UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 33-19811
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DIVERSIFIED HISTORIC INVESTORS VI
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2492210
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1521 Locust Street, Philadelphia, PA 19102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
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N/A
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
Assets
September 30, 2001 December 31, 2000
------------------ -----------------
(Unaudited)
Rental properties, at cost:
Land $ 950,238 $ 950,238
Buildings and improvements 27,122,815 27,285,223
Furniture and fixtures 1,030,601 864,471
----------- -----------
29,103,654 29,099,932
Less - accumulated depreciation (14,085,389) (13,243,935)
----------- -----------
15,018,265 15,855,997
Cash and cash equivalents 63,817 46,215
Restricted cash 329,518 365,806
Investment in affiliate (60,535) (48,006)
Other assets (net of
amortization of
$852,676 and $751,489) 298,526 426,782
----------- -----------
Total $15,649,591 $16,646,794
=========== ===========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $16,668,663 $16,857,962
Accounts payable:
Trade 1,342,470 1,321,939
Taxes 14,945 20,465
Related parties 457,464 446,202
Other 15,271 10,824
Interest payable 1,703,228 1,618,642
Tenant security deposits 178,089 168,550
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Total liabilities 20,380,130 20,444,584
Partners' deficit (4,730,539) (3,797,790)
----------- -----------
Total $15,649,591 $16,646,794
=========== ===========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three months Nine months
ended September 30, ended September 30,
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Rental income $580,772 $614,405 $1,814,518 $1,815,109
Other income 0 3,146 3,916 6,360
Interest income 930 1,110 3,714 1,110
-------- -------- ---------- ----------
Total revenues 581,702 618,661 1,822,148 1,822,579
-------- -------- ---------- ----------
Costs and expenses:
Rental operations 226,963 331,870 950,167 973,776
Interest 257,710 349,920 849,557 1,044,630
Depreciation and
amortization 328,705 291,901 942,643 874,481
-------- -------- ---------- ----------
Total costs and
expenses 813,378 973,691 2,742,367 2,892,887
-------- -------- ---------- ----------
Loss before equity
in affiliate (231,676) (355,030) (920,219) (1,070,308)
Equity in net loss of
affiliate (4,952) 0 (12,529) (11,808)
-------- -------- ---------- ----------
Net loss ($236,628) ($355,030) ($ 932,748) ($1,082,116)
======== ======== ========== ==========
Net loss per limited
partnership unit:
Loss before equity in
affiliate ($ 9.01) ($ 13.80) ($ 35.78) ($ 41.62)
Equity in net loss of
affiliate (.19) (.00) (.49) (.46)
-------- -------- ---------- ----------
Net loss ($ 9.20) ($ 13.80) ($ 36.27) ($ 42.08)
======== ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Nine months ended
September 30,
2001 2000
---- ----
Cash flows from operating activities:
Net loss ($932,748) ($1,082,116)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 942,643 874,481
Equity in loss of affiliate 12,529 11,808
Changes in assets and liabilities:
Increase in restricted cash 36,287 4,391
Decrease (increase) in other assets 27,069 (28,250)
Decrease in accounts payable taxes (5,520) (5,520)
Increase in accounts payable - trade 20,531 29,378
Increase (decrease) in accounts
payable - related parties 11,262 (13,314)
Increase (decrease) in accounts
payable - other 4,447 (33,761)
Increase in interest payable 84,585 398,341
Increase in tenant security deposits 9,538 3,456
Increase in advances 0 34,287
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Net cash provided by operating activities 210,623 193,181
-------- ----------
Cash flows from investing activities:
Capital expenditures (3,722) (5,809)
-------- ----------
Net cash used in investing activities (3,722) (5,809)
-------- ----------
Cash flows from financing activities:
Principal payments (189,299) (174,641)
-------- ----------
Net cash used in financing activities (189,299) (174,641)
-------- ----------
Increase in cash and cash equivalents 17,602 12,731
Cash and cash equivalents at
beginning of period 46,215 40,599
-------- ----------
Cash and cash equivalents at end
of period $ 63,817 $ 53,330
======== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors VI (the "Registrant") and related notes have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying
consolidated financial statements and related notes should be read in
conjunction with the audited financial statements and notes thereto
contained in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
NOTE 2- SUBSEQUENT EVENTS
Strehlow Terrace Apartments was foreclosed by the Department of
Housing and Urban Development, the guarantor of the first mortgage, on
April 30, 2002.
On June 30, 2002, the Registrant sold its investment in Saunders
Apartments for $25,000. The proceeds of the sale were used to pay the
accrued expenses of the Registrant.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of September 30, 2001, Registrant had cash of $63,818.
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 September 30, 2001, Registrant had restricted cash
of $329,518 consisting primarily of funds held as security deposits,
replacement reserves and escrows for taxes and insurance. As a
consequence of the restrictions as to use, Registrant does not deem
these funds to be a source of liquidity.
Strehlow Terrace Apartments was foreclosed by the
Department of Housing and Urban Development, the guarantor of the
first mortgage, on April 30, 2002.
On June 30, 2002, the Registrant sold its investment in
Saunders Apartments for $25,000. The proceeds of the sale were used
to pay the accrued expenses of the Registrant.
In recent years the Registrant has realized significant
losses, including the foreclosure of two properties and a substantial
reduction of interest in a third property. At the present time, the
remaining properties are able to pay their operating expenses and debt
service including two of the properties where the mortgages are cash-
flow mortgages, requiring all available cash after payment of
operating expenses to be paid to the first mortgage holder. None of
the properties are currently producing a material amount of revenues
in excess of operating expenses and debt service. Therefore, it is
unlikely that any cash will be available to the Registrant to pay its
general and administrative expenses.
It is the Registrant's intention to continue to hold the
properties until they can no longer meet the debt service requirements
and the properties are foreclosed, or the market value of the
properties increases to a point where they can be sold at a price
which is sufficient to repay the underlying indebtedness (principal
plus accrued interest).
(2) Capital Resources
Any capital expenditures needed are generally replacement
items and are funded out of cash from operations or replacement
reserves, if any. Registrant is not aware of any factors which would
cause historical capital expenditure levels not to be indicative of
capital requirements in the future and accordingly, does not believe
that it will have to commit material resources to capital investment
for the foreseeable future.
(3) Results of Operations
During the third quarter of 2001, Registrant incurred a
net loss of $236,628 ($9.20 per limited partnership unit) compared to
a net loss of $355,030 ($13.80 per limited partnership unit) for the
same period in 2000. For the first nine months of 2001, the
Registrant incurred a net loss of $932,478 ($36.26 per limited
partnership unit) compared to a net loss of $1,082,116 ($42.08 per
limited partnership unit) for the same period in 2000.
Rental income decreased $33,633 from $614,405 in the
third quarter of 2000 to $580,772 in the same period of 2001 and for
the first nine months decreased $591 from $1,815,109 in the first nine
months of 2000 to $1,814,518 in the same period in 2001. The decrease
from the third quarter and the first nine months of 2000 to the same
period in 2001 is due to a decrease in rental income at Roseland and
at Strehlow Terrace, partially offset by an increase at Firehouse
Square, Canal House, and Mater Dolorosa. The decrease in rental income
at Roseland is due to a decrease in subsidized rental payments. The
decrease at Strehlow Terrace is due to a non-recurring insurance
recovery in 2000. The increase at Firehouse Square, Canal House, and
Mater Dolorosa is due to an increase in average rental rates.
Rental operations expense decreased $104,907 from
$331,870 in the third quarter of 2000 to $226,963 in the same period
of 2001 and for the first nine months decreased $23,609 from $973,776
in 2000 to $950,167 in the same period of 2001. The decrease in rental
operations expense from the third quarter and the first nine months of
2000 to the same period in 2001 is due to a decrease in wages and
salaries expense, maintenance expense and insurance expense. The
decrease in wages and salaries expense is due to a decrease at Mater
Dolorosa due to a decrease in contract security payroll. The decrease
in maintenance expense at Firehouse Square is due to a decrease in
roof repairs. The decrease in insurance expense at Canal House is due
to insurance market conditions.
Interest expense decreased by $92,210 from $349,920 in
the third quarter of 2000 to $257,710 in the same period in 2001 and
decreased $195,073 from $1,044,630 in the first nine months of 2000 to
$849,557 for the same period in 2001. The decrease from the third
quarter and the first nine months of 2000 to the same period in 2001
is due to a decrease in interest expense at Firehouse Square and
Strehlow Terrace due to the timing of interest expense accruals.
The losses incurred during the quarter at the
Registrant's properties was $209,000, compared to a loss of
approximately $336,000 for the same period in 2000. For the first
nine months of 2001 the Registrant's properties incurred a loss of
$850,000 compared to approximately $1,013,000 for the same period in
2000.
In the third quarter of 2001, Registrant incurred a loss
of $82,000 at Firehouse Square including $87,000 of depreciation and
amortization expense, compared to a loss of $167,000 including $64,000
of depreciation and amortization expense in the third quarter of 2000
and, for the first nine months of 2001, incurred a loss of $272,000
including $217,000 of depreciation and amortization expense, compared
to a loss of $400,000 including $193,000 of depreciation and
amortization expense for the same period in 2000. The decrease in the
loss from the third quarter and the first nine months of 2000 to the
same period in 2001 is due to an increase in rental income, and a
decrease in maintenance expense and interest expense. The increase in
rental income is due to an increase in average rental rates. The
decrease in maintenance expense is due to a decrease in roof repairs
and maintenance service. The decrease in interest expense is due to
the timing of interest expense accruals.
In the third quarter of 2001, Registrant incurred a loss
of $68,000 at Canal House including $113,000 of depreciation and
amortization expense, compared to a loss of $66,000 including $98,000
of depreciation and amortization expense in the third quarter of 2000.
For the first nine months of 2001, the Registrant incurred a loss of
$343,000 including $339,000 of depreciation and amortization expense,
compared to a loss of $308,000 for the same period in 2000 including
$295,000 of depreciation and amortization expense. The increase in
income before depreciation and amortization from the third quarter of
2000 to the same period in 2001 is due to an increase in rental income
and a decrease in utilities expense and leasing commissions. The
increase in rental income is due to an increase in average rental
rates. The decrease in utilities expense is due to a decrease in
electricity charges. The decrease in leasing commissions is due to a
decrease in turnover of apartment units. The decrease in loss before
depreciation and amortization from the first nine months of 2000 to
the same period in 2001 is due to an increase in rental income and a
decrease in insurance expense. The increase in rental income is due
to an increase in average rental rates. The decrease in insurance
expense is due to insurance market conditions.
In the third quarter of 2001, the Registrant incurred a
loss of $45,000 including $60,000 of depreciation at Strehlow Terrace,
compared to a loss of $85,000 including $60,000 of depreciation
expense in the third quarter of 2000. For the first nine months of
2001, the Registrant incurred a loss of $152,000 including $181,000 of
depreciation expense at Strehlow Terrace, compared to a loss of
$239,000 including $180,000 of depreciation and amortization expense
for the same period in 2000. The decrease in loss for the third
quarter and the first nine months of 2001 to the same period in 2000
is due to a decrease in interest expense, partially offset by a
decrease in rental income. The decrease in interest is due to the
timing of interest expense accruals. The decrease in rental income is
due to a non-recurring insurance recovery in 2000.
Strehlow Terrace Apartments was foreclosed by the
Department of Housing and Urban Development, the guarantor of the
first mortgage, on April 30, 2002.
In the third quarter of 2001, Registrant recognized
income of $23,000 at Mater Dolorosa including $32,000 of depreciation
and amortization expense, compared to income of $4,000 including
$32,000 of depreciation and amortization expense in the third quarter
of 2000 and, for the first nine months of 2001, the Registrant
recognized income of $7,000 at Mater Dolorosa including $95,000 of
depreciation and amortization expense, compared to income of $3,000
including $96,000 of depreciation and amortization expense for the
same period in 2000. The increase in income for the third quarter and
the first nine months of 2001 to the same periods in 2000 is due to an
increase in rental income and decreases in legal and accounting
expense and wages and salaries expense. The increase in rental income
is due to an increase in average rental rates. The decrease in legal
and accounting expense is due to a decrease in auditing expense. The
decrease in wages and salaries expense is due to a decrease in
contract security payroll.
In the third quarter of 2001, Registrant incurred a loss of
$37,000 at Roseland including $17,000 of depreciation and amortization
expense, compared to a loss of $22,000 including $18,000 of
depreciation in the third quarter of 2000 and, for the first nine
months of 2001, the Registrant incurred a loss of $90,000 including
$52,000 of depreciation and amortization expense, compared to a loss
of $69,000, including $53,000 of depreciation and amortization expense
for the same period in 2000. The increase in loss from the third
quarter and the first nine months of 2000 to the same period in 2001
is due to a decrease in rental income and increases in utilities
expense and wages and salaries expense. The decrease in rental income
is due to a decrease in subsidized rental payments. The increase in
utilities expense is due to an increase in electric, water, and sewer
charges. The increase in wages and salaries expense is due to an
increase in resident managers salaries.
The Registrant owns a minority interest in Saunders
Apartments which it accounts for on the equity method. The Registrant
does not include the assets or liabilities of Saunders Apartments in
its consolidated financial statements. The following operating
information is provided for the property. For the third quarter and
the first nine months of 2001 Registrant incurred a loss of $13,000 at
Saunders Apartments compared to a loss of $12,000 for the same period
of 2000. The increase in the loss from the third quarter and first
nine months of 2001 to the same period in 2000 is due to an increase
in wages and salaries expense. The increase is due to an increase in
managers and assistant managers salaries and employee benefits
expense.
On June 30, 2002, the Registrant sold its investment in
Saunders Apartments for $25,000. The proceeds of the sale were used
to pay the accrued expenses of the Registrant.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
All of our assets and liabilities are denominated in U.S.
dollars, and as a result, we do not have exposure to currency exchange
risks.
We do not engage in any interest rate, foreign currency
exchange rate or commodity price-hedging transactions, and as a
result, we do not have exposure to derivatives risk.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our
Securities Exchange Act of 1934 reports is recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms, and that such information is accumulated and
communicated to our management, including our managing partner's
principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures,
our management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and our management
necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible controls and procedures.
Under the supervision of our managing partner's principal
executive officer and principal financial officer we have carried out
an evaluation of the effectiveness of our adopted disclosure controls
and procedures as of the end of the period covered by this report.
Based upon that evaluation, our managing partner's president and
treasurer concluded that our disclosure controls and procedures are
effective.
There have been no significant changes in our internal
controls over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting during our most recent fiscal quarter.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not party to,
nor is any of its property the subject of, any pending material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter covered by this
report to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Document
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3 Registrant's Amended and
Restated Certificate of Limited
Partnership and Agreement of
Limited Partnership, previously
filed as part of Amendment No.
2 of Registrant's Registration
Statement on Form S-11, are
incorporated herein by
reference.
21 Subsidiaries of the Registrant
are listed in Item 2.
Properties on Form 10-K,
previously filed and
incorporated herein by
reference.
31 General Partners Opinion
Certification
32 Certification Pursuant to 18
U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
ended September 30, 2001.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DIVERSIFIED HISTORIC INVESTORS VI
By: Dover Historic Advisors VI, its
general partner
By: EPK, Inc., managing partner
Date: July 19, 2004 By: /s/ Spencer Wertheimer
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SPENCER WERTHEIMER
President (principal executive
officer, principal financial
officer)
Exhibit 31
CERTIFICATION
I, Spencer Wertheimer, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
quarterly period ended September 30, 2001, of Diversified Historic
Investors VI;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) [Omission in accordance with SEC Release Nos. 33-
8238, 34-47986 and IC-26068 (June 5, 2003)] for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to me by others within those entities, particularly during
the period in which this report is being prepared;
(b) [Omitted in accordance with SEC Release Nos. 33-8238, 34-
47986 and IC-26068 (June 5, 2003)];
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: July 19, 2004 /s/ Spencer Wertheimer
------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer,
principal financial
officer) of the
registrant's managing
partner, EPK, Inc.
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Diversified Historic
Investors VI on Form 10-Q for the quarterly period ended September 30,
2001 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Spencer Wertheimer, President and Treasurer
of the Company's managing partner, EPK, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all
material respects, the , financial condition and results of operations
of the Company.
Date: July 19, 2004 /s/ Spencer Wertheimer
------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer,
principal financial
officer) of the
registrant's managing
partner, EPK, Inc.