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 June 30, 2001
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 33-26385
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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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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
June 30, 2001 December 31, 2000
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(Unaudited)
Rental properties, at cost:
Land $ 35,469 $ 35,469
Buildings and improvements 10,587,234 10,577,922
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10,622,703 10,613,391
Less - accumulated depreciation (4,746,068) (4,532,396)
----------- -----------
5,876,635 6,080,995
Cash and cash equivalents 12,671 19,354
Restricted cash 61,317 61,578
Investment in affiliate 1,583,049 1,595,808
Other assets (net of amortization
of $120,523 and $118,082) 416,385 410,879
----------- -----------
Total $ 7,950,057 $ 8,168,614
=========== ===========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $ 3,346,379 $ 3,374,247
Accounts payable:
Trade 1,103,792 1,034,829
Related parties 434,983 484,837
Interest payable 101,216 103,181
Tenant security deposits 25,769 26,885
Other liabilities 4,729 1,335
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Total liabilities 5,016,868 5,025,314
Minority interests 242,364 243,084
Partners' equity 2,690,825 2,900,216
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Total $ 7,950,057 $ 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
-------------------------------------
(Unaudited)
Three months Six months
ended June 30, ended June 30,
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Rental income $187,330 $206,210 $377,271 $394,222
Interest income 0 0 206 0
-------- -------- -------- --------
Total revenues 187,330 206,210 377,477 394,222
-------- -------- -------- --------
Costs and expenses:
Rental operations 105,224 105,527 220,328 200,535
General and
administrative 0 42,000 0 84,000
Interest 70,834 74,022 142,259 148,036
Depreciation and
amortization 108,056 108,350 216,112 216,701
-------- -------- -------- --------
Total costs
and expenses 284,114 329,899 578,699 649,272
-------- -------- -------- --------
Loss before minority
interest and equity
in affiliate (96,784) (123,689) (201,222) (255,050)
Minority interest 334 351 719 702
Equity in net loss
of affiliate (326) (8,833) (8,888) (16,124)
-------- -------- -------- --------
Net loss ($ 96,776) ($132,171) ($209,391) ($270,472)
======== ======== ======== ========
Net loss per limited
partnership unit:
Loss before minority
interest and
equity in
affiliate ($ 5.37) ($ 6.86) ($ 11.16) ($ 14.15)
Minority interest .01 .02 .03 .04
Equity in net
loss of
affiliate ($ .01) (.49) (.49) (.90)
-------- -------- -------- --------
Net loss ($ 5.37) ($ 7.33) ($ 11.62) ($ 15.01)
======== ======== ======== ========
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)
Six months ended
June 30,
2001 2000
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Cash flows from operating activities:
Net loss ($209,392) ($270,472)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 216,112 216,701
Equity in loss of affiliate 8,888 16,124
Minority interest (719) (702)
Changes in assets and liabilities:
Decrease in restricted cash 261 10,777
Increase in other assets (4,080) (1,703)
Increase in accounts payable - trade 68,963 137,200
Decrease in accounts payable related parties (49,849) (52,453)
Decrease in interest payable (1,965) (2,055)
(Decrease)increase in tenant security deposits(1,116) 723
Increase in other liabilities 3,394 336
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Net cash provided by operating activities 30,497 54,476
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Cash flows from investing activities:
Capital expenditures (9,312) (9,564)
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Net cash used in investing activities (9,312) (9,564)
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Cash flows from financing activities:
Principal payments (27,868) (26,651)
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Net cash used in financing activities (27,868) (26,651)
-------- --------
(Decrease) increase in cash and cash
equivalents (6,683) 18,261
Cash and cash equivalents at
beginning of period 19,354 2,986
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Cash and cash equivalents at end of period $ 12,671 $ 21,247
======== ========
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 in Form 10-K and
notes thereto, in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
NOTE 2 - SUBSEQUENT EVENTS
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 June 30, 2001, Registrant had cash of $12,671.
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 June 30, 2001, Registrant had restricted cash of
$61,317 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 their 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. 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. 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 second quarter of 2001, Registrant incurred a
net loss of $96,776 ($5.37 per limited partnership unit) compared to a
net loss of $132,171 ($7.33 per limited partnership unit) for the same
period in 2000. For the first six months of 2001, the Registrant
incurred a net loss of $209,392 ($11.62 per limited partnership unit)
compared to a net loss of $270,472 ($15.01 per limited partnership
unit) for the same period in 2000.
Rental income decreased $18,880 from $206,210 in the
second quarter of 2000 to $187,330 in the same period of 2001 and
increased $16,951 from $394,222 for the first six months of 2000 to
$377,271 for the same period in 2001. Rental income decreased during
the second quarter due to a decrease in average occupancy at Flint
Goodridge (95% to 92%) and increased during the first six months due
to an increase in average occupancy at Robidoux (95% to 98%).
Rental operations expense decreased $303 from $105,527 in
the second quarter of 2000 to $105,224 in the same period of 2001 and
increased $19,793 from $200,535 for the first six months of 2000 to
$220,328 for the same period in 2001. Rental operations expense
decreased during the second quarter of 2001 due to a decrease in wages
and salary expense at Flint Goodridge. Rental operations expense
increased in the first six months of 2001 due to an increase in
insurance expense at Robidoux.
Losses incurred during the second quarter at the
Registrant's properties were approximately $85,000, compared to losses
of approximately $70,000 for the same period in 2000. Losses incurred
during the first six months of 2001 at the Registrant's properties
were approximately $175,000 compared to losses of approximately
$148,000 for the same period in 2000.
In the second quarter of 2001, Registrant incurred a loss
of $52,000 at Flint Goodridge including $51,000 of depreciation and
amortization expense, compared to a loss of $35,000, including $51,000
of depreciation and amortization expense for the same period in 2000
and for the first six months of 2001 incurred a loss of $104,000
including $102,000 of depreciation and amortization expense, compared
to a loss of $78,000, including $103,000 of depreciation and
amortization expense for the same period in 2000. The increase in
loss for the second quarter and first six months of 2001 as compared
to the same periods in 2000 is due to a decrease in rental income.
Rental income decreased due to a decrease in average occupancy for the
second quarter and for the first six months (95% to 92%).
In the second quarter of 2001, Registrant incurred a loss of
$33,000 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 second quarter of 2000
and for the first six months of 2001, Registrant incurred a loss of
$71,000 at Robidoux, including $92,000 of depreciation and
amortization expense, compared to a loss of $70,000, including $92,000
of depreciation and amortization expense for the same period in 2000.
The decrease in loss for the second quarter of 2001, compared to the
same period in 2000 is due to an increase in rental income due to an
increase in average occupancy (95% to 98%). The increase in loss for
the first six months of 2001 compared to the same period in 2000 is
due to an increase in insurance expense.
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 the second
quarter of 2001, the Bakery Apartments recognized a net income of
$7,000 including $51,000 of depreciation and amortization expense
compared to a loss of $17,000 including $56,000 of depreciation and
amortization expense for the same period in 2000 and for the first six
months of 2001, incurred a net loss of $3,000, including $101,000 of
depreciation and amortization expense compared to a loss of $30,000,
including $111,000 of depreciation and amortization expense for the
same period in 2000. The decrease in the losses from the second
quarter and first six months of 2000 to the same periods in 2001 is
due to an increase in rental income due to an increase in average
rental rates and a decrease in maintenance expense. Maintenance
expense decreased due to an overall decrease in general repairs made
at the building.
On May 28th 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 in 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 second quarter of
2000 and 2001, the Registrant incurred a loss of $9,000. For the
first six months of 2001, Registrant incurred a loss of $17,000 at
Kensington Tower compared to a loss of $16,000 for the same period of
2000.
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 is any of its property the subject of, any pending material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter covered by
this report to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Document
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3 Registrant's Amended and
Restated Certificate of Limited
Partnership and Agreement of
Limited Partnership, previously
filed as part of Amendment No.
2 of Registrant's Registration
Statement on Form S-11, are
incorporated herein by
reference.
21 Subsidiaries of the Registrant
are listed in Item 2.
Properties on Form 10-K,
previously filed and
incorporated herein by
reference.
31 General Partners Opinion
Certification
32 Certification Pursuant to 18
U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
ended June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DIVERSIFIED HISTORIC INVESTORS 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 June 30, 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 June 30,
2001 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Spencer Wertheimer, President and Treasurer
of the Company's managing partner, EPK, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: July 20, 2004 /s/ Spencer Wertheimer
------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer,
principal financial
officer) of the
registrant's managing
partner, EPK, Inc.