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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE YEAR ENDED: DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 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
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<S> <C>
California 11-2685746
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STATE OR OTHER JURISDICTION I.R.S. EMPLOYER
OF INCORPORATION IDENTIFICATION NO.
1764 San Diego Avenue
San Diego, CA 92110 Attn.: Robert J. Svatos 92110-1906
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
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Registrant's telephone number, including area code (619) 297-6771
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
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TITLE OF CLASS
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 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 the 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)
Documents Incorporated by Reference:
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31,
1998.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF BUSINESS AND OBJECTIVES
ConAm Realty Investors 4 L.P., formerly known as Hutton/ConAm Realty
Investors 4 (the "Partnership"), is a California Limited Partnership formed
on January 13, 1984. ConAm Property Services IV, Ltd. ("CPS IV"), a
California limited partnership, and RI 3-4 Real Estate Services, Inc. ("RI
3-4"), a Delaware corporation, were the original co-general partners of the
Partnership. On October 8, 1997, CPS IV acquired RI 3-4's co-general partner
interest in the Partnership, effective July 1, 1997, pursuant to a Purchase
Agreement between CPS IV and RI 3-4 dated August 29, 1997. As a result, CPS
IV now serves as the sole general partner (the "General Partner") of the
Partnership. In conjunction with this transaction, the name of the
Partnership was changed from Hutton/ConAm Realty Investors 4 to ConAm Realty
Investors 4 L.P.
The Partnership was organized to engage in the business of acquiring,
operating and holding for investment multifamily residential properties. The
Partnership originally invested in three residential apartment properties and
three limited partnerships, each of which owned a specified property. As
described below, prior to December 31, 1998, four of the properties were sold
and cash distributions representing substantially all of the net proceeds
from sale were distributed to the Unitholders. As of January 29, 1999, all of
the Partnership's remaining investments in the properties were sold, and the
General Partner anticipates that the final liquidation of the Partnership
will be completed in mid-1999.
The Partnership's principal investment objectives with respect to its
interests in real property were:
(1) capital appreciation;
(2) distribution of net cash from operations attributable to rental income;
and
(3) preservation and protection of capital.
Distribution of net cash from operations was the Partnership's objective
during its operational phase, while preservation and appreciation of capital
were the Partnership's long-term objectives. The attainment of the
Partnership's investment objectives was dependent on many factors, including
economic conditions in the United States as a whole and, in particular, in
the localities in which the Partnership's properties were located, especially
with regard to achievement of capital appreciation.
The Partnership utilized the proceeds of its public offering to acquire six
residential apartment complexes either directly or through investments in
limited partnerships and joint ventures, as follows: (1) Village at the
Foothills II, a 120-unit apartment complex located in Tucson, Arizona; (2)
Shadowood Village, a 110-unit apartment complex located in Jacksonville,
Florida; (3) Pelican Landing, a 204-unit apartment complex located in
Clearwater, Florida; (4) River Hill, a 192-unit apartment complex located in
Tulsa, Oklahoma; (5) Cypress Lakes, a 176-unit apartment complex located in
Deerfield Beach, Florida; and (6) Trails at Meadowlakes, a 189-unit apartment
complex located in Fort Lauderdale, Florida. On July 19, 1995, the
Partnership sold Cypress Lakes and Trails at Meadowlakes to an unaffiliated
buyer for sales prices of $8,825,000 and $8,940,000, respectively. On August
6, 1997, the Partnership sold River Hill to an unaffiliated buyer for
$7,275,000. On December 30, 1997, the Partnership sold Pelican Landing to an
unaffiliated buyer for $13,400,000. For further information on each of the
properties, see Note 4 to the Consolidated Financial Statements incorporated
herein by reference to the Partnership's Annual Report to Unitholders for the
year ended December 31, 1998, which is filed as an exhibit under Item 14.
During its year ended December 31, 1998, following consideration of various
alternatives available to the Partnership, the General Partner concluded that
a sale of the Partnership's two remaining properties, Village at the
Foothills II and Shadowood Village (collectively the "Properties"), would be
in the best interests of the Partnership and the Unitholders. Throughout much
of 1998, the General Partner, on behalf of the Partnership, negotiated the
terms of a sale of the Properties with Lend Lease Real Estate Investments,
Inc. ("Lend Lease"), on behalf of two pension funds which are unaffiliated
with the General Partner. Once the terms were negotiated, as required by the
Partnership's Certificate and Agreement of Limited Partnership ("Agreement of
Limited Partnership"), the General Partner solicited the consent of a
majority in interest of the Unitholders to the sale pursuant to a Consent
Solicitation Statement dated December 16, 1998. The requisite consent was
obtained on January 15, 1999, and on January 29, 1999, the Partnership
consummated the sale
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of the Properties to DOC Investors, L.L.C., a Delaware limited liability
company (the "Purchaser"), for a sales price of $9,350,000 (before selling
costs and prorations). The members of the Purchaser are two pension funds
advised by Lend Lease, which own an aggregate 91% interest in the Purchaser,
and ConAm DOC Affiliates LLC, an affiliate of the General Partner ("ConAm
DOC"), which owns a 9% interest in the Purchaser. ConAm DOC has the potential
to receive up to an additional 18% of the profits of the Purchaser after
certain priority returns to the members of the Purchaser.
The Partnership received approximately $ 9,318,000 of cash proceeds from the
sale, net of closing costs of approximately $32,000. All net cash proceeds
from the sale and previously undistributed cash from operations, less an
amount the General Partner determined to set aside for contingencies, were
distributed to the Limited Partners on February 26, 1999.
The Partnership considers itself to have been engaged in only one industry
segment, real estate investment.
COMPETITION
The Partnership's real property investments were subject to competition from
similar types of properties in the vicinities in which they were located.
Such former competition increased during the Partnership's period of
ownership of the Properties due principally to the addition of newly
constructed apartment complexes offering increased residential and
recreational amenities. The Properties were also subject to competition from
condominiums and single-family properties especially as potential renters
chose to buy homes especially during periods of low mortgage interest rates.
The Partnership competed with other real estate owners and developers in the
rental and leasing of its Properties by offering competitive rental rates
and, if necessary, leasing incentives. Such competition affected the
occupancy levels and revenues of the Properties. The occupancy level at the
Properties reflects some seasonality, which is typical in these markets. In
some cases, the Properties competed with properties owned by partnerships
affiliated with the General Partner.
For a discussion of market conditions in the areas where the Properties were
located, reference is made to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1998, which is filed as an exhibit under Item
14.
EMPLOYEES
The Partnership has no employees. Services are provided by CPS IV and ConAm
Management Corporation ("ConAm Management"), an affiliate of CPS IV. Pursuant
to property management agreements with the Partnership, ConAm Management
provided property management services with respect to the Properties. In
addition, the Partnership retained Brock, Tibbitts & Snell, an Accountancy
Corporation, an unaffiliated company located in San Diego, California, to
provide accounting and investor communication functions. During 1998, Service
Data Corporation, an unaffiliated company, provided transfer agent services
for the Partnership. In February 1999, pursuant to the terms of a sale of its
contracts, Service Data Corporation assigned the transfer agent functions of
the Company to MAVRICC Management Systems, Inc., an unaffiliated company
located in Troy, Michigan. See Item 13, "Certain Relationships and Related
Transactions" for a further description of the service and management
agreements between the Partnership and affiliated entities.
ITEM 2. PROPERTIES
For a description of the Properties owned and operated by the Partnership
during 1998 and discussion of market conditions in the areas where the
Properties are located, reference is made to the Partnership's Annual Report
to Unitholders for the year ended December 31, 1998, which is filed as an
exhibit under Item 14. For information on the Partnership's purchase of the
Properties, reference is made to Note 4 of the Consolidated Financial
Statements, included herein by reference to the Partnership's Annual Report
to Unitholders. For information on the sale of the Properties by the
Partnership in January 1999, reference is made to Item 1 and Note 9 of the
Consolidated Financial Statements, included herein by reference to the
Partnership's Annual Report to Unitholders. Average occupancy rates at each
property are incorporated by reference to Item 7.
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ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 16, 1998, pursuant to a Consent Solicitation Statement, the
Unitholders were asked to approve the sale of the Partnership's remaining
properties and a related amendment to the Agreement of Limited Partnership. A
majority in interest of the Unitholders approved the sale and the amendment
and the sale was completed on January 29,1999. During the fourth quarter of
the year ended December 31, 1998, no other matters were submitted to a vote
of Unitholders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
As of December 31, 1998, the number of Unitholders of record was 6,670.
No established public trading market exists for the Units, and it is not
anticipated that such a market will develop in the future.
Distributions of net cash from operations are determined by the General
Partner on a quarterly basis, with distributions generally occurring
approximately 45 days after the end of each quarter. Such distributions to
the Unitholders have been made from net operating income with respect to the
Partnership's investment in the Properties and from interest on short-term
investments. Information on cash distribution paid by the Partnership for the
past two years is incorporated by reference to the Partnership's Annual
Report to Unitholders for the year ended December 31, 1998, which is filed as
an exhibit under Item 14. No distribution was made for the fourth quarter of
the year ended December 31, 1998 because the General Partner decided to
suspend distributions pending the outcome of the solicitation of the consent
of the Unitholders to the sale of the Properties.
Because of the sale of the Partnership's remaining Properties, no further
quarterly distributions of Net Cash From Operations will be made. The
Partnership distributed $10,000,267 to the Unitholders ($78.06 per Unit) and
$91,887 to the General Partner on February 26, 1999, which amounts are equal
to substantially all of the net proceeds from the sale of the Properties,
together with other available cash of the Partnership, less an amount for
costs associated with the sale of the Properties and liquidation of the
Partnership and other contingencies of approximately $509,000. The final
liquidation of the Partnership is expected to occur in mid-1999, and the
remaining funds, if any, will be distributed to the Unitholders at that time.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1998, which is filed as an exhibit under Item
14.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Partnership had cash and cash equivalents of
$1,403,143, which were invested in unaffiliated money market funds, compared
with $15,150,595, at December 31, 1997. The decrease in cash and cash
equivalents is primarily the result of distribution in 1998 of the net sales
proceeds from the 1997 sale of Pelican Landing and cash distributions to
partners exceeding cash provided by operating activities during the year
ended December 31, 1998.
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Other assets increased to $160,534 at December 31, 1998 compared to $3,300 at
December 31, 1997. Accounts payable and accrued expenses increased to
$239,393 at December 31, 1998 compared to 144,530 at December 31, 1997. This
increase in other assets and accounts payable and accrued expenses was
primarily due to costs that are associated with the sale of the Properties.
Distribution payable decreased to $0 at December 31, 1998 compared to
$13,729,122 at December 31, 1997. The decrease is primarily attributable to
the payment in 1998 of the distribution of the net proceeds from the sale of
Pelican Landing. The distribution for Pelican Landing was declared in
December 1997.
As a result of the Partnership's sale of the Properties on January 29, 1999,
all of the Partnership's assets have been converted to cash and cash
equivalents. Pending distribution to the Unitholders as described in Item 5
above, the Partnership's funds have been invested in the Pacific Horizon
Money Market Funds, Prime Fund. The General Partner retained from the initial
distribution an amount it believes is sufficient to provide for
contingencies, and to cover the expenses of operating the Partnership until
final liquidation of the Partnership, including legal and accounting fees.
RESULTS OF OPERATIONS
1998 VERSUS 1997
Partnership operations for the year ended December 31, 1998 resulted in net
income of $73,292, compared with net income of $6,019,161 for the year ended
December 31, 1997. The decrease in net income is primarily attributable to
the $4,907,439 net gain on sale of properties, comprised of a $5,157,383 gain
from the sale of Pelican Landing, and a $249,944 loss from the sale of River
Hill in 1997. Excluding the gain, the Partnership generated income from
operations of $73,292 and $1,111,722 for the years ended December 31, 1998
and 1997, respectively. Net cash provided by operating activities was
$430,125 for the year ended December 31, 1998, compared to $1,741,457 in
1997. The decrease in income from operations and net cash provided by
operations is primarily due to the sales of River Hill in August 1997 and
Pelican Landing in December 1997.
Rental income for the year ended December 31, 1998 was $1,623,889, compared
with $4,272,753 for the year ended December 31, 1997. The decrease in 1998
reflects the sale of River Hill and Pelican Landing, partially offset by
increased rental income at Village at the Foothills II and Shadowood Village.
Interest and other income for the year ended December 31, 1998 was $117,236,
compared with $212,589 in 1997. The decrease is primarily due to the
Partnership maintaining higher average cash balances in 1997 following the
sale of River Hill.
Total expenses for the year ended December 31, 1998 were $1,667,833, compared
with $3,373,620 in 1997. The decrease reflects decreases in depreciation and
property operating expenses primarily as a result of the sale of River Hill
and Pelican Landing in 1997.
General and administrative expenses increased in 1998 due primarily to legal
fees incurred in the third quarter of 1998 to defend the Partnership in an
action brought by a firm, which desired to purchase Units from Unitholders.
The action, which was improperly filed in Kansas City, Missouri, was
dismissed by the court for lack of jurisdiction and has not been re-filed.
1997 VERSUS 1996
Partnership operations for the year ended December 31, 1997 resulted in net
income of $6,019,161, compared with net income of $1,022,553 for the year
ended December 31, 1996. The increase in net income is primarily attributable
to the $4,907,439 gain on sale of properties, composed of a $5,157,383 gain
from the sale of Pelican Landing, and a $249,944 loss from the sale of River
Hill. Excluding the gain, the Partnership generated income from operations of
$1,111,722 for the year ended December 31, 1997. Net cash provided by
operating activities was $1,741,457 for the year ended December 31, 1997,
compared to $2,137,022 in 1996. The decrease is primarily due to the decrease
in cash flow from property operations resulting from the sale of River Hill
in August 1997.
Rental income for the year ended December 31, 1997 was $4,272,753, compared
with $4,778,238 for the year ended December 31, 1996. The decrease in 1997
reflects the sale of River Hill, partially offset by increased rental income
at
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Pelican Landing and Shadowood Village. Interest and other income for the year
ended December 31, 1997 was $212,589, compared with $148,102 in 1996. The
increase is primarily due to the Partnership maintaining higher average cash
balances in 1997.
Total expenses for the year ended December 31, 1997 were $3,373,620, compared
with $3,903,787 in 1996. The decrease reflects a decrease in depreciation and
property operating expenses primarily as a result of the sale of River Hill.
Property operating expenses for the year ended December 31, 1997 totaled
$2,465,118, compared to $2,545,471 in 1996. The decrease reflects the sale of
River Hill, and was partially offset by an increase in repairs and
maintenance expenses at Pelican Landing, Shadowood Village and Village at the
Foothills II, primarily due to carpet and appliance replacement at all three
properties.
Depreciation expense for the year ended December 31, 1997 totaled $695,023,
compared to $1,184,781 for the year ended December 31, 1996. The decrease is
due to the reclassification of River Hill as property held for disposition
effective October 1, 1996 and the reclassification of Pelican Landing as
property held for disposition effective October 1, 1997.
General and administrative expenses for the year ended December 31, 1997
totaled $213,479, compared to $173,535 in 1996. The increase is primarily
attributable to an increase in expenses for Partnership accounting, tax and
other administrative services. During the 1997 period, certain expenses
incurred by RI 3-4, its affiliates, and an unaffiliated third party service
provider in servicing the Partnership, which were voluntarily absorbed by
affiliates of RI 3-4 in prior periods, were reimbursable to RI 3-4 and its
affiliates.
The average occupancy levels at each of the Properties owned during the years
ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
PROPERTY 1998 1997 1996
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<S> <C> <C> <C>
Village at the Foothills II 94% 94% 95%
Shadowood Village 96% 93% 95%
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</TABLE>
YEAR 2000
Due to the consummation of the sale of the Properties in January 1999, the
Partnership is no longer engaged in the operation of real properties or any
other business. As a result of the foregoing, and in view of the General
Partner's plan to complete the full liquidation of the Partnership prior to
January 1, 2000, the Partnership has no exposure to Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership sold its remaining Properties on January 29, 1999 and
has no interest bearing indebtedness, the Partnership has no exposure to
interest rate risk. In addition, the Partnership is expected to be liquidated
during 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1998, which is filed as an exhibit under Item
14. Supplementary Data is incorporated by reference to F-1 and F-2 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective December 1, 1997, the Partnership advised Coopers & Lybrand L.L.P.
(now a part of PricewaterhouseCoopers LLP) that it was changing accounting
firms and engaged KPMG LLP.
Coopers & Lybrand L.L.P.'s report on the consolidated financial statements
for the year ended December 31, 1996 contained no adverse opinion or
disclaimer of opinion and was not qualified as to uncertainty, audit scope or
accounting
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principles. There had been no disagreements with Coopers & Lybrand L.L.P. on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope procedure.
The decision to change accountants was approved by CPS IV and RI 3-4, the
general partners of the Partnership at that time.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership has no officers or directors. CPS IV, as the General Partner
of the Partnership, manages and controls the affairs of the Partnership and
has general responsibility and authority in all matters affecting its
business.
CPS IV is a California limited partnership organized on August 30, 1982. The
sole general partner of CPS IV is Continental American Development, Inc.
("ConAm Development"). The names and positions held by the directors and
executive officers of ConAm Development are set forth below. There are no
family relationships between any officers or directors.
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Name Office
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Daniel J. Epstein President, Director and Principal
Executive Officer
E. Scott Dupree Vice President and Director
Robert J. Svatos Vice President and Director
Ralph W. Tilley Vice President
J. Bradley Forrester Vice President
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DANIEL J. EPSTEIN, 59, has been the President and a Director of ConAm
Development and a general partner of Continental American Properties, Ltd.
("ConAm"), an affiliate of CPS IV, since their inception. He is also Chairman
and Chief Executive Officer of ConAm Management. Prior to organizing ConAm,
Mr. Epstein was Vice President and a Director of American Housing Guild,
which he joined in 1969. At American Housing Guild, he was responsible for
the formation of the Multi-Family Division and directed its development and
property management activities. Mr. Epstein holds a Bachelor of Science
degree in Engineering from the University of Southern California.
E. SCOTT DUPREE, 48, is a Senior Vice President and general counsel of ConAm
Management responsible for negotiation, documentation, review and closing of
acquisition, sale and financing proposals. Mr. Dupree also acts as principal
legal advisor on general legal matters ranging from issues and contracts
involving the management company to supervision of litigation and employment
issues. Prior to joining ConAm Management in 1985, he was corporate counsel
to Trusthouse Forte, Inc., and a major international hotel and restaurant
corporation. Mr. Dupree holds a B.A. from United States International
University and a Juris Doctorate degree from the University of San Diego.
ROBERT J. SVATOS, 40, is a Senior Vice President and Chief Financial Officer
of ConAm Management. His responsibilities include the accounting, treasury
and data processing functions of the organization. Prior to joining ConAm
Management in 1988, he was the Chief Financial Officer for AmeriStar
Financial Corporation, a nationwide mortgage banking firm. Mr. Svatos holds
an M.B.A. in Finance from the University of San Diego and a Bachelor of
Science degree in Accounting from the University of Illinois. He is a
Certified Public Accountant.
RALPH W. TILLEY, 44, is a Senior Vice President and Treasurer of ConAm
Management. He is responsible for the financial aspects of syndications and
acquisitions, the company's asset management portfolio and risk management
activities. Prior to joining ConAm Management in 1980, he was a senior
accountant with KPMG LLP, specializing in real estate. He holds a Bachelor
of Science degree in Accounting from San Diego State University and is a
Certified Public Accountant.
J. BRADLEY FORRESTER, 41, is the President of ConAm Management. He is
currently responsible for overseeing all aspects of the operations of the
firm. His primary focus is on new business related activities including
property acquisitions,
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property development and rehabilitation, and the acquisition of other
property management companies. Prior to joining ConAm, Mr. Forrester served
as Senior Vice President - Commercial Real Estate for First Nationwide Bank
in San Francisco, where he was responsible for a $2 billion problem asset
portfolio including bank-owned real estate and non-performing commercial real
estate loans. His past experience includes significant involvement in real
estate development and finance, property acquisitions and dispositions and
owner's representation matters. Prior to entering the real estate profession,
he worked for KPMG LLP in Dallas, Texas. Mr. Forrester holds a Bachelor of
Science degree in Accounting from Louisiana State University. He received his
CPA certification in the State of Texas.
ITEM 11. EXECUTIVE COMPENSATION
Neither the General Partner nor any of its directors or executive officers
received any compensation from the Partnership. See Item 13 of this report
for a description of certain costs of the General Partner and its affiliates
reimbursed by the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March, 1999, no person was known by the Partnership to be the
beneficial owner of more than five percent of the Units of the Partnership.
Daniel J. Epstein, President and Director of ConAm Services, owned twenty
Units (approximately .017% of the outstanding Units) as of March 1, 1999. No
other directors or executive officers of the General Partner owns any Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CPS IV received $42,703 as the General Partner's allocable share of
distributions from Net Cash From Operations with respect to year ended
December 31, 1998. For the year ended December 31, 1998, $42,703 of the
Partnership's net income was allocated to CPS IV. For a description of the
share of Net Cash From Operations and the allocation of income and loss to
which the General Partner is entitled, reference is made to Note 3 to the
Consolidated Financial Statements, included in the Partnership's Annual
Report to Unitholders for the year ended December 31, 1998, which is filed as
an exhibit under Item 14. Effective July 1, 1997, all General Partner
allocations were made solely to CPS IV.
The Partnership entered into property management agreements with ConAm
Management pursuant to which ConAm Management assumed direct responsibility
for day-to-day management of the Properties. It was the responsibility of
ConAm Management to select resident managers and monitor their performance.
ConAm Management's services also included the supervision of leasing, rent
collection, maintenance, budgeting, employment of personnel, payment of
operating expenses, strategic asset management and related services. For such
services, ConAm Management was entitled to receive a management fee equal to
5% of gross revenues. A summary of property management fees earned by ConAm
Management during the past three years is incorporated by reference to Note 6
to the Consolidated Financial Statements, included in the Partnership's
Annual Report to Unitholders for the year ended December 31, 1998, which is
filed as an exhibit under Item 14.
Pursuant to Section 12(g) of the Partnership's Agreement of Limited
Partnership, the General Partner may be reimbursed by the Partnership for
certain of its costs. A summary of amounts paid to the General Partner or its
affiliates during the past three years is incorporated by reference to Note 6
to the Consolidated Financial Statements, included in the Partnership's
Annual Report to Unitholders for the year ended December 31, 1998, which is
filed as an exhibit under Item 14.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS:
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Page
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Consolidated Balance Sheets - December 31, 1998 and 1997......................(1)
Consolidated Statements of Operations - For the years ended
December 31, 1998, 1997 and 1996..............................................(1)
Consolidated Statements of Partners' Capital - For the years ended
December 31, 1998, 1997 and 1996..............................................(1)
Consolidated Statements of Cash Flows - For the years ended
December 31, 1998, 1997 and 1996..............................................(1)
Notes to the Consolidated Financial Statements................................(1)
Independent Auditors' Report..................................................(1)
Report of Former Independent Accountants......................................(1)
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(a)(2) FINANCIAL STATEMENT SCHEDULE:
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<S> <C>
Schedule III - Real Estate and Accumulated Depreciation.....................(F-1)
Independent Auditors' Report................................................(F-2)
Report of Former Independent Accountants....................................(F-3)
</TABLE>
(1) INCORPORATED BY REFERENCE TO THE PARTNERSHIP'S ANNUAL REPORT TO
UNITHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1998, FILED AS AN
EXHIBIT UNDER ITEM 14.
(a)(3) EXHIBITS:
(3) Certificate and Agreement of Limited Partnership (included
as, and incorporated herein by reference to, Exhibit A to
the Prospectus of Registrant dated January 13, 1984 (the
"Prospectus"), contained in Amendment No. 1 to Registration
Statement No. 2-84863 of Registrant, filed January 13, 1984
(the "1984 Registration Statement")).
(4) Subscription Agreement and Signature Page (included as, and
incorporated herein by reference to, Exhibit 3.1 to the
Prospectus).
(4.1) Amendment, dated January 18, 1999 to the Partnership's
Certificate and Agreement of Limited Partnership (included
as, and incorporated herein by reference to, Exhibit 4.1 to
the Partnership's Report on Form 8-K filed on February 16,
1999).
(10)(A) Purchase Agreement relating to Pelican Landing (formerly
Feather Sound Apartments), between the Registrant and
Feather Sound, Inc., and the exhibits thereto (included as,
and incorporated herein by reference to, Exhibit (10)(B) to
the 1984 Annual Report).
(B) Purchase Agreement relating to River Hill Apartments
(formerly Oxbow Ridge I), between the Registrant and Tres
Titan Investors, and the exhibits thereto (included as,
and incorporated herein by reference to, Exhibit (10)(D)
to the 1984 Annual Report).
(C) Purchase Agreement relating to Village at the Foothills
II (formerly Ina Village Apartments), between the
Registrant and Epoch Properties, Inc. and the exhibits
thereto (included as, and incorporated herein by
reference to, Exhibit (10)(E) to the 1984 Annual Report).
Page 9
<PAGE>
(D) Documents relating to Shadowood Village (included as, and
incorporated herein by reference to, Exhibit (10)(A) to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1985 (the "1985 Quarterly
Report" (Commission File No. 0-13329)).
(E) Settlement Agreement by and among the Managing Joint
Venturers and the Epoch Joint Venturers dated July 1,
1992 (included as, and incorporated herein by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1992
(Commission File No. 0-13329)).
(F) Amended and Restated Agreement of Limited Partnership of
Village at the Foothills II Joint Venture Limited
Partnership dated as of July 1, 1992 (included as, and
incorporated herein by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992 (Commission File No.
0-13329)).
(G) Certificate and Agreement of Limited Partnership of River
Hill Apartments, Ltd. (included as, and incorporated
herein by reference to Exhibit 10(I) to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1991 (Commission File No. 0-13329)).
(H) Amended and Restated Agreement of Limited Partnership of
Shadowood Village, Ltd., dated as of July 1, 1992
(included as, and incorporated herein by reference to
Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1992 (Commission
File No. 0-13329)).
(I) Property Management Agreement between Hutton/ConAm Realty
Investors 4 and ConAm Management Corporation for the
Pelican Landing property (included as, and incorporated
herein by reference to Exhibit 10-M to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1993 (Commission File No. 0-13329)).
(J) Property Management Agreement between Hutton/ConAm Realty
Investors 4 and ConAm Management Corporation for the
River Hill property (included as, and incorporated herein
by reference to Exhibit 10-N to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
(Commission File No. 0-13329)).
(K) Property Management Agreements between Hutton/ConAm
Realty Investors 4 and ConAm Management Corporation for
the Shadowood Village property (included as, and
incorporated herein by reference to Exhibit 10-O to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993 (Commission File No. 0-13329)).
(L) Property Management Agreement between Hutton/ConAm Realty
Investors 4 and ConAm Management Corporation for the Village
at the Foothills II property (included as, and incorporated
herein by reference to Exhibit 10-Q to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1993 (Commission File No. 0-13329)).
(M) Agreement for Purchase and Sale and Joint Escrow
Instructions between Village at the Foothills (Phase II)
Joint Venture Limited Partnership and DOC Investors, L.L.C.,
dated January 26, 1999 with respect to Village at the
Foothills II & III Apartments (included as, and incorporated
herein by reference to, Exhibit 10.1 to the Partnership's
Report on Form 8-K filed on February 16, 1999).
(N) Agreement for Purchase and Sale and Joint Escrow
Instructions between Shadowood Village, Ltd. and DOC
Investors, L.L.C. dated January 26, 1999 with respect to
Shadowood Village Apartments (included as, and incorporated
herein by reference to, Exhibit 10.2 to the Partnership's
Report on Form 8-K filed on February 16, 1999).
(13) Annual Report to Unitholders for the year ended December
31, 1998.
(21) List of Subsidiaries, Joint Ventures or Limited Partnerships
(included as, and incorporated herein by reference to
Exhibit 22 of the Registrant's Annual Report on Form 10-K
filed March 27, 1992 (Commission File No. 0-13329)).
(27) Financial Data Schedule.
Page 10
<PAGE>
(99) Portions of the Prospectus of Registrant dated January 13,
1984 (included as, and incorporated herein by reference to
Exhibit 28 to the Registrant's 1988 Annual Report on Form
10-K for the year ended December 31, 1988 (Commission File
No. 0-13329)).
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Partnership during the
fourth quarter of the year ended December 31, 1998.
(c) EXHIBITS
See Item 14(a)(3) above.
Page 11
<PAGE>
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.
Dated: March 30, 1999
BY: ConAm Property Services IV, Ltd.
General Partner
BY: Continental American Development, Inc.
General Partner
BY: /s/ Daniel J. Epstein
----------------------------
Name: Daniel J. Epstein
Title: President, Director and
Principal Executive Officer
Page 12
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
CONAM PROPERTY SERVICES IV, LTD.
A General Partner
By: Continental American Development, Inc.
General Partner
Date: March 30, 1999
BY: /s/ Daniel J. Epstein
---------------------------
Daniel J. Epstein
Director, President and
Principal Executive Officer
Date: March 30, 1999
BY: /s/ E. Scott Dupree
------------------------
E. Scott Dupree
Vice President and Director
Date: March 30, 1999
BY: /s/ Robert J. Svatos
--------------------------
Robert J. Svatos
Vice President and Director
Date: March 30, 1999
BY: /s/ Ralph W. Tilley
-------------------------
Ralph W. Tilley
Vice President
Date: March 30, 1999
BY: /s/ J. Bradley Forrester
------------------------------
J. Bradley Forrester
Vice President
Page 13
<PAGE>
EXHIBIT 13
CONAM REALTY INVESTORS 4 L.P.
1998 ANNUAL REPORT
<PAGE>
- -------------------------------------------------------------------------------
CONAM REALTY INVESTORS 4 L.P.
- -------------------------------------------------------------------------------
ConAm Realty Investors 4 L.P. is a California limited partnership
formed in 1984 to acquire, operate and hold for investment multifamily
residential properties. At December 31, 1998, the Partnership's
portfolio consisted of two apartment properties located in Florida and
Arizona. On January 29, 1999, with the consent of the Unitholders, the
two remaining properties were sold for a price of $ 9,350,000 (before
closing costs) and substantially all of the cash, less a contingency
amount, was distributed to the Unitholders on February 26, 1999.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
1 Message to Investors
2 Performance Summary
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to the Consolidated Financial Statements
13 Independent Auditors' Report
14 Report of Former Independent Accountants
15 Net Asset Valuation
</TABLE>
- --------------------------------------------------------------------------------
ADMINISTRATIVE INQUIRIES PERFORMANCE INQUIRIES/FORM 10Ks
ADDRESS CHANGES/TRANSFERS Brock, Tibbitts and Snell
MAVRICC Management Systems, Inc. 625 Broadway, Suite 911
1845 Maxwell, Suite 101 San Diego, California 92101
Troy, MI 48084-4510
Attn: Financial Communications
248-637-7897 619-232-0365
- --------------------------------------------------------------------------------
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
- --------------------------------------------------------------------------------
Presented for your review is the 1998 Annual Report for ConAm Realty
Investors 4 L.P. (the "Partnership"). In this report we have included a
performance summary which addresses operations at each of the properties (the
"Properties") and the financial highlights for the year.
We are pleased to announce that the proposed sale of the Partnership's two
remaining Properties to DOC Investors, L.L.C., a Delaware limited liability
company, was approved by a majority in interest of the Unitholders as of
January 15, 1999 and that the sale was completed on January 29, 1999.
Following the close of the sale of the Properties, a distribution of $78.06
per Unit, representing the majority of the net proceeds from the sale and
other cash from operations, was paid to Unitholders on February 26, 1999.
This distribution included the net proceeds from the sale of the
Partnership's Properties in January 1999 of $71.60 per Unit, and cash from
operations of $6.46 per Unit.
CASH DISTRIBUTIONS
The Partnership paid quarterly cash distributions of operating cashflow
totaling $3.00 per Unit for the year ended December 31, 1998. The General
Partner elected not to make a fourth quarter distribution pending the outcome
of the solicitation of the consent of the Unitholders to the sale of the
Partnership's Properties. Including the distribution of sale proceeds and
cash from operations on February 26, 1999, since inception, the Partnership
has paid distributions totaling $587.07 per original $500 Unit.
OPERATIONS OVERVIEW
In 1998, operations at the Partnership's Properties continued to be impacted
to varying degrees by strong competition for residents in the markets where
the two Properties are located. Population and job growth escalated in
Arizona and Florida, but these factors fueled construction of new apartment
complexes which in turn put pressure on rental rate increases and overall
vacancy rates. Despite these pressures, average occupancy at Shadowood
Village was 96% for 1998 compared to 93% in 1997, which is approximately 4%
above the average in the Jacksonville area. Average occupancy at Village at
the Foothills II was 94% for 1998, unchanged from last year, and rental rates
also increased, due in part to the continuance of rent concessions and
maintenance of the attractive appearance of the property. Although the Tucson
market has improved from its previous overbuilt condition, over 1,900 new
units are under construction or in planning. This new construction may put
downward pressure on rents and occupancy in the future. Moreover, many
renters have taken advantage of low mortgage rates to buy homes.
SUMMARY
The sale of the Properties on January 29, 1999 and the initial distribution
of net sales proceeds and cash from operations on February 26, 1999,
represents a major step toward the liquidation of the Partnership that is
expected to be completed in August 1999. A final distribution of remaining
Partnership cash, if any, will be made shortly thereafter.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein, President
Continental American Development Inc.
General Partner of ConAm Property Services IV, Ltd.
March 30, 1999
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
VILLAGE AT THE FOOTHILLS II TUCSON, ARIZONA
Village at the Foothills II is a 120-unit apartment community located in the
northwest area of Tucson. The property maintained an average occupancy rate
of 94% during 1998, unchanged from 1997. Apartment vacancy rates remain high
in this market, but significant population and job growth in Tucson over the
last few years is slowly reducing the number of available units. Low interest
rates and affordable home prices have also increased competition by luring
many renters to purchase homes. This competition led to the use of rental
incentives and other concessions in the marketplace to attract residents.
SHADOWOOD VILLAGE JACKSONVILLE, FLORIDA
Shadowood Village is a 110-unit luxury apartment complex located in a
residential area in Jacksonville. The property's average occupancy level
increased to 96% in 1998, from 93% in 1997, while rental income increased 8%
from the prior year. Favorable market conditions in the Jacksonville area led
to an increase in new multifamily construction throughout the year. This
increase in construction was partially due to the city's 1996 ranking as one
of the fastest growing labor markets in the country. Although population and
job growth in the Jacksonville area remains high, this new construction
softened the market by outpacing population and job growth and will continue
to affect the region as new units become available. Vacancy rates remained
low in 1998, due to increased use of rental concessions in the marketplace to
attract and retain residents.
2
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
For the years ended December 31, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA
<S> <C> <C> <C> <C> <C>
Total Income $1,741 $4,485 $4,926 $6,597 $7,633
Gain on Sale of Properties -- 4,907 -- 2,855 --
Net Income 73 6,019 1,023 3,260 985
Net Cash Provided by
Operating Activities 430 1,741 2,137 2,363 3,034
Long-term Obligations at Year End -- -- -- -- 5,051
Total Assets at Year End 8,772 22,770 26,010 27,247 44,686
Net Income per
Limited Partnership Unit* 0.24 45.32 6.32 22.28 2.12
Distributions per Limited
Partnership Unit* 3.00 15.00 15.00 11.25 9.00
Special Distributions per Limited
Partnership Unit* -- 158.00 -- 111.25 --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* 128,110 UNITS OUTSTANDING
<TABLE>
<CAPTION>
CASH DISTRIBUTIONS
PER LIMITED PARTNERSHIP UNIT 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Special Distributions* $ -- $158.00
First Quarter 1.00 3.75
Second Quarter 1.00 3.75
Third Quarter 1.00 3.75
Fourth Quarter -- 3.75
-------------------------------------
TOTAL $ 3.00 $173.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
Cash distributions were reduced in 1998 due to a suspension of distributions
in the fourth quarter pending the outcome of the solicitation of the consent
the Unitholders to the sale of the Properties.
* On October 31, 1997, the Partnership paid a special cash distribution of
$55.00 per Unit, representing net proceeds from the sale of River Hill
Apartments on August 6, 1997. On January 21, 1998, the Partnership paid a
special cash distribution of $103.00 per Unit which was declared in 1997.
This special cash distribution represented the net proceeds from the
December 30, 1997 sale of Pelican Landing.
3
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, AT DECEMBER 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 2,153,239 $ 2,153,239
Buildings and improvements 11,023,211 11,015,879
-------------------------------------------
13,176,450 13,169,118
Less accumulated depreciation (5,968,023) (5,552,827)
--------------------------------------------
7,208,427 7,616,291
Cash and cash equivalents 1,403,143 15,150,595
Other assets 160,534 3,300
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 8,772,104 $ 22,770,186
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 239,393 $ 144,530
Distribution payable -- 13,729,122
Due to general partner and affiliates 6,853 15,471
Security deposits 34,109 35,573
------------------------------------------
Total Liabilities 280,355 13,924,696
------------------------------------------
Partners' Capital:
General Partner -- --
Limited Partners (128,110 Units outstanding) 8,491,749 8,845,490
------------------------------------------
Total Partners' Capital 8,491,749 8,845,490
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,772,104 $ 22,770,186
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Rental $ 1,623,889 $ 4,272,753 $ 4,778,238
Interest and other 117,236 212,589 148,102
---------------------------------------------------
Total Income 1,741,125 4,485,342 4,926,340
---------------------------------------------------
EXPENSES
Property operating 998,052 2,465,118 2,545,471
Depreciation 422,811 695,023 1,184,781
General and administrative 240,495 213,479 173,535
Write-off of assets 6,475 -- --
----------------------------------------------------
Total Expenses 1,667,833 3,373,620 3,903,787
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 73,292 1,111,722 1,022,553
Gain on sale of properties, net -- 4,907,439 --
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 73,292 $ 6,019,161 $ 1,022,553
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
NET INCOME ALLOCATED:
To the General Partner $ 42,703 $ 213,517 $ 213,517
To the Limited Partners 30,589 5,805,644 809,036
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 73,292 $ 6,019,161 $ 1,022,553
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(128,110 UNITS OUTSTANDING):
Income from operations $ 0.24 $ 7.32 $ 6.32
Gain on sale of properties, net -- 38.00 --
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 0.24 $ 45.32 $ 6.32
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996 GENERAL LIMITED
PARTNER PARTNERS TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ -- $ 26,315,490 $ 26,315,490
Net income 213,517 809,036 1,022,553
Distributions ($15.00 per Unit) (213,517) (1,921,650) (2,135,167)
- -------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $ -- $ 25,202,876 $ 25,202,876
Net income 213,517 5,805,644 6,019,161
Distributions ($173.00 per Unit) (213,517) (22,163,030) (22,376,547)
- -------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 $ -- $ 8,845,490 $ 8,845,490
Net income 42,703 30,589 73,292
Distributions ($3.00 per Unit) (42,703) (384,330) (427,033)
- -------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 $ -- $ 8,491,749 $ 8,491,749
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 73,292 $ 6,019,161 $ 1,022,553
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 422,811 695,023 1,184,781
Write-off of assets 6,475 -- --
Gain on sale of properties, net (4,907,439) --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Other assets (157,234) 12,070 836
Accounts payable and accrued expenses 94,863 36,261 (73,169)
Due to general partner and affiliates (8,618) (4,972) 841
Security deposits (1,464) (108,647) 1,180
------------------------------------------------
Net cash provided by operating activities 430,125 1,741,457 2,137,022
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property -- 20,279,729 --
Additions to real estate (21,422) (4,250) (69,956)
-------------------------------------------------
Net cash provided by (used in) investing activities (21,422) 20,275,479 (69,956)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES-
Distributions to partners (14,156,155) (9,181,217) (2,188,546)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (13,747,452) 12,835,719 (121,480)
Cash and cash equivalents, beginning of period 15,150,595 2,314,876 2,436,356
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,403,143 $ 15,150,595 $2,314,876
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (14,090) $ -- $ --
Write-off of accumulated depreciation $ 7,615 $ -- $ --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
Notes to the Consolidated Financial Statements
DECEMBER 31, 1998, 1997 AND 1996
1. ORGANIZATION
ConAm Realty Investors 4 L.P. (formerly Hutton/ConAm Realty Investors 4) (the
"Partnership") was organized as a Limited Partnership under the laws of the
State of California pursuant to a Certificate and Agreement of Limited
Partnership (as subsequently amended, the "Partnership Agreement") dated May
10, 1984. The Partnership was formed for the purpose of acquiring and
operating multifamily residential real estate. The general partners of the
Partnership were RI 3-4 Real Estate Services, Inc. ("RI 3-4"), an affiliate
of Lehman Brothers, Inc. (see below), and ConAm Property Services IV, Ltd.
("CPS IV"), an affiliate of Continental American Properties, Ltd. (the
"General Partners"). On October 8, 1997, CPS IV acquired RI 3-4's co general
partner interest in the Partnership, effective July 1, 1997, pursuant to a
purchase agreement between CPS IV and RI 3-4 dated August 29, 1997. As a
result, CPS IV now serves as the sole general partner (the "General Partner")
of the Partnership. In conjunction with this transaction, the name of the
Partnership was changed from Hutton/ConAm Realty Investors 4 to ConAm Realty
Investors 4 L.P. On January 15, 1999, a majority in interest of Unitholders
agreed to the sell the Partnership's remaining properties and liquidate the
Partnership. The Partnership sold its properties on January 29, 1999 (Note 9)
and expects to liquidate during 1999.
2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
FINANCIAL STATEMENTS The consolidated financial statements are prepared on
the accrual basis of accounting and include the accounts of the Partnership
and its affiliated ventures when the Partnership has a controlling interest
in the ventures. The effect of transactions between the Partnership and its
ventures have been eliminated in consolidation.
INVESTMENTS IN REAL ESTATE Investments in real estate are recorded at cost
less accumulated depreciation and include the initial purchase price of the
property, legal fees, acquisition and closing costs.
Revenue is recognized when earned and expenses (including depreciation) are
recognized when incurred in accordance with generally accepted accounting
principles. Leases are generally for terms of one year or less.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the properties (25 years). Maintenance and repairs
are charged to operations as incurred. Costs incurred for significant
betterments and improvements are capitalized and depreciated over their
estimated useful lives.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in net income for the period.
IMPAIRMENT OF LONG-LIVED ASSETS The Partnership assesses its real estate
investments for impairment whenever events or changes in circumstances
indicate that the carrying amount of the real estate may not be recoverable.
Recoverability of real estate to be held and used is measured by a comparison
of the carrying amount of the real estate to future net cash flows
(undiscounted and without interest) expected to be generated by the real
estate. If the real estate is considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying amount of the real
estate exceeds the fair value of the real estate. At December 31, 1998, the
Partnership's properties were assets to be held and used as the Partnership
did not have the ability to sell the properties without the approval of a
majority of the Unitholders.
INCOME TAXES No provision for income taxes has been made in the financial
statements as the liability for such taxes is that of the partners rather
than the Partnership.
7
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of highly liquid
short-term investments with original maturities of three months or less.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institution's federally
insured limits. The Partnership invests its cash and cash equivalents with
high credit quality federally insured financial institutions or treasury
based money market funds.
USE OF ESTIMATES Management of the Partnership has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
3. THE PARTNERSHIP AGREEMENT
The Partnership Agreement provides that net cash from operations, as defined,
is to be distributed quarterly, 90% to the limited partners and 10% to the
General Partner.
Net loss and all depreciation for any year is to be allocated 99% to the
limited partners and 1% to the General Partner.
Net income before depreciation is to be allocated as follows:
(a) To the extent that net income from operations before depreciation
does not exceed the amount of net cash from operations
distributable to the partners with respect to such year, net income
from operations before depreciation is to be allocated among the
partners, pro rata in accordance with the amount of net cash from
operations distributable to each partner with respect to such year
to the extent thereof; and
(b) To the extent that net income from operations before depreciation
exceeds the amount of net cash from operations distributable to the
partners with respect to such year, such excess is to be allocated
(1) first, 100% to the General Partner, pro rata, in an amount
equal to the excess, if any, of the General Partner's deficit, if
any, in its capital account, over an amount equal to 1% of the
aggregate capital contributions to the Partnership as reduced by
the amount of the General Partner's capital contributions, and (2)
second, 99% to the limited partners and 1% to the General Partner.
Net proceeds from sales or refinancing are to be distributed 100% to the
limited partners until each limited partner has received an amount equal to
his adjusted capital value (as defined) and an annual, cumulative 7% return
thereon. The balance, if any, is to be distributed 85% to the limited
partners and 15% to the General Partner.
Effective July 1, 1997, all General Partner allocations were made solely to
CPS IV.
8
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
4. INVESTMENTS IN REAL ESTATE
The Partnership owns two remaining residential apartment complexes acquired
through investments in joint ventures and limited partnerships as follows:
<TABLE>
<CAPTION>
APARTMENT DATE PURCHASE
PROPERTY NAME UNITS LOCATION ACQUIRED PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Village at the Foothills II 120 Tucson, AZ 5/30/85 $ 7,216,400
Shadowood Village 110 Jacksonville, FL 7/3/86 5,400,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Village at the Foothills II was acquired through a joint venture with an
unaffiliated developer and Shadowood Village was acquired through a limited
partnership with an unaffiliated developer. To each limited partnership and
joint venture, the Partnership assigned its rights to acquire the above
properties and contributed cash equal to the purchase price of the
properties. The Partnership's partners did not make initial capital
contributions to these entities.
On July 20, 1995, the Partnership sold Trails at Meadowlakes and Cypress
Lakes. Trails at Meadowlakes and Cypress Lakes were sold for $8,940,000 and
$8,825,000, respectively, to an unaffiliated institutional buyer. The
Partnership received net proceeds of $17,551,351 from the transaction of
which $5,057,952, representing outstanding principal and interest, was used
to fully satisfy the Partnership's mortgage obligation on Trails at
Meadowlakes. The transaction resulted in a gain on sale of $2,854,884, which
is reflected in the Partnership's consolidated statements of operations for
the year ended December 31, 1995.
On August 22, 1995, the Partnership paid a special distribution of
$14,252,238 to the limited partners. The special distribution was comprised
of net proceeds from the sale of Trails at Meadowlakes and Cypress Lakes and
from Partnership cash reserves.
In 1995, the Partnership recorded a write-down of $477,170 to reduce the
carrying value of River Hill Apartments to its estimated fair value. The
impairment was caused by the need for necessary property improvements and
changing market conditions.
On August 6,1997, the Partnership sold River Hill Apartments to an
unaffiliated institutional buyer for a sales price of $7,275,000. The
Partnership received net proceeds from the sale totaling $7,108,356 and the
transaction resulted in a loss of $249,944, which is reflected in the
Partnership's consolidated statements of operations for the year ended
December 31, 1997. On October 31, 1997, the General Partners paid a special
distribution to Limited Partners representing the net proceeds from the sale.
On December 30, 1997, the Partnership sold Pelican Landing to an unaffiliated
institutional buyer for a sales price of $13,400,000. The Partnership
received net proceeds from the sale totaling $13,171,373 and the transaction
resulted in a net gain of $5,157,383, which is reflected in the Partnership's
consolidated statements of operations for the year ended December 31, 1997. A
distribution in the amount of $103 per Unit was paid to limited partners on
January 21, 1998, and was reflected on the Partnership's Balance Sheet as
"Distribution payable" at December 31, 1997. Distribution payable was
$13,195,330 at December 31, 1997.
The limited partnership agreement of River Hill Apartments substantially
provides that:
a. Net cash from operations of River Hill Apartments is to be
distributed 100% to the Partnership until it has received an
annual, noncumulative return of 10% on its adjusted capital
contribution. Any remaining balance is to be distributed 60% to the
Partnership and 40% to the co-venturer.
9
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
b. Net income of the limited partnership is to be allocated to the
Partnership and the co-venturers basically in accordance with the
distribution of net cash from operations. All net losses and
depreciation are to be allocated to the Partnership.
c. Net proceeds from a sale or refinancing of River Hill Apartments
are to be distributed 100% to the Partnership, until it has
received an amount equal to 110% of its adjusted capital
contribution. Distributions are to then be made 75% to the
Partnership and 25% to the co-venturer, until the Partnership has
received an additional 110% of the Partnership's adjusted capital
contribution. Any remaining balance is to be distributed 50% to the
Partnership and 50% to the co-venturer. In 1997, 100% of the net
proceeds from sale were distributed to the Partnership.
The joint venture and limited partnership agreements of Village at the
Foothills II and Shadowood Village substantially provide that:
a. Available cash from operations is to be distributed 100% to the
Partnership until it has received its annual, noncumulative
preferred return, as defined. Any remaining balance is to be
distributed 99% to the Partnership and 1% to the General Partner.
b. Net income is to be allocated first, proportionately to partners
with negative capital accounts, as defined, until such capital
accounts, as defined, have been increased to zero; then, to the
Partnership up to the amount of any payments made on account of its
preferred return; thereafter, 99% to the Partnership and 1% to the
General Partner. All losses are to be allocated first to the
partners with positive capital accounts, as defined, until such
accounts have been reduced to zero and, then, 99% to the
Partnership and 1% to the General Partner.
c. Income from a sale is to be allocated to the Partnership until the
Partnership's capital accounts, as defined, are equal to the fair
market value of the venture's assets at the date of the amendments;
then, any remaining balance is to be allocated 99% to the
Partnership and 1% to the General Partner. Net proceeds from a sale
or refinancing are to be distributed first to the partners with a
positive capital account balance, as defined; thereafter, 99% to
the Partnership and 1% to the General Partner.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that the fair values be disclosed
for the Partnership's financial instruments. The carrying amount of cash and
cash equivalents, accounts payable and accrued expenses, distributions
payable, due to general partner and affiliates, and security deposits are
reasonable estimates of their fair values due to the short-term nature of
those instruments.
10
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
6. TRANSACTIONS WITH RELATED PARTIES
The following is a summary of fees earned and reimbursable expenses to the
General Partners and affiliates for the years ended December 31, 1998, 1997
and 1996, and the unpaid portion at December 31, 1998:
<TABLE>
<CAPTION>
EARNED AND
UNPAID AT EARNED
DECEMBER 31, ----------------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RI 3-4 Real Estate Services, Inc.
and affiliates -
Out-of-pocket expenses $ -- $ 298 1,236 724
ConAm and affiliates:
Property operating salaries -- 147,532 298,398 307,565
Property management fees 6,853 81,849 220,820 239,560
- ------------------------------------------------------------------------------------------------------------------
TOTAL $ 6,853 $ 229,679 520,454 547,849
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
7. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION
The following is a reconciliation of the net income for financial statement
purposes to net income for federal income tax purposes for the years ended
December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per financial statements $ 73,292 $ 6,019,161 $ 1,022,553
Depreciation deducted for tax purposes in excess
of depreciation expense per financial
statements (unaudited) -- (144,847) (92,628)
Tax basis joint venture net income (loss)
in excess of GAAP basis joint
venture net income (unaudited) (58,334) 1,916,863 (104,176)
Gain on sale of properties
For tax purposes in excess of gain per
Financial statements (unaudited) -- 3,487,244 --
Other (unaudited) (10,850) 10,820 (2,213)
- -------------------------------------------------------------------------------------------------------------------
TAXABLE NET INCOME (UNAUDITED) $ 4,108 $ 11,289,241 $ 823,536
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital for federal income tax purposes as of December 31,
1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital per financial statements $ 8,491,749 $ 8,845,490 $ 25,202,876
Accrued distribution from sale
of Pelican Landing (unaudited) -- 13,195,330 --
Adjustment for cumulative difference between
tax basis net income and net income
per financial statements (unaudited) 3,366,730 3,435,914 (1,834,166)
- -------------------------------------------------------------------------------------------------------------------
PARTNERS' CAPITAL PER INCOME TAX RETURN (UNAUDITED) $ 11,858,479 $ 25,476,734 $ 23,368,710
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, the tax basis of the Partnership's assets was
$12,011,848 and the tax basis of the Partnership's liabilities was $153,369.
The Partnership does not consolidate its investment in joint ventures for
income tax purposes.
8. DISTRIBUTIONS PAID
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognizes specific record dates for
payments within each year. The consolidated statements of cash flows
recognize actual cash distributions paid during the year. The following table
discloses the annual amounts as presented on the consolidated financial
statements:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
PAYABLE DISTRIBUTIONS DISTRIBUTIONS PAYABLE
BEGINNING OF YEAR DECLARED PAID DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 $ 13,729,122 $ 427,033 $ 14,156,155 $ --
1997 533,792 22,376,547 9,181,217 13,729,122
1996 587,171 2,135,167 2,188,546 533,792
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
9. SALE OF PROPERTIES
On January 29, 1999, the Partnership consummated the sale of the Village at
the Foothills II and Shadowood Village to DOC Investors, L.L.C., a Delaware
limited liability company, for a sales price of $9,350,000 (before selling
costs and prorations). As required by the Partnership's Partnership
Agreement, the General Partner solicited the consent of a majority in
interest of the Unitholders to the sale pursuant to a Consent Solicitation
Statement dated December 16, 1998. The requisite consent was obtained on
January 15, 1999.
The Partnership received approximately $9,318,000 of cash proceeds from the
sale, net of closing costs of approximately $32,000.
On February 26, 1999, the Partnership distributed $10,000,267 ($78.06 per
Unit) to the Unitholders and $91,887 to the General Partner.
12
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 4 L.P.:
We have audited the accompanying consolidated balance sheets of ConAm Realty
Investors 4 L.P. (a California limited partnership) and consolidated ventures
(the Partnership), as of December 31, 1998 and 1997, and the related
consolidated statements of operations, partners' capital, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated 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.
As further discussed in Note 9 to the consolidated financial statements, the
Partnership sold substantially all of its assets on January 29, 1999.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ConAm
Realty Investors 4 L.P. and consolidated ventures as of December 31, 1998 and
1997, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
KPMG LLP
San Diego, California
March 12, 1999
13
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Partners of
ConAm Realty Investors 4 L.P.:
We have audited the consolidated balance sheet of ConAm Realty Investors 4
L.P. (formerly Hutton/ConAm Realty Investors 4), a California Limited
Partnership, and Consolidated Ventures as of December 31, 1996 and the
related consolidated statements of operations, partners' capital (deficit)
and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ConAm Realty Investors 4 L.P., a California Limited Partnership, and
Consolidated Ventures as of December 31, 1996, and the consolidated results
of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
14
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUATION
- -----------------------------------------------------------------------------------------------------------------------
COMPARISON OF ACQUISITION COSTS TO DECEMBER 31, 1998 PROPERTY VALUES AND
DETERMINATION OF NET ASSET VALUE PER UNIT AT DECEMBER 31, 1998 (UNAUDITED)
ACQUISITION COST
(PURCHASE PRICE
PLUS GENERAL
DATE OF PARTNERS' NET ASSET VALUE
PROPERTY ACQUISITION ACQUISITION FEES) SALES PRICE (1) DETERMINATION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Village at the Foothills II 05-30-85 $ 7,376,000 $ 4,800,000
Shadowood Village 07-03-86 5,649,540 4,550,000
--------------------
Aggregate Property Value at 12-31-98 $9,350,000
Less estimated transaction costs in escrow (32,000)
------------------
Sales Proceeds 9,318,000
Cash and cash equivalents 1,403,143
Other assets 160,534
------------------
Total assets 10,881,677
------------------
Less:
Liabilities (280,355)
Contingency amounts (2) (509,168)
------------------
Total liabilities (789,523)
------------------
Partnership Net Asset Value (3) 10,092,154
------------------
Net Asset Value Allocated:
Limited Partners 10,000,267
General Partner 91,887
------------------
10,092,154
------------------
NET ASSET VALUE PER UNIT
(128,110) UNITS OUTSTANDING $78.06
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the Partnership's share of the fair market value of the
properties as reflected in the purchase and sale agreements pursuant to
which the properties were sold on January 29, 1999. The purchase prices
contained in such agreements were negotiated and agreed to in
December 1998.
(2) Includes an amount for estimated future costs related to the sale of the
properties and liquidation of the Partnership and an amount the General
Partner determined to set aside for contingencies.
(3) The Partnership Net Asset Value assumes a sale at December 31, 1998 of all
the Partnership's properties at prices equal to the sales prices set forth
in the purchase and sale agreements described in Note (1), payment of all
Partnership liabilities, and the distribution of the proceeds of such sale
and other Partnership cash to the partners.
Since the Partnership sold all of its real property assets in January 1999,
is in dissolution, and is in the process of winding up and liquidating, the
foregoing Partnership Net Asset Value is intended to approximate the
liquidation value of the Partnership and the Net Asset Value Per Unit is
intended to approximate the per Unit amount which is expected to be
distributed to the Limited Partners in connection with the Partnership's
liquidation. The Net Asset Valuation does not take into account the illiquid
nature of an investment in the Units or the fact that at December 31, 1998 a
holder of Units would likely not have been able to sell its Units for the Net
Asset Value Per Unit set forth above. Fiduciaries of Limited Partners which
are subject to ERISA or other provisions of law requiring valuation of Units
should consider all relevant factors, including but not limited to Net Asset
Value Per Unit, in determining the fair market value of the investment in the
Partnership for such purposes.
15
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
CONSOLIDATED VENTURES
-------------------------------------------------------------
VILLAGE AT THE
RESIDENTIAL PROPERTY: FOOTHILLS II SHADOWOOD VILLAGE TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location Tucson, AZ Jacksonville, FL na
Construction date 1984-1985 1985-1986 na
Acquisition date 05-30-85 07-03-86 na
Life on which depreciation in latest
income statements is computed 25 years 25 years na
Initial cost to Partnership -
Land $ 1,584,049 $ 566,000 $ 2,150,049
Buildings and improvements 5,838,595 5,125,065 10,963,660
Costs capitalized subsequent to acquisition -
Land, buildings and improvements 32,557 44,274 76,831
Write-off of building and improvements (14,090) -- (14,090)
Gross amount at which carried at close of period: (1)
Land $ 1,583,965 $ 569,274 $ 2,153,239
Buildings and improvements 5,857,146 5,166,065 11,023,211
- --------------------------------------------------------------------------------------------------------------------------
7,441,111 5,735,339 13,176,450
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation $ 3,270,299 $ 2,697,724 $ 5,968,023
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The aggregate costs for land, buildings and improvements for federal
income tax purposes are $ 12,011,848.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS IN REAL ESTATE:
Beginning of period $ 13,169,118 $ 33,434,084 $ 33,752,728
Additions 21,422 4,250 69,956
Dispositions and disposals (14,090) (20,269,216) (388,600)
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 13,176,450 $ 13,169,118 $ 33,434,084
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION:
Beginning of period $ 5,552,827 $ 9,754,730 $ 8,958,549
Depreciation expense 422,811 695,023 1,184,781
Elimination of accumulated depreciation -- -- (388,600)
Dispositions and disposals (7,615) (4,896,926) --
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 5,968,023 $ 5,552,827 $ 9,754,730
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT.
F-1
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 4 L.P.:
Under date of March 12, 1999, we reported on the consolidated balance sheets
of ConAm Realty Investors 4 L.P. (a California limited partnership) and
consolidated ventures (the Partnership) as of December 31, 1998 and 1997, and
the related consolidated statements of operations, partners' capital, and
cash flows for the years then ended, as contained in the 1998 annual report
to Unitholders. These consolidated financial statements and our report
thereon are incorporated by reference in the 1998 annual report on Form 10-K.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule III. This consolidated financial statement schedule is the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on this consolidated financial statement schedule based on
our audits.
In our opinion, the consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.
KPMG LLP
San Diego, California
March 12, 1999
F-2
<PAGE>
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Our report on the consolidated financial statements of ConAm Realty Investors
4 L.P. (formerly Hutton/ConAm Realty Investors 4), a California Limited
Partnership, and Consolidated Ventures has been incorporated by reference in
this Form 10-K from the Annual Report to Unitholders of ConAm Realty
Investors 4 L.P. for the year ended December 31, 1996. In connection with our
audit of such financial statements, we have also audited the related
financial statement schedule listed in the index of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
F-3
<TABLE> <S> <C>
<PAGE>
<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> 1,403,143
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 13,176,450
<DEPRECIATION> (5,968,023)
<TOTAL-ASSETS> 8,772,104
<CURRENT-LIABILITIES> 280,355
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,491,749
<TOTAL-LIABILITY-AND-EQUITY> 8,772,104
<SALES> 1,623,889
<TOTAL-REVENUES> 1,741,125
<CGS> 0
<TOTAL-COSTS> 998,052
<OTHER-EXPENSES> 663,306
<LOSS-PROVISION> 6,475
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 73,292
<INCOME-TAX> 0
<INCOME-CONTINUING> 73,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,292
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
