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 March 31, 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 3326385
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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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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
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Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
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Assets
March 31, 2001 December 31, 2000
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(Unaudited)
Rental properties, at cost:
Land $ 35,469 $ 35,469
Buildings and improvements 10,582,992 10,577,922
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10,618,461 10,613,391
Less - accumulated depreciation (4,639,232) (4,532,396)
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5,979,229 6,080,995
Cash and cash equivalents 13,593 19,354
Restricted cash 59,990 61,578
Investment in affiliate 1,587,245 1,595,808
Other assets (net of amortization
of $119,302 and $118,082) 405,210 410,879
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Total $ 8,045,267 $ 8,168,614
=========== ===========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 3,360,473 $ 3,374,247
Accounts payable:
Trade 1,086,983 1,034,829
Related parties 437,632 484,837
Interest payable 102,567 103,181
Other Liabilities 1,351 1,335
Tenant security deposits 25,962 26,885
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Total liabilities 5,014,968 5,025,314
Minority interest 242,698 243,084
Partners' equity 2,787,601 2,900,216
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Total $ 8,045,267 $ 8,168,614
=========== ===========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
Three months ended
March 31,
2001 2000
Revenues: ---- ----
Rental income $189,941 $188,012
Other income 206 0
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Total revenues 190,147 188,012
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Costs and expenses:
Rental operations 115,105 95,007
General and administrative 0 42,000
Interest 71,424 74,014
Depreciation and amortization 108,056 108,350
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Total costs and expenses 294,585 319,371
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Loss before minority interests
and equity in affiliate (104,438) (131,359)
Minority interests' portion of loss 386 350
Equity in net loss of affiliate (8,563) (7,292)
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Net loss ($112,615) ($138,301)
======== ========
Net loss per limited
partnership unit ($ 6.25) ($ 7.68)
======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
Three months ended
March 31,
2001 2000
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Cash flows from operating activities:
Net loss ($112,615) ($138,301)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 108,056 108,350
Minority interest (385) (350)
Equity in loss of affiliate 8,563 7,292
Changes in assets and liabilities:
Decrease in restricted cash 1,588 10,178
Decrease in other assets 4,444 1,922
Increase in accounts payable - trade 52,159 82,946
Decrease in accounts payable - related
parties (47,206) (44,953)
Decrease in interest payable (614) (1,351)
Increase in other liabilities 16 0
(Decrease) increase in tenant
security deposits (923) 618
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Net cash provided by operating activities 13,083 26,351
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Cash flows from investing activities:
Capital expenditures (5,070) (5,917)
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Net cash used in investing activities (5,070) (5,917)
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Cash flows from financing activities:
Principal payments (13,774) (12,798)
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Net cash used in financing activities (13,774) (12,798)
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(Decrease) increase in cash and cash
equivalents (5,761) 7,636
Cash and cash equivalents at
beginning of period 19,354 2,986
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Cash and cash equivalents at end of period $ 13,593 $ 10,622
======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS VII
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors VII (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,
in Form 10-K of the Registrant 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 EVENT
On May 28th 2003, the Bakery Apartments was sold. The net proceeds
from the sale were used to pay the expenses of the Registrant.
On June 1, 2002, the Hill Hotel was sold. The net proceeds from
the sale were used to pay the expenses of the Registrant.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of March 31, 2001, Registrant had cash of $13,593.
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 March 31, 2001 Registrant had restricted cash of
$59,990 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.
In recent years the Registrant has realized significant
losses, including the foreclosure of two properties due to the
properties' inability to generate sufficient cash flow to pay
operating expenses and debt service. At the present time, with the
exception of Northern Liberties, 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 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. With respect
to Northern Liberties, any development of the remaining lot will
require additional funding of capital. The Registrant has not
identified any sources for this funding, and does not anticipate being
able to identify any such sources for the foreseeable future.
On May 28th 2003, the Bakery Apartments was sold. The
net proceeds from the sale were used to pay the expenses of the
Registrant.
On June 1, 2002, the Hill Hotel was sold. The net
proceeds from the sale were used to pay the expenses of the
Registrant.
(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. With respect to Northern
Liberties, any development of the remaining lots 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 do so. While the Registrant will be seeking to sell this
property, the Registrant does not believe that there is an active
market for properties of this sort and accordingly, there can be no
assurance that the property can be sold at a price acceptable to the
Registrant.
(3) Results of Operations
During the first quarter of 2001, Registrant incurred a
net loss of $112,615 ($6.25 per limited partnership unit) compared to
a net loss of $138,301 ($7.68 per limited partnership unit) for the
same period in 2000.
Rental income increased $1,929 from $188,012 in the first
quarter of 2000 to $189,941 in the same period of 2001. The increase
in rental income is due to an increase in average occupancy at
Robidoux (97% to 98%), partially offset by a decrease in rental income
at Flint Goodridge due to a decrease in average occupancy (97% to
94%).
Rental operations expense increased by $20,101 from
$95,004 in the first quarter of 2000, to $115,105 in the same period
of 2001. The increase in rental operations expense is due to an
increase in wages and salary expense at Flint Goodridge and Robidoux.
Wages and salaries expense increased at Flint Goodridge due to an
increase in office salary expense. The increase at Robidoux is due to
an increase in management salaries.
Losses incurred during the quarter at the Registrant's
properties were approximately $91,000 compared to losses of
approximately $78,000 for the same period in 2000.
In the first quarter of 2001 the Registrant incurred a
loss of $53,000 at Flint Goodridge including $51,000 of depreciation
and amortization expense, compared to a loss of $43,000 in the first
quarter of 2000 including $51,000 of depreciation and amortization
expense. The increase in the loss from the first quarter of 2000 to
the same quarter of 2001 is due to an increase in miscellaneous
operating expense and a decrease in rental income. Miscellaneous
operating expense increased due to general expenses made on behalf of
the property. The decrease in rental income is due to a decrease in
average occupancy (97% to 94%).
In the first quarter of 2001 the Registrant incurred a
loss of $38,000 at Robidoux, including $46,000 of depreciation and
amortization expense, compared to a loss of $35,000 including $ 46,000
of depreciation and amortization expense in the first quarter of 2000.
The increase in the loss from the first quarter of 2000 to the same
quarter of 2001 is due to an increase in wages and salaries expense,
partially offset by an increase in rental income. The increase in
wages and salary expense is due to an increase in management salaries.
Rental income increased due to an increase in average occupancy (97%
to 98%).
Summary of Minority Interest Investments
The Registrant owns a minority interest in the Bakery
Apartments in 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 the first
quarter of 2001, the Bakery Apartments recognized a net income of
$10,000 including $51,000 of depreciation and amortization expense
compared to a loss of $6,000 including $56,000 of depreciation and
amortization expense for the same period in 2000. The decrease in the
loss from the first quarter of 2000 to the same period in 2001 is due
to an overall decrease in rental operating expenses.
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 owns a minority interest in Kensington
Tower (Hill Hotel), 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 the first
quarter of 2001, Registrant incurred a loss of $9,000 compared to a
loss of $7,000 in the same period of 2000. The increase in loss from
the first quarter of 2000 to the same period in 2001 is due to an
overall increase in rental operating expenses.
On June 1, 2002, the Hill Hotel was sold. The net
proceeds from the sale were used to pay the 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 are any of its properties 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 March 31, 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 VII
By: Dover Historic Advisors VII, its
general partner
By: EPK, Inc., managing partner
Date: July 20, 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 March 31, 2001 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
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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 VII on Form 10-Q for the quarterly period ended March 31,
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 20, 2004 /s/ Spencer Wertheimer
------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer,
principal financial
officer) of the
registrant's managing
partner, EPK, Inc.