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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file 33-15597
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DIVERSIFIED HISTORIC INVESTORS V
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2479468
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1521 LOCUST STREET, PHILADELPHIA, PA 19102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215)557-9800
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Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act: 11,142 Units
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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. [ X ]
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 Pennsylvania Law. As of
December 31, 2000, 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 and
effective as of January 1999, its interest in another was
foreclosed. It currently owns one property. 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.
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 partnership
in which it has an interest, have been rehabilitated and
certified as historic structures and have received the related
investment tax credit. The Registrant's remaining property is
being held for rental operations. At this time it is anticipated
that this property will continue to be held for that purpose. At
such time as real property values in the area in which the
property is located begin to increase, the Registrant will re-
evaluate its investment strategy regarding the property.
As of December 31, 2000, Registrant owned one
property, located in Pennsylvania. The property contains 21
apartment units. As of December 31, 2000, 18 of the apartment
units were under lease at monthly rental rates ranging from $460
to $665. For a further discussion of the property, see Item 2,
Properties.
The Registrant is affected by and subject to the
general competitive conditions of the residential real estate
industry. 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 that 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.
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 one property.
A summary description of that property is given below.
The Lofts at Red Hill is a 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 square foot)
("sf"). In September 1997, a mortgage was placed on the property
in the amount of $400,000 (principal balance of $429,645 at
December 31, 2000). The proceeds from the mortgage were utilized
to satisfy certain outstanding liabilities of the Registrant. The
note accrues interest at 14% and is payable at 10%, with the
entire principal balance and accrued interest due October 1,
2002. The note is current, as payments in excess of interest at
10% are being made. The Registrant intends to renew this
mortgage at the same or better terms with the current lender or
refinance it in the open market.
The property is managed by BCMI. As of December 31,
2000, 18 apartment units were under lease (86%) at monthly rental
rates ranging from $460 to $665. All leases are renewable, one-
year leases. The occupancy for the previous four years was 86%
for 1999, 76% for 1998, 92% for 1997, and 78% for 1996. The
monthly rental range has been approximately the same since 1996.
For federal income 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
$15,441.13 based on an assessed value of $803,520 taxed at a rate
of $19.217 per $1,000 of assessed value. 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
To the best of its knowledge, as of December 31, 2000,
Registrant was not a party to, nor was its property the subject
of, any pending material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were 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 107 units were
sold or exchanged of record in 2000.
b. As of December 31, 2000, there were 1,353 record
holders of Units.
c. Registrant did not declare any cash dividends in
2000 or 1999.
Item 6. Selected Financial Data
The following selected financial data are for the five
years ended December 31, 2000. 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.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Rental income $ 133,925 $ 110,807 $ 121,383 $ 20,685 $ 767,508
Hotel income 0 18,181 1,131,690 1,755,787 2,387,208
Interest income 305 2,746 2,295 17,449 7,024
Net (loss) income (132,797) 3,630,276 (2,777,858)(2,211,312) (607,725)
Net (loss)
income per Unit (11.80) 322.56 (246.82) (196.48) (54.00)
Total assets (net
of depreciation
and amortization)1,065,966 1,179,580 6,764,832 7,964,174 9,046,109
Debt obligations 429,645 417,399 7,566,974 6,804,113 6,163,254
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(1) Liquidity
As of December 31, 2000, Registrant had cash of
$7,545. Such funds are expected to be used to pay liabilities and
general and administrative expenses of Registrant, and to fund
cash deficits of the property. Cash generated from operations is
used primarily to fund operating expenses and debt service. If
cash flow proves to be insufficient, the Registrant will attempt
to negotiate loan modifications with the lender in order to
remain current on all obligations. The Registrant is not aware
of any additional sources of liquidity.
As of December 31, 2000, Registrant had restricted
cash of $112,630 consisting primarily of funds held as security
deposits and escrows for real estate taxes. As a consequence of
these restrictions as to use, Registrant does not deem these
funds to be a source of liquidity.
(2) Capital Resources
Any capital expenditures needed are generally
replacement items and are funded out of cash from operations or
replacement reserves, if any. The Registrant is not aware of any
factors which would cause historical capital expenditure levels
not to be indicative of capital requirements in the future and
accordingly, does not believe that it will have to commit
material resources to capital investment for the foreseeable
future.
(3) Results of Operations
During 2000, Registrant incurred a net loss of
$132,797 ($11.80 per limited partnership unit) compared to net
income of $3,630,276 ($322.56 per limited partnership unit) in
1999 and a net loss of $2,777,858 ($246.82 per limited
partnership unit) in 1998.
Rental income was $133,925 in 2000, $110,807 in
1999, and $121,383 in 1988. The increase in rental income from
1999 to 2000 is due to an increase in average occupancy (82% to
90%) at the Lofts at Red Hill. The decrease in rental income from
1998 to 1999 is due to a decrease in the average occupancy (87%
to 82%) at the Lofts at Red Hill.
Hotel income was $0 in 2000, $18,181 in 1999, and
1,607,056 in 1998. The decrease in hotel income from 1999 to 2000
and 1998 to 1999 is due to the foreclosure of the Redick Plaza
Hotel effective as of January 1999.
Rental operations expense was $83,724 in 2000,
$81,554 in 1999, and $76,524 in 1998. The increase from 1998 to
1999 is due to an increase in maintenance expense at the Lofts at
Red Hill due to painting and plumbing repairs made at the
property throughout the year.
Hotel operations expense was $0 in 2000, 96,318 in
1999, and 1,607,056 in 1998. The decrease from 1999 to 2000 and
1998 to 1999 is due to the foreclosure of the Redick Plaza Hotel
effective as of January 1999.
General and administrative expense was $0 in 2000,
$75,646 in 1999 and $76,346 in 1998. The Registrant ceased
accruing partnership administration fees in 2000. The cash flow
and debt of the Registrant make it unlikely that these fees will
be paid. Legal and accounting fees also decreased due to the
foreclosure of the Redick Plaza Hotel effective as of January
1999.
Interest expense was $60,246 in 2000, $100,735 in
1999 and $1,011,704 in 1998. The decrease in interest expense
from 1999 to 2000 and 1998 to 1999 is due to the foreclosure of
the Redick Plaza Hotel effective as of January 1999.
Depreciation and amortization expense was $123,057
in 2000, $141,961 in 1999, and $584,544 in 1998. The decrease
from 1999 to 2000 and from 1998 to 1999 is due to the foreclosure
of the Redick Plaza Hotel effective as of January 1999.
A nonrecurring impairment loss of $677,052 was
recognized in 1998. During 1998, the value of the Redick Plaza
Hotel was deemed to be impaired and it was written down to its
fair value. Fair value, which was determined by reference to the
present value of the estimated future cash flows, exceeded the
carrying value by $677,052.
Effective as of January 1999 the Redick Plaza Hotel
was foreclosed by the second mortgage lender, with the consent of
the first mortgage lender, by recordation of a deed in lieu of
foreclosure. The deed was recorded in June 1999 to be effective
as of January 15, 1999. As a result, the Registrant realized an
extraordinary gain on forgiveness of indebtedness in the amount
of $3,994,755, which is the difference between the debt of the
hotel and the net book value of its assets.
During the year, a net loss of approximately $71,000
was incurred at the Registrant's remaining property compared to
net income of approximately $3,765,000 in 1999 and a net loss of
approximately $1,962,000 in 1998. Included in income for 1999 is
extraordinary income of $3,994,755 related to the foreclosure of
the Redick Plaza Hotel effective as of January 1999. A
discussion of property operations/activities follows.
In 2000, Registrant incurred a net loss of $71,000
at the Lofts at Red Hill including $61,000 of depreciation and
amortization expense compared to a net loss of $90,000 including
$61,000 of depreciation expense in 1999 and a loss of $74,000
including $61,000 in depreciation expense in 1998. The decrease
in net loss from 1999 to 2000 is due to an increase in rental
income and a decrease in rental operations expense. The increase
in rental income is due to an increase in average occupancy (82%
to 90%). The decrease in rental operations expense is due to a
decrease in legal and accounting fees. The increase in the loss
from 1998 to 1999 is due to a decrease in rental income combined
with an increase in maintenance expense. The decrease in rental
income is due to a decrease in average occupancy (87% to 82%).
Maintenance expense increased due to painting and plumbing
repairs made at the property. In 1999, Registrant recognized
income of $3,855,000 at the Redick Plaza Hotel, including $19,000
of depreciation and amortization expense, compared to a loss of
$1,888,000, including $462,000 of depreciation and amortization
expense, in 1998. Included in income for 1999 is extraordinary
income of $3,995,000 related to the foreclosure of the Redick
Plaza Hotel effective as of January 1999.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk
Not applicable.
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 sheet of
Diversified Historic Investors V (a Pennsylvania Limited
Partnership) and subsidiaries as of December 31, 2000 and 1999
and the related statements of operations and changes in partners'
equity and cash flows for the years ended December 31, 2000, 1999
and 1998. These consolidated financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
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 audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Diversified Historic Investors V as of December 31,
2000 and 1999, and the results of operations and cash flows for
the years ended December 31, 2000, 1999 and 1998 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 20 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.
The accompanying financial statements have been prepared assuming
that the partnership will continue as a going concern. In recent
years, the partnership has incurred significant losses from
operations, which raise substantial doubt about its ability to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
Gross, Kreger & Passio, L.L.C.
Philadelphia, Pennsylvania
June 25, 2001
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, 2000 and 1999 10
Consolidated Statements of Operations for the Years
Ended December 31, 2000, 1999, and 1998 11
Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 2000, 1999, and 1998 12
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999, and 1998 13
Notes to consolidated financial statements 14-18
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 20
Notes to Schedule XI 21
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, 2000 and 1999
Assets
2000 1999
---- ----
Rental properties at cost:
Land $ 61,046 $ 61,046
Buildings and improvements 1,445,431 1,445,431
Furniture and fixtures 89,316 86,863
---------- ----------
1,595,793 1,593,340
Less - accumulated depreciation (769,734) (711,121)
---------- ----------
826,059 882,219
Cash and cash equivalents 7,545 3,951
Restricted cash 112,630 116,039
Accounts and notes receivable 6,954 150
Other assets (net of amortization
of $224,919 and $160,475,
respectively) 112,778 177,221
---------- ----------
Total $1,065,966 $1,179,580
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 429,645 $ 417,399
Accounts payable:
Trade 115,800 111,524
Related parties 33,656 33,656
Taxes 17,332 13,693
Accrued liabilities 12,811 14,160
Tenant security deposits 9,715 9,344
---------- ----------
Total liabilities 618,959 599,776
Partners' equity 447,007 579,804
---------- ----------
Total $1,065,966 $1,179,580
========== ==========
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, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Revenues:
Rental income $133,925 $ 110,807 $ 121,383
Hotel income 0 18,181 1,131,690
Interest income 305 2,746 2,295
-------- ---------- ----------
Total revenues 134,230 131,734 1,255,368
-------- ---------- ----------
Costs and expenses:
Rental operations 83,724 81,554 76,524
Hotel operations 0 96,317 1,607,056
General and administrative 0 75,646 76,346
Interest 60,246 100,735 1,011,704
Depreciation and amortization 123,057 141,961 584,544
Impairment loss 0 0 677,052
-------- ---------- ----------
Total costs and expenses 267,027 496,213 4,033,226
-------- ---------- ----------
Loss before extraordinary item (132,797) (364,479) (2,777,858)
Extraordinary gain on
extinguishment of debt 0 3,994,755 0
-------- ---------- ----------
Net (loss) income ($132,797) $3,630,276 ($2,777,858)
======== ========== ==========
Net (loss) income per limited
partnership unit
Loss before extraordinary item ( 11.80) ( 32.39) ( 246.82)
Extraordinary item 0 354.95 0
-------- ---------- ----------
($ 11.80) $ 322.56 ($ 246.82)
======== ========== ==========
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, 2000, 1999 and 1998
Dover
Historic Limited
Advisors V Partners
(1) (2) Total
-------- -------- ---------
Percentage participation in
profit or loss 1% 99% 100%
== === ====
Balance at December 31, 1997 ($171,879) ($ 100,735) ($ 272,614)
Net loss (27,779) (2,750,079) (2,777,858)
-------- ---------- ----------
Balance at December 31, 1998 (199,658) (2,850,814) (3,050,472)
Net income 36,303 3,593,973 3,630,276
-------- ---------- ----------
Balance at December 31, 1999 (163,355) 743,159 579,804
Net loss (1,328) (131,469) (132,797)
-------- ---------- ----------
Balance at December 31, 2000 ($164,683) $ 611,690 $ 447,007
======== ========== ==========
(1) General Partner.
(2) 11,142 limited partnership units outstanding at December 31,
2000, 1999, and 1998.
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, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Cash flows from operating
activities:
Net income (loss) ($132,797) $3,630,276 ($2,777,858)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortization 123,057 141,961 584,544
Extraordinary gain on
extinguishment of debt 0 (3,994,755) 0
Impairment loss 0 0 677,052
Changes in assets and liabilities:
Decrease (increase) in restricted
cash 3,409 (3,612) (87,733)
(Increase) decrease in accounts
and notes receivable (6,804) (90) 17,514
Increase in other assets 0 0 (67,000)
Increase in accounts payable -
trade 4,276 114,167 193,360
Decrease in accounts payable -
related parties 0 0 (21,344)
Increase in accounts payable -
taxes 3,639 57,756 60,135
Increase in interest payable 0 42,320 629,191
(Decrease) increase in accrued
liabilities (1,350) 153 (44,452)
Increase (decrease) in tenant
security deposits 371 1,199 (1,235)
---------- ---------- ----------
Net cash used in operating
activities (6,199) (10,625) (837,826)
---------- ---------- ----------
Cash flows from investing
activities:
Assets disposed of 0 0 73,000
Capital expenditures (2,453) (1,420) (41,785)
---------- ---------- ----------
Net cash (used in) provided
by investing activities (2,453) (1,420) 31,215
---------- ---------- ----------
Cash flows from financing
activities:
Proceeds from debt financings 12,246 10,414 762,861
Repayments of debt financings 0 (8,404) 0
---------- ---------- ----------
Net cash provided by
financing activities 12,246 2,010 762,861
---------- ---------- ----------
Increase (decrease) in cash and
cash equivalents 3,594 (10,035) (43,750)
Cash and cash equivalents at
beginning of year 3,951 13,986 57,736
---------- ---------- ----------
Cash and cash equivalents at
end of year $ 7,545 $ 3,951 $ 13,986
========== ========== ==========
Supplemental Disclosure of Cash
Flow Information
Cash paid during the year for
interest $ 48,000 $ 48,000 $ 382,513
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 as such, and to engage
in any and all activities related or incidental thereto. Any
rehabilitations undertaken by the Partnership were done with a view to
obtaining certification of expenditures as "qualified rehabilitation
expenditures" as defined in the Code.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies 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, 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
2000, 1999, and 1998).
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 a 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 anticipates it will be unable to
obtain replacement financing or debt modification sufficient to allow
it to continue to hold 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 deficits, and has been unable, or
anticipates it will be unable, to obtain debt modification, financing
or refinancing sufficient to allow it to continue to hold 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.
11. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
NOTE C - PARTNERSHIP 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 will be distributed
to the limited partners in an amount equal to their adjusted invested
capital plus an amount equal to 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 average adjusted
invested capital, 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 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 a general partnership
interest in a partnership, which acquired a property in 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.
This property was foreclosed effective as of January 1999.
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 residential apartment 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,
2000 1999
---- ----
Note payable, interest accrues at 14% and
is payable at 10%; principal due October $429,645 $417,399
1, 2002. -------- --------
Annual principal payments of debt obligations are as follows:
Year ending December 31,
------------------------
2000 0
2001 0
2002 $429,645
2003 0
2004 0
--------
$429,645
========
NOTE F - TRANSACTIONS WITH RELATED PARTIES
Included in Accounts Payable - Related Parties was $33,656 at December
31, 2000 and 1999 owed to the co-general partner in the partnership
referred to in Note D, for amounts owed in connection with the sale of
such partnership's property.
NOTE G - IMPAIRMENT LOSS
During 1998, the Redick Plaza Hotel was deemed to be impaired and was
written down to its fair value. Fair value, which was determined by
reference to the present value of the estimated future cash flow,
exceeded the carrying value by $677,052. An impairment loss of that
amount was charged to operations in 1998.
NOTE H - EXTRAORDINARY GAIN
Effective as of January 1999, the Redick Plaza Hotel was foreclosed by
the second mortgage lender, with the consent of the first mortgage
lender, by recordation of deed in lieu of foreclosure. As a result,
the Registrant realized an extraordinary gain on forgiveness of
indebtedness in the amount of $3,994,755, which is the difference
between the debt of the hotel and the net book value of its assets.
NOTE I - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time periods for financial reporting ("book")
purposes and for income tax ("tax") purposes. A reconciliation of the
results of operations follows:
For the Years Ended December 31,
2000 1999 1998
------ ------ ------
Net income (loss) - book ($ 132,797) $3,630,276 ($2,777,858)
Excess of book over tax depreciation 4,609 6,033 98,002
Minority interest - tax only 0 (17,168) (18,126)
Impairment loss 0 0 677,052
Extraordinary gain on debt
extinguishment 0 (946,522) 0
---------- ---------- ----------
Net income (loss) - tax ($ 128,188) $2,672,619 ($2,020,930)
========== ========== ==========
Partners' equity - book $ 447,007 $ 579,804 ($3,050,472)
Costs of issuance 1,419,240 1,419,240 1,419,240
Cumulative book over tax loss 977,184 972,575 1,930,232
Facade easement donation (tax only) (612,750) (612,750) (612,750)
---------- ---------- ----------
Partners' equity - tax $2,230,681 $2,358,869 ($ 313,750)
========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
Cost
Capitalized
Initial Cost Subsequent to
to Partnership Acquisition
Buildings Date of Date
Encumbrances and Constr. Acqu-
Description(a) (e) Land Improvements Improvements (a) ired
21 unit
condominium
Complex in
Red Hill, PA $429,645 $61,046 $1,461,413 $ 6,022 1987 12/31/87
105 apartment
units and
6,900 square
feet of
commercial
space in New
Orleans, LA 0 0 0 67,312 1988 12/30/87
-------- ------- ---------- -------
$429,645 $61,046 $1,461,413 $73,334
======== ======= ========== =======
Gross Amount at which Carried at
December 31, 2000
Buildings
and Total Accumulated
Description(a) Land Improvements (b) (c) Depr.(c)(d)
21 unit
condominium
complex in Red
Hill, PA $61,046 $1,467,435 $1,528,481 $769,734
105 apartment
units and
6,900 square
feet of
commercial space
in
New Orleans, LA 0 67,312 67,312 0
------- ---------- ---------- --------
$61,046 $1,534,747 $1,595,793 $769,734
======= ========== ========== ========
DIVERSIFIED HISTORIC INVESTORS V
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2000
(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 were rehabilitated.
(B) The cost of real estate owned at December 31, 2000, for Federal
income tax purposes was approximately $1,477,845. The
depreciable basis of buildings and improvements was reduced for
Federal income tax purposes by 50% of the historic rehabilitation
credit obtained.
(C) Reconciliation of land, buildings and improvements:
2000 1999 1998
---- ---- ----
Balance at beginning of year $1,593,340 $11,791,970 $12,500,237
Additions during the year:
Improvements 2,453 1,420 41,785
Deductions during the year:
Impairment loss 0 0 (677,052)
Foreclosure of property 0 (10,200,050) (73,000)
---------- ----------- -----------
Balance at end of year $1,595,793 $ 1,593,340 $11,791,970
========== =========== ===========
Reconciliation of accumulated depreciation:
2000 1999 1998
---- ---- ----
Balance at beginning of year $ 711,121 $ 5,752,945 $ 5,284,345
Depreciation expense for the year 58,613 76,892 468,600
Deductions during the year 0 (5,118,716) 0
---------- ----------- -----------
Balance at end of year $ 769,734 $ 711,121 $ 5,752,945
========== =========== ===========
(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:
Term of
Name Age Position Office Period Served
---- --- -------- ------ -------------
SWDHA, Inc. -- Partner in No fixed Since May 1997
DoHA-V term
EPK, Inc. -- Partner in No fixed Since May 1997
DoHA-V term
For further description of DoHA-V, 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 and 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 and
ventures.
Donna M. Zanghi (age 43) 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., a subsidiary of D,
LTD, since June 14, 1993 and as a Director and Secretary/Treasurer of
D, LTD. She has been 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 35) was appointed on May 13, 1997
as Assistant Secretary of EPK, Inc. Ms. Rudoi has 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 2000, Registrant 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 2000, 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 2000 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. Neither the general
partner of the registrant, nor its partners own any units.
b. Security Ownership of Management - None.
c. Changes in Control - Registrant does not know of any
arrangement, the operation of which may at a subsequent date result in
a change in control of Registrant.
Item 13. Certain Relationships and Related Transactions
a. Pursuant to Registrant's Amended and Restated Agreement
of Limited Partnership, DoHA-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 1998 through 2000.
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, 2000 and 1999.
b. Consolidated Statements of Operations for
the Years Ended December 31, 2000, 1999 and 1998.
c. Consolidated Statements of Changes in
Partners' Equity for the Years Ended December 31,
2000, 1999 and 1998.
d. Consolidated Statements of Cash Flows for
the Years Ended December 31, 2000, 1999 and 1998.
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.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during
the quarter ended December 31, 2000.
(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: November 1, 2001 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 November 1, 2001
---------------------- -----------------
SPENCER WERTHEIMER
President and Treasurer
By: /s/ Michele F. Rudoi November 1, 2001
----------------------- -----------------
MICHELE F. RUDOI
Assistant Secretary