CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP, 10QSB, 1999-11-15

CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP
10QSB, 1999-11-15
OPERATORS OF APARTMENT BUILDINGS

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<PAGE>

FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1999
------------------

Commission file number 0-13523
-------------

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
- --------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

Maryland 52-1328767
- ----------------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)

(301) 468-9200
- --------------------------------------------------------------------------
(Issuer's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

Not applicable Not applicable
- -------------------------- ---------------------------------------
(Class) (Outstanding at September 30, 1999)
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

INDEX TO FORM 10-QSB

FOR THE QUARTER ENDED SEPTEMBER 30, 1999

Page
----

PART I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets - September 30, 1999 and
December 31, 1998 . . . . . . . . . . . . . . . . 1

Consolidated Statements of Operations and Accumulated
Losses - for the three and nine months ended
September 30, 1999 and 1998 . . . . . . . . . . . 2

Consolidated Statements of Cash Flows - for the
nine months ended September 30, 1999 and 1998 . . 4

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 . . . . . . . . . . . 5

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 19

PART II. Other Information

Item 3. Defaults upon Senior Securities . . . . . . . . . . 25

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 30

Signature . . . . . . . . . . . . . . . . . . . . . . . . . 31

Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Investments in and advances to partnerships $ 32,690,797 $ 31,835,072
Partnership interest held in escrow 965,089 --
Cash and cash equivalents 8,902,590 10,765,753
Restricted cash equivalents 50,400 50,400
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $397,214 and $389,111, respectively 666,747 708,083
Property purchase costs, net of accumulated amortization of
$369,944 and $365,258, respectively 609,574 652,206
Other assets -- 58,378
------------- -------------

Total assets $ 43,885,197 $ 44,069,892
============= =============

LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships $ 39,423,801 $ 36,976,223
Accrued interest payable 105,063,191 96,821,772
Accounts payable and accrued expenses 162,976 147,537
------------- -------------
Total liabilities 144,649,968 133,945,532
------------- -------------
Commitments and contingencies

Partners' capital (deficit):

Capital paid-in:
General Partners 2,000 2,000
Limited Partners 73,501,500 73,501,500
------------- -------------
73,503,500 73,503,500

Less:
Accumulated distributions to partners (7,654,870) (7,654,870)
Offering costs (7,562,894) (7,562,894)
Accumulated losses (159,050,507) (148,161,376)
------------- -------------
Total partners' deficit (100,764,771) (89,875,640)
------------- -------------
Total liabilities and partners' deficit $ 43,885,197 $ 44,069,892
============= =============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

-1-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

AND ACCUMULATED LOSSES

(Unaudited)

For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Share of income from partnerships $ 721,950 $ 1,166,060 $ 2,863,584 $ 2,136,012
------------- ------------- ------------- -------------

Other revenue and expenses:

Revenue:
Interest and other income 117,877 167,994 365,079 456,150
------------- ------------- ------------- -------------

Expenses:
Interest 4,081,283 4,241,792 13,524,310 12,725,374
Management fee 93,750 93,750 281,250 281,250
General and administrative 58,156 42,116 193,299 144,387
Professional fees 27,373 25,175 80,504 91,350
Amortization of deferred costs 12,881 13,364 38,431 40,092
------------- ------------- ------------- -------------
4,273,443 4,416,197 14,117,794 13,282,453
------------- ------------- ------------- -------------
Total other revenue and expenses (4,155,566) (4,248,203) (13,752,715) (12,826,303)
------------- ------------- ------------- -------------

Net loss (3,433,616) (3,082,143) (10,889,131) (10,690,291)

Accumulated losses, beginning of period (155,616,891) (140,615,311) (148,161,376) (133,007,163)
------------- ------------- ------------- -------------

Accumulated losses, end of period $(159,050,507) $(143,697,454) $(159,050,507) $(143,697,454)
============= ============= ============= =============

</TABLE>

(Continued)

The accompanying notes are an integral part
of these consolidated financial statements.

-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

AND ACCUMULATED LOSSES - Continued

(Unaudited)

For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss allocated to General
Partners (1.51%) $ (51,848) $ (46,540) $ (164,426) $ (161,423)
============= ============= ============= =============

Net loss allocated to Initial and Special
Limited Partners (1.49%) $ (51,161) $ (45,924) $ (162,248) $ (159,285)
============= ============= ============= =============

Net loss allocated to Additional Limited
Partners (97%) $ (3,330,607) $ (2,989,679) $ (10,562,457) $ (10,369,583)
============= ============= ============= =============

Net loss per unit of Additional Limited
Partner Interest based on 73,500 units outstanding $ (45.31) $ (40.68) $ (143.71) $ (141.08)
============= ============= ============= =============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

-3-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

<TABLE>
<CAPTION>
For the nine months ended
September 30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(10,889,131) $(10,690,291)

Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Share of income from partnerships (2,863,584) (2,136,012)
Amortization of discount on purchase money notes 4,748,888 4,574,486
Amortization of deferred costs 38,431 40,092

Changes in assets and liabilities:
Decrease in other assets 58,378 883,060
Increase in accrued interest payable 8,774,819 8,150,888
Payment of purchase money note interest (533,400) (319,885)
Increase (decrease) in accounts payable and accrued expenses 15,439 (81,504)
Decrease in consulting fees payable to related parties -- (8,869)
------------ ------------
Net cash (used in) provided by operating activities (650,160) 411,965
------------ ------------

Cash flows from investing activities:
Receipt of distributions from partnerships 1,088,307 867,329
------------ ------------

Cash flows from financing activities:
Payment of purchase money note principal (2,301,310) (36,113)
------------ ------------

Net (decrease) increase in cash and cash equivalents (1,863,163) 1,243,181

Cash and cash equivalents, beginning of period 10,765,753 10,197,871
------------ ------------

Cash and cash equivalents, end of period $ 8,902,590 $ 11,441,052
============ ============

Supplemental disclosure of cash flow information:

Cash paid during the period for interest $ 533,400 $ 319,885
============ ============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

-4-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

1. BASIS OF PRESENTATION

In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the
accompanying unaudited financial statements reflect all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation of the financial
position of Capital Realty Investors-IV Limited Partnership (the Partnership) as
of September 30, 1999, and the results of its operations for the three and nine
months ended September 30, 1999 and 1998, and its cash flows for the nine months
ended September 30, 1999 and 1998. The results of operations for the interim
period ended September 30, 1999, are not necessarily indicative of the results
to be expected for the full year.

The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and with the
instructions to Form 10-QSB. Certain information and accounting policies and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such instructions. These condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report on Form 10-KSB at December 31, 1998.

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a. Due on investments in partnerships
----------------------------------

The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$39,710,081 (exclusive of unamortized discount on purchase money notes of
$286,280) plus accrued interest of $105,063,191 as of September 30, 1999, are
payable in full upon the earliest of: (1) sale or refinancing of the respective
Local Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity. Purchase money notes in the
aggregate principal amount of $1,370,000 matured on July 27, 1994 but have not
been paid or extended, as discussed below. Purchase money notes in the
aggregate principal amount of $1,330,000 matured on August 31, 1997 and have
been extended to January 3, 2000. Purchase money notes in the aggregate
principal amount of $2,035,000 and $434,000 matured on July 1, 1999 and July 31,
1999, respectively, and have not been paid or extended. A purchase money note
in the principal amount of $434,000 matured on July 31, 1999, and has been
extended to July 31, 2004. A purchase money note in the principal amount of
$2,301,310 matured on July 31, 1999, and was paid in full on July 30, 1999.
Purchase money notes in the aggregate principal amount of $16,397,081 matured
during August and September, 1999, and have not been paid or extended. Purchase
money notes in the aggregate principal amount of $12,195,000 have matured or
will mature in the fourth quarter of 1999, and have not been paid or extended.
Purchase money notes in the aggregate principal amounts of $1,500,000 and
$1,350,000 were due to mature on September 27, 1999 and October 31, 1999,
respectively, and were extended to September 27, 2002 and April 30, 2000,
respectively. The remaining two purchase money notes mature in April 2000
($2,165,000) and September 2026 ($500,000).

-5-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

The purchase money notes, which are nonrecourse to the Partnership, are
generally secured by the Partnership's interest in the respective Local
Partnerships. There is no assurance that the underlying properties will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes' principal and accrued interest when due. If a purchase money note
is not paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest in
the respective Local Partnership. The Partnership's inability to pay certain of
the purchase money note principal and accrued interest balances when due, and
the resulting uncertainty regarding the Partnership's continued ownership
interest in the related Local Partnerships, does not adversely impact the
Partnership's financial condition because the purchase money notes are
nonrecourse and secured solely by the Partnership's interest in the related
Local Partnerships. Therefore, should the investment in any of the Local
Partnerships with maturing purchase money notes not produce sufficient value to
satisfy the related purchase money notes, the Partnership's exposure to loss is
limited because the amount of the nonrecourse indebtedness of each of the
maturing purchase money notes exceeds the carrying amount of the investment in,
and advances to, each of the related Local Partnerships. Thus, even a complete
loss of the Partnership's interest in one of these Local Partnerships would not
have a material adverse impact on the financial condition of the Partnership.
See further discussion of certain purchase money notes, below.

The following chart presents information related to purchase money notes
which have matured or are scheduled to mature through September 30, 2000, and
which remain unpaid or unextended as of November 15, 1999. Excluded from the
following chart are notes which matured through September 30, 1999, and which
have been paid off or extended on or before November 15, 1999. See further
discussion of these purchase money notes, below.

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<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>
Carrying Amount
of Partnership's
Investment in Aggregate Aggregate
and Advances to Principal Accrued
Number of Underlying Local Balance Interest
Purchase Underlying Partnerships as as of Balance as of
Money Note Local Percentage of September Percentage September Percentage September Percentage
(PMN) Maturity Partnerships of Total 30, 1999 of Total 30, 1999 of Total 30, 1999 of Total
- ---------------- ------------ ---------- ---------------- ---------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3rd Quarter 1994 1 3% $ 1,437,840 4% $ 1,370,000 3% $ 6,189,137 6%
3rd Quarter 1999 14 40% 16,064,544 49% 18,866,081 48% 45,082,752 43%
4th Quarter 1999 9 26% 7,094,665 22% 12,195,000 31% 29,034,329 28%
1st Quarter 2000 1 3% -- -% 1,330,000 3% 3,539,153 3%
2nd Quarter 2000 2 5% 3,476,958 11% 3,515,000 9% 16,737,290 16%
---- ----- ----------- ----- ----------- ----- ------------ -----
Total through
9/30/2000 27 77% $28,074,007 86% $37,276,081 94% $100,582,661 96%
==== ===== =========== ===== =========== ===== ============ =====
Total, Local
Partnerships 35 100% $32,690,797 100% $39,710,081 100% $105,063,191 100%
==== ===== =========== ===== =========== ===== ============ =====

</TABLE>

The Managing General Partner is continuing to investigate possible
alternatives to reduce the Partnership's debt obligations. These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, paying off certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes,
refinancing the respective properties' underlying debt, or selling the
underlying real estate and using the Partnership's share of the proceeds to pay
or buy down certain purchase money note obligations. Although the Managing
General Partner has had some success applying these strategies in the past, the
Managing General Partner cannot assure that these strategies will be successful
in the future. Based on preliminary discussions with the holders of purchase
money notes maturing through September 30, 2000, the Managing General Partner
anticipates that, at least in some instances, the noteholders may not be willing
to negotiate any extension or discounted payoff. In such instances, upon
maturity of the purchase money notes, if the purchase money notes remain unpaid,
the noteholders may have the right to foreclose on the Partnership's interest in
the related Local Partnerships. In the event of a foreclosure, the excess of
the nonrecourse indebtedness over the carrying amount of the Partnership's
investment in the related Local Partnership would be deemed cancellation of
indebtedness income which would be taxable to Limited Partners at a federal tax
rate of up to 39.6%. Additionally, in the event of a foreclosure, the
Partnership would lose its investment in the Local Partnership and, likewise,
its share of any future cash flow distributed by the Local Partnership from
rental operations, mortgage debt refinancings, or the sale of the real estate.
Of the 35 Local Partnerships in which the Partnership is invested as of both

-7-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

September 30, 1999 and December 31, 1998, the 27 Local Partnerships with
associated purchase money notes which mature through September 30, 2000 and
which remain unpaid or unextended as of November 15, 1999, represent the
following percentages of the Partnership's total distributions received from
Local Partnerships and share of income from Local Partnerships.

Percentage of Total Partnership's Share of
For the Nine Month Distributions Received Income from
Periods Ending from Local Partnerships Local Partnerships
------------------ ----------------------- ----------------------
<S> <C> <C>
September 30, 1999 53% $1,938,243
September 30, 1998 53% 1,114,079

</TABLE>

Interest expense on the Partnership's purchase money notes for the three
and nine months ended September 30, 1999 was $4,081,283 and $13,524,310,
respectively, and $4,241,792 and $12,725,374 during the three and nine months
ended September 30, 1998, respectively. Amortization of discount on purchase
money notes increased interest expense during the three and nine months ended
September 30, 1999 by $1,148,243 and $4,748,888, respectively, and by $1,524,829
and $4,574,486 during the three and nine months ended September 30, 1998,
respectively. The accrued interest on the purchase money notes of $105,063,191
and $96,821,772 as of September 30, 1999 and December 31, 1998, respectively, is
due on the respective maturity dates of the purchase money notes or earlier, in
some instances, if (and to the extent of a portion thereof) the related Local
Partnership has distributable net cash flow, as defined in the relevant Local
Partnership agreement.

Asbury Tower
------------

The Partnership defaulted on its purchase money note related to Asbury
Tower Associates Limited Partnership (Asbury Tower) on August 31, 1999 when the
note matured and was not paid. The default amount included principal and
accrued interest of $3,732,081 and $9,978,961, respectively. As of November 15,
1999, principal and accrued interest of $3,732,081 and $10,208,619,
respectively, were due. The Partnership and the noteholder have reached an
agreement in principle to extend the maturity date of the purchase money note
until August 31, 2004, and they are negotiating the related documents. There is
no assurance that an extension of the maturity date will be finalized.

-8-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Cedar Point
-----------

The Partnership defaulted on its purchase money note related to Southwest
Development Company (Cedar Point) on August 30, 1999 when the note matured and
was not paid. The default amount included principal and accrued interest of
$1,320,000 and $2,460,115, respectively. As of November 15, 1999, principal and
accrued interest of $1,320,000 and $2,504,338, respectively, were due. The
Partnership is currently negotiating to extend the maturity date of the purchase
money note for five years. There is no assurance that an extension will be
obtained.

Chippewa County
---------------

The Partnership defaulted on its purchase money note related to Chippewa
County Housing Partners (Chippewa County) on August 1, 1999 when the note
matured and was not paid. The default amount included principal and accrued
interest of $860,000 and $2,297,423, respectively. As of November 15, 1999,
principal and accrued interest of $860,000 and $2,344,466 respectively, were
due. The Partnership, together with the Local Partnership and the noteholders,
is currently exploring settlement options in connection with a possible
extension of the maturity date of the purchase money note, while also pursuing a
possible sale of the property or a refinancing of the first mortgage loan
related to Chippewa County. There is no assurance that any such extension, sale
or refinancing will occur.

Cottonwood Park
---------------

The Partnership defaulted on its purchase money note related to Shawnee
Heights Limited Partnership (Cottonwood Park) on August 1, 1999 when the note
matured and was not paid. The default amount included principal and accrued
interest of $975,000 and $2,576,421, respectively. As of November 15, 1999,
principal and accrued interest of $975,000 and $2,667,851, respectively, were
due. The Partnership is currently negotiating to extend the maturity date of
the purchase money note, but the noteholder has preliminarily rejected the
Partnership's offer. The Partnership is exploring other arrangements with the
noteholder. There is no assurance that an extension or an other arrangement
will be obtained.

Crescent Gardens
----------------

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<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

$434,000, effective October 15, 1999. In connection with the terms of the
extension agreement, the Partnership made a payment to the noteholder, to be
applied against accrued but unpaid interest. The terms of the agreement extend
the maturity date to July 31, 2004, require semi-annual interest payments and
reduce the interest rate of the First Crescent Note. The Partnership has not
yet been contacted by the holders of the Second Crescent Note, and thus cannot
predict the course of action with regard to the Second Crescent Note.

Deangelis Manor
---------------

The Partnership defaulted on its purchase money note related to Natick
Associates (Deangelis Manor) on July 1, 1999 when the note matured and was not
paid. The default amount included principal and accrued interest of $1,015,000
and $2,677,971, respectively. As of November 15, 1999, principal and accrued
interest of $1,015,000 and $2,793,430, respectively, were due. The Partnership
is currently negotiating to extend the maturity date or a discounted payoff of
the purchase money note. There is no assurance that an extension or a
discounted payoff will be obtained.

Glenridge Gardens
-----------------

The Partnership defaulted on its purchase money note related to Glenridge
Development Company (Glenridge Gardens) on August 1, 1999 when the note matured
and was not paid. The default amount included principal and accrued interest of
$740,000 and $1,875,229, respectively. As of November 15, 1999, principal and
accrued interest of $740,000 and $1,997,518, respectively, were due. The
Partnership has received a demand letter from the noteholders, and is currently
negotiating to extend the maturity date of the purchase money note for five
years. There is no assurance that an extension will be obtained.

Harborview Apartments
---------------------

The Partnership defaulted on its purchase money notes related to Harborview
Apartments Associates Limited Partnership (Harborview Apartments) on August 1,
1999 when the notes matured and were not paid. The default amount included
principal and accrued interest of $3,000,000 and $5,342,321, respectively. As
of November 15, 1999, principal and accrued interest of $3,000,000 and
$5,457,093 respectively, were due. The Partnership is currently negotiating an
extension of the maturity date or a discounted payoff of the purchase money
notes. There is no assurance that an extension or a discounted payoff will
occur.

-10-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Highland Village
----------------

The Partnership defaulted on its purchase money notes related to Highland
Village Associates (Highland Village) on October 31, 1999 when the notes matured
and were not paid. The default amount included principal and accrued interest
of $1,100,000 and $4,123,565, respectively. As of November 15, 1999, principal
and accrued interest of $1,100,000 and $4,139,428, respectively, were due. The
Partnership is currently negotiating to extend the maturity date of the purchase
money notes. In connection with the proposed extension of the maturity date,
the Managing General Partner, the local managing general partner and the
noteholders are jointly exploring various options to refinance the Massachusetts
Housing Finance Agency (MHFA) and HUD Section 236 interest rate subsidized
mortgage loan related to this property. There is no assurance that an extension
will be obtained, or that a refinancing of the mortgage loan will occur.

Holiday Village
---------------

The Partnership defaulted on its purchase money note related to Holiday
Village Apartments (Holiday Village) on July 27, 1994 when the note matured and
was not paid. The default amount included principal and accrued interest of
$1,370,000 and $2,862,342, respectively. As of November 15, 1999, principal and
accrued interest of $1,370,000 and $6,290,048, respectively, were due. The
Managing General Partner and the noteholder have reached an agreement on a
discounted payoff of the note in connection with a potential sale of the
property agreed to by the Local Partnership and an unrelated third party. There
is no assurance that the sale will be completed, and therefore, that the payoff
of the note at a discount will occur. Should the noteholder begin foreclosure
proceedings on the Partnership's interest in the related Local Partnership, the
Partnership intends to vigorously defend against any action by the noteholder.
However, there is no assurance that the Partnership will be able to retain its
interest in the Local Partnership. The uncertainty about the continued
ownership of the Partnership's interest in the related Local Partnership does
not adversely impact the Partnership's financial condition, as discussed above.

Hometown Village
----------------

The Partnership defaulted on its purchase money note related to Hometown
Villages Limited Partnership (Hometown Village) on August 1, 1999 when the note
matured and was not paid. The default amount included principal and accrued
interest of $1,495,000 and $5,025,603, respectively. As of November 15, 1999,
principal and accrued interest of $1,495,000 and $5,202,648, respectively, were
due. The Partnership, together with the Local Partnership and the noteholders,
is currently exploring a possible extension of the maturity date of the purchase
money note, while also pursuing a possible sale of the property or a refinancing
of the first mortgage loan related to Hometown Village. There is no assurance
that any such extension, sale or refinancing will occur.

-11-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Jewish Federation
-----------------

The purchase money note related to Jewish Federation Apartments Associates
(Jewish Federation), in the principal amount of $1,350,000, was due to mature on
October 31, 1999. In 1997, the Managing General Partner entered into an
agreement with the noteholder to extend the maturity date for five years,
subject to the donation and transfer by the Local Partnership of an unimproved
portion of the property to an entity affiliated with the local managing general
partner and the noteholder. The Local Partnership had entered into an agreement
to make such donation and transfer, but the transaction was denied by HUD in
January 1998. In April 1998, the local managing general partner indicated that
it had received verbal approval from HUD and intended to reapply for financing
with HUD. There is no assurance that such financing will be obtained. On May
21, 1999, the noteholder extended the maturity date of the purchase money note
to April 30, 2000, to allow time for the donation and transfer to occur.

Lakes of Northdale
------------------

The purchase money note related to Lakes of Northdale Limited Partnership
(Lakes of Northdale), in the principal amount of $1,500,000, was due to mature
on September 27, 1999. The Partnership and the noteholder previously agreed,
with the 1996 property mortgage refinancing, to extend the maturity date of the
purchase money note to September 27, 2002, if the Local Partnership completed an
extension of the letter of credit serving as credit enhancement with respect to
its first mortgage debt, which extension occurred on June 28, 1999.
Accordingly, the purchase money note for Lakes of Northdale presently matures on
September 27, 2002.

Mary Allen West Tower
---------------------

On July 30, 1999, the Partnership paid, in full, the purchase money note
related to Galesburg Housing Partners (Mary Allen West Tower). The purchase
money note was in the principal amount of $2,301,310.

Matthew XXV
-----------

The Partnership defaulted on its purchase money note related to Diakonia
Associates (Matthew XXV) on July 1, 1999 when the note matured and was not paid.
The default amount included principal and accrued interest of $1,020,000 and
$2,695,752, respectively. As of November 15, 1999, principal and accrued
interest of $1,020,000 and $2,819,060, respectively, were due. The Partnership
is currently negotiating to extend the maturity date or a discounted payoff of
the purchase money note. There is no assurance that an extension or a
discounted payoff will be obtained.

-12-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Redden Gardens
--------------

The Partnership defaulted on its purchase money note related to Redden
Development Company (Redden Gardens) on August 31, 1997 when the note matured
and was not paid. The default amount included principal and accrued interest of
$1,330,000 and $2,783,593, respectively. The noteholders have extended the
maturity date of the purchase money note to January 2000. In connection with
the extension, the Partnership placed in escrow documents transferring its
interest in Redden Gardens to the noteholders, to be released to the noteholders
upon a future default by the Partnership on the purchase money note. The
uncertainty about the continued ownership of the Partnership's interest in the
related Local Partnership does not adversely impact the Partnership's financial
condition, as discussed above.

Due to the possible transfer of the Partnership's interest in the Local
Partnership to the noteholders, the Partnership's basis in the Local
Partnership, which was $965,089 as of September 30, 1999, has been reclassified
to partnership interest held in escrow in the accompanying consolidated
financial statements.

Riverview Manor
---------------

The Partnership defaulted on its purchase money notes related to Riverview
Manor Company Limited Partnership (Riverview Manor) on September 30, 1999 when
the notes matured and were not paid. The default amount included principal and
accrued interest of $740,000 and $1,853,014, respectively. As of November 15,
1999, principal and accrued interest of $740,000 and $1,869,104, respectively,
were due. The Partnership is currently negotiating with the noteholders to
extend the maturity date of the purchase money notes for five years. There is
no assurance that an extension will be obtained.

Scoville Center
---------------

The Partnership defaulted on its purchase money notes related to Beloit
Housing Partners (Scoville Center) on October 1, 1999 when the notes matured and
were not paid. The default amount included principal and accrued interest of
$1,400,000 and $2,123,397, respectively. As of November 15, 1999, principal and
accrued interest of $1,400,000 and $2,139,123, respectively, were due. The
Managing General Partner is currently exploring settlement options in connection
with a sale of the property or a refinancing of the first mortgage loan related
to Scoville Center. There is no assurance that any settlement in connection
with a sale or refinancing will occur.

Thornwood House
---------------

-13-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

$1,775,000 and $3,229,230, respectively. As of November 15, 1999, principal and
accrued interest of $1,775,000 and $3,277,442, respectively, were due. The
Partnership is currently negotiating to extend the maturity date of the purchase
money notes for five years. There is no assurance that an extension will be
obtained.

Valley View
-----------

The Partnership defaulted on its purchase money notes related to Valley
View Associates (Valley View) on September 1, 1999 when the notes matured and
were not paid. The default amount included principal and accrued interest of
$920,000 and $1,788,829, respectively. As of November 15, 1999, principal and
accrued interest of $920,000 and $1,813,790, respectively, were due. The
Partnership, together with the Local Partnership and the noteholders, are
currently exploring a possible settlement in connection with a possible sale of
the property. There is no assurance that a sale will occur.

Westport Village
----------------

The Partnership defaulted on its purchase money notes related to Westport
Associates (Westport Village) on September 1, 1999 when the notes matured and
were not paid. The default amount included principal and accrued interest of
$840,000 and $1,615,644, respectively. As of November 15, 1999, principal and
accrued interest of $840,000 and $1,638,271, respectively, were due. The
Partnership and the noteholders are currently exploring various settlement
options. There is no assurance that any settlement will be reached.

Wollaston Manor
---------------

The Partnership defaulted on its purchase money notes related to Wollaston
Manor Associates (Wollaston Manor) on October 1, 1999 when the notes matured and
were not paid. The default amount included principal and accrued interest of
$2,125,000 and $4,111,380, respectively. As of November 15, 1999, principal and
accrued interest of $2,125,000 and $4,145,364, respectively, were due. The
Partnership is currently negotiating a discounted payoff of the purchase money
notes in conjunction with a possible sale of the property. There is no
assurance that a sale of the property resulting in a discounted payoff will
occur.

b. Advances to Local Partnerships
------------------------------

Lakes of Northdale
------------------

To cover operating deficits incurred in prior years by Lakes of Northdale,
the Partnership advanced funds totaling $54,500 as of both September 30, 1999
and December 31, 1998. No advances have been made to Lakes of Northdale since
September 1989. These non-interest bearing advances are payable from cash flow

-14-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

of Lakes of Northdale after payment of first mortgage debt service and after
satisfaction by the Partnership of certain other interest obligations on the
purchase money notes relating to the Local Partnership. For financial reporting
purposes, these advances have been reduced to zero by the Partnership as a
result of losses at the Local Partnership level during prior years.

c. Property matters
----------------
Garden Court
------------

On December 31, 1998, Garden Court Associates Limited Partnership sold the
Garden Court property. The net proceeds to the Partnership of $50,000 were
received on March 2, 1999.

d. Summarized financial information
--------------------------------

Combined statements of operations for the 35 and 36 Local Partnerships in
which the Partnership is invested as of September 30, 1999 and 1998,
respectively, follow. The combined statements have been compiled from
information supplied by the management agents of the projects and are unaudited.

-15-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>

For the three months ended For the nine months ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 8,920,685 $ 10,165,890 $ 25,722,612 $ 27,152,306
Other, principally interest 614,005 582,609 1,797,063 1,696,993
------------ ------------ ------------ ------------
Total revenue 9,534,690 10,748,499 27,519,675 28,849,299
------------ ------------ ------------ ------------

Expenses:
Operating and other 5,849,348 5,963,068 15,562,097 16,766,374
Interest 1,456,525 2,073,982 4,369,594 5,445,477
Depreciation and amortization 1,816,618 2,072,115 5,449,865 5,723,249
------------ ------------ ------------ ------------
Total expenses 9,122,491 10,109,165 25,381,556 27,935,100
------------ ------------ ------------ ------------
Net income $ 412,199 $ 639,334 $ 2,138,119 $ 914,199
============ ============ ============ ============

</TABLE>

As of both September 30, 1999 and December 31, 1998, the Partnership's
share of cumulative losses to date for nine of the 35 Local Partnerships
exceeded the amount of the Partnership's investments in and advances to those
Local Partnerships by $12,811,509 and $12,157,676, respectively. As the
Partnership has no further obligation to advance funds or provide financing to
these Local Partnerships, the excess losses have not been reflected in the
accompanying consolidated financial statements.

3. AFFORDABLE HOUSING LEGISLATION

President Clinton signed the Fiscal Year 1998 HUD appropriations bill into
law, effective October 1, 1997. The legislation allowed all Section 8 HAP
contracts with rents at less than 100% of fair market rents which expired
between October 1997 and September 1998 to be renewed for one year. In the case
of Section 8 HAP contracts with rents that exceeded 100% of fair market rents,
these contracts could be renewed for one year, but these rents were reduced to
100% of fair market rents (Mark-to-Market). As of the beginning of Fiscal Year
1999 (October 1, 1998), all expiring contracts with rents exceeding comparable
market rents, and properties with mortgage loans insured by the Federal Housing
Administration (FHA), were subject to the Mark-to-Market legislation.

-16-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

3. AFFORDABLE HOUSING LEGISLATION - Continued

Mark-to-Market implementation will reduce rental income at properties which
are currently subsidized at higher-than-market rental rates, and will therefore
lower cash flow available to meet mortgage payments and operating expenses.
Each affected property will undergo debt restructuring according to terms
determined by an individual property and operations evaluation. This will
involve reducing the first mortgage loan balance to an amount supportable by the
property, taking into account the property's operating expenses and reduced
income. The balance of the amount written down from the first mortgage loan
will be converted to a non-performing but accruing (soft) second mortgage loan.

Five properties in which the Partnership is invested may be affected by the
Mark-to-Market program since they have Section 8 HAP contracts expiring in 1999
and 2000. Of these five properties, rent studies for three properties indicate
that the current HAP rents are below fair market rents, and therefore these
properties should not be subject to a mark-to-market restructuring. A rent
study is being performed for the fourth property. The fifth property did not
renew its contract when it expired in June 1999. Properties with expiring HAP
contract rents greater than 100% of fair market rents in the area where each
property is located may be affected immediately by the new legislation. These
five properties are as follows.

-17-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

3. AFFORDABLE HOUSING LEGISLATION - Continued

<TABLE>
<CAPTION>
Units Original Renewed
Authorized for Expiration of Expiration of
Number of Rental Assistance Section 8 Section 8
Property Rental Units Under Section 8 HAP Contract HAP Contract
-------- ------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Cottonwood Park 126 6 06/30/98 06/30/99 (1)
Glenridge Gardens 120 24 05/31/99 (2)
Pilgrim Tower North 258 205 10/31/98 02/29/00
Redden Gardens 150 29 09/30/98 09/30/00
Tradewinds Terrace 122 44 09/30/98 04/30/00
---- ---
Total 776 308
==== ===

</TABLE>

(1) The Section 8 HAP contract was not renewed at the election of the Managing
General Partner.
(2) The Managing General Partner expects that this Section 8 HAP Contract will
be renewed for one year upon expiration.

With the uncertainty of continued project-based Section 8 subsidies for
properties with expiring HAP contracts, there is no assurance that these rental
properties will be able to maintain the rental income and occupancy levels
necessary to pay operating costs and debt service. As a result, it is not
possible to predict the impact on the Local Partnerships and the resulting
impact on the Partnership at this time.

There is a new HUD-sponsored initiative known as the Emergency Initiative
to Preserve Below-Market Project Based Section 8 Multifamily Housing Stock
("Mark-up-to-Market"). Under this initiative, properties with expiring Section
8 contracts which are located in high-rent areas as defined by HUD are eligible
for rent increases which would be necessary to bring Section 8 rents in line
with market rate rents. For properties with subsidized FHA loans, the market
rents are reduced to take into account the benefits the property is already
receiving from the below-market rate interest rate by means of a HUD determined
Interest Subsidy Adjustment Factor. The purpose of this initiative is to
incentivize owners of properties with expiring Section 8 contracts not to
convert these properties to market rate housing.

In return for receiving market rate rents under Mark-up-to-Market, the
property owner must enter into a five year conditional Section 8 contract with
HUD, subject to the annual availability of funding by Congress. In addition,
property owners who enter into the Mark-up-to-Market program will receive a
waiver from the cash flow restriction imposed on the property by the limited
dividend limitation.

-18-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1999 and 1998

(Unaudited)

4. RELATED-PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership. The Partnership paid $36,389 and $127,764 for the
three and nine months ended September 30, 1999, respectively, and $22,488 and
$84,814 for the three and nine months ended September 30, 1998, respectively, as
direct reimbursement of expenses incurred on behalf of the Partnership. Such
expenses are included in the accompanying consolidated statements of operations
as general and administrative expenses. Additionally, in accordance with the
terms of the Partnership Agreement, the Partnership is obligated to pay the
Managing General Partner an annual incentive management fee (the Management Fee)
after all other expenses of the Partnership are paid. The Partnership paid the
Managing General Partner a Management Fee, as discussed above, of $93,750 and
$281,250 for the three and nine months ended September 30, 1999, respectively,
and like amounts for the three and nine months ended September 30, 1998,
respectively.

The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the
property it owns, payable under certain conditions upon the sale of an
investment in a Local Partnership or the property it owns. The payment of the
fee is subject to certain restrictions, including the achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners. The Managing General Partner and/or its affiliates earned net fees
for services relating to the sale of River Run of $26,606 on August 27, 1996.
Of this amount, $17,737 was paid by the Partnership on December 20, 1996. On
March 24, 1998, the remaining balance of $8,869 was paid by the Partnership.

-19-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------

Capital Realty Investors-IV Limited Partnership's (the Partnership)
Management's Discussion and Analysis of Financial Condition and Results of
Operations section contains information that may be considered forward looking,
including statements regarding the effect of governmental regulations. Actual
results may differ materially from those described in the forward looking
statements and will be affected by a variety of factors including national and
local economic conditions, the general level of interest rates, governmental
regulations affecting the Partnership and interpretations of those regulations,
the competitive environment in which the Partnership operates, and the
availability of working capital.

General
-------

Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies. The Managing General Partner has been working to
develop strategies to sell or refinance certain properties pursuant to programs
developed by these agencies. These programs may include opportunities to sell
the property to a qualifying purchaser who would agree to maintain the property
as low to moderate income housing in perpetuity, or to refinance the property,
or to obtain supplemental financing. The Managing General Partner continues to
monitor certain state housing agency programs, and/or programs provided by
certain lenders, to ascertain whether the properties would qualify within the
parameters of a given program and whether these programs would provide an
appropriate economic benefit to the limited partners of the Partnership.

Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of project-based Section 8 Rental Housing Assistance Payments
(HAP) provided by the U.S. Department of Housing and Urban Development (HUD)
pursuant to Section 8 HAP contracts. President Clinton signed the Fiscal Year
1998 HUD appropriations bill into law, effective October 1, 1997. The
legislation allowed all Section 8 contracts with rents at less than 100% of fair
market rents which expired between October 1997 and September 1998 to be renewed
for one year. In the case of Section 8 HAP contracts with rents that exceeded
100% of fair market rents, these contracts could be renewed for one year, but
these rents were reduced to 100% of fair market rents (Mark-to-Market). At the
beginning of Fiscal Year 1999 (October 1, 1998), all expiring contracts with
rents exceeding comparable market rents, and properties with mortgage loans
insured by the Federal Housing Administration (FHA), were subject to the Mark-
to-Market legislation.

-20-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

study is being performed for the fourth property. The fifth property did not
renew its contract when it expired in June 1999. Properties with expiring HAP
contract rents greater than 100% of fair market rents in the area where each
property is located may be affected immediately by the new legislation.

In many instances, the mark-to-market rental rate restructuring may require
the write down of an FHA-insured mortgage loan, which would trigger cancellation
of indebtedness income to the partners, a taxable event, even though no actual
cash is received. Additionally, if the existing first mortgage loan is
bifurcated into a second mortgage loan, the newly created second mortgage loan
will accrue interest at a below-market rate; however, the Internal Revenue
Service issued a ruling in July 1998 that concluded that the below-market rate
of interest will not generate additional ordinary income. Each property subject
to Mark-to-Market will be affected in a different manner, and it is very
difficult to predict the exact form of restructuring, or potential tax
liabilities to the limited partners, at this time.

The Managing General Partner is considering new strategies to deal with the
ever changing environment of affordable housing policy. The Section 236 and
Section 221(d)(3) mortgage loans may be eligible for pre-payment in their 18th
year or later. Properties with expiring Section 8 HAP contracts may become
convertible to market-rate apartment properties. Currently there are few
lenders that will provide financing either to prepay the existing mortgage loans
of these types or provide additional funds to allow a property to convert to
market-rate units. Where opportunities exist, the Managing General Partner will
continue to work with the Local Partnerships to develop strategies that make
economic sense for all parties involved.

-21-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Financial Condition/Liquidity
-----------------------------

The Partnership's liquidity, with unrestricted cash resources of $8,902,590
($117.49 per Additional Limited Partner unit) and $10,765,753 ($142.08 per
Additional Limited Partner unit) as of September 30, 1999 and December 31, 1998,
respectively, along with anticipated future cash distributions from the Local
Partnerships, are expected to be adequate to meet its current and anticipated
operating cash needs. However, see the discussion below regarding the upcoming
maturity of many of the Partnership's purchase money notes. As of November 15,
1999, $50,400 of cash resources were restricted for future interest payments on
one of the purchase money notes. As of November 15, 1999, there were no
material commitments for capital expenditures.

-22-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Partnerships with maturing purchase money notes not produce sufficient value to
satisfy the related purchase money notes, the Partnership's exposure to loss is
limited because the amount of the nonrecourse indebtedness of each of the
maturing purchase money notes exceeds the carrying amount of the investment in,
and advances to, each of the related Local Partnerships. Thus, even a complete
loss of the Partnership's interest in one of these Local Partnerships would not
have a material adverse impact on the financial condition of the Partnership.
See further discussion of certain purchase money notes in the notes to
consolidated financial statements.

-23-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Carrying Amount
of Partnership's
Investment in Aggregate Aggregate
and Advances to Principal Accrued
Number of Underlying Local Balance Interest
Purchase Underlying Partnerships as as of Balance as of
Money Note Local Percentage of September Percentage September Percentage September Percentage
(PMN) Maturity Partnerships of Total 30, 1999 of Total 30, 1999 of Total 30, 1999 of Total
- ---------------- ------------ ---------- ---------------- ---------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3rd Quarter 1994 1 3% $ 1,437,840 4% $ 1,370,000 3% $ 6,189,137 6%
3rd Quarter 1999 14 40% 16,064,544 49% 18,866,081 48% 45,082,752 43%
4th Quarter 1999 9 26% 7,094,665 22% 12,195,000 31% 29,034,329 28%
1st Quarter 2000 1 3% -- -% 1,330,000 3% 3,539,153 3%
2nd Quarter 2000 2 5% 3,476,958 11% 3,515,000 9% 16,737,290 16%
---- ----- ----------- ----- ----------- ----- ------------ -----
Total through
9/30/2000 27 77% $28,074,007 86% $37,276,081 94% $100,582,661 96%
==== ===== =========== ===== =========== ===== ============ =====
Total, Local
Partnerships 35 100% $32,690,797 100% $39,710,081 100% $105,063,191 100%
==== ===== =========== ===== =========== ===== ============ =====

</TABLE>

-24-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

following percentages of the Partnership's total distributions received from
Local Partnerships and share of income from Local Partnerships.

</TABLE>

The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
For the nine months ended September 30, 1999 and 1998, the receipt of
distributions from Local Partnerships was adequate to support operating cash
requirements. Cash and cash equivalents decreased during the nine months ended
September 30, 1999, as net cash used in operating activities and to pay off one
purchase money note exceeded receipt of distributions from partnerships.

The Partnership made a cash distribution of $735,000 ($10.00 per Additional
Limited Partner unit) to the Additional Limited Partners from cash resources
accumulated from operations and distributions from partnerships on November 5,
1999, to holders of record as of October 1, 1999. The Managing General Partner
intends to retain all of the Partnership's remaining undistributed cash for the
possible repayment, prepayment or retirement of the Partnership's outstanding
purchase money notes related to the Local Partnerships.

-25-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Results of Operations
---------------------

The Partnership's net loss for the three months ended September 30, 1999
increased from the corresponding period in 1998 primarily due to an decrease in
share of income from partnerships generally due to an increase in operating
expenses at three properties. Contributing to the increase in the Partnership's
net loss was an increase in general and administrative expenses primarily due to
higher reimbursed payroll costs. Partially offsetting the increase in the
Partnership's net loss were a decrease in interest expense due to lower
amortization of discount on purchase money notes, and an increase in interest
and other income due to rising rates earned on cash and cash equivalents.

The Partnership's net loss for the nine months ended September 30, 1999
increased from the corresponding period in 1998 primarily due to an increase in
interest expense due to higher amortization of discount on purchase money notes
during the first part of the 1999 period, an increase in general and
administrative expenses as discussed above, and a decrease in interest and other
income due to lower cash and cash equivalent balances. Offsetting the increase
in the Partnership's net loss was an increase in share of income from
partnerships due to generally lower operating expenses at the properties.

For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships. As
a result, the Partnership's recognized losses for the three and nine months
ended September 30, 1999 did not include losses of $217,945 and $653,833,
respectively, compared to excluded losses of $538,581 and $1,219,462,
respectively, for the three and nine months ended September 30, 1998.

No other significant changes in the Partnership's operations have taken
place during this period.

Year 2000 Computer Issue
------------------------

The Year 2000 ("Y2K") computer issue refers to the inability of many
computer systems in use today to recognize "00" in the date field as the year
2000 and to recognize the year 2000 as a leap year. The Y2K problem arose
because, for many years, computer software programs, including programs embedded
in hardware, utilized only the last two digits to specify the year with the
assumption that the first two digits were "19." As a result, such programs may
not be able to recognize and process dates beyond 1999; rather, they may
recognize and process "00," "01," "02,", etc., incorrectly as 1900, 1901, 1902,
instead of as 2000, 2001, 2002. In the opinion of computer experts, this could
cause such programs to create erroneous results, malfunction, or fail completely
unless corrective measures are taken.

The Partnership utilizes software and related computer technologies
essential to its operations that will be affected by the Y2K issue. To address
the issue, the Managing General Partner has developed and is currently
implementing a plan (the "Y2K Project") designed to ensure that the Y2K date
change will not have an adverse impact on the Partnership's operations. The Y2K
Project is on schedule and the Managing General Partner expects completion by
the end of 1999. The Y2K Project consists of four phases -- Planning,

-26-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Assessment, Implementation and Testing. The Planning Phase began early in 1998
and is complete. Under the Planning Phase, the Managing General Partner
conducted an inventory of all internal hardware and software systems, data
interfaces, business operations and non-information technology functions which
may be susceptible to the Y2K issue. This phase was completed at the end of
November, 1998. Under the next phase, the Assessment Phase, all applications
and functions identified in the Planning Phase were analyzed to determine Y2K
compliance and the materiality of each identified risk. In the event of
noncompliance for material risks, timetables for corrective action, as well as
estimated costs to achieve compliance, were determined. This phase was
completed during the first quarter of 1999. The Implementation Phase is now
underway. Renovation and replacement of existing internal hardware and software
systems has begun and completion is expected by December 1999. Additionally,
the Managing General Partner is currently working with third party vendors,
service providers, Local Partnership managing general partners, and Local
Partnership property managers, to verify their Y2K compliance, with completion
expected by December 1999. The Testing Phase, which includes testing of
internal applications as well as some third party systems, began during January
1999 and will continue throughout 1999. Contingency planning commenced during
the fourth quarter 1998 and will be completed by year-end 1999. The Managing
General Partner does not expect the expense associated with the Y2K Project to
be material.

PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------

Asbury Tower
------------

Cedar Point
-----------

-27-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Continued
-------------------------------

Chippewa County
---------------

The Partnership defaulted on its purchase money note related to Chippewa
County Housing Partners (Chippewa County) on August 1, 1999 when the note
matured and was not paid. The default amount included principal and accrued
interest of $860,000 and $2,297,423, respectively. As of November 15, 1999,
principal and accrued interest of $860,000 and $2,344,466, respectively, were
due. The Partnership, together with the Local Partnership and the noteholders,
is currently exploring settlement options in connection with a possible
extension of the maturity date of the purchase money note, while also pursuing a
possible sale of the property or a refinancing of the first mortgage loan
related to Chippewa County. There is no assurance that any such extension, sale
or refinancing will occur.

Cottonwood Park
---------------

Crescent Gardens
----------------

The Partnership defaulted on its two purchase money notes related to
Crescent Gardens Associates Limited Partnership (Crescent Gardens) on July 31,
1999 when the notes matured and were not paid. The default amount included
aggregate principal and accrued interest of $868,000 and $1,974,004,
respectively. As of November 15, 1999, aggregate principal and accrued interest
of $434,000 and $1,032,057, respectively, were due on one of these notes. The
Partnership successfully negotiated an agreement to extend the maturity date of
one of the purchase money notes (First Crescent Note) in the principal amount of
$434,000, effective October 15, 1999. In connection with the terms of the
extension agreement, the Partnership made a payment to the noteholder, to be
applied against accrued but unpaid interest. The terms of the agreement extend
the maturity date to July 31, 2004, require semi-annual interest payments and
reduce the interest rate of the First Crescent Note. The Partnership has not
yet been contacted by the holders of the Second Crescent Note, and thus cannot
predict the course of action with regard to the Second Crescent Note.

-28-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Continued
-------------------------------

Deangelis Manor
---------------

Glenridge Gardens
-----------------

Harborview Apartments
---------------------

The Partnership defaulted on its purchase money notes related to Harborview
Apartments Associates Limited Partnership (Harborview Apartments) on August 1,
1999 when the notes matured and were not paid. The default amount included
principal and accrued interest of $3,000,000 and $5,342,321, respectively. As
of November 15, 1999, principal and accrued interest of $3,000,000 and
$5,457,093, respectively, were due. The Partnership is currently negotiating an
extension of the maturity date or a discounted payoff of the purchase money
notes. There is no assurance that an extension or a discounted payoff will
occur.

Highland Village
----------------

-29-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Continued
-------------------------------

Holiday Village
---------------

Hometown Village
----------------

Matthew XXV
-----------

Redden Gardens
--------------

-30-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Continued
-------------------------------

related Local Partnership does not adversely impact the Partnership's financial
condition, as discussed above.

Riverview Manor
---------------

Scoville Center
---------------

Thornwood House
---------------

The Partnership defaulted on its purchase money notes related to Thornwood
House Associates (Thornwood House) on August 30, 1999 when the notes matured and
were not paid. The default amount included principal and accrued interest of
$1,775,000 and $3,229,230, respectively. As of November 15, 1999, principal and
accrued interest of $1,775,000 and $3,277,442, respectively, were due. The
Partnership is currently negotiating to extend the maturity date of the purchase
money notes for five years. There is no assurance that an extension will be
obtained.

-31-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Continued
-------------------------------

Valley View
-----------

The Partnership defaulted on its purchase money notes related to Valley
View Associates (Valley View) on September 1, 1999 when the notes matured and
were not paid. The default amount included principal and accrued interest of
$920,000 and $1,788,829, respectively. As of November 15, 1999, principal and
accrued interest of $920,000 and $1,813,790, respectively, were due. The
Partnership together with the Local Partnership and the noteholders are
currently exploring a possible settlement in connection with a possible sale of
the property. There is no assurance that a sale will occur.

Westport Village
----------------

Wollaston Manor
---------------

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------

a. None

b. No Reports on Form 8-K were filed with the Commission during the
quarter ended September 30, 1999.

All other items are not applicable.

-32-
<PAGE>
SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
-----------------------------------------------
(Registrant)

by: C.R.I., Inc.
-------------------------------------------
Managing General Partner

November 15, 1999 by: /s/ Michael J. Tuszka
- ----------------- ---------------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
and Principal Accounting Officer)

-33-
<PAGE>

EXHIBIT INDEX
-------------

Exhibit Method of Filing
- ------- -----------------------------

27 Financial Data Schedule Filed herewith electronically

-34-

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
THIRD QUARTER 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 10-QSB.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,902,590
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,885,197
<CURRENT-LIABILITIES> 0
<BONDS> 144,486,992
0
0
<COMMON> 0
<OTHER-SE> (100,764,771)
<TOTAL-LIABILITY-AND-EQUITY> 43,885,197
<SALES> 0
<TOTAL-REVENUES> 3,228,663
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 593,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,524,310
<INCOME-PRETAX> (10,889,131)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,889,131)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,889,131)
<EPS-BASIC> (143.71)
<EPS-DILUTED> (143.71)

</TABLE>