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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, 1999
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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
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Commission file number 33-26385
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DIVERSIFIED HISTORIC INVESTORS VII
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2539694
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1609 WALNUT STREET, PHILADELPHIA, PA 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: 17,839 Units
UNITS OF LIMITED PARTNERSHIP INTEREST
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Units held by non-affiliates of the Registrant:
Not Applicable*
* Securities not quoted in any trading market to Registrant's knowledge.
PART I
Item 1. Business
a. General Development of Business
Diversified Historic Investors VII
("Registrant") is a limited partnership formed
in 1988 under Pennsylvania law. As of December
31, 1999, Registrant had outstanding 17,839
units of limited partnership interest (the
"Units").
Registrant is presently in its
operating stage. It originally owned seven
properties or interests therein. Interests in
two properties have been lost through
foreclosure of the properties, and interests in
two others have been reduced substantially.
See Item 2. Properties, for a description of
the remaining properties. It currently owns
interests in five properties. For a discussion
of the operations of the Registrant, See Part
II, Item 7. Management's Discussion and
Analysis of Financial Condition and the Results
of Operations.
b. Financial Information about
Industry Segments
The Registrant operates in one
industry segment.
c. Narrative Description of 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"), or
which are eligible for designation as such, for
use as apartments, offices, hotels and
commercial spaces, or any combination thereof,
or low income housing eligible for the 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 partnerships in
which it has an interest, except for one
(Northern Liberties), have been rehabilitated
and certified as historic structures and have
received the related investment tax credit. In
addition, three properties (Flint Goodridge,
Kensington Tower and Robidoux) are low-income
housing structures qualifying for low income
housing tax credits.
Four of the Registrant's
properties are currently held for rental
operations, and are anticipated to continue to
be held for this purpose. Registrant's
remaining property has not been developed. At
such time as real property values begin to
increase, the Registrant will re-evaluate its
investment strategy regarding the properties.
As of December 31, 1999,
Registrant owned interests in five properties
located in Nebraska (one), Missouri (one),
Pennsylvania (one), and Louisiana (two). In
total, the properties in which the Registrant
has a controlling interest (Flint-Goodridge and
Robidoux) contain 153 apartment units. As of
December 31, 1999, 142 apartment units were
under lease at monthly rental rates ranging
from $210 to $580. For a further discussion of
the properties, see Item 2. Properties.
The Registrant is affected by and
subject to the general competitive conditions
of the residential real estate industry. Due
to the overbuilding that occurred in the
1980's, the competition for moderate-to-low
income residential tenants in the local markets
where the Registrant's properties are 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. In addition, rents
are fixed in relation to specified income
levels of the tenants. In each market (New
Orleans, Louisiana, Omaha, Nebraska, and St.
Joseph's, Missouri), there are several similar
historically-certified rehabilitated buildings
that are available to tenants who fall within
certain income restrictions. However, there is
no organization which holds a dominant position
in the residential housing in any of the
geographic areas in which Registrant's
properties are located.
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 December 31, 1999,
Registrant owned controlling interests in two
partnerships which each own one property and
minority interests in two additional
partnerships which each own one property. A
summary description of each property is given
below.
a. Flint-Goodridge Apartments -
consists of a 93 unit low income housing
facility at 2425 Louisiana Avenue in New
Orleans, Louisiana. In July 1989, Registrant
acquired a 90% interest in Flint-Goodridge
General Partnership ("FGGP"), a general
partnership which owns Flint-Goodridge
Apartments, for a cash contribution of
$2,808,000. Registrant subsequently
capitalized $574,000 in acquisition costs
related to the investment. FGGP acquired and
rehabilitated the buildings for $5,108,022
($100.99 per sf), including a mortgage note
payable of $2,427,000. The note bears interest
at 10% and both principal (based on a 30-year
amortization) and interest are payable monthly
until June 2020. The principal balance at
December 31, 1999 was $2,173,882. In addition,
FGGP entered into a 45-year ground lease for
the land on which the buildings are located for
a lump sum rent of $90,000 payable at the
inception of the lease.
The property is managed by a property
management firm which is an affiliate of the
Registrant's co-general partner in FGGP. As of
December 31, 1999, 83 units were under lease
(89%) with monthly rents ranging from $420 to
$580. All leases are renewable, one-year
leases. The occupancy rate was 91% for 1998,
95% for 1997, 92% for 1996 and 99% for 1995.
The monthly rental range has been approximately
the same since 1995. For tax purposes, this
property has a federal tax basis of $4,087,725
and is depreciated using the straight-line
method of depreciation with a useful life of
27.5 years. The annual real estate taxes are
$2,958 which is based on an assessed value of
$18,300 taxed at a rate of $161.64 per $1,000.
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.
b. Robidoux School Apartments -
consists of a 60 unit low income housing
facility at 201 South 10th Street in St.
Joseph, Missouri. In September 1989,
Registrant acquired a 99% general partnership
interest in Robidoux Redevelopment Joint
Venture ("RRJV"), a Missouri general
partnership which owns the property, for a cash
capital contribution of $2,400,000. Registrant
subsequently capitalized $446,000 in
acquisition costs relating to the investment.
The cost to acquire and rehabilitate the
property was $3,641,993 ($99.52 sf) including a
construction loan of $1,450,000, a Community
Development Block Grant ("CDBG") loan of
$74,000 (principal balance at December 31, 1999
of $5,167), and a CDBG grant of $38,500. A
portion of the construction loan was paid
through a line of credit extended by another
lender ($513,321 principal outstanding at
December 31, 1999) which bears interest at the
prime rate (8.5% and 8% at December 31, 1999
and 1998, respectively) and is due October
2008. This loan is personally guaranteed by an
affiliate of the Registrant's co-general
partner. On October 30, 1995, the balance of
the construction loan was repaid with two new
loans, one for $850,000 and the other for
$200,000. The first loan bears interest at 9%
with monthly principal and interest payments
based on a 30 year amortization, principal
balance due in October 2005. At December 31,
1999, there was $774,946 outstanding on the
loan. The second loan had an interest rate of
8.75% and was due in March 1996. It was repaid
by an advance in March 1996 from David E.
Slattery, an affiliate of the Registrant's co-
general partner. The advance will be repaid
out of available cash flow and is non-interest
bearing. The CDBG loan bears interest at 1%
and both principal and interest are payable
monthly until its maturity in September 2000.
The property is managed by an
independent property management firm. As of
December 31, 1999, 59 of the 60 apartment units
were under lease (98%), with monthly rents
ranging from $210 to $350. All leases are
renewable, one-year leases. The occupancy rate
was 95% for 1998, 99% for 1997, 98% for 1996
and 92% for 1995. The monthly rental range has
been approximately the same since 1995. For
tax purposes, this property has a federal tax
basis of $4,082,816 and is depreciated using
the straight-line method of depreciation with a
useful life of 27.5 years. The annual real
estate taxes are $758 which is based on an
assessed value of $8,450 taxed at a rate of
$89.70 per $1,000. 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.
c. The Bakery Apartments - consists
of 68 apartment units at 1111 South Peters
Street in New Orleans, Louisiana. In March
1991, the Registrant acquired a 16.83% general
partnership interest in The Bakery Apartments
General Partnership ("BAGP"), a Louisiana
general partnership which owns the property,
for a cash contribution of $300,000. Certain
affiliates of the Registrant simultaneously
acquired 82.17% of the general partnership
interests in BAGP for an aggregate cash
contribution of $1,400,000. BAGP subsequently
capitalized $242,040 in acquisition costs
relating to the investment. BAGP acquired and
rehabilitated the property for $5,029,000
($65.18 per sf). The rehabilitation of the
property was financed in part with two loans,
one for $3,135,000 and the other for $201,500
(principal balance of $189,371 at December 31,
1999). The first loan bore interest at 8.25%,
with monthly principal and interest payments
based on a 30-year amortization schedule,
principal due in 1999. The second loan is from
the general partner of BAGP and has the same
terms as the first loan. The first loan was
refinanced in November 1998. The new loan was
for $3,100,000 (principal balance of $3,069,945
at December 31, 1999), bears interest at
6.775%, is payable in monthly payments of
principal and interest in the amount of $20,158
and is due in November 2008. In March 1991, a
$175,000 collateral mortgage note (principal
balance of $152,385 at December 31, 1999) was
issued to the developer/partner for working
capital advances. This note bears interest at
9% with payments based on available positive
cash flow of the property. In order to satisfy
certain credit requirements of the lender, the
Registrant exchanged its general partnership
interest for a limited partnership interest in
a reconstituted partnership. However, the
Registrant retained substantially the same
rights and privileges as it had as a general
partner.
The property is managed by a property
management firm which is an affiliate of the
general partner of BAGP. As of December 31,
1999, 62 units are under lease (91%) with rents
ranging from $500 to $2,150. All leases are
renewable, one-year leases. The occupancy rate
was 96% for 1998, 94% for 1997, 95% for 1996
and 100% for 1995. The monthly rental range
has been approximately the same since 1995.
For tax purposes, this property has a basis of
$3,381,856 and is depreciated using the
straight-line method with a useful life of 27.5
years. The annual real estate taxes are
$11,677 which is based on an assessed value of
$65,700 taxed at a rate of $17.773 per $100.
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.
d. Kensington Tower ("Hill Hotel") -
consists of a 65 unit low income housing
facility and 3,550 square feet of commercial
space at 505 South 16th Street in Omaha,
Nebraska. In June 1989, Registrant acquired a
98% general partnership interest in Hill Hotel
Apartments Joint Venture ("HHAJV"), a Nebraska
general partnership which owns the property,
for a cash contribution of $2,350,000. HHAJV
acquired and rehabilitated the property for
$4,369,249 ($105.93 sf), including a
construction note payable of $2,700,000. The
note was originally due in April 1992. During
1990 and 1991, this note was partially
refinanced with $400,000 of a $600,000
Community Development Block Grant ("CDBG") loan
(principal balance at December 31, 1999 of
$600,000), a $500,000 Tax Increment Financing
("TIF") Loan (principal balance at December 31,
1999 of $140,881) and a $1,100,000 subordinated
note payable to the co-general partner. In
1992, the remaining $200,000 of the CDBG Loan
was applied to the construction loan ($60,000)
and to the TIF Loan ($140,000), in order to
extend the date of the construction loan's
maturity from April 1992 to June 1993. The
construction loan balance was $1,030,591 at
December 31, 1993. In March 1994, the
construction loan was repaid with a $665,000
(principal balance of $481,651 at December 31,
1999), 15-year permanent loan with an interest
rate of 8-3/8% and a $365,000 equity
contribution from Commercial Federal Realty
Investors Corporation, the Registrant's co-
general partner. On June 1, 1993, an amended
and restated joint venture agreement was
reached whereby the Registrant's interest was
reduced to a 30% interest.
The property is managed by an
independent property management firm. As of
December 31, 1999, 59 units are under lease
(91%) with monthly rents ranging from $405 to
$440. All leases are renewable, one-year
leases. The occupancy rate was 94% for 1998,
97% for 1997, 94% for 1996, and 94% for 1995.
The monthly rental range has been approximately
the same since 1995. For tax purposes, this
property has a federal tax basis of $5,323,340,
and is depreciated using the straight-line
method of depreciation with a useful life of
27.5 years. The annual real estate taxes are
$52,934 which is based on an assessed value of
$2,045,900 taxed at a rate of $25.873 per
$1,000. No one tenant occupies ten percent or
more of the building. It is the opinion of the
management of the Registrant that the property
is adequately covered by insurance.
Item 3. Legal Proceedings
a. 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
fiscal year 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 259 units of
record were sold or exchanged in 1999.
b. As of December 31, 1999, there
were 1,722 record holders of Units.
c. Registrant has not declared any
cash dividends in 1999 or 1998.
Item 6. Selected Financial Data
The following selected financial data
are for the five years ended December 31, 1999.
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.
1999 1998 1997 1996 1995
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Rental income $ 728,042 $ 738,997 $ 725,798 $ 713,215 $ 829,061
Interest income 1,739 2,358 0 1,742 1,591
Net loss 613,300 632,754 198,574 708,659 1,482,456
Net loss per Unit 34.04 35.12 11.02 39.33 82.28
Total assets (net of
depreciation and
amortization) 8,622,952 9,120,351 9,570,778 9,929,110 10,194,943
Debt obligations 3,467,316 3,488,821 3,521,250 3,605,963 3,858,348
Note: See Part II, Item 7.2 Results of Operations for a discussion of
factors which materially affect the comparability of the information
reflected in the above table.
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
(1) Liquidity
As of December 31, 1999,
Registrant had total unrestricted cash of
$2,986. Such funds are expected to be used to
pay liabilities and general and administrative
expenses of the Registrant, and to fund cash
deficits of the properties. Cash generated
from operations is used primarily to fund
operating expenses and debt service. If cash
flow proves to be insufficient, the Registrant
will attempt to negotiate loan modifications
with the various lenders in order to remain
current on all obligations. The Registrant is
not aware of any additional sources of
liquidity.
As of December 31, 1999,
Registrant had restricted cash of $79,045
consisting primarily of funds held as security
deposits, replacement reserves and escrows for
taxes and insurance. As a consequence of these
restrictions as to use, Registrant does not
deem these funds to be a source of liquidity.
The property owned by RRJV has
historically been unable to meet its operating
expenses and required debt service payments
from its own revenues. The Developer/Operating
General Partner has provided the necessary
funds. Through 1992 these funds were provided
pursuant to legal obligations. Thereafter, the
Registrant was able to prevail upon the
Developer to continue such funding on a
voluntary basis. In 1996, the Developer
reported that it was no longer able or willing
to make such advances. To avoid the loss of
RRJV's property, either through foreclosure or
a forced sale at depressed values, in January
1997 the Registrant sold approximately 20% of
its interest in RRJV. Simultaneously with the
sale, the Partnership Agreement was amended to
allocate Low Income Housing Tax Credits in the
amount of $1,081,930 over the next nine years
to the purchaser. The proceeds from the sale
were sufficient to satisfy outstanding
obligations and should enable RRJV to continue
to operate in the foreseeable future.
In recent years the Registrant has
realized significant losses, including the
foreclosure of two properties. At the present
time, with the exception of Northern Liberty,
the remaining properties are able to generate
enough cash flow to cover their operating
expenses and debt service, but there is no
additional cash 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 their debt service
requirements and the properties (or its
interests therein) 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. With respect to Northern
Liberty, any development of the remaining lot
and building will require additional funding of
capital. The Registrant has not yet identified
any sources for this funding, and does not
anticipate being able to identify any such
sources for the foreseeable future.
(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 1999, the Registrant
incurred a net loss of $613,300 ($34.04 per
limited partnership unit), compared to a net
loss of $632,754 ($35.12 per limited
partnership unit) in 1998, and a net loss of
$198,574 ($11.02 per limited partnership unit)
in 1997.
Rental income increased from
$725,798 in 1997 to $738,997 in 1998 and
decreased to $728,042 in 1999. The decrease
from 1998 to 1999 is due to a decrease in
average occupancy at Flint Goodridge, partially
offset by an increase in rental income at
Robidoux due to an increase in average
occupancy. The increase from 1997 to 1998 is
due to an increase in the average rental rates
at Robidoux.
Other income decreased from
$411,632 in 1997 to $0 in 1998 and increased to
$31,700 in 1999. Other income in 1999 was
primarily for the write-off of an account
payable at Robidoux. The decrease from 1997 to
1998 is due to the non-recurring sale of a
partial interest in Robidoux Redevelopment
Joint Venture in 1997, as described in
"Liquidity", above.
Operating expenses increased from
$363,624 in 1997 to $405,012 in 1998 and to
$419,821 in 1999. The increase from 1998 to
1999 is due to an increase in maintenance
expense at Flint Goodridge and an increase in
wages and salaries at Robidoux. Maintenance
expense at Flint Goodridge increased due to the
higher turnover of apartment units. The
increase in wages and salary expense at
Robidoux is due to charges made by the
property's management company throughout the
year for repairs. The increase from 1997 to
1998 is due to an increase in maintenance
expense at both Flint Goodridge and Robidoux
and an increase in wages and salaries to
Robidoux. Maintenance expense at Flint
Goodridge increased due to deferred maintenance
performed in 1998. Maintenance and wages and
salaries increased due to a change in the
property's management company.
Interest expense decreased from
$344,941 in 1997 to $343,902 in 1998 and to
$325,634 in 1999. The decrease from 1998 to
1999 is the result of the interest rate
decrease from 9% in 1998 to 7% in 1999 at
Robidoux. The decrease from 1997 to 1998 is
the result of a decrease in interest expense at
Robidoux due to a non-interest bearing advance
made by the Registrant's co-general partner in
order to repay the principal of a loan which
matured in March 1996.
Depreciation and amortization
increased from $428,374 in 1997 to $431,559 in
1998 and to $433,402 in 1999. The increases
from 1997 to 1998 and from 1998 to 1999 are the
result of increases in depreciation expense at
Robidoux due to the depreciation of capital
improvements made at the property.
During the year, losses of
$363,000 were incurred at Registrant's
properties compared to a loss of $383,000 in
1998 and a loss of $355,000 in 1997. A
discussion of individual property
operations/activities follows:
In 1999, Registrant sustained a
loss of $210,000 at Flint-Goodridge including
$205,000 of depreciation and amortization
expense compared to a loss of $182,000
including $205,000 of depreciation and
amortization expense in 1998 and a loss of
$173,000 including $206,000 of depreciation and
amortization expense in 1997. Since Flint-
Goodridge is a low income housing property,
rents are fixed in relation to specified income
levels of its tenants. As a result, the
property experiences high occupancy but rental
income remains low. The increase in the loss
from 1998 to 1999 is due to the decrease in
rental income combined with an increase in
maintenance expense. Rental income decreased
due to a decrease in average occupancy (91% to
89%). Maintenance expense increased due to the
higher turnover of apartments. The increase in
the loss from 1997 to 1998 is due to a decrease
in rental income due to a decrease in the
average occupancy (95% to 90%) combined with an
increase in maintenance expense. Maintenance
expense increased due to deferred maintenance
performed in 1998.
In 1999, Registrant incurred a
loss of $153,000 at Robidoux including $183,000
of depreciation and amortization expense
compared to a loss of $201,000 including
$181,000 of depreciation and amortization
expense in 1998 and a loss of $182,000
including $177,000 of depreciation and
amortization expense in 1997. Since Robidoux
is a low income housing property, rents are
fixed in relation to specified income levels of
its tenants. Accordingly, as with Flint
Goodridge, the property experiences high
occupancy but rental income remains low. The
decrease in the loss from 1998 to 1999 is due
to an increase in both rental and other income
combined with a decrease in interest expense,
partially offset by an increase in depreciation
and wages and salary expense. The increase in
rental income is due to an increase in the
average occupancy (95% to 98%). The increase
in other income in 1999 was primarily for the
write-off of an account payable. Interest
expense decreased as a result of the interest
rate decrease from 9% in 1998 to 7% in 1999.
Depreciation expense increased due to
depreciation of capital improvements made at
the property. The increase in wages and salary
expense is the result of charges made by the
management company throughout the year for
repairs. The increase in the loss from 1997 to
1998 is mainly the result of an increase in
maintenance and wages expense partially offset
by an increase in rental income due to an
increase in the average rental rates.
Maintenance and wages and salaries expense
increased due to a change in the property's
management company.
Summary of Minority Interest
Investments
The Registrant owns a minority
interest in the Bakery Apartments which it
accounts for on the cost method. The
Registrant does not include the assets,
liabilities, income or expenses of the Bakery
in its consolidated financial statements. The
following operating information is provided for
the property. In 1999, the Bakery Apartments
incurred a loss of $191,000 including $202,000
of depreciation and amoritization expense
compared to a loss of $184,000 including
$239,000 of depreciation and amortization
expense in 1998 and a loss of $190,000
including $223,000 of depreciation and
amortization expense in 1997. The Registrant
expects that full occupancy and positive cash
flow will continue throughout 2000.
The Registrant owns a minority
interest in Kensington Tower which it accounts
for on the equity method. The Registrant does
not include the assets or liabilities of
Kensington Tower in its consolidated financial
statements. The following operating information
is provided for the property. In 1999,
Registrant incurred a loss of $29,000 compared
to a loss of $28,000 in 1998, and a loss of
$33,000 in 1997. The increase in the loss from
1998 to 1999 is due a decrease in rental income
resulting from a decrease in occupancy, as well
as an increase in maintenance expenses due to
repairs made at the property. The decrease in
the loss from 1997 to 1998 is due to an
increase in rental income resulting from higher
average occupancy, as well as a decrease in
operating expenses due to efficiencies achieved
at the property.
Item7A. Quantitative and Qualitative
Disclosures about Market Risk
Not applicable.
Item 8. Financial Statements and
Supplementary Data
Registrant is not required to furnish
the supplementary financial information
referred to in Item 302 of Regulation S-K.
Independent Auditor's Report
To the Partners of
Diversified Historic Investors VII
We have audited the accompanying consolidated
balance sheet of Diversified Historic Investors
VII (a Pennsylvania Limited Partnership) and
subsidiaries as of December 31, 1999 and 1998
and the related statements of operations and
changes in partners' equity and cash flows for
the years ended December 31, 1999, 1998 and
1997. 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 did not audit the financial
statements of Flint Goodridge General
Partnership, which statements reflect total
assets of $3,241,113 and $3,478,899 as of
December 31, 1999 and 1998, respectively, and
total revenues of $503,132 and $531,335,
respectively for the years then ended. Those
statements were audited by other auditors whose
reports have been furnished to us, and our
opinion, insofar as it relates to the amounts
included for Flint Goodridge General
Partnership, is based solely on the reports of
the other auditors.
We conducted our audit in accordance with
generally accepted auditing standards. 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
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, based on our audits and the
report of other auditors, the consolidated
financial statements referred to above present
fairly, in all material respects, the financial
position of Diversified Historic Investors VII
as of December 31, 1999 and 1998, and the
results of operations and cash flows for the
years ended December 31, 1999, 1998 and 1997 in
conformity with generally accepted accounting
principles.
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 26 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.
Gross, Kreger & Passio, L.L.C.
Philadelphia, Pennsylvania
February 22, 2000
Independent Auditor's Report
To the Partners of
Flint Goodridge General Partnership
New Orleans, Louisiana:
We have audited the accompanying balance sheets
of Flint Goodridge General Partnership, HUD
Project No. 064-35269-PM, as of December 31,
1999 and 1998, and the related statements of
income, changes in partners' equity, and cash
flows for the years then ended. These
financial statements are the responsibility of
the Partnership's management. Our
responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards and
Government Auditing Standards, issued by the
Comptroller General of the United States.
Those standards require that we plan and
perform the audit to obtain reasonable
assurance about whether the financial
statements are free of material misstatement.
An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures
in the 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 audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position of
Flint Goodridge General Partnership, HUD
Project No. 064-35269-PM, as of December 31,
1999 and 1998, and the results of its
operations, changes in partners' equity, and
cash flows for the years then ended in
conformity with generally accepted accounting
principles.
In accordance with Government Auditing
Standards and the Consolidated Audit Guide for
Audits of HUD Programs issued by the U.S.
Department of Housing and Urban Development, we
have also issued a report dated February
10,2000, on our consideration of Flint
Goodridge General Partnership's internal
control structure and reports dated February
10,2000, on its compliance with specific
requirements applicable to major HUD programs
and specific requirements applicable to
Affirmative Fair Housing.
Pailet, Meurier and LeBlanc, L.L.P.
Metairie, Louisiana
February 10, 2000
Independent Auditor's Report
To the Partners of
The Bakery Apartments Limited Partnership
We have audited the accompanying balance sheets
of The Bakery Apartments Limited Partnership,
for December 31, 1999 and 1998 and the related
statements of operations, partners' equity and
cash flows for the years ended. These
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 audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audits to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position of
The Bakery Apartments Limited Partnership as of
December 31, 1999 and 1997 and the results of
its operations and its cash flows for the years
then ended in conformity with generally
accepted accounting principles.
Pailet, Meurier and LeBlanc, L.L.P.
Metairie, Louisiana
February 10, 2000
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 1999 and 1998 15
Consolidated Statements of Operations for the Years
Ended December 31, 1999, 1998, and 1997 16
Consolidated Statements of Changes in Partners' Equity for
the Years Ended December 31, 1999, 1998, and 1997 17
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998, and 1997 18
Notes to consolidated financial statements 19-24
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 26
Notes to Schedule XI 27
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 VII
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
Assets
1999 1998
Rental properties at cost: ------ ------
Land $ 35,469 $ 35,469
Buildings and improvements 10,566,992 10,562,083
----------- -----------
10,602,461 10,597,552
Less - accumulated depreciation (4,105,411) (3,676,865)
----------- -----------
6,497,050 6,920,687
Cash and cash equivalents 2,986 8,615
Restricted cash 79,045 116,295
Investments in affiliates 1,353,816 1,383,270
Other assets (net of accumulated
amortization of $113,216 and $108,361) 690,055 691,484
----------- -----------
Total $ 8,622,952 $ 9,120,351
=========== ===========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 3,467,316 $ 3,488,821
Accounts payable:
Trade 991,769 812,312
Related parties 500,851 530,957
Interest payable 23,495 33,886
Tenant security deposits
26,571 26,595
----------- -----------
Total liabilities $ 5,010,002 $ 4,892,571
----------- -----------
Minority interests 244,897 246,427
Partners' equity 3,368,053 3,981,353
----------- -----------
Total $ 8,622,952 $ 9,120,351
=========== ===========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------ ------- ------
Revenues:
Rental income $ 728,042 $ 738,997 $ 725,798
Other income 31,700 0 411,632
Interest income 1,739 2,358 0
---------- ---------- ----------
Total revenues 761,481 741,355 1,137,430
---------- ---------- ----------
Costs and expenses:
Rental operations 419,821 405,012 363,624
General and administrative 168,000 168,000 168,000
Interest 325,634 343,902 344,941
Depreciation and amortization 433,402 431,559 428,374
---------- ---------- ----------
Total costs and expenses 1,346,857 1,348,473 1,304,939
---------- ---------- ----------
Loss before minority interests and
equity in affiliate (585,376) (607,118) (167,509)
Minority interests' portion of loss 1,530 2,011 1,824
Equity in net loss of affiliate (29,454) (27,647) (32,889)
---------- ---------- ----------
Net loss ($ 613,300) ($ 632,754) ($ 198,574)
========== ========== ==========
Net loss per limited partnership unit:
Loss before minority interests
and equity in affiliate ($ 32.49) ($ 33.70) ($ 9.30)
Minority interests .08 .11 .10
Equity in net loss of affiliate (1.63) (1.53) (1.82)
---------- ---------- ----------
($ 34.04) ($ 35.12) ($ 11.02)
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1999, 1998 and 1997
Dover
Historic
Advisors Limited
VII Partners
(1) (2) Total
-------- -------- -----
Percentage participation in
profit or loss 1% 99% 100%
Balance at December 31, 1996 $458,632 $4,354,049 $4,812,681
Net loss (1,986) (196,588) (198,574)
-------- ---------- ----------
Balance at December 31, 1997 456,646 4,157,461 4,614,107
Net loss (6,328) (626,426) (632,754)
-------- ---------- ----------
Balance at December 31, 1998 450,318 3,531,035 3,981,353
Net loss (6,133) (607,167) (613,300)
-------- ---------- ----------
Balance at December 31, 1999 $444,185 $2,923,868 $3,368,053
======== ========== ==========
(1) General Partner.
(2) 17,839 limited partnership units outstanding at
December 31, 1999, 1998, and 1997.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------ ------ ------
Cash flows from operating activities:
Net loss ($613,300) ($632,754) ($198,574)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 433,402 431,559 428,374
Minority interest (1,530) (2,011) (1,824)
Equity in loss of affiliate 29,454 27,647 32,889
Changes in assets and liabilities:
Decrease (increase) in
restricted cash 37,250 (72,991) 51,454
Increase in other assets (3,427) (1,529) (105,122)
Increase (decrease) in accounts
payable - trade 179,457 74,283 (62,343)
(Decrease) increase in accounts
payable - related parties (30,106) 150,814 19,797
Decrease in interest payable (10,391) (4,502) (2,243)
(Decrease) increase in tenant
security deposits (24) (3,827) 3,070
Decrease in other liabilities 0 0 (31,502)
-------- -------- --------
Net cash provided by (used in)
operating activities 20,785 (33,311) 133,976
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (4,909) (18,020) (23,527)
-------- -------- --------
Net cash used in investing activities (4,909) (18,020) (23,527)
-------- -------- --------
Cash flows from financing activities:
Principal payments (21,505) (32,429) (84,713)
-------- -------- --------
Net cash used in financing activities: (21,505) (32,429) (84,713)
-------- -------- --------
Net (decrease) increase in cash
and cash equivalents (5,629) (83,760) 25,736
Cash and cash equivalents at
beginning of year 8,615 92,375 66,639
-------- -------- --------
Cash and cash equivalents at end of year $ 2,986 $ 8,615 $ 92,375
======== ======== ========
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year for interest $336,025 $348,404 $347,184
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors VII (the
"Partnership") was formed in December 1988 with
Dover Historic Advisors VII as the General
Partner. Upon the admittance of additional
limited partners, the initial limited partner
withdrew.
The Partnership was organized to acquire,
rehabilitate, and manage real properties
containing improvements which are Certified
Historic Structures, as defined in the Internal
Revenue Code of 1986 ("the Code"), or which may
also be (but are not required to be) eligible
for low income housing tax credits as provided
by Section 42 of the Code, and such other uses
as Dover Historic Advisors VII (the "General
Partner") deems appropriate, and to engage in
any and all activities related or incidental
thereto.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A summary of the significant accounting
policies consistently applied in the
preparation of the accompanying consolidated
financial statements follows.
1. Principles of Consolidation
The accompanying financial statements of the
Partnership include the accounts of three
subsidiary partnerships (the "Ventures"), in
which the Partnership has controlling
interests, with appropriate elimination of
inter-partnership transactions and balances.
In addition, the Partnership owns a minority
interest of 16.83% in one partnership, which it
accounts for on the cost method, and a minority
interest of 30% in one partnership, which it
accounts for on the equity method. 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 results for those years.
2. 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.
The Partnership prepaid all amounts due under a
ground lease for one of its properties. Such
prepayments have been deferred and are being
amortized over the term of the lease (45
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 during the period
(17,839 in 1999, 1998, and 1997).
4. Cash and Cash Equivalents
The Partnership considers all highly liquid
investments purchased with a maturity of three
months or less to be cash equivalents.
5. Restricted Cash
Restricted cash includes amounts held for
tenant security deposits, real estate tax
reserves and other cash restricted as to use.
6. 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.
7. Income Taxes
Federal and state income taxes are payable by
the individual partners; accordingly, no
provision or liability for income taxes is
reflected in the financial statements.
8. Revenue Recognition
Revenues are recognized when rental payments
are due on a straight-line basis. Rental
payments received in advance are deferred until
earned.
9. Rental Properties
Rental properties are stated at cost. A
provision for impairment of value is recorded
when a decline in value of 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 for 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 a continued hold of 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 deficit results of
operations, and has been unable to, or
anticipates it will be unable to, obtain debt
modification, financing or refinancing
sufficient to allow a continued hold of 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.
10. 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 AGREEMENTS
The significant terms of the Agreement of
Limited Partnership (the "Agreement"), as they
relate to the financial statements, follow:
All distributable cash from operations (as
defined in the Agreement of Limited
Partnership) will be distributed 1% to the
General Partner and 99% to the limited
partners.
All distributable cash from sales or
dispositions (as defined) will be distributed
to the limited partners up to their adjusted
invested capital (as defined) plus an amount
equal to the sum of the greater of an 8.5%
cumulative, noncompounded annual return on the
average after-credit invested capital (as
defined), less amounts previously distributed
(as defined); 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.
Net income or loss from operations of the
Partnership is allocated 1% to the General
Partner and 99% to the limited partners.
NOTE D - ACQUISITIONS
The Partnership acquired controlling general or
limited partnership interests in Ventures and
minority interests in partnerships during the
period from June 1989 to March 1991, as
discussed below.
In June 1989, the Partnership was admitted,
with a 98% general partner interest, to a
Nebraska general partnership which owns a
building located in Nebraska, consisting of 65
apartment units and 3,550 square feet of
commercial space, for a cash capital
contribution of $2,350,000. In addition,
$3,000,000 of rehabilitation costs relating to
the investment were capitalized as part of the
building and improvements. These capitalized
costs have been removed from the balance sheet.
Pursuant to the June 1993 Amended and Restated
Joint Venture Agreement, the Partnership's
interest was reduced to 30%.
In July 1989, the Partnership was admitted,
with a 90% general partner interest, to a
Pennsylvania general partnership which owns two
buildings located in Louisiana, consisting of
93 apartments units, for a cash capital
contribution of $2,808,000.
In September 1989, the Partnership was
admitted, with a 99% general partner interest,
to a Missouri general partnership which owns a
building located in Missouri, consisting of 60
apartment units, for a cash capital
contribution of $2,400,000. In addition,
$2,300,000 of rehabilitation costs relating to
the investment were capitalized as part of the
building and improvements.
In December 1989, the Partnership was admitted,
with a 98% general partner interest, to a
Nebraska general partnership which owns
property located in South Dakota, consisting of
58,793 square feet of commercial space, for a
cash capital contribution of $1,350,000. In
addition, $3,400,000 of acquisition costs
relating to the investment have been
capitalized as part of the building and
improvements. In March 1995, the deed to the
property, which was held in escrow, was
delivered to the first mortgage holder.
In February 1990, the Partnership was admitted,
with a 99% general partner interest, to a
Pennsylvania general partnership, which owned a
property which was originally intended to be
rehabilitated into 250,000 square feet of
residential and commercial space located in
Pennsylvania, for a cash contribution of
$2,000,000. In December 1994, the Partnership
donated to a neighborhood group all but a
12,247 square foot vacant lot.
In September 1990, the Partnership purchased
19% interest in a Washington, D.C. general
partnership which owned a building located in
Washington, D.C., consisting of 54 hotel rooms,
for a cash capital contribution of $550,000.
In February 1993, a party holding a mortgage on
the property, with permission of the bankruptcy
court, foreclosed on the property.
In March 1991, the Partnership purchased 16.83%
interest in a Pennsylvania general partnership
which owns a building located in Louisiana,
consisting of 68 units, for $300,000.
NOTE E - DEBT OBLIGATIONS
Debt obligations are as follows:
December 31,
1999 1998
----- ------
Mortgage payable, interest at 10%; $2,173,882 $2,204,627
payable in monthly installments of
principal and interest of $20,819, with
maturity in June 2020; collateralized by
related rental property
Note payable, interest at 7.75% in 1999 774,946 793,883
and 8.5% in 1998; principal and interest
payments of $6,458 due monthly; with
maturity at October 2005; collateralized
by related rental property
Note payable, interest accrues at the 513,321 477,458
prime rate (effective rate of 7.75% and
8% at December 31, 1999 and 1998,
respectively); principal balance due
October 2018; collateralized by related
rental property (A)
Note payable, interest at 1%; principal
and interest payments of $648 due
monthly; remaining principal due
September 2000; collateralized by
related rental property 5,167 12,853
---------- ----------
$3,467,316 $3,488,821
========== ==========
(A) This note payable is personally guaranteed by an affiliate of the
Registrant's co-general partner.
Maturities of debt obligations at December 31, 1999, are as follows:
Year Ending December 31,
------------------------
2000 $ 451,790
2001 62,844
2002 69,148
2003 76,087
2004 83,025
Thereafter 2,724,422
----------
$3,467,316
==========
NOTE F - RELATED PARTY TRANSACTIONS
Included in Accounts Payable - Related Party is
$428,555 and $455,345 at December 31, 1999 and
1998, respectively, owed to an affiliate of the
General Partner, by one of the Partnership's
Ventures, for additional amounts advanced for
working capital needs. These advances are non-
interest bearing and will be paid out of
available cash flow.
Included in Accounts Payable - Related Party is
$44,953 and $48,269 at December 31, 1999 and
1998, respectively, owed to the co - general
partner, by one of the Partnership's Ventures,
for additional amounts advanced for working
capital needs. These advances are non-interest
bearing and will be paid out of available cash
flow.
Included in Accounts Payable - Related Party is
$27,343 at December 31,1999 and 1998, owed to
the General Partner, for amounts advanced to
pay certain outstanding liabilities of the
Partnership. The advance is non-interest
bearing and will be paid out of available cash
flow.
NOTE G - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of
the results of operations in different time
period for financial reporting ("book")
purposes and for income tax ("tax") purposes.
A reconciliation follows:
For the Years Ended December 31,
1999 1998 1997
------ ------ ------
Net loss - book ($ 613,300) ($ 632,754) ($ 198,574)
Other income (31,700) 0 (411,632)
Minority interest 166,396 138,002 134,243
Excess of book over tax depreciation 161,871 168,344 161,981
---------- ---------- ----------
Net income (loss) - tax ($ 316,733) ($ 326,408) ($ 313,982)
========== ========== ==========
Partners' equity - book $3,368,053 $3,981,353 $4,614,107
Distribution to limited partners 33,861 33,861 33,861
Costs of issuance 2,288,270 2,288,270 2,288,270
Basis reduction due to Investment
Tax Credit (3,790,041) (3,790,041) (3,790,041)
Cumulative tax under book loss 3,920,562 3,623,995 3,317,649
Capital contributions (641,684) (641,684) (641,684)
---------- ---------- ----------
Partner's equity - tax $5,179,021 $5,495,754 $5,822,162
========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
Costs
Inital Cost Capitalized Date of Date
to Partnership Subsequent to Construc- Ac-
(b) Acquisition tion quired
Buildings
and
Description(a) Encum- Land Improve- Improve-
brances(d) (b) ments ments
93 unit apart-
ments in New
Orleans, LA $2,173,882 $17,182 $4,667,050 $ 993,353 1989 7/89
60 unit apart-
ments in St.
Joseph, MO 1,293,434 1,500 2,482,287 2,322,599 1989 9/89
12,247 square
feet of
residential
and commer-
cial space in
Philadelphia, PA - 16,787 101,703 0 (a) 2/90
---------- ------- ---------- ----------
$3,467,316 $35,469 $7,251,040 $3,315,952
========== ======= ========== ==========
Gross Amount at
which Carried at
December 31, 1999
Buildings Accumulated
and Depreciation
Description (a) Land (b) Improvements Total (b)(c) (c)(d)
93 unit apart-
ments in
New Orleans, LA $17,182 $ 5,660,403 $ 5,677,585 $2,474,734
60 unit apart-
ments in
St. Joseph, MO 1,500 4,804,886 4,806,386 1,594,063
12,247 square
feet of
residential
and commer-
cial space in
Philadelphia, PA 16,787 101,703 118,490 36,614
------- ---------- ----------- ----------
$35,469 $10,566,992 $10,602,461 $4,105,411
======= =========== =========== ==========
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
NOTES TO SCHEDULE XI
DECEMBER 31, 1999
(A) All properties are certified historic
structures as defined in the Internal
Revenue Code of 1986, or are eligible for
designations 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, 1999, for Federal income tax purposes
was approximately $8,446,848. The
depreciable basis of the building and
improvements of the properties has been
reduced for Federal income tax purposes by
the historic rehabilitation credit.
(C) Reconciliation of real estate:
1999 1998 1997
------ ------ ------
Balance at beginning of year $10,597,552 $10,579,532 $10,556,005
Additions during this year:
Improvements 4,909 18,020 23,527
----------- ----------- -----------
Balance at end of year $10,602,461 $10,597,552 $10,579,532
=========== =========== ===========
Reconciliation of accumulated depreciation:
1999 1998 1997
------ ------ ------
Balance at beginning of year $3,676,865 $3,250,162 $2,826,761
Depreciation expense for the year 428,546 426,703 423,401
---------- ---------- ----------
Balance at end of year $4,105,411 $3,676,865 $3,250,162
========== ========== ==========
(D) See Note E to the consolidated financial statements for further
information.
(E) See Note B to the consolidated financial statements for
depreciation method and lives.
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 VII (DoHA-
VII), a Pennsylvania general partnership. The
partners of DoHA-VII are as follows:
Name Age Position Term of Office Period Served
Gerald Katzoff 49 Partner in No fixed term December 1988-
DoHA-VII May 1997
Dover Historic -- Partner in No fixed term December 1988-
Advisors, Inc. DoHA-VII May 1997
("Dover Advisors")
SWDHA, Inc. -- Partner in No fixed term Since May 1997
DoHA-VII
EPK, Inc. -- Partner in No fixed term Since May 1997
DoHA-VII
For further description of DoHA-
VII, 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-VII 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-VII. Spencer Wertheimer,
the President of SWDHA, Inc., is an attorney
with extensive experience in real estate
activities 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-VII.
The officers and directors of EPK,
Inc. are described below.
Spencer Wertheimer was appointed May
13, 1997 as President, Treasurer and Sole
Director of EPK, Inc. Mr. Wertheimer is an
attorney with extensive experience in real
estate ventures.
Donna M. Zanghi (age 42) 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. since
June 14, 1993 and as a Director and
Secretary/Treasurer of D, LTD. She was
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 33) was
appointed on May 13, 1997 as Assistant
Secretary of EPK, Inc. Ms. Rudoi previously
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 1999,
Registrant paid no cash compensation to DoHA-
VII, 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
1999, or is proposed to be paid or distributed
in the future, to DoHA-VII, any partner
therein, or any person named in paragraph c. of
Item 10.
c. Other Compensation - No
compensation not referred to in paragraph a. or
paragraph b. of this Item was paid or
distributed during 1999 to Dover Advisors, DoHA-
VII, 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.
b. 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-VII is entitled to 10% of Registrant's
distributable cash from operations in each
year. There was no such share allocable to
DoHA-VII for fiscal years 1997 through 1999.
b. Certain Business Relationships -
Registrant has no directors.
c. Indebtedness of Management - No
executive officer or significant employee of
Registrant, Registrant's general partner (or
any employee thereof), or any affiliate of any
such person, is or has at any time been
indebted to Registrant.
PART IV
Item 14. (A) Exhibits, Financial Statement Schedules and Reports on Form 8-K.
1. Financial Statements:
a. Consolidated Balance Sheets at December 31, 1999 and 1998.
b. Consolidated Statements of Operations for the Years
Ended December 31, 1999, 1998 and 1997.
c. Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 1999, 1998 and 1997.
d. Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997.
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 Document
Number
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
of this Form 10-K.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
ended December 31, 1999.
(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 VII
Date: September 6, 2000 By: Dover Historic Advisors, VII 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 VII General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer September 6, 2000
---------------------- -----------------
SPENCER WERTHEIMER
President and Treasurer
By:/s/ Michele F. Rudoi September 6, 2000
----------------------- -----------------
MICHELE F. RUDOI
Assistant Secretary