Item 1. Business
a. General Development of Business
Diversified Historic Investors IV ("Registrant") is a limited partnership formed in 1987 under Pennsylvania law. As of December 31, 2001, Registrant had outstanding 8,285.7 units of limited partnership interest (the "Units").
Registrant is presently in its operating stage. It originally owned three properties or interests therein. One property has been sold. It currently owns two properties. See Item 2.
Item 2. Properties, for a description thereof. For a discussion of the operations of the Registrant, See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following is a summary of significant transactions involving the Registrant's interests:
During 1994, the Registrant converted the Henderson Riverfront Apartments owned by 700 Commerce Mall General Partnership ("CMGP"), a Louisiana general partnership in which the Registrant owns a 95% interest, into condominiums and began offering the units for sale. Because of mortgage underwriting and banking market conditions, the seller, CMGP, provided financing for a large percentage of the units sold. As of December 31, 1996, all 61 units had been sold for an aggregate amount of $6,009,745 ($4,055,459 net of selling expenses and capital expenditures). The units sold ranged in price from $71,250 to $127,065. Of the units sold, 46 of the buyers opted for the seller provided financing with loans ranging from $62,700 to $181,900 (represents one mortgage secured by two units).
On December 30, 1997, the mortgage loans were sold. These mortgages were "nonconforming" which means that they could not be sold on the standard secondary market. However, the Registrant believed that then current favorable economic environment provided an unusual opportunity to sell the mortgages. Any deterioration in the real estate markets or the interest rate environment would have substantially decreased the value of the mortgage loans and would have increased the likelihood of defaults thereunder. The loans were sold for 85.5% of their aggregate face value. Included in operations in 1997 is a loss of $448,957 related to the sale of the loans.
b. Financial Information about Industry Segments
The Registrant operates in one industry segment.
c. Narrative Description of Business
Registrant is in the business of operating, holding, selling, exchanging and otherwise dealing in and with real properties containing improvements that are "Certified Historic Structures," as such term is defined in the Internal Revenue Code (the "Code") for use as apartments, offices, hotels and commercial spaces, or any combination thereof, or low income housing eligible for the tax credit provided by Section 42 of the Code, and such other uses as the Registrant's general partner may deem appropriate.
Since the Registrant's inception, all the properties either acquired by the Registrant, or the subsidiary partnerships in which it has an interest, have been rehabilitated and certified as historic structures and have received the related investment tax credit. All the properties are held for rental operations. At this time it is anticipated that the two remaining properties will continue to be held for this purpose until such time as real property values in the areas in which these properties are located begin to increase. At that time, the Registrant will re-evaluate its investment strategy regarding the properties.
As of December 31, 2001, Registrant owned two properties, one each located in North Carolina and Pennsylvania. In total, the properties contain 22 apartment units. As of December 31, 2001, 21 of the apartment units were under lease at monthly rental rates ranging from $500 to $1,095. Rental of the apartments is not expected to be seasonal. For a further discussion of the properties, see Item 2. Properties.
The Registrant is affected by and subject to the general competitive conditions of the residential real estate industry. As a result of the overbuilding that occurred in the 1980's, the competition for residential tenants in the local markets where the Registrant's properties are located is generally strong. The properties held for rental by the Registrant are located in the Old City Historic District in Philadelphia, Pennsylvania and Concord, North Carolina. In both areas there are several similar historically certified rehabilitated buildings. However, there is no organization which holds a dominant position in the residential housing market in either of the geographic areas in which the Registrant's properties are located. The apartment market remains stable in both areas and new construction remains virtually nonexistent in Concord, North Carolina although the availability of favorable home financing has placed pressure on the rental tenant base. The Registrant is able to raise rental rates and stay fully occupied in the Philadelphia property but at the same time, competitive pressure exists from other buildings in the Old City area and the emerging Northern Liberties neighborhood.
Registrant has no employees. Registrant's activities are overseen by Brandywine Construction & Management, Inc., ("BCMI"), a real estate management firm.
d. Financial Information About Foreign and Domestic Operations and Export Sales.
See Item 8. Financial Statements and Supplementary Data.
Item 2. Properties
As of December 31, 2001, Registrant owned two properties, or interests therein, as follows:
a. The Brass Works - consists of 12 apartments located at 231-237 Race Street, Philadelphia, Pennsylvania. In May 1987, Registrant acquired and rehabilitated the Property for $1,200,000 ($111 per square foot)("sf") funded by its equity contribution.
The property is managed by BCMI. At December 31, 2001, 11 of the apartment units were under lease (99%) with monthly rents ranging from $650 to $1,095. All leases are renewable, one-year leases. The occupancy for the previous four years was 100% for 2000, 100% for 1999, and 100% for 1998. The monthly rental range was $650 to $925 during 2000, $690 to $875 during 1999, $665 to $815 during 1998, and $665 to $755 during 1997. The monthly rental range increased to its present level due to the increase in popularity of the Old City neighborhood in which the property is located, and the sustained ability of the property to be fully occupied (other than transitory vacancies) at increasing monthly rental rates. For tax purposes, this property has a federal tax basis of $1,053,923 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $9,424.92, which is based on an assessed value of $115,200 taxed at a rate of $8.264 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. Locke Mill Plaza - consists of 10 residential apartment condominium units in a 169 condominium unit project located on Buffalo Avenue at Union Street in Concord, North Carolina. In November 1988, Registrant acquired the units for $665,000 funded by its equity contribution.
The property is managed by BCMI. As of December 31, 2001, 10 units were under lease (100%) with monthly rates ranging from $500 to $560. All leases are renewable, one-year leases. The occupancy as of year end for the previous four years was 60% for 2000, 80% for 1999, 100% for 1998, and 89% for 1997. The monthly rental range has been approximately the same since 1997. For tax purposes, this property has a federal tax basis of $623,769 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $2,663.09 which is based on an assessed value of $475,550 taxed at a rate of $.56 per $100. No one tenant occupies ten percent or more of the building. It is the opinion of the management of the Registrant that the property is adequately covered by insurance.
Item 3.
Item 3. Legal Proceedings
a. To the best of its knowledge, Registrant is not a party to, nor is any of its property the subject of, any pending material legal proceeding.
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 38 units were sold or exchanged in 2001.
b. As of December 31, 2001, there were 1,009 record holders of Units.
c. In 2001 and 2000 Registrant made no distributions out of available cash flow.
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 $203,679 $188,729 $194,123 $190,058 $180,312 Interest income 8,944 10,061 11,328 35,117 274,358 Net loss (69,298) (86,597) (92,209) (60,005) (541,583) Net loss per unit (8.28) (10.35) (11.02) (7.17) (64.71) Total assets (net of depreciation and amortization) 1,520,361 1,590,514 1,675,218 2,029,350 4,802,128 Dividends (distributions) 0 0 276,190 2,529,533 276,190
Item 7.
Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations
(1) Liquidity
At December 31, 2001, Registrant had cash of approximately $336,033. The Registrant expects that those funds plus the cash generated from operations at each property will be sufficient to fund the operating expenses of the properties.
As of December 31, 2001, Registrant had restricted cash of $25,042 consisting primarily of funds held as security deposits, replacement reserves, escrows for taxes and insurance. As a consequence of these restrictions as to use, Registrant does not deem these funds to be a source of liquidity.
(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 investments for the foreseeable future.
(3) Results of Operations
During 2001, Registrant incurred a net loss of $69,298 ($8.28) per limited partnership unit compared to a loss of $86,597 ($10.35 per limited partnership unit) in 2000 and a loss of $92,209 ($11.02 per limited partnership unit) in 1999.
Rental income was $203,679 in 2001, $188,729 in 2000 and $194,128 in 1999. The increase from 2000 to 2001 is due to an increase in average occupancy (71% to 88%) at Locke Mill Plaza and an increase in average rental rates at the Brass Works. The decrease from 1999 to 2000 is due to a decrease in rental income at Locke Mill Plaza due to a decrease in average occupancy (93% to 71%) partially offset by an increase in rental income at Brass Works due to an increase in average rental rates.
Interest income was $8,944 in 2001, $10,061 in 2000, and $11,328 in 1999. The decrease in interest income from 2000 to 2001 is due to decreasing interest rates. The decrease in interest income from 1999 to 2000 is due to a decrease in the average invested cash balances.
Rental operation expense was $117,381 in 2001, $119,337 in 2000 and $129,346 in 1999. The decrease in rental operation expense from 2000 to 2001 is due to a decrease in maintenance expense at the Brass Works, offset by an increase in marketing and leasing expense at the Locke Mill apartments. The decrease in maintenance expense at the Brass Works is due to a decrease in apartment preparation expense. The increase in marketing and leasing expense resulted in the increase in unit occupancy. The decrease in rental operation expense from 1999 to 2000 is due to a decrease in legal expense. The decrease is due to the settlement of a tenant claim at the Henderson Apartments in 1999.
General and administrative expense was $72,000 in 2001, $74,425 in 2000 and $77,000 in 1999. The decreases from 1999 to 2000 and 2000 to 2001 are due to the decrease in fees paid to the general partner.
During 2001, income of $36,000 was recognized at the Registrant's three properties compared to $19,000 of income in 2000 and $20,000 of income in 1999. A discussion of property operations/activities follows:
In 2001, Registrant recognized net income of $0 at The Henderson Riverfront Apartments compared to net income of $0 in 2000 and a net loss of $5,000 in 1999. The net loss in 1999 is due to legal expenses for the settlement of a tenant claim in 1999 net of interest income.
In 2001, Registrant recognized net income of $36,000 including $49,000 in depreciation expense at the Brass Works compared to net income of $21,000, including $49,000 in depreciation expense in 2000, and net income of $20,000, including $49,000 depreciation expense in 1999. The increase in income from 2000 to 2001 is due to an increase in rental income combined with a decrease in maintenance expense. The increase in rental income is due to an increase in average rental rates. The decrease in maintenance expense is due to a decrease in apartment preparation expense. The increase in income from 1999 to 2000 is due to an increase in rental income partially offset by increases in maintenance expense and advertising expense. The increase in rental income is due to an increase in monthly rental rates. The increase in advertising is due to an increase in signage and marketing expenses, and the increase in maintenance expense is due to nonrecurring repairs at the property.
In 2001, Registrant incurred a loss of $7,000 at Locke Mill Plaza including $27,000 of depreciation expense compared to a loss of $9,000 including $27,000 of depreciation expense in 2000 compared to income of $5,000 including $26,000 of depreciation expense in 1999. The decrease in loss from 2000 to 2001 is due to an increase in rental income, partially offset by an increase in marketing and leasing expense. The increase in rental income is due to an increase in average occupancy (71% to 88%). The increase in marketing and leasing expense resulted in the increase in unit occupancy. The decrease from 1999 to 2000 is due to the decrease in rental income due to a decrease in average occupancy (93% to 71%).
Item 7A.
Item 7A. 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 Regulation S-K.
Independent Auditor's Report
To the Partners of Diversified Historic Investors IV
We have audited the accompanying consolidated balance sheet of Diversified Historic Investors IV (a Pennsylvania Limited Partnership) and subsidiaries as of December 31, 2001 and 2000 and the related statements of operations and changes in partners' equity and cash flows for the years ended December 31, 2001, 2000 and 1999. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We 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 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 present fairly, in all material respects, the financial position of Diversified Historic Investors IV 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 beginning on page 19 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 Philadelphia, Pennsylvania March 19, 2002
DIVERSIFIED HISTORIC INVESTORS IV (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 10
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000, and 1999 11
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 2001, 2000, and 1999 12
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999 13
Notes to consolidated financial statements 14-17
Financial statement schedules:
Schedule XI - Real Estate and Accumulated 19 Depreciation Notes to Schedule XI 20
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 IV (a limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
Assets
2001 2000 ---- ---- Rental properties at cost: Land $ 74,324 $ 74,324 Buildings and improvements 2,246,555 2,246,555 Furniture and fixtures 44,660 29,814 ---------- ---------- 2,365,539 2,350,693 Less - accumulated depreciation (1,227,712) (1,135,171) ---------- ---------- 1,137,827 1,215,522 Cash and cash equivalents 336,033 330,149 Restricted cash 25,042 22,787 Other assets 21,459 22,056 ---------- ---------- Total $1,520,361 $1,590,514 ========== ==========
Liabilities and Partners' Equity
Liabilities:
Accounts payable - trade $ 16,268 $ 44,679 Other liabilities 28,909 1,378 Tenant security deposits 12,290 12,265 ---------- ---------- Total liabilities 57,467 58,322 Partners' equity 1,462,894 1,532,192 ---------- ---------- Total $1,520,361 $1,590,514 ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV (a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999 ---- ---- ---- Revenues: Rental income $203,679 $188,729 $194,123 Interest income 8,944 10,061 11,328 -------- -------- -------- Total revenues 212,623 198,790 205,451 -------- -------- -------- Costs and expenses: Rental operations 117,380 119,337 129,346 General and administrative 72,000 74,425 77,000 Depreciation and amortization 92,541 91,625 91,314 -------- -------- -------- Total costs and expenses 281,921 285,387 297,660 -------- -------- -------- Net loss ($ 69,298)($ 86,597)($ 92,209) ======== ======== ======== Net loss per limited partnership unit ($ 8.28)($ 10.35)($ 11.02) ======== ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV (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 III(1) (2) Total -------- -------- ----- Percentage participation in profit or loss 1% 99% 100% == === ==== Balance at December 31, 1998 ($427,343) $2,414,531 $1,987,188 Net loss (922) (91,287) (92,209) Distribution to partners (27,619) (248,571) (276,190) -------- ---------- ---------- Balance at December 31, 1999 (455,884) 2,074,673 1,618,789 Net loss (866) (85,731) (86,597) -------- ---------- ---------- Balance at December 31, 2000 (456,750) 1,988,942 1,532,192 Net loss (693) (68,605) (69,298) -------- ---------- ---------- Balance at December 31, 2001 ($457,443) $1,920,337 $1,462,894 ======== ========== ==========
(1) General Partner
(2) 8,285.7 limited partnership units outstanding at December 31, 2001, 2000, and 1999.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV (a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999 ---- ---- ---- Cash flows from operating activities: Net loss ($ 69,298) ($ 86,597) ($ 92,209) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 92,541 91,625 91,314 Changes in assets and liabilities: (Increase) decrease restricted cash (2,255) 2,382 (1,496) Decrease (increase) in other assets 596 (5,044) (9,534) (Decrease) increase in accounts payable - trade (28,408) 1,223 12,579 Increase (decrease) in other liabilities 27,529 (160) 717 Increase in tenant security deposits 25 830 970 -------- -------- -------- Net cash provided by operating activities 20,730 4,259 2,341 -------- -------- -------- Cash flows from investing activities: Capital expenditures (14,846) 0 (3,760) -------- -------- -------- Net cash used in investing activities (14,846) 0 (3,760) -------- -------- -------- Cash flows from financing activities: Distributions to partners 0 0 (276,190) -------- -------- -------- Net cash used in financing activities 0 0 (276,190) -------- -------- -------- Increase (decrease) in cash and cash equivalents 5,884 4,259 (277,609) Cash and cash equivalents at beginning of year 330,149 325,890 603,499 -------- -------- -------- Cash and cash equivalents at end of year $336,033 $330,149 $325,890 ======== ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV (a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors IV (the "Partnership") was formed in January 1987, with Dover Historic Advisors III as the General Partner and DHP, Inc., (formerly Dover Historic Properties, Inc.,) as the limited partner. Upon the admission of additional limited partners, the initial limited partner withdrew.
The Partnership was formed to acquire, rehabilitate, and manage real properties which are certified historic structures as defined in the Internal Revenue Code (the "Code"), or which were eligible for designation as such, utilizing 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 therefor as "qualified rehabilitation 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 consolidated financial statements of the Partnership include the accounts of one subsidiary partnership in which the Partnership had a controlling interest, 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 Partnership's General Partner, are necessary for a fair statement of the results for the year.
2. Costs of Issuance
Costs incurred in connection with the offering and sale of limited partnership units were charged against partners' equity as incurred.
3. 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.
4. Net Loss Per Limited Partnership Unit
The net loss per limited partnership interest (a "Unit") is based on the weighted average number of limited partnership Units outstanding during the period (8,285.7 Units in 2001, 2000, and 1999).
5. Income Taxes
Federal and state income taxes are payable by the individual partners; therefore, no provision or liability for income taxes is reflected in the financial statements.
6. Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with a maturity of less than three months to be cash equivalents.
7. Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to concentration of credit risk consist principally of cash and cash equivalents. The Partnership maintains its cash and cash equivalents in financial institutions insured by the Federal Deposit Insurance Corporation up to $100,000 per company. At December 31, 2001, uninsured funds held at one institution are approximately $202,000.
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 the 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.
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 - PARTNERSHIP AGREEMENT
The significant terms of the amended and restated Agreement of Limited Partnership (the "Agreement"), as they relate to the financial statements, follow:
The Agreement provides that beginning with the date of the admission of subscribers as limited partners, all distributable cash from operations (as defined) 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 original capital contributions plus an amount equal to six percent of their original capital contributions per annum on a cumulative basis, less the sum of all prior distributions to them; thereafter, after receipt by the General Partner or its affiliates of any accrued but unpaid real estate brokerage commissions, the distributable cash 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% percent to the General Partner and 99% to the limited partners.
NOTE D - ACQUISITIONS
The Partnership acquired two properties and one general partnership interest in a partnership owning a third property during the period from May 1987 to November 1988, as discussed below.
In May 1987, the Partnership purchased a three-story building located in Philadelphia, Pennsylvania consisting of 12 apartment units. The cost to acquire and rehabilitate this property was approximately $1,200,000.
In July 1987, the Partnership was admitted, with a 95% general partnership interest, to a Pennsylvania general partnership which owned a building located in New Orleans, Louisiana consisting of 61 apartment units, for cash contributions of $4,620,000. As of December 31, 1996, all of the units were sold. As of December 31, 1997, the mortgages from the seller provided financing in connection with the sale of the units were sold.
In November 1988, the Partnership purchased 10 condominium units, in a building located in Concord, North Carolina, for $665,000.
NOTE E - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of operations in different time periods for financial reporting ("book") purposes and for income tax ("tax") purposes. A reconciliation of net loss and partners' equity follows:
For the years ended December 31, 2001 2000 1999 ---- ---- ---- Net loss - book ($ 69,298) ($ 86,597) ($ 92,209) Excess of book over tax depreciation 20,302 21,726 21,569 Minority interest (tax only) (372) (339) 238 -------- --------- --------- Net loss - tax ($ 49,368) ($ 65,210) ($ 70,402) ========= ========= =========
For the years ended December 31, 2001 2000 1999 ---- ---- ---- Partners' equity - book $1,462,894 $1,532,192 $1,618,791 Costs of issuance 1,077,141 1,077,141 1,077,141 Cumulative tax over book loss 274,659 254,730 233,343 ---------- ---------- ---------- Partners' equity - tax $2,814,694 $2,864,063 $2,929,275 ========== ========== ==========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS IV (a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2001
Gross Amount at which Carried Initial Cost at December 31, to Partnership 2001 (b)
Buildings Buildings and and Accumu- Descrip- Improve- Improve- lated tion Land ments Land ments Total Depr. - ------- ---- --------- ---- -------- ----- ------- (a) (d)(e)
apart- ment units in Phila- delphia, PA $54,000 $1,209,858 $54,000 $1,589,153 $1,643,153 $ 864,434
apart- ment units in North Concord, NC $20,324 692,522 20,324 702,062 722,386 363,278 ------- ---------- ------- ---------- ---------- ---------- $74,324 $1,902,380 $74,324 $2,291,215 $2,365,539 $1,227,712 ======= ========== ======= ========== ========== ==========
Date Descrip- of Date tion Constr. Acquired - ------- ------- -------- (a) (a)
apart- ment units in Phila- delphia, PA 1988 5/22/87
apart- ment units in North Concord, NC 1988 11/30/88
DIVERSIFIED HISTORIC INVESTORS IV (a limited partnership)
NOTES TO SCHEDULE XI
December 31, 2001
(A) Each property is a certified historic structure as defined in the Internal Revenue Code of 1986. The "date of construction" refers to the period in which the properties were rehabilitated.
(B) Includes development/rehabilitation costs incurred pursuant to development agreements entered into when the properties were acquired.
(C) The aggregate cost of real estate owned at December 31, 2001, for Federal income tax purposes is approximately $1,677,692. The depreciable basis of buildings and improvements is reduced for Federal income tax purposes by the historic rehabilitation credit obtained.
(D) Reconciliation of land, buildings and improvements:
2001 2000 1999 ---- ---- ----
Balance at beginning of year $2,350,693 $2,350,693 $2,346,933 Additions during the year: Improvements 14,846 0 3,760 ---------- ---------- ---------- Balance at end of year $2,365,539 $2,350,693 $2,350,693 ========== ========== ==========
Reconciliation of accumulated depreciation:
2001 2000 1999 ---- ---- ---- Balance at beginning of year $1,135,171 $1,043,546 $ 952,232 Depreciation expense for the year 92,541 91,625 91,314 ---------- ---------- ---------- Balance at end of year $1,227,712 $1,135,171 $1,043,546 ========== ========== ==========
(E) See Note B to the consolidated financial statements for depreciation methods 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 Registrant
a. Identification of Directors - Registrant has no directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Dover Historic Advisors III (DoHA-III), a Pennsylvania general partnership. The partners of DoHA-III are as follows:
Name Age Position Term of Office Period Served
Name Age Position Term of Office Period Served - ---- --- -------- -------------- -------------
SWDHA, Inc. -- Partner in DoHA-III No fixed term Since May 1997
EPK, Inc. -- Partner in DoHA-III No fixed term Since May 1997
For further description of DoHA-III, 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.
d. Family Relationships. None.
e. Business Experience. DoHA-III is a general partnership formed in 1987. The partners of DoHA-III are EPK, Inc. and SWDHA, Inc. EPK, Inc., is managing partner of DoHA III and is thus responsible for management and control of DoHA III, which in turn is responsible for the management and control of the Registrant and has general responsibility and authority for conducting its operations.
On May 13, 1997, SWDHA, Inc. replaced Gerald Katzoff and EPK, Inc. replaced DHP, Inc. as partners of DoHA-III. 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 previously served as Secretary and Treasurer of DHP, Inc. since June 14, 1993 and as a Director and Secretary/Treasurer of D, LTD. She has been 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 has also served as Assistant Secretary and Director of both D, LTD and DHP, Inc. from January 27, 1993.
Item 11.
Item 11. Executive Compensation
a. Cash Compensation - During 2001, Registrant did not pay any cash compensation to DoHA-III.
b. Compensation Pursuant to Plans - Registrant has no plan pursuant to which compensation was paid or distributed, or is proposed to be paid or distributed in the future, to DoHA-III, any partner therein, or any person named in paragraph c. of Item 10 of this report.
c. Other Compensation - Compensation not referred to in paragraph a. or paragraph b. of this Item was not paid or distributed during 2001 to DoHA-III, 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-III is entitled to 10% of Registrant's distributable cash from operations in each year. The amount allocable to DoHA-III for 2001, 2000 and 1999 was $0 for both 2000 and 2001, and $27,619 for 1999, respectively.
a. Transactions with Management - Fees paid during 2001 to the general partner were $0.
b. Certain Business Relationships - Registrant has no directors.
c. Indebtedness of Management - No 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. 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, 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.
Date: May 30, 2003 DIVERSIFIED HISTORIC INVESTORS IV Income Fund ------------ --------------------------------------------- By: Dover Historic Advisors III, General Partner
By: EPK, Inc., General Partner
By: /s/ Spencer Wertheimer ---------------------- SPENCER WERTHEIMER President
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 III General Partner
By: EPK, Inc., General Partner
By: /s/ Spencer Wertheimer May 30, 2003 ---------------------- ------------ SPENCER WERTHEIMER, President
By: /s/ Michele F. Rudoi May 30, 2003 ----------------------- ------------ MICHELE F. RUDOI, Assistant Secretary