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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 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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.)
Suite 500, 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) 735-5001
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act: 25,461 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 VI ("Registrant")
is a limited partnership formed in 1988 under the Pennsylvania Uniform
Limited Partnership Act. As of December 31, 1996, Registrant had
outstanding 25,461 units of limited partnership interest (the
"Units").
Registrant is presently in its operating stage.
It originally owned eight properties or interests therein. Interest
in two properties have been lost through foreclosure, one of which was
foreclosed in March 1997, and an interest in a third property has been
reduced substantially. See Item 2. Properties, for a description
thereof.
The following is a summary of significant
transactions involving the Registrant's interests:
A property owned by Strehlow Terrace Apartments
Limited Partnership ("STALP"), a little partnership in which
the Registrant owns a 98% interest, has historically been
unable, from its own revenues, to meet its operating expenses and
required debt service payments, 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 nor willing to make such advances. To avoid loss
of STALP's property, either through foreclosure or a forced sale at
depressed values, in January 1997 the Registrant sold approximately
20% of its interest in STALP. Simultaneously with the sale, the
Partnership Agreement was amended to allocate Low Income Housing Tax
Credits in the amount of $587,549 over the next four years to the
purchaser. The proceeds from the sale were sufficient to satisfy
outstanding obligations and should enable STALP to continue to operate
in the foreseeable future.
On January 21, 1994, a property owned by the
Registrant, Locke Mill Plaza, was transferred to Locke Mill Partners
("LMP") a limited partnership in which the Registrant owns a 99%
interest. The property was transferred so that it would be held by
the Registrant in a manner similar to all of the other properties held
by the Registrant. On February 14, 1994, LMP filed a reorganization
petition pursuant to Chapter 11 of the U.S. Bankruptcy Code. LMP
filed a Plan of Reorganization and Disclosure Statement on July 7,
1994. On June 6, 1995, LMP filed the Second Plan of Reorganization
(the "Plan") and the Plan was confirmed in August 1995. The
bankruptcy was subsequently dismissed. On March 14, 1997, the
Registrant was declared in default on the first mortgage for failure
to make the minimum monthly payment. On March 31, 1997, a settlement
agreement was reached whereby the Registrant has agreed to relinquish
its partnership interests in LMP. See Item 2. Properties.
In order to forestall the lender's threatened
foreclosure, on January 28, 1993, Firehouse Square General
Partnership, a general partnership in which the Registrant owns a 90%
interest, filed a reorganization petition pursuant to Chapter 11 of
the U.S. Bankruptcy Code. In May 1993, the lender sold its note and
mortgage to another entity. On June 1, 1993, an agreement was entered
into with the new holder of the note and mortgage to restructure the
note. The bankruptcy was subsequently dismissed. See Item 2.
Properties for a description of the restructured note. On November
16, 1994, the first mortgage holder foreclosed on its mortgage and
subsequently sold the property to a newly formed partnership known as
901 King Street Associates which is owned 90% by the Registrant. See
Item 2. Properties for a description of the foreclosure.
On September 9, 1993, St. James Limited
Partnership ("SJLP"), a limited partnership in which the Registrant
owns a 98% interest, filed a reorganization petition pursuant to
Chapter 11 of the U.S. Bankruptcy Code. After filing the petition,
it became apparent that there could not be a confirmable plan of
reorganization without either the Registrant making an additional
equity contribution to SJLP or an extremely favorable settlement of a
complaint by the Registrant against the Registrant's co-general
partner in SJLP and United National Bank alleging misappropriation of
funds from a deficit cash reserve account. See Part II, Item 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations. Since the Registrant had no additional sources
of equity and the outcome of the co-general partner/bank suit was
uncertain, the automatic stay was lifted and the first mortgage holder
foreclosed on the property on October 21, 1994.
On August 14, 1992, Commercial Federal Realty
Investors Corporation ("CFRIC"), the owner of a 1% interest in the
Saunders Apartments Joint Venture ("SAJV") filed an action in the
District Court of Douglas County, Nebraska seeking damages of $275,000
plus interest alleged to be due under the terms of various agreements
between parties which were executed in connection with the
establishment of the joint venture. The Registrant denied liability
and filed a counterclaim seeking declaratory judgment and money
damages for breach of contract and breach of fiduciary duty. On June
1, 1993, a settlement agreement was reached and an Amended and
Restated Joint Venture Agreement was reached whereby the Registrant
was entitled to retain all funds held in escrow ($275,000) pursuant to
the original joint venture agreement. In return, CFRIC agreed to
convert $1,155,000 in amounts owed to it by SAJV to a capital
contribution, (increasing its ownership in SAJV to 70%) and will
receive 100% of future income, losses and tax credits for tax purposes
until such time as it recovers $430,000 of the capital contribution,
any advances it must make on behalf of the property in the form of
loan reduction and cash flow shortfalls (with interest at 10%), and
any amounts resulting from any recapture of tax credits. Thereafter,
future income and losses for both book and tax purposes will be
allocated 70% to CFRIC and 30% to the Registrant.
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, have been rehabilitated and
certified as Historic Structures and have received the related
Investment Tax Credit. In addition, four properties (Roseland, Mater
Dolorosa, Strehlow Terrace and Saunders Apartments) are low-income
housing structures which qualify for, have received, and will continue
to receive, the Low Income Tax Credits. Each of the six properties
currently owned are held for rental operations. At this time it is
anticipated that all the properties will continue to be held for this
purpose. 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, 1996, Registrant owned
interests in seven properties, located in Nebraska (three), North
Carolina (one), Virginia (one), Pennsylvania (one), and Louisiana
(one). In total, the properties contain 178 apartment units, 149
condominium units used as rental units, and 50,815 square feet ("sf")
of commercial/retail space. As of December 31, 1996, 315 of the
apartment and condominium units were under lease (97%) at monthly
rental rates ranging from $275 to $1,200. In addition, 41,642 sf of
commercial/retail space was under lease (82%) at annual rates ranging
from $1.58 to $22.61 per sf. The property located in North Carolina,
which consists of 78 condominium units and 6,700 sf of commercial
space, was foreclosed in March 1997. Rental of the apartments and
commercial space is not expected to be seasonal. 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 and commercial real
estate industry. As a result of the overbuilding that occurred in the
1980's, the competition for both residential and commercial tenants in
the local markets where the Registrant's properties are located is
generally strong. In each of the markets, there are several similar
historically certified rehabilitated buildings. Two of the properties
held for rental are market-rate properties and are located in
Alexandria, Virginia, and Philadelphia, Pennsylvania. At these
properties the Registrant is forced to keep its rent levels
competitively low in order to maintain moderate to high occupancy
levels. Management of each of these properties makes frequent market
analyses in order to set rent levels. When occupancy nears the 97-99%
range, management considers raising the rents by more than a normal
cost of living increase. If occupancy falls below 85%, management
considers lowering rents. Four of the properties held for rental are
low-income housing structures and are located in Omaha, Nebraska, and
New Orleans, Louisiana. These properties have fixed rental rates and
face competition for low to moderate income tenants from other low
income properties in the area. However, there is no organization
which holds a dominant position in the residential housing or
commercial leasing market in any of the geographic areas in which the
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, 1996, Registrant owned interests in
six partnerships which each own one property and a minority interest
in an additional partnership which owns one property. A summary
description of each property is given below.
a. Locke Mill Plaza - consists of 78 residential
condominium units and 6,700 sf of commercial/retail space in a 185
condominium unit project located at Buffalo Avenue and Union Street in
North Concord, North Carolina. An affiliate of the Registrant owns an
additional 10 units. In December 1988, Registrant acquired the units
for $5,042,000, ($65.44 per sf) which was funded by Registrant's
equity contribution and two $1,250,000 notes payable. In recent
years, cash flow has not been sufficient to cover operating expenses
(including real estate taxes) and debt service, including principal
amortization. In order to ease the debt service payment burden on the
property, the Registrant discussed with its two lenders the
possibility of restructuring its loan obligations. These discussions
were not successful. In January 1994, the property's ad valorem
property tax payments were in default and the taxing authorities
commenced proceedings to sell the property. Since the property was
unable to satisfy past due obligations and meet the demands of its
secured creditors, on February 14, 1994, Locke Mill Partners ("LMP",
the partnership to which the property was transferred on January 21,
1994) filed a reorganization petition pursuant to Chapter 11 of the
U.S. Bankruptcy Code. On June 6, 1995, LMP filed the Second Plan of
Reorganization (the "Plan") and the Plan was confirmed in August 1995.
The Plan provided for the following : (1) the sale of some or all of
the units to satisfy the claims of its creditors; and (2) an extension
of the maturity date of the notes payable for three years, with the
option to extend for an additional two years if at least fifty percent
(50%) of the principal amount of the debt outstanding at the
confirmation of the Plan has been repaid. The net proceeds of the
sales will be used to retire the principal balance of the debt. At
December 31, 1996 none of the units have been sold. A new lender has
placed a wrap-around mortgage on the property in the amount of
$3,500,000 (principal balance of $3,649,988 at December 31, 1996) and
has agreed to fund the necessary costs for the marketing of the units
and any improvements to the units. The wrap-around mortgage amount is
supported by a current appraisal of the property, therefore the
difference between the wrap-around mortgage and the underlying
mortgages was accounted for as an adjustment to the related fixed
assets. Monthly payments of interest to the new lender are to be made
in an amount equal to net operating income, with a minimum of $25,000
per month. The note accrues interest at 12% and is due in August
2000. On March 14, 1997, the Registrant was declared in default on
the first mortgage for failure to make the minimum monthly payment.
On March 31, 1997, a settlement agreement was reached whereby the
Registrant has agreed to relinquish its partnership interests in LMP.
The property is managed by BCMI. As of December 31, 1996, 75 units
were under lease (96%) with monthly rents ranging from $435 to $630
and 5,283 sf of commercial space were leased (79%) at annual rents
ranging from $1.58 to $4.24 per sf.
All residential leases are renewable, one-year leases.
The occupancy for the residential units for the previous four years
was 94% for 1995, 93% for 1994, 96% for 1993 and 94% for 1992. The
monthly rental range has been approximately the same since 1992. The
occupancy for the commercial space was 78% for 1995, 46% for 1994, 46%
for 1993 and 41% for 1992. The average annual rent has been $1.45 to
$3.16 per sf in 1995, $2.07 per sf in 1994, $5.10 to $6.75 per sf for
1993 and $5.85 per sf for 1992. There are four tenants who each
occupy ten percent or more of the rentable square footage. They
operate principally as a photographic studio, modeling agency, leasing
office and a maintenance shop. The leasing office and maintenance
shop each have month to month leases which require sixty (60) days
notice to vacate. All leases are operating leases and the minimum
future rentals on the noncancelable leases as of December 31, 1996 are
$12,654. There are no contingent liabilities included in income for
the years ended December 31, 1996, 1995 and 1994.
The following is a table showing commercial lease
expirations at Locke Mill Plaza for the next five years.
Total annual % of gross
Number of Total sf of rental covered by annual rental
leases expiring expiring leases expiring leases from property
1997 1 2,000 $3,150 <1%
1998 0 0 0 0
1999 1 1,275 5,400 <1%
2000 0 0 0 0
2001 0 0 0 0
Thereafter 0 0 0 0
Although no firm commitments have been made, the
Registrant anticipates the lease which is scheduled to expire in 1997
will be extended for at least an additional year, due to the long-
standing tenancy of the merchant and the availability of a renewal
option under its lease.
For tax purposes, this property has a basis of
$6,693,007 and is depreciated using the straight-line method with a
useful life of 27.5 years. The annual real estate taxes are $36,535
which is based on an assessed value of $3,479,550 taxed at a rate of
$.46 per $100 by the City of Concord and a rate of $.62 per $100 by
the County of Cabarrus. It is the opinion of the management of the
Registrant that the property is adequately covered by insurance.
b. Firehouse Square - consists of 32,544 sf of
commercial space at 902-910 King Street in Alexandria, Virginia. In
December 1988, Registrant was admitted, with a 90% general partner
interest, to Firehouse Square General Partnership ("FSGP"), a Virginia
general partnership, for a cash capital contribution of $1,750,000.
FSGP acquired and rehabilitated the property for $5,660,000 ($151.51
per sf), funded by the equity contribution and a mortgage note payable
of $4,207,000. On June 1, 1993, the first mortgage was modified. The
terms of the modification include the addition of all accrued and
unpaid interest ($218,728) to the principal balance and revising the
payment terms. The lender also advanced $40,711 for real estate taxes
and $33,627 for tenant improvements. Monthly payments of interest to
the new note holder were to be made in an amount equal to net
operating income. The note accrues interest at prime plus 1/2% (8.75%
and 9% at December 31, 1996 and 1995, respectively). On November 16,
1994, the new first mortgage holder foreclosed upon its mortgage. By
"credit bidding" its mortgage, the mortgage holder became the
successful bidder at sale. The first mortgage holder sold its
successful bid to a partnership known as 901 King Street Associates
("KSA"). KSA is a general partnership owned 90% by DHI-VI. The
selling price of the mortgage was the amount that the mortgage had
been immediately prior to foreclosure. The obligation has terms
materially the same as the original mortgage loan and is secured by a
new mortgage on the Property. Therefore, after the sale, the
Registrant's interest in the Property is unchanged. The principal
balance of the mortgage at December 31, 1996 was $4,239,795. The
entire principal balance is due October 1998. In June 1995, the
Registrant refinanced $900,000 of the first mortgage (principal
balance of $887,140 at December 31, 1996). The new loan bears
interest at 9.75%, payable in monthly installments of principal and
interest of $8,021 and is due in June 2005. The property is managed
by BCMI. As of December 31, 1996, Firehouse Square has 25,768 sf of
space under lease (82%) at annual rates ranging from $7.00 to $20.55
per sf.
The occupancy for the previous four years was 89% for
1995, 88% for 1994, 87% for 1993 and 53% for 1992. The average annual
rent has been $6.57 to $26.96 per sf for 1995, $6.50 to $19.29 per sf
for 1994, $6.50 to $30.18 per sf for 1993 and $19.78 per sf for 1992.
There are two tenants who each occupy ten percent or more of the
rentable square footage. They operate principally as a law firm and
an architectural firm. All leases are operating leases and the
minimum future rentals on the noncancelable leases as of December 31,
1996 are $386,990. There are no contingent liabilities included in
income for the years ended December 31, 1996, 1995 and 1994.
The following is a table showing commercial lease
expirations at Firehouse Square for the next five years.
Total annual % of gross
Number of Total sf of rental covered by annual rental
leases expiring expiring leases expiring leases from property
1997 1 1,965 $ 28,245 8%
1998 1 1,502 19,918 5%
1999 2 13,181 205,693 53%
2000 1 1,344 19,488 5%
2001 1 2,574 41,184 10%
Thereafter 3 5,202 72,462 19%
Although no firm commitments have been made, the
Registrant anticipates the lease which is scheduled to expire in 1997
will be extended for at least an additional year, due to the
availability of a renewal option under their lease.
For tax purposes, this property has a basis of
$3,583,703 and is depreciated using the straight-line method with a
useful life of 39 years. The annual real estate taxes are $33,419
which is based on an assessed value of $3,123,300 taxed at a rate of
$1.07 per $100. It is the opinion of the management of the Registrant
that the property is adequately covered by insurance.
c. Roseland - consists of 17 low income apartments
and 3,100 sf of retail space at 4932 South 24th Street in South Omaha,
Nebraska. In July 1988, Registrant was admitted with a 98% general
partner interest and a 1% limited partner interest to Roseland
Redevelopment Partners ("RRP"), a Nebraska limited partnership, for a
cash capital contribution of $700,000. RRP acquired and rehabilitated
the property for $1,680,000 ($70.29 per sf), funded by the equity
contribution and three notes payable. The first note payable of
$500,000 is non-interest bearing, principal due upon sale of the
property; the second note payable of $63,313 bears interest at 8.64%,
interest adjusting every three years based on the three-year Treasury
Bill rate plus 250 basis points, payable in semi-annual installments
of principal and interest of $5,188, due in November 2001 (principal
balance at December 31, 1996 of $39,457); the third note payable of
$393,786 bears interest at 9.44%, payable in monthly installments of
principal and interest of $3,346. In August 1996, the Registrant
refinanced the first mortgage (principal balance of $365,808 at
December 31, 1996). The mortgage bears interest at 8.25%, payable in
monthly installments of principal and interest of $3,123 and is due in
August 2006. The closing costs were paid by borrowing $17,065
(principal balance of $15,013 at December 31, 1996) which bears
interest at 8.5%, payable in monthly payments of principal and
interest of $776 and is due in August 1998. The property is managed
by an independent property management firm. On December 31, 1996, 15
of the units were leased (88%) at monthly rents of $300 to $840, and
3,100 sf of commercial space (100%) was leased at annual rents ranging
from $3.00 to $4.29 per sf.
All residential leases are renewable, one-year leases.
The occupancy for the residential units for the previous four years
was 94% for 1995, 87% for 1994, 98% for 1993 and 98% for 1992. The
monthly rental range has been approximately the same since 1992. The
commercial space has been 100% occupied since 1992. The range for
annual rents has been $3.00 per sf to $3.43 per sf for 1995, $2.75 per
sf for 1994, $2.75 to $5.14 per sf for 1993 and $5.15 to $8.25 per sf
for 1992. There is one tenant who occupies ten percent or more of the
rentable square footage. It principally functions as a counseling
center. All commercial leases are operating leases and the minimum
future rentals on the noncancelable leases as of December 31, 1996 are
$10,200. There are no contingent liabilities included in income for
the years ended December 31, 1996, 1995 and 1994.
The following is a table showing commercial lease
expirations at Roseland for the next five years:
Total annual % of gross
Number of Total sf of rental covered by annual rental
leases expiring expiring leases expiring leases from property
1997 0 0 0 0
1998 0 0 0 0
1999 0 0 0 0
2000 2 3,100 $10,200 14%
2001 0 0 0 0
Thereafter 0 0 0 0
For tax purposes, this property has a basis of
$1,662,067 and is depreciated using the straight-line method with a
useful life of 27.5 years. The annual real estate taxes are $9,399
which is based on an assessed value of $333,300 taxed at a rate of
$2.81991 per $100. It is the opinion of the management of the
Registrant that the property is adequately covered by insurance.
d. Mater Dolorosa Apartments - consists of 68 low
income apartments located at 1265 South Carrollton Avenue in New
Orleans, Louisiana. In July 1988, Registrant was admitted with a 90%
general partnership interest to Mater Dolorosa General Partnership
("MDGP") a Pennsylvania general partnership, for a cash contribution
of $1,519,000. MDGP acquired and rehabilitated the property for
$3,149,000 ($59.39 per sf), funded by the equity contribution and a
note payable of $1,790,000. The note payable bears interest at 8.5%,
is payable monthly in principal and interest payments of $17,627, and
is due in April 2005 (principal balance at December 31, 1996 of
$1,251,224). The property is managed by a property management firm
which is an affiliate of the Registrant's co-general partner of MDGP.
At December 31, 1996, 67 of the units were rented (99%) at monthly
rents of $482 to $567. All leases are renewable, one-year leases.
The occupancy for the previous four years was 100% for 1995, 99% for
1994, 99% for 1993 and 99% for 1992. The monthly rental range has
been approximately the same since 1992. For tax purposes, this
property has a basis of $3,178,476 and is depreciated using the
straight-line method with a useful life of 27.5 years. The annual
real estate taxes are $5,248 which is based on an assessed value of
$32,530 taxed at a rate of $16.1328 per $100. There is no one tenant
who 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.
e. Strehlow Terrace Apartments - consists of 70 low
income apartment units located at 2024 North 16th Street, Omaha,
Nebraska. In January 1989, Registrant was admitted with a 98% general
partner interest to Strehlow Terrace Apartments Limited Partnership
("STALP"), a Nebraska limited partnership, for a cash capital
contribution of $2,250,000. STALP acquired and rehabilitated the
property for $5,817,000 ($52.02 per sf) funded by the equity
contribution and three mortgage loans. The first loan, financed
through the Governmental National Mortgage Association ("GNMA") is for
$1,789,000 (principal balance at December 31, 1996 of $1,775,053),
bears interest at 10-1/4%, is payable in monthly installments of
principal and interest of $15,540, and is due in 2030. In August
1993, six units were damaged by a fire at Strehlow Terrace. Due to
the financial difficulties caused by the fire, STALP fell behind on
its monthly debt service by several months. Although the property was
able to reduce the arrearage by 50% and commenced regular, monthly
payments by May 1994, the loan was declared in default and was
assigned by GNMA to the Federal Housing Administration/Housing and
Urban Development ("FHA/HUD"), on June 24, 1994. At December 31,
1996, HUD was unwilling to agree to a workout proposal and is planning
to sell the loan to a third party. When the sale occurs, the
Registrant will attempt to negotiate terms with the new holder of the
note. The other two loans were made by the City of Omaha. One, in
the amount of $1,700,000, bears interest at 1%, and the other, in the
amount of $75,000, is non-interest bearing. The principal and
interest (if any) on both City of Omaha loans is due upon the sale of
the property or in the year 2030, whichever is earlier. The property
is managed by an independent property management firm. On December
31, 1996, 67 of the apartments were leased (96%) at monthly rents
ranging from $275 to $572.
All leases are renewable, one-year leases. The
occupancy for the previous four years was 87% for 1995, 91% for 1994,
95% for 1993 and 96% for 1992. The monthly rental range has been
approximately the same since 1992. For tax purposes, this property
has a basis of $5,860,590 and is depreciated using the straight-line
method with a useful life of 27.5 years. The annual real estate taxes
are $16,284 which is based on an assessed value of $575,500 taxed at a
rate of $2.81991 per $100. No one tenant occupies ten percent of more
of the building. It is the opinion of the management of the
Registrant that the property is adequately covered by insurance.
f. Canal House - consists of 71 residential
condominium units and 8,471 sf of commercial condominium space located
at 4250-4312 Main Street, Manayunk, Pennsylvania. In February 1989,
Registrant was admitted to Canal House Historic Associates ("CHHA"), a
Pennsylvania limited partnership with a 99% general partner interest
for a cash contribution of $6,000,000. During 1990, Registrant made
an additional cash contribution of $200,000. (The 1% limited
partnership interest is also controlled by Registrant; it is held by a
Pennsylvania corporation whose stock is owned by Registrant). CHHA
acquired and rehabilitated the property for $9,700,000 ($94.41 per sf)
which was funded by the equity contribution and a loan of $4,000,000
with interest at 7.75% and monthly principal (based on a 30-year
amortization) and interest payments. In October 1995, the Registrant
ceased making debt service payments. The loan was sold in December
1995. The Registrant entered into an agreement with the new holder of
the note (principal balance of $1,652,722 at December 31, 1996)
whereby the maturity of the loan was extended to December 2000 and
monthly payments of interest are to be made to the new note holder in
an amount equal to net operating income. In April 1996, the
Registrant refinanced $3,216,000 (principal balance of $3,202,761 at
December 31, 1996) of the first mortgage. The new loan is a first
mortgage which bears interest at 8.75%, payable in monthly
installments of principal and interest of $25,300 and is due in April
2003. The property is managed by BCMI. At December 31, 1996, all of
the residential units were under lease (100%) at monthly rents of $640
to $1,200, and 7,491 sf of the commercial space was under lease (88%)
at annual rents ranging from $19.00 to $22.61 per sf.
All residential leases are renewable, one-year leases.
The occupancy for the residential units for the previous four years
was 88% for 1995, 90% for 1994, 99% for 1993 and 92% for 1992. The
monthly rental range has been approximately the same since 1992. The
occupancy for the commercial space was 94% for 1995, 88% for 1994, 88%
for 1993 and 88% in 1992. The range for annual rents has been $18.86
to $19.52 per sf for 1995, $17.00 to $19.00 per sf for 1994, $11.59 to
$18.51 per sf in 1993 and $11.52 to $15.96 per sf for 1992. There are
three tenants who each occupy ten percent or more of the rentable
square footage. They function principally as a bank, a restaurant and
a retail store. All leases are operating leases and the minimum
future rentals on the noncancelable leases as of December 31, 1996 are
$156,276. There are no contingent liabilities included in income for
the years ended December 31, 1996, 1995 and 1994.
The following is a table showing commercial lease
expirations at Canal House for the next five years.
Total annual % of gross
Number of Total sf of rental covered by annual rental
leases expiring expiring leases expiring leases from property
1997 0 0 0 0
1998 0 0 0 0
1999 0 0 0 0
2000 1 2,426 46,094 5%
2001 2 5,065 110,183 13%
For tax purposes, this property has a basis of
$9,268,155 and is depreciated using the straight-line method with a
useful life of 27.5 years. The annual real estate taxes are $87,863
which is based on an assessed value of $1,063,200 taxed at a rate of
$8.264 per $100. It is the opinion of the management of the
Registrant that the property is adequately covered by insurance.
g. Saunders Apartments - consists of 23 low-income
apartments at 415 North 41st Avenue in Omaha, Nebraska. Registrant
acquired a 99% joint venture interest in Saunders Apartments Joint
Venture ("SAJV"), a Nebraska Joint Venture, for a cash capital
contribution of $875,000. SAJV acquired and rehabilitated the
property for $1,815,000 ($79.96 per sf), funded by the equity
contribution and a mortgage payable of $675,000. The note was retired
with $285,000 advanced from Registrant's co-general partner, and a
mortgage note payable of $395,000 (principal balance at December 31,
1996 of $295,954). The mortgage note bears interest at 10.87%, is
payable in monthly installments of $3,723 and matures in May 1997. On
June 1, 1993 an amended and restated joint venture agreement was
reached whereby the Registrant's interest was reduced to a 30%
interest. See Item 1.a. "Business - General Development of Business."
The property is managed by an independent property management firm.
As of December 31, 1996, 20 units were under lease (87%) with rents
ranging from $350 to $410. All leases are renewable, one-year leases.
The occupancy for the previous four years was 83% for 1995, 78% for
1994, 83% for 1993 and 100% for 1992. The monthly rental range has
been approximately the same since 1992. For tax purposes, this
property has a basis of $1,990,022 and is depreciated using the
straight-line method with a useful life of 27.5 years. The annual
real estate taxes are $9,401 which is based on an assessed value of
$347,900 taxed at a rate of $27.0212 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. On February 14, 1994, Locke Mill Partners, a limited
partnership in which the Registrant owns a 99% interest, filed a
reorganization petition pursuant to Chapter 11 of the U.S. Bankruptcy
Code. On March 31, 1997, the lender foreclosed on the property. For
a description of the proceedings, see Item 2.a, Properties.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fiscal years covered
by this report to a vote of security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
a. There is no established public trading market for
the Units. Registrant does not anticipate any such market will
develop. Trading in the units occurs solely through private
transactions. The Registrant is not aware of the prices at which
trades occur. Registrant's records indicate that 291 units were sold
or exchanged of record in 1996.
b. As of December 31, 1996, there were 2,807 record
holders of Units.
c. Registrant did not declare any cash dividends in
1996 or 1995.
Item 6. Selected Financial Data
The following selected financial data are for the five
years ended December 31, 1996. This data should be read in
conjunction with the consolidated financial statements included
elsewhere herein. This data is not covered by the independent
auditors' report.
1996 1995 1994 1993 1992
Rental income $ 2,622,418 $ 2,516,916 $ 2,976,153 $ 3,053,542 $ 2,872,735
Interest income 1,229 3,330 5,864 6,430 16,432
Net loss 2,114,935 2,497,861 816,728 2,555,477 2,559,710
Net loss per Unit 82.24 97.13 31.75 99.36 99.53
Total assets (net
depreciation and
amortization) 25,557,744 26,767,721 26,779,880 34,240,234 37,520,594
Debt obligations 19,353,961 19,141,915 17,026,650 22,292,519 22,548,622
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
At December 31, 1996, Registrant had total
unrestricted cash of $59,334. 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, 1996, Registrant had restricted
cash of $362,796 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.
In recent years the Registrant has realized
significant losses, including the foreclosure of two properties and a
substantial reduction of interest in a third property. At the present
time, all remaining properties are able to pay their operating
expenses and debt service; however, at two of the six properties, the
mortgages are basically "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
Due to the relatively recent rehabilitations of
the properties, 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 expenditures 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 investments for the foreseeable future.
(3) Results of Operations
During 1996, Registrant incurred a net loss of
$2,114,935 ($82.24 per limited partnership unit) compared to a net
loss of $2,497,861 ($97.13 per limited partnership unit), in 1995 and
a net loss of $816,728 ($31.75 per limited partnership unit) in 1994.
Included in the 1994 loss is $1,483,064 of extraordinary income
relating to the foreclosure of the St. James and the extinguishment of
debt at Firehouse Square. Registrant's results for 1997 will be
materially affected by the loss of Locke Mill Plaza, as discussed in
Item 2. Properties.
Rental income decreased from $2,976,153 in 1994 to
$2,516,916 in 1995 and increased to $2,622,418 in 1996. The increase
from 1995 to 1996 is mainly the result of an increase in rental income
at Canal House, Strehlow Terrace Apartments, and Locke Mill partially
offset by a decrease at Firehouse Square. The decrease from 1994 to
1995 is mainly the result of the loss of one of the properties (St.
James) due to foreclosure combined with a decrease at Firehouse Square
due to a decrease in average occupancy partially offset by increases
in rental income at Strehlow Terrace and Canal House.
Rental operations expense decreased from
$1,495,727 in 1994 to $1,228,389 in 1995 and increased to $1,373,076
in 1996. The increase from 1995 to 1996 is mainly the result of an
increase in commissions expense and condominium fees at Locke Mill, an
increase in legal fees at Canal House partially offset by a decrease
in legal fees at Firehouse Square and Locke Mill. The decrease from
1994 to 1995 is mainly the result of the loss of St. James and a
decrease in overall operating expenses (i.e. utilities, repairs and
maintenance, commissions and wages) at several of the properties
partially offset by an increase in real estate taxes at Canal House.
General and administrative expenses decreased from
$342,785 in 1994 to $280,577 in 1995 to $176,949 in 1996. The
decrease from 1995 to 1996 is the result of a decrease in
administrative fees charged. The decrease from 1994 to 1995 is the
result of a decrease in administrative fees at Locke Mill and a
decrease in legal fees incurred in connection with the loss of St.
James.
Interest expense increased from $1,719,645 in 1994
to $2,123,206 in 1995 and decreased to $1,773,685 in 1996. The
decrease from 1995 to 1996 is the result of a decrease at Canal House
and Mater Dolorosa partially offset by an increase at Locke Mill. The
increase from 1994 to 1995 is the result of increases at Locke Mill
and Canal House partially offset by the loss of St. James and a
decrease at Firehouse Square due to the extinguishment of debt in
1994.
Depreciation and amortization expense decreased
from $1,703,576 in 1994 to $1,364,876 in 1995 and increased to
$1,397,601 in 1996. The increase from 1995 to 1996 is mainly the
result of an increase in amortization expense at Canal House and Locke
Mill due to the amortization of loan fees. The decrease from 1994 to
1995 is the result of the loss of St. James in 1994 and the fact that
the equipment at Strehlow was fully depreciated during 1994.
In 1996, losses of $1,845,000 were incurred at
Registrant's Properties compared to a loss of $2,136,000 in 1995 and
$31,000 in 1994. A discussion of property operations/activities
follows:
In 1996, Registrant sustained a loss of $481,000
at Locke Mill Plaza including $251,000 of depreciation and
amortization expense, compared to a loss of $338,000 including
$240,000 of depreciation and amortization expense in 1995 and a loss
of $327,000 including $227,000 of depreciation and amortization
expense in 1994. The increased loss from 1995 to 1996 is the result
of an increase in interest, leasing commissions, condominium fees and
amortization expense partially offset by an increase in rental income
and a decrease in legal fees. Interest expense increased due to a
higher debt balance resulting from a loan restructuring (see Item 2.
Properties) and an increase in the interest rate with respect to the
financing secured by the property while leasing commissions increased
due to increased unit turnover. Condominium fees increased due to a
special assessment charged by the condominium association for capital
improvements to the building. Amortization increased due to the
amortization of loan fees paid in connection with the restructuring.
Rental income increased due to an increase in the average rental rates
and legal fees decreased due to legal fees incurred in the third
quarter of 1995 in connection with the bankruptcy. The increase in
the loss from 1994 to 1995 is the result of an increase in interest
expense partially offset by a decrease in legal and administrative
fees incurred in connection with the bankruptcy combined with an
increase in rental income. Interest expense increased due to the
higher debt balance and an increase in the interest rate. Rental
income increased due to an increase in average occupancy in the
commercial space (46% to 78%).
In 1996 and 1995, Registrant recognized income of
$0 at The St. James compared to income of $129,000 including $223,000
of depreciation expense in 1994. The 1994 loss without the effect of
the foreclosure would have been $280,000. Included in operations for
1994 is an extraordinary gain of $409,000 representing the excess of
the liabilities satisfied in the foreclosure over the fair market
value of the St. James property.
In 1996, Registrant incurred losses of $71,000 at
Roseland including $73,000 of depreciation expense compared to a loss
of $77,000 including $73,000 of depreciation expense in 1995 and a
loss of $74,000 including $73,000 of depreciation expense in 1994.
Since Roseland is a low income housing property, rents are fixed in
relation to specified income levels. As a result, similar to Mater
Dolorosa and Strehlow Terrace discussed below, the property
experiences high occupancy but rental income remains low. The
decrease in the loss from 1995 to 1996 is the result of an overall
decrease in the operating expenses of the property. The increase in
the loss from 1994 to 1995 is the result of an increase in
expenditures for certain deferred maintenance items such as the
painting and recarpeting of several units.
In 1996, Registrant incurred a loss of $594,000 at
Firehouse Square including $267,000 of depreciation and amortization
expense compared to a loss of $575,000 including $255,000 of
depreciation and amortization expense in 1995 and income of $944,000
including $257,000 of depreciation and amortization expense in 1994.
The decrease in the loss from 1995 to 1996 is mainly due to a decrease
in legal fees partially offset by a decrease in rental income due to a
decrease in the average rental rates. Legal fees decreased due to
legal fees incurred in the third quarter of 1995 in connection with
the refinancing of part of the debt. Included in operations for 1994
is an extraordinary gain of $1,470,000 relating to the extinguishment
of debt in connection with the foreclosure (See Item 2. Properties for
a discussion of the foreclosure). Excluding such income, the loss in
1994 would have been $526,000. The increase in the loss (excluding
extraordinary items) from 1994 to 1995 is the result of a decrease in
rental income due to a decrease in average occupancy (88% to 80%)
combined with an increase in legal fees incurred in connection with
the refinancing of part of the debt, partially offset by a decrease in
interest expense due to the extinguishment of debt in 1994.
In 1996, Registrant incurred a loss of $6,000 at
Mater Dolorosa including depreciation expense of $127,000 compared to
a loss of $24,000 including depreciation expense of $130,000 in 1995
and a loss of $50,000 including depreciation expense of $130,000 in
1994. Since Mater Dolorosa is a low income housing property, rents
are fixed in relation to specified income levels. As a result,
similar to Roseland and Strehlow Terrace, the property experiences
high occupancy but rental income remains low. The decrease in the
loss from 1995 to 1996 is due to a decrease in interest expense due to
a correction of interest expense relating to a prior period. The
decrease in the loss from 1994 to 1995 is due to an overall decrease
in operating expenses (i.e. utilities, maintenance, and wages) due to
operating efficiencies achieved at the property.
In 1996, Registrant incurred a loss of $213,000 at
Strehlow Terrace Apartments, including $228,000 of depreciation
expense compared to a loss of $239,000 including $226,000 of
depreciation expense in 1995 and a loss of $314,000 including $255,000
of depreciation expense in 1994. Since Strehlow is a low income
housing property, rents are fixed in relation to specified income
levels. As a result, similar to Registrant's other low-income
properties, the property experiences high occupancy but rental income
remains low. The decrease in the loss from 1995 to 1996 is mainly the
result of an increase in rental income due to a one-time lump sum
payment for rental increases received in the first quarter of 1996
from the Omaha Housing Authority retroactive to the years 1989-1994.
The decrease in the loss from 1994 to 1995 the result of an increase
in rental income and a decrease in maintenance and depreciation
expense. Maintenance decreased due to maintenance work done in 1994
to repair damage from a fire and depreciation decreased due to the
fact that the furniture and fixtures became fully depreciated in 1994.
In 1996, Registrant incurred a loss of $480,000 at
Canal House, including $377,000 of depreciation expense compared to a
loss of $883,000 including depreciation and amortization expense of
$443,000 in 1995 and a loss of $339,000 including depreciation and
amortization expense of $443,000 in 1994. The decrease in the loss
from 1995 to 1996 is due to an increase in rental income due to higher
average rental rates and a decrease in interest expense partially
offset by an increase in legal fees and amortization expense.
Interest expense decreased due to default interest incurred in 1995.
Legal fees increased due to fees incurred in connection with the
restructuring of the debt while amortization expense increased due to
the amortization of loan fees occurred in the refinancing of the
mortgage. The increase in the loss from 1994 to 1995 is the result of
an increase in interest expense and real estate tax expense partially
offset by an increase in rental income due to an increase in average
occupancy (90% to 94%) and higher average rental rates combined with a
decrease in maintenance and commissions expense. Interest expense
increased due to default interest incurred before the loan was sold
and real estate taxes increased due to the expiration of the tax
abatement. Repairs and maintenance expense decreased due to
expenditures for certain deferred maintenance items in 1994 and
commissions decreased due to lower turnover of units.
Summary of Minority Interest Investments
In 1996, Registrant incurred losses of $17,000 at
Saunders Apartments compared to a loss of $21,000 in 1995 and a loss
of $20,000 in 1994. The Registrant expects to achieve in 1997 results
comparable to those experienced in 1996.
Effective January 1, 1995, the Partnership adopted
the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long - Lived Assets and for
Long - Lived Assets to be Disposed Of." There was no cumulative
effect of the adoption of SFAS No. 121.
Item 8. Financial Statements and Supplementary Data
Registrant is not required to furnish the supplementary
financial information referred to in Item 302 of Regulations S-K.
Independent Auditor's Report
To the Partners of Diversified Historic Investors VI
We have audited the accompanying consolidated balance sheets of
Diversified Historic Investors VI (a Pennsylvania Limited Partnership)
and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, changes in partners' equity and
cash flows for the years ended December 31, 1996, 1995 and 1994.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We
did not audit the financial statements of Strehlow Terrace Apartments
Limited Partnership, which reflect total assets of $4,233,870 and
$4,437,173 as of December 31, 1996 and 1995 and total revenues of
$393,567 and $329,956, respectively for the years then ended. In
addition, we did not audit the financial statements of Mater Dolorosa
General Partnership which reflect assets of $2,165,984 and $2,270,611
as of December 31, 1996 and 1995 and total revenues of $396,038 and
$394,822, 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 Strehlow
Terrace Apartments Limited Partnership and Mater Dolorosa General
Partnership, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the
reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors,
the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of
Diversified Historic Investors VI and subsidiaries as of December 31,
1996 and 1995, and the results of their operations and their cash flow
for the years ended December 31, 1996, 1995 and 1994 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 38 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
March 4, 1997
Independent Auditor's Report
To the Partners of
Strehlow Terrace Apartments Limited Partnership
We have audited the accompanying balance sheets of Strehlow Terrace
Apartments Limited Partnership, (a Nebraska limited partnership), FHA
Project No. 103-94006, as of December 31, 1996 and 1995, and the
related statements of operations, partners' deficit, 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 consolidated 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 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 consolidated financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Strehlow
Terrace Apartments Limited Partnership at December 31, 1996 and 1995,
and the results of its operations, changes in partners' deficit and
cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The supplementary information
listed in the table of contents 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.
Blackman & Associates, P.C.
Omaha, Nebraska
February 7, 1997
Independent Auditor's Report
To the Partners of
Mater Dolorosa General Partnership
We have audited the accompanying balance sheets of Mater Dolorosa
General Partnership, for December 31, 1996 and 1995 and the related
statements of operations, 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 consolidated financial statements based on our
audits.
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 consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Mater
Dolorosa General Partnership as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended
in conformity with generally accepted accounting principles.
Pailet, Meunier and LeBlanc, L.L.P.
Metairie, Louisiana
January 21, 1997
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 1996 and 1995 22
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995, and 1994 23
Consolidated Statements of Changes in Partners' Equity for
the Years Ended December 31, 1996, 1995, and 1994 24
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, and 1994 25
Notes to consolidated financial statements 26-35
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 37
Notes to Schedule XI 38
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 VI
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
Assets
1996 1995
Rental properties at cost:
Land $ 1,081,164 $ 1,081,164
Buildings and improvements 33,506,607 33,462,131
Furniture and fixtures 1,068,784 1,068,784
---------- ----------
35,656,555 35,612,079
Less - accumulated depreciation (10,933,587) (9,605,719)
---------- ----------
24,722,968 26,006,360
Cash and cash equivalents 59,334 72,395
Restricted cash 362,796 297,751
Investment in affiliate 27,301 44,572
Other assets (net of accumulated
amortization of $424,590 and $354,858) 385,345 346,643
---------- ----------
Total $25,557,744 $26,767,721
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $19,353,961 $19,141,915
Accounts payable:
Trade 790,335 675,141
Taxes 21,830 49,414
Related parties 272,760 296,166
Other 70,926 39,310
Interest payable 1,254,336 654,897
Tenant security deposits 138,963 141,310
---------- ----------
Total liabilities 21,903,111 20,998,153
---------- ----------
Partners' equity 3,654,633 5,769,568
---------- ----------
Total $25,557,744 $26,767,721
========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Revenues:
Rental income $2,622,418 $2,516,916 $2,976,153
Interest income 1,229 3,300 5,864
--------- --------- ---------
Total revenues 2,623,647 2,520,216 2,982,017
--------- --------- ---------
Costs and expenses:
Rental operations 1,373,076 1,228,389 1,495,727
General and administrative 176,949 280,577 342,785
Interest 1,773,685 2,123,206 1,719,645
Depreciation and amortization 1,397,601 1,364,876 1,703,576
--------- --------- ---------
Total costs and expenses 4,721,311 4,997,048 5,261,733
--------- --------- ---------
Loss before minority interests and
equity in affiliate (2,097,664) (2,476,832) (2,279,716)
Equity in net loss of affiliate (17,271) (21,029) (20,076)
--------- --------- ---------
Loss before extraordinary item (2,114,935) (2,497,861) (2,299,792)
Extraordinary income 0 0 1,483,064
--------- --------- ---------
Net loss ($2,114,935) ($2,497,861) ($ 816,728)
========= ========= =========
Net loss per limited partnership unit:
Loss before minority interests and
equity in affiliate ($ 81.57) ($ 86.31) ($ 88.64)
Equity in net loss of affiliate (.67) (.82) (.78)
--------- --------- ---------
Loss before extraordinary item (82.24) (97.13) (89.42)
Extraordinary item 0 0 57.67
--------- --------- ---------
($ 82.24) ($ 97.13) ($ 31.75)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
Dover
Historic
Advisors Limited
VI (1) Partners (2) Total
Percentage participation in profit or loss 1% 99% 100%
--- ---- -----
Balance at December 31, 1993 ($119,818) $9,203,975 $9,084,157
Net loss (8,167) (808,561) (816,728)
------- --------- ---------
Balance at December 31, 1994 (127,985) 8,395,414 8,267,429
Net loss (24,979) (2,472,882) (2,497,861)
------- --------- ---------
Balance at December 31, 1995 (152,964) 5,922,532 5,769,568
Net loss (21,149) (2,093,786) (2,114,935)
------- --------- ---------
Balance at December 31, 1996 ($174,113) $3,828,746 $3,654,633
======= ========= =========
(1) General Partner.
(2) 25,461 limited partnership units outstanding at December 31,
1996, 1995, and 1994.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net loss ($2,114,935) ($2,497,861) ($ 816,728)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 1,397,601 1,364,876 1,703,576
Extraordinary income 0 0 (1,483,064)
Equity in loss of affiliate 17,271 21,029 20,076
Changes in assets and liabilities:
(Increase) decrease in restricted cash (65,045) (6,211) 147,156
Increase in other assets (108,436) (249,461) (3,477)
Increase in accounts payable - trade 115,195 215,589 224,274
(Decrease) increase in accounts payable
- taxes (27,584) (18,308) 11,138
(Decrease) increase in accounts payable
- related party (23,406) 27,355 (5,982)
Increase (decrease) in accounts payable
- other 31,616 (3,333) 52,726
Increase in interest payable 599,439 144,748 150,678
(Decrease) increase in tenant security
deposits (2,347) 4,386 6,123
Net cash (used in) provided by ------- --------- -------
operating activities (180,631) (997,191) 6,496
------- --------- -------
Cash flows from investing activities:
Purchase of rental property (44,476) (171,516) (17,167)
------- --------- -------
Net cash used in investing activities (44,476) (171,516) (17,167)
------- --------- -------
Cash flows from financing activities
Proceeds from debt financing 360,704 1,309,064 31,222
Principal payments (148,658) (127,138) (139,022)
Net cash provided by (used in) ------- --------- -------
financing activities 212,046 1,181,926 (107,800)
(Decrease) increase in cash and cash ------- --------- -------
equivalents (13,061) 13,219 (118,471)
Cash and cash equivalents at beginning of year72,395 59,176 177,647
------- --------- -------
Cash and cash equivalents at end of year $ 59,334 $ 72,395 $ 59,176
======= ========= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $1,174,246 $1,076,594 $1,164,477
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Net assets transferred for liability reduction*:
Net assets transferred 0 0 $5,119,758
Liability reduction 0 0 $5,528,863
* As a result of foreclosures on properties owned by the Partnership.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors VI (the "Partnership"), a limited
partnership, was formed in January 1988 to acquire, rehabilitate,
renovate, manage, operate, hold, sell, exchange, and otherwise deal in
and with real properties containing improvements which are "certified
historic structures" as defined in the Internal Revenue Code of 1986
(the "Code"), or which are eligible for the tax credit provided by
Section 42 of the Code, and such other uses as Dover Historic Advisors
VI (the "General Partner") deems appropriate, and to engage in any and
all activities related or incidental thereto. Any rehabilitations
undertaken by the Partnership will be done with a view to obtaining
certification of expenditures therefor as "qualified rehabilitation
expenditures" as defined in the Code.
NOTE B - SUMMARY OF 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 include the accounts of the
Partnership and six subsidiary partnerships ("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 30% in one partnership, which
it accounts for on the equity method. Allocations of income and loss
to the minority owners of the Ventures will be made until and unless
the cumulative losses applicable to the minority interests exceed the
minority interests in the equity capital of the Ventures. These
financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which, in the opinion of the
Partnership's General partner, are necessary for a fair statement of
the results for those years.
2. Depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Buildings and improvements are
depreciated over 25 years and furniture and fixtures over five years.
3. Net Loss Per Partnership Unit
The net loss per limited partnership unit is based on the weighted
average number of limited partnership units outstanding (25,461 in
1996, 1995 and 1994).
4. Costs of Issuance
Costs incurred in connection with the offering and sale of limited
partnership units were charged against partners' equity as incurred.
5. Cash and Cash Equivalents
The Partnership considers all highly liquid instruments purchased with
a maturity of less than three months to be cash equivalents.
6. Income Taxes
Income taxes or credits resulting from earnings or losses are payable
by or accrue to the benefits of the partners; accordingly, no
provision has been made for income taxes in these financial
statements.
7. Restricted Cash
Restricted cash includes amounts held for tenant security deposits and
real estate tax reserves.
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 which the Partnership does not have the
resources to meet, and which the Partnership 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
of each year.
10. New Accounting Pronouncement
Effective January 1, 1995, the Partnership adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long - Lived Assets and for Long -
Lived Assets to be Disposed Of." There was no cumulative effect of
the adoption of SFAS No. 121.
NOTE C - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During 1995, a new lender placed a wrap-around mortgage in the amount
of $3,500,000 on one of the properties owned by the Partnership. The
wrap-around mortgage amount is supported by a current appraisal of the
property, therefore the difference between the wrap-around mortgage
and the underlying mortgages is accounted for as an adjustment to
related fixed assets. The effect of this transaction, which is
excluded from the statement of cash flows, follows:
Increase in assets $ 933,339
Increase in liabilities (933,339)
-------
Net effect on Partnership $ 0
=======
NOTE D - LEASES
The Partnership's leases with commercial tenants are classified as
operating leases. Leases are generally for a period of three to five
years and provide for a fixed base rent plus contingent rents based on
level of sales and sharing of certain operating costs.
Minimum future commercial rentals on operating leases as of December
31, 1996 are as follows:
1997 $489,055
1998 457,660
1999 438,242
2000 227,149
2001 151,367
NOTE E - PARTNERSHIP AGREEMENT
The significant terms of the amended and restated Agreement of Limited
Partnership (the "Agreement"), as they relate to the financial
statements, follow:
1. Capital Contributions
The partnership offered investors limited partnership units at $1,000
per unit; the minimum purchase per investor was three units. A total
of 25,461 limited partnership units was sold. After payment of costs
of issuance as provided for in the Agreement and the withdrawal of the
initial limited partner, initial partnership capital net of costs of
issuance was $22,181,070 from limited partners and $9,900 from the
General Partner.
2. Distributions from Operations
The Agreement provides that, beginning with the date of the admission
of subscribers as limited partners, all distributable cash from
operations (as defined) will be distributed 99% to the limited
partners and 1% to the General Partner. After cash flows from
operations are positive, the General Partner shall also receive 4% of
such cash flows exclusive of interest earned on investments.
All distributable cash from sales or dispositions will be distributed
to the limited partners up to their adjusted invested capital plus an
amount equal to the sum of the greater of an 8.5% cumulative, non-
compounded annual return on the average after-credit invested capital
or a 6% cumulative, non-compounded annual return on the average
adjusted invested capital, plus an early investor incentive, less
amounts previously distributed; thereafter, after receipt by the
General Partner or its affiliates of any accrued but unpaid real
estate brokerage commissions, the balance will be distributed 85% to
the limited partners and 15% to the General Partner. Terms used
throughout this paragraph are as defined under the Agreement.
3. Allocation of Net Income and Net Losses from Operations
Net income and net loss (as defined) will be allocated 99% to the
limited partners and 1% to the General Partner with certain exceptions
as defined in the Agreement.
The Agreement provides that the fiscal year of the Partnership will be
the calendar year and that the Partnership shall continue until
December 31, 2038, unless sooner terminated upon the occurrence of
certain events.
NOTE F - ACQUISITIONS
The Partnership acquired one property and five general or limited
partnership interests in Ventures during the period from January 7,
1988, to December 1988, and one general and one limited partnership
interest in Ventures in 1989, as discussed below.
In July 1988, the Partnership was admitted, with a 98% general partner
and a 1% limited partner interest, to a Nebraska limited partnership
which owns a building located in Omaha, Nebraska, consisting of 17
apartment units, for a cash capital contribution of $700,000. In
addition, $128,284 in acquisition costs relating to the investment
have been capitalized as part of buildings and improvements.
In July 1988, the Partnership was admitted, with a 90% general partner
interest, to a Louisiana general partnership which owns a building
located in New Orleans, Louisiana, consisting of 68 apartment units,
for a cash capital contribution of $1,519,000. In addition, $241,173
of acquisition costs relating to the investment have been capitalized
as part of buildings and improvements. During 1990, as permanent
financing was obtained, $60,000 of the capital contribution was
returned to the Partnership.
In December 1988, the Partnership acquired a 99% joint venture
interest in a Nebraska joint venture which owns a building located in
Omaha, Nebraska, consisting of 23 apartment units, for a cash capital
contribution of $875,000. In addition, $153,940 in acquisition costs
relating to the investment have been capitalized as part of buildings
and improvements. These capitalized costs have been removed from the
balance sheet (see NOTE C - SUPPLE-MENTAL DISCLOSURE OF CASH FLOW
INFORMATION). Pursuant to the June 1993 Amended and Restated Joint
Venture Agreement, the Partnership's interest was reduced to 30%.
In December 1988, the Partnership was admitted, with a 97% general
partner and a 1% limited partner interest, to a West Virginia limited
partnership which owned a building located in Huntington, West
Virginia, consisting of 53 apartment units and 41,590 square feet of
commercial space, for a general partner cash capital contribution of
$1,470,000 and limited partner cash capital contribution of $10,000.
In addition, $492,609 of acquisition costs relating to the investment
were capitalized as part of building and improvements. The lender
foreclosed on the property in October 1994.
In December 1988, the Partnership was admitted, with a 90% general
partner interest, to a Virginia general partnership which owns a
building located in Alexandria, Virginia, consisting of 32,544 square
feet of commercial space, for a cash capital contribution of
$1,750,000. In addition, $436,164 in acquisition costs relating to
the investment have been capitalized as part of buildings and
improvements. In 1990, the Partnership made an additional cash
contribution of $196,621 pursuant to an agreement with the co-general
partner.
In December 1988, the Partnership purchased 78 condominium units and
6,700 square feet of commercial space located in North Carolina for
$5,042,000. In addition, $774,258 of acquisition costs relating to
the property were capitalized as part of buildings and improvements.
On January 21, 1994, the property was transferred to a Pennsylvania
limited partnership in which the partnership owns a 99% interest. On
March 14, 1997, the Registrant was declared in default on the first
mortgage for failure to make the minimum monthly payment. On March
31, 1997, a settlement agreement was reached whereby the Registrant
has agreed to relinquish its partnership interests in the limited
partnership.
In January 1989, the Partnership was admitted, with a 98% general
partner interest, to a Nebraska general partnership which owns a
building located in Omaha, Nebraska, consisting of 70 apartments
units, for a cash capital contribution of $2,250,000. In addition,
$448,993 of acquisition costs relating to the investment have been
capitalized as part of buildings and improvements.
In February 1989, the Partnership was admitted, with a 99% general
partner interest, to a Pennsylvania limited partnership which owns a
building located in Manayunk, Pennsylvania, consisting of 73 apartment
units and 8,471 square feet of commercial space, for a total cash
capital contribution of $6,000,000, less funds advanced prior to
admittance ($2,431,552 at December 31, 1988). In addition, $664,509
of acquisition costs relating to the investment have been capitalized
as part of buildings and improvements. The building was subsequently
converted to a condominium, with the Partnership retaining title to
all property. During 1990, the Partnership made additional cash
contributions of $220,000.
NOTE G - DEBT OBLIGATIONS
Debt obligations were as follows: December 31,
1996 1995
------- -------
Note payable, non-interest bearing; principal due upon $ 500,000 $ 500,000
sale of property; collateralized by related rental
property.
Note payable, interest at 8.64% at December 31, 1996 and 39,457 44,294
1995, adjusted every three years, based upon the three-year
Treasury Bill rate plus 250 basis points, payable in semi-
annual installments of principal and interest of $4,686
(payment adjusted in accordance with interest rate changes);
due in November 2001; collateralized by related rental
property.
Note payable, interest at 8.25% and 9.44% at December 31, 365,808 379,383
1996 and 1995, respectively; payable in monthly installments
of principal and interest of $3,153; due in August 2006;
collateralized by related rental property. (A)
Note payable, interest at 8.5% at December 31, 1996; payable 15,013 0
in monthly installments of principal and interest of $776;
due in August 1998. (A)
Note payable, interest at 8.5%, payable in monthly 1,251,224 1,359,710
installments of principal and interest of $17,627, due in
April 2005; collateralized by related rental property.
Mortgage loan, interest accrues at prime plus .5% 4,239,795 4,202,189
effective rate of 8.75% and 9% at December 31, 1996 and
1995, respectively), interest only payable monthly to
the extent of net operating income; principal due October
1998; collateralized by related rental property.
Mortgage loan, interest at 9.75%, payable in monthly 887,140 895,661
installments of principal and interest of $8,021; principal
due June 2005; collateralized by related rental property.
Mortgage loan, interest at 12%, interest only payable 3,649,988 3,583,625
monthly to the extent of net operating income with a
minimum of $25,000; principal due August 2000; collateralized
by related rental property. (B)
Note payable, non-interest bearing; principal due upon sale 75,000 75,000
of property; collateralized by related rental property.
Note payable, interest at 10.25%; payable in monthly 1,775,053 1,775,053
installments of principal and interest of $15,540, with
maturity in March 2030; collateralized by related rental
property.
Note payable, interest at 1%, accruing to principal; 1,700,000 1,700,000
unpaid principal and interest are due upon sale or in
January 2030; collateralized by related rental property.
Note payable, interest at 7.75%; interest only payable 1,652,722 4,627,000
monthly to the extent of net operating income; due December
2000; collateralized by related rental property. (C)
Mortgage loan, interest at 8.75%, payable in monthly
installments of principal and interest of $25,300;
principal due April 2003; collateralized by related
rental property. (C) 3,202,761 0
---------- -----------
$19,353,961 $19,141,915
(A) In August 1996, the Registrant refinanced the first mortgage
and paid the closing costs by borrowing $17,065.
(B) See Note H.
(C) In April 1996, the Partnership refinanced $3,215,000 of the
first mortgage.
Maturities of debt obligation at December 31, 1996 were as follows:
Year Ending December 31,
1997 $ 221,587
1998 4,457,136
1999 226,496
2000 5,546,403
2001 259,796
Thereafter 8,642,543
----------
$19,353,961
==========
NOTE H - COMMITMENTS AND CONTINGENCIES
On February 14, 1994, Locke Mill Partners, a limited partnership in
which the Partnership owns a 99% interest, filed a reorganization
petition pursuant to Chapter 11 of the U.S. Bankruptcy Code. On June
6, 1995, LMP filed the Second Plan of Reorganization (the "Plan") and
the Plan was confirmed in August 1995. The Plan provides for the
following : (1) the sale of some or all of the units in order to
satisfy the claims of its creditors; and (2) an extension of the
maturity date of the notes payable for three years, with the option to
extend for an additional two years if fifty percent (50%) of the
principal amount of the debt has been retired at that time. The net
proceeds of the sales will be used to retire the principal balance of
the debt. The Partnership has entered into an agreement with a new
lender who has agreed to fund the necessary costs for the marketing
and any improvements to the units in return for a wrap mortgage on the
property in the amount of $3,500,000. Monthly payments of interest to
the new lender are to be made in an amount equal to net operating
income, with a minimum of $25,000 per month. The note accrues
interest at 12% and is due in August 2000. On March 14, 1997, the
Partnership was declared in default on the first mortgage for failure
to make the minimum monthly payment. On March 31, 1997, a settlement
agreement was reached whereby the Partnership has agreed to relinquish
its partnership interests in LMP.
NOTE I- EXTRAORDINARY GAINS/LOSSES
In order to forestall the lender's threatened foreclosure, on January
28, 1993 Firehouse Square General Partnership, a general partnership
in which the Partnership owns a 90% interest, filed a reorganization
petition pursuant to Chapter 11 of the U.S. Bankruptcy Code. In May
1993, the lender sold its note and mortgage to another entity. On
June 1, 1993, an agreement was entered into with the new holder of the
note and mortgage to restructure the note. The bankruptcy was
subsequently dismissed. On November 16, 1994, the first mortgage
holder foreclosed on its mortgage and subsequently sold it to a
partnership known as 901 King Street Associates which is owned 90% by
DHI-VI. The Partnership recognized extraordinary income of $1,470,000
in 1994 relating to the extinguishment of debt in connection with the
foreclosure.
In July 1991, St. James Limited Partnership ("SJLP"), a limited
partnership in which the Partnership owns a 98% interest, filed a
reorganization petition pursuant to Chapter 11 of the U.S. Bankruptcy
Code. In March 1992, a settlement agreement was reached with the
first mortgage holder. The settlement agreement provided for
modification of one loan and the use of certain escrowed funds to pay
delinquencies on another loan. In addition, the Partnership filed a
complaint against its co-general partner and United National Bank
which claimed misappropriation of monies from the deficit cash reserve
account. Throughout the rest of 1992 and 1993 the operating losses
continued as occupancy did not increase significantly in the
commercial space. In addition, certain commercial leases were
scheduled to expire in 1994 and were not expected to be renewed. As a
result, it became increasingly difficult to pay the operating expenses
of the property and the monthly debt service and SJLP anticipated that
its operating income was going to decrease, rather then increase, in
the near future. On September 9, 1993, SJLP filed a reorganization
petition pursuant to Chapter 11 of the U.S. Bankruptcy Code. After
filing the petition, it became apparent that there could not be a
confirmable plan of reorganization without either the Partnership
making an additional equity contribution to SJLP or an extremely
favorable settlement of the complaint against the Partnership's co-
general partner in SJLP and United National Bank. Since the
Registrant had no additional sources of equity and the outcome of the
co-general partner/bank suit was uncertain, the automatic stay was
lifted and the first mortgage holder foreclosed on the property on
October 21, 1994. The Partnership recognized an extraordinary gain of
$409,000 in 1994 for the difference between the book value of the
property (which approximated fair value) and the extinguished debt.
NOTE J - SUBSEQUENT EVENTS
A property owned by Strehlow Terrace Apartments Limited Partnership
("STALP"), a limited partnership in which the Partnership owns a
98% interest, has historically been unable, from its own
revenues, to meet its operating expenses and required debt service
payments, 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 nor willing to make
such advances. To avoid loss of STALP's property, either through
foreclosure or a forced sale at depressed values, in January 1997 the
Partnership sold approximately 20% of its interest in STALP.
Simultaneously with the sale, the Partnership Agreement was amended to
allocate Low Income Housing Tax Credits in the amount of $587,549 over
the next four years to the purchaser. The proceeds from the sale were
sufficient to satisfy outstanding obligations and should enable STALP
to continue to operate in the foreseeable future.
NOTE K - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting ("book")
purposes and for income tax ("tax") purposes. Reconciliations of net
loss and partners' equity follow:
For the Years Ended December 31,
1996 1995 1994
-------- -------- --------
Net loss - book ($ 2,114,935) ($ 2,497,861) ($ 816,728)
Excess of tax under book depreciation 403,406 380,754 379,925
Interest (618,142) 676,241 213,252
Gain on foreclosure 0 0 (943,490)
Other timing differences 22,804 (81,401) 10,827
Minority interest - tax only 53,507 46,386 59,798
---------- ---------- ----------
Net loss - tax ($ 2,253,360) ($ 1,475,881) ($ 1,096,416)
========== ========== ==========
Partners' equity - book $ 3,654,633 $ 5,769,568 $ 8,267,429
Costs of issuance 3,279,930 3,279,930 3,279,930
Cumulative tax under book loss 3,402,667 3,541,092 2,519,112
Investment credit recapture 9,900 9,900 9,900
Rehabilitation credit (251,117) (251,117) (251,117)
---------- ---------- ----------
Partner's equity - tax $10,096,013 $12,349,373 $13,825,254
========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Costs Capitalized
Initial Cost Subsequent to
to Partnership Acquisition
(b)
Buildings
and
Description (a) Encumbrances Land Improvements Improvements
(e) (b)
17 unit apartments
and 3,100 square
feet of retail $ 920,278 $ 10,000 $ 1,774,986 $ 18,370
space in Omaha, NE
68 unit apartments
in New Orleans, LA 1,251,224 - 2,948,634 471,015
32,500 square feet
of commercial space
in Alexandria, VA 5,126,934 540,238 5,014,827 1,232,808
78 unit condominiums
and 6,700 square feet
of commercial space
in Concord, NC 3,649,988 130,926 5,748,914 944,092
70 apartment units
in Omaha, NE 3,550,053 - 448,993 5,860,590
71 unit apartments
and 8,500 square
feet of commercial
space in Manayunk, PA 4,855,484 400,000 664,508 9,447,654
---------- --------- ---------- ----------
$19,353,961 $1,081,164 $16,600,862 $17,974,529
========== ========= ========== ==========
Gross Amount at
which Carried at
December 31,
1996
Buildings and Accum. Date of Date
Description (a) Land Improvements Total (c)(d) Depr.(d) Constr. Acq
(e)(a)
17 unit apartments
and 3,100 square
feet of retail space
in Omaha, NE $ 10,000 $ 1,793,356 $ 1,803,356 $ 619,884 1988 7/88
68 unit apartments - 3,419,649 3,419,649 1,213,685 1988 7/88
in New Orleans, LA
32,500 square feet of
commercial space in
Alexandria, VA 540,238 6,6247,635 6,787,873 1,915,912 1988 12/88
78 condominium units
and 6,700 square feet
of commercial space
in Concord, NC 130,926 6,693,006 6,823,932 2,031,336 1988 12/88
70 apartment units
in Omaha, NE - 6,309,583 6,309,583 1,858,545 1989 1/89
71 unit apartments
and 8,500 square feet
of commercial space
in Manayunk, PA 400,000 10,112,162 10,512,162 3,294,225 1989 2/89
--------- ---------- ---------- ----------
$1,081,164 $34,575,391 $35,656,555 $10,933,587
========= ========== ========== ==========
DIVERSIFIED HISTORIC INVESTORS VI
(a limited partnership)
NOTES TO SCHEDULE XI
DECEMBER 31, 1996
(A) All properties are certified historic structures as defined in
the Internal Revenue Code of 1986. The "date of construction"
refers to the period in which such properties were
rehabilitated.
(B) Represents costs of a parcel of land with historic building
located thereon. Amounts do not include any
development/rehabilitation costs incurred pursuant to a turnkey
development agreement entered into when the property was
purchased.
(C) The cost of real estate owned at December 31, 1996, for Federal
income tax purposes was approximately $32,236,020. The
depreciable basis of the building and improvements of the
properties has been reduced for Federal income tax purposes by
the historic rehabilitation credit.
(D) Reconciliation of real estate:
1996 1995 1994
Balance at beginning of year $35,612,079 $34,507,224 $41,460,786
Additions during this year:
Improvements 44,476 171,516 17,167
Other increase 0 933,339 0
---------- ---------- ----------
Deductions during the year:
Retirements 0 0 (6,970,729)
---------- ---------- ----------
Balance at end of year $35,656,555 $35,612,079 $34,507,224
========== ========== ==========
Reconciliation of accumulated depreciation:
1996 1995 1994
Balance at beginning of year $ 9,605,719 $ 8,277,323 $ 8,185,818
Depreciation expense for the year 1,327,868 1,328,396 1,703,576
Retirements 0 0 (1,612,071)
---------- ---------- ----------
Balance at end of year $10,933,587 $ 9,605,719 $ 8,277,323
========== ========== ==========
(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 VI (DoHA-VI), a Pennsylvania general partnership.
The partners of DoHA-VI are as follows:
Name Age Position Term of Office Period Served
Gerald Katzoff 49 Partner in DoHA-VI No fixed term January 1988 - May 1997
DHP, Inc. -- Partner in DoHA-VI No fixed term January 1988 - May 1997
(Formerly Dover
Historic
Properties, Inc.)
SWDHA, Inc. -- Partner in DoHA-VI No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-VI No fixed term Since May 1997
For further description of DHP, Inc., 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 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-VI is a general
partnership formed in 1987. 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-VI. 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-VI.
The officers and directors of EPK, Inc. are described
below.
Donna M. Zanghi (age 40) was appointed on May 13, 1997 as
Secretary and Treasurer 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 32) was appointed on May 13, 1997
as Assistant Secretary and Director 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 1996, Registrant paid
no cash compensation to DoHA-VI, 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
1996, or is proposed to be paid or distributed in the future, to DoHA-
VI, any partner therein, or any person named in paragraph c. of Item
10 of this report.
c. Other Compensation - No compensation not referred
to in paragraph a. or paragraph b. of this Item was paid or
distributed during 1996 to DoHA-VI, 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 - No equity
securities of Registrant are beneficially owned by any person named in
paragraph c. of Item 10.
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-VI is entitled to 10% of
Registrant's distributable cash from operations in each year. There
was no such share allocable to DoHA-VI for fiscal years 1994 through
1996.
b. Certain Business Relationships - Registrant has no
directors. For a description of business relationships between
Registrant and certain affiliated persons, see paragraph a. of this
Item.
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, 1996 and 1995.
b. Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994.
c. Consolidated Statements of Change in Partners' Equity for
the Years Ended December 31, 1996, 1995 and 1994.
d. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.
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, 1996.
(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 VI
Date: October 9, 1997 By: Dover Historic Advisors VI, General Partner
By: EPK, Inc., Partner
By: /s/ Donna M. Zanghi
---------------------------
DONNA M. ZANGHI,
Secretary 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 VI General Partner
By: EPK, Inc., Partner
By: /s/ Donna M. Zanghi October 9, 1997
-----------------------
DONNA M. ZANGHI,
Secretary and Treasurer
By: /s/ Michele F. Rudoi October 9, 1997
-----------------------
MICHELE F. RUDOI,
Assistant Secretary