<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR QUARTER ENDED MARCH 31, 1995
COMMISSION FILE NUMBER 2-74063
REAL ESTATE ASSOCIATES LIMITED IV
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-3718731
9090 Wilshire Blvd., Suite 201
Beverly Hills, Calif. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed with the Commission by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
<PAGE> 2
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Balance Sheets, March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . 1
Statements of Operations,
Three Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 2
Statement of Partners' Equity,
Three Months Ended March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Cash Flows,
Three Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Analysis and Discussion of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8- K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
INVESTMENTS IN AND ADVANCES TO
LIMITED PARTNERSHIPS $3,315,959 $3,234,884
CASH AND CASH EQUIVALENTS 4,769,543 4,594,174
SHORT-TERM INVESTMENTS 125,000 125,000
---------- ----------
TOTAL ASSETS $8,210,502 $7,954,058
========== ==========
LIABILITIES AND PARTNERS' EQUITY
NOTES PAYABLE $1,230,743 $1,230,743
INTEREST PAYABLE 463,156 432,406
ACCOUNTS PAYABLE 26,397 16,042
---------- ----------
1,720,296 1,679,191
PARTNERS' EQUITY 6,490,206 6,274,867
---------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $8,210,502 $7,954,058
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
INTEREST INCOME $ 28,171 $ 17,615
OPERATING EXPENSES:
Interest expense 30,750 30,750
Management fees 126,348 126,348
General and administrative 58,960 68,127
--------- ---------
Total operating expenses 216,058 225,225
--------- ---------
LOSS FROM OPERATIONS (187,887) (207,610)
DISTRIBUTIONS RECOGNIZED AS INCOME 271,226 342,786
EQUITY IN INCOME OF LIMITED PARTNERSHIPS
AND AMORTIZATION OF ACQUISITION COSTS 132,000 163,000
--------- ----------
NET INCOME $ 215,339 $ 298,176
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- -------- ---------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS,
at March 31, 1995 13,202
==========
BALANCE (DEFICIENCY),
at January 1, 1995 $(209,281) $6,484,148 $6,274,867
Net income for three months
ended March 31, 1995 2,153 213,186 215,339
--------- ---------- ----------
BALANCE (DEFICIENCY),
at March 31, 1995 $(207,128) $6,697,334 $6,490,206
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 215,339 $ 298,176
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in income of limited partnerships (138,000) (169,000)
Amortization of acquisition costs 6,000 6,000
Increase (decrease) in -
Interest payable 30,750 30,750
Accounts payable 10,355 20,384
---------- ----------
Net cash provided by operating activities 124,444 186,310
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Distributions from limited partnerships
recognized as a return of capital 50,925 -
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 175,369 186,310
CASH AND CASH EQUIVALENTS, beginning of period 4,594,174 3,937,531
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $4,769,543 $4,123,841
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
financial statements; accordingly, the financial statements included
herein should be reviewed in conjunction with the financial statements
and related notes thereto contained in the Annual Report for the year
ended December 31, 1994 filed by Real Estate Associates Limited IV (the
"Partnership"). Accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The results of
operations for the interim period presented are not necessarily
indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position
as of March 31, 1995 and the results of operations and changes in cash
flow for the three months then ended.
METHOD ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investment in limited partnerships is accounted for on the equity
method. Acquisition and selection fees and other costs related to the
acquisition of the projects have been capitalized as part of the
investment account.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit.
SHORT TERM INVESTMENTS
Short term investments consist of bank certificates of deposit with
original maturities ranging from more than three months to twelve
months. The fair value of these securities, which have been classified
as held for sale, approximates their carrying value.
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the liability of the
individual partners.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in twenty-two
limited partnerships. In addition, the Partnership holds a general
partner interest in REA. NAPICO is also a general partner in REA II.
REA II, in turn, holds limited partner interests in seven additional
limited
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1995
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
partnerships. In total, therefore, the Partnership holds interests,
either directly or indirectly through REA II, in twenty-nine
partnerships which own residential rental projects consisting of 2,783
apartment units. The mortgage loans of these projects are insured by
various governmental agencies.
The Partnership, as a limited partner, is entitled to between 80 percent
and 99 percent of the profits and losses of the limited partnerships it
has invested in directly. The Partnership is also entitled to 99.9
percent of the profits and losses of REA II. REA II is entitled to a 99
percent interest in each of the limited partnerships in which it has
invested.
Equity in loss of the limited partnerships is recognized until the
investment balance is reduced to zero. Losses incurred after the
limited partnership investment account is reduced to zero are not
recognized.
Distributions from the limited partnerships are accounted for as a
return of capital until the investment balance is reduced to zero or to
a negative amount equal to further capital contributions required.
Subsequent distributions received are recognized as income.
Certain of the Partnership's investments involved purchases of
partnership interest from partners who subsequently withdrew from the
operating partnership. The Partnership is obligated on non-recourse
notes payable of $1,230,743 bearing interest at 10 percent, to the
sellers of the partnership interests. The notes and the related
interest are payable by the Partnership through REA II, and have
principal maturity dates ranging from 2015 to 2022 or upon sale or
refinancing of the underlying partnership properties. The notes are
collateralized by REA II's investment in the respective limited
partnerships and are payable only out of cash distributions from the
investee partnerships as defined in the notes. Unpaid interest is due
at maturity of the notes.
The following is a summary of the investment in limited partnerships as
of March 31, 1995:
<TABLE>
<CAPTION>
1994
-----------
<S> <C>
Beginning of period $3,234,884
Equity in income of limited partnerships 138,000
Distributions recognized as a return of capital (50,925)
Amortization of acquisition costs (6,000)
-----------
End of period $3,315,959
==========
</TABLE>
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1995
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
The following are unaudited combined estimated statements of operations
for the limited partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
INCOME
Rental and other $5,871,000 $5,802,000
---------- ----------
EXPENSES
Depreciation 920,000 920,000
Interest 2,077,000 2,157,000
Operating 2,857,000 2,679,000
---------- ----------
5,854,000 5,756,000
---------- ----------
Net income $ 17,000 $ 46,000
========== ==========
</TABLE>
NOTE 3 - MANAGEMENT FEE AND EXPENSES DUE TO GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited
Partners, the Partnership is obligated to NAPICO for an annual
management fee equal to .4% of the invested assets of the limited
partnerships. Invested assets are defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage
loans related to the Partnership's interests in the capital accounts of
the respective partnerships. The fee was approximately $126,350 for the
three months ended March 31, 1995 and 1994.
The partnership reimburses NAPICO for certain expenses. In 1995, the
reimbursement to NAPICO of $8,001 has been paid and included in the
Partnership's operating expenses.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The corporate general partner of the partnership is a plaintiff in
various lawsuits and has also been named a defendant in other lawsuits
arising from transactions in the ordinary course of business. In the
opinion of management, and the corporate general partner, the claims
will not result in any material liability to the Partnership.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1995
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary source of funds is the proceeds from its
public offering. Other sources include interest income earned from
investing available cash and distributions from limited partnerships in
which the Partnership has invested. It is not expected that any of the
local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to limited
partners in any material amount.
The Partnership will be able to meet its equity contribution commitments
as they become due by redeeming portions of its investments from short
term investments. There are no expectations that the partnership will
require the use of outside financing to satisfy any of its current of
long-term obligations, primarily equity contribution commitments.
The Partnership is obligated on notes payable of $1,230,743 bearing
interest at 10 percent, payable at maturity dates ranging from 2015 to
2022 or upon the sale or refinancing of the underlying partnership
properties.
RESULTS OF OPERATIONS
The Partnership was formed to provide various benefits to its partners
as discussed in Item 1 of the annual 10-K report. It is anticipated
that the local limited partnerships in which REAL IV has invested could
produce tax losses for as long as 20 years. The Partnership will seek
to defer income taxes from capital gains by not selling any projects or
project interests within 10 years, except to qualified tenant
cooperatives, or when proceeds of the sale would supply sufficient cash
to enable the partners to pay applicable taxes.
Tax benefits will decline over time as the advantages of accelerated
depreciation are greatest in the earlier years, as deductions for
interest expense will decrease as mortgage principal is amortized, and
as the Tax Reform Act of 1986 limits the deductions available. The
Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1995
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Distributions received from limited partnerships are recognized as
return of capital until the investment balance has been reduced to zero
or to a negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income.
Except for certificates of deposition and money market funds, the
Partnership's investments are entirely interests in other limited
partnerships owning government assisted projects. Available cash not
invested in Limited Partnerships is invested in these funds earning
interest income as reflected in the statements of operations. These
money market funds and certificates of deposit can be converted to cash
to meet obligations as they arise. The Partnership intends to continue
investing available funds in this manner.
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
A recurring partnership expense is the annual management fee. The fee
is payable to the corporate general partner of the Partnership and is
calculated as a percentage of the Partnership's invested assets. The
fee is payable beginning with the month following the Partnership's
initial investment in a local limited partnership.
Operating expenses, exclusive of management fees and interest consist
substantially of professional fees for services rendered to the
Partnership and recurring general and administrative expenses.
The Partnership, as a limited partner in the local limited partnerships
in which it has invested, is subject to the risks incident to the
management and ownership of improved real estate. The Partnership
investments are also subject to adverse general economic conditions,
and, accordingly, the status of the national economy, including
substantial unemployment and concurrent inflation, could increase
vacancy levels, rental payment defaults, and operating expenses, which
in turn, could substantially increase the risk of operating losses for
the projects.
9
<PAGE> 12
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1995
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 1995, the Partnership's Corporate General Partner was a
plaintiff or defendant in several suits. None of the litigation involving the
General Partner are related to REAL IV.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of item 7 of
regulation S-K.
10
<PAGE> 13
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
By: National Partnership Investments Corp.,
General Partner
Date: 5/17/95
----------------------------------
By: /s/ BRUCE E. NELSON
----------------------------------
Bruce E. Nelson
President
Date: 5/17/95
----------------------------------
By: /s/ SHAWN HORWITZ
---------------------------------
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,769,543
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,894,543
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,210,502
<CURRENT-LIABILITIES> 26,397
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 6,490,206
<TOTAL-LIABILITY-AND-EQUITY> 8,210,502
<SALES> 0
<TOTAL-REVENUES> 431,397
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 185,308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,750
<INCOME-PRETAX> 215,339
<INCOME-TAX> 0
<INCOME-CONTINUING> 215,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,339
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
