Item 1. Business
a. General Development of Business
Diversified Historic Investors 1990 ("Registrant") is a limited partnership formed in 1989 under Pennsylvania law. As of December 31, 1998, Registrant had outstanding 5,032 units of limited partnership interest (the "Units").
Registrant is presently in its operating stage. It currently owns three properties or interests therein. See Item 2.
Item 2. Properties
As of the date hereof, Registrant owned three properties, or interests therein. A summary description of each property held at December 31, 1998 is given below.
a. Jefferson/Seymour - consists of 30 apartment units and 665 sf of commercial space at 94-96, 98-100 Jefferson Street and 134-138 Seymour Street in Hartford, Connecticut. In October 1990, the Registrant was admitted as a limited partner with a 99% interest in Jefferson Seymour Limited Partnership ("JSLP"), a Connecticut limited partnership, for a cash contribution of $1,417,000. One of the other general partners also contributed $390,000 of capital. JSLP subsequently capitalized $261,665 in acquisition costs related to the investment. JSLP acquired and rehabilitated the buildings for $3,288,665 ($129.48 per sf), including two mortgage notes payable in the original aggregate principal amount of $1,220,000. The first note payable of $300,000 (principal balance of $272,626 at December 31, 1998) bears interest at 1% and is due June 2010. The second note payable of $920,000 (principal balance of $747,819 at December 31, 1998) bears interest at the lender's cost of funds plus 2 1/2%. In 1997, the loan was sold and the Registrant is in the process of negotiating payment terms with the new holder of the note.
The property is managed by an independent property management firm. As of December 31, 1998, 27 residential apartments are under lease (90%) at monthly rents ranging from $375 to $608 per month. As of December 31, 1998, none of the 665 sf of commercial space is under lease. Every effort is being made at this time by the property management firm to rent the commercial space. All residential leases are renewable, one-year leases. The occupancy rate was 97% for 1997, 92% for 1996, 92% for 1995 and 96% for 1994. The monthly rental range has been approximately the same since 1994. The occupancy for the commercial space was 17% for 1997, 46% for 1996, 50% for 1995 and 100% for 1994. The range for annual rents was $27.00 per sf for 1997, $27.00 per sf for 1996, $27.00 per sf for 1995 and $27.00 per sf for 1994. There are no contingent rentals included in income for the years ended December 31, 1998, 1997 and 1996. For tax purposes, this property has a basis of $2,447,665 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $26,374 which is based on an assessed value of $839,930 taxed at a rate of $3.140 per $100. No one tenant occupies ten percent or more of the building. It is the opinion of the management of the Registrant that the property is adequately covered by insurance.
b. Shockoe Hearth Apartments - consists of 29 apartment units and 14,451 sf of commercial space at 1417-1423 East Cary Street in Richmond, Virginia. In December 1990, the Registrant was admitted with a 99% general partnership interest in Lawrence One General Partnership ("LOGP"), a Virginia general partnership, for a cash contribution of $800,000. LOGP subsequently capitalized $150,455 in acquisition costs relating to the investment. LOGP acquired and rehabilitated the property for $2,600,000 (excluding the capitalized costs, referred to above) ($90.49 per sf), consisting of the equity contribution and $1,800,000 provided by a loan. The loan was refinanced in May 1998. As refinanced, the loan is in the stated amount of $1,890,500 (principal balance of $1,876,281 at December 31, 1998), bears interest at 8%, with monthly principal and interest payments of $14,591 and maturing in 2013.
The property is managed by an independent property management firm. As of December 31, 1998, all 29 of the apartments are under lease with rents ranging from $275 to $865 per month, and all of the commercial space is under lease by one tenant at an annual rent of $10.01 per sf. All residential leases are renewable, one-year leases. The occupancy rate was 98% for 1997, 100% for 1996, 96% for 1995 and 98% for 1994. The monthly rental range has been approximately the same since 1994. The occupancy for the commercial space was 100% for 1997, 100% for 1996, 100% for 1995 and 100% for 1994. The range for annual rents was $9.54 per sf in 1997, $9.08 per sf in 1996, $8.65 per sf in 1995 and $8.30 per sf in 1994. The commercial space is occupied by one tenant which operates as a restaurant and currently has a ten-year lease which expires February 14, 2003. The minimum rental is $151,940 per year. There are no contingent rentals included in income for the years ended December 31, 1998 1997 and 1996. For tax purposes, this property has a basis of $2,503,962 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $24,453 which is based on an assessed value of $1,710,000 taxed at a rate of $1.430 per $100. It is the opinion of the management of the Registrant that the property is adequately covered by insurance.
c. The Bakery Apartments - consists of 68 apartment units at 1111 South Peters Street in New Orleans, Louisiana. In March 1991, the Registrant acquired a 72.3% general partnership interest in The Bakery Apartments General Partnership ("BAGP"), a Louisiana general partnership which owns the property, for a cash contribution of $1,235,000. Affiliates of the Registrant simultaneously acquired 26.7% of the general partnership interests in BAGP for an aggregate cash contribution of $465,000. BAGP subsequently capitalized $242,040 in acquisition costs relating to the investment. BAGP acquired and rehabilitated the property for $5,029,000 ($65.18 per sf). The rehabilitation of the property was financed in part with two loans, one for $3,135,000 and the other for $201,500 (principal balance of $191,824 at December 31, 1998). The first loan bore interest at 8.25%, with monthly principal and interest payments based on a 30 year amortization schedule, principal due in 1999. The second loan is from the general partner of BAGP and has the same terms as the first loan. The first loan was refinanced in November 1998. The new loan was for $3,100,000 (principal balance of $3,100,000 at December 31, 1998) bears interest at 6.775%, is payable in monthly payments of principal and interest in the amount of $20,158 and is due in November 2008. In March 1991, a $175,000 collateral mortgage note (principal balance of $152,385 at December 31, 1998) was issued to the developer/partner for working capital advances. This note bears interest at 9% with payments based on available positive cash flow of the property. In order to satisfy certain credit requirements of the lender, the Registrant exchanged its general partnership interest for a limited partnership interest in a reconstituted partnership. However, the Registrant retained substantially the same rights and privileges as it had as a general partner. The property is managed by a property management firm which is an affiliate of the general partner of BAGP.
As of December 31, 1998, 65 units are under lease (96%) with rents ranging from $500 to $2,150. All leases are renewable, one-year leases. The occupancy rate was 94% for 1997, 95% for 1996, 100% for 1995 and 93% for 1994. The monthly rental range has been approximately the same since 1994. For tax purposes, this property has a basis of $3,381,856 and is depreciated using the straight-line method with a useful life of 27.5 years. The annual real estate taxes are $11,677 which is based on an assessed value of $65,700 taxed at a rate of $17.773 per $100. No one tenant occupies ten percent or more of the building. It is the opinion of the management of the Registrant that the property is adequately covered by insurance.
Item 3.
Item 3. Legal Proceedings
a. To the best of its knowledge, Registrant is not party to, nor is any of its property the subject of any pending material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fiscal years covered by this report to a vote of security holders.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
a. There is no established public trading market for the Units. Registrant does not anticipate any such market will develop. Trading in the Units occurs solely through private transactions. The Registrant is not aware of the prices at which trades occur. Registrant's records indicate that 0 units were transferred of record in 1998.
b. As of December 31, 1998, there were 489 record holders of Units.
c. Registrant did not declare any cash dividends in 1998 and 1997.
Item 6.
Item 6. Selected Financial Data
The following selected financial data are for the five years ended December 31, 1998. This data should be read in conjunction with the consolidated financial statements included elsewhere herein. This data is not covered by the independent auditors' report.
1998 1997 1996 1995 1994
Rental income $1,109,060 $1,092,708 $1,081,821 $1,059,508 $1,026,467 Interest income 470 300 1,540 2,491 1,884 Net loss 442,499 450,509 496,109 469,528 482,279 Net loss per Unit 87.06 88.63 97.60 92.37 94.88 Total assets (net of 8,116,644 8,352,879 8,771,520 9,244,523 9,755,227 depreciation and amortization) Debt obligations 6,340,936 6,085,969 6,154,278 6,199,255 6,275,832
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
(1) Liquidity
As of December 31, 1998, Registrant had cash of approximately $59,236. Such funds are expected to be used to pay liabilities and general and administrative expenses of Registrant and to fund cash deficits of the properties. Cash generated from operations is used primarily to fund operating expenses and debt service. If cash flow proves to be insufficient, the Registrant will attempt to negotiate with the various lenders in order to remain current on all obligations. The Registrant is not aware of any additional sources of liquidity.
As of December 31, 1998, Registrant had restricted cash of $152,762 consisting primarily of funds held as security deposits, replacement reserves and escrows for taxes. As a consequence of these restrictions as to use, Registrant does not deem these funds to be a source of liquidity.
At the present time, all three properties are able to pay their operating expenses and debt service but it is unlikely that any cash will be available to the Registrant to pay its general and administrative expenses. It is the Registrant's intention to continue to hold the properties until they can no longer meet the debt service requirements and the properties are foreclosed, or the market value of the properties increases to a point where they can be sold at a price which is sufficient to repay the underlying indebtedness (principal plus accrued interest).
(2) Capital Resources
Any capital expenditures needed are generally replacement items and are funded out of cash from operations or replacement reserves, if any. The Registrant is not aware of any factors which would cause historical capital expenditures levels not to be indicative to capital requirements in the future and accordingly, does not believe that it will have to commit material resources to capital investment for the foreseeable future.
(3) Results of Operations
During the fiscal year 1997, Registrant incurred a loss of $442,499 ($87.06 per limited partnership unit) compared to a loss of $450,509 ($88.63 per limited partnership unit) in 1997 and a loss of $496,109 ($97.60 per limited partnership unit) in 1996 .
Rental income increased from $1,081,821 in 1996 to $1,092,708 in 1997 to $1,109,060 in 1998. The increase from 1997 to 1998 is due to increases in rental income at both the Bakery and Shockhoe Hearth due to increases in the average rental rates. The increase from 1996 to 1997 is due to an increase at Shockoe Hearth Apartments, partially offset by decreases at Jefferson Seymour and The Bakery Apartments. The increase at Shockoe Hearth Apartments was due to a scheduled rental increase for the sole commercial tenant and an increase in average residential rental rates. Rental income decreased at Jefferson Seymour due to lower average occupancy of residential units (92% to 89%), as well as lower average occupancy of commercial space (46% to 17%), and decreased at The Bakery Apartments due to lower average occupancy of residential and corporate apartment rental units (95% to 92%).
Expenses for rental operations decreased from $570,109 in 1996 to $534,794 in 1997 and increased to $539,844 in 1998. The increase from 1997 to 1998 resulted from an increase in maintenance expense at Shockhoe Hearth due to a higher turnover of apartment units. The decrease from 1996 to 1997 is due to a decrease in maintenance, corporate apartment expense, and insurance expense at The Bakery Apartments, combined with a decrease in utilities expense at Jefferson Seymour and a decrease in legal fees at Shockoe Hearth, partially offset by an increase in maintenance and bad debt expense at Jefferson Seymour, and an increase in maintenance expense at Shockoe Hearth, as well as an increase in salaries and wages expense at The Bakery Apartments (as discussed below).
Interest expense increased from $522,698 in 1996 to $540,682 in 1997 and decreased to $529,213 in 1998. The decrease from 1997 to 1998 is the result of a decrease at Shockoe Hearth due to a decrease in the interest rate from 10% to 8% in connection with the May 1998 refinancing. The increase from 1996 to 1997 is due to an increase at The Bakery Apartments, partially offset by a decrease at Jefferson Seymour. Interest expense increased at The Bakery Apartments due to an adjustment made to properly calculate interest on the mortgage loan. Interest expense decreased at Jefferson Seymour due to the reduction of principal balances on which interest is calculated.
Depreciation and amortization expense decreased from $492,417 in 1996 to $475,914 in 1997 and increased to $489,088 in 1998. The increase from 1997 to 1998 is the result of amortization of loan fees incurred in connection with the refinancings at both the Bakery and Shockoe Hearth partially offset by a decrease at Jefferson Seymour due to the fact that organization costs became fully amortized in January 1998. The decrease from 1996 to 1997 is the result of organizational fees becoming fully amortized in 1996 at Shockoe Hearth and certain fixed assets becoming fully depreciated in 1996 at The Bakery Apartments.
In 1998 losses of $414,000 were incurred at the Registrant's three properties compared to $422,000 in 1997 and $476,000 in 1996. A discussion of property operations/activities follows:
In 1998, Registrant incurred a loss of $145,000 at Jefferson/Seymour, including $120,000 of depreciation and amortization expense compared to a loss of $152,000 including $128,000 of depreciation and amortization expense in 1997 and a loss of $150,000 including $128,000 of depreciation and amortization expense in 1996. The decrease in the loss from 1997 to 1998 is the result of a decrease in bad debt expense and amortization expense. Bad debt expense decreased due to a write-off of tenant receivables in the third quarter of 1997. Amortization expense decreased due to the fact that organization costs became fully amortized in January 1998. The increase in the loss from 1996 to 1997 is due to a decrease in rental income combined with an increase in maintenance and bad debt expense partially offset by a decrease in utilities and interest expense. Rental income decreased due to lower average occupancy of residential units (92% to 89%), as well as lower average occupancy of commercial space (46% to 17%). Maintenance expense increased due to new carpeting installed in several units as well as roofing repairs made at the property, and bad debt expense increased as a result of the write-off of tenant receivables that were deemed uncollectible. Utilities expense decreased due to a decline in the average occupancy of residential units, and interest expense decreased due to the reduction of principal balance on which interest expense is calculated.
In 1998, Registrant incurred a loss of $85,000 at Shockoe Hearth including $104,000 of depreciation and amortization expense compared to a loss of $80,000 including $99,000 of depreciation and amortization expense in 1997 and a loss of $115,000 including $103,000 of depreciation and amortization expense in 1996. The increase in the loss form 1997 to 1998 is mainly due to an increase in amortization and maintenance expense partially offset by an increase in rental income and a decrease in interest expense. Amortization expense increased due to loan costs incurred in connection of the refinancing of the first mortgage. Maintenance expense increased due to a higher turnover of apartment units. Rental income increased due to an increase in the average rental rates. Interest expense decreased due to the refinancing of the first mortgage which lowered the interest rate from 10% to 8%. The decrease in the loss from 1996 to 1997 is due to an increase in rental income combined with a decrease in legal fees and amortization expense, partially offset an increase in maintenance expense. Rental income increased as a result of a scheduled rent increase for the sole commercial tenant, as well as an increase in average rental rates of residential units. Legal fees decreased since negotiations between the property management and the sole commercial tenant were completed in 1996. Amortization decreased due to organizational fees becoming fully amortized in the fourth quarter of 1996. Maintenance expense increased as a result of roofing repairs completed at the property.
In 1998, Registrant incurred a loss of $184,000 at the Bakery including $239,000 of depreciation and amortization expense compared to a loss of $190,000 including $223,000 of depreciation and amortization expense in 1997 and a loss of $211,000 including $236,000 of depreciation and amortization expense in 1996. The decrease in the loss from 1997 to 1998 is due to a decrease in wages and salaries and corporate apartments expense and an increase in rental income partially offset by an increase in amortization expense. Wages and salaries decreased due to the replacement of employees with contracted security service. Corporate apartments expense decreased due to a decrease in the rental of corporate apartments. Rental income increased due to an increase in the average rental rates. Amortization expense increased due to the amortization of loan costs incurred in connection with the refinancing of the first mortgage. The decrease in the loss from 1996 to 1997 is due to a decrease in maintenance, corporate apartment expense, depreciation, and insurance expense, partially offset by a decrease in rental income and an increase in interest expense and salaries and wages expense. Maintenance expense decreased due to the replacement of carpeting in several units and extermination services performed in 1996 which were not repeated in 1997. Corporate apartment expense decreased due to lower rentals of corporate apartments, and depreciation expense decreased due to certain fixed assets becoming fully depreciated in 1996. Insurance expense decreased due to lower premiums, and rental income decreased due to lower average occupancy of residential units (95% to 92%). Interest expense increased due to an adjustment made to properly calculate interest on the mortgage loan, and salaries and wages expense increased due to an increase in the salary of the property manager, partially offset by a decrease in the wages of the maintenance personnel.
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 Regulation S-K.
Independent Auditor's Report
To the Partners of Diversified Historic Investors 1990
We have audited the accompanying consolidated balance sheet of Diversified Historic Investors 1990 (a Pennsylvania Limited Partnership) and subsidiaries as of December 31, 1998 and 1997 and the related consolidated statements of operations and changes in partners' equity and cash flows for the years ended December 31, 1998, 1997, and 1996. 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 did not audit the financial statements of The Bakery Apartments General Partnership, which statements reflect total assets of $3,620,782 and $3,705,621 as of December 31, 1998 and 1997, respectively, and total revenues of $624,484 and $625,890, respectively for the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for The Bakery Apartments General Partnership is based solely on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Diversified Historic Investors 1990 as of December 31, 1998 and 1997, and the results of their operations and their cash flows for the years ended December 31, 1998, 1997, and 1996 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule of Real Estate and Accumulated Depreciation on page 24 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Gross, Kreger & Passio, L.L.C. Philadelphia, Pennsylvania March 2, 1999
Independent Auditor's Report
To the Partners of The Bakery Apartments Limited Partnership
We have audited the accompanying balance sheets of The Bakery Apartments Limited Partnership, for December 31, 1998 and 1997 and the related statements of operations, partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Bakery Apartments Limited Partnership as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Pailet, Meunier and LeBlanc, L.L.P. Metairie, Louisiana February 10, 1999
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements: Page
Consolidated Balance Sheets at December 31, 1998 and 1997 13
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997, and 1996 14
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1998, 1997, and 1996 15
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997, and 1996 16
Notes to consolidated financial statements 17-22
Financial statement schedules:
Schedule XI - Real Estate and Accumulated Depreciation 24
Notes to Schedule XI 25
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997
Assets
1998 1997 Rental properties at cost: Land $ 248,856 $ 248,856 Buildings and improvements 10,928,637 10,915,625 Furniture and fixtures 155,592 155,592 ---------- ---------- 11,333,085 11,320,073 Less - accumulated depreciation (3,636,531) (3,195,801) ---------- ---------- 7,696,554 8,124,272
Cash and cash equivalents 59,236 28,549 Restricted cash 152,762 95,609 Accounts receivable 26,700 24,505 Other assets (net of accumulated amortization of $314,312 and $264,054) 181,392 79,944 ---------- ---------- Total $ 8,116,644 $ 8,352,879 ========== ========== Liabilities and Partners' Equity
Liabilities: Debt obligations $ 6,340,936 $ 6,085,969 Accounts payable: Trade 547,097 579,708 Related parties 166,699 192,796 Interest payable 221,346 125,670 Tenant security deposits 62,196 61,038 Other liabilities 5,151 37,864 ---------- ---------- Total liabilities 7,343,425 7,083,045 ---------- ---------- Minority interests 390,343 444,459
Partners' equity 382,876 825,375 ---------- ---------- Total $ 8,116,644 $ 8,352,879 ========== ==========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
Revenues: Rental income $1,109,060 $1,092,708 $1,081,821 Interest income 470 300 1,540 --------- --------- --------- Total revenues 1,109,530 1,093,008 1,083,361 --------- --------- --------- Costs and expenses: Rental operations 539,844 534,794 570,109 General and administrative 48,000 48,000 56,030 Interest 529,213 540,682 522,698 Depreciation and amortization 489,088 475,914 492,417 --------- --------- --------- Total costs and expenses 1,606,145 1,599,390 1,641,254 --------- --------- --------- Loss before minority interests (496,615) (506,382) (557,893)
Minority interests' portion of loss 54,116 55,873 61,784 --------- --------- --------- Net loss ($ 442,499)($ 450,509)($ 496,109) ========= ========= ========= Net loss per limited partnership unit: Loss before minority interests ($ 97.70)($ 99.62)($ 109.75) Minority interests 10.64 10.99 12.15 --------- --------- --------- ($ 87.06)($ 88.63)($ 97.60) ========= ========= =========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
Diversified Historic Advisors Limited 1990 (1) Partners (2) Total
Percentage participation in profit or loss 1% 99% 100%
Balance at December 31, 1995 ($16,312) $1,788,305 $1,771,993 Net loss (4,961) (491,148) (496,109) ------ --------- --------- Balance at December 31, 1996 (21,273) 1,297,157 1,275,884 Net loss (4,505) (446,004) (450,509) ------ --------- --------- Balance at December 31, 1997 (25,778) 851,153 825,375 Net loss (4,425) (438,074) (442,499) ------ --------- --------- Balance at December 31, 1998 ($30,203) $ 413,079 $ 382,876 ====== ========= =========
(1) General Partner.
(2) 5,032 limited partnership units outstanding at December 31, 1998, 1997, and 1996.
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
Cash flows from operating activities: Net loss ($ 442,499) ($450,509) ($496,109) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 489,088 475,914 492,417 Minority Interests (54,116) (55,873) (61,784) Changes in assets and liabilities: (Increase) decrease in restricted cash (57,153) (3,640) 54,346 Increase in accounts receivable (2,195) (6,604) (7,736) (Increase) decrease in other assets (149,806) (32,337) 672 (Decrease) increase in accounts payable - trade (32,611) 97,692 67,786 (Decrease) increase in accounts payable - related parties (26,097) 44,786 76 Increase in interest payable 95,676 34,235 68,139 Increase (decrease) increase in tenant security 1,158 (6,002) 3,911 deposits Decrease in other liabilities (32,713) (14,660) (9,128) --------- ------- ------- Net cash (used in) provided by operating (211,268) 83,002 112,590 activities --------- ------- ------- Cash flows from investing activities: Capital expenditures (13,012) (19,304) (39,569) --------- ------- ------- Net cash used in investing activities: (13,012) (19,304) (39,569) --------- ------- ------- Cash flows from financing activities: Proceeds from debt refinancing 3,100,000 0 0 Payments of principal under debt obligations (2,845,033) (68,309) (44,977) --------- ------- ------- Net cash provided by (used in) financing 254,967 (68,309) (44,977) activities: --------- ------- ------- Increase (decrease) in cash and cash equivalents 30,687 (4,611) 28,044 Cash and cash equivalents at beginning of year 28,549 33,160 5,116 --------- ------- ------- Cash and cash equivalents at end of year $ 59,236 $ 28,549 $ 33,160 ========= ======= ======= Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest $ 443,537 $506,447 $454,559
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Diversified Historic Investors 1990 (the "Partnership") was formed in December 1989, to acquire, rehabilitate, and manage real properties which were Certified Historic Structures, as defined in the Internal Revenue Code of 1986 (the "Code"), or which are eligible for designation as such, and which may also be (but are not required to be) eligible for low income housing tax credits as provided by Section 42 of the Code, and such other uses as Dover Historic Advisors 1990 (the "General Partner") deems appropriate, and to engage in any and all activities related or incidental thereto.
The General Partner, Dover Historic Advisors 1990 (a general partnership), whose partners are Dover Historic Advisors, Inc., (a Pennsylvania corporation) and Jacqueline Reichman, has the exclusive responsibility for all aspects of the Partnership's operations.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows:
1. Principles of Consolidation
The accompanying financial statements of the Partnership include the accounts of three subsidiary partnerships (the "Ventures"), in which the Partnership has controlling interests, with appropriate elimination of inter-partnership transactions and balances. These financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of the General Partner, are necessary for a fair statement of the results for those years.
2. Depreciation
Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Buildings and improvements are depreciated over 25 years and furniture and fixtures over five years.
3. Net Loss Per Limited Partnership Unit
The net loss per limited partnership unit is based on the weighted average number of limited partnership units outstanding during the period (5,032 in 1998, 1997, and 1996).
4. Income Taxes
Federal and state income taxes are payable by the individual partners; accordingly, no provision or liability for income taxes is reflected in the financial statements.
5. Deferred Expenses
Loan fees have been incurred with respect to certain loans. Such fees were deferred and are amortized over the term of the related loans and charged to amortization expense.
6. Cash and Cash Equivalents
The Registrant considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
7. Acquisition Costs
Costs incurred in identifying and evaluating properties for possible acquisition and rehabilitation are deferred. Such costs are capitalized as part of the cost of the property if the related property is acquired and are charged to expense if it is not acquired. Interest, real estate taxes, and insurance costs incurred during the rehabilitation period have been capitalized as part of the cost of the property.
8. Restricted Cash
Restricted cash includes amounts held for tenant security deposits, real estate tax reserves and other cash restricted as to use.
9. Revenue Recognition
Revenues are recognized when rental payments are due on a straight- line basis. Rental payments received in advance are deferred until earned.
10. Rental Properties
Rental properties are stated at cost. A provision for impairment of value is recorded when a decline in value of property is determined to be other than temporary as a result of one or more of the following: (1) a property is offered for sale at a price below its current carrying value, (2) a property has significant balloon payments due with the foreseeable future for which the Partnership does not have the resources to meet, and anticipates it will be unable to obtain replacement financing or debt modification sufficient to allow 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 deficit results of operations, and has been unable to, or anticipates it will be unable to, obtain debt modification, financing or refinancing sufficient to allow 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 - PARTNERSHIP AGREEMENT
The significant terms of the Agreement of Limited Partnership (the "Agreement"), as they relate to the financial statements, follow:
All distributable cash from operations (as defined in the Agreement of Limited Partnership) will be distributed 1% to the General Partner and 99% to the limited partners.
All distributable cash from sales or dispositions (as defined) will be distributed to the limited partners up to their adjusted invested capital (as defined) or a 6.5% cumulative, noncompounded annual return on their average amounts previously distributed (as defined); thereafter, after receipt by the General Partner or its affiliates of any accrued but unpaid real estate brokerage commissions, the balance will be distributed 15% to the General Partner and 85% to the limited partners.
Net income or loss from operations of the Partnership is allocated 1% to the General Partner and 99% to the limited partners.
NOTE D - TRANSACTIONS WITH RELATED PARTIES
Included in Accounts Payable - Related Party was $166,699 and $192,796 at December 31, 1998 and 1997, respectively, owed to the co-general partners of the Partnership's Ventures, for additional amounts advanced for working capital needs. These advances are non-interest bearing and will be paid out of available cash flow from the related properties.
NOTE E - LEASES
The Partnership's leases with commercial tenants are classified as operating leases. These leases are generally for a period of three to five years and provide for a fixed base rent plus a share of certain operating costs.
Minimum future commercial rentals on operating leases as of December 31, 1998 are as follows:
1999 $151,940 2000 159,536 2001 167,512 2002 175,892 2003 29,550
NOTE F - ACQUISITIONS
The Partnership acquired three controlling general or limited partnership interests in Ventures during the period from October 1990 to March 1991, as discussed below.
In October 1990, the Partnership was admitted, with a 99% limited partner interest, to a Connecticut general partnership which owns a building located in Hartford, Connecticut, consisting of 30 apartment units and 665 square feet of commercial space, for a cash contribution of $1,417,000.
In December 1990, the Partnership was admitted, with a 99% general partner interest, to a Virginia general partnership which owns a building located in Richmond, Virginia, consisting of 29 apartment units and 14,451 square feet of commercial space, for a cash capital contribution of $800,000.
In March 1991, the Partnership purchased a 72.3% interest of a Pennsylvania general partnership which owns a building located in New Orleans, Louisiana, consisting of 68 apartments, for $1,235,000. In October 1992, in conjunction with a refinancing, the Partnership exchanged its general partnership interest for a limited partnership interest in a reconstituted partnership.
NOTE G - DEBT OBLIGATIONS
Debt obligations were as follows: December 31, 1998 1997 ------ ------ Mortgage loan; interest at 8% until January 1996 when $ 747,819 $ 747,819 interest resets based on a specified index; monthly payments of principal and interest of $7,102; based on a 25-year amortization schedule; collateralized by the related rental property (A)
Note payable; interest at 1%; monthly payments of 272,626 272,626 principal and interest of $1,380; based on a 20-year amortization schedule; due 2010
Mortgage loan; interest at 8%; monthly payments of 1,876,281 0 principal and interest of $14,591; based on a 30-year amortization schedule; principal due June 2013; collateralized by the related rental property (B)
Mortgage loan; interest at the Fidelity Federal Savings 0 1,725,581 Bank prime plus 1.5% with a minimum of 10% and a maximum of 15% (10% at December 31, 1997); monthly payments of principal and interest of $16,275; based on a 30-year amortization schedule; callable by the lender in 1997; due February 2022; collateralized by the related rental property (B)
Mortgage loan; interest at 6.775%; monthly payments 3,100,000 0 of principal and interest of $20,158; based on 30-year amortization schedule; principal due November 2008; collateralized by the related rental property (C)
Mortgage loan; interest at 8.25%; monthly payments of 0 2,984,137 principal and interest of $23,552; based on a 30-year amortization schedule, collateralized by the related rental property; due November 1999 (C)
Note payable to developer; interest at 9%; payments 152,386 161,533 based on positive cash flow of the property; due upon sale of the property
Note payable to developer; interest at 8.25%; monthly payments of principal and interest of $1,514; based on a 30- year amortization schedule; collateralized by the related rental property; due November 1999 191,824 194,273 --------- --------- $6,340,936 $6,085,969 ========= =========
(A) The mortgage was sold in 1997. The partnership is in the process of negotiating payment terms with the new holder of the note.
(B) The loan was refinanced in May 1998.
(C ) The loan was refinanced in November 1998.
Maturities of debt obligations at December 31, 1998, are as follows:
Year Ending December 31,
1999 $ 995,625 2000 63,061 2001 67,835 2002 72,975 2003 78,508 Thereafter 5,062,932 --------- $6,340,936 =========
NOTE H - INCOME TAX BASIS RECONCILIATION
Certain items enter into the determination of the results of operations in different time periods for financial reporting ("book") purposes and for income tax ("tax") purposes. The reconciliation of net loss and partners' equity follows:
For the Years Ended December 31, 1998 1997 1996 ------ ------ ------ Net loss - book ($ 422,499) ($ 450,509) ($ 496,109) Excess of book over tax depreciation 176,436 134,039 160,384 Other timing differences 661 1,759 (1,379) Minority Interest (30,386) (15,699) (21,621) --------- --------- --------- Net loss - tax ($ 275,788) ($ 330,410) ($ 358,725) ========= ========= ========= Partners' equity - book $ 382,876 $ 825,376 $1,275,885 Costs of issuance 638,660 638,660 638,660 Cumulative book over tax loss 670,713 504,000 383,901 Basis reduction (1,565,104) (1,565,104) (1,565,104) --------- --------- --------- Partners' equity - tax $ 127,145 $ 402,932 $ 733,342 ========= ========= =========
SUPPLEMENTAL INFORMATION
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998
Costs Capitalized Subsequent to Acquisition Initial Cost to Partnership (b) (b)
Buildings and Description (a) Encumbrances Land Improvements Improvements (e)
30 apartment units and 665 square feet of commercial space in Hartford, CT $1,020,445 - $3,027,000 $261,665
29 apartment units and 14,451 square feet of commercial space in Richmond, VA 1,876,281 186,381 2,287,980 353,425
68 apartment units in New Orleans, LA 3,444,210 62,475 5,103,816 37,331 --------- ------- ---------- ------- $6,340,936 $248,856 $10,418,796 $652,421 ========= ======= ========== =======
Gross Amount at which Carried at December 31, 1998
Buildings and Accum Date of Date Description (a) Land Improvements Total Depr. Constr. Acq. (b)(c) (c)(d) (a)
30 apartment units and 665 square feet of commercial space in Hartford, CT - $3,288,665 $3,288,665 $1,143,201 1990 1990
29 apartment units and 14,451 square feet of commercial space in Richmond, VA 186,381 2,654,417 2,840,798 835,664 1990 1990
68 apartment units in New Orleans, LA 62,475 5,141,147 5,203,622 1,657,666 1991 1991 ------- ---------- ---------- --------- $248,856 $11,084,229 $11,333,085 $3,636,531 ======= ========== ========== =========
DIVERSIFIED HISTORIC INVESTORS 1990 (a limited partnership)
NOTES TO SCHEDULE XI
December 31, 1998
(A) All properties are certified historic structures as defined in the Internal Revenue Code. The "date of construction" refers to the period in which such properties are rehabilitated.
(B) The aggregate cost of real estate owned at December 31, 1998, for Federal income tax purposes is approximately $8,333,483. However, the depreciable basis of buildings and improvements is reduced for Federal income tax purposes by the investment tax credit and the historic rehabilitation credit obtained.
(C) Reconciliation of real estate:
1998 1997 1996 ------ ------ ------ Balance at beginning of year $11,320,073 $11,300,769 $11,261,200 Additions during the year: Improvements 13,012 19,304 39,569 ---------- ---------- ---------- Balance at end of year $11,333,095 $11,320,073 $11,300,769 ========== ========== ========== Reconciliation of accumulated depreciation: 1998 1997 1996 ------ ------ ------ Balance at beginning of year $ 3,195,801 $ 2,755,349 $ 2,301,499 Depreciation expense for the year 440,730 440,452 453,850 ---------- ---------- ---------- Balance at end of year $ 3,636,531 $ 3,195,801 $ 2,755,349 ========== ========== ==========
(D) See Note B to the financial statements for depreciation method and lives.
(E) See Note E to the financial statements for further information.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of Registrant
a. Identification of Directors - Registrant has no directors.
b. Identification of Executive Officers
The General Partner of the Registrant is Dover Historic Advisors 1990 (DoHA-1990), a Pennsylvania general partnership. The partners of DoHA-1990 are as follows:
Name Position Term of Office Period Served
Dover Historic Advisors, Partner in DoHA- No fixed term Since September 1990 Inc. 1990 ("Dover Advisors")
Jacqueline D. Reichman Partner in No fixed term Since May 1994 DOHA-1990
For further description of Dover Advisors, see paragraph e. of this Item. There is no arrangement or understanding between either person named above and any other person pursuant to which any person was or is to be selected as an officer.
c. Identification of Certain Significant Employees. Registrant has no employees. Its administrative and operational functions are carried out by a property management and partnership administration firm engaged by the Registrant.
d. Family Relationships. There is no family relationship between or among the executive officers and/or any person nominated or chosen by Registrant to become an executive officer.
The general partner is responsible for the management and control of Registrant's affairs and will have general responsibility and authority in conducting its operations. DoHA-1990 is a general partnership formed in 1989. e. Business Experience.
The partners of DoHA-1990 are Dover Advisors and Jacqueline Reichman. The General Partner may retain its affiliates to manage certain of the Properties.
Dover Advisors, a wholly-owned subsidiary of DHP, Inc., (formerly Dover Historic Properties, Inc.) is a corporation formed in February 1989 under the laws of the Commonwealth of Pennsylvania for the purpose of acting as the general partner (or a partner of the general partner) in real estate programs such as the Registrant. DHP, Inc. is a subsidiary of The Dover Group, Ltd., an entity formed in 1985 to act as the holding company for DHP, Inc. and certain other companies involved in the development and operations of both historic properties and conventional real estate as well as in financial (non-banking) services. In February 1992, The Dover Group, Ltd's name was changed to D, LTD.
The executive officers, directors and key employees of Dover Advisors are described below.
Donna M. Zanghi (age 41) was appointed Secretary/Treasurer of Dover Advisors and Secretary/Treasurer of DHP, Inc. on June 15, 1993. She is also a Director and Secretary/Treasurer of D, LTD. She has been associated with Dover Advisors and its affiliates since 1984 except for the period from December 1986 to June 1989 and the period from November 1, 1992 to June 14, 1993.
Michele F. Rudoi, (age 33) was appointed on January 27, 1993 as Assistant Secretary of Dover Advisors, D, LTD and DHP, Inc. and Director of D, LTD.
Jacqueline D. Reichman was appointed on May 11, 1994 as a partner of DoHA-1990. Ms. Reichman and her affiliates have extensive experience in real estate related ventures.
Item 11.
Item 11. Executive Compensation
a. Cash Compensation - The Registrant did not pay any cash compensation during 1997.
b. Compensation Pursuant to Plans - Registrant has no plan pursuant to which compensation was paid or distributed during 1998, or is proposed to be paid or distributed in the future, to DoHA- 1990, any partner therein, or any person named in paragraph c. of Item 10 of this report.
c. Other Compensation - No compensation not referred to in paragraph a. or paragraph b. of this Item was paid or distributed during 1998 to DoHA-1990, any partner therein, or any person named in paragraph c. of Item 10.
d. Compensation of Directors - Registrant has no directors.
e. Termination of Employment and Change of Control Arrangement - Registrant has no compensatory plan or arrangement, with respect to any individual, which results or will result from the resignation or retirement of any individual, or any termination of such individual's employment with Registrant or from a change in control of Registrant or a change in such individual's responsibilities following such a change in control.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
a. Security Ownership of Certain Beneficial Owners - No person is known to Registrant to be the beneficial owner of more than five percent of the issued and outstanding Units.
b. Security Ownership of Management - No equity securities of Registrant are beneficially owned by any person named in paragraph c. of Item 10.
c. Changes in Control - Registrant does not know of any arrangement, the operation of which may at a subsequent date result in a change in control of Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions
Pursuant to Registrant's Amended and Restated Agreement of Limited Partnership, DoHA-1990 is entitled to 10% of Registrant's distributable cash from operations in each year. There was no such share allocable to DoHA-1990 for fiscal years 1996 to 1998.
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, 1998 and 1997.
b. Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996.
c. Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1998, 1997 and 1996.
d. Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996.
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, 1998.
(c) Exhibits:
See Item 14 (A)(3) above.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DIVERSIFIED HISTORIC INVESTORS 1990
Date: April 26, 1999 By: Dover Historic Advisors 1990, -------------- General Partner
By: Dover Historic Advisors, Inc., Ptr.
By: /s/ Jacqueline D. Reichman -------------------------- Jacqueline D. Reichman Partner
By: /s/ Michele F. Rudoi --------------------------- MICHELE F. RUDOI, Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
DOVER HISTORIC ADVISORS 1990 General Partner
By: Dover Historic Advisors, Inc., Partner
By: /s/ Jacqueline D. Reichman April 26, 1999 -------------------------- -------------- Jacqueline D. Reichman Partner
By: /s/ Michele F. Rudoi April 26, 1999 -------------------------- -------------- MICHELE F. RUDOI, Assistant Secretary