<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 MARCH 31, 1997
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 MARCH 31, 1997
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Balance Sheets, March 31, 1997 and December 31, 1996....................................1
Statements of Operations,
Three Months Ended March 31, 1997 and 1996.......................................2
Statement of Partners' Equity (Deficiency),
Three Months Ended March 31, 1997................................................3
Statements of Cash Flows,
Three Months Ended March 31, 1997 and 1996.......................................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
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 3,099,451 $ 3,098,674
CASH AND CASH EQUIVALENTS (Note 1) 6,740,374 6,603,047
OTHER ASSETS 72,830 72,829
----------- -----------
TOTAL ASSETS $ 9,912,655 $ 9,774,550
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
LIABILITIES:
Notes payable (Notes 1 and 5) $ 1,230,744 $ 1,230,743
Interest payable (Notes 1 and 5) 272,659 244,760
Accounts payable 9,959 14,701
----------- -----------
1,513,362 1,490,204
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (188,037) (189,186)
Limited partners 8,587,330 8,473,532
----------- -----------
8,399,293 8,284,346
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $ 9,912,655 $ 9,774,550
=========== ===========
</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, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
INTEREST INCOME $ 72,876 $ 36,766
--------- ---------
OPERATING EXPENSES:
Legal and accounting 36,822 9,446
Management fees - general partner (Note 3) 126,348 126,348
Interest (Note 1) 27,899 30,750
Administrative (Note 3) 20,600 63,828
--------- ---------
TOTAL OPERATING EXPENSES 211,669 230,372
--------- ---------
LOSS FROM OPERATIONS (138,793) (193,606)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 239,740 92,990
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS 14,000 120,000
--------- ---------
NET INCOME $ 114,947 $ 19,384
========= =========
NET INCOME PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ 9 $ 1
========= =========
</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)
THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS,
March 31, 1997 13,202
==========
EQUITY (DEFICIENCY),
January 1, 1997 $ (189,186) $8,473,532 $8,284,346
Net income for the three months
ended March 31, 1997 1,149 113,798 114,947
---------- ---------- ----------
EQUITY (DEFICIENCY),
March 31, 1997 $ (188,037) $8,587,330 $8,399,293
========== ========== ==========
</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, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 114,947 $ 19,384
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Equity in income of limited partnerships and amorti-
zation of additional basis and acquisition costs (14,000) (120,000)
(Decrease) increase in accounts payable and interest payable 23,158 60,459
----------- -----------
Net cash provided by (used in) operating activities 124,105 (40,157)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnerships
recognized as return of capital 13,222 10,578
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 137,327 (29,579)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,603,047 5,561,045
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,740,374 $ 5,531,466
=========== ===========
</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, 1997
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, 1996 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, 1997 and the results of operations and changes in
cash flows for the three 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 and are being
amortized on a straight line basis over the estimated lives
of the underlying assets, which is generally 30 years.
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)
MARCH 31, 1997
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. The Partnership has its cash and cash
equivalents on deposit primarily with one high credit
quality financial institution. Such cash and cash
equivalents are in excess of the FDIC insurance limit.
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership adopted Statement of Financial Accounting
Standards No. 121, Account for the Improvement of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of as of
January 1, 1996 without a significant effect on its
financial statements. The Partnership reviews long-lived
assets to determine if there has been any permanent
impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be
recoverable. If the sum of the expected future cash flows is
less than the carrying amount of the assets, the Partnership
recognizes an impairment loss.
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.
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
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 $1,115,952
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, 1997:
<TABLE>
<CAPTION>
<S> <C>
Balance, beginning of period $3,098,676
Equity in income of limited partnerships 17,000
Distributions recognized as a return of capital (13,225)
Amortization of acquisition costs (3,000)
----------
Balance, end of period $3,099,451
==========
</TABLE>
The following are unaudited combined estimated statements of
operations for the three months ended March 31, 1997 and
1996 for the limited partnerships in which the Partnership
has investments:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
REVENUES
<S> <C> <C>
Rental and other $ 5,987,000 $ 5,874,000
----------- -----------
EXPENSES
Depreciation 922,000 941,000
Interest 2,043,000 2,022,000
Operating 3,289,000 2,927,000
----------- -----------
6,254,000 5,890,000
----------- -----------
Net loss $ (267,000) $ (16,000)
=========== ===========
</TABLE>
NAPICO, or one of its affiliates, is the general partner and
property management agent for certain of the limited
partnerships included above.
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 June 1997 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)
MARCH 31, 1997
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 $126,000
for the three months ended March 31, 1997 and 1995.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was approximately $8,382 and
$8,100 for the three months ended March 31, 1997 and 1996,
respectively, and is included in administrative expenses.
NOTE 4 - CONTINGENCIES
The corporate general partner of the Partnership is involved
in various 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 5 - 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)
MARCH 31, 1997
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.
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
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REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership's Corporate General Partner is involved in various lawsuits.
None of these 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, 1997
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
Date:
-------------------------------------
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,740,374
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,813,204
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,912,655
<CURRENT-LIABILITIES> 9,959
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,399,293
<TOTAL-LIABILITY-AND-EQUITY> 9,912,655
<SALES> 0
<TOTAL-REVENUES> 326,616
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 183,780
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,899
<INCOME-PRETAX> 114,947
<INCOME-TAX> 0
<INCOME-CONTINUING> 114,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,947
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
