<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 0-15731
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
MARYLAND 52-1473440
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9200 KEYSTONE CROSSING, SUITE 500
INDIANAPOLIS, INDIANA 46240-7602
(Address of principal executive offices)
(Zip Code)
(317) 817-7500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30,
1998 December 31,
(Unaudited) 1997
------------- ------------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 168,523 $ 45,275
Accounts receivable 2,999 2,591
Prepaid insurance and tenant security deposits 81,847 121,534
Mortgage escrow deposits 797,721 962,616
Reserve for insurance premiums 120,570 87,240
Investments in and advances to Local Limited Partnerships (Note 2) - -
Land 3,650,000 3,650,000
Building and improvements - less accumulated depreciation
of $4,968,846 and $4,671,875 9,653,057 9,656,311
Deferred finance costs 879,634 925,930
---------- -----------
$15,354,351 $ 15,451,497
========== ===========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Liabilities:
Accounts payable and accrued expenses from rental operations $ 615,965 $ 797,882
Administrative and reporting fee payable to General Partner (Note 3) 1,309,069 1,222,366
Due to General Partner (Note 3) 8,095,858 8,077,709
Accrued interest on partner loans (Note 3) 2,580,274 1,838,021
Other accrued expenses 32,953 40,030
Mortgage note payable 9,329,886 9,620,000
---------- ----------
21,964,005 21,596,008
---------- ----------
Partners' deficit:
General Partner -- The National Housing Partnership (NHP) (195,790) (191,139)
Original Limited Partner -- 1133 Fifteenth Street Four Associates (200,690) (196,039)
Other Limited Partners --15,414 investment units (6,213,174) (5,757,333)
---------- ----------
(6,609,654) (6,144,511)
---------- ----------
$15,354,351 $15,451,497
========== ==========
</TABLE>
See notes to financial statements.
-1-
<PAGE> 3
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ------------------------
1998 1997 1998 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
RENTAL REVENUES $ 906,472 $ 874,714 $2,678,189 $2,577,293
---------- ---------- --------- ---------
RENTAL EXPENSES:
Interest 154,016 299,533 466,805 882,073
Renting and administrative 107,740 130,914 315,926 342,836
Operating and maintenance 184,522 168,060 496,590 481,011
Depreciation and amortization 123,851 100,279 343,267 300,837
Taxes and insurance 201,298 192,883 584,988 584,482
---------- ---------- --------- ---------
771,427 891,669 2,207,576 2,591,239
---------- ---------- --------- ---------
PROFIT (LOSS) FROM RENTAL OPERATIONS 135,045 (16,955) 470,613 (13,946)
---------- ---------- --------- ---------
COSTS AND EXPENSES:
Interest on partner loans (Note 3) 280,387 96,995 809,672 277,165
Administrative and reporting fees to General
Partner (Note 3) 28,901 28,901 86,703 86,703
Other operating expenses 36,679 17,086 76,212 48,515
---------- ---------- --------- ---------
345,967 142,982 972,587 412,383
---------- ---------- --------- ---------
OTHER REVENUES:
Distributions received in excess of investment
in Local Limited Partnerships 23,068 - 23,068 34,017
Interest income 10,840 3,147 13,763 4,835
---------- ---------- --------- ---------
33,908 3,147 36,831 38,852
---------- ---------- --------- ---------
NET LOSS $ (177,014) $ (156,790) $ (465,143) $ (387,477)
========== ========== ========= =========
NET LOSS ASSIGNABLE TO OTHER
LIMITED PARTNERS $ (173,476) $ (153,654) $ (455,841) $ (379,727)
========== ========== ========= =========
NET LOSS PER OTHER LIMITED
PARTNERSHIP INTEREST $ (11) $ (10) $ (30) $ (25)
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
-2-
<PAGE> 4
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
The National 1133
Housing Fifteenth Other
Partnership Street Four Limited
(NHP) Associates Partners Total
----------- ---------- -------- -----
<S> <C> <C> <C> <C>
Deficit at January 1, 1998 $(191,139) $(196,039) $(5,757,333) $(6,144,511)
Net loss -- nine months ended
September 30, 1998 (4,651) (4,651) (455,841) (465,143)
-------- -------- ---------- ----------
Deficit at September 30, 1998 $(195,790) $(200,690) $(6,213,174) $(6,609,654)
======== ======== ========== ==========
Percentage interest at
September 30, 1998 1% 1% 98% 100%
======== ======== ========== ==========
(A) (B) (C)
</TABLE>
(A) General Partner
(B) Original Limited Partner
(C) Consists of 15,414 investment units
See notes to financial statements.
-3-
<PAGE> 5
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Rent collections $ 2,611,268 $ 2,499,241
Distributions received in excess of investment in
Local Limited Partnerships 23,068 34,017
Interest received 13,763 4,835
Other income 62,784 66,385
Interest paid on loan from General Partner (67,419) -
Operating expenses paid, including rental expenses (1,603,938) (1,695,246)
Mortgage interest paid (466,805) (880,828)
---------- ----------
Net cash provided by operating activities 572,721 28,404
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (293,717) (122,136)
Deposits to real estate tax escrow (494,721) (490,604)
Withdrawals from real estate tax escrow 659,616 606,930
Deposits to reserve for insurance premiums (33,330) (67,406)
Withdrawals from reserve for insurance premiums - 73,590
---------- ----------
Net cash (used in) provided by investing activities (162,152) 374
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from General Partner 2,793 16,853
Payments of principal on mortgage note (290,114) (46,454)
---------- ----------
Net cash used in financing activities (287,321) (29,601)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 123,248 (823)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 45,275 70,382
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 168,523 $ 69,559
========== ==========
</TABLE>
See notes to financial statements.
-4-
<PAGE> 6
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1998 1997
-------------------------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net loss $ (465,143) $ (387,477)
----------- ----------
Adjustments to reconcile net loss to net cash provided by
operating activities -
Depreciation 296,971 274,257
Amortization 46,296 26,580
Mortgagor entity expenses 9,731 4,359
(Increase) decrease in accounts receivable (408) 25,148
Decrease (increase) in prepaid insurance, utility, and
tenant security deposits 39,687 (72,719)
Decrease in accounts payable and accrued expenses
from rental operations (181,917) (200,992)
Increase in administrative and reporting fees payable
to General Partner 86,703 86,703
Increase in due to General Partner 5,625 5,625
Increase in accrued interest on partner loans 742,253 277,165
Decrease in other accrued expenses (7,077) (10,245)
----------- ----------
Total adjustments 1,037,864 415,881
----------- ----------
Net cash provided by operating activities $ 572,721 $ 28,404
=========== ==========
</TABLE>
See notes to financial statements.
-5-
<PAGE> 7
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES
NATURE OF BUSINESS
National Housing Partnership Realty Fund IV (the "Partnership") is a
limited partnership organized on January 8, 1986 under the laws of the
State of Maryland under the Maryland Revised Uniform Limited
Partnership Act. The Partnership was formed for the purpose of raising
capital by offering and selling limited partnership interests and then
investing in limited partnerships ("Local Limited Partnerships"), each
of which owns and operates an existing rental housing project which is
financed and/or operated with one or more forms of rental assistance
or financial assistance from the U.S. Department of Housing and Urban
Development ("HUD").
The General Partner raised capital for the Partnership by offering and
selling to additional limited partners 15,414 investment units. The
Partnership acquired limited partnership interests of 99% in four
Local Limited Partnerships, each of which was organized to acquire and
operate an existing rental housing project. In addition, the
Partnership directly purchased Trinity Apartments ("Trinity"), a
conventionally financed rental apartment project.
On June 3, 1997, Apartment Investment and Management Company, a
Maryland corporation ("AIMCO" and, together with its subsidiaries and
other controlled entities, the "AIMCO Group"), acquired all of the
issued and outstanding capital stock of NHP Partners, Inc., a Delaware
corporation ("NHP Partners"), and the AIMCO Group acquired all of the
outstanding interests in NHP Partners Two Limited Partnership, a
Delaware limited partnership ("NHP Partners Two"). The Acquisition was
made pursuant to a Real Estate Acquisition Agreement, dated as of May
22, 1997 (the "Agreement"), by and among AIMCO, AIMCO Properties,
L.P., a Delaware limited partnership (the "Operating Partnership"),
Demeter Holdings Corporation, a Massachusetts corporation ("Demeter"),
Phemus Corporation, a Massachusetts corporation ("Phemus"), Capricorn
Investors, L.P., a Delaware limited partnership ("Capricorn"), J.
Roderick Heller, III and NHP Partners Two LLC, a Delaware limited
liability company ("NHP Partners Two LLC"). NHP Partners owns all of
the outstanding capital stock of the National Corporation for Housing
Partnerships, a District of Columbia corporation ("NCHP"), which is
the general partner of The National Housing Partnership, a District of
Columbia limited partnership ("NHP"). Together, NCHP and NHP Partners
Two own all of the outstanding partnership interests in NHP. NHP is
the general partner of National Housing Partnership Realty Fund IV (a
Maryland Limited Partnership) (the "Registrant"). As a result of these
transactions, the AIMCO Group has acquired control of the general
partner of the Registrant and, therefore, may be deemed to have
acquired control of the Registrant.
The Original Limited Partner of the Partnership is 1133 Fifteenth
Street Four Associates, whose limited partners were key employees of
NCHP at the time the Partnership was formed and whose general partner
is NHP.
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to
present a fair statement of the financial condition and results of
operations for the interim periods presented. All such adjustments are
of a normal recurring nature.
While the General Partner believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that
these financial statements be read in conjunction with the financial
statements and the notes included in NHP Realty Fund IV's Annual
Report filed in Form 10-K for the year ended December 31, 1997.
-6-
<PAGE> 8
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(2) INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS
The Partnership owns a 99% limited partnership interest in four Local
Limited Partnerships. In addition, the Partnership directly owns
Trinity Apartments. Because the Partnership, as a limited partner,
does not exercise control over the activities of the four Local
Limited Partnerships in accordance with the partnership agreements,
the investments in the Local Limited Partnerships are accounted for
using the equity method. Thus, the investments (and the advances made
to the Local Limited Partnerships as discussed below) are carried at
cost less the Partnership's share of the Local Limited Partnerships'
losses and distributions. However, because the Partnership is not
legally liable for the obligations of the Local Limited Partnerships,
and is not otherwise committed to provide additional support to them,
it does not recognize losses once its investment, reduced for its
share of losses and cash distributions, reaches zero in each of the
individual Local Limited Partnerships. As of September 30, 1998 and
December 31, 1997 investments in all four Local Limited Partnerships
had been reduced to zero. As a result, the Partnership did not
recognize $1,299,504 and $1,285,448 of losses from Local Limited
Partnerships during the nine months ended September 30, 1998 and 1997,
respectively. As of September 30, 1998 and December 31, 1997, the
Partnership had not recognized $15,646,082 and $14,346,578,
respectively, of its allocated share of cumulative losses from the
Local Limited Partnerships in which its investment is zero.
Advances made by the Partnership to the individual Local Limited
Partnerships are considered part of the Partnership's investment in
Local Limited Partnerships. When advances are made, they are charged
to operations as a loss on investment in the Local Limited Partnership
using previously unrecognized cumulative losses. As discussed above,
due to the cumulative losses incurred by the Local Limited
Partnerships, the aggregate balance of investments in and advances to
the Local Limited Partnerships has been reduced to zero at September
30, 1998 and December 31, 1997. To the extent these advances are
repaid by the Local Limited Partnerships in the future, the repayments
will be credited as distributions and repayments received in excess of
investments in Local Limited Partnerships. These advances are carried
as a payable to the Partnership by the Local Limited Partnerships.
No working capital advances or repayments occurred between the
Partnership and the Local Limited Partnerships during the nine months
ended September 30, 1998 and 1997. The combined amount carried as
payable to the Partnership by the Local Limited Partnerships was
$12,200 as of September 30, 1998.
The following are combined statements of operations for the three and
nine months ended September 30, 1998 and 1997, respectively, of the
Local Limited Partnerships in which the Partnership has invested. The
statements are compiled from financial statements of the Local Limited
Partnerships, prepared on the accrual basis of accounting, as supplied
by the management agents of the projects, and are unaudited.
-7-
<PAGE> 9
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Rental income $ 1,169,371 $ 1,297,593 $ 3,489,913 $ 3,633,800
Other income 104,494 48,363 176,575 110,721
---------- ---------- ---------- ----------
Total income 1,273,865 1,345,956 3,666,488 3,744,521
---------- ---------- ---------- ----------
Operating expenses 882,204 813,343 2,534,598 2,423,332
Interest, taxes and insurance 648,314 706,101 1,911,324 1,893,631
Depreciation 171,210 244,521 533,196 725,990
---------- ---------- ---------- ----------
Total expenses 1,701,728 1,763,965 4,979,118 5,042,953
---------- ---------- ---------- ----------
Net loss $ (427,863) $ (418,009) $(1,312,630) $(1,298,432)
========== ========== ========== ==========
National Housing Partnership
Realty Fund IV share of losses $ (423,585) $ (413,829) $(1,299,504) $(1,285,448)
========== ========== ========== ==========
</TABLE>
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL
PARTNER
During the nine month periods ended September 30, 1998 and 1997, the
Partnership accrued administrative and reporting fees payable to the
General Partner in the amount of $86,703 for services provided to the
Partnership. The Partnership has not made any payments to the General
Partner for these fees during the nine months ended September 30, 1998
and 1997. The amount due the General Partner by the Partnership was
$1,309,069 and $1,222,366 at September 30, 1998 and December 31, 1997,
respectively.
During the nine months ended September 30, 1998 and 1997, the General
Partner paid entity expenses of $9,731 and $4,359, respectively, on
behalf of Trinity. During the nine months ended September 30, 1998 and
1997, respectively, the General Partner made working capital advances
of $2,793 and $16,853 to the Partnership. During the nine months ended
September 30, 1998, Trinity repaid accrued interest in the amount of
$67,419 to the General Partner. No repayments were made during the
nine months ended September 30, 1997. The amount owed to the General
Partner at September 30, 1998 and December 31, 1997, was $8,067,733
and $8,055,209, respectively. Interest is charged on borrowings at the
Chase Manhattan Bank rate of prime plus 2%. Chase Manhattan Bank prime
was 8.5% at September 30, 1998. Accrued interest on this loan amounted
to $2,580,274 and $1,838,021 at September 30, 1998 and December 31,
1997, respectively. There can be no assurance that the General Partner
will continue to advance such funds to the Partnership.
Annual partnership administrative fees of $5,625 were accrued on
behalf of Trinity during the nine months ended September 30, 1998 and
1997. These fees are payable to the General Partner without interest
from cash available for distribution to partners. No payments were made
during the nine months ended September 30,
-8-
<PAGE> 10
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1998 and 1997. The balance owed to the General Partner for these fees
was $28,125 and $22,500 at September 30, 1998 and December 31, 1997,
respectively, and is included in Due to General Partner.
The advances and accrued administrative and reporting fees payable to
the General Partner will be paid as cash flow permits or from proceeds
generated from the sale or refinancing of one or more of the
underlying properties of the Local Limited Partnerships.
-9-
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this Report and other Partnership filings (collectively "SEC
Filings") under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended (as well as information communicated orally or
in writing between the dates of such SEC Filings) contains or may contain
information that is forward-looking, including statements regarding the effect
of government 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, terms of governmental regulations that affect the
Partnership and interpretations of those regulations, the competitive
environment in which the properties owned by the Local Limited Partnerships
operate, the availability of working capital and dispositions of properties
owned by the Partnership.
YEAR 2000 COMPLIANCE
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any computer programs or hardware
that have date-sensitive software or embedded chips 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.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
Status of Progress in Becoming Year 2000 Compliant
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in
operating equipment. The Managing Agent anticipates having all phases complete
by June 1, 1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the General Partner was to the security systems,
elevators, heating-ventilation-air-conditioning systems, telephone systems and
switches, and sprinkler systems. The General Partner is currently engaged in
the identification of all non-compliant operational systems, and is in the
process of estimating the costs associated with any potential modifications or
replacements needed to such systems in order for them to be Year 2000
compliant. It is not expected that such costs would have a material adverse
affect upon the operations of the Partnership.
-10-
<PAGE> 12
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Risk Associated with the Year 2000
The General Partner believes that the Managing Agent has an effective program
in place to resolve the Year 2000 issue in a timely manner and has appropriate
contingency plans in place for critical applications that could affect the
Partnership's operations. To date, General Partner is not aware of any
external agent with a Year 2000 issue that would materially impact the
Partnership's results of operations, liquidity or capital resources. However,
the General Partner has no means of ensuring that external agents will be Year
2000 compliant. The General Partner does not believe that the inability of
external agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or results of
operations of the Partnership. However, the effect of non-compliance by
external agents is not readily determinable.
LIQUIDITY AND CAPITAL RESOURCES
The properties in which the Partnership has invested, through its investments
in the Local Limited Partnerships, receive one or more forms of assistance from
Federal, state or local governments or agencies. As a result, the Local Limited
Partnerships' ability to transfer funds either to the Partnership or among
themselves in the form of cash distributions, loans or advances is generally
restricted by these government-assistance programs. These restrictions may
impact the Partnership's ability to meet its cash obligations.
For the past several years, various proposals have been advanced by the United
States Department of Housing and Urban Development ("HUD"), Congress and others
proposing the restructuring of HUD's rental assistance programs under Section 8
of the United States Housing Act of 1937 ("Section 8"), under which 896 units,
63 percent of the total units owned by the properties in which the Partnership
has invested, receive rental subsidies. These subsidies are generally provided
pursuant to project-based Housing Assistance Payment Contracts ("HAP
Contracts") between HUD and the owners of the properties. On October 27, 1997,
the President signed into law the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act,
the mortgage financing and HAP contracts of certain properties assisted under
Section 8, with rents above market levels and financed with HUD-insured
mortgage loans, will be restructured by adjusting subsidized rents to market
levels, thereby reducing subsidy levels, and lowering required debt service
costs as needed to ensure financial viability at the reduced rents and subsidy
levels. The 1997 Housing Act retains project-based subsidies for most
properties (properties in rental markets with limited supply, properties
serving the elderly, and certain other properties).
The 1997 Housing Act phases out project-based subsidies on selected properties
servicing families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy. Under a tenant-based
system, rent vouchers would be issued to qualified tenants who then could elect
to reside at properties of their choice, provided the tenant has the financial
ability to pay the difference between the selected property's monthly rent and
the value of the voucher, which would be established based on HUD's regulated
fair market rent for the relevant geographical areas. The 1997 Housing Act
provides that properties will begin the restructuring process in federal fiscal
year 1999 (beginning October 1, 1998), and that HUD will issue final
regulations implementing 1997 Housing Act on or before October 27, 1998.
Congress has elected to renew HAP Contracts expiring before October 1, 1998 for
one year terms, generally at existing rents, so long as the properties remain
in compliance with the HAP Contracts. While the Partnership does not expect the
provisions of the 1997 Housing Act to result in a significant number of tenants
relocating from properties owned by the Local Limited Partnerships, there can
be no assurance that the provisions will not significantly affect the
operations of the properties of the Local Limited Partnerships. Furthermore,
there can be no assurance that other changes in Federal housing subsidy policy
will not occur. Any such changes could have an adverse effect on the operation
of the Partnership.
-11-
<PAGE> 13
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net cash provided by operations for the nine months ended September 30, 1998
was $572,721 as compared to net cash provided by operations of $28,404 for the
nine months ended September 30, 1997. The increase to cash provided by
operations resulted primarily from an increase in rent collections and a
decrease in operating expenses and mortgage interest paid, as a result of the
refinancing that occurred in December 1997, partially offset by an increase in
interest paid on loan from General Partner and a decrease in distributions
received in excess of investment in Local Limited Partnerships.
No working capital advances or repayments occurred between the Partnership and
the Local Limited Partnerships during the nine months ended September 30, 1998
and 1997. The combined amount carried as due to the Partnership by the Local
Limited Partnerships was $12,200 as of September 30, 1998. Future advances made
will be charged to operations; likewise, future repayments will be credited to
operations.
Distributions received from Local Limited Partnerships represent the
Partnership's proportionate share of the excess cash available for distribution
from the Local Limited Partnerships. As a result of the use of the equity
method of accounting for the Partnership's investments, as of September 30,
1998, investments in all four Local Limited Partnerships had been reduced to
zero. For these investments, cash distributions received are recorded as
distributions received in excess of investment in Local Limited Partnerships.
During the nine months ended September 30, 1998 and 1997, cash distributions of
$23,068 and $34,017, respectively were received from the Local Limited
Partnerships. The receipt of distributions in future quarters is dependent upon
the operations of the underlying properties of the Local Limited Partnerships
to generate sufficient cash for distribution in accordance with applicable HUD
regulations.
Cash and cash equivalents amounted to $168,523 at September 30, 1998. The
ability of the Partnership to meet its on-going cash requirements, in excess of
cash on hand at September 30, 1998, is dependent on operations of Trinity,
distributions received from the Local Limited Partnerships, and proceeds from
the sales or refinancing of the underlying Properties. As of September 30,
1998, the Partnership owes the General Partner $1,309,069 for administrative
and reporting services performed. In addition, as of September 30, 1998, the
Partnership owes the General Partner $8,095,858 plus accrued interest of
$2,580,274. The payment of the unpaid administrative and reporting fees and
advances from the Partnership and NHP to the Local Limited Partnerships will
most likely result from the sale or refinancing of the underlying Properties of
the Local Limited Partnerships rather than through recurring operations. The
General Partner will continue to manage the Partnership's assets prudently in
an effort to achieve positive cash flow and will evaluate lending the
Partnership additional funds as such funds are needed, but is in no way legally
obligated to make such loans.
On December 29, 1997, Trinity refinanced their mortgage note payable. The new
mortgage note payable of $9,329,886 at September 30, 1998, is held by Lehman
Capital and is secured by a deed of trust on the rental property and an
assignment of all right of title and interest in, leases with the tenants. The
note bears interest at the rate of 6.557% per annum. The principal and interest
are payable by Trinity in equal monthly installments of $84,102 to December 1,
2012.
Except for Trinity, all the properties in which the Partnership has invested
carry deferred acquisition notes. These notes are secured by both the
Partnership's and the General Partner's interests in the Local Limited
Partnerships. In the event of a default on the notes, the note holders would be
able to assume the General Partner's and the Partnership's interests in the
Local Limited Partnerships. Due to weak rental market conditions where the
properties are located, the General Partner believes the amounts due on the
acquisition notes may exceed the value to be obtained by a sale or refinancing
of the Properties. The deferred acquisition notes mature in 2001. There can be
no assurance that the General Partner will be successful in extending or
restructuring the deferred acquisition notes as they mature.
-12-
<PAGE> 14
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Trinity has generated substantial losses from operations which have resulted in
the accumulation of significant accounts payable and accrued expenses and has
necessitated significant funding from the General Partner in prior years. The
General Partner's intentions are to continue to manage Trinity prudently so
that the property can maintain positive cash flows and pay its general
obligations. The General Partner will evaluate lending Trinity additional
funds as such funds are needed, but is in no way legally obligated to make such
loans.
Royal Towers Limited Partnership has a significant amount of payables and only
limited resources with which to pay such items, which raises substantial doubt
about the Royal Towers Limited Partnership's ability to continue as a going
concern. Royal Towers continued existence as a going concern is dependent upon
maintaining positive cash flows from operations or obtaining additional
fundings from partners if positive cash flows are not maintained. The General
Partner's intentions are to continue managing the property prudently so that it
can maintain positive cash flows and decrease its debts. The General Partner
will evaluate lending Royal Towers Limited Partnership additional funds as such
funds are needed, but is in no way legally obligated to make such loans. Should
Royal Towers Limited Partnership not be able to continue as a going concern,
the Partnership could lose its interest in Royal Towers Limited Partnership,
and as a result the partners in the Partnership may incur adverse tax
consequences. The impact of the tax consequences is dependent upon each
partner's individual tax situation.
RESULTS OF OPERATIONS
The Partnership has invested as a limited partner in four Local Limited
Partnerships which operate four rental housing properties. In addition, the
Partnership directly owns Trinity. Results of operations are significantly
impacted by the losses on rental operations of Trinity, and in prior years, by
the Partnership's share of the losses of the Local Limited Partnerships. These
losses included depreciation and accrued deferred acquisition note interest
expense which are non-cash in nature. Because the investments in and advances
to Local Limited Partnerships have been reduced to zero, the Partnership's
share of the operations of the Local Limited Partnerships is no longer being
recorded.
The Partnership's net loss increased to $465,143 for the nine months ended
September 30, 1998 from a net loss of $387,477 for the nine months ended
September 30, 1997. Net loss per unit of other limited partnership interest
increased from $25 to $30 for the 15,414 units outstanding throughout both
periods. The primary reasons for the increase in net loss is the increase in
interest on due to General Partner, partially offset by an increase in rental
income and a decrease in mortgage interest as a result of its refinancing.
During the nine months ended September 30, 1998, the Partnership incurred
operating expenses of approximately $56,900 related to complying with SEC
filing, auditing, and reporting and mailing requirements. The Partnership did
not recognize $1,299,504 of its allocated share of losses from the four Local
Limited Partnerships for the nine months ended September 30, 1998, as the
Partnership's net carrying basis in these Local Limited Partnerships was
reduced to zero prior years. The Partnership's share of losses from the Local
Limited Partnerships, if not limited to its investment account balance, would
have increased $14,056 between periods, primarily due to a decrease in rental
income, partially offset by a decrease in expenses.
The Partnership's net loss increased to $177,014 for the three months ended
September 30, 1998 from a net loss of $156,790 for the three months ended
September 30, 1997. Net loss per unit of other limited partnership interest
increased from $10 to $11 for the 15,414 units outstanding throughout both
periods. The primary reasons for the increase in net loss is the increase in
interest on due to General Partner, partially offset by an increase in rental
income and a decrease in mortgage interest as a result of its refinancing.
During the three months ended September 30, 1998, the Partnership incurred
operating expenses of approximately $19,900 related to complying with SEC
filing, auditing, and reporting and mailing requirements. The Partnership did
not recognize $423,585 of its allocated share of losses from the four Local
Limited Partnerships for the three months ended September 30, 1998, as the
Partnership's net carrying basis in these Local
-13-
<PAGE> 15
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Limited Partnerships was reduced to zero prior years. The Partnership's share
of losses from the Local Limited Partnerships, if not limited to its investment
account balance, would have increased $9,756 between periods, primarily due to
a decrease in rental income, partially offset by a decrease in expenses.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
27 Financial Data Schedule.
-14-
<PAGE> 16
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.
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
-------------------------------------------
(Registrant)
By: The National Housing Partnership,
its sole General Partner
By: National Corporation for Housing
Partnerships, its sole General Partner
November 13, 1998 By: /s/
- ----------------- -----------------------------------------
Troy D. Butts
As Senior Vice President and Chief Financial
Officer
-15-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,168,661
<SECURITIES> 0
<RECEIVABLES> 2,999
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,171,660
<PP&E> 18,271,903
<DEPRECIATION> 4,968,846
<TOTAL-ASSETS> 15,354,351
<CURRENT-LIABILITIES> 12,634,119
<BONDS> 9,329,886
0
0
<COMMON> 0
<OTHER-SE> (6,609,654)
<TOTAL-LIABILITY-AND-EQUITY> 15,354,351
<SALES> 0
<TOTAL-REVENUES> 2,715,020
<CGS> 0
<TOTAL-COSTS> 1,740,771
<OTHER-EXPENSES> 162,915
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,276,477
<INCOME-PRETAX> (465,143)
<INCOME-TAX> 0
<INCOME-CONTINUING> (465,143)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (465,143)
<EPS-PRIMARY> (30)
<EPS-DILUTED> (30)
</TABLE>
