<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 JUNE 30, 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 JUNE 30, 1997
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, June 30, 1997 and December 31, 1996...............1
Statements of Operations,
Six and Three Months Ended June 30, 1997 and 1996 ...........2
Statement of Partners' Equity (Deficiency),
Six Months Ended June 30, 1997 ..............................3
Statements of Cash Flows,
Six Months Ended June 30, 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
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 3,095,327 $ 3,098,674
CASH AND CASH EQUIVALENTS (Note 1) 7,611,971 6,603,047
OTHER ASSETS 50,000 72,829
------------ ------------
TOTAL ASSETS $ 10,757,298 $ 9,774,550
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
LIABILITIES:
Notes payable (Notes 1 and 5) $ 1,230,743 $ 1,230,743
Interest payable (Notes 1 and 5) 157,197 244,760
Accounts payable 11,874 14,701
------------ ------------
1,399,814 1,490,204
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (178,455) (189,186)
Limited partners 9,535,939 8,473,532
------------ ------------
9,357,484 8,284,346
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $ 10,757,298 $ 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
SIX AND THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 148,864 $ 75,988 $ 78,868 $ 42,101
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Legal and accounting 71,381 34,558 70,484 16,640
Management fees - general partner (Note 3) 252,696 126,348 252,696 126,348
Interest (Note 1) 55,798 27,899 61,500 30,750
Administrative (Note 3) 44,982 24,383 36,689 17,258
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 424,857 213,188 421,369 190,996
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (275,993) (137,200) (342,501) (148,895)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 1,321,131 1,081,391 1,012,655 919,665
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS 28,000 14,000 240,000 120,000
----------- ----------- ----------- -----------
NET INCOME $ 1,073,138 $ 958,191 $ 910,154 $ 890,770
=========== =========== =========== ===========
NET INCOME PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ 81 $ 73 $ 69 $ 67
=========== =========== =========== ===========
</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)
SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS,
June 30, 1997 13,202
==========
EQUITY (DEFICIENCY),
January 1, 1997 $ (189,186) $8,473,532 $8,284,346
Net income for the six months
ended June 30, 1997 10,731 1,062,407 1,073,138
---------- ---------- ----------
EQUITY (DEFICIENCY),
June 30, 1997 $ (178,455) $9,535,939 $9,357,484
========== ========== ==========
</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
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,073,138 $ 910,154
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 (28,000) (240,000)
Decrease in advances to limited partnership 22,829 40,000
Decrease in accounts payable and interest payable (90,390) (90,977)
----------- -----------
Net cash provided by operating activities 977,577 619,177
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnerships
recognized as return of capital 31,347 38,239
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,008,924 657,416
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,603,047 5,561,045
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,611,971 $ 6,218,461
=========== ===========
</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
JUNE 30, 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 June 30, 1997 and the results of operations
for the six and three months then ended and changes in cash flows
for the six 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)
JUNE 30, 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)
JUNE 30, 1997
NOTE 2 - INVESTMENTS 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 $1,230,743 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 Partnership is undergoing an extensive review of disposition,
refinancing or re-engineering alternatives for the properties in its
Portfolio that are subject to governmental mortgage and rental
subsidy programs. The Partnership has began to incur expenses in
connection with this review by various third party professionals.
Amounts incurred to date are not material to the operating results
of the Partnership.
The following is a summary of the investment in limited partnerships
for the six months ended June 30, 1997:
<TABLE>
<S> <C>
Balance, beginning of period $3,098,674
Equity in income of limited partnerships 34,000
Distributions recognized as a return of capital (31,347)
Amortization of acquisition costs (6,000)
----------
Balance, end of period $3,095,327
==========
</TABLE>
The following are unaudited combined estimated statements of
operations for the six months ended June 30, 1997 and 1996 for the
limited partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Rental and other $ 11,974,000 $ 5,987,000 $ 11,750,000 $ 5,875,000
------------ ------------ ------------ ------------
EXPENSES
Depreciation 1,844,000 922,000 1,882,000 941,000
Interest 4,086,000 2,043,000 4,044,000 2,022,000
Operating 6,578,000 3,289,000 5,854,000 2,927,000
------------ ------------ ------------ ------------
12,508,000 6,254,000 11,780,000 5,890,000
------------ ------------ ------------ ------------
Net loss $ (534,000) $ (267,000) $ (30,000) $ (15,000)
============ ============ ============ ============
</TABLE>
NAPICO, or one of its affiliates, is the general partner and
property management agent for certain of the limited partnerships
included above.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 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 percent 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 $253,000 for the six months ended June 30, 1997 and
1996.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was $17,585 and $16,111 for the six
months ended June 30, 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)
JUNE 30, 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 is undergoing an extensive review of disposition,
refinancing or re-engineering alternatives for the properties in its
Portfolio that are subject to governmental mortgage and rental
subsidy programs. The Partnership has began to incur expenses in
connection with this review by various third party professionals.
Amounts incurred to date are not material to the operating results
of the Partnership.
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)
JUNE 30, 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)
JUNE 30, 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:
--------------------------------------
Charles H. Boxenbaum
Chief Executive 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,611,971
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,661,971
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,757,298
<CURRENT-LIABILITIES> 11,874
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,357,484
<TOTAL-LIABILITY-AND-EQUITY> 10,757,298
<SALES> 0
<TOTAL-REVENUES> 1,497,995
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 369,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,798
<INCOME-PRETAX> 1,073,138
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,073,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,073,138
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
