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 _______________
Commission file number 33-26385
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DIVERSIFIED HISTORIC INVESTORS VII
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2539694
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
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Securities registered pursuant to Section 12(g) of the Act: 17,839 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
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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*
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* Securities not quoted in any trading market to Registrant's
knowledge.
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes No X
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PART I
Item 1. Business
a. General Development of Business
Diversified Historic Investors VII ("Registrant") is a
limited partnership formed in 1988 under Pennsylvania law. As of
December 31, 2000, Registrant had outstanding 17,839 units of limited
partnership interest (the "Units").
Registrant is presently in its operating stage. It
originally owned seven properties or interests therein. Interests in
two properties have been lost through foreclosure of the properties,
and interests in two others have been reduced substantially. See Item
2. Properties, for a description of the remaining properties.
Registrant currently owns interests in five properties. For a
discussion of the operations of the Registrant, See Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and the
Results of Operations.
b. Financial Information about Industry Segments
The Registrant operates in one industry segment.
c. Narrative Description of Business
Registrant is in the business of operating, holding,
selling, exchanging and otherwise dealing in and with real properties
containing improvements which are "Certified Historic Structures," as
such term is defined in the Internal Revenue Code (the "Code"), or
which are eligible for designation as such, for use as apartments,
offices, hotels and commercial spaces, or any combination thereof, or
low income housing eligible for the tax credit provided by Section 42
of the Code, and such other uses as the Registrant's general partner
may deem appropriate.
Since the Registrant's inception, all the properties
acquired either by the Registrant, or the subsidiary partnerships in
which it has an interest, except for one (Northern Liberties), have
been rehabilitated and certified as historic structures and have
received the related investment tax credit. In addition, three
properties (Flint Goodridge, Kensington Tower and Robidoux) are low-
income housing structures qualifying for low income housing tax
credits.
Four of the Registrant's properties are currently held
for rental operations, and are anticipated to continue to be held for
this purpose. Registrant's remaining property has not been developed.
At such time as real property values begin to increase, the Registrant
will re-evaluate its investment strategy regarding the properties.
As of December 31, 2000, Registrant owned interests in
five properties located in Nebraska (one), Missouri (one),
Pennsylvania (one), and Louisiana (two). In total, the properties in
which the Registrant has a controlling interest (Flint-Goodridge and
Robidoux) contain 153 apartment units. As of December 31, 2000, 147
apartment units were under lease at monthly rental rates ranging from
$265 to $580. For a further discussion of the properties, see Item 2.
Properties.
The Registrant is affected by and subject to the general
competitive conditions of the residential real estate industry. The
competition for moderate-to-low income residential tenants in the
local markets where the Registrant's properties are located is
generally strong. As a result, the Registrant is forced to keep its
rent levels competitively low in order to maintain moderate to high
occupancy levels. In addition, rents are fixed in relation to
specified income levels of the tenants. In each market (New Orleans,
Louisiana, Omaha, Nebraska, and St. Joseph, Missouri), there are
several similar historically-certified rehabilitated buildings that
are available to tenants who fall within certain income restrictions.
However, there is no organization which holds a dominant position in
the residential housing in any of the geographic areas in which
Registrant's properties are located.
Registrant has no employees. Registrant's activities are
overseen by Brandywine Construction & Management, Inc. ("BCMI"), a
real estate management firm.
d. Financial Information about Foreign and
Domestic Operations and Export Sales.
See Item 8. Financial Statements and Supplementary Data
Item 2. Properties
As of December 31, 2000, Registrant owned controlling
interests in two partnerships which each own one property and minority
interests in two additional partnerships which each own one property.
A summary description of each property is given below.
a. Flint-Goodridge Apartments - consists of a 93 unit low
income housing facility at 2425 Louisiana Avenue in New Orleans,
Louisiana. In July 1989, Registrant acquired a 90% interest in Flint-
Goodridge General Partnership ("FGGP"), a general partnership which
owns Flint-Goodridge Apartments, for a cash contribution of
$2,808,000. Registrant subsequently capitalized $574,000 in
acquisition costs related to the investment. FGGP acquired and
rehabilitated the buildings for $5,108,022 ($100.99 per sf), including
a mortgage note payable of $2,427,000. The note bears interest at 10%
and both principal (based on a 30-year amortization) and interest are
payable monthly until June 2020. The principal balance at December
31, 2000 was $2,139,918. In addition, FGGP entered into a 45-year
ground lease for the land on which the buildings are located for a
lump sum rent of $90,000 payable at the inception of the lease.
The property is managed by a property management firm which
is an affiliate of the Registrant's general partner in FGGP. As of
December 31, 2000, 87 units were under lease (94%) with monthly rents
ranging from $418 to $580. All leases are renewable, one-year leases.
The occupancy rate was 89% for 1999, 91% for 1998, 95% for 1997, and
92% for 1996. The monthly rental range has been approximately the
same since 1996. For tax purposes, this property has a tax basis of
$4,212,019 and the buildings are depreciated using the straight-line
method of depreciation with a useful life of 27.5 years. The annual
real estate taxes are $75,094.62 which is based on an assessed value
of $442,540 taxed at a rate of $169.69 per $1,000. No one tenant
occupies ten percent or more of the building. It is the opinion of
the management of the Registrant that the property is adequately
covered by insurance.
b. Robidoux School Apartments - consists of a 60 unit low
income housing facility at 201 South 10th Street in St. Joseph,
Missouri. In September 1989, Registrant acquired a 99% general
partnership interest in Robidoux Redevelopment Joint Venture ("RRJV"),
a Missouri general partnership which owns the property, for a cash
capital contribution of $2,400,000. Registrant subsequently
capitalized $446,000 in acquisition costs relating to the investment.
The cost to acquire and rehabilitate the property was $3,641,993
($99.52 sf) including a construction loan of $1,450,000, a Community
Development Block Grant ("CDBG") loan of $74,000 (the loan was paid
off as of August 1, 2000), and a CDBG grant of $38,500. A portion of
the construction loan was paid through a line of credit extended by
another lender ($478,174 principal outstanding at December 31, 2000)
which bears interest at the prime rate (8% at December 31, 2000 and
8.5% at December 31, 1999) and is due October 2008. This loan is
personally guaranteed by an affiliate of the Registrant's general
partner. On October 30, 1995, the balance of the construction loan
was repaid with two new loans, one for $850,000 and the other for
$200,000. The first loan bears interest at 7.75% with monthly
principal and interest payments based on a 30 year amortization,
principal balance due in October 2005. At December 31, 2000, there
was $756,871 outstanding on the loan. The second loan had an interest
rate of 8.75% and was due in March 1996. It was repaid by an advance
in March 1996 from David E. Slattery, an affiliate of the Registrant's
general partner. The advance will be repaid out of available cash
flow and is non-interest bearing. The CDBG loan bears interest at 1%
and both principal and interest were payable monthly until it matured
in September 2000.
The property is managed by an independent property
management firm. As of December 31, 2000, all 60 apartment units were
under lease (100%), with monthly rents ranging from $265 to $420. All
leases are renewable, one-year leases. The occupancy rate was 98% for
1999, 95% for 1998, 99% for 1997, and 98% for 1996. The monthly rental
range has been approximately the same since 1996. For tax purposes,
this property has a federal tax basis of $4,364,308 and the building
is depreciated using the straight-line method of depreciation with a
useful life of 27.5 years. The annual real estate taxes are $484.30
which is based on an assessed value of $8,480 taxed at a rate of
$57.11 per $1,000. No one tenant occupies ten percent or more of the
building. It is the opinion of the management of the Registrant that
the property is adequately covered by insurance.
c. The Bakery Apartments - consists of 68 apartment units at
1111 South Peters Street in New Orleans, Louisiana. In March 1991,
the Registrant acquired a 16.83% general partnership interest in The
Bakery Apartments General Partnership ("BAGP"), a Louisiana general
partnership which owns the property, for a cash contribution of
$300,000. Certain affiliates of the Registrant simultaneously
acquired 82.17% of the general partnership interests in BAGP for an
aggregate cash contribution of $1,400,000. BAGP subsequently
capitalized $242,040 in acquisition costs relating to the investment.
BAGP acquired and rehabilitated the property for $5,029,000 ($65.18
per sf). The rehabilitation of the property was financed in part with
two loans, one for $3,135,000 and the other for $201,500 (principal
balance of $189,371 at December 31, 2000). The first loan bore
interest at 8.25%, with monthly principal and interest payments based
on a 30-year amortization schedule, principal was due in 1999. The
second loan is from the general partner of BAGP and has the same terms
as the first loan. The first loan was refinanced in November 1998.
The new loan was for $3,100,000 (principal balance of $3,034,964 at
December 31, 2000), bears interest at 6.775%, is payable in monthly
payments of principal and interest in the amount of $20,158 and is due
in November 2008. In March 1991, a $175,000 collateral mortgage note
(principal balance of $152,385 at December 31, 2000) was issued to the
developer/partner for working capital advances. This note bears
interest at 9% with payments based on available positive cash flow of
the property. In order to satisfy certain credit requirements of the
lender, the Registrant exchanged its general partnership interest for
a limited partnership interest in a reconstituted partnership.
However, the Registrant retained substantially the same rights and
privileges as it had as a general partner. The Bakery Apartments was
sold on May 28, 2003. The net proceeds of the sale were used to pay
the expenses of the Registrant.
The property is managed by a property management firm
which is an affiliate of the general partner of BAGP. As of December
31, 2000, 68 units are under lease (100%) with rents ranging from $570
to $2,250. All leases are renewable, one-year leases. The occupancy
rate was 91% for 1999, 96% for 1998, 94% for 1997, and 95% for 1996.
The monthly rental range has been approximately the same since 1996.
For tax purposes, this property has a basis of $3,444,331 and the
building is depreciated using the straight-line method with a useful
life of 27.5 years. The annual real estate taxes are $13,958.23 which
is based on an assessed value of $75,210 taxed at a rate of $18.56 per
$100. No one tenant occupies ten percent or more of the building. It
is the opinion of the management of the Registrant that the property
is adequately covered by insurance.
d. Kensington Tower ("Hill Hotel") - consists of a 65 unit
low income housing facility and 3,550 square feet of commercial space
at 505 South 16th Street in Omaha, Nebraska. In June 1989, Registrant
acquired a 98% general partnership interest in Hill Hotel Apartments
Joint Venture ("HHAJV"), a Nebraska general partnership which owns the
property, for a cash contribution of $2,350,000. HHAJV acquired and
rehabilitated the property for $4,369,249 ($105.93 sf), including a
construction note payable of $2,700,000. The note was originally due
in April 1992. During 1990 and 1991, this note was partially
refinanced with $400,000 of a $600,000 Community Development Block
Grant ("CDBG") loan (principal balance at December 31, 2000 of
$600,000), a $500,000 Tax Increment Financing ("TIF") Loan (principal
balance at December 31, 2000 of $109,452) and a $1,100,000
subordinated note payable to the co-general partner. In 1992, the
remaining $200,000 of the CDBG Loan was applied to the construction
loan ($60,000) and to the TIF Loan ($140,000), in order to extend the
date of the construction loan's maturity from April 1992 to June 1993.
The construction loan balance was $1,030,591 at December 31, 1993. In
March 1994, the construction loan was repaid with a $665,000
(principal balance of $448,401 at December 31, 2000), 15-year
permanent loan with an interest rate of 8-3/8% and a $365,000 equity
contribution from Commercial Federal Realty Investors Corporation, the
Registrant's co-general partner. On June 1, 1993, an amended and
restated joint venture agreement was reached whereby the Registrant's
interest was reduced to a 30% interest. The Hill Hotel was sold on
June 1, 2002. The net proceeds from the sale were used to pay the
expenses of the Registrant.
The property is managed by an independent property
management firm. As of December 31, 2000, 43 units are under lease
(66%) with monthly rents ranging from $390 to $625. All leases are
renewable, one-year leases. The occupancy rate was 91% for 1999, 94%
for 1998, 97% for 1997, and 94% for 1996. The monthly rental range has
been approximately the same from 1996 to 1999. From 1999 to 2000 rates
increased due to the increased specified income levels of its tenants.
For tax purposes, this property has a tax basis of $5,323,340 and is
depreciated using the straight-line method of depreciation with a
useful life of 27.5 years. The annual real estate taxes are
$37,553.14 which is based on an assessed value of $1,970,000 taxed at
a rate of $19.062 per $1,000. No one tenant occupies ten percent or
more of the building. It is the opinion of the management of the
Registrant that the property is adequately covered by insurance.
Item 3. Legal Proceedings
To the best of its knowledge, Registrant is not party to,
nor is any of its property the subject of, any pending material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fiscal year covered by
this report to a vote of security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
a. There is no established public trading market for the
Units. Registrant does not anticipate any such market will develop.
Trading in the units occurs solely through private transactions. The
Registrant is not aware of the prices at which trades occur.
Registrant's records indicate that 166 units of record were sold or
exchanged in 2000.
b. As of December 31, 2000, there were 1,726 record holders
of Units.
c. Registrant has not declared 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
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Rental income $ 773,580 $ 728,042 $ 738,997 $ 725,798 $ 713,215
Interest income 1,257 1,739 2,358 0 1,742
Net loss 467,836 613,300 632,754 198,574 708,659
Net loss per Unit 25.96 34.04 35.12 11.02 39.33
Total assets (net
of depreciation
and amortization) 8,168,614 8,622,952 9,120,351 9,570,778 9,929,110
Debt obligations 3,374,963 3,467,316 3,488,821 3,521,250 3,605,963
Note: See Part II, Item 7(3) Result of Operations for a discussion of
factors which materially affect the comparability of the information
reflected in the above table.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(1) Liquidity
As of December 31, 2000, Registrant had total
unrestricted cash of $19,354. Such funds are expected to be used to
pay liabilities and general and administrative expenses of the
Registrant and to fund cash deficits of the properties. Cash generated
from operations is used primarily to fund operating expenses and debt
service. If cash flow proves to be insufficient, the Registrant will
attempt to negotiate loan modifications with the various lenders in
order to remain current on all obligations. The Registrant is not
aware of any additional sources of liquidity.
As of December 31, 2000, Registrant had restricted cash
of $61,579 consisting primarily of funds held as security deposits,
replacement reserves and escrows for taxes and insurance. As a
consequence of these restrictions as to use, Registrant does not deem
these funds to be a source of liquidity.
The property owned by RRJV has historically been unable
to meet its operating expenses and required debt service payments from
its own revenues. The Developer/Operating General Partner has provided
the necessary funds. Through 1992 these funds were provided pursuant
to legal obligations. Thereafter, the Registrant was able to prevail
upon the Developer to continue such funding on a voluntary basis. In
1996, the Developer reported that it was no longer able or willing to
make such advances. To avoid the loss of RRJV's property, either
through foreclosure or a forced sale at depressed values, in January
1997 the Registrant sold approximately 20% of its interest in RRJV.
Simultaneously with the sale, the Partnership Agreement was amended to
allocate Low Income Housing Tax Credits in the amount of $1,081,930
over the next nine years to the purchaser. The proceeds from the sale
were sufficient to satisfy outstanding obligations and should enable
RRJV to continue to operate in the foreseeable future.
In recent years the Registrant has realized significant
losses, including the foreclosure of two properties. At the present
time, with the exception of Northern Liberty, the remaining properties
are able to generate enough cash flow to cover their operating
expenses and debt service, but there is no additional cash available
to the Registrant to pay its general and administrative expenses.
It is the Registrant's intention to continue to hold the
properties until they can no longer meet their debt service
requirements and the properties (or its interests therein) are
foreclosed, or the market value of the properties increases to a point
where they can be sold at a price which is sufficient to repay the
underlying indebtedness. With respect to Northern Liberties, any
development of the remaining lot and building will require additional
funding of capital. The Registrant has not yet identified any sources
for this funding, and does not anticipate being able to identify any
such sources for the foreseeable future.
(2) Capital Resources
Any capital expenditures needed are generally replacement
items and are funded out of cash from operations or replacement
reserves, if any. The Registrant is not aware of any factors which
would cause historical capital expenditure levels not to be indicative
of capital requirements in the future, and accordingly, does not
believe that it will have to commit material resources to capital
investment for the foreseeable future.
(3) Results of Operations
During 2000, the Registrant incurred a net loss of
$467,836 ($25.96 per limited partnership unit), compared to a net loss
of $613,302 ($34.04 per limited partnership unit) in 1999 and a net
loss of $632,754 ($35.12 per limited partnership unit) in 1998.
Rental income was $773,580 in 2000, $728,042 in 1999 and
$738,997 in 1998. The increase in rental income from 1999 to 2000 is
due to an increase in average occupancy (91% to 94%) at the Flint
Goodridge Apartments. The decrease from 1998 to 1999 is due to a
decrease in average occupancy at the Flint Goodridge Apartments (95%
to 91%), partially offset by an increase in rental income at Robidoux
due to an increase in average occupancy (95% to 98%).
Other income was $20,717 in 2000, $31,700 in 1999, and $0
in 1998. The decrease in other income from 1999 to 2000 is due to an
account payable write off that occurred during 1999 at the Robidoux
Apartments, partially offset by an increase at Flint Goodridge due to
a grant distributed to the property during the year. The increase in
other income from 1998 to 1999 was due to the write-off of an account
payable at Robidoux.
Rental operations expense was $457,716 in 2000, $419,821
in 1999 and $405,012 in 1998. The increase in rental operations
expense from 1999 to 2000 is due to an increase in real estate taxes,
partially offset by a decrease in maintenance expense. The increase
in real estate taxes is due to the expiration of the ten year tax
abatement at Flint Goodridge. The decrease in maintenance expense is
due to a decrease in various building related repairs at Flint
Goodridge. The increase from 1998 to 1999 is due to an increase in
maintenance expense at Flint Goodridge and an increase in wages and
salaries at Robidoux. Maintenance expense at Flint Goodridge
increased due to the higher turnover of apartment units. The increase
in wages and salary expense at Robidoux is due to charges made by the
property's management company throughout the year for repairs.
Interest expense was $326,019 in 2000, $325,634 in 1999,
and $343,902 in 1998. The decrease from 1998 to 1999 is due to a
decrease in the principal balances upon which interest is calculated.
Depreciation and amortization was $431,865 in 2000,
$433,402 in 1999, and $431,559 in 1998.
During the year, a loss of $378,000 was incurred at the
Registrant's properties compared to a loss of $363,000 in 1999, and a
loss of $383,000 in 1998. A discussion of individual property
operations/activities follows:
In 2000, Registrant sustained a loss of $197,000 at Flint-
Goodridge including $203,000 of depreciation and amortization expense
compared to a loss of $210,000 including $205,000 of depreciation and
amortization expense in 1999 and a loss of $182,000 including $205,000
of depreciation and amortization expense in 1998. Since Flint-
Goodridge is a low income housing property, rents are fixed in
relation to specified income levels of its tenants. As a result, the
property experiences high occupancy but rental income remains low. The
decrease in loss from 1999 to 2000 is due to an increase in rental
income and other income and a decrease in maintenance expense,
partially offset by an increase in real estate tax expense. Rental
income increased due to an increase in average occupancy (91% to 94%).
The increase in other income is due to a grant that was distributed to
the property in 2000. The decrease in maintenance expense is due to a
decrease in various building related repairs. The increase in real
estate taxes is due to the expiration of the ten year tax abatement at
Flint Goodridge. The increase in the loss from 1998 to 1999 is due to
the decrease in rental income and an increase in maintenance expense.
Rental income decreased due to a decrease in average occupancy (91% to
89%). Maintenance expense increased due to the higher turnover of
apartments units.
In 2000, Registrant incurred a loss of $179,000 at
Robidoux including $184,000 of depreciation and amortization expense
compared to a loss of $153,000 including $183,000 of depreciation and
amortization expense in 1999 and a loss of $201,000 including $181,000
of depreciation and amortization expense in 1998. Since Robidoux is a
low income housing property, rents are fixed in relation to specified
income levels of its tenants. Accordingly, as with Flint Goodridge,
the property experiences high occupancy but rental income remains low.
The increase in loss from 1999 to 2000 is due to a decrease in other
income and an increase in miscellaneous operating expense and interest
expense. The decrease in other income is due to an account payable
write off that occurred during 1999. The increase in miscellaneous
operating expense is due to an increase in various office related
expenses. The increase in interest expense is due to a prior year
adjustment. The decrease in the loss from 1998 to 1999 is due to an
increase in rental and other income and a decrease in interest
expense, partially offset by an increase in depreciation and wages and
salary expense. The increase in rental income is due to an increase in
the average occupancy (98% to 100%). The increase in other income in
1999 was primarily for the write-off of an account payable. Interest
expense decreased due to a decrease in the principal balance upon
which interest is calculated. Depreciation expense increased due to
depreciation of capital improvements made at the property. The
increase in wages and salary expense is the result of charges made by
the management company throughout the year for repairs.
Summary of Minority Interest Investments
The Registrant owns a minority interest in the Bakery
Apartments which it accounts for on the cost method. The Registrant
does not include the assets, liabilities, income or expenses of the
Bakery in its consolidated financial statements. The following
operating information is provided for the property. In 2000, the
Bakery Apartments incurred a loss of $77,000 including $202,000 of
depreciation and amortization expense compared to a loss of $191,000
including $202,000 of depreciation and amortization expense in 1999
and a loss of $184,000 including $239,000 of depreciation and
amortization expense in 1998. The Registrant expects that full
occupancy and positive cash flow will continue throughout 2001. The
Bakery Apartments was sold on May 28, 2003 . The net proceeds from
the sale were used to pay the expenses of the Registrant.
The Registrant owns a minority interest in Kensington
Tower which it accounts for on the equity method. The Registrant does
not include the assets or liabilities of Kensington Tower in its
consolidated financial statements. The following operating information
is provided for the property. In 2000, Registrant incurred a loss of
$36,000 compared to a loss of $29,000 in 1999, and a loss of $28,000
in 1998. The increase in the loss from 1999 to 2000 is due to a
decrease in other income and an increase in maintenance expense. The
decrease in other income is due to a decrease in commercial rents and
interest income. The increase in maintenance expense is due to
increases in general repairs and maintenance salaries. The increase in
the loss from 1998 to 1999 is due a decrease in rental income
resulting from a decrease in occupancy, and an increase in maintenance
expenses due to repairs made at the property. The Hill Hotel was sold
on June 1, 2002. The net proceeds from the sale were used to pay the
expenses of the Registrant.
Item7A. 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 8. Financial Statements and Supplementary Data
Registrant is not required to furnish the supplementary
financial information referred to in Item 302 of Regulation S-K.
Independent Auditor's Report
To the Partners of
Diversified Historic Investors VII
We have audited the accompanying consolidated balance sheet of
Diversified Historic Investors VII (a Pennsylvania Limited
Partnership) and subsidiaries as of December 31, 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 did not audit
the financial statements of Flint Goodridge General Partnership, which
statements reflect total assets of $3,038,749 and $3,241,113 as of
December 31, 2000 and 1999, respectively, and total revenues of
$566,137 and $503,132, respectively for the years then ended. Those
statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts
included for Flint Goodridge General Partnership, is based solely on
the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of
Diversified Historic Investors VII as of December 31, 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 26 is presented for the
purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
Gross, Kreger & Passio, L.L.C.
Philadelphia, Pennsylvania
July 20, 2001
Independent Auditor's Report
To the Partners of
Flint Goodridge General Partnership
New Orleans, Louisiana:
We have audited the accompanying balance sheets of Flint Goodridge
General Partnership, HUD Project No. 064-35269-PM, as of December 31,
2000 and 1999, and the related statements of income, changes in
partners' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Flint
Goodridge General Partnership, HUD Project No. 064-35269-PM, as of
December 31, 2000 and 1999, and the results of its operations, changes
in partners' equity, and cash flows for the years then ended in
conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs issued by the U.S. Department
of Housing and Urban Development, we have also issued a report dated
February 2, 2001, on our consideration of Flint Goodridge General
Partnership's internal control structure and reports dated, February
2, 2001, on its compliance with specific requirements applicable to
major HUD programs and specific requirements applicable to Affirmative
Fair Housing.
Pailet, Meurier and LeBlanc, L.L.P.
Metairie, Louisiana
February 2, 2001
Independent Auditor's Report
To the Partners of
The Bakery Apartments Limited Partnership
We have audited the accompanying balance sheets of The Bakery
Apartments Limited Partnership, for December 31, 2000 and 1999 and the
related statements of operations, partners' equity and cash flows for
the years ended. These financial statements are the responsibility of
the partnership's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Bakery
Apartments Limited Partnership as of December 31, 2000 and 1998 and
the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
Pailet, Meurier and LeBlanc, L.L.P.
Metairie, Louisiana
February 2, 2001
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AND FINANCIAL STATEMENT SCHEDULES
---------------------------------
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 2000 and 1999 16
Consolidated Statements of Operations for the Years
Ended December 31, 2000, 1999 and 1998 17
Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 2000, 1999 and 1998 18
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2000, 1999 and 1998 19
Notes to consolidated financial statements 20-25
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 26-27
Notes to Schedule XI 28
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
December 31, 2000 and 1999
Assets
2000 1999
---- ----
Rental properties at cost:
Land $ 35,469 $ 35,469
Buildings and improvements 10,577,922 10,566,992
----------- -----------
10,613,391 10,602,461
Less - accumulated depreciation (4,532,396) (4,105,411)
----------- -----------
6,080,995 6,497,050
Cash and cash equivalents 19,354 2,986
Restricted cash 61,579 79,045
Investments in affiliates 1,595,808 1,635,352
Other assets (net of accumulated
amortization of $118,022 and
$113,216) 410,878 408,519
----------- -----------
Total $ 8,168,614 $ 8,622,952
=========== ===========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 3,374,963 $ 3,467,316
Accounts payable:
Trade 1,034,829 991,769
Related parties 484,837 500,851
Interest payable 103,181 23,495
Tenant security deposits 26,885 26,571
Other liabilities 619 0
----------- -----------
Total liabilities 5,025,314 5,010,002
Minority interests 243,084 244,897
Partners' equity 2,900,216 3,368,053
----------- -----------
Total $ 8,168,614 $ 8,622,952
=========== ===========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the years ended December 31, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Revenues:
Rental income $ 773,580 $ 728,042 $ 738,997
Other income 20,717 31,700 0
Interest income 1,257 1,739 2,358
---------- ---------- ----------
Total revenues 795,554 761,481 741,355
---------- ---------- ----------
Costs and expenses:
Rental operations 457,715 419,821 405,012
General and administrative 13,800 168,000 168,000
Interest 326,019 325,634 343,902
Depreciation and amortization 431,865 433,402 431,559
---------- ---------- ----------
Total costs and expenses 1,229,399 1,346,857 1,348,473
---------- ---------- ----------
Loss before minority interests
and equity in affiliate (433,845) (585,376) (607,118)
Minority interests 1,813 1,530 2,011
Equity in net loss of affiliate (35,804) (29,454) (27,647)
---------- ---------- ----------
Net loss ($ 467,836) ($ 613,300) ($ 632,754)
========== ========== ==========
Net loss per limited partnership
unit:
Loss before minority interests
and equity in affiliate ($ 24.08) ($ 32.49) ($ 33.70)
Minority interests .10 .08 .11
Equity in net loss of affiliate ($ 1.98) ($ 1.63) ($ 1.53)
---------- ---------- ----------
($ 25.96) ($ 34.04) ($ 35.12)
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
------------------------------------------------------
For the years ended December 31, 2000, 1999 and 1998
Dover
Historic Limited
Advisors Partners
VII (1) (2) Total
-------- -------- -----
Percentage participation in
profit or loss 1% 99% 100%
== === ====
Balance at December 31, 1997 $456,646 $4,157,461 $4,614,107
Net loss (6,328) (626,426) (632,754)
-------- ---------- ----------
Balance at December 31, 1998 450,318 3,531,035 3,981,353
Net loss (6,133) (607,167) (613,300)
-------- ---------- ----------
Balance at December 31, 1999 444,185 2,923,868 3,368,053
Net loss (4,678) (463,158) (467,836)
-------- ---------- ----------
Balance at December 31, 2000 $439,507 $2,460,710 $2,900,217
======== ========== ==========
(1) General Partner.
(2) 17,839 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 VII
(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 loss ($467,836) ($613,300) ($632,754)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 431,865 433,402 431,559
Minority interest (1,813) (1,530) (2,011)
Equity in loss of affiliate 35,804 29,454 27,647
Changes in assets and liabilities:
Decrease (increase) in restricted cash 17,466 37,250 (72,991)
Increase in other assets (3,500) (3,427) (1,529)
Increase in accounts payable - trade 43,060 179,457 74,283
(Decrease) increase in accounts
payable - related parties (16,014) (30,106) 150,814
Increase (decrease) in interest payable 79,686 (10,391) (4,502)
Increase (decrease) in tenant
security deposits 314 (24) (3,827)
Increase in other liabilities 619 0 0
-------- -------- --------
Net cash provided by (used in)
operating activities 119,651 20,785 (33,311)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (10,930) (4,909) (18,020)
-------- -------- --------
Net cash used in investing activities (10,930) (4,909) (18,020)
-------- -------- --------
Cash flows from financing activities:
Principal payments (92,353) (21,505) (32,429)
-------- -------- --------
Net cash used in financing activities (92,353) (21,505) (32,429)
-------- -------- --------
Increase (decrease) in cash and
cash equivalents 16,368 (5,629) (83,760)
Cash and cash equivalents at
beginning of year 2,986 8,615 92,375
-------- -------- --------
Cash and cash equivalents at end of year $ 19,354 $ 2,986 $ 8,615
======== ======== ========
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year for interest $246,333 $336,025 $348,404
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors VII (the "Partnership") was formed in
December 1988 with Dover Historic Advisors VII as the General Partner.
Upon the admittance of additional limited partners, the initial
limited partner withdrew.
The Partnership was organized to acquire, rehabilitate, and manage
real properties containing improvements which are Certified Historic
Structures, as defined in the Internal Revenue Code of 1986 ("the
Code"), or which may also be (but are not required to be) eligible for
low income housing tax credits as provided by Section 42 of the Code,
and such other uses as Dover Historic Advisors VII (the "General
Partner") deems appropriate, and to engage in any and all activities
related or incidental thereto.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial
statements follows.
1. Principles of Consolidation
The accompanying financial statements of the Partnership include the
accounts of three subsidiary partnerships in which the Partnership has
controlling interests, with appropriate elimination of inter-
partnership transactions and balances. In addition, the Partnership
owns a minority interest of 16.83% in one partnership, which it
accounts for on the cost method, and a minority interest of 30% in one
partnership, which it accounts for on the equity method. These
financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which, in the opinion of the General
Partner, are necessary for a fair statement of results for those
years.
2. Deferred Expenses
Loan fees have been incurred with respect to certain loans. Such fees
were deferred and are being amortized over the term of the related
loans.
The Partnership prepaid all amounts due under a ground lease for one
of its properties. Such prepayments have been deferred and are being
amortized over the term of the lease (45 years).
3. Net Loss per Limited Partnership Unit
The net loss per limited partnership unit is based on the weighted
average number of limited partnership units outstanding during the
period (17,839 in 2000, 1999, and 1998).
4. Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
5. Restricted Cash
Restricted cash includes amounts held for tenant security deposits,
real estate tax reserves and other cash restricted as to use.
6. Depreciation
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Buildings and improvements are
depreciated over 25 years and furniture and fixtures over five years.
7. Income Taxes
Federal and state income taxes are payable by the individual partners;
accordingly, no provision or liability for income taxes is reflected
in the financial statements.
8. Revenue Recognition
Revenues are recognized when rental payments are due on a straight-
line basis. Rental payments received in advance are deferred until
earned.
9. Rental Properties
Rental properties are stated at cost. A provision for impairment of
value is recorded when a decline in value of property is determined to
be other than temporary as a result of one or more of the following:
(1) a property is offered for sale at a price below its current
carrying value, (2) a property has significant balloon payments due
within the foreseeable future for which the Partnership does not have
the resources to meet, and anticipates it will be unable to obtain
replacement financing or debt modification sufficient to allow a
continued hold of the property over a reasonable period of time, (3) a
property has been, and is expected to continue, generating significant
operating deficits and the Partnership is unable or unwilling to
sustain such deficit results of operations, and has been unable to, or
anticipates it will be unable to, obtain debt modification, financing
or refinancing sufficient to allow a continued hold of the property
for a reasonable period of time or, (4) a property's value has
declined based on management's expectations with respect to projected
future operational cash flows and prevailing economic conditions. An
impairment loss is indicated when the undiscounted, sum of estimated
future cash flows from an asset, including estimated sales proceeds,
and assuming a reasonable period of ownership up to 5 years, is less
than the carrying amount of the asset. The impairment loss is
measured as the difference between the estimated fair value and the
carrying amount of the asset. In the absence of the above
circumstances, properties and improvements are stated at cost. An
analysis is done on an annual basis at December 31.
10. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
NOTE C - PARTNERSHIP AGREEMENTS
The significant terms of the Agreement of Limited Partnership (the
"Agreement"), as they relate to the financial statements, follow:
All distributable cash from operations (as defined in the Agreement of
Limited Partnership) will be distributed 1% to the General Partner and
99% to the limited partners.
All distributable cash from sales or dispositions (as defined) will be
distributed to the limited partners up to their adjusted invested
capital (as defined) plus an amount equal to the sum of the greater of
an 8.5% cumulative, noncompounded annual return on the average after-
credit invested capital (as defined), less amounts previously
distributed (as defined); thereafter, after receipt by the General
Partner or its affiliates of any accrued but unpaid real estate
brokerage commissions, the balance will be distributed 15% to the
General Partner and 85% to the limited partners.
Net income or loss from operations of the Partnership is allocated 1%
to the General Partner and 99% to the limited partners.
NOTE D - ACQUISITIONS
The Partnership acquired controlling general or limited partnership
interests in Ventures and minority interests in partnerships during
the period from June 1989 to March 1991, as discussed below.
In June 1989, the Partnership was admitted, with a 98% general partner
interest, to a Nebraska general partnership which owns a building
located in Nebraska, consisting of 65 apartment units and 3,550 square
feet of commercial space, for a cash capital contribution of
$2,350,000. In addition, $3,000,000 of rehabilitation costs relating
to the investment were capitalized as part of the building and
improvements. These capitalized costs have been removed from the
balance sheet. Pursuant to the June 1993 Amended and Restated Joint
Venture Agreement, the Partnership's interest was reduced to 30%.
In July 1989, the Partnership was admitted, with a 90% general partner
interest, to a Pennsylvania general partnership which owns two
buildings located in Louisiana, consisting of 93 apartments units, for
a cash capital contribution of $2,808,000.
In September 1989, the Partnership was admitted, with a 99% general
partner interest, to a Missouri general partnership which owns a
building located in Missouri, consisting of 60 apartment units, for a
cash capital contribution of $2,400,000. In addition, $2,300,000 of
rehabilitation costs relating to the investment were capitalized as
part of the building and improvements.
In December 1989, the Partnership was admitted, with a 98% general
partner interest, to a Nebraska general partnership which owns
property located in South Dakota, consisting of 58,793 square feet of
commercial space, for a cash capital contribution of $1,350,000. In
addition, $3,400,000 of acquisition costs relating to the investment
have been capitalized as part of the building and improvements. In
March 1995, the deed to the property, which was held in escrow, was
delivered to the first mortgage holder.
In February 1990, the Partnership was admitted, with a 99% general
partner interest, to a Pennsylvania general partnership, which owned a
property which was originally intended to be rehabilitated into
250,000 square feet of residential and commercial space located in
Pennsylvania, for a cash contribution of $2,000,000. In December
1994, the Partnership donated to a neighborhood group all but a 12,247
square foot vacant lot.
In September 1990, the Partnership purchased 19% interest in a
Washington, D.C. general partnership which owned a building located in
Washington, D.C., consisting of 54 hotel rooms, for a cash capital
contribution of $550,000. In February 1993, a party holding a
mortgage on the property, with permission of the bankruptcy court,
foreclosed on the property.
In March 1991, the Partnership purchased 16.83% interest in a
Pennsylvania general partnership which owns a building located in
Louisiana, consisting of 68 units, for $300,000.
NOTE E - DEBT OBLIGATIONS
Debt obligations are as follows:
December 31,
2000 1999
---- ----
Mortgage payable, interest at 10%; $2,139,918 $2,173,882
payable in monthly installments of
principal and interest of $20,819, with
maturity in June 2020; collateralized by
related rental property
Note payable, interest at 7.75% in 2000 756,871 774,946
and in 1999; principal and interest
payments of $6,458 due monthly; with
maturity at October 2005; collateralized
by related rental property
Note payable, interest accrues at the 478,174 513,321
prime rate (effective rate of 8% and 8.5%
at December 31, 2000 and 1999,
respectively); principal balance due
October 2018; collateralized by related
rental property (A)
Note payable, interest at 1%; principal
and interest payments of $648 due
monthly; remaining principal due
September 2000; collateralized by related
rental property 0 5,167
---------- ----------
$3,374,963 $3,467,316
========== ==========
(A) This note payable is personally guaranteed by an affiliate of the
Registrant's co-general partner.
Maturities of debt obligations at December 31, 2000, are as follows:
Year Ending December 31,
2001 $ 57,048
2002 64,252
2003 68,580
2004 75,205
2005 723,013
Thereafter 2,326,865
----------
$3,374,963
==========
NOTE F - RELATED PARTY TRANSACTIONS
Included in Accounts Payable - Related Party is $412,937 and $428,555
at December 31, 2000 and 1999, respectively, owed to an affiliate of
the General Partner, by one of the Partnership's Ventures, for
additional amounts advanced for working capital needs. These advances
are non-interest bearing and will be paid out of available cash flow.
Included in Accounts Payable - Related Party is $44,557 and $44,953 at
December 31, 2000 and 1999, respectively, owed to the co - general
partner, by one of the Partnership's Ventures, for additional amounts
advanced for working capital needs. These advances are non-interest
bearing and will be paid out of available cash flow.
Included in Accounts Payable - Related Party is $27,343 at December
31, 2000 and 1999, owed to the General Partner, for amounts advanced
to pay certain outstanding liabilities of the Partnership. The
advance is non-interest bearing and will be paid out of available cash
flow.
NOTE G - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of
operations in different time period for financial reporting ("book")
purposes and for income tax ("tax") purposes. A reconciliation
follows:
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
Net loss - book ($ 467,836)($ 613,300)($ 632,754)
Other income (20,717) (31,700) 0
Minority interest 155,866 166,396 138,002
Excess of book over tax depreciation 114,672 161,871 168,344
---------- ---------- ----------
Net income (loss) - tax ($ 218,015)($ 316,733)($ 326,408)
========== ========== ==========
Partners' equity - book $2,900,216 $3,368,053 $3,981,353
Distribution to limited partners 33,861 33,861 33,861
Costs of issuance 2,288,270 2,288,270 2,288,270
Basis reduction due to Investment
Tax Credit (3,790,041) (3,790,041) (3,790,041)
Cumulative tax under book loss 4,170,384 3,920,562 3,623,995
Capital contributions (641,684) (641,684) (641,684)
---------- ---------- ----------
Partner's equity - tax $4,961,006 $5,179,021 $5,495,754
========== ========== ==========
NOTE H - SUBSEQUENT EVENTS
1.) On May 28, 2003, the Bakery Apartments was sold. The net proceeds
from the sale were used to pay the expenses of the Registrant. The
Registrant incurred a loss on sale in the amount of $142,029.
2.) On June 1, 2002, the Hill Hotel was sold. The net proceeds from
the sale were used to pay the expenses of the Registrant. The
Registrant incurred a loss on sale in the amount of $1,233,064.
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS VII
(a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
- ------------------------------------------------------
DECEMBER 31, 2000
Cost
Capitalized
Initial Cost Subsequent
to Partnership to
(b) Acquisition
Buildings
and Date Date
Encum- Improve- Improve- of Ac-
Description brances Land ments ments Constr. quired
- ----------- ------- ---- --------- -------- ------- ------
(a) (d) (b)
93 unit
apartments
in New
Orleans, LA $2,139,918 $17,182 $4,667,050 $1,000,647 1989 7/89
60 unit
apartments
in St.
Joseph, MO 1,234,329 1,500 2,482,287 2,326,235 1989 9/89
12,247 square
feet of
residential
and commercial
space in
Philadelphia,
PA - 16,787 101,703 0 (a) 2/90
---------- ------- ---------- ----------
$3,374,247 $35,469 $7,251,040 $3,326,882
========== ======= ========== ==========
Gross Amount
at which
Carried at
December 31, 2000
Buildings
and Accumu-
Description Improve- Total lated
(a) Land ments (b)(c) Depr.(c)(e)
- ----------- ---- --------- ------- -----------
93 unit
apartments
in New
Orleans, LA $17,182 $ 5,667,697 $ 5,684,879 $2,736,397
60 unit
apartments
in St.
Joseph, MO 1,500 4,808,522 4,810,022 1,795,999
12,247 square
feet of
residential
and commercial
space in
Philadelphia,
PA 16,787 101,703 118,490 -
------- ----------- ----------- ----------
$35,469 $10,577,922 $10,613,391 $4,532,396
======= =========== =========== ==========
DIVERSIFIED HISTORIC INVESTORS VII
(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
designations as such. The "date of construction" refers to the
period in which such properties were rehabilitated.
(B) The cost of real estate owned at December 31, 2000, for Federal
income tax purposes was approximately $8,576,327. The depreciable
basis of the building and improvements of the properties has been
reduced for Federal income tax purposes by the historic
rehabilitation credit.
(C) Reconciliation of real estate:
2000 1999 1998
---- ---- ----
Balance at beginning of year $10,602,461 $10,597,552 $10,579,532
Additions during this year:
Improvements 10,930 4,909 18,020
----------- ----------- -----------
Balance at end of year $10,613,391 $10,602,461 $10,597,552
=========== =========== ===========
Reconciliation of accumulated depreciation:
2000 1999 1998
---- ---- ----
Balance at beginning of year $ 4,105,411 $ 3,676,865 $ 3,250,162
Depreciation expense for the year 426,985 428,546 426,703
----------- ----------- -----------
Balance at end of year $ 4,532,396 $ 4,105,411 $ 3,676,865
=========== =========== ===========
(D) See Note E to the consolidated financial statements for further
information.
(E) See Note B to the consolidated financial statements for
depreciation method and lives.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial
Disclosure
None.
Item 9A. 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 III
Item 10. Directors and Executive Officers of Registrant
a. Identification of Directors - Registrant has no
directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Dover Historic
Advisors VII (DoHA-VII), a Pennsylvania general partnership. The
partners of DoHA-VII are as follows:
Name Age Position Term of Office Period Served
- ---- --- -------- -------------- -------------
Gerald December 1988-
Katzoff 50 Partner in DoHA-VII No fixed term May 1997
Dover Historic
Advisors, Inc.
("Dover December 1988-
Advisors") -- Partner in DoHA-VII No fixed term May 1997
SWDHA, Inc. -- Partner in DoHA-VII No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-VII No fixed term Since May 1997
For further description of DoHA-VII, see paragraph e. of
this Item. There is no arrangement or understanding between either
person named above and or any other person pursuant to which any
person was or is to be selected as an officer.
c. Identification of Certain Significant Employees.
Registrant has no employees. Its administrative and operational
functions are carried out by a property management and partnership
administration firm engaged by the Registrant.
d. Family Relationships. There is no family relationship
between or among the executive officers and/or any person nominated or
chosen by Registrant to become an executive officer.
e. Business Experience. DoHA-VII is a general partnership
formed in 1988. The General Partner is responsible for management and
control of Registrant's affairs and will have general responsibility
and authority in conducting its operations. The General Partner may
retain its affiliates to manage certain of the Properties.
f. Involvement in certain legal proceedings. - None.
g. Promoters and control persons. - Not Applicable.
h. Audit committee financial expert. - None.
On May 13, 1997, SWDHA, Inc. replaced Gerald Katzoff and EPK,
Inc. replaced DHP, Inc. as partners of DoHA-VII. Spencer Wertheimer,
the President of SWDHA, Inc., is an attorney with extensive experience
in real estate activities ventures.
EPK, Inc. is a Delaware corporation formed for the purpose of
managing properties or interests therein. EPK, Inc. is a wholly-owned
subsidiary of D, LTD, an entity formed in 1985 to act as the holding
company for various corporations engaged in the development and
management of historically certified properties and conventional real
estate as well as a provider of financial (non-banking) services.
EPK, Inc. is an affiliate of DoHA-VII.
The officers and directors of EPK, Inc. are described below.
Spencer Wertheimer was appointed May 13, 1997 as President,
Treasurer and Sole Director of EPK, Inc. Mr. Wertheimer is an
attorney with extensive experience in real estate ventures.
Donna M. Zanghi (age 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. 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 34) 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 2000, Registrant paid no cash
compensation to DoHA-VII, any partner therein or any person named in
paragraph c. of Item 10.
b. Compensation Pursuant to Plans - Registrant has no plan
pursuant to which compensation was paid or distributed during 2000, or
is proposed to be paid or distributed in the future, to DoHA-VII, any
partner therein, or any person named in paragraph c. of Item 10.
c. Other Compensation - No compensation not referred to in
paragraph a. or paragraph b. of this Item was paid or distributed
during 2000 to Dover Advisors, DoHA-VII, any partner therein, or any
person named in paragraph c. of Item 10.
d. Compensation of Directors - Registrant has no directors.
e. Termination of Employment and Change of Control
Arrangement -
Registrant has no compensatory plan or arrangement, with respect to
any individual, which results or will result from the resignation or
retirement of any individual, or any termination of such individual's
employment with Registrant or from a change in control of Registrant
or a change in such individual's responsibilities following such a
change in control.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
a. Security Ownership of Certain Beneficial Owners - No
person is known to Registrant to be the beneficial owner of more than
five percent of the issued and outstanding Units.
b. Security Ownership of Management - None.
c. Changes in Control - Registrant does not know of any
arrangement, the operation of which may at a subsequent date result
in a change in control of Registrant.
Item 13. Certain Relationships and Related Transactions
a. Transactions with Management and Others - Pursuant to
Registrant's Amended and Restated Agreement of Limited Partnership,
DoHA-VII is entitled to 10% of Registrant's distributable cash from
operations in each year. There was no such share allocable to DoHA-
VII for fiscal years 1997 through 1999.
b. Certain Business Relationships - Registrant has no
directors.
c. Indebtedness of Management - No executive officer or
significant employee of Registrant, Registrant's general partner (or
any employee thereof), or any affiliate of any such person, is or has
at any time been indebted to Registrant.
Item 14. Principal Accounting Fees and Services
a. Audit Fees
b. Audit-Related Fees
c. Tax Fees
d. All Other Fees
PART IV
Item 15. (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.
21 Subsidiaries of the Registrant
are listed in Item 2. Properties
of this Form 10-K.
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 December 31, 2000.
(c) Exhibits:
See Item 14 (A) (3) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: July 20, 2004 DIVERSIFIED HISTORIC INVESTORS VII
------------- ----------------------------------
By: Dover Historic Advisors VII, its
general partner
By: EPK, Inc., managing partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President (principal executive
officer, principal financial
officer)
Pursuant to the requirements 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.
Date: July 20, 2004 DIVERSIFIED HISTORIC INVESTORS VII
------------- ----------------------------------
By: Dover Historic Advisors VII, its
general partner
By: EPK, Inc., managing partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President (principal executive
Exhibit 31
CERTIFICATION
I, Spencer Wertheimer, certify that:
1. I have reviewed this annual report on Form 10-K for the period
ended December 31, 2000 of Diversified Historic Investors VII;
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 20, 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 Annual Report of Diversified Historic
Investors VII on Form 10-K for the period ended December 31, 2000 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 20, 2004 /s/ Spencer Wertheimer
------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer, principal
financial officer) of the
registrant's managing
partner, EPK, Inc.