain on debt
extinguishment 0 0 (946,522)
---------- ---------- ----------
Net income (loss) - tax ($ 123,847)($ 128,188) $2,672,619
========== ========== ==========
Partners' equity - book $ 311,696 $ 447,007 $ 579,804
Costs of issuance 1,419,240 1,419,240 1,419,240
Cumulative book over tax loss 988,648 977,184 972,575
Facade easement donation
(tax only) (612,750) (612,750) (612,750)
---------- ---------- ----------
Partners' equity - tax $2,106,834 $2,230,681 $2,358,869
========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
Cost
Capitalized
Initial Cost Subsequent
to Partnership to
Acquisition
Buildings
and Date Date
Encum- Improve- Improve- of Acquir-
Description brances Land ments ments Constr. ed
- ----------- ------- ---- --------- -------- ------ -------
(a) (e) (a)
21 unit
condominium
Complex in $459,699 $61,046 $1,461,413 $ 8,813 1987 12/31/87
Red Hill, PA
Personal
property
located in
New Orleans,
LA 0 0 0 67,312 1988 12/30/87
-------- ------- ---------- -------
TOTAL $459,699 $61,046 $1,461,413 $76,125
======== ======= ========== =======
Gross Amount at which Carried
at December 31, 2001
Buildings
and
Improve- Accumulated
Description Land ments Total Depreciation
- ----------- ---- --------- ----- ------------
(a) (b)(c) (c)(d)
21 unit
condominium
complex in Red
Hill, PA $61,046 $1,470,226 $1,531,272 $828,871
Personal
property located
in New Orleans,
LA 0 67,312 67,312 0
------- ---------- ---------- --------
TOTAL $61,046 $1,537,538 $1,598,584 $828,871
======= ========== ========== ========
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2001
(A) All properties are certified historic structures as defined
in the Internal Revenue Code of
1986, or are eligible for designation as such. The "date of
construction" refers to the period in which such properties
were rehabilitated.
(B) The cost of real estate owned at December 31, 2001, for
Federal income tax purposes was approximately $1,469,408.
The depreciable basis of buildings and improvements was
reduced for Federal income tax purposes by 50% of the
historic rehabilitation credit obtained.
(C) Reconciliation of land, buildings and improvements:
2001 2000 1999
---- ---- ----
Balance at beginning of year $1,595,794 $1,593,340 $11,791,970
Additions during the year:
Improvements 2,790 2,453 1,420
Deductions during the year:
Foreclosure of property 0 0 (10,200,050)
---------- ---------- -----------
Balance at end of year $1,598,854 $1,595,793 $ 1,593,340
========== ========== ===========
Reconciliation of accumulated depreciation:
Balance at beginning of year $ 769,734 $ 711,121 $ 5,752,945
Depreciation expense for the year 59,137 58,613 76,892
Deductions during the year 0 0 (5,118,716)
---------- ---------- -----------
Balance at end of year $ 828,871 $ 769,734 $ 711,121
========== ========== ===========
(D) See Note B to the consolidated financial statements for
depreciation method and lives.
(E) See Note E to the consolidated financial statements for
further information.
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 V (DoHA-V), a Pennsylvania general partnership. The
partners of DoHA-V are as follows:
Name Age Position Term of Office Period Served
- ---- --- -------- -------------- -------------
SWDHA, Inc. -- Partner in DoHA-V No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-V No fixed term Since May 1997
For further description of DoHA-V, 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 engaged by the Registrant.
d. Family Relationships. There is no family
relationship between or among the executive officers and/or any
person nominated or chosen by Registrant to become an executive
officer.
e. Business Experience. DoHA-V is a general
partnership formed in 1988. The General Partner is responsible
for management and control of Registrant's affairs and will have
general responsibility and authority in conducting its
operations. The General Partner may retain its affiliates to
manage certain of the Properties.
On May 13, 1997, SWDHA, Inc. replaced Gerald
Katzoff and EPK, Inc. replaced DHP, Inc. as partners of DoHA-V.
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. EPK, Inc. is an affiliate of
DoHA-V.
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., a
subsidiary of D, LTD, 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 served as
Assistant Secretary and Director of both D, LTD and DHP, Inc.
since January 27, 1993.
Item 11. Executive Compensation
a. Cash Compensation - During 2001, Registrant paid
no cash compensation to DoHA-V, 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 DoHA-V, 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 DoHA-V, 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.
Neither the general partner of the registrant, nor its partners
own any units.
Security Ownership of Management - None.
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
a. Pursuant to Registrant's Amended and Restated
Agreement of Limited Partnership, DoHA-V is entitled to 10% of
Registrant's distributable cash from operations in each year.
There was no such share allocable to DoHA-V for fiscal years 1999
through 2001.
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 V
Item 14.
(A)Exhibits, Financial Statement Schedules and Reports
on Form 8K.
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.
(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.
DIVERSIFIED HISTORIC INVESTORS
Date: June 2, 2003 By: Dover Historic Advisors V,
------------ 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 Registrant and in the capacities and on the
dates indicated.
Signature Capacity Date
DOVER HISTORIC ADVISORS V General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer June 2, 2003
---------------------- ------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi June 2, 2003
---------------------- ------------
MICHELE F. RUDOI,
Assistant Secretary