UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 33-15597
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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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N/A
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - September 30, 2002 (unaudited)
and December 31, 2001
Consolidated Statements of Operations - For the Three Months
and Nine Months Ended September 30, 2002 and 2001 (unaudited)
Consolidated Statements of Cash Flows - For the Nine Months
Ended September 30, 2002 and 2001 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of September 30, 2002, Registrant had cash of
$4,363. Such funds are expected to be used to pay liabilities and
general and administrative expenses of Registrant, and to fund cash
deficits of the properties. Cash generated from operations is used
primarily to fund operating expenses and debt service. If cash flow
proves to be insufficient, the Registrant will attempt to negotiate
loan modifications with the lender in order to remain current on all
obligations. The Registrant is not aware of any additional sources of
liquidity.
As of September 30, 2002, Registrant had restricted
cash of $121,532 consisting primarily of funds held as security
deposits escrows for real estate taxes. As a consequence of the
restrictions as to use, Registrant does not deem these funds to be a
source of liquidity.
On October 1, 2002, the mortgage note secured by the
Lofts at Red Hill matured and was declared in default by the lender.
On September 10, 2003, the Lofts at Red Hill was sold.
The net proceeds of the sale were used to pay the mortgage note
secured by the property and accrued expenses of the Registrant. No
funds remained for distribution to unit holders. The Registrant
liquidated thereafter.
(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 the third quarter of 2002, Registrant incurred a
net loss of $39,413 ($3.50 per limited partnership unit) compared to a
net loss of $45,720 ($4.06 per limited partnership unit) for the same
period in 2001. For the first nine months of 2002, Registrant
incurred a loss of $112,772 ($10.02 per limited partnership unit)
compared to a net loss of $105,148 ($9.34 per limited partnership
unit) for the same period in 2001.
Rental income decreased $2,001 from $32,575 in the third
quarter of 2001 to $30,574 in the same period of 2002 and decreased
$5,757 from $102,028 for the first nine months of 2001 to $96,271 for
the same period in 2002. The decrease in rental income from both the
third quarter and first nine months of 2001, compared to the same
periods in 2002, is due to a decrease in average occupancy (84% to 81%
and 85% to 82%, respectively)
Other income of $7,299 recognized in the third quarter of
2002 was due to the return of real estate taxes from prior periods due
to a successful tax appeal.
Rental operations expense decreased $347 from $30,041 in
the third quarter of 2001 to $29,694 in the same period in 2001. The
decrease in rental operations expense from the third quarter of 2001,
compared to the same period in 2002, is due to a decrease in
advertising expense and leasing commissions.
Rental operations expense increased $2,180 from $69,882
for the first nine months of 2001 to $72,062 for the same period in
2002. The increase in rental operations expense from the first nine
months of 2001, compared to the same period in 2002, is due to an
increase in apartment preparation expense and insurance expense. The
increase in apartment preparation expense is due to an increase in the
turnover of apartment units. The increase in insurance expense is due
to an increase in insurance premiums.
Interest expense increased $901 from $16,238 in the third
quarter of 2001 to $17,139 in the same period in 2002 and increased
$2,323 from $47,511 for the first nine months of 2001 to $49,834 for
the same period in 2002. The increase from both the third quarter and
the first nine months of 2001, compared to the same periods in 2002,
is due to an increase in the principal balance of the mortgage on
which the interest is calculated.
In the third quarter of 2002, Registrant incurred a loss
of approximately $24,000 at the Lofts at Red Hill, including $15,000
of depreciation and amortization expense, compared to a loss of
approximately $30,000 including $17,000 of depreciation expense in the
third quarter of 2001. The decrease in loss from the third quarter of
2001, compared to the same period in 2002, is due to an increase in
other income, partially offset by a decrease in rental income and a
decrease in rental operations expense. The increase in other income is
due to the return of real estate taxes from previous periods due to a
successful tax appeal, partially offset by a decrease in rental income
due to a decrease in average occupancy (84% to 81%). The decrease in
rental operations expense is due to a decrease in advertising expense
and leasing commissions.
In the first nine months of 2002, Registrant incurred a
loss of approximately $67,000 at the Lofts at Red Hill, including
$46,000 of depreciation expense compared to a loss of approximately
$60,000 including depreciation expense of $47,000 for the first nine
months of 2001. The increase in loss from the first nine months of
2001, compared to the same period in 2002, is due to a decrease in
rental income and interest income and an increase in rental operations
expense, partially offset by an increase in other income. The decrease
in rental income is due to a decrease in average occupancy (85% to
82%) and the decrease in interest income is due to a decrease in
interest rates. The increase in other income is due to the return of
real estate taxes from previous periods due to a successful tax
appeal. The increase in rental operations expense is due to an
increase in maintenance expense and insurance expense. The increase in
maintenance expense is due to an increase in apartment preparation
expense and the increase in insurance expense is due to an increase in
insurance premiums.
On October 1, 2002, the mortgage note secured by the Lofts
at Red Hill matured and was declared in default by the lender.
On September 10, 2003, the Lofts at Red Hill was sold.
The net proceeds of the sale were used to pay the mortgage note
secured by the property and accrued expenses of the Registrant. No
funds remained for distribution to unit holders. The Registrant
liquidated thereafter.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our
Securities Exchange Act of 1934 reports is recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms, and that such information is accumulated and
communicated to our management, including our managing partner's
principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures,
our management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and our management
necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible controls and procedures.
Under the supervision of our managing partner's principal
executive officer and principal financial officer we have carried out
an evaluation of the effectiveness of our adopted disclosure controls
and procedures as of the end of the period covered by this report.
Based upon that evaluation, our managing partner's president and
treasurer concluded that our disclosure controls and procedures are
effective.
There have been no significant changes in our internal
controls over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting during our most recent fiscal quarter.
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
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Assets
September 30, 2002 December 31, 2001
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(Unaudited)
Rental properties, at cost:
Land $ 61,046 $ 61,046
Buildings and improvements 1,445,431 1,445,431
Furniture and fixtures 92,107 92,107
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1,598,584 1,598,584
Less - accumulated depreciation (873,332) (828,871)
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725,252 769,713
Cash and cash equivalents 4,363 4,974
Restricted cash 121,532 118,001
Accounts and notes receivable 9,402 13,931
Other assets (net of amortization
of $337,221 and $289,363) 475 48,333
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Total $ 861,024 $ 954,952
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Liabilities and Partners' Equity
Liabilities:
Debt obligations 477,333 459,699
Accounts payable:
Trade 129,079 127,132
Related parties 33,656 33,656
Accrued liabilities 12,557 13,564
Tenant security deposits 9,475 9,205
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Total liabilities 662,100 643,256
Partners' equity 198,924 311,696
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Total $ 861,024 $ 954,952
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The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
Three months Nine months
ended September 30, ended September 30,
2002 2001 2002 2001
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Revenues:
Rental income $30,574 $32,574 $ 96,271 $102,028
Interest income 320 79 1,076 3,962
Other income 7,299 0 7,299 0
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Total revenues 38,193 32,653 104,646 105,990
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Costs and expenses:
Rental operations 29,694 30,040 72,062 69,882
Interest 17,139 16,238 49,834 47,511
Bad debt 0 0 3,202 0
Depreciation and
Amortization 30,773 32,095 92,320 93,745
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Total costs
and expenses 77,606 78,373 217,418 211,138
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Net loss ($39,413) ($45,720) ($112,772) ($105,148)
======= ======= ======== ========
Net loss per limited
partnership unit: ($ 3.50) ($ 4.06) ($ 10.02) ($ 9.34)
======= ======= ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
Nine months ended
September 30,
2002 2001
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Cash flows from operating activities:
Net loss ($112,772) ($105,148)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 92,320 93,745
Changes in assets and liabilities:
(Increase) decrease in restricted cash (3,530) 1,136
Decrease (increase) in accounts
receivable 4,528 (5,986)
Increase in accounts payable - trade 1,947 7,793
Decrease in accounts payable - taxes 0 (15,684)
(Decrease) increase in accrued
liabilities (1,008) 540
Increase (decrease) in tenant
security deposits 270 (485)
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Net cash used in operating activities: (18,245) (24,089)
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Cash flows from financing activities:
Proceeds from debt financings 17,634 25,711
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Net cash provided by financing
activities 17,634 25,711
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(Decrease) increase in cash and cash
equivalents (611) 1,622
Cash and cash equivalents at
beginning of period 4,974 7,545
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Cash and cash equivalents at end of
period $ 4,363 $ 9,167
======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors V (the "Registrant") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such
rules and regulations. The accompanying consolidated financial
statements and related notes should be read in conjunction with the
audited financial statements and notes thereto in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 2001.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
NOTE 2 - SUBSEQUENT EVENTS
On October 1, 2002, the mortgage note secured by the Lofts at Red Hill
matured and was declared in default by the lender.
The personal property in New Orleans, Louisiana was conveyed to the
owners of the building in which it is located in exchange for the
release of an escrow account, which was used to pay accrued expenses
of the partnership.
On September 10, 2003, the Lofts at Red Hill was sold. The net
proceeds of the sale were used to pay the mortgage note secured by the
property and accrued expenses of the Registrant.
No funds remained for distribution to unit holders. The Registrant
liquidated thereafter.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not a party
to, nor is its property the subject of, any pending material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter covered by
this report to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Document
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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 September 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: January 19, 2004 DIVERSIFIED HISTORIC INVESTORS V
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By: Dover Historic Advisors V,
General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
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SPENCER WERTHEIMER
President and Treasurer
Exhibit 31
CERTIFICATION
I, Spencer Wertheimer, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
quarterly period ended September 30, 2003 of Diversified Historic
Investors V;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) [Omission in accordance with SEC Release Nos. 33-
8238, 34-47986 and IC-26068 (June 5, 2003)] for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to me by others within those entities, particularly during
the period in which this report is being prepared;
(b) [Omitted in accordance with SEC Release Nos. 33-8238, 34-
47986 and IC-26068 (June 5, 2003)];
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. I have disclosed, based on my most recent evaluation of
internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: January 19, 2004 /s/ Spencer Wertheimer
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Name: Spencer Wertheimer
Title: President (principal
executive officer) of the
registrant's managing
partner, EPK, Inc.
Date: January 19, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: Treasurer (principal
financial officer) of the
registrant's managing
partner, EPK, Inc.
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Diversified Historic
Investors V on Form 10-Q for the quarterly period ended September 30,
2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Spencer Wertheimer, President and Treasurer
of the Company's managing partner, EPK, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: January 19, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer) of the
registrant's managing
partner, EPK, Inc.
Date: January 19, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: Treasurer (principal
financial officer) of the
registrant's managing
partner, EPK, Inc.