FORM 10-Q
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 Quarter Ended Commission File Number
June 30, 1999 0-14386
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
(Exact Name of Registrant as specified in its charter)
Delaware 16-1245153
(State of Formation) (IRS Employer Identification Number)
2350 North Forest Road
Suite 12 A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-0280
Indicate by a check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No_____
Indicate by a 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-Q or any
amendment to this Form 10-Q. (X)
As of June 30, 1999 the issuer had 23,365.9 units of limited partnership
interest outstanding.
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
INDEX
-----
PAGE NO.
--------
<S> <C>
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
June 30, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended June 30, 1999 and 1998 4
Statements of Operations -
Six Months Ended June 30, 1999 and 1998 5
Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998 6
Statements of Partners' (Deficit) -
Six Months Ended June 30, 1999 and 1998 7
Notes to Financial Statements 8 - 18
PART II: MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS 19 - 22
-------------------------------------------
PART III: FINANCIAL DATA SCHEDULE
- --------- -----------------------
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-2-
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
BALANCE SHEETS
--------------
June 30, 1999 and December 31, 1998
-----------------------------------
(Unaudited)
June 30 December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Property, at cost:
Land $ 626,300 $ 626,300
Buildings and improvements 11,385,396 11,385,396
Furniture, fixtures and equipment 1,237,500 1,237,500
----------------- ----------------
13,249,196 13,249,196
Less accumulated depreciation 5,686,124 5,598,075
----------------- ----------------
Property, net 7,563,072 7,651,121
Cash 40,013 29,981
Escrow deposits 430,074 437,505
Prepaid expenses 6,592 69,613
Mortgage costs, net of accumulated amortization
of $75,340 and $69,127 176,767 182,879
Other assets 45,938 13,970
----------------- ----------------
Total Assets $ 8,262,456 $ 8,385,069
================= ================
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Mortgages payable $ 7,222,879 $ 7,241,726
Note payable - other 118,331 208,331
Accounts payable and accrued expenses 641,453 670,189
Accounts payable - affiliates 3,327,823 2,780,685
Accrued interest 27,781 27,781
Security deposits and prepaid rents 174,981 147,117
----------------- ----------------
Total Liabilities 11,513,248 11,075,829
----------------- ----------------
Minority interest in joint venture (36,954) (36,954)
----------------- ----------------
Partners' (Deficit):
General partners (545,453) (528,652)
Limited partners (2,668,385) (2,125,154)
----------------- ----------------
Total Partners' (Deficit) (3,213,838) (2,653,806)
----------------- ----------------
Total Liabilities and Partners' (Deficit) $ 8,262,456 $ 8,385,069
================= ================
</TABLE>
See notes to financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended June 30, 1999 and 1998
-----------------------------------------
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 509,802 $ 785,611
Interest and other income 33,425 37,759
----------------- -----------------
Total income 543,227 823,370
----------------- -----------------
Expenses:
Property operations 283,934 652,656
Interest:
To affiliates 226,581 25,923
Other 150,509 288,698
Depreciation and amortization 91,156 206,233
Administrative:
To affiliates 83,238 112,455
Other 18,283 220,248
----------------- -----------------
Total expenses 853,701 1,506,213
----------------- -----------------
Loss before allocated loss from joint venture and (310,474) (682,843)
extraordinary item
Loss allocated to minority interest - 19,779
Extraordinary item:
Gain on sales - 3,559,333
----------------- -----------------
Net (loss) income $ (310,474) $ 2,896,269
================= =================
Loss per limited partnership unit before
extraordinary item $ (13.29) $ (27.53)
Gain on sales per limited partnership unit - 147.76
----------------- -----------------
(Loss) income per limited partnership unit $ (13.29) $ 120.23
================= =================
Distributions per limited partnership unit $ - $ -
================= =================
Weighted average number of
limited partnership units
outstanding 23,366 23,366
================= =================
</TABLE>
See notes to financial statements
-4-
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<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 960,441 $ 1,455,061
Interest and other income 60,592 68,121
----------------- ----------------
Total income 1,021,033 1,523,182
----------------- ----------------
Expenses:
Property operations 623,033 1,247,459
Interest:
To affiliates 304,240 147,143
Other 297,535 625,277
Depreciation and amortization 94,262 429,375
Administrative:
To affiliates 164,526 204,962
Other 97,469 342,913
----------------- ----------------
Total expenses 1,581,065 2,997,129
----------------- ----------------
Loss before allocated loss from joint venture and
extraordinary item (560,032) (1,473,947)
Loss allocated to minority interest - 33,302
Extraordinary item:
Gain on sales - 3,559,333
----------------- ----------------
Net (loss) income $ (560,032) $ 2,118,688
================= ================
Loss per limited partnership unit before
extraordinary item $ (23.25) $ (59.81)
Gain on sales per limited partnership unit - 147.76
----------------- ----------------
(Loss) income per limited partnership unit $ (23.25) $ 87.95
================= ================
Distributions per limited partnership unit $ - $ -
================= ================
Weighted average number of
limited partnership units
outstanding 23,366 23,366
================= ================
</TABLE>
See notes to financial statements
-5-
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT)
---------------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(Unaudited)
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1998 $ (710,608) 23,366 $ (3,877,035)
Net income 63,561 - 2,055,127
----------------- -------------- ------------------
Balance, June 30, 1998 $ (647,047) 23,366 $ (1,821,908)
================= ============== ==================
Balance, January 1, 1999 $ (528,652) 23,366 $ (2,125,154)
Net loss (16,801) - (543,231)
----------------- -------------- ------------------
Balance, June 30, 1999 $ (545,453) 23,366 $ (2,668,385)
================= ============== ==================
</TABLE>
See notes to financial statements
-6-
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $ (560,032) $ 2,118,688
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Depreciation and amortization 94,262 429,375
Loss allocated to minority interest - (33,302)
Extraordinary gains - (3,559,333)
Changes in operating assets and liabilities:
Escrow deposits 7,431 30,029
Interest and other receivables - (3,446)
Prepaid expenses 63,021 226,975
Other assets (31,968) -
Accounts payable and accrued expenses (28,736) (39,245)
Accrued interest - 109,529
Security deposits and prepaid rent 27,864 (141,268)
----------------- ----------------
Net cash used in operating activities (428,158) (861,998)
----------------- ----------------
Cash flow from investing activities:
Capital dispositions (expenditures) - 9,873,904
----------------- ----------------
Net cash provided by investing activities - 9,873,904
----------------- ----------------
Cash flows from financing activities:
Mortgage costs (101) 282,969
Cash overdraft - (515,316)
Accounts payable - affiliates 547,138 (1,800,064)
Principal payments on mortgages (18,847) (6,979,495)
Principal payments on note (90,000) -
----------------- ----------------
Net cash provided by (used in) financing activities 438,190 (9,011,906)
----------------- ----------------
Increase in cash 10,032 -
Cash - beginning of period 29,981 -
----------------- ----------------
Cash - end of period $ 40,013 $ -
================= ================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 297,535 $ 515,748
================= ================
</TABLE>
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(Unaudited)
1. GENERAL PARTNERS' DISCLOSURE
----------------------------
In the opinion of the General Partners of Realmark Property Investors
Limited Partnership IV, all adjustments necessary for a fair
presentation of the Partnership's financial position, results of
operations and changes in cash flows for the six month periods ended
June 30, 1999 and 1998, have been made in the financial statements. Such
financial statements are unaudited and subject to any year-end
adjustments which may be necessary.
2. FORMATION AND OPERATION OF PARTNERSHIP
--------------------------------------
Realmark Property Investors Limited Partnership IV (the "Partnership"),
a Delaware Limited Partnership, was formed on February 12, 1985, to
invest in a diversified portfolio of income-producing real estate
investments.
In April 1985, the Partnership commenced the public offering of units of
limited partnership interest. Other than matters relating to
organization, it had no business activities and, accordingly, had not
incurred any expenses or earned any income until the first interim
closing (minimum closing) of the offering, which occurred on September
20, 1985. On June 22, 1986 the offering was concluded, at which time
23,362.9 units of limited partnership interest were outstanding,
excluding 3 units held by an affiliate of the General Partners. The
General Partners are Realmark Properties, Inc., a wholly-owned
subsidiary of J.M. Jayson & Company, Inc. and Joseph M. Jayson, the
Individual General Partner. Joseph M. Jayson is the sole shareholder of
J.M. Jayson & Company, Inc.
Under the partnership agreement, the general partners and their
affiliates can receive compensation for services rendered and
reimbursement for expenses incurred on behalf of the Partnership.
Net income or loss and proceeds arising from a sale or refinancing shall
be distributed first to the limited partners in amounts equivalent to a
7% return on the average of their adjusted capital contributions, then
an amount equal to their capital contributions, then an amount equal to
an additional 5% of the average of their adjusted capital contributions
after the general partners receive a disposition fee, then to all
partners in an amount equal to their respective positive capital
balances and, finally, in the ratio of 87% to the limited partners and
13% to the general partners.
-8-
<PAGE>
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
--------------------------------------------------
The partnership agreement also provides that distribution of funds,
revenues, costs and expenses arising from partnership activities,
exclusive of any sale or refinancing activities, are to be allocated 97%
to the limited partners and 3% to the general partners.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
----
For purposes of reporting cash flows, cash includes the following
items: cash on hand; cash in checking; and money market savings.
Property and Depreciation
-------------------------
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance and repairs are expensed as incurred, and major renewals and
betterments are capitalized. The Accelerated Cost Recovery System and
Modified Accelerated Cost Recovery System are used to determine
depreciation expense for tax purposes.
Rental Income
-------------
Leases for residential properties have terms of one year or less.
Commercial leases have terms of from one to five years. Rental income is
recognized on the straight line method over the term of the lease.
Mortgage Costs
--------------
Mortgage costs incurred in obtaining property mortgage financing have
been deferred and are being amortized over the terms of the respective
mortgages.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
Rents Receivable
----------------
Due to the nature of these accounts, residential rent receivables are
fully reserved for at June 30, 1999 and 1998.
Minority Interest in Consolidated Joint Venture
-----------------------------------------------
The minority interest in a consolidated joint venture is stated at the
amount of capital contributed by the minority investors adjusted for
their share of joint venture losses. Lakeview Joint Venture is
consolidated in the Partnership's financial statements because the
Partnership is the majority owner.
Comprehensive Income
--------------------
The Partnership has adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income. SFAS 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
Comprehensive income is defined as "the change in equity of a business
during a period from transactions and other events and circumstances
from non-owner sources". Other than net income (loss), the Partnership
has no other sources of comprehensive income.
Segment Information
-------------------
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information establishes standards for the way public business
enterprises report information about operating segments in annual
financial statements. The Partnership's only operating segment is the
ownership and operation of income-producing real property for the
benefit of its limited partners.
-10-
<PAGE>
4. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY
----------------------------------------------
In November 1985, the Partnership acquired a 168 unit apartment complex
(Lakeview Village) located in Milwaukee, Wisconsin, for a purchase price
of $4,411,659, which included $320,779 in acquisition fees.
In December 1985, the Partnership acquired a 288 unit apartment complex
(Sutton Park, formerly Bristol Square) located in Lansing, Michigan for
a purchase price of $7,252,858, which included $588,716 in acquisition
fees.
In August 1986, the Partnership acquired two office/warehouse buildings
consisting of 62,598 square feet (Airlane I) and 68,300 square feet
(Airlane III), consisting of approximately 25% office space and 75%
warehouse space located in Nashville, Tennessee, for a purchase price of
$6,180,920, which included $383,169 in acquisition fees.
In October 1986, the Partnership acquired an 86 unit apartment complex
(Gold Key Village II) located in Englewood, Ohio for a purchase price of
$2,354,615, which included $152,744 in acquisition fees.
In December 1986, the Partnership acquired two apartment complexes
consisting of 96 and 144 units (Creekside Apartments, formerly Bretton
Park I and II) located in Flat Rock, Michigan, for a purchase price of
$5,462,176, which included $445,964 in acquisition fees.
In December 1986, the Partnership acquired a 215 unit apartment complex
(Willow Creek) located in Greenville, South Carolina, for a purchase
price of $5,040,560, which included $477,987 in acquisition fees.
In December 1986, the Partnership acquired a 72 unit apartment complex
(Evergreen Terrace) located in Lansing, Michigan for a purchase price of
$1,1711,093, which included $314,379 in acquisition fees.
In May 1987, the Partnership acquired a 56 unit apartment complex (Cedar
Court) located in Monroeville, Pennsylvania, for a purchase price of
$1,439,832, which included $370,728 in acquisition fees.
-11-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
----------------------------------------------------------
In 1988, the Partnership acquired, upon its dissolution, the net assets
and liabilities of the Willow Lake Joint Venture, which amounted to
$1,635,474. Since the date of the acquisition, the Partnership had
capitalized additional construction costs of $5,059,296 which included
capitalized interest of $151,993. Construction on this project was
substantially complete in early 1991. During September 1992, Willow
Lake's lender foreclosed and took possession of the property because the
Partnership had difficulty in obtaining tenant leases and financing to
complete tenant build-out costs. The disposal generated a $1,328,352
loss for financial statement purposes.
In October, 1989 the Partnership sold the Gold Key II apartment complex
for $2,881,136 which generated a gain of $911,177 for financial
statement purposes.
In July 1997, the mortgage holder on Chapelwood Estates foreclosed on
the property resulting in an extraordinary gain of $150,771.
In February 1998 Airlane Office Warehouse was sold for a sales price of
$4,700,000. The sale resulted in a gain for financial statement purposes
of $1,148,604.
In March 1998 Creekside Apartments was sold for a sales price of
$5,075,000. The sale generated a gain for financial statement purposes
of $2,410,729.
In November 1998, the mortgage holder on Evergreen Terrace Apartments
foreclosed on the property resulting in an extraordinary gain of
$224,712.
In November 1998, the Partnership sold the Lakeview Village Apartment
Complex for $3,400,000 which generated a gain of $851,317 for financial
statement purposes.
Financial Accounting Standards Statement No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of (the "Statement") requires that assets to be disposed of be recorded
at the lower of carrying value or fair value, less costs to sell. The
Statement also requires that such assets not be depreciated during the
disposal period, as the assets will be recovered through sale rather
than through operations. In accordance with this Statement, the
long-lived assets of the Partnership, classified as held for sale on the
balance sheet, are recorded at the carrying amount which is the lower of
carrying value or fair value less costs to sell, and have not been
depreciated during the disposal period. Depreciation expense, not
recorded during the disposal period, for the six months ended June 30,
1999 totaled approximately $88,000.
-12-
<PAGE>
5. MORTGAGES AND NOTES PAYABLE
---------------------------
The Partnership has the following mortgages and notes payable:
Lakeview
--------
The mortgage with a balance of $2,481,746 at June 30, 1998 was satisfied
in full when the property was sold in December 1998.
Woodbridge Manor (formerly Sutton Park)
---------------------------------------
An 8% mortgage with a balance of $3,272,879 and $3,316,055 at June 30,
1999 and 1998, respectively, which provides for annual principal and
interest payments of $306,168 payable in equal monthly installments with
the remaining balance due February 1, 2006.
Airlanes I & III
----------------
The mortgage was satisfied in full when the property was sold in
February 1998.
Creekside
---------
The mortgage was satisfied in full when the property was sold in
February 1998.
Andover Park (formerly Willow Creek)
------------------------------------
A mortgage with a balance of $3,950,000 at June 30, 1999 and 1998. The
mortgage has a two-year term with a variable interest rate set at a rate
equivalent to 300 basis points over the thirty-day LIBOR rate (8.6875%
at June 30, 1999). The mortgage has monthly interest only payments, with
the remaining balance due and payable in July 2000.
Evergreen Terrace
-----------------
The mortgage with a balance of $1,009,005 at June 30, 1998 was forgiven
by the lender when it foreclosed on the property in November 1998.
The mortgages described above are secured by the Partnership properties
to which they relate.
-13-
<PAGE>
MORTGAGES AND NOTES PAYABLE (CONTINUED)
---------------------------------------
The aggregate maturities of mortgages and notes payable for each of the
next five years and thereafter are as follows:
Year Amount
---- ------
1999 $ 44,441
2000 3,998,130
2001 52,125
2002 56,451
2003 61,137
Thereafter 3,029,442
----------------
TOTAL $ 7,241,726
================
6. INVESTMENT IN JOINT VENTURE
---------------------------
On September 1, 1992, the Partnership entered into an agreement to form
a joint venture with Realmark Property Investors Limited Partnership
VI-B (RPILP VI-B). The joint venture was formed for the purpose of
operating the Lakeview Apartment complex owned by the Partnership. Under
the terms of the agreement, RPILP VI-B contributed $175,413, with the
Partnership contributing the property net of the first mortgage.
The joint venture agreement provides that any income, loss, gain, cash
flow, or sale proceeds be allocated 83.78% to the Partnership and 16.22%
to RPILP VI-B. The net loss from the date of inception has been
allocated to the minority interest in accordance with the agreement and
has been recorded as a reduction of the capital contribution.
A reconciliation of the minority interest share in the Lakeview Joint
Venture is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, January 1 $ (36,954) $ ( 28,677)
Allocated Loss - ( 33,302)
---------- ----------
Balance, June 30 $ (36,954) $ ( 61,979)
=========== ===========
</TABLE>
-14-
<PAGE>
7. RELATED PARTY TRANSACTIONS
--------------------------
Management fees for the management of certain of the Partnership's
properties are paid to an affiliate of the General Partners. The
management agreement provides for 5% of gross monthly receipts of the
complexes to be paid as fees for administering the operations of the
properties. These fees totaled approximately $55,135 and $94,488 for the
six months ended June 30, 1999 and 1998, respectively.
The Partnership entered into a management agreement with an unrelated
third party for the management of Airlane I and III on August 15, 1986.
The agreement provides for the payment of a management fee equal to 4%
of monthly gross rental income. An affiliate of the General Partners
also receives a management fee of 2% of monthly gross rental income.
According to the terms of the Partnership Agreement, the Corporate
General Partner is also entitled to receive a partnership management fee
equal to 7% of net cash flow (as defined in the Partnership Agreement),
2% of which is subordinated to the limited partners having received an
annual cash return equal to 7% of their average adjusted capital
contributions. No such fee was paid or accrued by the partnership for
the six months ended June 30, 1999 and 1998.
Accounts payable to affiliates amounted to $3,327,823 and $1,866,885 at
June 30, 1999 and 1998, respectively. The payable represents fees due
and advances from the Corporate General Partner or an affiliate of the
General Partners. Interest charged on accounts payable to affiliates
totaled $302,240 and $147,143 for the six months ended June 30, 1999 and
1998.
The General Partners are also allowed to collect a property disposition
fee upon sale of acquired properties. This fee is not to exceed the
lesser of 50% of amounts customarily charged in arm's-length
transactions by others rendering similar services for comparable
properties, or 3% of the sales price. The property disposition fee is
subordinate to payments to the limited partners of a cumulative annual
return (not compounded) equal to 7% of their average adjusted capital
balances and to repayment to the limited partners of an amount equal to
their original capital contributions. Since these conditions have not
been met, no fees have been recorded or paid on the sale of the Gold Key
II apartment complex.
Computer service charges for the partnerships are paid or accrued to an
affiliate of the General Partner. The fee is based upon the number of
apartment units and totaled approximately $4,800 and $5,700 for the six
months ended June 30, 1999 and 1998, respectively.
-15-
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
Partnership accounting and portfolio management fees, investor services
fees and brokerage fees are allocated based on total assets, the number
of partners, and number of units, respectively. In addition to the
above, other property specific expenses, such as payroll, benefits, etc.
are charged to property operations on the Statement of Operations.
8. EXTRAORDINARY GAINS
-------------------
In November 1998, the mortgage holder on Evergreen Terrace Apartments
foreclosed on the property. They seized fixed assets that had a carrying
value of $907,854. In return, the property wrote off the mortgage
balance and accrued interest of $1,144,244. In addition, $40,588 of
other liabilities were forgiven in the foreclosure. The lender retained
approximately $28,348 of escrow balances and $23,923 of cash and other
deposits. An extraordinary gain of $224,712 was recognized on the
foreclosure in 1998.
The Partnership sold the Lakeview Village Apartments in December 1998.
The Partnership satisfied the majority of its mortgage liability using
the proceeds from the sale of the property. The remaining obligation was
forgiven by the lender, resulting in an extraordinary gain of $253,159
in 1998.
In July 1997, the mortgage holder on Chapelwood Estates foreclosed on
the property. They seized fixed assets that had a carrying value of
$806,437, which served as collateral on the loan. In return, the
property wrote off the mortgage balance and accrued interest of $894,551
and $89,365, respectively. In addition, approximately $41,240 of other
liabilities were forgiven in the foreclosure. The lender retained
$67,948 of escrow balances. An extraordinary gain of $150,771 was
recognized on the foreclosure in 1997.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair value of
accounts receivable, notes payable - other, accounts payable, accounts
payable - affiliates, accrued expenses and deposit liabilities
approximate the carrying value due to the short-term nature of these
instruments.
-16-
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
-----------------------------------------------
Management has estimated that the fair value of the mortgage payable on
Andover Park (formerly Willow Creek) approximates its carrying value of
$3,950,000 since the mortgage was obtained in 1998 and has a variable
interest rate.
Management has estimated that the fair value of the mortgage payable on
Woodbridge Manor (formerly Sutton Park), based on currently available
rates for mortgages of similar terms, approximates its carrying value of
$3,300,000.
See footnote 5 for a description of the terms of the mortgages payable.
10. INCOME TAXES
------------
No provision has been made for income taxes since the income or loss of
the partnership is to be included in the tax returns of the Individual
Partners.
The tax returns of the Partnership are subject to examination by the
Federal and state taxing authorities. Under federal and state income tax
laws, regulations and rulings, certain types of transactions may be
accorded varying interpretations and, accordingly, reported partnership
amounts could be changed as a result of any such examination.
The reconciliation of net (loss) income for the six months ended June
30, 1999 and 1998 as reported in the statements of operations, and as
would be reported for tax purposes, is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Net (loss) income - statement of operations $ ( 560,032) $ 2,118,688
Add to (deduct from):
Difference in depreciation ( 150,000) (133,858)
Gain on sale of property - -
Allowance for doubtful accounts ( 176,000) 153,741
------------ ------------
Net (loss) income - tax return purposes $ ( 886,032) $ 2,138,571
============ ============
</TABLE>
-17-
<PAGE>
INCOME TAXES (CONTINUED)
------------------------
The reconciliation of Partners' (Deficit) as of June 30, 1999 and
December 31, 1998 as reported in the balance sheet, and as reported for
tax purposes, is as follows:
June 30, December 31,
1999 1998
---- ----
Partners' (Deficit) - balance sheet $(3,213,838) $(2,653,806)
Add to (deduct from):
Accumulated difference in
depreciation (6,431,518) (6,281,518)
Accumulated amortization 382,695 382,695
Syndication fees 2,734,297 2,734,297
Difference in book and tax
basis in partnership investments ( 635,737) ( 635,737)
Gain from sales of properties 1,453,577 1,453,577
Gain from fire loss ( 706,158) ( 706,158)
Gain on foreclosure 693,879 693,879
Other 1,109,871 1,285,871
------------ -----------
Partners' (Deficit) - tax return purposes $( 4,612,932) $(3,726,900)
============ ===========
11. SUBSEQUENT EVENTS
-----------------
The General Partners sold Woodbridge Manor (formerly Sutton Park)
located in Lansing, Michigan at the end of August 1999. The sales price
was $6.4 million. A gain will be recorded on the third quarter financial
statements for the Partnership.
-18-
<PAGE>
PART II MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Liquidity and Capital Resources:
- --------------------------------
The General Partner continues to fund the Partnership's shortfalls in cash flow,
although under no obligation to do so. Such advances to the Partnership are
considered payable on demand to the General Partner, and at this point in time,
there is no assurance that these advances will continue. The Partnership did not
make any distributions during either the second quarter of 1999 or 1998, and is
not likely to make any in the future until all Partnership obligations are
satisfied and the General Partner is reimbursed for the advances it has made to
the Partnership.
Management successfully sold Woodbridge Manor (formerly Sutton Park Apartments)
near the end of August 1999. The sales price in the contract dated July 1, 1999
was $6.4 million. The sale will result in a gain being recorded on the
Partnership's financial statements during the third quarter of 1999.
The General Partner continues its efforts to locate a buyer for the sole
property remaining in this Partnership as it is felt that the sale of the
property is in the best interests of the Limited Partners. Until such time as
the property is sold, it is highly unlikely that the Limited Partners will
receive any return of their investments. Management continues to "heavily"
market the remaining property in the Partnership for sale through the use of
major media sources, such as the Wall Street Journal. Management believes that
occupancy at Andover Park (formerly Willow Creek) must be stabilized and
physical improvements must be completed to otherwise enhance the value of the
portfolio for either the possible sale or refinancing of this property.
The Partnership has conducted a review of its computer systems to identify the
systems that could be affected by the "year 2000 issue" and has substantially
developed an implementation plan to resolve such issues. The year 2000 issue is
the result of computer programs being written using two digits rather than four
digits to define the applicable year. Computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. Management has discussed with outside independent computer
consultants its readiness for the Year 2000. The majority of the software in use
is either "2000 compliant" or will be with little adaptation and at no
significant cost per information provided by their software providers.
Management has also engaged a computer firm to re-write its tax software making
it Year 2000 compliant. This work began May 1, 1999 and is expected to take
three months.
-19-
<PAGE>
Liquidity and Capital Resources (continued):
- --------------------------------------------
Management has a complete inventory of its computers and feels that the cost of
replacing those which will not be "2000 compliant" will be relatively minor
(i.e., most likely under $20,000). Non-informational systems have also been
evaluated and management feels that there will be little, if any, cost to
preparing these for the Year 2000 (i.e., most likely under $20,000). Management
expects to be fully Year 2000 compliant with all testing done by October 31,
1999. The Partnership is working on a contingency plan in the unlikely event
that its systems do not operate as planned. It is management's belief that in
the unlikely event that its informational systems do not operate as planned in
the year 2000, all records could be maintained manually until the problems with
its systems are resolved. Management feels that its external vendors, suppliers
and customers, for the most part, will be unaffected by the Year 2000 as most do
not rely on information systems in their businesses.
Results of Operations:
- ----------------------
Net loss for the three month period ended June 30, 1999 amounted to $310,474 or
$13.29 per limited partnership unit versus net income for the three month period
ended June 30, 1998 of $2,896,269 or $120.23 per limited partnership unit. For
the six month period ended June 30, 1999, the net loss amounted to $560,032 or
$23.25 per limited partnership unit, versus net income of $2,118,688 or $87.95
per limited partnership unit for the six month period ended June 30, 1998. The
net income generated during the six month period ended June 30, 1998 was due to
the gain resulting from the sales of Airlanes and Creekside which amounted to
$3,559,333. Without such gain, the Partnership incurred a net loss of $1,440,645
or $59.81 per limited partnership unit for the six months ended June 30, 1998.
On a tax basis, the Partnership generated a loss of $886,032 or $36.78 per
limited partnership unit for the six month period ended June 30, 1999 versus
taxable income of $2,138,571 or $88.78 per limited partnership unit for the six
month period ended June 30, 1998. Without considering the gain on sale, the tax
basis loss which would have been reported for the first six months of 1998 was
approximately $1,420,762 or $58.98 per limited partnership unit.
-20-
<PAGE>
Results of Operations (continued):
- ----------------------------------
Partnership revenue for the quarter ended June 30, 1999 totaled $543,227, a
decrease of approximately $280,000 from the same period in 1998. For the six
month period ended June 30, 1999 total income decreased by approximately
$500,000 from the corresponding period in 1998; total income for the six months
ended June 30, 1999 and 1998 was $1,021,033 and $1,523,182, respectively. Rental
income for the six month period ended June 30, 1999, totaled $960,441, a
decrease of almost $495,600 over the same time period in 1998 when rental income
totaled $1,455,061. The above decreases are primarily related to the sales of
Airlanes Office/Warehouse Building in February 1998, Creekside Apartments during
March 1998, and Lakeview Village Apartments during December 1998, and the
eventual foreclosure on Evergreen Apartments during 1998 (i.e., there are four
less complexes in the Partnership generating revenue). The decrease is also
attributable to extremely low occupancy at Woodbridge Manor (formerly Sutton
Park Apartments), which at June 30, 1999 had a physical occupancy of only 75.3%.
Also contributing to the decline in revenues are continued delinquencies and
concessions offered at both complexes remaining in the Partnership at June 30,
1999.
For the three month period ended June 30, 1999, the Partnership expenses totaled
$853,701, a decrease of approximately $653,000 from the quarter ended June 30,
1998. For the six months ended June 30, 1999, the Partnership expenses totaled
$1,581,065, decreasing over $1,415,000 from six months ended June 30, 1998.
Property operations costs remain high, even with the disposal of four
properties, due to management's plans to physically improve the remaining
properties in an effort to make them more attractive to potential renters.
Payroll and associated costs and repairs and maintenance expenses saw large
increases between the two six month periods, and it is management's expectation
that such costs will continue to be relatively high through the remaining six
months of 1999 due to necessary capital improvement work (capitalizable and
non-capitalizable) at Andover Park (formerly Willow Creek), specifically in the
replacement of carpeting and appliances and both interior and exterior painting.
Amortization was extremely high during the six months ended June 30, 1998 as a
result of additional amortization taken on fees paid to extend the Willow Creek
mortgage and hold off on a pending foreclosure; this mortgage was subsequently
paid in full when a new mortgage was negotiated. Interest expense to affiliates
increased dramatically between the six months ended June 30, 1999 and 1998 when
the expense totaled $304,240 and $147,143, respectively. The increase is due to
the large increase in funds advanced to the Partnership from the General
Partners and/or its affiliates in the form of either cash advances, uncollected
management fees or uncollected reimbursements. Administrative costs also
remained relatively high due to continued legal expenses incurred for evictions
and increased brokerage fees incurred and being accrued as a result of
management's increased efforts to sell the properties in this partnership.
-21-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
PART II
-------
OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
- --------------------------
The Partnership is not party to, nor is it the subject of, any material pending
legal proceedings other than ordinary routine litigation incidental to the
Partnership's business.
Item 2, 3, 4 and 5
- ------------------
Not applicable.
Item 6 - Exhibits and reports on Form 8-K
- -----------------------------------------
None.
-22-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP IV
By: /s/ Joseph M. Jayson September 30, 1999
--------------------- ------------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
-23-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Realmark Property Investors Limited Partnership IV for
the six months ended June 30, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 40,013
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 522,617
<PP&E> 13,249,196
<DEPRECIATION> 5,686,124
<TOTAL-ASSETS> 8,262,456
<CURRENT-LIABILITIES> 4,290,369
<BONDS> 7,222,879
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,262,456
<SALES> 0
<TOTAL-REVENUES> 1,021,033
<CGS> 0
<TOTAL-COSTS> 1,581,065
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 601,775
<INCOME-PRETAX> (560,032)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (560,032)
<EPS-BASIC> (23.25)
<EPS-DILUTED> 0
</TABLE>
