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 March 31, 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 33-19811
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DIVERSIFIED HISTORIC INVESTORS VI
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2492210
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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
------ ------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
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Assets
March 31, 2002 December 31, 2001
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(Unaudited)
Rental properties, at cost:
Land $ 950,238 $ 950,238
Buildings and improvements 27,280,952 27,280,952
Furniture and fixtures 970,440 970,440
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29,201,630 29,201,630
Less - accumulated depreciation (14,581,535) (14,365,627)
----------- -----------
14,620,095 14,836,003
Cash and cash equivalents 58,483 38,973
Restricted cash 283,676 305,995
Accounts and notes receivable 50,978 54,382
Investment in affiliate (59,113) (59,113)
Other assets (net of amortization
of $837,248 and $819,993) 347,938 394,825
----------- -----------
Total $15,302,057 $15,571,065
=========== ===========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $16,553,730 $16,616,789
Accounts payable:
Trade 1,412,805 1,410,766
Taxes 21,780 21,780
Related parties 556,829 493,876
Other 37,659 28,717
Interest payable 2,074,591 2,022,602
Advance 53,287 35,720
Tenant security deposits 131,533 134,443
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Total liabilities 20,842,214 20,764,693
Partners' deficit (5,540,157) (5,193,628)
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Total $15,302,057 $15,571,065
=========== ===========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three months ended
March 31,
2002 2001
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Revenues:
Rental income $603,836 $609,240
Interest income 673 1,719
Other income 3,279 0
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Total revenues 607,788 610,959
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Costs and expenses:
Rental operations 447,061 375,875
Bad debt 9,197 0
Interest 264,896 250,841
Depreciation and amortization 233,162 169,762
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Total costs and expenses 954,316 796,478
Loss before equity in affiliate (346,528) (185,519)
Equity in net loss of affiliate 0 (5,099)
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Net loss ($346,528) ($190,618)
======== ========
Net loss per limited
partnership unit:
Loss before equity in
affiliate and
extraordinary loss ($ 13.47) ($ 7.21)
Equity in net loss of
affiliate 0.00 (0.20)
-------- --------
Net loss ($ 13.47) ($ 7.41)
========= ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Three months ended
March 31,
2002 2001
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Cash flows from operating activities:
Net loss ($346,528) ($190,618)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 233,162 169,762
Equity in loss of affiliate 0 5,099
Changes in assets and liabilities:
Decrease in restricted cash 22,318 55,068
Decrease in other assets 29,633 15,192
Decrease in accounts receivable 3,404 0
Increase in accounts payable - trade 2,039 13,980
Decrease in accounts payable - taxes 0 (5,520)
Increase in accounts payable -
related parties 62,952 0
Increase in accounts payable - other 8,943 11,346
Increase in interest payable 51,989 27,528
(Decrease) increase in tenant
security deposits (2,909) 2,560
Increase in advances 17,566 0
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Net cash provided by
operating activities 82,569 104,397
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Cash flows from investing activities:
Capital expenditures 0 (2,280)
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Net cash used in investing activities 0 (2,280)
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Cash flows from financing activities:
Principal payments (63,059) (85,672)
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Net cash used in financing activities (63,059) (85,672)
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Increase in cash and cash equivalents 19,510 16,445
Cash and cash equivalents at
beginning of period 38,973 46,215
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Cash and cash equivalents at end
of period $ 58,483 $ 62,660
======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors VI (the "Registrant") and related notes 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 in Form 10-K of the
Registrant, and notes thereto, 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
Strehlow Terrace Apartments was foreclosed by the Department of
Housing and Urban Development, the guarantor of the first mortgage, on
April 30, 2002.
On June 30, 2002, the Registrant sold its investment in Saunders
Apartments for $25,000. The proceeds of the sale were used to pay the
accrued expenses of the Registrant.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of March 31, 2001, Registrant had cash of $58,483.
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
various lenders in order to remain current on all obligations. The
Registrant is not aware of any additional sources of liquidity.
As of March 31, 2001, Registrant had restricted cash of
$283,676 consisting primarily of funds held as security deposits,
replacement reserves, and escrows for taxes and insurance. As a
consequence of the restrictions as to use, Registrant does not deem
these funds to be a source of liquidity.
Strehlow Terrace Apartments was foreclosed by the
Department of Housing and Urban Development, the guarantor of the
first mortgage, on April 30, 2002.
On June 30, 2002, the Registrant sold its investment in
Saunders Apartments for $25,000. The proceeds of the sale were used
to pay the accrued expenses of the Registrant.
In recent years the Registrant has realized significant
losses, including the foreclosure of two properties. At the present
time, the remaining properties are able to pay their operating
expenses and debt service; however, at two of the properties, the
mortgages are cash-flow mortgages, requiring all available cash after
payment of operating expenses to be paid to the first mortgage holder.
Therefore, it is unlikely that any cash will be available to the
Registrant to pay its general and administrative expenses.
It is the Registrant's intention to continue to hold the
properties until they can no longer meet the debt service requirements
and the properties are foreclosed, or the market value of the
properties increases to a point where they can be sold at a price
which is sufficient to repay the underlying indebtedness (principal
plus accrued interest).
(2) Capital Resources
Any capital expenditures needed are generally replacement
items and are funded out of cash from operations or replacement
reserves, if any. 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 first quarter of 2002, Registrant incurred a
net loss of $346,528 ($13.47 per limited partnership unit) compared to
a net loss of $190,618 ($7.41 per limited partnership unit) for the
same period in 2001.
Rental income decreased $5,404 from $609,240 in the first
quarter of 2001 to $603,836 in the same period in 2002. The decrease
in the first quarter of 2001 from the same period in 2002 is due to a
decrease in rental income at Mater Dolorosa, Roseland, and Strehlow
Terrace, partially offset by an increase at Firehouse Square. The
decrease in rental income at Mater Dolorosa is due to a decrease in
average occupancy (92% to 88%). The increase at Firehouse Square is
due to an increase in average rental rates.
Rental operations expense increased by $71,186 from
$375,875 in the first quarter of 2001 to $447,061 in the same period
in 2002. The increase in expense from the first quarter of 2001 to
the same period of 2002 is due to an increase in insurance expense at
Firehouse Square and Mater Dolorosa, an increase utilities,
maintenance, and wages and salaries expenses at Strehlow Terrace and
an increase in insurance and maintenance expense at Canal House,
partially offset by a decrease in management fees and wages and
salaries expense at Roseland. The increase in insurance expense at
Firehouse Square, Canal House and Mater Dolorosa is due to insurance
market conditions. The increase in utilities expense at Strehlow
Terrace is due to increases in electric, water and sewer charges; the
increase in maintenance expense is due to an increase in plumbing and
painting supplies expense and wages and salaries increased due to an
increase in maintenance and painting labors. The increase in
maintenance expense at Canal House is due to an increase in
maintenance service and painting expense. The decrease in wages and
salaries expense at Roseland is due to a decrease in resident managers
salaries.
Interest expense increased $14,055 from $250,841 in the
first quarter of 2001 to $264,896 in the same period in 2002. The
increase in interest expense is due to the timing of expense
recognition at Firehouse.
Losses incurred during the quarter at the Registrant's
properties were approximately $316,000 compared to a loss of
approximately $239,000 for the same period in 2001.
In the first quarter of 2002, Registrant incurred a loss
of $85,000 at Firehouse Square including $69,000 of depreciation and
amortization expense, compared to a loss of $58,000 including $65,000
of depreciation and amortization expense in the first quarter of 2001.
The increase in the loss from the first quarter of 2001 to the same
period in 2002 is due to an increase in interest and insurance
expenses, partially offset by an increase in rental income. The
increase in interest expense is due to the timing of expense
recognition The increase in insurance expense is due to insurance
market conditions. The increase in rental income is due to an increase
in average rental rates.
In the first quarter of 2002, Registrant incurred a loss
of $17,000 at Mater Dolorosa including $32,000 of depreciation and
amortization expense, compared to a loss of $12,000 including $32,000
of depreciation and amortization expense in the first quarter of 2001.
The increase in loss from the first quarter of 2001 to the same period
in 2002 is due to a decrease in rental income and an increase in
insurance expense. The decrease in rental income is due to a decrease
in average occupancy (92% to 88%). The increase in insurance expense
is due to insurance market conditions.
In the first quarter of 2002, Registrant incurred a loss
of $22,000 at Roseland including $17,000 of depreciation expense,
compared to a loss of $22,000 including $17,000 of depreciation
expense in the first quarter of 2001. During the first quarter of
2002 compared to the same period in 2001 rental income decreased
offset by a decrease in management fees and wages and salaries
expenses. The decrease in wages and salaries expense is due to a
decrease in resident managers salaries.
In the first quarter of 2002, Registrant incurred a loss
of $15,000 at Strehlow Terrace, compared to income of $14,000 in the
first quarter of 2001. The decrease in income from the first quarter
of 2001 to the same period in 2002 is due to a decrease in rental
income and an increase in utilities, maintenance and wages and
salaries expenses. The increase in utilities expense is due to an
increase in electric, water and sewer charges. The increase in
maintenance expense is due to an increase in plumbing and painting
supplies expenses. The increase in wages and salaries expense is due
to an increase in maintenance and painting labor.
Strehlow Terrace Apartments was foreclosed by the
Department of Housing and Urban Development, the guarantor of the
first mortgage, on April 30, 2002.
In the first quarter of 2002, Registrant incurred a loss
of $177,000 at Canal House including $100,000 of depreciation and
amortization expense, compared to a loss of $161,000 including
$113,000 of depreciation and amortization expense in the first quarter
of 2001. The increase in the loss from the first quarter of 2001 to
the same period in 2002 is due to an increase in insurance and
maintenance expenses. The increase in insurance expense is due to
insurance market conditions. The increase maintenance expense is due
to an increase in maintenance service and painting expense.
The Registrant owns a minority interest in Saunders
Apartments which it accounts for on the equity method. The Registrant
does not include the assets or liabilities of Saunders Apartments in
its consolidated financial statements. The following information is
provided for the property. In the first quarter of 2002, Registrant
incurred no loss at Saunders Apartments compared to a loss of $5,000
in the first quarter 2001.
On June 30, 2002, the Registrant sold its investment in
Saunders Apartments for $25,000. The proceeds of the sale were used
to pay the accrued expenses of the Registrant.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
All of our assets and liabilities are denominated in U.S.
dollars, and as a result, we do not have exposure to currency exchange
risks.
We do not engage in any interest rate, foreign currency
exchange rate or commodity price-hedging transactions, and as a
result, we do not have exposure to derivatives risk.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not party to,
nor is any of 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.
21 Subsidiaries of the Registrant
are listed in Item 2.
Properties on Form 10-K,
previously filed and
incorporated herein by
reference.
31 General Partners Opinion
Certification
32 Certification Pursuant to 18
U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
ended March 31, 2002.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DIVERSIFIED HISTORIC INVESTORS VI
By: Dover Historic Advisors VI, its
general partner
By: EPK, Inc., managing partner
Date: August 30, 2004 By: /s/ Spencer Wertheimer
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SPENCER WERTHEIMER
President (principal executive
officer, principal financial
officer)
Exhibit 31
CERTIFICATION
I, Spencer Wertheimer, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
quarterly period ended March 31, 2002, of Diversified Historic
Investors VI;
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: August 30, 2004 /s/ Spencer Wertheimer
--------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer,
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 VI on Form 10-Q for the quarterly period ended March 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: August 30, 2004 /s/ Spencer Wertheimer
--------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer,
principal financial
officer) of the
registrant's managing
partner, EPK, Inc.