<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended SEPTEMBER 30, 1996
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
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed 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 SEPTEMBER 30, 1996
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . 1
Statements of Operations,
Nine and Three Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . 2
Statement of Partners' Equity (Deficiency),
Nine Months Ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Cash Flows,
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis 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
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 3,198,206 $ 3,221,339
CASH AND CASH EQUIVALENTS (Note 1) 6,516,237 5,561,045
SHORT TERM INVESTMENTS (Note 1) 125,000 125,000
OTHER ASSETS 50,000 90,000
------------- -------------
TOTAL ASSETS $ 9,889,443 $ 8,997,384
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
LIABILITIES:
Notes payable (Notes 1 and 5) $ 1,230,743 $ 1,230,743
Interest payable (Notes 1 and 5) 348,898 407,511
Accounts payable 21,678 29,327
------------- -------------
1,601,319 1,667,581
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (189,149) (198,732)
Limited partners 8,477,273 7,528,535
------------- -------------
8,288,124 7,329,803
------------- -------------
TOTAL LIABILITIES AND PARTNERS'
EQUITY (DEFICIENCY) $ 9,889,443 $ 8,997,384
============= =============
</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
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 127,157 $ 48,289 $ 113,642 $ 41,100
-------------- ------------- -------------- --------------
OPERATING EXPENSES:
Legal and accounting 89,969 19,485 89,969 13,545
Management fees - general partner 379,044 126,348 379,044 126,348
Interest (Note 1) 92,250 30,750 92,250 30,750
Administrative (Note 3) 50,233 13,545 31,609 9,783
-------------- ------------- -------------- --------------
TOTAL OPERATING EXPENSES 611,496 190,128 592,872 180,426
-------------- ------------- -------------- --------------
LOSS FROM OPERATIONS (484,339) (141,839) (479,230) (139,326)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED
AS INCOME (Note 2) 1,082,660 70,005 1,331,813 198,115
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTI-
ZATION OF ACQUISITION COSTS 360,000 120,000 396,000 132,000
-------------- ------------- -------------- --------------
NET INCOME $ 958,321 $ 48,166 $ 1,248,583 $ 190,789
============== ============= ============== ==============
NET INCOME PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ 73 $ 4 $ 95 $ 14
============== ============= ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS,
September 30, 1996 13,202
============
EQUITY (DEFICIENCY),
January 1, 1996 $ (198,732) $ 7,528,535 $ 7,329,803
Net income for the nine months
ended September 30, 1996 9,583 948,738 958,321
------------ ------------ ------------
EQUITY (DEFICIENCY),
September 30, 1996 $ (189,149) $ 8,477,273 $ 8,288,124
============ ============ ============
</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
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 958,321 $ 1,248,583
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in income of limited partnerships and amorti-
zation of additional basis and acquisition costs (360,000) (396,000)
Decrease (increase) in advances to limited partnership 40,000 (85,000)
Decrease in accounts payable and interest payable (66,262) (68,596)
------------ ------------
Net cash provided by operating activities 572,059 698,987
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnerships
recognized as return of capital 383,133 333,198
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 955,192 1,032,185
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,561,045 4,594,174
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,516,237 $ 5,626,359
============ ============
</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
SEPTEMBER 30, 1996
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
audited 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, 1995 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 September 30, 1996 and the results of operations for the nine and
three months then ended and changes in cash flows for the nine months
then ended.
The general partners have a 1 percent interest in profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest which is allocated in proportion to their respective individual
investments. National Partnership Investments Corp. (NAPICO) is the
corporate general partner of the Partnership.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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.
NET INCOME PER LIMITED PARTNERSHIP INTEREST
Net income per limited partnership interest was computed by dividing the
limited partners' share of net income by the number of limited
partnership interests outstanding during the year. The number of
limited partnership interests was 13,202 for the periods presented.
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity of three months or less.
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 - INVESTMENTS 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 II. NAPICO is also a general partner in REA
II. REA II, in turn, holds limited partner interests in seven
additional limited 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
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
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 September 30, 1996:
<TABLE>
<S> <C>
Balance, beginning of period $3,221,339
Equity in income of limited partnerships 495,000
Distributions recognized as a return of capital (383,133)
Amortization of acquisition costs (135,000)
----------
Balance, end of period $3,198,206
==========
</TABLE>
The following are unaudited combined estimated statements of
operations for the nine and three months ended September 30, 1996 and
1995 for the limited partnerships in which the Partnership has
investments:
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Rental and other $17,625,000 $5,875,000 $17,613,000 $5,871,000
----------- ---------- ----------- ----------
EXPENSES
Depreciation 2,823,000 941,000 2,760,000 920,000
Interest 6,066,000 2,022,000 6,231,000 2,077,000
Operating 8,781,000 2,927,000 8,571,000 2,857,000
----------- ---------- ----------- ----------
17,670,000 5,890,000 17,562,000 5,854,000
----------- ---------- ----------- ----------
Net (loss) income $ (45,000) $ (15,000) $ 51,000 $ 17,000
=========== ========== =========== ==========
</TABLE>
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included
above.
NOTE 3 - MORTGAGE NOTE PAYABLE
Authorization was granted to Lakeland Place limited partnership to
proceed with the request for a $3,200,000 loan from the partnership's
excess reserves. If approval is granted, the loan is expected to
close by the end of December 1996 and the proceeds used to retire
existing debt.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 4 - 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 $379,044 for the nine
months ended September 30, 1996 and 1995.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was approximately $26,000 and $24,000 for
the nine months ended September 30, 1996 and 1995, respectively, and
is included in administrative expenses.
NOTE 5 - 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.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair
value information about financial instruments, when it is practicable
to estimate that value. The notes payable are collateralized by the
Partnership's investments in the investee limited partnerships and are
payable only out of cash distributions from the investee partnerships.
The operations generated by the investee limited partnerships are
subject to various government rules, regulations and restrictions
which make it impracticable to estimate the fair value of the notes
payable and related accrued interest. The carrying amount of other
assets and liabilities reported on the balance sheets that require
such disclosure approximates fair value due to their short-term
maturity.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds 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.
RESULTS OF OPERATIONS
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.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in
an amount equal to .5 percent of investment assets is payable to the
corporate general partner.
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. Losses incurred after the limited partnership
investment balance is reduced to zero are not recognized.
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 deposit 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.
9
<PAGE> 12
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1996
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 1996, 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
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REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1996
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:
-------------------------------
By:
-------------------------------
Bruce Nelson
President
Date:
-------------------------------
By:
-------------------------------
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,516,237
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,691,237
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,889,443
<CURRENT-LIABILITIES> 21,678
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,288,124
<TOTAL-LIABILITY-AND-EQUITY> 9,889,443
<SALES> 0
<TOTAL-REVENUES> 1,569,817
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 519,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,250
<INCOME-PRETAX> 958,321
<INCOME-TAX> 0
<INCOME-CONTINUING> 958,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 958,321
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
