Item 1. Business
a. General Development of Business
Diversified Historic Investors III ("Registrant") is a limited partnership formed in 1986 under Pennsylvania Law. As of December 31, 2001, Registrant had outstanding 13,981.5 units of limited partnership interest (the "Units").
Registrant is presently in its operating stage. It originally owned five properties or interests therein. One property has been lost through foreclosure. See Item 2.
Item 2. Properties
As of the date hereof, Registrant owned four properties, or interests therein. A summary description of each property held at December 31, 2001 is given below.
a. Lincoln Court - consists of 58 apartment units in three buildings located at 5351 Overbrook Avenue in Philadelphia, Pennsylvania. In March 1987, the Registrant acquired the buildings and is the 100% equity owner of this property. Registrant acquired and rehabilitated the property for $3,417,640 ($64 per sf) (such amount is exclusive of $158,985 of capitalized fees incurred) which were funded by Registrant's equity contributions, including mortgage financing of $1,730,000 and a note payable of $10,000 (total balance due of $10,000 at December 31, 2001). The note payable bears interest at 10%. It is payable interest only on a quarterly basis; the principal was due in 1994. In 1988, a $95,000 second mortgage loan was obtained. In 1991, and $100,000 third mortgage loan was obtained which was due in 1994. Due to decreased cash flow, the Registrant stopped making scheduled debt service payments to the holder of the first, second and third mortgages. Notice of default was received from the lender on November 29, 1993. The Registrant pursued settlement discussions with the lender; however, in December 1994 the mortgage notes were sold. The Registrant entered into an agreement with the new holder of the mortgages whereby the maturities of the notes were extended to 1999 and monthly payments of interest were to be made to the new note holder in an amount equal to net operating income. In June 1996, the Registrant refinanced $1,268,000 of the first mortgage. In November 1998, the Registrant restructured the mortgage notes. The first mortgage was refinanced with a $1,540,000 mortgage ($1,493,104 principal balance at December 31, 2001) which bears interest at 6.83%, is payable in monthly installments of principal and interest of $10,070 and is due in November 2008. The portion of the first mortgage that was not refinanced plus the second and third mortgage notes were consolidated and a new note (principal balance of $1,942,681 at December 31, 2001 including accrued but unpaid interest) was structured which extends the maturity date to December 2, 2008, bears interest at 15% with monthly payments of interest to be made in an amount equal to net operating income.
The property is managed by BCMI. As of December 31, 2001, 57 residential units (98%) were under lease at monthly rents ranging from $471 to $1,700. All leases are renewable, one- year leases. The occupancy for the previous four years was 86% for 2000, 88% for 1999, 88% for 1998, and 87% for 1997. The monthly rental ranges for the previous four years were $460 to $1,700 during 2000, $460 to $1,565 during 1999 and 1998, and $375 to $1,450 during 1997. For tax purposes, this property has a federal tax basis of $3,336,188 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $29,924 which is based on an assessed value of $365,760 taxed at a rate of $6.90 per $100. No one tenant occupies ten percent or more of the building. The Registrant believes that the property is adequately covered by insurance.
b. The Green Street Apartments - consists of 18 apartment units in three adjoining buildings located at 1826-1828- 1830 Green Street in Philadelphia, Pennsylvania. In July 1987, Registrant acquired its interest in this property by purchasing a 99% general partnership interest in 18th & Green Associates General Partnership ("18th & Green"), a Pennsylvania general partnership, for $800,000. 18th & Green contracted to acquire and rehabilitate the Property for $1,600,000 ($100 per sf). Additionally, $100,000 of cash/marketing reserves were provided. The total cost of the project was funded by Registrant's equity contribution and mortgage financing of $900,000 (principal balance of $1,318,119 at December 31, 2001) which bears interest at 12%. During 1990, Registrant defaulted on its mortgage loan and the lender obtained a confession of judgment pursuant to the loan documents. Registrant petitioned the court to open the judgment and negotiated a settlement with the lender. The settlement required the Registrant to make payments toward delinquent interest in December 1990 and April 1991. Registrant did not make the April 1991 payment; however, no notice of default was received from the lender. In 1992, the Resolution Trust Corporation ("RTC") took over control of the lender. The Registrant received notice in 1993 that the RTC had sold the loan. The purchaser of the note contacted the Registrant who attempted to negotiate a loan modification. In September 1994, the mortgage note was sold again. The Registrant entered into an agreement with the new holder of the mortgage whereby the note maturity was extended through July 2009 with monthly payments of interest to be made in an amount equal to net operating income, with a minimum of $5,750 per month. The property is managed by BCMI.
As of December 31, 2001, 18 apartments (100%) were under lease at monthly rents ranging from $540 to $725. All leases are renewable, one-year leases. The occupancy for the previous four years was 94% for 2000, 83% for 1999, 94% for 1998, and 94% for 1997. The monthly rental range has been approximately the same since 1997. For tax purposes, this property has a federal tax basis of $1,480,897 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $15,316, which is based on assessed value of $187,200 taxed at a rate of $8.18 per $100. No one tenant occupies ten percent or more of the building. Registrant believes that the property is adequately covered by insurance.
c. The Loewy Building - consists of two adjoining buildings located at 505 West Fourth Street in Winston- Salem, North Carolina. The buildings consist of 62,146 rentable sf of commercial space. In November 1986, the Registrant acquired its interest in this Property by purchasing a 99% interest in Triad Properties General Partnership ("Triad"), a Pennsylvania general partnership, for a cash contribution of $2,250,000. Triad contracted to acquire and rehabilitate the Property for $5,690,000 ($88 per sf). Additionally, $560,000 of working capital/marketing reserves were provided. The total cost of the project was funded by Registrant's equity contribution, mortgage financing of $3,560,000 (principal balance of $3,873,752 at December 31, 2001) and a $500,000 note payable to the developer (Cwood Properties, Inc., Thomas L. Kummer and Gail R. Citron; all of whom are general partners of Triad). The first mortgage bears interest at 11.5% and is due in January 2012. The developers note was sold in September 1997. The Registrant entered into an agreement with the new holder of the note whereby monthly payments of interest are to be made in an amount equal to net operating income with a minimum monthly payment of $27,500. The Registrant advanced an additional $1,098,000 and Triad obtained $200,000 of additional financing in 1987 (principal balance due of $200,000 at December 31, 2001) to fund cost overruns resulting from delays and changes in rehabilitation and construction plans. The additional financing bears interest at the prime rate with a minimum of 6% and a maximum of 8% adjusting annually on January 2, (6% at December 31, 2001 and 8% at December 31, 2000). The property is managed by BCMI.
As of December 31, 2001, 22,369 sf were rented (36%) at annual rates ranging from $6.00 to $14.28 per sf. The occupancy at year end for the previous four years has been 36% for 2000, 41% for 1999, 98% for 1998, and 88% for 1997. The significant drop in occupancy as of December 31, 1999 as compared to 1998 is the result of the expiration of a tenant lease for 33,121 sf on December 31, 1999. The range for annual rents has been $6.00 to $13.41 per sf for 2000, $6.00 to $13.41 per sf for 1999, $6.00 to $16.44 per sf for 1998, and $6.00 to $16.21 per sf for 1997. There are two tenants who each occupy ten percent or more of the rentable square footage. Both tenants operate principally as law firms.
The following is a table showing commercial lease expirations at Loewy Building for the next five years.
Total annual Number of Total sf of rental covered % of gross Years leases expiring by expiring annual rental expiring leases leases from property 2002 1 3,261 $ 47,000 17% 2003 0 0 0 0% 2004 0 0 0 0% 2005 1 2,800 $ 35,000 13% 2006 3 16,308 $197,000 70%
No commercial leases expired during 2001. For tax purposes, this property has a basis of $5,457,427 and is depreciated using the straight-line method with a useful life of 39 years. The annual real estate taxes are $21,174 which is based on an assessed value of $5,414,779 taxed at a rate of $.39 per $100. Registrant believes that the property is adequately covered by insurance.
d. Magazine Place - is a four story building consisting of 57 apartment units located at 730 Magazine Street in New Orleans, Louisiana. In October 1986, the Registrant was admitted with a 60% general partnership interest in Magazine Place Limited Partnership ("MPP"), a Louisiana partnership, for a cash contribution of $600,000. Registrant subsequently made an additional equity contribution of $142,393 to fund certain fees incurred by MPP. MPP acquired and rehabilitated the property for $4,091,393 ($51 per sf), including mortgage financing of $3,050,000 and cash contributions by limited partners of $344,000. The mortgage note bore interest at 10%, was payable in monthly installments of principal and interest of $26,766, and was due in 1999. The excess proceeds from equity investments and mortgage financing over the acquisition and rehabilitation costs were utilized to provide working capital reserves. The mortgage ($2,798,832 principal at September 27, 1999) was refinanced in 1999 with a $2,870,000 mortgage which bears interest at 7.91%, is payable in monthly installments of principal and interest of $20,879 and is due in September of 2009. In 1987, Registrant made an equity contribution of $7,000 (MPP's other partners contributed cash in the amount of $28,000 in 1987) to fund operating deficits incurred during the lease-up period. According to the Amended and Restated Partnership Agreement, the Registrant's interest in MPP will be reduced from 60% to 40% as of the First Conversion Date. The First Conversion Date is the date on which the Registrant will have received a return of its initial capital contribution. For purposes of determining the First Conversion Date, the Registrant will be deemed to have received a return of its initial capital contribution when the sum of the following amounts equals $600,000: (i) cash distributions from MPP; (ii) investment tax credits allocable to the Registrant; and (iii) 50% of the aggregate of MPP's net losses and deductions allocable to the Registrant. As of December 31, 1994, the Registrant had received a return of its initial capital and the Registrant's interest in the MPP was reduced to 40%. Since that date, the Registrant has accounted for its investment in MPP on the equity basis.
The property is managed by a New Orleans property management firm not affiliated with BCMI. As of December 31, 2001, 49 residential units were under lease (86%) at monthly rents ranging from $634 to $1,485. All leases are renewable, one- year leases. The occupancy for the previous four years was 100% for 2000, 98% for 1999, 89% for 1998 and 91% for 1997. The monthly rental ranges for the previous four years were $634 to $1,485 during 2000, $620 to $1,250 during 1999, $620 to $1,300 during 1998, and $610 to $1,240 during 1997. For tax purposes, this property has a basis of $2,527,541 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $52,063, which is based on assessed value of $280,000 taxed at a rate of $18.59 per $100. No one tenant occupies ten percent or more of the building. Registrant believes that the property is adequately covered by insurance.
Item 3.
Item 3. Legal Proceedings
To the best of its knowledge, Registrant is not party to, nor is any of its property the subject of any pending material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted during the fiscal year covered by this report to a vote of security holders.
PART II
Item 5.
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 73 Units of record were sold or exchanged in 2001.
b. As of December 31, 2001, there were 1,583 record holders of Units.
c. Registrant did not declare any cash dividends in 2001 or 2000.
Item 6.
Item 6. Selected Financial Data
The following selected financial data are for the five years ended December 31, 2001. The data should be read in conjunction with the consolidated financial statements included elsewhere herein. This data is not covered by the independent auditors' report.
2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Rental income $ 931,137 $ 936,392 $1,257,195 $1,251,911 $1,251,764 Interest income 2,414 4,397 3,866 2,113 441 Net loss (3,444,268) (2,006,951)(1,070,903)(1,297,537)(1,017,497) Net loss per Unit (243.88) (142.11) (75.83) (91.88) (72.05) Total assets (net of depreciation and amortization) 3,348,854 6,024,542 7,307,432 7,758,588 8,196,299 Debt obligations 8,996,269 8,972,599 8,966,573 8,970,613 8,418,142
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
(1) Liquidity
At December 31, 2001, Registrant had cash of approximately $24,568. Registrant uses cash generated from operations primarily to fund operating expenses and debt service. In recent years the Registrant has realized significant losses, including the threatened foreclosure of one property, due to the properties' inability to generate sufficient cash flow to pay their operating expenses and debt service. At the present time Registrant has feasible loan modifications in place at Lincoln Court and Green Street. At Lincoln Court, Green Street, and the Loewy Building, the mortgages are cash-flow mortgages, requiring all available cash after payment of operating expenses to be paid to the first mortgage holder. Therefore, it is unlikely that any cash will be available to the Registrant to pay its general and administrative expenses. The Registrant is not aware of any additional sources of liquidity.
As of December 31, 2001, Registrant had restricted cash of $125,704 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.
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).
Since the lenders have agreed to forebear from taking any foreclosure action as long as cash flow payments are made, the Registrant believes it is appropriate to continue presenting the financial statements on a going concern basis.
(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 in the foreseeable future. If the need for capital expenditures does arise, the first mortgage holder for Lincoln Court, Loewy Building and 18th and Green has agreed to fund capital expenditures at terms similar to the first mortgages.
Results of Operations
During 2001, Registrant incurred a net loss of $3,444,268 ($243.88 per limited partnership unit), compared to a net loss of $2,006,951 ($142.11 per limited partnership unit) in 2000, and a net loss of $1,070,903 ($75.83 per limited partnership unit) in 1999.
Rental income was $931,137 in 2001, $936,392 in 2000, and $1,257,195 in 1999. The decrease in rental income from 2000 to 2001 is due to a decrease at the Loewy Building and the Green Street Apartments, partially offset by an increase at Lincoln Court. The decrease in rental income at the Loewy Building is due a decrease in average occupancy (38% to 36%). The decrease at the Green Street Apartments is due to a decrease in average occupancy (98% to 86%). The increase at the Lincoln Court is due to an increase in average occupancy (86% to 95%). The decrease in rental income from 1999 to 2000 is due to a decrease at the Loewy Building partially offset by increases at Lincoln Court and Green Street Apartments. The decrease in occupancy at the Loewy Building is due to the decrease in average occupancy (78% to 38%). The increase in rental income at the Lincoln Court Apartments is due to an increase in average rental rates from $460 to $1,565 during 1999 to $460 to $1,700 during 2000. The increase at the Green Street Apartments is due to an increase in average occupancy (83% to 94%).
Rental operations expense was $567,914 in 2001, $552,505 in 2000, and $585,564 in 1999. The increase from 2000 to 2001 is due to an increase in commission expense at Lincoln Court and the Green Street Apartments, partially offset by a decrease in legal and accounting expense at the Loewy Building. The increase in commission expense at Lincoln Court and the Green Street Apartments is due to an increase in the turnover of apartment units. The decrease in legal expenses at the Loewy Building is due to a decrease in professional services rendered during 2001. The decrease from 1999 to 2000 was due to a decrease in maintenance expense at the Lincoln Court Apartments. Maintenance expense decreased at Lincoln Court due to a decrease in apartment preparation expenses and maintenance services.
General and administrative expense was $0 in both 2000 and 2001, and $126,000 in 1999. The Registrant ceased accruing partnership administration fees in 2000. The cash flow and debt of the Registrant make it unlikely that these fees will be paid.
Interest expense was $1,068,080 in 2001, $1,068,425 in 2000, and $1,066,780 in 1999. The increase in interest expense from 1999 to 2000 is due to an increase at the Loewy Building due to an increase in principal balance as a result of principal additions made during the year.
Depreciation and amortization was $495,581 in 2001, $522,814 in 2000 and $519,656 in 1999. The decrease from 2000 to 2001 is due to a decrease in depreciation expense at the Loewy Building due to the impairment loss taken during the fourth quarter of 2001 which decreased the depreciable basis of the building. The increase from 1999 to 2000 is due to asset additions at Lincoln Court and the Loewy Building.
During 2001, the Registrant incurred an impairment loss of $2,264,000. The Loewy Building was deemed to be impaired and was written down to its fair market value. Fair value, which was determined by reference to the present value of the estimated future cash inflows, exceeded the carrying value by $2,264,000. An impairment loss of that amount has been charged to operations in 2001.
During 2000, the Registrant incurred an impairment loss of $820,000. The Loewy Building was deemed to be impaired and was written down to its fair market value. Fair value, which was determined by reference to the present value of the estimated future cash inflows, exceeded the carrying value by $820,000. An impairment loss of that amount has been charged to operations in 2000.
In 2001, a loss of approximately $1,140,000 was incurred at the Registrant's four properties compared to a loss of $1,115,000 in 2000 and a loss of $873,000 in 1999. A discussion of property operations/activities follows:
During 2001, the Registrant sustained a loss of $269,000 at Lincoln Court including $165,000 of depreciation and amortization expense. In 2000, Registrant sustained a loss of $349,000 including $163,000 of depreciation and amortization expense compared to a loss of $375,000 including $161,000 of depreciation expense in 1999. The decrease in loss from 2000 to 2001 is due to an increase in rental income and a decrease in maintenance expense, partially offset by an increase in commission expense. The increase in rental income is due to an increase in average occupancy (86% to 95%). The decrease in maintenance expense is due to a decrease in maintenance service expense. The increase in commission expense is due to an increase in the turnover of apartment units. The decrease in loss from 1999 to 2000 is due to an increase in rental income and a decrease in maintenance expense. The decrease in maintenance expense is due to a decrease in apartment preparation expense and maintenance service expense.
On June 30, 1992 Diversified Historic Properties, Inc. ("DHP"), a partner of the Registrant's general partner, assigned to D, LTD (its parent) a note receivable from the Registrant in the amount of $432,103 which bears interest at 10% with the entire principal and accrued interest due on June 30, 1997. Interest accrued was $45,703 during both 2001 and 2000. Payments on the note are to be made from available cash flow and before any distribution can be made to the Registrant's limited partners. The balance of the note (including accrued but unpaid interest) at December 31, 2001 was $807,417.
In 2001 Green Street apartments sustained a loss of $145,000 including $59,000 in depreciation expense compared to a loss of $132,000 including $59,000 of depreciation expense in 2000, and a loss of $147,000 in 1999 including $59,000 of depreciation expense. The increase in loss from 2000 to 2001 is due to a decrease in rental income and an increase in commission expense. The decrease in rental income is due to a decrease in average occupancy (98% to 86%). The increase in commission expense is due to an increase in the turnover of apartment units. The decrease in the loss from 1999 to 2000 is due to an increase in rental income due to an increase in average occupancy (83% to 94%).
On June 30, 1992, DHP assigned to D, LTD a note receivable from 18th and Green to the Registrant, that had been assigned to it, in the amount of $63,493 which bears interest at 10% with the entire principal and accrued interest due on June 30, 1997. On December 6, 1993 D, LTD obtained a judgment in the amount of $78,171 on this note in Common Pleas Court for Philadelphia County. The judgment accrues interest at 15%. Interest accrued was $5,055 during 2000 and 2001. Payments on the judgment are to be made from available cash flow from 18th and Green. The balance of the note at December 31, 2001 was $70,343.
In 2001, the Loewy Building sustained a loss (exclusive of the impairment loss) of $745,000 including $290,000 of depreciation and amortization expenses compared to a loss of $650,000 including $286,000 of depreciation and amortization expense during 2000 and to a loss of $317,000 including $285,000 of depreciation and amortization expense in 1999. The decrease in loss from 2000 to 2001 is due to a decrease in rental income and an increase in maintenance expense. The decrease in rental income at the Loewy Building is due to a decrease in average occupancy (38% to 36%). The increase in maintenance expense is due to an increase in cleaning and maintenance service. The increase in loss from 1999 to 2000 is due to a decrease in rental income due to a decrease in average occupancy (78% to 38%).
Summary of Minority Interests
In 2001, the Registrant recognized net income of $18,000 at Magazine Place compared to an income of $16,000 in 2000 and a loss $34,000 in 1999. This investment is accounted for by the equity method. The increase in net income from 2000 to 2001 is due to a decrease in rental operating expenses. The net income in 2000 versus a loss in 1999 is due to an increase average rental rates from a range of $620 to $1,300 during 1999 to a range of $634 to $1,485 during 2000.
Item7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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 Regulations S-K.
Independent Auditor's Report
To the Partners of Diversified Historic Investors III
We have audited the accompanying consolidated balance sheet of Diversified Historic Investors III (a Pennsylvania Limited Partnership) and subsidiaries as of December 31, 2001 and 2000 and the related statements of operations, changes in partners' equity and cash flows for the years ended December 31, 2001, 2000 and 1999. These consolidated statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above presents fairly, in all material respects, the financial position of Diversified Historic Investors III and subsidiaries as of December 31, 2001 and 2000, and the results of operations and cash flows for the years ended December 31, 2001, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule of Real Estate and Accumulated Depreciation on page 26 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
The accompanying financial statements have been prepared assuming that the partnership will continue as a going concern. In recent years, the partnership had incurred significant losses from operations, which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Gross, Kreger & Passio, L.L.C. Philadelphia, Pennsylvania March 20, 2002
DIVERSIFIED HISTORIC INVESTORS III (a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 2001 and 2000 14
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000, and 1999 15
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 2001, 2000, and 1999 16
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999 17
Notes to consolidated financial statements 18-24
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 26
Notes to Schedule XI 27
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 III (a limited partnership)
CONSOLIDATED BALANCE SHEETS December 31, 2001 and 2000 Assets
2001 2000 Rental properties at cost: ---- ---- Land $ 465,454 $ 465,454 Buildings and improvements 8,941,775 11,170,423 Furniture and fixtures 170,548 157,259 ----------- ----------- 9,577,777 11,793,136 Less - accumulated depreciation (6,891,195) (6,424,759) ----------- ----------- 2,686,582 5,368,377
Cash and cash equivalents 24,568 28,338 Restricted cash 125,703 181,556 Accounts receivable 103,775 90,688 Investment in affiliate 181,003 163,246 Other assets (net of accumulated amortization of $259,565 and $230,421) 227,223 191,837 ----------- ----------- Total $ 3,348,854 $ 6,024,042 =========== ===========
Liabilities and Partners' Equity
Liabilities: Debt obligations $ 8,996,269 $ 8,972,599 Accounts payable: Trade 1,208,816 1,180,280 Related parties 873,567 827,860 Real Estate Taxes 21,174 Interest payable 2,994,518 2,345,061 Tenant security deposits 62,468 57,885 Other liabilities 30,681 34,729 ----------- ----------- Total liabilities 14,187,493 13,418,414 Partners' deficit (10,838,639) (7,394,372) ----------- ----------- Total $ 3,348,854 $ 6,024,042 =========== ===========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS III (a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999 ---- ---- ---- Revenues: Rental income $ 931,137 $ 936,392 $1,257,195 Interest income 2,414 4,397 3,866 ---------- ---------- ---------- Total revenues 933,551 940,789 1,261,061 ---------- ---------- ---------- Costs and expenses: Rental operations 567,915 552,505 585,564 General and administrative 0 0 126,000 Interest 1,068,080 1,068,425 1,066,780 Depreciation and amortization 495,581 522,814 519,656 Impairment loss 2,264,000 820,000 0 ---------- ---------- ---------- Total costs and expenses 4,395,576 2,963,744 2,298,000 ---------- ---------- ---------- Loss before equity in affiliate (3,462,025) (2,022,955) (1,036,939) Equity in net income (loss) of affiliate 17,757 16,004 (33,964) ---------- ---------- ---------- Net loss ($3,444,268) ($2,006,951) ($1,070,903) ========== ========== ==========
Net loss per limited partnership unit: Loss before equity in affiliate ($ 245.14) ($ 143.24) ($ 73.42) Equity in net income (loss) of affiliate 1.26 1.13 (2.41)
---------- ---------- ---------- ($ 243.88) ($ 142.11) ($ 75.83) ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS III (a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 2001, 2000 and 1999
Dover Historic Limited Advisors Partners II(1) (2) Total -------- -------- ----- Percentage participation in profit or loss 1% 99% 100% == === ==== Balance at December 31, 1998 ($156,204) ($4,160,314) ($ 4,316,518) Net loss (10,709) (1,060,194) (1,070,903) -------- ---------- ----------- Balance at December 31, 1999 ($166,913) ($5,220,508) ($ 5,387,421) Net loss (20,070) (1,986,881) (2,006,951) -------- ---------- ----------- Balance at December 31, 2000 ($186,983) ($7,207,389) ($ 7,394,372) Net loss (34,443) (3,409,825) (3,444,267) -------- ---------- ----------- Balance at December 31, 2001 ($221,426) ($10,617,214) ($10,838,639) ======== =========== ===========
(1) General Partner.
(2) 13,981.5 limited partnership units outstanding at December 31, 2001, 2000, and 1999.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS III (a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000 and 1999 2001 2000 1999 ---- ---- ---- Cash flows from operating activities: Net loss ($3,444,268)($2,006,951)($1,070,903) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 495,581 522,814 519,656 Impairment loss 2,264,000 820,000 0 Equity in (income) loss of affiliate (17,757) (16,004) 33,964 Changes in assets and liabilities: Decrease (increase) in restricted cash 55,852 (9,546) (3,666) Increase in accounts receivable (13,087) (28,449) (36,932) Increase in other assets (64,530) (8,585) (19,971) Increase in accounts payable - trade 28,536 18,658 164,864 Increase in accounts payable - related parties 45,707 45,703 45,699 Increase in accounts payable - real estate 21,174 0 0 Increase in interest payable 649,457 662,100 392,010 Increase in tenant security deposits 4,584 2,001 10,111 (Decrease) increase in other liabilities (4,049) (10,927) 11,103 ---------- ---------- ---------- Net cash provided by (used in) operating activities 21,200 (9,186) 45,935 ---------- ---------- ---------- Cash flows from investing activities: Capital expenditures (48,641) (22,744) (19,634) ---------- ---------- ---------- Net cash used in investing activities (48,641) (22,744) (19,634) ---------- ---------- ----------
Cash flows from financing activities: Proceeds from debt obligations 40,487 21,437 10,627 Payments of principal under debt obligations (16,816) (15,411) (14,667) ---------- ---------- ---------- Net cash provided by (used in) financing activities 23,671 6,026 (4,040) ---------- ---------- ---------- (Decrease) increase in cash and cash equivalents (3,770) (25,904) 22,261 Cash and cash equivalents at beginning of year 28,338 54,242 31,981 ---------- ---------- ---------- Cash and cash equivalents at end of year $ 24,568 $ 28,338 $ 54,242 ========== ========== ==========
Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest $ 418,623 $ 406,325 $ 674,770
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS III (a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors III (the "Partnership") was formed in February 1986 under the laws of the Commonwealth of Pennsylvania. The Partnership was formed 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 were eligible for designation as such, utilizing mortgage financing and the net proceeds from the sale of limited partnership units. Any rehabilitations undertaken by the Partnership were done with a view to obtaining certification of expenditures therefore as "qualified rehabilitations expenditures" as defined in the Code.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies 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 a controlling interest with appropriate elimination of inter-partnership transactions and balances. In addition, the Partnership owns a minority interest of 40% in one partnership which it accounts for on the equity method. These financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of the Partnership's 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. Costs of Issuance
Costs incurred in connection with the offering and sale of limited partnership units were charged against partners' equity as incurred.
4. Cash and Cash Equivalents
The Partnership considers all highly liquid instruments purchased with a maturity of less than three months to be cash equivalents.
5. Interest Payable
Interest payable includes all accrued and unpaid interest on the debt obligations, as well as interest in arrears.
6. 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 (13,981.5 in 2001, 2000, and 1999).
7. Income Taxes
Federal and state income taxes are payable by the individual partners; accordingly, no provision or liability for income taxes is reflected in the financial statements.
8. 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 a 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 mortgage loan on a property has significant balloon payments due within the foreseeable future 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 it to continue to hold 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 deficits, and has been unable, or anticipates it will be unable, to obtain debt modification, financing or refinancing sufficient to allow it to continue to hold 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.
11. Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
NOTE C - GOING CONCERN
In recent years the Partnership has realized significant losses, including the foreclosure of one property, due to the properties' inability to generate sufficient cash flow to pay their operating expenses and debt service. At the present time, the Partnership has feasible loan modifications in place at Lincoln Court and Green Street. However, in all three properties, Lincoln Court, Green Street, and the Loewy Building, the mortgages are cash-flow mortgages, requiring all available cash after payment of operating expenses to be paid to the first mortgage holder. Therefore, it is unlikely that any cash will be available to the Partnership to pay its general and administrative expenses.
It is the Partnership'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).
Since the lenders have agreed to forebear from taking any foreclosure action as long as cash flow payments are made, the Partnership believes it is appropriate to continue presenting the financial statements on a going concern basis.
NOTE D - IMPAIRMENT LOSS
During 2001, the Loewy Building was deemed to be impaired and was written down to its fair value. The value, which was determined by reference to the present value of the estimated future cash inflows, exceeded the carrying value by $2,264,000. An impairment loss of that amount has been charged to operations in 2001.
During 2000, the Registrant incurred an impairment loss of $820,000. The Loewy Building was deemed to be impaired and was written down to its fair market value. Fair value, which was determined by reference to the present value of the estimated future cash inflows, exceeded the carrying value by $820,000. An impairment loss of that amount has been charged to operations in 2000.
NOTE E - PARTNERSHIP AGREEMENT
The significant terms of the Agreement of Limited Partnership, as they relate to the financial statements, follow:
All distributable cash from operations (as defined in the Agreement of Limited Partnership) will be distributed 90% to the limited partners and 10% to the General Partner.
All distributable cash from sales or dispositions (as defined) will be distributed to the limited partners up to their adjusted invested capital (as defined) plus an amount equal to the sum of the greater of a 6% cumulative, noncompounded annual return on the average after-credit invested capital, less amounts previously distributed (as defined); thereafter, after receipt by the General Partner or its affiliates of any accrued but unpaid real estate brokerage commissions, the balance will be distributed 15% to the General Partner and 85% to the limited partners.
Net income or loss from operations of the Partnership is allocated 1% to the General Partner and 99% to the limited partners.
NOTE F - ACQUISITIONS
The Partnership acquired five controlling or limited partnership interests in Ventures during the period October 1986 to July 1987, as discussed below.
In October 1986, the Partnership was admitted, with a 60% general partnership interest, to a Louisiana limited partnership which owns a building located in Louisiana consisting of 57 residential units, for a cash capital contribution of $600,000. Pursuant to the Amended and Restated Partnership Agreement, the Partnership's interest was reduced to 40% effective January 1, 1995.
In November 1986, the Partnership was admitted, with a 99% general partnership interest, to a Pennsylvania general partnership which owns a building located in North Carolina consisting of 64,000 square feet of commercial space, for a cash contribution of $2,450,000.
In December 1986, the Partnership was admitted, with a 99% general partnership interest, to a Maryland general partnership which owned a property located in Maryland consisting of 55 residential units and 14,800 square feet of commercial space, for a cash contribution of $3,508,700. The lender on the property foreclosed in January 1996.
In March 1987, the Partnership purchased a property consisting of three buildings (58 residential units) located in Pennsylvania for a cash capital contribution of $500,000.
In July 1987, the Partnership was admitted, with a 99% general partnership interest, to a Pennsylvania general partnership which owns a building located in Pennsylvania consisting of 18 residential units, for a cash capital contribution of $800,000.
NOTE G- DEBT OBLIGATIONS
Debt obligations are as follows: December 31, 2001 2000 ---- ---- Mortgage loan, interest accrues at 11 1/2%, $3,873,752 $3,833,265 interest only payable monthly to the extent of net operating income; principal due January 2012; collateralized by the related rental property
Note, interest payable monthly at prime, 200,000 200,000 with a minimum of 6% and a maximum of 8%, adjusting annually on January 2 (8% at December 31, 2000 and 1999); due in 1997; collateralized by the related rental property (A)
Allowed unsecured claims in the amount of 158,612 158,612 $268,042; non-interest bearing
Note payable, interest only at 10%, 10,000 10,000 payable quarterly; principal due in 1994 (A)
Mortgage loan, interest at 6.83%, payable 1,493,105 1,509,922 in monthly principal and interest installments of $10,070; principal due November 2008; collateralized by the related rental property
Mortgage loan, interest accrues at 15%, 1,942,681 1,942,681 interest only payable monthly to the extent of net operating income; principal due December 2008; collateralized by the related rental property
Mortgage loan, interest at 12%; interest only payable to the extent of net operating income with a minimum monthly payment of $5,750; principal due in July 2009; collateralized by the related rental property 1,318,119 1,318,119 ---------- ---------- $8,996,269 $8,972,599 ========== ==========
(A) Although this obligation has matured, the lenders have not made any demand for payment.
Approximate maturities of the mortgage loan obligations at December 31, 2001, for each of the succeeding five years are as follows:
2002 $ 368,612 2003 19,319 2004 20,408 2005 22,159 2006 23,743 Thereafter 8,542,028 ---------- $8,996,269 ==========
NOTE H - COMMITMENTS AND CONTINGENCIES
Pursuant to certain agreements, the developers of the properties and limited partners in the Ventures are entitled to share in the following:
a. 15% to 50% of net cash flow from operations above certain specified amounts (three properties)
b. 30% of the net proceeds, as defined, from the sale or refinancing of one property. The Partnership is entitled to a priority distribution of such proceeds prior to any payment to the developer.
According to the Amended and Restated Partnership Agreement, the Partnership's interest in Magazine Place Limited Partnership ("MPP") was reduced from 60% to 40% as of the First Conversion Date. The First Conversion Date was the date on which the Partnership received a return of its initial capital contribution as referred to in the Partnership Agreement. For purposes of determining the First Conversion Date, the Partnership was deemed to have received a return of its initial capital contribution when the sum of the following amounts equalled $600,000: (i) cash distributions to the Partnership from MPP; (ii) investment tax credit allocable to the Partnership; and (iii) 50% of the aggregate of MPP's net losses and deductions allocable to the Partnership. As of December 31, 1994, the Partnership had received a return of its initial capital and the Partnership's interest in the MPP was reduced to 40%. Since that date, the Partnership has accounted for its investment in MPP on the equity basis.
NOTE I - TRANSACTIONS WITH RELATED PARTIES
Included in debt obligations for 2001, 2000 and 1999 is $140,000 owed to an affiliate of the General Partner by one of the Partnership's Ventures for additional amounts advanced for working capital needs.
On June 30, 1992 DHP, Inc. assigned to D, LTD a note receivable from the Partnership in the amount of $432,103 which bears interest at 10% with the entire principal and accrued interest due on June 30, 1997. Interest accrued was $45,703 during both 2000 and 2001. Payments on the note are to be made from available cash flow and before any distribution can be made to the Partnership's limited partners. The balance of the note at December 31, 2001 was $807,417. Although this obligation has matured, the lender has made no demand for payment.
On June 30, 1992 DHP, Inc. assigned to D, LTD a note receivable, from 18th and Green to the Partnership, that had been assigned to it, in the amount of $63,493 which bears interest at 10% with the entire principal and accrued interest due on June 30, 1997. On December 6, 1993 D, LTD confessed judgment in the amount of $78,171 against 18th and Green in Common Pleas Court for Philadelphia County. The judgment accrues interest at 15%. Interest accrued was $5,055 during both 2000 and 2001. Payments on the judgment are to be made from available cash flow from 18th and Green. The balance of the judgment at December 31, 2001 was $70,343.
In June 1998, the General Partner advanced the Partnership $66,150 to pay certain outstanding liabilities of the Partnership. The advance is non-interest bearing and will be paid out of available cash flow.
NOTE J - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of operations in different time periods for financial reporting ("book") purposes and for income tax ("tax") purposes. Reconciliations of net loss and partners' equity follow:
For the Years Ended December 31, 2001 2000 1999 ---- ---- ----
Net loss - book ($ 3,444,268)($2,006,951)($1,070,903) Excess of book over tax depreciation 67,753 98,882 153,257 Minority interest 7,047 6,078 (51,133) Impairment Loss 2,264,000 820,000 0 ----------- ---------- ---------- Net loss - tax ($ 1,105,468)($1,081,991)($ 968,779) =========== ========== ==========
Partners' equity - book ($10,838,639)($7,394,371)($5,387,421) 1987 distribution of interest on escrow deposits to limited partners (39,576) (39,576) (39,576) Costs of issuance 1,697,342 1,697,342 1,697,342 Cumulative tax under book loss 3,771,616 1,432,816 507,857 ----------- ---------- ---------- Partners' equity - tax ($ 5,409,257)($4,303,789)($3,221,798) =========== ========== ==========
NOTE K - SUBSEQUENT EVENTS
Green Street Apartments was foreclosed by the first mortgage lender on October 1, 2002. Magazine Place was sold on June 26, 2002. The net proceeds received by the partnership were used to pay outstanding debts.
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS III (a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2001
Cost Capitalized Initial Cost Subsequent to Partnership to (b) Acquisition
Buildings and Date Date Encum- Improve- Improve- of Acquir- Description brances Land ments ments Constr. ed - ----------- ------- ---- --------- -------- ------ ------- (a) (c) (a)
64,000 square feet of commercial space in Winston 1986- Salem, NC $4,232,365 $308,624 $6,290,125 ($415,244) 1988 11/14/86 Impairment Loss (2,668,756) (415,244)
58 apartment units in Philadelphia, 1986- PA 3,445,785 86,187 3,490,437 392,511 1987 9/9/86
18 apartment units in Philadelphia, PA 1,318,119 70,643 1,559,017 48,989 1987 2/27/87 ---------- -------- ---------- -------- TOTAL $8,996,269 $465,454 $8,670,823 $441,500 ========== ======== ========== ========
Gross Amount at which Carried at December 31, 2001
Buildings and Improve- Accumulated Description Land ments Total Depreciation - ----------- ---- --------- ----- ------------ (d)(e) (e)(f) 64,000 square feet of commercial space in Winston- Salem, NC $308,624 $3,847,092 $4,155,716 $3,810,535
58 apartment units in Philadelphia, PA 86,187 3,770,086 3,856,273 2,220,855
18 apartment units in Philadelphia, PA 70,643 1,495,145 1,565,788 859,798 -------- ---------- ---------- ---------- TOTAL $465,454 $9,112,323 $9,577,777 $6,891,188 ======== ========== ========== ==========
DIVERSIFIED HISTORIC INVESTORS III
(a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2001
(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 were rehabilitated.
(B) Includes development/rehabilitation costs incurred pursuant to turnkey development agreements entered into when the properties were acquired.
(C) See Note E to the financial statements for further information
(D) The aggregate cost of real estate owned at December 31, 2001, for federal income tax purposes is approximately $10,274,512. 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.
(E) Reconciliation of real estate: 2001 2000 1999 ---- ---- ----
Balance at beginning of year: $12,613,136 $12,590,391 $12,570,757 Additions during the year: Improvements 48,641 22,745 19,634 ----------- ----------- ----------- Balance at end of year $12,661,777 $12,613,136 $12,590,391 =========== =========== ===========
Reconciliation of accumulated depreciation: 2001 2000 1999 ---- ---- ----
Balance at beginning of year $ 6,424,759 $ 5,931,577 $ 5,442,634 Depreciation expense for the year 466,437 493,182 488,943 ----------- ----------- ----------- Balance at end of year $ 6,891,196 $ 6,424,759 $ 5,931,577 =========== =========== ===========
(F) See Note B to the financial statements for depreciation method and lives.
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 the Registrant
a. Identification of Directors - Registrant has no directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Dover Historic Advisors II (DoHA-II), a Pennsylvania general partnership. The partners of DoHA-II are as follows:
Name Age Position Term of Office Period Served - ---- --- -------- -------------- -------------
SWDHA, Inc. -- Partner in DoHA-II No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-II No fixed term Since May 1997
For further description of DoHA-II, 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. None.
e. Business Experience. DoHA-II is a general partnership formed in February 1986. The partners of DoHA-II are EPK, Inc. and SWDHA, Inc. The General Partner is responsible for the management and control of the Registrant's affairs and has general responsibility and authority in conducting its operations.
On May 13, 1997, SWDHA, Inc. replaced Gerald Katzoff and EPK, Inc. replaced DHP, Inc. as partners of DoHA-II. Spencer Wertheimer, the President of SWDHA, Inc., is an attorney with extensive experience in real estate activities and ventures.
EPK, Inc. is a Delaware corporation formed for the purpose of managing properties or interests therein. EPK, Inc. is a wholly-owned subsidiary of D, LTD, an entity formed in 1985 to act as the holding company for various corporations engaged in the development and management of historically certified properties and conventional real estate as well as a provider of financial (non-banking) services.
The officers and directors of EPK, Inc. are described below.
Spencer Wertheimer was appointed on May 13, 1997 as President, Treasurer and Sole Director of EPK, Inc. Mr. Wertheimer is an attorney with extensive experience in real estate activities and ventures.
Donna M. Zanghi (age 44) was appointed on May 13, 1997 as Vice President and Secretary of EPK, Inc. Ms. Zanghi had previously served as Secretary and Treasurer of DHP, Inc. since June 14, 1993 and as a Director and Secretary/Treasurer of D, LTD. She was associated with DHP, Inc. and its affiliates since 1984 except for the period from December 1986 to June 1989 and the period from November 1, 1992 to June 14, 1993.
Michele F. Rudoi (age 36) was appointed on May 13, 1997 as Assistant Secretary of EPK, Inc. Ms. Rudoi previously served as Assistant Secretary and Director of both D, LTD and DHP, Inc. since January 27, 1993.
Item 11.
Item 11. Executive Compensation
a. Cash Compensation - During 2001, Registrant paid no cash compensation to DoHA-II, any partner therein or any person named in paragraph c. of Item 10.
b. Compensation Pursuant to Plans - Registrant has no plan pursuant to which compensation was paid or distributed during 2001 or is proposed to be paid or distributed in the future, to DoHA-II, 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 2001 to DoHA-II, 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-II is entitled to 10% of Registrant's distributable cash from operations in each year. There was no such share allocable to DoHA-II for fiscal years 1999 through 2001.
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, 2001 and 2000.
b. Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999.
c. Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 2001, 2000 and 1999.
d. Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999.
e. Notes to consolidated financial statements.
2. Financial statement schedules:
a. Schedule XI- Real Estate and Accumulated Depreciation.
b. Notes to Schedule XI.
3. Exhibits:
(a) Exhibit Number Document --------------- -------- 3 Registrant's Amended and Restated Certificate of Limited Partnership and Agreement of Limited Partnership, previously filed as part of Amendment No. 2 of Registrant's Registration Statement on Form S-11, are incorporated herein by reference.
21 Subsidiaries of the Registrant are listed in Item 2. Properties of this Form 10-K.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter ended December 31, 2001.
(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 III
Date: May 28, 2003 By: Dover Historic Advisors II, ------------ General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer ---------------------- SPENCER WERTHEIMER President and Treasurer
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 II General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer May 28, 2003 ---------------------- ------------ SPENCER WERTHEIMER President and Treasurer
By: /s/ Michele F. Rudoi May 28, 2003 ---------------------- ------------ MICHELE F. RUDOI, Assistant Secretary