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 June 30, 2003
----------------------------------
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
-----------------------------------------
DIVERSIFIED HISTORIC INVESTORS V
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2479468
- -------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1521 Locust Street, Philadelphia, PA 19102
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
--------------
N/A
- -----------------------------------------------------------------
(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
------ ------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30, 2003 (unaudited) and
December 31, 2002
Consolidated Statements of Operations - For the Three Months
and Six Months Ended June 30, 2003 and 2002 (unaudited)
Consolidated Statements of Cash Flows - For the Six Months
Ended June 30, 2003 and 2002 (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 June 30, 2003, Registrant had cash of $7,983.
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 June 30, 2003, Registrant had restricted cash of
$125,980 consisting primarily of funds held as security deposits and
escrows for 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 second quarter of 2003, the Registrant
incurred a net loss of $22,010 ($1.96 per limited partnership unit)
compared to a net loss of $38,445 ($3.42 per limited partnership unit)
for the same period in 2002. For the first six months of 2003, the
Registrant incurred a loss of $44,029 ($3.91 per limited partnership
unit) compared to net loss of $73,359 ($6.52 per limited partnership
unit) for the same period in 2002.
Rental income increased $1,488 from $33,205 in the
second quarter of 2002 to $34,693 in the same period of 2003 and
decreased $1,469 from $65,697 in the first six months of 2002 to
$64,228 in the same period of 2003. The increase in rental income from
the second quarter of 2002, compared to the same period in 2003, is
due to an increase in average rental rates. The decrease in rental
income from the first six months of 2002, compared to the same period
in 2003 is due to a decrease in average occupancy (83% to 78%).
Rental operations expense decreased $1,844 from $21,560
in the second quarter of 2002 to $19,716 in the same period of 2003
and decreased $2,798 from $42,369 in the first six months of 2002 to
$39,571 in the same period of 2003. The decrease in rental operations
expense from both the second quarter and the first six months of 2002,
compared to the same periods in 2003, is due to a decrease in
miscellaneous operating expense and professional fees. The decrease in
miscellaneous operating expense is due to a decrease in bank service
charges, office expense, travel expense, and telephone and answering
service expense. The decrease in professional fees is due to one time
appraisal fees incurred in 2002.
Interest expense increased $5,628 from $16,558 in the
second quarter of 2002 to $22,186 in the same period of 2003, and
increased $6,430 from $32,695 for the first six months of 2002 to
$39,125 for the same period of 2003. The increase from both the second
quarter and the first six months of 2002, compared to the same periods
in 2003, is due an increase in principal balance on the mortgage upon
which the interest is calculated.
Depreciation and amortization expense decrease $15,721
from $30,651 in the second quarter of 2002 to $14,930 in the same
period of 2003 and decrease $789 from $30,651 in the first six months
of 2002 to $29,862 in the same period of 2003. The decrease from both
the second quarter and the first six months of 2002 to the same period
in 2003, is due to a decrease in amortization expense. A deferred
expense incurred in a prior year became fully amortized during 2002.
In the second quarter of 2003, Registrant incurred a
loss of approximately $22,000 at the Lofts at Red Hill, including
$15,000 of depreciation and amortization expense, compared to a loss
of $23,000 including $15,000 of depreciation expense in the second
quarter of 2002. The decrease in loss from the second quarter of
2002, compared to the same period in 2003 is due to an increase in
rental income and a decrease in rental operations expense, partially
offset by an increase in interest expense. The increase in rental
income is due to an increase in average rental rates. The decrease in
rental operations expense is due to a decrease in miscellaneous
operating expense and professional fees. The decrease in miscellaneous
operating expense is due to a decrease in bank service charges and
office expense. The decrease in professional fees is due to one time
appraisal fees incurred in 2002. The increase in interest expense is
due to an increase in principal balance on the mortgage upon which the
interest is calculated.
For the first six months of 2003, Registrant incurred a
loss of approximately $44,000 at the Lofts at Red Hill, including
$30,000 of depreciation and amortization expense, compared to a loss
of $43,000 including $30,000 of depreciation expense in the same
period in 2002. The increase in loss from the first six months of
2002, compared to the same period in 2003 is due to a decrease in
rental income, and an increase in interest expense, partially offset
by a decrease in rental operations expense. The decrease in rental
income for the first six months of 2003 is due to a decrease in
average occupancy (83% to 78%). The increase in interest expense is
due to an increase in principal balance on the mortgage upon which the
interest is calculated. The decrease in rental operations expense is
due to a decrease in miscellaneous operating expense and professional
fees. The decrease in miscellaneous operating expense is due to a
decrease in bank service charges, travel expense and telephone and
answering service expense. The decrease in professional fees is due
to one time appraisal fees incurred in 2002.
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
---------------------------
Assets
June 30, 2003 December 31, 2002
------------- -----------------
(Unaudited)
Rental properties, at cost:
Land $ 61,046 $ 61,046
Buildings and improvements 1,445,431 1,445,431
Furniture and fixtures 94,975 94,975
---------- ----------
1,601,452 1,601,452
Less - accumulated depreciation (918,302) (888,440)
---------- ----------
683,150 713,012
Cash and cash equivalents 7,983 4,623
Restricted cash 125,980 124,401
Accounts and notes receivable 12,557 10,753
---------- ----------
Total $ 829,670 $ 852,789
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 497,453 $ 482,329
Accounts payable:
Trade 137,567 135,357
Related parties 33,656 33,656
Accrued liabilities 16,799 13,714
Tenant security deposits 9,470 8,980
---------- ----------
Total liabilities 694,945 674,036
Partners' equity 134,725 178,753
---------- ----------
Total $ 829,670 $ 852,789
========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three months Six months
ended June 30, ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues:
Rental income $34,694 $33,205 $ 64,227 $ 65,697
Interest income 129 320 301 755
------- ------- -------- --------
Total revenues 34,823 33,525 64,528 66,452
------- ------- -------- --------
Costs and expenses:
Rental operations 19,716 21,560 39,571 42,368
Bad debt 0 3,202 0 3,202
Interest 22,186 16,557 39,124 32,695
Depreciation and
amortization 14,931 30,651 29,862 61,546
------- ------- -------- --------
Total costs and
expenses 56,833 71,970 108,557 139,811
------- ------- -------- --------
Net loss ($22,010) ($38,445) ($ 44,029)($ 73,359)
======= ======= ======== ========
Net loss per limited
partnership unit ($ 1.96) ($ 3.42) ($ 3.91)($ 6.52)
======= ======= ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Six months ended
June 30,
2003 2002
---- ----
Cash flows from operating activities:
Net loss ($44,029) ($73,359)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 29,862 61,546
Changes in assets and liabilities:
Increase in restricted cash (1,579) (6,247)
(Increase) decrease in accounts
receivable (1,803) 2,817
Increase in accounts payable - trade 2,210 3,986
Increase (decrease) in accrued
liabilities 3,085 (1,570)
Increase (decrease) in tenant
security deposits 490 (130)
------- -------
Net cash used in operating
activities: (11,764) (12,957)
------- -------
Cash flows from financing activities:
Proceeds from debt financings 15,124 12,495
------- -------
Net cash provided by financing
activities: 15,124 12,495
------- -------
Increase (decrease) in cash and cash
equivalents 3,360 (462)
Cash and cash equivalents at
beginning of period 4,623 4,974
------- -------
Cash and cash equivalents at end of
period $ 7,983 $ 4,512
======= =======
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, 2002.
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
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
--------------- --------
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 June 30, 2003.
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 21, 2004 DIVERSIFIED HISTORIC INVESTORS V
----------------
By: Dover Historic Advisors V,
General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
----------------------
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 June 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 21, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer) of the
registrant's managing
partner, EPK, Inc.
Date: January 21, 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 June 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 21, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer) of the
registrant's managing
partner, EPK, Inc.
Date: January 21, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: Treasurer (principal
financial officer) of the
registrant's managing
partner, EPK, Inc.