Item 1. Business
a. General Development of Business
Diversified Historic Investors 1990 ("Registrant") is a limited partnership formed in 1989 under the Pennsylvania Uniform Limited Partnership Act. As of December 31, 1997, Registrant had outstanding 5,032 units of limited partnership interest (the "Units").
Registrant is presently in its operating stage. It currently owns three properties or interests therein. See Item 2.
Item 2. Properties
As of the date hereof, Registrant owned three properties, or interests therein. A summary description of each property held at December 31, 1997 is given below.
a. Jefferson/Seymour - consists of 30 apartment units and 665 sf of commercial space at 94-96, 98-100 Jefferson Street and 134-138 Seymour Street in Hartford, Connecticut. In October 1990, the Registrant was admitted as a limited partner with a 99% interest in Jefferson Seymour Limited Partnership ("JSLP"), a Connecticut limited partnership, for a cash contribution of $1,417,000. One of the other general partners also contributed $390,000 of capital. JSLP subsequently capitalized $261,665 in acquisition costs related to the investment. JSLP acquired and rehabilitated the buildings for $3,288,665 ($129.48 per sf), including two mortgage notes payable in the original aggregate principal amount of $1,220,000. The first note payable of $300,000 (principal balance of $272,626 at December 31, 1997) bears interest at 1% and is due June 2010. The second note payable of $920,000 (principal balance of $747,819 at December 31, 1997) bears interest at the lender's cost of funds plus 2 1/2%. The loan was sold and the Registrant is in the process of negotiating payment terms with the new holder of the note.
The property is managed by an independent property management firm. As of December 31, 1997, 29 residential apartments are under lease (97%) at monthly rents ranging from $375 to $608 per month. As of December 31, 1997, none of the 665 sf of commercial space is under lease, however 50% of the space was rented for four months during 1997 (17%). Every effort is being made at this time by the property management firm to rent the commercial space. All residential leases are renewable, one-year leases. The occupancy rate was 92% for 1996, 92% for 1995, 96% for 1994, and 98% for 1993. The monthly rental range has been approximately the same since 1993. The occupancy for the commercial space was 46% for 1996, 50% for 1995, 100% for 1994, and 100% for 1993. The range for annual rents was $27.00 per sf for 1996, $27.00 per sf for 1995, $27.00 per sf for 1994, and $24.96 to $25.32 per sf for 1993. There are no contingent rentals included in income for the years ended December 31, 1997, 1996 and 1995. For tax purposes, this property has a basis of $2,447,665 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $26,374 which is based on an assessed value of $839,930 taxed at a rate of $3.140 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.
b. Shockoe Hearth Apartments - consists of 29 apartment units and 14,451 sf of commercial space at 1417-1423 East Cary Street in Richmond, Virginia. In December 1990, the Registrant was admitted with a 99% general partnership interest in Lawrence One General Partnership ("LOGP"), a Virginia general partnership, for a cash contribution of $800,000. LOGP subsequently capitalized $150,455 in acquisition costs relating to the investment. LOGP acquired and rehabilitated the property for $2,600,000 (excluding the capitalized costs, referred to above) ($90.49 sf), consisting of the equity contribution and $1,800,000 provided by a loan (principal balance of $1,725,581 at December 31, 1997) bearing interest at 10% and due February 2022. The loan was called by the lender in 1997. The Registrant is in the process of obtaining refinancing for the loan. The proposed refinancing has a principal balance of $1,799,000 bearing interest at 8% with principal and interest payments based on a 25 year amortization schedule, principal due in 2017.
The property is managed by an independent property management firm. As of December 31, 1997, all 29 of the apartments are under lease with rents ranging from $210 to $577 per month, and all of the commercial space is under lease by one tenant at annual rents ranging from $2.97 per sf for the basement area to $16.51 per sf for the restaurant area. All residential leases are renewable, one- year leases. The occupancy rate was 100% for 1996, 96% for 1995, 98% for 1994, and 100% for 1993. The monthly rental range has been approximately the same since 1993. The occupancy for the commercial space was 100% for 1996, 100% for 1995, 100% for 1994, and 100% for 1993. The range for annual rents was $2.80 to $16.00 per sf in 1996, $2.70 to $15.00 per sf in 1995, $16.68 per sf in 1994, and $14.40 to $20.40 per sf for 1993. The commercial space is occupied by one tenant which operates as a restaurant and currently has a ten-year lease which expires February 14, 2003. The minimum rental is $138,000 per year. There are no contingent rentals included in income for the years ended December 31, 1997, 1996 and 1995. For tax purposes, this property has a basis of $2,490,950 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $24,453 which is based on an assessed value of $1,710,000 taxed at a rate of $1.430 per $100. 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 72.3% general partnership interest in The Bakery Apartments General Partnership ("BAGP"), a Louisiana general partnership which owns the property, for a cash contribution of $1,235,000. Affiliates of the Registrant simultaneously acquired 26.7% of the general partnership interests in BAGP for an aggregate cash contribution of $465,000. Registrant 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 (principal balance of $2,984,137 at December 31, 1997) and the other for $201,500 (principal balance of $194,273 at December 31, 1997). The first loan bears interest at 8.25%, with monthly principal and interest payments based on a 30 year amortization schedule, principal due in 1999. The second loan is from the general partner of BAGP and has the same terms as the first loan. In March 1991, a $175,000 collateral mortgage note (principal balance of $161,533 at December 31, 1997) 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 property is managed by a property management firm which is an affiliate of the general partner of BAGP.
As of December 31, 1997, 64 units are under lease (94%) with rents ranging from $560 to $2,170. All leases are renewable, one-year leases. The occupancy rate was 95% for 1996, 100% for 1995, 93% for 1994, and 92% for 1993. The monthly rental range has been approximately the same since 1993. For tax purposes, this property has a basis of $3,381,856 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $11,677 which is based on an assessed value of $65,700 taxed at a rate of $17.773 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.
Item 3.
Item 3. Legal Proceedings
a. 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.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fiscal years covered by this report to a vote of security holders.
PART II
Item 5.
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 60 units were transferred of record in 1997.
b. As of December 31, 1997, there were 489 record holders of Units.
c. Registrant did not declare any cash dividends in 1997 and 1996.
Item 6.
Item 6. Selected Financial Data
The following selected financial data are for the five years ended December 31, 1997. This data should be read in conjunction with the consolidated financial statements included elsewhere herein. This data is not covered by the independent auditors' report.
1997 1996 1995 1994 1993
Rental income $1,092,708 $1,081,821 $1,059,508 $1,026,467 $ 998,697 Interest income 300 1,540 2,491 1,884 2,850 Net loss 450,509 496,109 469,528 482,279 476,136 Net loss per Unit 88.63 97.60 92.37 94.88 93.68 Total assets (net 8,351,689 8,771,520 9,244,523 9,755,227 10,299,756 of depreciation and amortization) Debt obligations 6,085,969 6,154,278 6,199,255 6,275,832 6,348,546
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
(1) Liquidity
As of December 31, 1997, Registrant had cash of approximately $28,549. Such funds are expected to be used to pay liabilities and general and administrative expenses of 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 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, 1997, Registrant had restricted cash of $95,609 consisting primarily of funds held as security deposits, replacement reserves and escrows for taxes. As a consequence of these restrictions as to use, Registrant does not deem these funds to be a source of liquidity.
At the present time, all three properties are able to pay their operating expenses and debt service but it is unlikely that any cash will be available to the Registrant to pay its general and administrative expenses. It is the Registrant's intention to continue to hold the properties until they can no longer meet the debt service requirements and the properties are foreclosed, or the market value of the properties increases to a point where they can be sold at a price which is sufficient to repay the underlying indebtedness (principal plus accrued interest).
(2) Capital Resources
Due to the recent rehabilitations of the properties, 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 expenditures levels not to be indicative to capital requirements in the future and accordingly, does not believe that it will have to commit material resources to capital investment for the foreseeable future.
(3) Results of Operations
During the fiscal year 1997, Registrant incurred a loss of $450,509 ($88.63 per limited partnership unit) compared to a loss of $496,109 ($97.60 per limited partnership unit) in 1996 and a loss of $469,528 ($92.37 per limited partnership unit) in 1995.
Rental income increased from $1,059,508 in 1995 to $1,081,821 in 1996 to $1,092,708 in 1997. The increase of rental income from 1996 to 1997 is due to an increase at Shockoe Hearth Apartments, partially offset by decreases at Jefferson Seymour and The Bakery Apartments. The increase in rental income at Shockoe Hearth Apartments was due to a scheduled rental increase for the sole commercial tenant and an increase in average residential rental rates. Rental income decreased at Jefferson Seymour due to lower average occupancy of residential units (92% to 89%), as well as lower average occupancy of commercial space (46% to 17%), and decreased at The Bakery Apartments due to lower average occupancy of residential and corporate apartment rental units (95% to 92%). The increase from 1995 to 1996 is due to an increase in rental income at Shockoe Hearth Apartments and Jefferson Seymour, partially offset by a decrease at The Bakery Apartments. The increase in rental income at Shockoe Hearth Apartments was due to an increase in the average occupancy of residential units (96% to 100%) combined with an increase in the rental income from the sole commercial tenant, and the increase at Jefferson Seymour is the result of higher average rental rates. The decrease at The Bakery Apartments was the result of a decrease in the average occupancy of residential and corporate apartment rentals (98% to 94%).
Expenses for rental operations increased from $463,926 in 1995 to $570,109 in 1996 and decreased to $534,794 in 1997. The decrease from 1996 to 1997 is due to a decrease in maintenance, corporate apartment expense, and insurance expense at The Bakery Apartments, combined with a decrease in utilities expense at Jefferson Seymour and a decrease in legal fees at Shockoe Hearth, partially offset by an increase in maintenance and bad debt expense at Jefferson Seymour, and an increase in maintenance expense at Shockoe Hearth, as well as an increase in salaries and wages expense at The Bakery Apartments (as discussed below).
The increase from 1995 to 1996 is due to an increase in maintenance expense at all three properties, as well as an increase in legal and real estate tax expense at Shockoe Hearth Apartments and salaries and wages expense at The Bakery Apartments, partially offset by a decrease in insurance expense at Jefferson Seymour and corporate apartment expense at The Bakery Apartments. Maintenance expense increased at Jefferson Seymour due to repairs and renovations made to several units, and increased at Shockoe Hearth and The Bakery Apartments due to extermination services performed to control a termite problem. Legal fees increased at Shockoe Hearth Apartments due to negotiations between property management and the commercial tenant, and real estate tax expense increased due to the expiration of a real estate tax abatement. Salaries and wages expense increased at The Bakery Apartments due to a reassessment of certain expenses by the management company, and insurance expense decreased at Jefferson Seymour due to a decrease in premiums. Corporate apartment expense decreased at The Bakery Apartments due to lower corporate apartment rentals.
Interest expense decreased from $546,273 in 1995 to $522,698 in 1996 and increased to $540,682 in 1997. The increase from 1996 to 1997 is due to an increase at The Bakery Apartments, partially offset by a decrease at Jefferson Seymour. Interest expense increased at The Bakery Apartments due to an adjustment made to properly calculate interest on the mortgage loan. Interest expense decreased at Jefferson Seymour due to the reduction of principal balances on which interest is calculated. The decrease from 1995 to 1996 is due to the accrual of additional interest in 1995 on amounts owed to an affiliate of the Registrant upon which interest had not been properly calculated.
Depreciation and amortization expense decreased from $516,745 in 1995 to $492,417 in 1996 and to $475,914 in 1997. The decrease from 1996 to 1997 is the result of organizational fees becoming fully amortized in 1996 at Shockoe Hearth and certain fixed assets becoming fully depreciated in 1996 at The Bakery Apartments. The decrease from 1995 to 1996 is due to personal property becoming fully depreciated at The Bakery Apartments in 1995.
In 1997 losses of $422,000 were incurred at the Registrant's three properties compared to $476,000 in 1996 and $432,000 in 1995. A discussion of property operations/activities follows:
In 1997, Registrant incurred a loss of $152,000 at Jefferson/Seymour, including $128,000 of depreciation and amortization expense compared to a loss of $150,000 including $128,000 of depreciation and amortization expense in 1996 and a loss of $126,000 including $130,000 of depreciation and amortization expense in 1995. The increase in the loss from 1996 to 1997 is due to a decrease in rental income combined with an increase in maintenance and bad debt expense partially offset by a decrease in utilities and interest expense. Rental income decreased due to lower average occupancy of residential units (92% to 89%), as well as lower average occupancy of commercial space (46% to 17%). Maintenance expense increased due to new carpeting installed in several units as well as roofing repairs made at the property, and bad debt expense increased as a result of the write-off of tenant receivables that were deemed uncollectible. Utilities expense decreased due to a decline in the average occupancy of residential units, and interest expense decreased due to the reduction of principal balance on which interest expense is calculated. The increase in the loss from 1995 to 1996 is due to an increase in maintenance expense partially offset by an increase in rental income and a decrease in insurance expense. Maintenance expense increased due to the replacement of carpeting as well as repairs to heating systems in several units. Rental income increased due to higher average rental rates, while insurance expense decreased due to lower premiums.
In 1997, Registrant incurred a loss of $80,000 at Shockoe Hearth including $99,000 of depreciation and amortization expense compared to a loss of $115,000 including $103,000 of depreciation and amortization expense in 1996 and a loss of $127,000 including $103,000 of depreciation and amortization expense in 1995. The decrease in the loss from 1996 to 1997 is due to an increase in rental income combined with a decrease in legal fees and amortization expense, partially offset an increase in maintenance expense. Rental income increased as a result of a scheduled rent increase for the sole commercial tenant, as well as an increase in average rental rates of residential units. Legal fees decreased since negotiations between the property management and the sole commercial tenant were completed in 1996. Amortization decreased due to organizational fees becoming fully amortized in the fourth quarter of 1996. Maintenance expense increased as a result of roofing repairs completed at the property. The decrease in the loss from 1995 to 1996 is the result of an increase in rental income partially offset by an increase in maintenance expense, legal fees, and real estate taxes. The increase in rental income is due to higher average occupancy of residential rentals (96% to 100%) combined with an increase in the rental income from the sole commercial tenant. Maintenance expense increased due to extermination services performed to control a termite problem, and legal fees increased as a result of negotiations between property management and the commercial tenant. Real estate taxes increased due to the expiration of a real estate tax abatement in 1996 which caused the assessment value of the property to increase from $271,972 in 1995 to $1,710,000 in 1996 which resulted in an increase in the real estate taxes from $3,930 in 1995 to $23,987 in 1996.
In 1997, Registrant incurred a loss of $190,000 at the Bakery including $223,000 of depreciation and amortization expense compared to a loss of $211,000 including $236,000 of depreciation and amortization expense in 1996 and a loss of $179,000 including $252,000 of depreciation and amortization expense in 1995. The decrease in the loss from 1996 to 1997 is due to a decrease in maintenance, corporate apartment expense, depreciation, and insurance expense, partially offset by a decrease in rental income and an increase in interest expense and salaries and wages expense. Maintenance expense decreased due to the replacement of carpeting in several units and extermination services performed in 1996 which were not repeated in 1997. Corporate apartment expense decreased due to lower rentals of corporate apartments, and depreciation expense decreased due to certain fixed assets becoming fully depreciated in 1996. Insurance expense decreased due to lower premiums, and rental income decreased due to lower average occupancy of residential units (95% to 92%). Interest expense increased due to an adjustment made to properly calculate interest on the mortgage loan, and salaries and wages expense increased due to an increase in the salary of the property manager, partially offset by a decrease in the wages of the maintenance personnel. The increase in the loss from 1995 to 1996 is the result of a decrease in rental income combined with an increase in maintenance and salaries and wages expense, partially offset by a decrease in interest expense and corporate apartment expense. The decrease in rental income is due to a decrease in the average occupancy of residential units and corporate apartments (98% to 94%). Maintenance expense increased due to the replacement of carpeting in several units and extermination services performed to control the termites which are prevalent in the New Orleans area. Salaries and wages expense increased due to a reassessment of certain expenses by the management company. Interest expense decreased due to the accrual of interest in 1995 on amounts owed to an affiliate of the Registrant upon which interest had not been properly calculated. Corporate apartment expense decreased due to lower corporate apartment rentals.
Item 8.
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 1990
We have audited the accompanying consolidated balance sheets of Diversified Historic Investors 1990 (a Pennsylvania Limited Partnership) and its subsidiaries as of December 31, 1997 and 1996 and the related consolidated statements of operations, changes in partners' equity and cash flows for the years ended December 31, 1997, 1996, and 1995. 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 audits. We did not audit the financial statements of The Bakery Apartments General Partnership, which statements reflect total assets of $3,705,621 and $3,943,320, as of December 31, 1997 and 1996, respectively, and total revenues of $625,890 and $629,206, respectively for the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for The Bakery Apartments General Partnership is based solely on the report of the other auditors.
We conducted our audits, in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide 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 1990 as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the years ended December 31, 1997, 1996, and 1995 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 25 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 March 2, 1998
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, 1997 and 1996 and the related statements of operations, 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 audit.
We conducted our audits in accordance with generally accepted auditing standards. 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 The Bakery Apartments Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Pailet, Meunier and LeBlanc, L.L.P. Metairie, Louisiana January 30, 1998
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 1997 and 1996 14
Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996, and 1995 15
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996, and 1995 16
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996, and 1995 17
Notes to consolidated financial statements 18-23
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 25
Notes to Schedule XI 26
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 1990 (a limited partnership)
CONSOLIDATED BALANCE SHEETS December 31, 1997 and 1996
Assets
1997 1996 Rental properties at cost: Land $ 248,856 $ 248,856 Buildings and improvements 10,915,625 10,896,321 Furniture and fixtures 155,592 155,592 ---------- ---------- 11,320,073 11,300,769 Less - accumulated depreciation (3,195,801) (2,755,349) ---------- ---------- 8,124,272 8,545,420
Cash and cash equivalents 28,549 33,160 Restricted cash 95,609 91,969 Accounts receivable 24,505 17,901 Other assets (net of accumulated amortization of $264,054 and $228,889) 79,944 83,070 ---------- ---------- Total $ 8,352,879 $ 8,771,520 ========== ==========
Liabilities and Partners' Equity
Liabilities: Debt obligations $ 6,085,969 $ 6,154,278 Accounts payable: Trade 579,708 482,016 Related parties 192,796 148,010 Interest payable 125,670 91,435 Tenant security deposits 61,038 67,040 Other liabilities 37,864 52,524 ---------- ----------
Total liabilities 7,083,045 6,995,303 ---------- ---------- Minority interests 444,459 500,332
Partners' equity 825,375 1,275,885 ---------- ---------- Total $ 8,352,879 $ 8,771,520 ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Revenues: Rental income $1,092,708 $1,081,821 $1,059,508 Interest income 300 1,540 2,491 --------- --------- --------- Total revenues 1,093,008 1,083,361 1,061,999 --------- --------- --------- Costs and expenses: Rental operations 534,794 570,109 463,926 General and administrative 48,000 56,030 57,129 Interest 540,682 522,698 546,273 Depreciation and amortization 475,914 492,417 516,745 --------- --------- --------- Total costs and expenses 1,599,390 1,641,254 1,584,073 --------- --------- --------- Loss before minority interests (506,382) (557,893) (522,074)
Minority interests' portion of loss 55,873 61,784 52,546 --------- --------- --------- Net loss ($ 450,509) ($ 496,109) ($ 469,528) ========= ========= ========= Net loss per limited partnership unit: Loss before minority interests ($ 99.62) ($ 109.75) ($ 102.71) Minority interests 10.99 12.15 10.34 --------- --------- --------- ($ 88.63) ($ 97.60) ($ 92.37) ========= ========= =========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
Diversified Historic Advisors Limited 1990 (1) Partners (2) Total
Percentage participation in profit or loss 1% 99% 100%
Balance at December 31, 1994 ($11,617) $2,253,139 $2,241,522 Net loss (4,695) (464,833) (469,528) ------ --------- --------- Balance at December 31, 1995 (16,312) 1,788,306 1,771,994 Net loss (4,961) (491,148) (496,109) ------ --------- --------- Balance at December 31, 1996 (21,273) 1,297,158 1,275,885 Net loss (4,505) (446,004) (450,509) ------ --------- --------- Balance at December 31, 1997 ($25,778) $ 851,154 $ 825,376 ====== ========= =========
(1) General Partner.
(2) 5,032 limited partnership units outstanding at December 31, 1997, 1996, and 1995.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash flows from operating activities: Net loss ($450,509) ($496,109) ($469,528) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 475,914 492,417 516,745 Minority Interests (55,873) (61,784) (58,604) Changes in assets and liabilities: (Increase) decrease in restricted cash (3,640) 54,346 (1,835) Increase in accounts receivable (6,604) (7,736) (544) (Increase) decrease in other assets (32,337) 672 2,016 Increase in accounts payable - trade 97,692 67,786 47,260 Increase in accounts payable - related parties 44,786 76 29,741 Increase (decrease) in interest payable 34,235 68,139 (12,128) (Decrease) increase in tenant security deposits (6,002) 3,911 6,045 (Decrease) increase in other liabilities (14,660) (9,128) 22,171 Net cash provided by operating ------- ------- ------- activities 83,002 112,590 81,339 ------- ------- ------- Cash flows from investing activities: Capital expenditures (19,304) (39,569) (13,050) ------- ------- ------- Net cash used in investing activities: (19,304) (39,569) (13,050) ------- ------- ------- Cash flows from financing activities: Payments of principal under debt obligations (68,309) (44,977) (76,577) ------- ------- ------- Net cash used in financing activities: (68,309) (44,977) (76,577) ------- ------- ------- (Decrease) increase in cash and cash equivalents (4,611) 28,044 (8,288) Cash and cash equivalents at beginning of year 33,160 5,116 13,404 ------- ------- ------- Cash and cash equivalents at end of year $ 28,549 $ 33,160 $ 5,116 ======= ======= ======= Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest $506,447 $454,559 $517,739
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors 1990 (the "Partnership") was formed in December 1989, to acquire, rehabilitate, and manage real properties which were Certified Historic Structures, as defined in the Internal Revenue Code of 1986 (the "Code"), or which are eligible for designation as such, and 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 1990 (the "General Partner") deems appropriate, and to engage in any and all activities related or incidental thereto.
The General Partner, Dover Historic Advisors 1990 (a general partnership), whose partners are Dover Historic Advisors, Inc., (a Pennsylvania corporation) and Jacqueline Reichman, has the exclusive responsibility for all aspects of the Partnership's operations.
NOTE B - 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 (the "Ventures"), in which the Partnership has controlling interests, with appropriate elimination of inter-partnership transactions and balances. These financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of the General Partner, are necessary for a fair statement of the results for those years.
2. Depreciation
Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Buildings and improvements are depreciated over 25 years and furniture and fixtures over five years.
3. Net Loss Per Limited Partnership Unit
The net loss per limited partnership unit is based on the weighted average number of limited partnership units outstanding during the period (5,032 in 1997, 1996, and 1995).
4. 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.
5. Deferred Expenses
Loan fees have been incurred with respect to certain loans. Such fees were deferred and are amortized over the term of the related loans and charged to amortization expense.
6. Cash and Cash Equivalents
The Registrant considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
7. Acquisition Costs
Costs incurred in identifying and evaluating properties for possible acquisition and rehabilitation are deferred. Such costs are capitalized as part of the cost of the property if the related property is acquired and are charged to expense if it is not acquired. Interest, real estate taxes, and insurance costs incurred during the rehabilitation period have been capitalized as part of the cost of the property.
8. Restricted Cash
Restricted cash includes amounts held for tenant security deposits, real estate tax reserves and other cash restricted as to use.
9. Revenue Recognition
Revenues are recognized when rental payments are due on a straight- line basis. Rental payments received in advance are deferred until earned.
10. 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 with 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 of each year.
NOTE C - PARTNERSHIP AGREEMENT
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) or a 6.5% cumulative, noncompounded annual return on their average 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 - TRANSACTIONS WITH RELATED PARTIES
Included in Accounts Payable - Related Party was $192,796 and $148,010 at December 31, 1997 and 1996, respectively, owed to the co-general partners 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 from the property.
NOTE E - LEASES
The Partnership's leases with commercial tenants are classified as operating leases. Leases are generally for a period of three to five years and provide for a fixed base rent plus contingent rents based on level of sales and sharing of certain operating costs.
Minimum future commercial rentals on operating leases as of December 31, 1997 are as follows:
1998 $147,906 1999 154,852 2000 162,145 2001 177,480 2002 185,417
NOTE F - ACQUISITIONS
The Partnership acquired three controlling general or limited partnership interests in Ventures during the period from October 1990 to March 1991, as discussed below.
In October 1990, the Partnership was admitted, with a 99% limited partner interest, to a Connecticut general partnership which owns a building located in Hartford, Connecticut, consisting of 30 apartment units and 665 square feet of commercial space, for a cash contribution of $1,417,000.
In December 1990, the Partnership was admitted, with a 99% general partner interest, to a Virginia general partnership which owns a building located in Richmond, Virginia, consisting of 29 apartment units and 14,451 square feet of commercial space, for a cash capital contribution of $800,000.
In March 1991, the Partnership purchased a 72.3% interest of a Pennsylvania general partnership which owns a building located in New Orleans, Louisiana, consisting of 68 apartments, for $1,235,000. In October 1992, in conjunction with a refinancing, the Partnership exchanged its general partnership interest for a limited partnership interest in a reconstituted partnership.
NOTE G - DEBT OBLIGATIONS
Debt obligations were as follows: December 31, 1997 1996 ------ ------ Mortgage loan; interest at 8% until January 1996 when $ 747,819 $ 756,566 interest resets based on a specified index; monthly payments of $7,102 based on a 25 year amortization; collateralized by the related rental property (A)
Note payable; interest at 1%; monthly payments of 272,626 272,626 principal and interest of $1,380; based on a 20-year amortization schedule; due 2010
Mortgage loan; interest at the Fidelity Federal Savings 1,725,581 1,741,781 Bank prime plus 1.5% with a minimum of 10% and a maximum of 15% (10% at December 31, 1997 and 1996) based on a 30-year amortization schedule; callable by the lender in 1997; principal due February 1, 2022; collateralized by the related rental property (B)
Mortgage loan; interest at 8.25%; monthly payments of 2,984,137 3,018,995 $23,552 based on a 30-year amortization schedule, collateralized by the related rental property; due November 1999
Note payable to developer; interest at 9%; payments 161,533 169,386 based on positive cash flow of the property
Note payable to developer; interest at 8.25%; monthly payments of $1,514 based on a 30-year amortization schedule; collateralized by the related rental property; due November 1999 194,273 194,924 --------- --------- $6,085,969 $6,154,278 ========= =========
(A) The mortgage was sold in 1997. The partnership is in the process of negotiating payment terms with the new holder of the note.
(B) The lender called the note in 1997. The Partnership is in the process of refinancing the mortgage loan. The proposed refinancing has a principal balance of $1,799,000 bearing interest at 8% and will be due in 2017.
Maturities of debt obligations at December 31, 1997, are as follows:
Year Ending December 31,
1998 $1,082,007 1999 3,169,344 2000 30,439 2001 33,626 2002 37,147 Thereafter 1,733,406 --------- $6,085,969 =========
NOTE H - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of operations in different time periods for financial reporting ("book") purposes and for income tax ("tax") purposes. The reconciliation of net loss and partners' equity follows:
For the Years Ended December 31, 1997 1996 1995 ------ ------ ------ Net loss - book ($ 450,509) ($ 496,109) ($ 469,528) Excess of book over tax depreciation 134,039 160,384 185,200 Other timing differences 1,759 (1,379) 3,484 Minority Interest (15,699) (21,621) (31,983) --------- --------- --------- Net loss - tax ($ 330,410) ($ 358,725) ($ 312,827) ========= ========= =========
Partners' equity - book $ 825,376 $1,275,885 $1,771,994 Costs of issuance 638,660 638,660 638,660 Cumulative book over tax loss 504,000 383,901 246,517 Basis reduction (1,565,104) (1,565,104) (1,565,104) --------- --------- --------- Partners' equity - tax $ 402,932 $ 733,342 $1,092,067 ========= ========= =========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997
Costs Capitalized Subsequent to Acquisition Initial Cost to Partnership (b)
Buildings and Description (a) Encumbrances Land Improvements Improvements (e)
30 unit apartments and 665 square feet of commercial space in Hartford, CT $1,020,445 - $3,027,000 $261,665
29 unit apartments and 14,451 square feet of commercial space in Richmond, VA 1,725,581 186,381 2,287,980 353,425
68 unit apartments in New Orleans, LA 3,339,943 62,475 5,103,816 37,331 --------- ------- ---------- ------- $6,085,969 $248,856 $10,418,796 $652,421 ========= ======= ========== =======
Gross Amount at which Carried at December 31,
Buildings and Accum. Date of Date Description (a) Land Improvements Total Depr. Constr. Acquired (b)(c) (c)(d) (d) (a)
30 unit apartments and 665 square feet of commercial space in Hartford, CT $3,288,665 $3,288,665 $1,012,554 1990 1990
29 unit apartments and 14,451 square feet of commercial space in Richmond, VA 186,381 2,641,405 2,827,786 729,748 1990 1990
68 unit apartments in New Orleans, LA 62,475 5,141,147 5,203,622 1,453,499 1991 1991 ------- ---------- ---------- --------- $248,856 $11,071,217$11,320,073 $3,195,801 ======= ========== ========== =========
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
NOTES TO SCHEDULE XI
December 31, 1997
(A) All properties are certified historic structures as defined in the Internal Revenue Code. The "date of construction" refers to the period in which such properties are rehabilitated.
(B) The aggregate cost of real estate owned at December 31, 1997, for Federal income tax purposes is approximately $8,320,471. However, the depreciable basis of buildings and improvements is reduced for Federal income tax purposes by the investment tax credit and the historic rehabilitation credit obtained.
(C) Reconciliation of real estate:
1997 1996 1995 ------ ------ ------ Balance at beginning of year $11,300,769 $11,261,200 $11,248,150 Additions during the year: Improvements 19,304 39,569 13,050 ---------- ---------- ---------- Balance at end of year $11,320,073 $11,300,769 $11,261,200 ========== ========== ==========
Reconciliation of accumulated depreciation: Balance at beginning of year $ 2,755,349 $ 2,301,499 $ 1,834,659 Depreciation expense for the year 440,452 453,850 466,840 ---------- ---------- ---------- Balance at end of year $ 3,195,801 $ 2,755,349 $ 2,301,499 ========== ========== ==========
(D) See Note B to the financial statements for depreciation method and lives.
(E) See Note E to the financial statements for further information.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
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 1990 (DoHA-1990), a Pennsylvania general partnership. The partners of DoHA-1990 are as follows:
Name Position Term of Office Period Served
Dover Historic Advisors, Partner in DoHA- No fixed term Since September 1990 Inc. 1990 ("Dover Advisors")
Jacqueline D. Reichman Partner in No fixed term Since May 1994 DOHA-1990
For further description of Dover Advisors, see paragraph e. of this Item. There is no arrangement or understanding between either person named above and any other person pursuant to which any person was or is to be selected as an officer.
c. Identification of Certain Significant Employees. Registrant has no employees. Its administrative and operational functions are carried out by a property management and partnership administration firm engaged by the Registrant.
d. Family Relationships. There is no family relationship between or among the executive officers and/or any person nominated or chosen by Registrant to become an executive officer.
The general partner is responsible for the management and control of Registrant's affairs and will have general responsibility and authority in conducting its operations. DoHA-1990 is a general partnership formed in 1989. e. Business Experience.
The partners of DoHA-1990 are Dover Advisors and Jacqueline Reichman. The General Partner may retain its affiliates to manage certain of the Properties.
Dover Advisors, a wholly-owned subsidiary of DHP, Inc., (formerly Dover Historic Properties, Inc.) is a corporation formed in February 1989 under the laws of the Commonwealth of Pennsylvania for the purpose of acting as the general partner (or a partner of the general partner) in real estate programs such as the Registrant. DHP, Inc. is a subsidiary of The Dover Group, Ltd., an entity formed in 1985 to act as the holding company for DHP, Inc. and certain other companies involved in the development and operations of both historic properties and conventional real estate as well as in financial (non-banking) services. In February 1992, The Dover Group, Ltd's name was changed to D, LTD.
The executive officers, directors and key employees of Dover Advisors are described below.
Donna M. Zanghi (age 41) was appointed Secretary/Treasurer of Dover Advisors and Secretary/Treasurer of DHP, Inc. on June 15, 1993. She is also a Director and Secretary/Treasurer of D, LTD. She has been associated with Dover Advisors 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 33) was appointed on January 27, 1993 as Assistant Secretary of Dover Advisors, D, LTD and DHP, Inc. and Director of D, LTD.
Jacqueline D. Reichman was appointed on May 11, 1994 as a partner of DoHA-1990. Ms. Reichman and her affiliates have extensive experience in real estate related ventures.
Item 11.
Item 11. Executive Compensation
a. Cash Compensation - The Registrant did not pay any cash compensation during 1997.
b. Compensation Pursuant to Plans - Registrant has no plan pursuant to which compensation was paid or distributed during 1997, or is proposed to be paid or distributed in the future, to DoHA- 1990, any partner therein, or any person named in paragraph c. of Item 10 of this report.
c. Other Compensation - No compensation not referred to in paragraph a. or paragraph b. of this Item was paid or distributed during 1997 to DoHA-1990, 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.
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 - No equity securities of Registrant are beneficially owned by any person named in paragraph c. of Item 10.
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.
Item 13. Certain Relationships and Related Transactions
Pursuant to Registrant's Amended and Restated Agreement of Limited Partnership, DoHA-1990 is entitled to 10% of Registrant's distributable cash from operations in each year. There was no such share allocable to DoHA-1990 for fiscal years 1995 to 1997.
a. Certain Business Relationships - Registrant has no directors.
b. 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.
PART IV
Item 14.
Item 14. (A) Exhibits, Financial Statement Schedules and Reports on Form 8-K.
1. Financial Statements:
a. Consolidated Balance Sheets at December 31, 1997 and 1996.
b. Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995.
c. Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995.
d. Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.
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 Number
3 Registrant's Amended and Restated Certificate of Limited Partnership and Agreement of Limited Partnership, previously filed as part of Amendment No. 1 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.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended December 31, 1997.
(c) Exhibits: See Item 14 (A)(3) above.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DIVERSIFIED HISTORIC INVESTORS 1990
Date: April 20, 1998 By: Dover Historic Advisors 1990, -------------- General Partner
By: Dover Historic Advisors, Inc., Ptr.
By: /s/ Jacqueline D. Reichman -------------------------- JACQUELINE D. REICHMAN Partner
By: /s/ Michele F. Rudoi -------------------------- MICHELE F. RUDOI, Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
DOVER HISTORIC ADVISORS 1990 General Partner
By: Dover Historic Advisors, Inc., Partner
By: /s/ Jacqueline D. Reichman April 20, 1998 -------------------------- -------------- JACQUELINE D. REICHMAN Partner
By: /s/ Michele F. Rudoi April 20, 1998 --------------------------- -------------- MICHELE F. RUDOI, Assistant Secretary