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, 2002
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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. [X]
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, 2002, 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.
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.
As of December 31, 2002, Registrant owned one property,
located in Pennsylvania. The property contains 21 apartment units.
As of December 31, 2002, 16 of the apartment units were under lease at
monthly rental rates ranging from $485 to $695. 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 $482,328 at December 31, 2002). The proceeds
from the mortgage were utilized to satisfy certain outstanding
liabilities of the Registrant. The note matured on October 1, 2002, at
which time it was declared in default by the lender.
The property is managed by BCMI. As of December 31,
2002, 16 apartment units were under lease (76%) at monthly rental
rates ranging from $485 to $695. All leases are renewable, one-year
leases. The occupancy as of year end for the previous four years was
85% for 2001, 85% for 2000, 86% for 1999, and 76% for 1998. The
monthly rental range has been approximately the same since 1998. For
federal income tax purposes, the land and the building have a basis of
$1,533,322, and the building is depreciated using the straight-line
method with a useful life of 27.5 years. The annual real estate taxes
are $15,861 based on an assessed value of $803,520 taxed at a rate of
$20.11 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.
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.
Item 3. Legal Proceedings
To the best of its knowledge, as of December 31, 2002,
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 84 units were sold or exchanged of
record in 2002.
b. As of December 31, 2002, there were 1,354 record
holders of Units.
c. Registrant did not declare any cash dividends in 2002
or 2001.
Item 6. Selected Financial Data
The following selected financial data are for the five years
ended December 31, 2002. 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.
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Rental income $134,963 $133,688 $ 133,925 $ 110,807 $ 121,383
Hotel income 0 0 0 18,181 1,131,690
Interest income 1,426 5,478 305 2,746 2,295
Net (loss) income (132,943) (135,310) (132,797) 3,630,276 (2,777,858)
Net (loss) income
per Unit (11.81) (12.02) (11.80) 322.56 (246.82)
Total assets
(net of
depreciation and
amortization) 852,789 954,952 1,065,966 1,179,580 6,764,832
Debt obligations 482,328 459,699 429,645 417,399 7,566,974
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(1) Liquidity
As of December 31, 2002, Registrant had cash of $4,623.
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, 2002, Registrant had restricted cash
of $124,401 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.
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 2002, Registrant incurred a net loss of $132,943
($11.81 per limited partnership unit) compared to a loss of $135,310
($12.02 per limited partnership unit) in 2001, and a net loss of
$132,797 ($11.80 per limited partnership unit) in 2000.
Rental income was $127,463 in 2002, $133,688 in 2001,
and $133,925 in 2000. The increase in rental income from 2001 to 2002
is due to a decrease in average occupancy (86% to 82%). Rental income
has remained approximately the same from 2000 to 2001 due to the
consistency of average rental rates and average occupancy.
Other income of $7,500 recognized in 2002 was mainly
due to the return of real estate taxes from previous periods due to a
successful tax appeal.
Rental operations expense was $91,398 in 2002, $87,042
in 2001, and $83,724 in 2000. The increase in rental operations
expense from 2001 to 2002 is due to an increase in maintenance expense
and insurance expense, partially offset by a decrease in leasing
commission expense. The increase in maintenance expense is due to an
increase in apartment painting and maintenance. The increase in
insurance expense is due to insurance market conditions. The decrease
in leasing commission expense is due to a decrease in the turnover of
apartment units. The increase from 2000 to 2001 is due to an increase
in leasing commission expense, partially offset by a decrease in
maintenance expense. The increase in leasing 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.
Interest expense was $66,829 in 2002, $63,854 in 2001,
and $60,246 in 2000. The increase in interest expense from 2000 to
2002 is due to the increase in the principal balance upon which the
interest is calculated.
Depreciation and amortization expense was $107,903 in
2002, $123,580 in 2001, and $123,057 in 2000. The decrease to 2002
from 2001 is due to a decrease in amortization expense. A deferred
expense incurred in a prior year became fully amortized during 2002.
During the year, a net loss of approximately $87,000
was incurred at the Registrant's remaining property compared to net
loss of approximately $72,000 in 2001, and a loss of $71,000 in 2000.
A discussion of property operations/activities follows.
In 2002, Registrant incurred a net loss of $87,000 at
the Lofts at Red Hill including $62,000 of depreciation and
amortization expense compared to a net loss of $72,000 including
$62,000 of depreciation and amortization expense in 2001, and a net
loss of $71,000 including $61,000 of depreciation and amortization
expense in 2000. The increase in net loss from 2001 to 2002 is due to
a decrease in rental income, combined with an increase in rental
operations expense, interest expense and bad debt expense, partially
offset by an increase in other income. The decrease in rental income
is due to a decrease in average occupancy (86% to 82%). The increase
in rental operations expense is due to an increase in maintenance
expense, partially offset by a decrease in leasing commission expense.
The increase in maintenance expense is due to an increase in apartment
painting and maintenance and the decrease in leasing commission
expense is due to a decrease in the turnover of apartment units. The
increase in interest expense is due to an increase in the principal
balance upon which the interest is calculated. The bad debt expense is
due to the write off of tenant accounts receivable that were deemed
uncollectible. 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 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.
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 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.
Item 9A. 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.
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, 2002 and 2001 and the related
statements of operations and changes in partners' equity and cash
flows for the years ended December 31, 2002, 2001 and 2000. 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, 2002 and 2001,
and the results of operations and cash flows for the years ended
December 31, 2002, 2001 and 2000 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
May 6, 2003
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, 2002 and 2001 11
Consolidated Statements of Operations for the Years
Ended December 31, 2002, 2001, and 2000 12
Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 2002, 2001, and 2000 13
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2002, 2001, and 2000 14
Notes to consolidated financial statements 15-19
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciaton 21
Notes to Schedule XI 22
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, 2002 and 2001
Assets
2002 2001
---- ----
Rental properties at cost:
Land $ 61,046 $ 61,046
Buildings and improvements 1,445,431 1,445,431
Furniture and fixtures 94,975 92,107
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1,601,452 1,598,584
Less - accumulated depreciation (888,440) (828,871)
---------- ----------
713,012 769,713
Cash and cash equivalents 4,623 4,974
Restricted cash 124,401 118,001
Accounts and notes receivable 10,753 13,930
Other assets (net of amortization
of $337,696 and $289,362) 0 48,334
---------- ----------
Total $ 852,789 $ 954,952
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 482,328 $ 459,699
Accounts payable:
Trade 135,357 127,132
Related parties 33,656 33,656
Other liabilities 13,714 13,564
Tenant security deposits 8,980 9,205
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Total liabilities 674,035 643,256
Partners' equity 178,754 311,696
---------- ----------
Total $ 852,789 $ 954,952
========== ==========
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, 2002, 2001 and 2000
2002 2001 2000
---- ---- ----
Revenues:
Rental income $127,463 $133,688 $133,925
Interest income 1,426 5,478 305
Other income 7,500 0 0
-------- -------- --------
Total revenues 136,389 139,166 134,230
-------- -------- --------
Costs and expenses:
Rental operations 91,398 87,042 83,724
Interest 66,829 63,854 60,246
Depreciation and amortization 107,903 123,580 123,057
Bad debt expense 3,202 0 0
-------- -------- --------
Total costs and expenses 269,332 274,476 267,027
======== ======== ========
Net loss ($132,943) ($135,310) ($132,797)
======== ======== ========
Net loss per limited
partnership unit ($ 11.81) ($ 12.02) ($ 11.80)
======== ======== ========
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, 2002, 2001 and 2000
Dover
Historic Limited
Advisors Partners
V (1) (2) Total
-------- -------- -----
Percentage participation in
profit or loss 1% 99% 100%
== === ====
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
Net loss (1,329) (131,614) (132,943)
-------- -------- --------
Balance at December 31, 2002 ($167,365) $346,119 $178,754
======== ======== ========
(1) General Partner.
(2) 11,142 limited partnership units outstanding at
December 31, 2002, 2001, and 2000.
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, 2002, 2001 and 2000
2002 2001 2000
---- ---- ----
Cash flows from operating activities:
Net loss ($132,943) ($135,310) ($132,797)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 107,903 123,580 123,057
Changes in assets and liabilities:
(Increase) decrease in restricted
cash (6,400) (5,371) 3,409
Decrease (increase) in
accounts and notes receivable 3,177 (6,977) (6,804)
Increase in accounts payable - trade 8,225 11,332 4,276
(Decrease) increase in accounts
payable-taxes 0 (17,332) 3,639
Increase (decrease) in
accrued liabilities 149 753 (1,350)
(Decrease) increase in
tenant security deposits (223) (510) 371
-------- -------- --------
Net cash used in
operating activities (20,112) (29,835) (6,199)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (2,868) (2,790) (2,453)
-------- -------- --------
Net cash used in investing
activities (2,868) (2,790) (2,453)
-------- -------- --------
Cash flows from financing activities:
Proceeds from debt financings 22,629 30,054 12,246
-------- -------- --------
Net cash provided by
financing activities 22,629 30,054 12,246
-------- -------- --------
(Decrease) increase in cash and
cash equivalents (351) (2,571) 3,594
Cash and cash equivalents at
beginning of year 4,974 7,545 3,951
-------- -------- --------
Cash and cash equivalents at end
of year $ 4,623 $ 4,974 $ 7,545
======== ======== ========
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 statements.
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
2002, 2001, and 2000).
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. This property was sold in September 2003.
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
December 31
2002 2001
---- ----
Debt obligations consist of the following:
Note payable, interest accrues at 14% and
is payable at 10%; matured on October 1,
2002 and declared in default by the lender $482,328 $459,699
-------- --------
NOTE F - TRANSACTIONS WITH RELATED PARTIES
Included in Accounts Payable - Related Parties was $33,656 at December
31, 2002 and 2001 owed to the co-general partner in the partnership
referred to in Note D, for amounts owed in connection with the sale of
such partnership's property.
NOTE G - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting ("book")
purposes and for income tax ("tax") purposes. A reconciliation of the
results of operations follows:
For the Years Ended December 31,
2002 2001 2000
---- ---- ----
Net loss - book ($ 132,943)($ 135,310)($ 132,797)
Excess of book over tax depreciation 9,080 9,130 4,609
Other 0 2,333 0
---------- ---------- ----------
Net loss - tax ($ 123,863)($ 123,847)($ 128,188)
========== ========== ==========
Partners' equity - book $ 178,753 $ 311,696 $ 447,007
Costs of issuance 1,419,240 1,419,240 1,419,240
Cumulative book over tax loss 997,728 988,648 977,184
Facade easement donation
(tax only) (612,750) (612,750) (612,750)
---------- ---------- ----------
Partners' equity - tax $1,982,971 $2,106,834 $2,230,681
========== ========== ==========
NOTE H - SUBSEQUENT EVENTS
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 Partnership.
No funds remained for distribution to unit holders. The partnership
liquidated thereafter.
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002
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 $482,328 $61,046 $1,461,413 $11,681 1987 12/31/87
Red Hill, PA
Personal
property
located in
New Orleans,
LA 0 0 0 67,312 1988 12/30/87
-------- ------- ---------- -------
TOTAL $459,328 $61,046 $1,461,413 $78,993
======== ======= ========== =======
Gross Amount at which Carried
at December 31, 2002
Buildings
and
Improve- Accumulated
Description Land ments Total Depreciation
- ----------- ---- --------- ----- ------------
(a) (b)(c) (c)(d)
21 unit
condominium
complex in Red
Hill, PA $61,046 $1,473,094 $1,534,140 $888,440
Personal
property located
in New Orleans,
LA 0 67,312 67,312 0
------- ---------- ---------- --------
TOTAL $61,046 $1,540,406 $1,601,452 $888,440
======= ========== ========== ========
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2002
(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, 2002, for Federal
income tax purposes was approximately $1,533,322. 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:
2002 2001 2000
---- ---- ----
Balance at beginning of year $1,598,584 $1,595,794 $1,593,340
Additions during the year:
Improvements 2,868 2,790 2,454
---------- ---------- ----------
Balance at end of year $1,601,452 $1,598,584 $1,595,794
========== ========== ==========
Reconciliation of accumulated depreciation:
Balance at beginning of year $ 828,871 $ 769,734 $ 711,121
Depreciation expense for
the year 59,569 59,137 58,613
---------- ---------- ----------
Balance at end of year $ 888,440 $ 828,871 $ 769,734
========== ========== ==========
(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 45) 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 37) 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 2002, 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 2002, 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 2002 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 2000 through 2002.
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 persons, 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, 2002 and 2001.
b. Consolidated Statements of Operations for
the Years Ended December 31, 2002, 2001 and 2000.
c. Consolidated Statements of Changes in
Partners' Equity for the Years Ended December 31,
2002, 2001 and 2000.
d. Consolidated Statements of Cash Flows for
the Years Ended December 31, 2002, 2001 and 2000.
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, 2002.
(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: January 20, 2004 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 January 20, 2004
---------------------- ----------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi January 20, 2004
---------------------- ----------------
MICHELE F. RUDOI,
Assistant Secretary
Exhibit 31
CERTIFICATION
I, Spencer Wertheimer, certify that:
1. I have reviewed this annual report on Form 10-K for the period
ended December 31, 2002 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 20, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer)
of the registrant's
managing partner,
EPK, Inc.
Date: January 20, 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 Annual Report of Diversified Historic
Investors V on Form 10-K for the period ended December 31, 2002 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 20, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer)
of the registrant's
managing partner,
EPK, Inc.
Date: January 20, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: Treasurer (principal
financial officer) of
the registrant's
managing partner, EPK, Inc.