Back to GetFilings.com
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, 1997
--------------------------------------------
[ ] 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 33-15597
------------------------------------------------------
DIVERSIFIED HISTORIC INVESTORS V
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2479468
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 500, 1521 LOCUST STREET, PHILADELPHIA, PA 19102
- ----------------------------------------------------------------------
(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: 11,142 Units
UNITS OF LIMITED PARTNERSHIP INTEREST
- ----------------------------------------------------------------------
(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 V ("Registrant") is
a limited partnership formed in 1987 under the Pennsylvania Uniform
Limited Partnership Act. As of December 31, 1997, Registrant had
outstanding 11,142 units of limited partnership interest (the
"Units").
Registrant is currently in its operating stage.
It originally owned three properties or interests therein; however, in
October 1996, its interest in one property was sold. It currently
owns two properties or interests therein. See Item 2. Properties, for
a description thereof. For a discussion of the operations of the
Registrant, See Part II. Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
The following is a summary of significant
transactions involving the Registrant's interests:
In October 1996, a property owned by the
Registrant, Redick Plaza Hotel, was transferred to 1504 Harney Street
Associates ("HSA") 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 the other properties held by
the Registrant. On October 28, 1996, HSA filed a reorganization
petition pursuant to Chapter 11 of the U.S. Bankruptcy Code. In July
1997, the loan was sold and the bankruptcy dismissed. The Registrant
entered into an agreement with the new note holder whereby monthly
payments of interest are to be made to the new note holder in an
amount equal to net operating income from the property. For a
description of the proceedings, see Item 2. Properties.
b. Financial Information about Industry Segments
The Registrant operates in one industry segment.
c. Narrative Description of the Business
Registrant is in the business of operating,
holding, selling, exchanging and otherwise dealing in and with real
properties containing improvements which are "Certified Historic
Structures," as such term is defined in the Internal Revenue Code (the
"Code"), for use as apartments, offices, hotels and commercial spaces,
or any combination thereof, or low income housing eligible for the
investment tax credit provided by Section 42 of the Code, and such
other uses as the Registrant's general partner may deem appropriate.
Since the Registrant's inception, all the
properties acquired either by the Registrant, or the subsidiary
partnerships in which it has an interest, have been rehabilitated and
certified as Historic Structures and have received the related
Investment Tax Credit. One of the Registrant's properties is being
held for rental operations and one is being held for hotel operations.
At this time it is anticipated that these properties will continue to
be held for those purposes. At such time as real property values in
the areas in which the properties are located begin to increase, the
Registrant will re-evaluate its investment strategy regarding the
properties.
As of December 31, 1997, Registrant owned two
properties (or interests therein), located in Nebraska (one) and
Pennsylvania (one). The Properties contain 89 hotel rooms and 21
apartment units. As of December 31, 1997, 18 of the apartment units
were under lease at monthly rental rates ranging from $390 to $585.
During 1997, the hotel maintained an average nightly room rate of
$91.88 and average occupancy of 53%. Rental of the apartment units
space is not expected to be seasonal. However, the hotel does
experience seasonal changes, with the busiest months being May and
June and the slowest months being November and December. 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 hotel real
estate industries. As a result of the overbuilding that occurred in
the 1980's, the competition for residential tenants in the local
market where the Registrant's residential property is located is
generally strong. As a result, the Registrant is forced to keep its
rent levels competitively low in order to maintain moderate to high
occupancy levels. The residential property currently owned by the
Registrant is located in a suburb of Philadelphia, Pennsylvania in
which there are several similar historically certified rehabilitated
buildings. The Registrant's main competitors in this market are
organizations which own similar residential buildings. In this area,
the apartment market remains stable and new construction remains
virtually nonexistent although the availability of favorable home
financing has placed pressure on the rental tenant base. The hotel is
located in downtown Omaha, Nebraska and relies heavily on business
travelers to the city. It recently began an aggressive marketing
campaign intended to attract tourists to the hotel by offering weekend
packages. The main competition to the hotel comes from other chain
hotels in the area, especially hotels located closer to the airport.
Registrant has no employees. Registrant's
activities are overseen by Brandywine Construction & Management, Inc.
("BCMI"), a real estate management firm.
d. Financial Information About Foreign and Domestic
Operations and Export Sales.
See Item 8, Financial Statements and Supplementary
Data.
Item 2. Properties
As of the date hereof, Registrant owned two Properties,
or interests therein. A summary description of each property held at
December 31, 1997 is given below.
a. Redick Plaza Hotel is an historically-certified
building located at 1504 Harney Street, Omaha, Nebraska. In December
1987, the Registrant acquired a 100% equity ownership interest in this
property. The property has been rehabilitated as an 89-room hotel.
Additionally, the property has a restaurant with a seating capacity
for 160, 3,500 sf of meeting/banquet space, and 45,510 sf of garage
space (119 covered spaces). The acquisition and rehabilitation price
of this property was approximately $9,500,000 ($71 per sf), financed
in part by industrial revenue bonds from the City of Omaha of
$6,500,000 (principal balance at December 31, 1997 of $6,404,574
including advances for legal fees and prepetition trade payables). On
February 9, 1995, the Registrant refinanced the outstanding bonds
which lowered the interest rate from 7.75% to a variable rate, giving
due regard to prevailing financial market conditions, but in no event
may the variable rate exceed 7.75%. The average interest rate on the
bonds was 4.59% for the year ended December 31, 1996. Payments of
interest only were due on the bonds monthly beginning March 2, 1995
and the entire principal balance was due on November 1, 1996. In
October 1996, Redick Plaza Hotel, was transferred to 1504 Harney
Street Associates ("HSA") 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 the other
properties held by the Registrant. HSA was unable to pay the bonds as
they became due, and on October 28, 1996, HSA filed a reorganization
petition pursuant to Chapter 11 of the U.S. Bankruptcy Code. In July
1997, the loan was sold and the bankruptcy dismissed. The Registrant
entered into an agreement with the new holder of the note whereby
monthly payments of interest are to be made to the new note holder in
an amount equal to net operating income and the due date extended to
September 30, 2002.
The property is managed by BCMI. Average
occupancy was 53% in 1997 at an average room rate of $91.88. The
occupancy for the previous four years has been 73% for 1996, 83% for
1995, 72% for 1994 and 73% for 1993. The average room rates have been
$92.15 for 1996, $94.24 for 1995, $90.84 for 1994 and $79.66 for 1993.
For tax purposes, this property has a basis of $10,621,408 and is
depreciated using the straight-line method with a useful life of 31.5
years. The annual real estate taxes are $107,139 which is based on an
assessed value of $3,818,100 taxed at a rate of $2.80608 per $100. It
is the opinion of the management of the Registrant that the property
is adequately covered by insurance.
b. The Lofts at Red Hill is an historically-
certified, four-story former factory located at 350 Main Street, Red
Hill Borough, Pennsylvania. In December 1987, the Registrant acquired
the building and is the 100% equity owner of this property. The
property was rehabilitated as a 21-unit rental residential complex.
The acquisition and rehabilitation price of this property was
approximately $1,350,000 ($81 per sf). In September 1997, a mortgage
was placed on the property in the amount of $400,000 (principal
balance of $399,539 at December 31, 1997). The note accrues interest
at 14% and is payable at 10% monthly with the entire principal balance
due October 1, 2002. The proceeds from the mortgage were utilized to
satisfy certain outstanding liabilities of the Registrant.
The property is managed by BCMI. As of December
31, 1997, 18 apartment units were under lease (86%) at monthly rental
rates ranging from $390 to $585. All leases are renewable, one-year
leases. The occupancy for the previous four years was 78% for 1996,
90% for 1995, 85% for 1994 and 81% for 1993. The monthly rental range
has been approximately the same since 1993. For tax purposes, this
property has a basis of $1,478,232 and is depreciated using the
straight-line method with a useful life of 27.5 years. The annual
real estate taxes are $14,361 which is based on an assessed value of
$42,700 taxed at a rate of $31.35 per $100. No one tenant occupies
ten percent or more of the building. It is the opinion of the
management of the Registrant that the property is adequately covered
by insurance.
Item 3. Legal Proceedings
a. For a description of legal proceedings involving
Registrant's properties, see Part I, Item 2 and Part II, Item 7.
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 118 units were sold
or exchanged of record in 1997.
b. As of December 31, 1997, there were 1,345 record
holders of Units.
c. Registrant did not declare any cash dividends in
1997 or 1996.
Item 6. Selected Financial Data
The following selected financial data are for the five
years ended December 31, 1997. The data should be read in conjunction
with the consolidated financial statements included elsewhere herein.
This data is not covered by the independent auditors' report.
1997 1996 1995 1994 1993
Rental income $ 120,685 $ 767,508 $1,205,122 $1,162,137 $1,093,652
Hotel income 1,755,787 2,387,200 2,548,434 2,442,274 2,307,827
Interest income 17,449 7,024 4,576 3,218 8,716
Net loss (2,211,312) (607,725) (712,598) (827,606) (808,627)
Net loss per Unit (196.48) (54.00) (63.32) (73.54) (71.85)
Total assets (net of
depreciation and
amortization) 7,964,174 9,046,109 13,517,285 14,035,936 14,927,634
Debt obligations 6,804,113 6,163,254 10,436,965 10,366,177 10,322,192
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(1) Liquidity
As of December 31, 1997, Registrant had cash of
$57,736. Such funds are expected to be used to pay liabilities and
general and administrative expenses of 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, 1997, Registrant had restricted
cash of $176,129 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.
(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 expenditure levels not to
be indicative of capital requirements in the future and accordingly,
does not believe that it will have to commit material resources to
capital investment for the foreseeable future.
(3) Results of Operations
During 1997, Registrant incurred a net loss of
$2,211,312 ($196.48 per limited partnership unit) compared to a net
loss of $607,725 ($54.00 per limited partnership unit) in 1996 and a
net loss of $712,598 ($63.32 per limited partnership unit) in 1995.
Rental and hotel income combined decreased from
$3,753,556 in 1995 to $3,154,708 in 1996 and to $1,876,472 in 1997.
The decrease from 1996 to 1997 is the result of a decrease in rental
income of $647,000 and a decrease of $631,000 in hotel income. The
decrease in rental income is mainly attributable to an overall
decrease in occupancy at St. Mary's Market due to the sale of the
property partially offset by an increase in rental income at the Lofts
at Red Hill due to an increase in the average occupancy. The decrease
in hotel income is due to a decrease in the average occupancy (73% to
53%) and a decrease in the average nightly room rate ($92.15 to
$91.88) at the Redick Plaza Hotel. The decrease from 1995 to 1996 is
the result of a decrease in rental income of $438,000 and a decrease
of $161,000 in hotel income. The decrease in rental income is mainly
attributable to an overall decrease in occupancy at St. Mary's Market
due to the sale of the property and the vacating of units as leases
expired in anticipation of the sale of the property. The decrease in
hotel income is due to a decrease in the average occupancy (83% to
73%) and a decrease in the average nightly room rate ($94.24 to
$92.15) at the Redick Plaza Hotel.
Expense for rental operations decreased from
$746,877 in 1995 to $605,294 in 1996 and to $196,216 in 1997. The
decrease from 1995 to 1996 and from 1996 to 1997 is due to an overall
decrease in operating expenses at St. Mary's Market, as discussed
below, as well as a decrease in real estate taxes at Lofts at Red Hill
from 1995 to 1996 due to a reduction in the assessed value of the
property. Hotel operations expense increased from $2,036,995 in 1995
to $2,237,857 in 1996 and decreased to $1,828,128 in 1997. The
decrease from 1996 to 1997 is due to an overall decrease in operating
expenses due to the decrease in average occupancy. The increase from
1996 to 1997 is due to an increase in rooms expense, professional and
legal fees and wages and salaries expense as discussed below.
General and administrative expenses increased from
$96,000 in 1995 to $98,859 in 1996 to $548,996 in 1997. The increase
from 1996 to 1997 is the result of administrative fees incurred in the
third quarter of 1997 in connection with the bankruptcy and subsequent
negotiations with the new mortgage holder at the Redick Plaza Hotel.
Interest expense decreased from $765,349 in 1995
to $662,031 in 1996 and increased to $989,390 in 1997. The increase
from 1996 to 1997 is the result of an increase in the interest rate at
the Redick Plaza Hotel and interest expense at the Lofts at Red Hill
due to the new loan partially offset by the sale of the St. Mary's
Market. The decrease from 1995 to 1996 is due to the sale of St.
Mary's Market in October 1996.
Depreciation and amortization expense decreased
from $825,509 in 1995 to $820,712 in 1996 and to $542,504 in 1997.
The decrease from 1996 to 1997 is the result of the sale of the St.
Mary's Market and loan costs at the Redick Plaza Hotel becoming fully
amortized in November 1996 partially offset by the amortization of
loan fees incurred in connection with refinancing of the Redick Plaza
Hotel. The decrease from 1995 to 1996 is due to the sale of St.
Mary's Market in October 1996 partially offset by the depreciation of
additional personal property purchased in 1996 at Redick Plaza Hotel.
Of the total 1997 loss, a loss of approximately
$1,561,000 was incurred at the Registrant's three properties compared
to a loss of approximately $501,000 in 1996 and $603,000 in 1995. A
discussion of property operations/activities follows.
In 1997, Registrant incurred a loss of $1,506,000
at the Redick Plaza Hotel including $453,000 of depreciation and
amortization expense compared to a loss of $782,000 including $574,000
of depreciation and amortization expense in 1996 and a loss of
$341,000 including $525,000 of depreciation expense in 1995. The
increase in the loss from 1996 to 1997 is mainly due to decrease in
rental income due to a decrease in the average occupancy (73% to 53%)
and an increase in interest expense as a result of the increase in the
interest rate of the first mortgage. The decrease is partially offset
by an overall decrease in operating expenses due to the decrease in
the average occupancy. The occupancy decreased due to the conversion
to an independent hotel from an affiliation with the Radisson chain of
hotels. The increased loss from 1995 to 1996 is due to a decrease in
rooms revenue and an increase in rooms expense, professional and legal
fees, wages and salaries and depreciation expense. Rooms revenue
decreased due to a decrease in the average occupancy (83% to 73%) and
a decrease in the average nightly room rate ($92.15 to $94.24)
resulting from the opening of a new hotel in the area served by the
Registrant and, accordingly, an increase in competition. Rooms
expense increased due to an increase in commissions expense in an
effort to increase occupancy, professional fees increased due to fees
paid to a consulting firm in an effort to compete with the new hotel,
legal fees increased due to fees incurred in connection with the
bankruptcy filing and wages and salaries increased due to cost of
living increases given to employees. Depreciation expense increased
due to the depreciation of additional personal property purchased in
1996.
In 1997, Registrant incurred a loss of $25,000 at
the St. Mary's Market compared to income of $319,000 including
$189,000 of depreciation expense in 1996 and a loss of $206,000
including $242,000 of depreciation expense in 1995. The loss in 1997
relates to the write off of accounts receivable balances which were
deemed uncollectable. Included in income in 1996 is a gain of
$586,000 related to the sale of the building. Overall, exclusive of
the gain resulting from the sale of the building, the loss increased
from $206,000 in 1995 to $267,000 in 1996. The increase in the loss
from 1995 to 1996 is due to a decrease in occupancy and an overall
decrease in operating expenses due to the vacating of the units as
leases expired in anticipation of the sale of the property.
In 1997, Registrant incurred a loss of $30,000 at
the Lofts at Red Hill including $59,000 of depreciation and
amortization expense compared to a loss of $38,000 including $58,000
of depreciation expense in 1996 and a loss of $56,000 including
$58,000 of depreciation expense in 1995. The decrease in the loss
from 1996 to 1997 is due to an increase in rental income due to an
increase in the average occupancy (78% to 92%) partially offset by an
increase in interest expense due to the new note (See Part 2.
Properties.) The decrease in the loss from 1996 to 1995 is mainly the
result of a decrease in real estate tax expense due to a reduction in
the assessed value of the property.
Item 8. Financial Statement and Supplementary Data
Registrant is not required to furnish the supplementary
financial information referred to in Item 302 of Regulations S-K.
Independent Auditor's Report
To the Partners
Diversified Historic Investors V
We have audited the accompanying consolidated balance sheets of
Diversified Historic Investors V (a Pennsylvania Limited Partnership)
and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of operations, changes in partners' equity and
cash flows for the years ended December 31, 1997, 1996 and 1995.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion
on these financial statements based on our 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 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 provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in
the first paragraph present fairly, in all material respects, the
financial position of Diversified Historic Investors V and
subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for the years ended December 31,
1997, 1996 and 1995 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 22 is presented for the
purposes of additional analysis and is not a required part 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 12, 1998
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 1997 and 1996 12
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996, and 1995 13
Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 1997, 1996, and 1995 14
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996, and 1995 15
Notes to consolidated financial statements 16-20
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 22
Notes to Schedule XI 23
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
Assets
1997 1996
Rental properties at cost:
Land $ 347,955 $ 347,955
Buildings and improvements 10,976,514 10,976,514
Furniture and fixtures 1,175,768 1,158,605
---------- ----------
12,500,237 12,483,074
Less - accumulated depreciation (5,284,345) (4,777,178)
---------- ----------
7,215,892 7,705,896
Cash and cash equivalents 57,736 1,126,711
Restricted cash 176,129 8,956
Accounts and notes receivable 117,468 172,869
Other assets (net of amortization
of $190,812 and $65,610, respectively) 396,949 31,677
---------- ----------
Total $ 7,964,174 $ 9,046,109
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 6,804,113 $ 6,163,254
Accounts payable:
Trade 385,613 517,295
Related parties 55,000 130,063
Taxes 35,123 44,084
Interest payable 869,660 158,962
Accrued liabilities 77,899 79,243
Tenant security deposits 9,380 14,510
---------- ----------
Total liabilities 8,236,788 7,107,411
---------- ----------
Partners' equity (272,614) 1,938,698
---------- ----------
Total $ 7,964,174 $ 9,046,109
========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Revenues:
Rental income $ 120,685 $ 767,508 $1,205,122
Hotel income 1,755,787 2,387,200 2,548,434
Interest income 17,449 7,024 4,576
Gain on sale of property 0 655,296 0
--------- --------- ---------
Total revenues 1,893,921 3,817,028 3,758,132
--------- --------- ---------
Costs and expenses:
Rental operations 196,215 605,294 746,877
Hotel operations 1,828,128 2,237,857 2,036,995
General and administrative 548,996 98,859 96,000
Interest 989,390 662,031 765,349
Depreciation and amortization 542,504 820,712 825,509
--------- --------- ---------
Total costs and expenses 4,105,233 4,424,753 4,470,730
--------- --------- ---------
Net loss ($2,211,312) ($ 607,725) ($ 712,598)
========= ========= =========
Net loss per limited partnership unit ($ 196.48) ($ 54.00) ($ 63.32)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
Dover
Historic Limited
Advisors V (1) Partners (2) Total
Percentage participation in profit or loss 1% 99% 100%
Balance at December 31, 1994 ($136,563) $3,395,584 $3,259,021
Net loss (7,126) (705,472) (712,598)
------- --------- ---------
Balance at December 31, 1995 (143,689) 2,690,112 2,546,423
Net loss (6,077) (601,648) (607,725)
------- --------- ---------
Balance at December 31, 1996 (149,766) 2,088,464 1,938,698
Net loss (22,113) (2,189,199) (2,211,312)
------- --------- ---------
Balance at December 31, 1997 ($171,879) ($ 100,735) ($ 272,614)
======= ========= =========
(1) General Partner.
(2) 11,142 limited partnership units outstanding at December 31,
1997, 1996, and 1995.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash flows from operating activities:
Net loss ($2,211,312) ($ 607,725) ($ 712,598)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 542,504 820,712 825,509
Gain on sale 0 (655,296) 0
Changes in assets and liabilities:
(Increase) decrease in restricted cash (167,173) 232,280 7,310
Decrease (increase) in accounts and notes
receivable 55,401 (85,222) (12,012)
(Increase) decrease in other assets (400,613) 1,116,709 (241,543)
(Decrease) increase in accounts payable
- trade (131,681) 189,190 113,322
(Decrease) increase in accounts payable
- related (75,063) 143,012 460
(Decrease) increase in accounts payable
- taxes (8,961) 3,760 (2,773)
Increase (decrease) in interest payable 710,698 152,085 (31,904)
Decrease in accrued liabilities (5,130) (57,646) (17,805)
Decrease in tenant security deposits (1,344) (3,667) (2,759)
Net cash (used by) provided by --------- -------- ---------
operating activities (1,692,674) 1,248,192 (74,793)
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (17,163) (170,375) (104,401)
--------- --------- ---------
Net cash used in investing activities (17,163) (170,375) (104,401)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under debt obligations 640,862 20,939 221,555
Repayments of debt financing 0 (12,899) (86,150)
--------- --------- ---------
Net cash provided by financing
activities 640,862 8,040 135,405
--------- --------- ---------
(Decrease) increase in cash and cash
equivalents (1,068,975) 1,085,857 (43,789)
Cash and cash equivalents at beginning of
year 1,126,711 40,854 84,643
--------- --------- ---------
Cash and cash equivalents at end of year $ 57,736 $1,126,711 $ 40,854
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest $ 278,692 $ 509,946 $ 758,473
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors V (the "Partnership") is a Pennsylvania
limited partnership formed in July 1987 to acquire, rehabilitate,
renovate, manage, operate, hold, sell, exchange, and otherwise deal in
and with real properties containing improvements which are certified
historic structures, as defined in the Internal Revenue Code (the
"Code"), or which were eligible for designation of such, and to engage
in any and all activities related or incidental thereto. Any
rehabilitations undertaken by the Partnership are done with a view to
obtaining certification of expenditures therefore as "qualified
rehabilitation expenditures" as defined in the Code.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial
statements follows:
1. Principles of Consolidation
The accompanying financial statements include the accounts of the
Partnership and a subsidiary partnership (the "Venture"), in which the
Partnership has a 95% equity interest, with appropriate elimination of
inter-partnership transactions and balances. These financial
statements reflect all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of the General partner,
are necessary for a fair statement of the results for those years.
2. Depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Buildings and improvements are
depreciated over 25 years and furniture and fixtures over five years.
3. Net Loss Per Limited Partnership Unit
The net loss per limited partnership unit is based on the weighted
average number of limited partnership units outstanding (11,142 in
1997, 1996, and 1995).
4 Income Taxes
Income taxes or credits resulting from earnings or losses are payable
by or accrue to the benefit of the partners; accordingly, no provision
has been made for income taxes in these financial statements.
5. Cash and Cash Equivalents
The Partnership considers all highly liquid instruments purchased with
a maturity of less than three months to be cash equivalents.
6. Restricted Cash
Restricted cash includes amounts held for tenant security deposits and
real estate tax reserves.
7. Revenue Recognition
Revenues are recognized when rental payments are due on a straight-
line basis. Rental payments received in advance are deferred until
earned.
8. Deferred Expenses
Loan fees have been incurred with respect to certain loans. Such fees
were deferred and are being amortized over the term of the related
loans.
9. Rental Properties
Rental properties are stated at cost. A provision for impairment of
value is recorded when a decline in value of property is determined to
be other than temporary as a result of one or more of the following:
(1) a property is offered for sale at a price below its current
carrying value, (2) a property has significant balloon payments due
within the foreseeable future for which the Partnership does not have
the resources to meet, and anticipates it will be unable to obtain
replacement financing or debt modification sufficient to allow a
continued hold of the property over a reasonable period of time, (3) a
property has been, and is expected to continue, generating significant
operating deficits and the Partnership is unable or unwilling to
sustain such deficit results of operations, and has been unable to, or
anticipates it will be unable to, obtain debt modification, financing
or refinancing sufficient to allow a continued hold of the property
for a reasonable period of time or, (4) a property's value has
declined based on management's expectations with respect to projected
future operational cash flows and prevailing economic conditions. An
impairment loss is indicated when the undiscounted sum of estimated
future cash flows from an asset, including estimated sales proceeds,
and assuming a reasonable period of ownership up to 5 years, is less
than the carrying amount of the asset. The impairment loss is
measured as the difference between the estimated fair value and the
carrying amount of the asset. In the absence of the above
circumstances, properties and improvements are stated at cost. An
analysis is done on an annual basis at December 31 of each year.
NOTE C - PARTNERSHIP AGREEMENT
1. Capital Contributions
The Partnership offered investors limited partnership units at $1,000
per unit; the minimum purchase per investor was three units. A total
of 11,142 limited partnership units were sold. After payment of costs
of issuance as provided for in the Agreement and the withdrawal of the
initial limited partner, initial Partnership capital was $9,722,760
from limited partners and $9,900 from the General Partner.
2. Distributions from Operations
The Agreement provides that, beginning with the date of the admission
of the additional limited partners, all distributable cash from
operations (as defined) will be distributed 99% to the limited
partners and 1% to the General Partner. The General Partner also
receives an incentive management fee equal to 4% of available cash (as
defined).
All distributable cash from sales or dispositions (as defined) will be
distributed to the limited partners equal to their adjusted invested
capital (as defined) 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 (as defined), less amounts previously
distributed (as defined); thereafter, after receipt by the General
Partner or its affiliates of any accrued but unpaid real estate
brokerage commissions, the balance will be distributed 15% to the
General Partner and 85% to the limited partners.
3. Allocation of Net Income and Net Losses from Operations
Net income and net loss (as defined) will be allocated 99% to the
limited partners and 1% to the General Partner with certain exceptions
as defined in the Agreement.
The Agreement provides that the fiscal year of the Partnership will be
the calendar year and that the partnership shall continue until
December 31, 2037, unless sooner terminated upon the occurrence of
certain events.
NOTE D - ACQUISITIONS
The Partnership acquired two properties and one general partnership
interest in a Venture during December 1987, as discussed below.
The Partnership purchased a four-story building located in
Pennsylvania for an acquisition and rehabilitation price of
$1,325,000.
The Partnership purchased an 89-room hotel located in Nebraska. The
acquisition and rehabilitation price of this property was $9,500,000.
The Partnership was admitted, with a 95% general partner interest, to
a Pennsylvania limited partnership which owned a building located in
Louisiana consisting of 105 units and 6,900 square feet of commercial
space, for a cash contribution of $3,450,000. This property was sold
in October 1996.
NOTE E- DEBT OBLIGATIONS
Debt obligations consist of the following:
December 31,
1997 1996
------ ------
Variable rate insured Industrial Development Bonds due $6,404,574 $6,005,000
September 30, 2002; interest only payable monthly to
the extent of net operating income; collateralized by
the related property.
Note payable, interest at 13%; principal and interest 0 158,254
due monthly; principal due December 1, 1996.
Note payable, interest accrues at 14%; payable at 10%
monthly; principal due October 1, 2002. 399,539 0
--------- ---------
$6,804,113 $6,163,254
========= =========
Annual principal payments of debt obligations are as follows:
Year Ending December 31,
1998 $ 0
1999 0
2000 0
2001 0
2002 6,804,113
---------
$6,804,113
=========
NOTE F - COMMITMENTS AND CONTINGENCIES
In October 1996, a property owned by the Partnership, Redick Plaza
Hotel, was transferred to 1504 Harney Street Associates ("HSA") a
limited partnership in which the Partnership owns a 99% interest. The
property was transferred so that it would be held by the Partnership
in a manner similar to the other properties held by the Partnership.
HSA was unable to pay the bonds as they became due, and on October 28,
1996, HSA filed a reorganization petition pursuant to Chapter 11 of
the U.S. Bankruptcy Code. In July 1997, the loan was sold and the
bankruptcy dismissed. The Partnership entered into an agreement with
the new note holder of the note whereby monthly payments of interest
are to be made to the new note holder in an amount equal to net
operating income.
NOTE G - SALE OF ST. MARY'S MARKET
On October 10, 1996, one of the Registrant's Ventures, St. Mary's
Market Partnership sold its property to Residence Inn by Marriott,
Inc. The property was sold for $6,270,000. After payment of the
existing first mortgage loan balance of $4,432,356 and other selling
costs, the net proceeds of the sale were approximately $1,171,000.
NOTE H - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting ("book")
purposes and for income tax ("tax") purposes. A reconciliation of the
results of operations follows:
For the Years Ended December 31,
1997 1996 1995
------ ------ ------
Net loss - book ($2,211,312) ($ 607,725) ($ 712,598)
Excess of book over tax depreciation 85,758 12,815 57,160
Minority interest - tax only (14,399) (122,089) 7,881
Gain on foreclosure 0 240,055 0
Audit adjustments 0 0 (238)
--------- --------- ---------
Net loss - tax ($2,139,953) ($ 476,944) ($ 647,795)
========= ========= =========
Partners' equity - book ($ 272,613) $1,938,698 $2,546,423
Costs of issuance 1,419,240 1,419,240 1,419,240
Cumulative book over tax loss 1,173,303 1,101,945 971,163
Facade easement donation (tax only) (612,750) (612,750) (612,750)
--------- --------- ---------
Partners' equity - tax $1,707,180 $3,847,133 $4,324,076
========= ========= =========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
Initial Cost to
Partnership
Buildings
and Date of Date
Description (a) Encumbrances Land Improvements Constr. Acquir.
(e) (a)
21 unit condominium
complex in Red Hill, PA $ 399,539 $ 61,046 $ 1,461,413 1987 12/31/87
105 apartment units
and 6,900 square feet
of commercial space
in New Orleans, LA - - - 1988 12/30/87
89 room hotel in
Omaha, NE 6,404,574 286,909 10,166,705 86-87 12/28/87
--------- ------- ----------
$6,804,113 $347,955 $11,628,118
========= ======= ==========
Costs Gross Amount at which Carried
Capitalized at December 31, 1997
Subsequent
to
Acquisition
Buildings
and Accumulated
Description (a) Improvements Land Improvements Total Depr.
(b)(c) (c)(d)
21 unit condominium
complex in Red Hill, PA - $ 61,046 $1,463,562 $1,524,608 $ 594,811
105 apartment units
and 6,900 square feet
of commercial space
in New Orleans, LA - - 67,312 67,312
89 room hotel in
Omaha, NE 116,598 286,909 10,621,408 10,908,317 4,689,534
------- ------- ---------- ---------- ---------
$116,598 $347,955 $12,152,282 $12,500,237 $5,284,345
======= ======= ========== ========== =========
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 1997
(A) All properties are certified historic structures as defined in
the Internal Revenue Code of 1986, or are eligible for
designation as such. The "date of construction" refers to the
period in which such properties are rehabilitated.
(B) The cost of real estate owned at December 31, 1997, for Federal
income tax purposes was approximately $12,166,951. However,
the depreciable basis of buildings and improvements for the
Omaha and Red Hill properties was reduced for Federal income
tax purposes by 50% of the historic rehabilitation credit
obtained.
(C) Reconciliation of real estate:
1997 1996 1995
------ ------ ------
Balance at beginning of year $12,483,074 $19,507,622 $19,403,221
Additions during the year:
Improvements 17,163 170,375 104,401
Deductions during the year:
Sale of property 0 (7,194,923) 0
---------- ---------- ----------
Balance at end of year $12,500,237 $12,483,074 $19,507,622
========== ========== ==========
Reconciliation of accumulated depreciation:
1997 1996 1995
------ ------ ------
Balance at beginning of year $ 4,777,178 $ 6,514,441 $ 5,814,124
Depreciation expense for the year 507,167 695,508 700,317
Deductions during the year 0 (2,432,771) 0
---------- ---------- ----------
Balance at end of year $ 5,284,345 $ 4,777,178 $ 6,514,441
========== ========== ==========
(D) See Note B to the consolidated financial statements for
depreciation method and lives.
(E) See Note E to the consolidated financial statements for further
information.
Item 9. Changes in and disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
a. Identification of Directors - Registrant has no
directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Dover
Historic Advisors V (DoHA-V), a Pennsylvania general partnership. The
partners of DoHA-V are as follows:
Name Age Position Term of Office Period Served
Gerald Katzoff 49 Partner in DoHA-V No fixed term July 1987-May 1997
DHP, Inc. -- Partner in DoHA-V No fixed term July 1987-May 1997
(Formerly Dover
Historic Properties,
Inc.)
SWDHA, Inc. -- Partner in DoHA-V No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-V No fixed term Since May 1997
For further description of 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 a property management and partnership
administration firm engaged by the Registrant.
d. Family Relationships. There is no family
relationship between or among the executive officers and/or any person
nominated or chosen by Registrant to become an executive officer.
e. Business Experience. DoHA-V is a general
partnership formed in 1988. The General Partner is responsible for
management and control of Registrant's affairs and will have general
responsibility and authority in conducting its operations. The
General Partner may retain its affiliates to manage certain of the
Properties.
On May 13, 1997, SWDHA, Inc. replaced Gerald
Katzoff and EPK, Inc. replaced DHP, Inc. as partners of DoHA-V.
Spencer Wertheimer, the President of SWDHA, Inc., is an attorney with
extensive experience in real estate activities ventures.
EPK, Inc. is a Delaware corporation formed for the
purpose of managing properties or interests therein. EPK, Inc. is a
wholly-owned subsidiary of D, LTD, an entity formed in 1985 to act as
the holding company for various corporations engaged in the
development and management of historically certified properties and
conventional real estate as well as a provider of financial (non-
banking) services. EPK, Inc. is an affiliate of DoHA-V.
The officers and directors of EPK, Inc. are
described below.
Spencer Wertheimer was appointed on May 13, 1997
as President, Treasurer and Sole Director of EPK, Inc. Mr. Wertheimer
is an attorney with extensive experience in real estate activities
ventures.
Donna M. Zanghi (age 40) was appointed on May 13,
1997 as Vice President and Secretary of EPK, Inc. Ms. Zanghi
previously served as Secretary and Treasurer of DHP, Inc. since June
14, 1993 and as a Director and Secretary/Treasurer of D, LTD. She was
associated with DHP, Inc. and its affiliates since 1984 except for the
period from December 1986 to June 1989 and the period from November 1,
1992 to June 14, 1993.
Michele F. Rudoi (age 32) was appointed on May 13,
1997 as Assistant Secretary of EPK, Inc. Ms. Rudoi previously served
as Assistant Secretary and Director of both D, LTD and DHP, Inc. since
January 27, 1993.
Item 11. Executive Compensation
a. Cash Compensation - During 1997, Registrant has
paid no cash compensation to DoHA-V, any partner therein or any person
named in paragraph c. of Item 10.
b. Compensation Pursuant to Plans - Registrant has no
plan pursuant to which compensation was paid or distributed during
1997, or is proposed to be paid or distributed in the future, to DoHA-
V, any partner therein, or any person named in paragraph c. of Item 10
of this report.
c. Other Compensation - No compensation not referred
to in paragraph a. or paragraph b. of this Item was paid or
distributed during 1997 to DoHA-V, any partner therein, or any person
named in paragraph c. of Item 10.
d. Compensation of Directors - Registrant has no
directors.
e. Termination of Employment and Change of Control
Arrangement -
Registrant has no compensatory plan or arrangement, with respect to
any individual, which results or will result from the resignation or
retirement of any individual, or any termination of such individual's
employment with Registrant or from a change in control of Registrant,
or a change in such individual's responsibilities following such a
change in control.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
a. Security Ownership of Certain Beneficial Owners -
No person is known to Registrant to be the beneficial owner of more
than five percent of the issued and outstanding Units.
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-V is entitled to 10% of
Registrant's distributable cash from operations in each year. There
was no such share allocable to DoHA-V for fiscal years 1995 through
1997.
b. Certain Business Relationships - Registrant has no
directors.
c. Indebtedness of Management - No employee of
Registrant, Registrant's general partner, (or any employee thereof),
or any affiliate of any such person, is or has at any time been
indebted to Registrant.
PART V
Item 14. (A) Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
1. Financial Statements:
a. Consolidated Balance Sheets at December 31, 1997
and 1996.
b. Consolidated Statements of Operations for the Years
Ended December 31, 1997, 1996 and 1995.
c. Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 1997, 1996 and 1995.
d. Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995.
e. Notes to consolidated financial statements.
2. Financial statement schedules:
a. Schedule XI - Real Estate and Accumulated Depreciation.
b. Notes to Schedule XI.
3. Exhibits:
(a) Exhibit
Number Document
3 Registrant's Amended and Restated
Certificate of Limited Partnership and
Agreement of Limited Partnership,
previously filed as part of Amendment
No. 2 of Registrant's Registration
Statement on Form S-11, are
incorporated herein by reference.
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, 1997.
(c) Exhibits:
See Item 14(A)(3) above.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIVERSIFIED HISTORIC INVESTORS
Date: August 11, 1997 By: Dover Historic Advisors V, General Partner
---------------
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
-----------------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi
-----------------------
MICHELE F. RUDOI,
Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
DOVER HISTORIC ADVISORS V General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer April 15, 1998
----------------------- --------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi April 15, 1998
----------------------- --------------
MICHELE F. RUDOI,
Assistant Secretary