<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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For the Fiscal Year Ended DECEMBER 31, 1998
Commission File Number
0-12439
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REAL ESTATE ASSOCIATES LIMITED IV
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. Employer Identification No. 95-3718731
9090 WILSHIRE BLVD., SUITE 201, BEVERLY HILLS, CALIFORNIA 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 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE> 2
PART I.
ITEM 1. BUSINESS:
Real Estate Associates Limited IV ("REAL IV" or the "Partnership") is a limited
partnership which was formed under the laws of the State of California on August
24, 1981. On March 12, 1982, REAL IV offered 3,000 units consisting of 6,000
Limited Partnership Interests and Warrants to purchase a maximum of 6,000
Additional Limited Partnership Interests through a public offering managed by
E.F. Hutton Inc.
The general partners of Real IV are National Partnership Investments Corp.
("NAPICO"), a California corporation (the "Corporate General Partner"), and
National Partnership Investments Associates ("NAPIA"). NAPIA is a limited
partnership formed under the California Limited Partnership Act and consists of
Messrs. Nicholas G. Ciriello, an unrelated individual, as general partner, and
Charles H. Boxenbaum as limited partner. The business of REAL IV is conducted
primarily by NAPICO.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The current members of NAPICO's Board of Directors are
Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry C. Casden.
REAL IV holds limited partnership interests in 7 local limited partnerships as
of December 31, 1998 and a general partner interest in Real Estate Associates II
("REA II") which in turn holds limited partnership interests in an additional 2
limited partnerships. Therefore, REAL IV holds directly or indirectly through
REA II investments in 9 local limited partnerships. The general partners of REA
II are REAL IV and NAPICO. In December 1998, the Partnership sold its interests
in 20 local limited partnerships to the Operating Partnership. Each of the local
partnerships own a low income housing project which is subsidized and/or has a
mortgage note payable to or insured by agencies of the federal or local
government.
In order to stimulate private investment in low income housing, the federal
government and certain state and local agencies have provided significant
ownership incentives, including interest subsidies, rent supplements, and
mortgage insurance, with the intent of reducing certain market risks and
providing investors with certain tax benefits, plus limited cash distributions
and the possibility of long-term capital gains. There remains, however,
significant risks. The long-term nature of investments in government assisted
housing limits the ability of REAL IV to vary its portfolio in response to
changing economic, financial and investment conditions. These investments are
also subject to changes in local economic circumstances and housing patterns, as
well as rising operating costs, vacancies, rent collection difficulties, energy
shortages and other factors which have an impact on real estate values. These
projects also require greater management expertise and may have higher operating
expenses than conventional housing projects.
Under recent adopted law and policy, the United States Department of Housing and
Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to be in an amount that would provide sufficient cash flow to
permit owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ( "MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a
first mortgage loan which will be amortized on a current basis and a low
interest second mortgage loan payable to FHA which will only be payable on
maturity of the first mortgage loan. This restructuring results in a reduction
in annual debt service payable by the owner
<PAGE> 3
of the FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties serving families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.
When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.
The partnerships in which REAL IV has invested were, at least initially,
organized by private developers who acquired the sites, or options thereon, and
applied for applicable mortgage insurance and subsidies. REAL IV became the
principal limited partner in these local limited partnerships pursuant to
arm's-length negotiations with these developers, or others, who act as general
partners. As a limited partner, REAL IV's liability for obligations of the local
limited partnership is limited to its investment. The local general partner of
the local limited partnership retains responsibility for developing,
constructing, maintaining, operating and managing the project. Under certain
circumstances of default, REAL IV has the right to replace the general partner
of the local limited partnerships, but otherwise does not have control of sale,
refinancing, etc.
Although each of the partnerships in which REAL IV has invested generally owns a
project which must compete in the market place for tenants, interest subsidies
and rent supplements from governmental agencies make it possible to offer these
dwelling units to eligible "low income" tenants at a cost significantly below
the market rate for comparable conventionally financed dwelling units in the
area.
<PAGE> 4
ITEM 6. SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Loss From Operations $ (1,114,270) $ (643,236) $ (636,501) $ (654,466) $ (680,262)
Gain on Sale of Limited
Partnership Interests 5,096,902 -- -- -- --
Distributions From
Limited Partnerships
Recognized as Income 1,316,421 1,406,888 1,107,630 1,222,286 1,053,488
Equity in Income (Loss)
of Limited Partnerships
and Amortization of
Acquisition Costs (1,609,650) 355,483 483,414 487,116 314,015
------------ ------------ ------------ ------------ ------------
Net Income $ 3,689,403 $ 1,119,135 $ 954,543 $ 1,054,936 $ 687,241
============ ============ ============ ============ ============
Net Income per Limited
Partnership Interest $ 279 $ 85 $ 72 $ 80 $ 52
============ ============ ============ ============ ============
Total assets $ 13,481,690 $ 10,896,957 $ 9,774,550 $ 8,997,384 $ 7,954,058
============ ============ ============ ============ ============
Investments in Limited
Partnerships $ -- $ 3,374,262 $ 3,098,674 $ 3,221,339 $ 3,234,884
============ ============ ============ ============ ============
Notes Payable $ -- $ 1,042,524 $ 1,230,743 $ 1,230,743 $ 1,230,743
============ ============ ============ ============ ============
</TABLE>
<PAGE> 5
During 1998, the projects in which REAL IV had invested were substantially
rented. The following is a schedule of the status as of December 31, 1998, of
the projects owned by local limited partnerships in which REAL IV, either
directly or indirectly, has invested.
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL IV HAS AN INVESTMENT
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Units Authorized
For Rental
Assistance Under
Section 8/or
Other Rent
No. of Supplement Units Percentage of
Name & Location Units Program Occupied Total Units
- ----------------------------- ------ ------------------ -------- -------------
<S> <C> <C> <C> <C>
Branford Elderly II
Branford, CT 44 44/0 0 0%
Daniel Scott Commons
Chester, PA 72 72/0 65 90%
Ninety-Five Vine Street
Hartford, CT 31 31/0 30 97%
Oakridge Park Apartments
North Biloxi, MS 40 0/40 40 100%
One Madison Avenue
Madison, ME 27 27/0 27 100%
Queensbury Heights
Middlesboro, KY 64 0/64 45 70%
Scituate Vista
Cranston, RI 232 230/0 226 98%
Village of Albany/
Village of Brodhead
Albany & Brodhead, WI 32 0/32 28 88%
Wright Park Phase II
Rome, NY 99 20/20 0 0%
--- ------- ---
TOTALS 641 424/156 461 72%
=== ======= ===
</TABLE>
<PAGE> 6
ITEM 2. PROPERTIES:
The local limited partnerships in which REAL IV holds interests own various
multi-family rental properties. See Item 1 for information pertaining to these
properties.
ITEM 3. LEGAL PROCEEDINGS:
On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to the REIT organized by an
affiliate of NAPICO. The plaintiffs seek preliminary and permanent injunctive
relief and other equitable relief, as well as compensatory and punitive damages.
The managing general partner of such NAPICO managed partnerships and the other
defendants believe that the plaintiffs' claims are without merit and intend to
contest the action vigorously.
As of December 31, 1998, the Partnership's Corporate General Partner was a
plaintiff or defendant in several other lawsuits. None of these suits were
related to REAL IV.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests, held for investment by the Partnership, by the Operating
Partnership, together with certain amendments to the Partnership Agreement and
other disclosures of various conflicts of interest in connection with the
proposed transaction. Prior to the sale of the partnership interests, the
consents of the limited partners to the sale and amendments to the Partnership
Agreement were obtained.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY
HOLDER MATTERS:
The limited partnership interests are not traded on a public exchange but were
sold through a public offering managed by E.F. Hutton Inc. It is not anticipated
that any public market will develop for the purchase and sale of any partnership
interest. Limited partnership interests may be transferred only if certain
requirements are satisfied. At December 31, 1998, there were 2,568 registered
holders of units in REAL IV. No distributions have been made from the inception
of the Partnership to December 31, 1998. The Partnership has invested in certain
government assisted projects under programs which in many instances restrict the
cash return available to project owners. The Partnership was not designed to
provide cash distributions to investors in circumstances other than refinancing
or disposition of its investments in limited partnerships. In March 1999, the
Partnership made distributions of $7,781,697 to the limited partners and $78,603
to the general partners, which included using proceeds from the sale of the
partnership interests.
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
LIQUIDITY
The Partnership's primary sources of funds include interest income on money
market funds and certificates of deposit and distributions from local
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 the Partnership's
limited partners in any material amount. The Partnership made a cash
distribution to investors in March 1999, which included using proceeds from the
disposition of its investments in certain limited partnerships.
CAPITAL RESOURCES
REAL IV received $16,500,000 in subscriptions for units of limited partnership
interests (at $5,000 per unit) during the period March 12, 1982 to July 15,
1982, pursuant to a registration statement on Form S-11. As of March 31, 1983,
REAL IV received an additional $16,500,000 in subscriptions pursuant to the
exercise of warrants and the sale of additional limited partnership interests.
RESULTS OF OPERATIONS
The Partnership was formed to provide various benefits to its partners as
discussed in Item 1. It is anticipated that the local limited partnerships in
which REAL IV has invested could produce tax losses for as long as 20 years. 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.
At December 31, 1998, the Partnership has investments in 9 limited partnerships,
all of which own housing projects that were substantially all rented. The
Partnership sold its interests in 20 local partnerships in December 1998. The
Partnership, as a limited partner, is entitled to 80% to 99% of the profits and
losses of the local limited partnerships. 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. Equity in losses of limited partnerships
is recognized in the financial statements until the limited partnership
investment account are reduced to a zero balance. Losses incurred after the
limited partnership investment account is reduced to zero are not recognized.
Limited partners are not liable for losses beyond their contributed capital. At
December 31, 1998, the Partnership does not have a positive investment balance
in any local limited partnership.
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.
The total income (losses) from the 29 local limited partnerships that were
allocated to the Partnership were $23,000, $317,000 and $(1,123,000) for the
years ended December 31, 1998, 1997 and 1996, respectively. However, because
losses incurred after the investment account is reduced to a zero balance are
not recognized, the Partnership recognized equity in (loss) income of limited
partnerships, substantially all from the partnerships with a positive investment
balance, of approximately ($1,610,000), $355,000 and $483,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. The loss in 1998 is the
result of recognizing an impairment of approximately $2,810,000 to the carrying
values of the investments in certain local limited partnerships. The cumulative
amount of the unrecognized equity in losses of certain limited partnerships was
approximately $7,005,000 and $11,268,000 as of December 31, 1998 and 1997,
respectively.
Distributions from the local limited partnerships in which the Partnership did
not have a positive investment balance were approximately $1,316,000, $1,406,000
and $1,107,000 for the years ended December 31, 1998, 1997 and 1996,
<PAGE> 8
respectively. These amounts were recognized as income on the accompanying
statements of operations, in accordance with the equity method of accounting.
As of December 31, 1998, 1997 and 1996, the Partnership has cash and cash
equivalents of $7,609,491, $7,430,796 and $6,603,047, respectively.
Substantially all of these amounts are on deposit primarily with two high credit
quality financial institutions, earning interest. Interest income has increased
as a result of increasing cash and cash equivalent balances. In addition, as a
result of changing financial institutions where the cash and cash equivalents
are on deposit, the interest rate earned on such deposits in 1998 and 1997 was
significantly greater than in prior years. This resulted in the Partnership
earning approximately $354,000, $326,000 and $173,000 in interest income for the
years ended December 31, 1998, 1997 and 1996, respectively. The amount of
interest income varies with market rates available on deposits and with the
amount of funds available for investment. As a result of the changing financial
institutions, interest rate earned on investments in 1998 and 1997 was
approximately 5%, compared to approximately 2.5% in prior years. Cash
equivalents can be converted to cash to meet obligations of the Partnership as
they arise. The Partnership intends to continue investing available funds in
this manner.
A recurring partnership expense is the annual management fee. The fee is payable
to the Corporate General Partner of the Partnership and is calculated at .4
percent of the Partnership's invested assets. The management fee is paid to the
Corporate General Partner for its continuing management of partnership affairs.
The fee is payable beginning with the month following the Partnership's initial
investment in a local limited partnership. Since the invested assets did not
change until the end of the three year in the period ended December 31, 1998,
management fees have remained constant at $505,392 for each of these years.
Until the sale of the partnership interests on December 30, 1997, the
Partnership was obligated on non-recourse notes payable of $1,042,524 which bore
interest at 10 percent per annum and had principal maturities ranging from 2015
to 2022. The notes and related interest were payable from cash flow generated
from operations of the related rental properties as defined in the notes. These
obligations were collateralized by the Partnership's investments in the limited
partnerships. Unpaid interest was due at maturity of the notes. Interest expense
was $119,252, $74,057 and $123,000 for the years ended December 31, 1998, 1997
and 1996, respectively. The Partnership was relieved of these notes in
connection with the sale of the partnership interests.
Under recent adopted law and policy, the United States Department of Housing and
Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to be in an amount that would provide sufficient cash flow to
permit owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ( "MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a
first mortgage loan which will be amortized on a current basis and a low
interest second mortgage loan payable to FHA which will only be payable on
maturity of the first mortgage loan. This restructuring results in a reduction
in annual debt service payable by the owner of the FHA-insured mortgage loan and
is expected to result in an insurance payment from FHA to the holder of the
FHA-insured loan due to the reduction in the principal amount. MAHRAA also
phases out project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such subsidies to a
tenant-based subsidy.
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
<PAGE> 9
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.
When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.
As a result of the foregoing, the Partnership in 1997 undertook an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to approximately $585,000 and $185,000 for the years ended December 31, 1998 and
1997, and are included in general and administrative expenses.
On December 30, 1998, the Partnership sold its limited partnership interests in
20 local limited partnerships. with a total carrying value of $1,489,865, to the
Operating Partnership. The sale resulted in net proceeds to the Partnership of
$5,860,300 and a gain of $5,096,902, after being relieved of notes and interest
payable of $1,270,045 and incurring selling costs of $543,578, some of which are
included in accounts payable at December 31, 1998. In March 1999, the
Partnership made cash distributions of $7,781,697 to the limited partners and
$78,603 to the general partners, which included using proceeds from the sale of
the partnership interests.
The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (iii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
Operating expenses, other than management fees and interest expense, consist of
legal and accounting fees for services rendered to the Partnership and
administrative expenses, which were generally consistent for the three years
presented. Legal and accounting fees were $130,203, $109,635 and $101,255 for
the years ended December 31, 1998, 1997 and 1996, respectively. Administrative
expenses were $713,068, $279,994 and $79,999 for the years ended December 31,
1998, 1997 and 1996, respectively. Included in administrative expenses are
reimbursements to NAPICO for certain expenses, which totaled $37,680, $37,681
and $34,565 for the years ended December 31, 1998, 1997 and 1996, respectively.
Also included in administrative expenses for 1998 and 1997 is $584,565 and
$185,099, respectively, related to the aforementioned third party review of the
properties owned by the local partnerships.
The results of operations of the local limited partnerships were fairly constant
during the years ended December 31, 1998, 1997 and 1996. Contributing to the
relative stability of operations at the local partnerships is the fact that
substantially all of the local partnerships are operating apartment projects
which are subsidized and have mortgage notes payable to or insured by agencies
of the federal or local government.
Total revenue for the 29 local partnerships has remained fairly constant, and
was $23,684,000, $24,215,000 and $23,947,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
<PAGE> 10
Total expenses for the 29 local partnerships were $23,661,000, $23,897,000 and
$25,017,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Expenses in 1996 were higher than in 1998 and 1997 primarily as a result of an
approximately $1,600,000 loss in 1996 from the foreclosure of a property owned
by one partnership.
The total net income (loss) for the 29 local partnerships for 1998, 1997 and
1996 aggregated approximately $23,000, $319,000 and $(1,070,000), respectively.
The income (losses) allocated to the Partnership were approximately $23,000,
$317,000 and $(1,123,000) for 1998, 1997 and 1996, respectively.
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, concurrent inflation and
changing legislation, could increase vacancy levels, rental payment defaults,
and operating expenses, which in turn, could substantially increase the risk of
operating losses for the projects.
The Partnership has assessed the potential impact of the Year 2000 computer
systems issue on its operations. The Partnership believes that no significant
actions are required to be taken by the Partnership to address the issue and
that the impact of the Year 2000 computer systems issue will not materially
affect the Partnership's future operating results or financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
The Financial Statements and Supplementary Data are listed under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE:
Not applicable.
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED IV
(A California limited partnership)
FINANCIAL STATEMENTS,
FINANCIAL STATEMENT SCHEDULES
AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
DECEMBER 31, 1998
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Real Estate Associates Limited IV
(A California limited partnership)
We have audited the accompanying balance sheets of Real Estate Associates
Limited IV (a California limited partnership) as of December 31, 1998 and 1997,
and the related statements of operations, partners' equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedules listed in the index in
item 14. These financial statements and financial statement schedules are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the financial statements of
certain limited partnerships, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting. The
investments in these limited partnerships represent 0 percent and 23 percent of
total assets as of December 31, 1998 and 1997, respectively, and the equity in
income of these limited partnerships represents 9 percent, 19 percent and 23
percent of the total net income of the Partnership for the years ended December
31, 1998, 1997 and 1996, respectively, and represent a substantial portion of
the investee information in Note 2 and the financial statement schedules. The
financial statements of these limited partnerships are audited by other
auditors. Their reports have been furnished to us and our opinion, insofar as it
relates to the amounts included for these limited partnerships, is based solely
on the reports of the other auditors.
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 our audits and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Real Estate Associates Limited IV as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, based on our
audits and the reports of other auditors, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
April 6, 1999
<PAGE> 13
[ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
AND ADDITIONAL FINANCIAL DATA REQUIRED BY
THE PENNSYLVANIA HOUSING FINANCE AGENCY
To the Partners of
Barnesboro Associates
We have audited the accompanying balance sheets of BARNESBORO ASSOCIATES, PHFA
Project No. R-1046-8F (Partnership), as of December 31, 1997 and 1996, and the
related statements of operations, changes in 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 Barnesboro Associates as of
December 31, 1997 and 1996, and its results of operations, changes in partners'
equity and cash flows for the years then ended in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying financial data (shown
on pages 12 through 25) are presented for the purpose of additional analysis
and are not a required part of the basic financial statements of the
Partnership. Such information has subjected to the auditing procedures applied
in the audits of the financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
<PAGE> 14
In accordance with Government Auditing Standards, we have also issued a report
dated January 23, 1998 on our consideration of the Partnership's internal
control and a report dated January 23, 1998, on its compliance with laws and
regulations.
/s/ ALTSCHULER, MELVOIN AND GLASSER LLP
- ----------------------------------------------
Chicago, Illinois
January 23, 1998
<PAGE> 15
[ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
AND ADDITIONAL FINANCIAL DATA REQUIRED BY
THE PENNSYLVANIA HOUSING FINANCE AGENCY
To the Partners of
Barnesboro Associates
We have audited the balance sheet of BARNESBORO ASSOCIATES, PHFA Project Number
R-1046-4F, as of December 31, 1996 and 1995, and the statements of operations,
changes in partners' equity and cash flows for the year 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 audits.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audits 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 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 Barnesboro Associates as of
December 31, 1996 and 1995, and the results of its operations, changes in
partners' equity and cash flows for the years then ended in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated January 14, 1997, on our consideration of the Partnership's internal
control structure and a report dated January 14, 1997, on its compliance with
laws and regulations.
2.
<PAGE> 16
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The additional financial data on pages 13
through 21 are presented for purposes of additional analysis and are not a
required part of the financial statements. This information has been subjected
to the procedures applied in the audits of the financial statements and, in our
opinion, is stated fairly in all material respects in relation to the financial
statements taken as a whole.
/s/ ALTSCHULER, MELVOIN AND GLASSER LLP
Chicago, Illinois
January 14, 1997
3.
<PAGE> 17
[RIZZO & AMORE, P.C. LETTERHEAD]
To The General Partner
The Branford Group Limited Partnership
Woodbridge, Connecticut
We have audited the accompanying statement of financial position of The Branford
Group Limited Partnership (a limited partnership), Connecticut Housing Finance
Authority Project Number 81-019M as of December 31, 1997 and 1996, and the
related statements of profit and loss, changes in partners' equity and cash
flows for the three years then ended. These financial statements are the
responsibility of the partnership. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. 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 the 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, the financial statements referred to above present fairly, in
all material respects, the financial position of The Branford Group Limited
Partnership as of December 31, 1997 and 1996, and the results of operations,
changes in partners' equity and cash flows for the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental data included in the report (shown
on pages 15 through 20) are presented for the purpose of additional analysis and
are not a required part of the basic financial statements of The Branford Group
Limited Partnership. Such information has been subjected to the same auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly presented in all material respects in relation to the
financial statements taken as a whole.
-3-
<PAGE> 18
In accordance with Government Auditing Standards, we have also issued a report
dated February 16, 1998 on our consideration of The Branford Group Limited
Partnership's internal controls and a report dated February 16, 1998 on its
compliance with laws and regulations.
[SIG]
------------------------
West Haven Connecticut
April 6, 1998
-4-
<PAGE> 19
[LITZ & COMPANY LETTERHEAD]
Normandie Avenue Development Company
aka Ethel Arnold Bradley Gardens Apartments
6330 San Vicente Boulevard, Suite 270
Los Angeles, California 90048
INDEPENDENT AUDITORS' REPORT
Gentlemen:
We have audited the accompanying balance sheet of Ethel Arnold Bradley
Gardens Apartments (HUD Project No. 122-35548-PM-L8) as of December 31, 1997,
and the related statements of profit and loss, changes in equity and cash flows
for the year 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 audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 include 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 audit provides 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 Ethel Arnold Bradley
Gardens Apartments as of December 31, 1997, and the results of its operations,
changes in equity and cash flows for the year then ended in conformity with
generally accepted accounting principles, except for the basis of the property
as explained in Note 1, applied on a basis consistent with prior periods and
HUD requirements.
In accordance with Government Auditing Standards, we have also issued
reports dated February 9, 1998 on our consideration of Ethel Arnold Bradley
Gardens Apartments' internal control structure and on its compliance with laws
and regulations.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (see Index to the Financial Statements) is presented for the purpose
of additional analysis and is not a required part of the basic financial
statements of Ethel Arnold Bradley Gardens Apartments. 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 financial statements taken as a whole.
/s/ LITZ & COMPANY
-----------------------------------
February 9, 1998
Erica M. Kish, CPA
Litz & Company
8906 W. Olympic Boulevard
Beverly Hills, CA 90211
(213) 272-1505
95-3537761
<PAGE> 20
[LITZ & COMPANY LETTERHEAD]
Normandie Avenue Development Company
aka Ethel Arnold Bradley Gardens Apartments
6330 San Vicente Boulevard, Suite 270
Los Angeles, California 90048
INDEPENDENT AUDITORS' REPORT
----------------------------
Gentlemen:
We have audited the accompanying balance sheet of Ethel Arnold Bradley
Gardens Apartments (HUD Project No. 122-35548-PM-L8) as of December 31, 1996,
and the related statements of profit and loss, changes in equity and cash flows
for the year 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 audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 audit provides 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 HUD Project
No. 122-35548-PM-L8 as of December 31, 1996, and the results of its operations,
changes in equity and cash flows for the year then ended in conformity with
generally accepted accounting principles, applied on a basis consistent with
prior periods and HUD requirements.
In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs issued by the U. S. Department of
Housing and Urban Development, we have also issued a report dated January 19,
1997 on our consideration of Ethel Arnold Bradley Gardens Apartments' internal
control structure, and reports dated January 19, 1997 on its compliance with
specific requirements applicable to major HUD programs and specific
requirements applicable to Affirmative Pair Housing.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information, as shown in
the attached Index, included in the report is presented for the purposes of
additional analysis and is not a required part of the basic financial statements
of HUD Project No. 122-35548-PM-L8. 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
financial statements taken as a whole.
/s/ LITZ & COMPANY
January 19, 1997
Erica M. Kish, CPA
Litz & Company
8906 W. Olympic Boulevard
Beverly Hills, CA 90211
(213) 272-1505
95-3537761
<PAGE> 21
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Lakeland Place Associates
Limited Dividend Housing Association
We have audited the accompanying balance sheets of Lakeland Place Associates
Limited Dividend Housing Association (A Michigan Limited Partnership, MSHDA
Development Number 513), as of December 31, 1997 and 1996, and the related
statements of operations, changes in partners' deficit, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 Lakeland Place Associates
Limited Dividend Housing Association, MSHDA No. 513, as of December 31, 1997
and 1996, and the results of its operations, and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Our 1997 audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The other financial information of
Lakeland Place Associates Limited Dividend Housing Association, MSHDA No. 513,
on pages 9 through 18 is presented for purposes of additional analysis and is
not a required part of the basic financial statements. The additional
information is the responsibility of the Partnership's management. 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.
In accordance with Government Auditing Standards, we have issued a report dated
February 2, 1998 on our consideration of Lakeland Place Associates Limited
Dividend Housing Association's internal control structure and a report dated
February 2, 1998 on its compliance with laws and regulations.
/s/ COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
February 2, 1998
<PAGE> 22
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Lakeland Place Associates
Limited Dividend Housing Association
We have audited the accompanying balance sheets of Lakeland Place Associates
Limited Dividend Housing Association (A Michigan Limited Partnership, MSHDA
Development Number 513), as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' deficit, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 Lakeland Place Associates
Limited Dividend Housing Association, MSHDA No. 513, as of December 31, 1996
and 1995, and the results of its operations, and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Our 1997 audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The other financial information of
Lakeland Place Associates Limited Dividend Housing Association, MSHDA No. 513,
on pages 9 through 17 is presented for purposes of additional analysis and is
not a required part of the basic financial statements. This additional
information is the responsibility of the Partnership's management. 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.
In accordance with Government Auditing Standards, we have issued a report dated
January 27, 1997 on our consideration of Lakeland Place Associates Limited
Dividend Housing Association's internal control structure and a report dated
January 27, 1997 on its compliance with laws and regulations.
/s/ COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
January 27, 1997
1
<PAGE> 23
[ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Lauderhill Apartment Investors Limited Partnership
We have audited the accompanying balance sheets of LAUDERHILL APARTMENT
INVESTORS LIMITED PARTNERSHIP as of December 31, 1997 and 1996, and the related
statements of income, changes in partners' deficiency 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 audits.
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 Lauderhill Apartment Investors
Limited Partnership as of December 31, 1997 and 1996, and the results of its
operations, changes in partners' equity, and cash flows for the years then ended
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The additional 1997 financial data, listed in the
Table of Contents, are presented for the purposes of additional analysis and are
not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the 1997 financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ ALTSCHULER, MELVOIN AND GLASSER LLP
Los Angeles, California
February 10, 1998
2
<PAGE> 24
[ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Lauderhill Apartment Investors Limited Partnership
We have audited the accompanying balance sheets of LAUDERHILL APARTMENT
INVESTORS LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the related
statements of income, changes in partners' deficiency 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 audits.
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 Lauderhill Apartment Investors
Limited Partnership as of December 31, 1996 and 1995, and its results of
operations, changes in partners' deficiency, and cash flows for the years then
ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The additional 1996 financial data, listed in the
Table of Contents, are presented for the purposes of additional analysis and are
not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the 1996 financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ ALTSCHULER, MELVOIN AND GLASSER LLP
Los Angeles, California
February 17, 1997
2.
<PAGE> 25
[PAUL DAMIANO LETTERHEAD]
The Partners
Scituate Vista Associates
(A Limited Partnership)
Cranston, RI
We have audited the accompanying balance sheet of RIHMFC Project No.
RI-43-H023-115 of Scituate Vista Associates (a limited partnership) as of
February 28, 1997, and the related statements of income and changes in partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the project's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 the 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, the financial statements referred to above present fairly
in all material respects, the financial position of RIHMFC Project No.
RI-43-H023-115 as of February 28, 1997 and the results of its operations and the
changes in partners' equity and cash flows for the year ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report shown on pages 13-18 are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of the
RIHMFC Project No. RI-43-H023-115. 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
financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a
report dated April 29, 1997 on our consideration of the Scituate Vista
Associates' internal control structure and a report dated April 29, 1997 on its
compliance with specific requirements applicable to RIHMFC programs.
/s/ PAUL DAMIANO CPA, P.C.
-----------------------------------
Lincoln, Rhode Island 02865
April 29, 1997
<PAGE> 26
[PAUL DAMIANO LETTERHEAD]
The Partners
Scituate Vista Associates
(A Limited Partnership)
Cranston, RI
We have audited the accompanying balance sheet of RIHMFC Project No.
RI-43-H023-115 of Scituate Vista Associates (a limited partnership) as of
February 29, 1996, and the related statements of income and changes in partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the project's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. 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 the 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, the financial statements referred to above present fairly
in all material respects, the financial position of RIHMFC Project No.
RI-43-H023-115 as of February 29, 1996 and the results of its operations and the
changes in partners' equity and cash flows for the year then ended in conformity
with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report shown on pages 12-18 are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of the
RIHMFC Project No. RI-43-H023-115. 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
financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a
report dated May 14, 1996 on our consideration of the Scituate Vista
Associates' internal control structure and a report dated May 14, 1996 on its
compliance with specific requirements applicable to RIHMFC programs.
/s/ PAUL DAMIANO CPA, P.C.
-----------------------------------
Lincoln, Rhode Island 02865
May 14, 1996
<PAGE> 27
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ -- $ 3,374,262
CASH AND CASH EQUIVALENTS (Note 1) 7,609,491 7,430,796
CASH DUE FROM ESCROW (Note 1) 5,860,300 --
OTHER ASSETS 11,899 91,899
------------ ------------
TOTAL ASSETS $ 13,481,690 $ 10,896,957
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
LIABILITIES:
Notes payable (Notes 3 and 7) $ -- $ 1,042,524
Interest payable (Notes 3 and 7) -- 320,101
Accounts payable 388,806 130,851
------------ ------------
388,806 1,493,476
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
PARTNERS' EQUITY (DEFICIENCY):
General partners (141,101) (177,995)
Limited partners 13,233,985 9,581,476
------------ ------------
13,092,884 9,403,481
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $ 13,481,690 $ 10,896,957
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 28
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST AND OTHER INCOME $ 353,645 $ 325,842 $ 173,145
------------ ------------ ------------
OPERATING EXPENSES:
Legal and accounting 130,203 109,635 101,255
Management fees - general partner (Note 4) 505,392 505,392 505,392
Interest (Note 3) 119,252 74,057 123,000
Administrative (Note 4) 713,068 279,994 79,999
------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,467,915 969,078 809,646
------------ ------------ ------------
LOSS FROM OPERATIONS (1,114,270) (643,236) (636,501)
GAIN ON SALE OF LIMITED PARTNERSHIP
INTERESTS (Note 2) 5,096,902 -- --
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 1,316,421 1,406,888 1,107,630
EQUITY IN (LOSS) INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (1,609,650) 355,483 483,414
------------ ------------ ------------
NET INCOME $ 3,689,403 $ 1,119,135 $ 954,543
============ ============ ============
NET INCOME PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ 279 $ 85 $ 72
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 29
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------- ----------- -----------
<S> <C> <C> <C>
EQUITY (DEFICIENCY),
January 1, 1996 $(198,732) $ 7,528,535 $ 7,329,803
Net income for 1996 9,545 944,998 954,543
--------- ----------- -----------
EQUITY (DEFICIENCY),
December 31, 1996 (189,187) 8,473,533 8,284,346
Net income for 1997 11,191 1,107,944 1,119,135
--------- ----------- -----------
EQUITY (DEFICIENCY),
December 31, 1997 (177,996) 9,581,477 9,403,481
Net income for 1998 36,894 3,652,509 3,689,403
--------- ----------- -----------
EQUITY (DEFICIENCY),
December 31, 1998 $(141,102) $13,233,986 $13,092,884
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 30
REAL ESTATE ASSOCIATES LIMITED IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,689,403 $ 1,119,135 $ 954,543
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of partnership interests (5,096,902) -- --
Equity in income of limited partnerships and amorti-
zation of additional basis and acquisition costs 1,609,650 (355,483) (483,414)
(Increase) decrease in other assets 80,000 (19,070) 17,171
Decrease in accrued interest payable (92,580)
Increase (decrease) in accounts payable 257,955 191,491 (177,377)
------------ ------------ ------------
Net cash provided by operating activities 447,526 936,073 310,923
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs related to sale of Partnership interests (543,578)
Capital contributions (102,500) -- --
Decrease in short term investments -- -- 125,000
Distributions from limited partnerships
recognized as return of capital 377,247 79,895 606,079
------------ ------------ ------------
Net cash (used in) provided by investing activities (268,831) 79,895 731,079
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable -- (188,219) --
------------ ------------ ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 178,695 827,749 1,042,002
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 7,430,796 6,603,047 5,561,045
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 7,609,491 $ 7,430,796 $ 6,603,047
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for interest $ 211,832 $ 1,284 $ 285,751
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF
NON-CASH FINANCING ACTIVITIES
See Note 2 to financial statements regarding
notes and interest payable
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 31
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Real Estate Associates Limited IV (the Partnership) was formed under the
California Limited Partnership Act on August 24, 1981. The Partnership
was formed to invest either directly or indirectly in other limited
partnerships which own and operate primarily federal, state and local
government-assisted housing projects. The general partners are National
Partnership Investments Corp. (NAPICO), the corporate general partner,
and National Partnership Investments Associates ("NAPIA"), a limited
partnership. The business of REAL IV is conducted primarily by NAPICO.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of
Casden Investment Corporation ("CIC"), which is wholly owned by Alan I.
Casden. On December 30, 1998, Casden Properties Operating Partnership,
L.P., (the "Operating Partnership") a majority owned subsidiary of Casden
Properties Inc., a real estate investment trust organized by Alan I.
Casden, purchased a 95.25% economic interest in NAPICO.
These financial statements include the accounts of the Partnership and
Real Estate Associates II (REA II), a California general partnership in
which the Partnership holds a 99.9 percent general partner interest.
Losses in excess of the minority interest in equity that would otherwise
be attributed to the minority interest, are being allocated to the
Partnership.
The Partnership issued 13,200 limited partner interests through a public
offering. The general partners have a 1 percent interest in operating
profits and losses of the Partnership. The limited partners have the
remaining 99 percent interest in proportion to their respective
investments.
The Partnership shall be dissolved only upon the expiration of 52
complete calendar years (December 31, 2033) from the date of formation of
the Partnership or the occurrence of various other events as specified in
the terms of the Partnership Agreement.
Upon total or partial liquidation of the Partnership or the disposition
or partial disposition of a project or project interest and distribution
of the proceeds, the general partners will be entitled to a liquidation
fee as stipulated in the Partnership Agreement. The limited partners will
have a priority return equal to their invested capital attributable to
the project(s) or project interest(s) sold and shall receive from the
sale of the project(s) or project interest(s) sold an amount sufficient
to pay state and federal income taxes, if any, calculated at the maximum
rate then in effect. The general partners' liquidation fee may accrue but
shall not be paid until the limited partners have received distributions
equal to 100 percent of their capital contributions.
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.
5
<PAGE> 32
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Method of Accounting for Investments in Limited Partnerships
The investments in limited partnerships are accounted for on the equity
method. Acquisition, selection 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 all years presented.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity date of three months or less. The
Partnership has its cash and cash equivalents on deposit primarily with
two high credit quality financial institutions. Such cash and cash
equivalents are in excess of the FDIC insurance limit.
Impairment of Long-Lived Assets
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.
During 1998, the Partnership recognized an impairment loss of
approximately $2,481,000, related to certain investments in local limited
partnerships, which has been included in equity in loss of limited
partnerships.
2. INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 7 limited
partnerships as of December 31, 1998, after selling its interests in 20
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 2 additional limited
partnerships. In total, therefore, the Partnership holds interests,
either directly or indirectly through REA II, in 9 partnerships which
owned as December 31, 1998, residential low income rental projects
consisting of 641 apartment units. The mortgage loans of these projects
are payable to or insured by various governmental agencies.
6
<PAGE> 33
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
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. The
cumulative amount of the unrecognized equity in losses of certain limited
partnerships was approximately $7,005,000 and $11,268,000 as of December
31, 1998 and 1997, respectively.
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.
The following is a summary of the investments in limited partnerships and
reconciliation to the limited partnership accounts:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Investment balance, beginning of year $ 3,374,262 $ 3,098,674
Equity in (loss) income of limited partnerships (1,434,692) 534,320
Investment balance in partnership interests sold (1,489,865)
Amortization of capitalized additional basis
and acquisition costs and fees (174,958) (178,837)
Capital contributions 102,500
Distributions recognized as return of capital (377,247) (79,895)
------------ ------------
Investment balance, end of year $ -- $ 3,374,262
============ ============
</TABLE>
The difference between the investment per the accompanying balance sheets
at December 31, 1998 and 1997, and the deficiency per the limited
partnerships' combined financial statements is due primarily to
cumulative unrecognized equity in losses of certain limited partnerships,
additional basis and costs capitalized to the investment account and
cumulative distributions recognized as income.
Selected financial information from the combined financial statements at
December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998, of the limited partnerships in which the
Partnership has invested directly or indirectly, is as follows:
7
<PAGE> 34
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Balance Sheets
<TABLE>
<CAPTION>
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Land and buildings, net $ 14,442 $ 59,032
======== ========
Total assets $ 18,924 $ 75,218
======== ========
Mortgages payable $ 20,013 $ 90,566
======== ========
Total liabilities $ 23,194 $ 95,985
======== ========
Deficiency of Real Estate Associates Limited IV $ (4,125) $(19,801)
======== ========
Deficiency of other partners $ (145) $ (965)
======== ========
</TABLE>
Statements of Operations
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Total revenue $23,684 $24,215 $ 23,947
======= ======= ========
Interest expense $ 7,733 $ 7,975 $ 8,173
======= ======= ========
Depreciation $ 4,319 $ 3,725 $ 3,690
======= ======= ========
Total expenses $23,661 $23,897 $ 25,017
======= ======= ========
Net income (loss) $ 23 $ 319 $ (1,070)
======= ======= ========
Net income (loss) allocable to the Partnership $ 23 $ 317 $ (1,123)
======= ======= ========
</TABLE>
Land and buildings above have been adjusted for the amount by which the
investments in the limited partnerships exceed the Partnership's share of
the net book value of the underlying net assets of the investee which are
recorded at historical costs. Depreciation on the adjustment is provided
for over the estimated remaining useful lives of the properties.
Prior to the sale of certain partnership interests on December 30, 1998,
an affiliate of NAPICO was the general partner in two of the limited
partnerships included above, and another affiliate received property
management fees of 5 percent of their revenue. The affiliate received
property management fees of approximately $154,000, $121,000 and $121,000
in 1998, 1997 and 1996, respectively. The following sets forth the
significant data for these partnerships, prior to the sale referred to
above, reflected in the accompanying financial statements using the
equity method of accounting:
8
<PAGE> 35
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
------ -------- ------
(in thousands)
<S> <C> <C> <C>
Total assets $ -- $ 5,448
====== ========
Total liabilities $ -- $ 8,748
====== ========
Deficiency of Real Estate Associates Limited IV $ -- $ (3,270)
====== ========
Deficiency of other partners $ -- $ (31)
====== ========
Total revenue $2,991 $ 2,949 $2,879
====== ======== ======
Net income $ 257 $ 139 $ 33
====== ======== ======
</TABLE>
These local limited partnerships were sold to the Operating Partnership
on December 30, 1998
Under recent adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which was generally the case under existing HAP
Contracts. The payments under the renewed HAP Contracts are not expected
to be in an amount that would provide sufficient cash flow to permit
owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage loans
insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured
into a first mortgage loan which will be amortized on a current basis and
a low interest second mortgage loan payable to FHA which will only be
payable on maturity of the first mortgage loan. This restructuring
results in a reduction in annual debt service payable by the owner of the
FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the
reduction in the principal amount. MAHRAA also phases out project-based
subsidies on selected properties serving families not located in rental
markets with limited supply, converting such subsidies to a tenant-based
subsidy.
MAHRAA provides that properties begin the restructuring process in
federal fiscal year 1999 (beginning October 1, 1998). On September 11,
1998, HUD issued interim regulations implementing MAHRAA and final
regulations are expected to be issued in 1999. With respect to the local
limited partnerships' expiring HAP Contracts, it is expected that the HAP
payments will be reduced or terminated pursuant to the terms of MAHRAA.
9
<PAGE> 36
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
As a result of the foregoing, the Partnership in 1997 undertook an
extensive review of disposition, refinancing or re-engineering
alternatives for the properties in which the limited partnerships have
invested and are subject to HUD mortgage and rental subsidy programs. The
Partnership has incurred expenses in connection with this review by
various third party professionals, including accounting, legal,
valuation, structural and engineering costs, which amounted to $585,000
and $185,000 for the years ended December 31, 1998 and 1997,
respectively, and are included in general and administrative expenses.
On December 30, 1998, the Partnership sold its limited partnership
interests in 20 local limited partnerships, with a total carrying value
of $1,489,865, to the Operating Partnership. The sale resulted in net
proceeds to the Partnership of $5,860,300 and a net gain of $5,096,902,
after being relieved of notes and interest payable of $1,270,045 and
incurring selling costs of $543,578. The cash proceeds were held in
escrow at December 31, 1998 and were collected subsequent to year-end. In
March 1999, the Partnership made cash distributions of $7,781,697 to the
limited partners and $78,603 to the general partners, which included
using proceeds from the sale of the partnership interests.
The Operating Partnership purchased such limited partner interests for
cash, which it raised in connection with a private placement of its
equity securities. The purchase was subject to, among other things, (i)
the purchase of the general partner interests in the local limited
partnerships by the Operating Partnership; (iii) the approval of HUD and
certain state housing finance agencies; and (iii) the consent of the
limited partners to the sale of the local limited partnership interests
held for investment by REAL IV.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the
limited partners' interests held for investment by the Partnership,
together with certain amendments to the Partnership Agreement and other
disclosures of various conflicts of interest in connection with the
proposed transaction. Prior to the sale of the partnership interests, the
consents of the limited partners to the sale and amendments to the
Partnership Agreement were obtained.
3. NOTES PAYABLE
Certain of the Partnership's investments involved purchases of
partnership interests from partners who subsequently withdrew from the
operating partnership. The Partnership was obligated on non-recourse
notes payable of $1,042,524 bearing interest at 10 percent, to the
sellers of the partnership interests. The notes and the related interest
were payable by the Partnership through REA II, and had principal
maturity dates ranging from 2015 to 2022 or upon sale or refinancing of
the underlying partnership properties. The notes were collateralized by
REA II's investment in the respective limited partnerships and were
payable only out of cash distributions from the investee partnerships as
defined in the notes. Unpaid interest was due at maturity of the notes.
10
<PAGE> 37
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
The Partnership was relieved of these notes and related accrued interest
in connection with the sale of the partnership interest.
4. FEES AND EXPENSES DUE 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 original invested assets of the limited
partnerships. Invested assets is defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage
loans related to the Partnerships interest in the capital accounts of the
respective partnerships.
The Partnership reimburses NAPICO for certain expenses. The reimbursement
to NAPICO was $37,680, $37,681 and $34,565 in 1998, 1997 and 1996,
respectively, and is included in operating expenses.
5. CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in Real Estate Associates Limited III (an
affiliated partnership in which NAPICO is the managing general partner)
and two investors holding an aggregate of five units of limited
partnership interest in Real Estate Associates Limited VI (another
affiliated partnership in which NAPICO is the managing general partner)
commenced an action in the United States District Court for the Central
District of California against the Partnership, NAPICO and certain other
affiliated entities. The complaint alleges that the defendants breached
their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the
consent solicitation statements sent to the limited partners of such
partnerships relating to approval of the transfer of partnership
interests in limited partnerships, owning certain of the properties, to
the Operating Partnership organized by an affiliate of NAPICO. The
plaintiffs seek preliminary and permanent injunctive relief and other
equitable relief, as well as compensatory and punitive damages. The
managing general partner of such NAPICO managed partnerships and the
other defendants believe that the plaintiffs' claims are without merit
and intend to contest the action vigorously.
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.
The Partnership has assessed the potential impact of the Year 2000
computer systems issue on its operations. The Partnership believes that
no significant actions are required to be taken by the Partnership to
address the issue and that the impact of the Year 2000 computer systems
issue will not materially affect the Partnership's future operating
results or financial condition.
11
<PAGE> 38
REAL ESTATE ASSOCIATES LIMITED IV
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. 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. The major differences in tax and financial reporting result
from the use of different bases and depreciation methods for the
properties held by the limited partnerships. Differences in tax and
financial reporting also arise as losses are not recognized for financial
reporting purposes when the investment balance has been reduced to zero.
7. 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. FOURTH-QUARTER ADJUSTMENT
The Partnership's policy is to record its equity in the income (loss) of
limited partnerships on a quarterly basis, using estimated financial
information furnished by the various local operating general partners.
The equity in income (loss) of limited partnerships reflected in the
accompanying financial statements is based primarily upon audited
financial statements of the investee limited partnerships. The increase
of approximately $1,880,000, between the estimated nine-month equity in
income and the actual 1998 equity in loss has been recorded in the fourth
quarter.
12
<PAGE> 39
SCHEDULE
REAL ESTATE ASSOCIATES LIMITED IV
INVESTMENTS IN LIMITED PARTNERSHIPS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------------------------------------------------------------
Cash
Balance Capital Distri- Equity Balance
January 1, Contri- butions in December 31,
Limited Partnerships 1998 butions Received Income(Loss) Sale 1998
- ----------------------------- ---------- -------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Towers* $ $ $ $ $ $ --
Antelope Village Apts.* (139,183) 139,183
Armitage Commons*
Barnesboro Family Project* 225,875 (24,924) (40,777) (160,174)
Baughman Towers*
Beacon Hill/Hillsdale Place*
Branford Elderly II 243,286 (11,961) (231,325)
Buckingham Apts.*
Coatesville Towers* (137,541) 137,541
Daniel Scott Commons
Ethel Arnold Bradley* 292,946 102,500 (12,959) 85,464 (467,951)
Glen Oaks Townhomes*
Lakeland Place* 181,345 (37,632) 124,589 (268,302)
Loch Haven Apts.* 456,781 (13,047) 149,704 (593,438)
Ninety-Five Vine St.
Oakridge Park Apts.
O'Fallon Apts.*
One Madison
Pacific Coast Villa*
Queensbury Heights
Rosewood Apts.*
Sandwich Apts.*
Scituate Vista 1,974,029 (1,974,029)
Sterling Village*
Villa del Sol*
Village of Albany/Brodhead
Vista Chino Park*
Wasco Arms Apts.*
Wright Park Phase II
---------- -------- --------- ----------- ----------- ----
$3,374,262 $102,500 $(377,247) $(1,609,650) $(1,489,865) $ --
========== ======== ========= =========== =========== ====
</TABLE>
* Sold to the Operating Partnership on December 30, 1998.
<PAGE> 40
SCHEDULE
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED IV
INVESTMENTS IN LIMITED PARTNERSHIPS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------------------------------------------------
Cash
Balance Capital Distri- Equity Balance
January 1, Contri- butions in December 31,
Limited Partnerships 1997 butions Received Income(Loss) 1997
---------- ------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Alliance Towers $ $ $ $ $
Antelope Village Apts.
Armitage Commons
Barnesboro Family Project 263,910 (21,033) (17,002) 225,875
Baughman Towers
Beacon Hill/Hillsdale Place
Branford Elderly II 215,082 (18,124) 46,328 243,286
Buckingham Apts.
Coatesville Towers
Daniel Scott Commons
Ethel Arnold Bradley 275,218 (13,223) 30,951 292,946
Glen Oaks Townhomes
Lakeland Place 153,592 (27,515) 55,268 181,345
Loch Haven Apts. 437,851 18,930 456,781
Ninety-Five Vine St.
Oakridge Park Apts.
O'Fallon Apts.
One Madison
Pacific Coast Villa
Queensbury Heights
Rosewood Apts.
Sandwich Apts.
Scituate Vista 1,753,021 221,008 1,974,029
Sterling Village
Villa del Sol
Village of Albany/Brodhead
Vista Chino Park
Wasco Arms Apts.
Wright Park Phase II
---------- ---- -------- -------- ----------
$3,098,674 $ -- $(79,895) $355,483 $3,374,262
========== ==== ======== ======== ==========
</TABLE>
<PAGE> 41
SCHEDULE
(Continued)
REAL ESTATE ASSOCIATES LIMITED IV
INVESTMENTS IN LIMITED PARTNERSHIPS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-----------------------------------------------------------------------
Cash
Balance Capital Distri- Equity Balance
January 1, Contri- butions in December 31,
Limited Partnerships 1996 butions Received Income(Loss) 1996
- ---------------------------- ---------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Alliance Towers $ -- $ $ (42,868) $ 42,868 $ --
Antelope Village Apts. -- (109,976) 109,976 --
Armitage Commons
Barnesboro Family Project 296,837 (27,661) (5,266) 263,910
Baughman Towers
Beacon Hill/Hillsdale Place
Branford Elderly II 188,495 (22,828) 49,415 215,082
Buckingham Apts.
Coatesville Towers -- (47,274) 47,274 --
Daniel Scott Commons
Ethel Arnold Bradley 280,238 (10,578) 5,558 275,218
Glen Oaks Townhomes
Lakeland Place 140,541 (37,632) 50,683 153,592
Loch Haven Apts. 790,250 (307,262) (45,137) 437,851
Ninety-Five Vine St.
Oakridge Park Apts.
O'Fallon Apts.
One Madison
Pacific Coast Villa
Queensbury Heights
Rosewood Apts.
Sandwich Apts.
Scituate Vista 1,524,978 228,043 1,753,021
Sterling Village
Villa del Sol
Village of Albany/Brodhead
Vista Chino Park
Wasco Arms Apts.
Wright Park Phase II
---------- ---- --------- -------- ----------
$3,221,339 $ -- $(606,079) $483,414 $3,098,674
========== ==== ========= ======== ==========
</TABLE>
<PAGE> 42
SCHEDULE III
REAL ESTATE ASSOCIATES LIMITED IV
REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL IV HAS INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BUILDINGS,
NUMBER OUTSTANDING FURNISHING
OF MORTGAGE AND ACCUMULATED CONSTRUCTION
PARTNERSHIP/LOCATION UNITS LOAN LAND EQUIPMENT TOTAL DEPRECIATION PERIOD
- ------------------------------ ----- ----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Branford Elderly II 44 $ 1,413,333 $ 306,089 $ 1,682,956 $ 1,989,045 $ 656,150 1982-1983
Branford, CT
Daniel Scott Commons 72 3,165,169 91,864 3,882,747 3,974,611 1,582,879 1982-1983
Chester, PA
Oakridge Park Apts 40 956,301 40,000 1,179,123 1,219,123 1,084,845 1982-1983
North Biloxi, Ms
One Madison Avenue 27 914,750 83,750 1,113,965 1,197,715 630,046 1982-1983
Madison, ME
Queensbury Heights 64 1,878,229 50,000 2,571,951 2,621,951 1,288,609 1982-1983
Middlesboro, KY
Scituate Vista 232 6,751,656 414,914 10,186,593 10,601,507 4,718,610 1981-1983
Cranston, RI
Village of Albany/ 32 1,048,830 59,850 1,156,718 1,216,568 605,420 1982-1983
Albany & Brodhead, WI
95 Vine Street 31 1,351,103 280,000 1,742,796 2,022,796 713,589 1982-1983
Hartford, CT
Wright Park Phase II 99 2,533,404 17,530 4,245,293 4,262,823 4,262,823 (A)
Rome, NY
Additional carrying value
of real estate on investee
limited partnerships not
recorded on said limited
partnerships 266,420 2,155,580 2,422,000 1,542,941
--- ----------- ---------- ----------- ----------- -----------
TOTAL 641 $20,012,775 $1,610,417 $29,917,722 $31,528,139 $17,085,912
=== =========== ========== =========== =========== ===========
</TABLE>
(A) This projected was completed when REAL IV entered the local partnership
<PAGE> 43
SCHEDULE
(Continued)
REAL ESTATE ASSOCIATES LIMITED IV
INVESTMENT IN LIMITED PARTNERSHIPS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTES: 1. Equity in income (losses) of the limited partnerships represents the
Partnership's allocable share of the net income (loss) from the
limited partnerships for the year. Equity in income (losses) of the
limited partnerships will be recognized until the investment balance
is reduced to zero, or below zero to an amount equal to future
capital contributions to be made by the Partnership.
2. Cash distributions from the limited partnerships will be treated as a
return on the investment and will reduce the investment balance until
such time as the investment is reduced to an amount equal to
additional contributions. Distributions subsequently received will be
recognized as income.
<PAGE> 44
SCHEDULE III
(Continued)
REAL ESTATE ASSOCIATES LIMITED IV
REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
HELD BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL IV HAS INVESTMENTS
DECEMBER 31, 1998
NOTES: 1. Each local limited partnership has developed, owns and operates the
housing project. Substantially all project costs, including
construction period interest expense, are being capitalized by the
limited partnerships.
2. Depreciation is, or will be, provided for by various methods over the
estimated useful lives of the projects. The estimated composite
useful lives of the buildings are generally from 25 to 40 years.
3. Investments in property and equipment:
<TABLE>
<CAPTION>
Buildings,
Furnishings,
And
Land Equipment Total
------------ ------------- -------------
<S> <C> <C> <C>
Balance, January 1, 1996 $ 10,484,020 $ 118,473,425 $ 128,957,445
Net retirements during 1996 (8,700) (2,810,957) (2,819,657)
------------ ------------- -------------
Balance, December 31, 1996 10,475,320 115,662,468 126,137,788
Net additions during 1997 79,806 4,714,186 4,793,992
------------ ------------- -------------
Balance, December 31, 1997 10,555,126 120,376,654 130,931,780
Net additions during 1998 (88,797) 633,225 544,428
Sale of properties during 1998 (8,855,912) (91,092,157) (99,948,069)
------------ ------------- -------------
Balance, December 31, 1998 $ 1,610,417 $ 29,917,762 $ 31,528,139
============ ============= =============
</TABLE>
<PAGE> 45
SCHEDULE III
(Continued)
REAL ESTATE ASSOCIATES LIMITED IV
REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
HELD BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL IV HAS INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Buildings
Furnishings
and Equipment
------------
<S> <C>
Accumulated Depreciation:
Balance, January 1, 1996 $ 63,204,306
Net additions during 1996 1,663,591
------------
Balance, December 31, 1996 64,867,897
Net additions during 1997 7,031,886
------------
Balance, December 31, 1997 71,899,783
Net additions during 1998 7,031,886
Sale of properties during 1998 (61,845,757)
------------
Balance, December 31, 1998 $ 17,085,912
============
</TABLE>
<PAGE> 46
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
REAL ESTATE ASSOCIATES LIMITED IV (the "Partnership") has no directors or
executive officers of its own.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The following biographical information is presented for the
directors and executive officers of NAPICO with principal responsibility for the
Partnership's affairs.
CHARLES H. BOXENBAUM, 69, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.
Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company.
Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
In 1963, he was the winner of the Snyder Award, the highest annual award offered
by the National Association of Real Estate Boards for Best Exchange. He is one
of the founders and a past director of the First Los Angeles Bank, organized in
November 1974. Mr. Boxenbaum was a member of the Board of Directors of the
National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree
from the University of Chicago.
BRUCE E. NELSON, 47, President and a director of NAPICO.
Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis, and negotiation of real estate investments.
From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged
in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor
of Arts degree from the University of Wisconsin and is a graduate of the
University of Colorado School of Law. He is a member of the State Bar of
California and is a licensed real estate broker in California and Texas.
ALAN I. CASDEN, 53, Chairman of Casden Properties Inc. and The Casden Company,
an affiliate of Casden Properties (formerly CoastFed Properties), a director and
member of the audit committee of NAPICO, and chairman of the Executive Committee
of NAPICO.
Mr. Casden is Chairman of the Board, Chief Executive Officer and sole
shareholder of The Casden Company and Casden Investment Company. He also became
the Chairman of Board of Casden Properties Inc. in 1998. Previously, he was the
president and chairman of Mayer Group, Inc., which he joined in 1975. He is also
chairman of Mayer Management, Inc., a real estate management firm. Mr. Casden
has been involved in
<PAGE> 47
approximately $3 billion of real estate financings and sales and has been
responsible for the development and construction of more than 12,000 apartment
units and 5,000 single-family homes and condominiums.
Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, and the President's Council of the California
Building Industry Association. He also serves on the advisory board to the
School of Accounting of the University of Southern California. He holds a
Bachelor of Science degree and a Masters in Business Administration degree from
the University of Southern California.
HENRY C. CASDEN, 55, President, Chief Operating Officer and Secretary of The
Casden Company and a director and secretary of NAPICO.
Mr. Casden has been President and Chief Operating Officer of The Casden Company,
as well as a director of NAPICO since February 1988. He became secretary of both
companies in late 1994. He also became the President of Casden Properties Inc.
in 1998. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los
Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel
and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr.
Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional
Corporation.
Mr. Casden received his Bachelor of Arts degree from the University of
California at Los Angeles, and is a graduate of the University of San Diego Law
School. Mr. Casden is a member of the State Bar of California and has numerous
professional affiliations.
PAUL PATIERNO, 42, Chief Financial Officer.
Mr. Patierno joined NAPICO in 1998 and is responsible for its financial affairs,
as well as the limited partnerships sponsored by it. From 1995 until joining
NAPICO in September 1998, Mr. Patierno was a senior manager in the affordable
housing group of Altschuler, Melvoin and Glasser LLP, a national public
accounting firm. From 1990 to 1995, he practiced public accounting with a firm
specializing in real estate syndication. Mr. Patierno received his bachelor of
science degree in accounting from California State University at Northridge, and
is a member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.
PATRICIA W. TOY, 69, Senior Vice President - Communications and Assistant
Secretary.
Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts Degree from the University of Nebraska.
MARK L. WALTHER, 38, Executive Vice President, General Counsel and Assistant
Secretary.
Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of
the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther
worked in the San Francisco law firm of Browne and Kahn which specialized in
construction litigation. Mr. Walther received his Bachelor of Arts Degree in
Political Science from the University of California, Santa Barbara and is a
graduate of the University of California, Davis, School of Law. He is a member
of the State Bar of Hawaii.
NAPICO and several of its officers, directors and affiliates, including Charles
H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings made by the Commission. The Commission found that
NAPICO and others had violated certain federal securities
<PAGE> 48
laws in connection with transactions unrelated to the Partnership. The
Commission's order did not impose any cost, burden or penalty on any partnership
managed by NAPICO and does not impact NAPICO's ability to serve as the
Partnership's Managing General Partner.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS:
Real Estate Associates Limited IV has no officers, employees or directors.
However, under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to pay the Corporate General Partner
an annual management fee. The annual management fee is approximately equal to .4
percent of the invested assets, including the Partnership's allocable share of
the mortgages related to real estate properties held by local limited
partnerships. The fee is earned beginning in the month the Partnership makes its
initial contribution to the limited partnership. In addition, the Partnership
reimburses the Corporate General Partner for certain expenses.
An affiliate of the General Partner is responsible for the on-site property
management for certain properties owned by the limited partnerships in which the
Partnership has invested.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
(a) Security Ownership of Certain Beneficial Owners
The general partners own all of the outstanding general partnership
interests of REAL IV; no person is known to own beneficially in excess of
5 percent of the outstanding limited partnership interests.
(b) At December 31, 1998, security ownership of management is as listed:
<TABLE>
<CAPTION>
Percentage of
Outstanding
Amount and Limited
Name of Nature of Partnership
Title of Class Owner Beneficial Owner Interests
- -------------- --------------------- ---------------- --------------
<S> <C> <C> <C>
Limited Charles H. Boxenbaum
Partnership 780 Latimer Road
Interest Santa Monica, CA 90402 $ 7,500 *
</TABLE>
* Cumulative limited partnership interests owned by corporate officers or the
General Partner is less than 1 percent interest of total outstanding Limited
Partnership interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
The Partnership has no officers, directors or employees of its own. All of its
affairs are managed by the Corporate General Partner, National Partnership
Investments Corp. The Partnership is obligated to NAPICO for an annual
management fee equal to .4 percent of the original invested assets of the
limited partnerships. Invested assets is defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage loans
related to the Partnership's interest in the capital accounts of the respective
partnerships. The management fee was $505,392 for each of the three years in the
period ended December 31, 1998.
<PAGE> 49
The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $37,680, $37,681 and $34,565 in 1998, 1997 and 1996, respectively,
and is included in operating expenses.
Prior to the sale of certain partnership interests on December 30, 1998, an
affiliate of NAPICO was the general partner in two of the limited partnerships
in which the Partnership had an investment, and another affiliate received
property management fees of approximately 5 percent of their revenue. The
affiliate received property management fees of approximately $122,000, $121,000
and $121,000 in 1998, 1997 and 1996, respectively.
On December 30, 1998, the Partnership sold its limited partnership interests in
20 local limited partnerships with a total carrying value of $1,489,865, to the
Operating Partnership. The sale resulted in net proceeds to the Partnership of
$5,860,000 and a net gain of $5,096,902, after being relieved of notes and
interest payable of $1,270,045 and incurring selling costs of $543,578. In March
1999, the Partnership made a cash distribution of $7,781,697 to the limited
partners and $78,603 to the general partners, which included using proceeds from
the sale of the partnership interests..
The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (ii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:
FINANCIAL STATEMENTS
Report of Independent Public Accountants.
Balance Sheets as of December 31, 1998 and December 31, 1997.
Statements of Operations for the years ended December 31, 1998, 1997 and 1996.
Statements of Partners' Equity (Deficiency) for the years ended December 31,
1998, 1997 and 1996.
Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996.
Notes to Financial Statements December 31, 1998.
FINANCIAL STATEMENT SCHEDULES
APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED IV, REAL ESTATE ASSOCIATES II AND
TO THE LIMITED PARTNERSHIPS IN WHICH REAL ESTATE ASSOCIATES IV AND REAL ESTATE
ASSOCIATES II HAVE INVESTMENTS:
Schedule - Investment in Limited Partnerships, December 31, 1998, 1997 and 1996.
Schedule III - Real Estate and Accumulated Depreciation, December 31, 1998.
<PAGE> 50
The remaining schedules are omitted because any required information is included
in the financial statements and notes thereto.
EXHIBITS
(3) Articles of incorporation and bylaws: The registrant is not
incorporated. The Partnership Agreement was filed with Form S-11, File
#274063 which is hereby incorporated by reference.
(10) Material contracts: The registrant is not party to any material
contracts, other than the Restated Certificate and Agreement of
Limited Partnership dated August 24, 1981, and the twenty-nine
contracts representing the Partnership investment directly or
indirectly in local limited partnerships as previously filed at the
Securities Exchange Commission, File #274063 which is hereby
incorporated by reference.
REPORTS ON FORM 8-K
A report on Form 8-K relating to an unsolicited offer to buy units of limited
partnership interests (the "Units"), as discussed below, was filed with the
Securities and Exchange Commission during the quarter ended September 30, 1998.
On June 26, 1998, Everest Management, L.L.C. and, on November 26, 1997, Bond
Purchase L.L.C. (the "Buyers") made unsolicited tender offers to buy a certain
number of Units in the Partnership for a price of $100 and $307, respectively,
per Unit. The Buyers did not contact the Corporate General Partner prior to
commencing their tender offers. By letter dated July 15, 1998, the Corporate
General Partner advised limited partners that it had determined not to take a
position with respect to the tender offer but cautioned limited partners to
consider certain items before determining whether to tender their Units to the
Buyers.
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Los Angeles,
State of California.
REAL ESTATE ASSOCIATES LIMITED IV
By: NATIONAL PARTNERSHIP INVESTMENTS CORP.
General Partner
/s/ CHARLES H. BOXENBAUM
- -------------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer
/s/ BRUCE E. NELSON
- -------------------------------------
Bruce E. Nelson
Director and President
/s/ ALAN I. CASDEN
- -------------------------------------
Alan I. Casden
Director
/s/ HENRY C. CASDEN
- -------------------------------------
Henry C. Casden
Director
/s/ PAUL PATIERNO
- -------------------------------------
Paul Patierno
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 7,609,491
<SECURITIES> 0
<RECEIVABLES> 5,860,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,469,791
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,481,690
<CURRENT-LIABILITIES> 388,806
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,092,884
<TOTAL-LIABILITY-AND-EQUITY> 13,481,690
<SALES> 0
<TOTAL-REVENUES> 5,157,318
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,348,663
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,252
<INCOME-PRETAX> 3,689,403
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,689,403
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,689,403
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
