<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
or
Transition Report Pursuant to Section 13 of 15(d) of the Securities
- ----- Exchange Act of 1934
For the transition period from to
----- -----
COMMISSION FILE NUMBER: 0-13329
CONAM REALTY INVESTORS 4 L.P.
-----------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
California 11-2685746
---------- ----------
STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER IDENTIFICATION NO.
INCORPORATION OR ORGANIZATION
1764 San Diego Avenue
San Diego, CA 92110 92110-1906
- --------------------- ----------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
(619) 297-6771
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1998 1997
- -------------------------------------------------------------------------------
ASSETS
Investments in real estate:
<S> <C> <C>
Land $ 2,153,239 $ 2,153,239
Buildings and improvements 11,015,879 11,015,879
-----------------------------
13,169,118 13,169,118
Less accumulated depreciation (5,869,930) (5,552,827)
-----------------------------
7,299,188 7,616,291
Cash and cash equivalents 1,533,173 15,150,595
Other assets 71,485 3,300
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 8,903,846 $22,770,186
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- -------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses 229,699 144,530
Distribution payable 142,344 13,729,122
Due to General Partner 10,757 15,471
Security deposits 35,579 35,573
-----------------------------
Total Liabilities 418,379 13,924,696
-----------------------------
Partners' Capital:
General Partner - -
Limited Partners (128,110 Units outstanding) 8,485,467 8,845,490
-----------------------------
Total Partners' Capital 8,485,467 8,845,490
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,903,846 $22,770,186
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- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
INCOME
<S> <C> <C> <C> <C>
Rental $406,642 $998,355 $1,220,582 $3,425,855
Interest and other 18,630 88,932 104,043 149,384
--------------------------------------------------------------------
Total Income 425,272 1,087,287 1,324,625 3,575,239
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 254,936 675,756 741,652 1,994,347
Depreciation 105,701 196,464 317,103 589,322
General and administrative 84,234 37,115 198,860 144,787
--------------------------------------------------------------------
Total Expenses 444,871 909,335 1,257,615 2,728,456
- ------------------------------------------------------------------------------------------------------------------------
Income (Loss) from operations (19,599) 177,952 67,010 846,783
Loss on sale of property - (249,944) - (249,944)
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(19,599) $ (71,992) $ 67,010 $ 596,839
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ 14,234 $ 53,379 $ 42,703 $ 160,138
To the Limited Partners (33,833) (125,371) 24,307 436,701
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NET INCOME (LOSS) $(19,599) $ (71,992) $ 67,010 $ 596,839
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(128,110 UNITS OUTSTANDING)
Income (Loss) from operations $ (0.26) $ 0.97 $ 0.19 $5.36
Loss on sale of property - (1.95) - (1.95)
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (0.26) $ (0.98) $ 0.19 $3.41
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $ - $8,845,490 $8,845,490
Net income 42,703 24,307 67,010
Distributions ($3.00 per Unit) (42,703) (384,330) (427,033)
- ------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1998 $ - $8,485,467 $8,485,467
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 67,010 $ 596,839
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 317,103 589,322
Loss on sale of property 249,944
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Other assets (68,185) 12,070
Accounts payable and accrued expenses 85,169 244,259
Due to General Partner (4,714) (41,257)
Security deposits 6 (6,232)
----------------------------
Net cash provided by operating activities 396,389 1,644,945
- ---------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES-
Net proceeds from sale of properties - 7,108,356
Additions to real estate - (4,250)
----------------------------
Net cash provided by investing activities - 7,104,106
- ---------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES-
Distributions (14,013,811) (1,601,376)
----------------------------
Net cash used for financing activities (14,013,811) (1,601,376)
- ---------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (13,617,422) 7,147,675
Cash and cash equivalents, beginning of period 15,150,595 2,314,876
- ---------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,533,173 $ 9,462,551
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1997 audited consolidated financial
statements within Form 10-K.
The unaudited interim consolidated financial statements include all normal
and recurring adjustments which are, in the opinion of management, necessary
to present a fair statement of financial position as of September 30, 1998
and the results of operations for the three and nine months ended September
30, 1998 and 1997, cash flows for the nine months ended September 30, 1998
and 1997, and the consolidated statement of partners' capital for the nine
months ended September 30, 1998. Results of operations are not necessarily
indicative of the results to be expected for the full year.
No significant events have occurred subsequent to the year ended December 31,
1997, and no material contingencies exist, which would require disclosure in
this interim report per Regulation S-X, Rule 10-01, Paragraph (a) (5).
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Partnership had cash and cash equivalents of
$1,533,173 which were invested in money market funds, compared with
$15,150,595 at December 31, 1997. The decrease reflects a special cash
distribution on January 21, 1998 of $103.00 per Unit from the net proceeds of
the sale of Pelican Landing . The Partnership expects sufficient cash to be
generated from operations to meet its current operating expenses.
The General Partner declared a regular cash distribution of $1.00 per Unit
for the quarter ended September 30, 1998 which will be paid in November,
1998. The General Partner will determine the amount of future quarterly
distributions based on the Partnership's available cash flow and future cash
needs.
The General Partner, on behalf of the Partnership, is negotiating and expects
to enter into an agreement for the sale of the Partnership's remaining
properties and properties owned by various other limited partnerships
affiliated with the General Partner (the "Affiliated Partnerships") to DOC
Investors LLC, a Delaware limited liability company to be formed to acquire
real property ( the "Purchaser"). An Affiliate of the General Partner will
hold a 9% interest in the Purchaser. Consummation of the sale is subject to
various conditions, including the execution of definitive documents, the
approval of a majority in interest of the Limited Partners, and approval by
the limited partners of the Affiliated Partnerships. Accordingly, there can
be no assurance that the sale will be consummated.
Following satisfaction of applicable securities regulatory requirements, the
General Partner will solicit the approval of the Limited Partners to the sale
and to a related amendment to the Partnership's agreement of limited
partnership by means of a Consent Solicitation Statement. Such Consent
Solicitation Statement will set forth the terms and conditions of the
proposed sale, the text of the proposed amendment to the Partnership's
agreement of limited partnership, and other matters with respect to the sale.
If the sale and related amendment are approved, and the other conditions to
the sale satisfied, the sale, which is expected to occur before December 31,
1998, would result in distributions approximating the net asset value of the
Units and the final liquidation of the Partnership. The terms of the proposed
sale are contained in the Preliminary Consent Solicitation Statement filed by
the Partnership with the Securities and Exchange Commission pursuant to
Section 14(a) of the Securities Exchange Act of 1934 on October 30, 1998.
RESULTS OF OPERATIONS
Partnership operations for the three and nine months ended September 30, 1998
generated a net loss of ($19,599) and net income of $67,010 respectively,
compared with a net loss of ($71,992) and net income of $596,839 for the
corresponding periods in 1997. The decrease for the three and nine month
periods is primarily attributable to reduced rental revenue partially offset
by reduced property operating expenses due to the sales of River Hill
Apartments on August 6, 1997 and Pelican Landing on December 30, 1997.
Rental income for the three and nine months ended September 30, 1998 was
$406,642 and $1,220,582, respectively, compared with $998,355 and $3,425,855,
respectively, for the corresponding periods in 1997. The decrease is
primarily due to the sales of properties as described above.
Interest and other income totaled $18,630 and $104,043, respectively, for
the three and nine months ended September 30, 1998 compared with $88,932 and
$149,384, respectively, for the corresponding periods in 1997. The decrease
is primarily due to higher cash equivalent balances in the first quarter
of 1998, related to the undistributed proceeds from the sale of Pelican
Landing in December, 1997.
Property operating expenses for the three and nine months ended September 30,
1998 totaled $254,936 and $741,652, respectively, compared with $675,756 and
$1,994,347, respectively, for the corresponding periods in 1997. The decrease
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - CONTINUED
is primarily attributable to a decrease in property operating expenses
associated with the sales of the two properties. The property operating
expenses for the two remaining properties, Shadowood Village and Village at
the Foothills II were relatively stable between the two periods.
The occupancy rate for Shadowood Village has increased from the same period
in 1997, reflecting favorable economic conditions in Florida. Occupancy for
Village at the Foothills II has remained unchanged from the prior nine
month period in 1997 but has decreased to approximately 91% during the three
months ended September 30, 1998. Increased rental rates at Village at the
Foothills II have offset the effects on rental income of the decrease
in occupancy.
During the first nine months of 1998 and 1997, average occupancy levels at
the Partnership's properties were as follows:
<TABLE>
<CAPTION>
PROPERTY 1998 1997
------------------------------------------------------
<S> <C> <C>
Shadowood Village 96% 93%
Village at the Foothills II 93% 93%
------------------------------------------------------
</TABLE>
YEAR 2000
The Partnership has assessed the potential impact of the Year 2000 issue on
its computer systems, operating equipment with imbedded microchips and major
third party vendors. If the proposed sale of its remaining properties is
consummated, the Partnership will liquidate prior to January 1, 2000, and no
Year 2000 issues will be presented.
In the event that the sale is not consummated, the Partnership has relied on
the efforts of ConAm Management Corporation ("ConAm Management"), which has
been retained by the Partnership to manage the business and financial
operation of the Partnership's properties, to resolve any potential Year 2000
issues. In the course of providing property management services for the
Partnership, ConAm Management retained a third party consultant to modify all
applicable software to provide for a 4-digit year field. The General Partner
believes that the modifications undertaken by ConAm Management related to
computer systems are sufficient to address any potential Year 2000 problems
and that the impact of the Year 2000 issue will not materially affect the
Partnership's operating results or financial condition if the Partnership is
not liquidated prior to January 1, 2000. Accordingly, neither ConAm
Management nor the Partnership has taken any further actions with respect to
the Year 2000 issue related to the computer systems.
The Partnership plans to initiate a program to evaluate the Year 2000
readiness of each property's operating equipment with embedded microchips and
replace as considered necessary. In the event that the replacement project
is not completed by the Year 2000, failure of the property's operating
equipment as a result of the Year 2000 issue is not expected to have a
significant impact on operations.
The Partnership plans to initiate discussion with significant suppliers and
other third parties to determine the extent to which the Partnership may be
vulnerable to the failure of these parties to address and correct their own
Year 2000 issues. However, there can be no guarantee that the systems of
other companies that support the Partnership's operations will be timely
converted or that a failure by these companies to correct their Year 2000
problems would not have a material adverse effect on the Partnership. At the
present time the Partnership does not have a contingency plan in place, in
the event of Year 2000 failure related to significant suppliers and other
third parties, but plans to create one within the next year.
The Partnership currently has no indication that the costs associated with any
remedial actions in connection with the Year 2000 related to its operating
equipment with imbedded microchips and major third party vendors issue will be
material. All costs related to the remediation plan of the computer system were
incurred by ConAm Management in connection with their management services.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONAM PROPERTY SERVICES IV, LTD.
General Partner of ConAm Realty Investors 4 L.P.
BY: CONTINENTAL AMERICAN DEVELOPMENT, INC.
GENERAL PARTNER
Date: November 13, 1998 BY:/s/ DANIEL J. EPSTEIN
Daniel J. Epstein
Director, President, and
Principal Executive Officer
Date: November 13, 1998 BY:/s/ ROBERT J. SVATOS
Robert J. Svatos
Vice President and Director
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONAM PROPERTY SERVICES IV, LTD.
General Partner of ConAm Realty Investors 4 L.P.
BY: CONTINENTAL AMERICAN DEVELOPMENT, INC.
GENERAL PARTNER
Date: November 13, 1998 BY:
--------------------------------
Daniel J. Epstein
Director, President, and
Principal Executive Officer
Date: November 13, 1998 BY:
--------------------------------
Robert J. Svatos
Vice President and Director
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
PART II OTHER INFORMATION
ITEMS 1-5 Not applicable
ITEM 6 Exhibits and reports on Form 8-K
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,533,173
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 13,169,118
<DEPRECIATION> 5,889,930
<TOTAL-ASSETS> 8,903,846
<CURRENT-LIABILITIES> 418,379
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,485,467
<TOTAL-LIABILITY-AND-EQUITY> 8,903,846
<SALES> 1,220,582
<TOTAL-REVENUES> 1,324,625
<CGS> 0
<TOTAL-COSTS> 741,652
<OTHER-EXPENSES> 515,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 67,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,010
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
