<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 ..... Commission file number 0-15731
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV (A MARYLAND LIMITED PARTNERSHIP)
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 52-1473440
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 KEYSTONE CROSSING, SUITE 500 INDIANAPOLIS, INDIANA 46240
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(Address of principal executive offices) (Zip Code)
</TABLE>
<TABLE>
<S> <C>
Registrant's telephone number, including area code: (317) 817-7500
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act: 15,414 LIMITED PARTNERSHIP INTERESTS
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</TABLE>
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 twelve 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 ninety days. Yes X No
--- ---
The registrant is a partnership. Accordingly, no voting stock is held by
non-affiliates of the registrant.
Documents incorporated by reference. NONE
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NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
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Page
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<S> <C> <C>
Item 1. Business 2
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
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Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 33
PART III
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Item 10. Directors and Executive Officers of the Registrant 34
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial
Owners and Management 37
Item 13. Certain Relationships and Related Transactions 37
PART IV
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Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 38
</TABLE>
1
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PART I
INTRODUCTION
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.
Item 1. Business
National Housing Partnership Realty Fund IV, a Maryland Limited
Partnership (the Partnership), was formed under the Maryland Revised Uniform
Limited Partnership Act as of January 8, 1986. On January 15, 1986, the
Partnership commenced offering 35,000 limited partnership interests, at a price
of $1,000 per interest, through a public offering registered with the Securities
and Exchange Commission (the Offering). The Offering was managed by Dean Witter
Reynolds, Inc. and was terminated on October 14, 1986, with subscriptions for
15,414 limited partnership interests.
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 acquisitions were 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" or "Partnership"). 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, a Maryland limited partnership, whose general partner is
NHP and whose limited partners were key employees of NCHP at the time the
Partnership was formed. The Original Limited Partner holds a 1% Limited
Partnership interest in the Partnership.
The remaining 98% limited partnership interests in the Partnership
are held by the investors who subscribed to the Offering.
In October 1997, NHP received a subpoena from the Inspector General
of the United States Department of Housing and Urban Development ("HUD")
requesting documents relating to any arrangement whereby NHP or any of its
affiliates provides or has provided compensation to owners of HUD multifamily
projects in exchange for in connection with property management of a HUD
project. AIMCO believes that other owners and managers of HUD projects have
received similar subpoenas. Documents relating to certain of NHP's aquisitions
of property management rights for HUD projects may be responsive to subpoenas.
AIMCO and NHP are in the process of complying with the subpoena and have
provided certain documents to the Inspector General, without conceding that
they are responsive to the subpoena. AIMCO believes that NHP's operations are
in compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. Effective February 13,
1998, counsel for NHP and the U.S. Attorney for the Northern District of
California entered into a Tolling agreement related to certain civil claims the
government may have against NHP. Although no action has been initiated against
NHP or AIMCO or, to AIMCO's knowledge, any owner of a HUD property managed by
NHP or AIMCO, if any such action is taken in the future, it could ultimately
affect existing arrangements with respect to HUD projects or otherwise have a
material adverse affect on the results of operations of AIMCO.
The Partnership's business is to own directly one multi-family
housing property, Trinity Apartments, and to hold limited partnership interests
in four limited partnerships (Local Limited Partnerships), which in turn, owns
and operates multi-family rental housing properties (Properties). With the
exception of Trinity Apartments, all of these Properties receive one or more
forms of assistance from the Federal Government.
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The Partnership acquired the interests in the four Local Limited
Partnerships from sellers who originally developed the Properties. The
Partnership directly purchased Trinity Apartments. With respect to the Local
Limited Partnerships, NHP is the general partner of each Local Limited
Partnership and the Partnership is the principal limited partner. As a limited
partner, the Partnership's liability for obligations of the Local Limited
Partnerships is limited to its investment, and the Partnership does not exercise
control over the activities of the Local Limited Partnerships in accordance with
the partnership agreements.
The Partnership's investment objectives are to:
(1) preserve and protect Partnership capital;
(2) provide current tax benefits to Limited Partners to the
extent permitted by law, including, but not limited to,
deductions that Limited Partners may use to offset
otherwise taxable income from other sources;
(3) provide capital appreciation through increase in value of
the Partnership's investments, subject to considerations of
capital preservation and tax planning; and
(4) provide potential cash distributions from sales or
refinancings of the Partnership's investments and, on a
limited basis, from operations.
The Partnership does not have any employees. Services are performed
for the Partnership by the General Partner and agents retained by it.
The following is a schedule of the Properties owned directly by the
Partnership or by the Local Limited Partnerships in which the Partnership is a
limited partner:
SCHEDULE OF PROPERTIES OWNED BY THE PARTNERSHIP OR BY
LOCAL LIMITED PARTNERSHIPS IN WHICH NATIONAL HOUSING PARTNERSHIP
REALTY FUND IV HAS AN INVESTMENT
<TABLE>
<CAPTION>
Units Authorized Occupancy
Financed, Insured for Rental Percentage
Property Name, Location Number and Subsidized Assistance Under for the Year Ended
and Partnership Name of Units Under Section 8 (D) December 31, 1997
- ----------------------- -------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Capital Park 316 (A) 304 99%
Columbus, Ohio
(Capital Park
Limited Partnership)
Kennedy Homes 172 (B) 172 93%
Gainesville, Florida
(Kennedy Homes
Limited Partnership)
Loring Towers Apartments 208 (A) 187 98%
Minneapolis, Minnesota
(Loring Towers Apartments
Limited Partnership)
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
Units Authorized Occupancy
Financed, Insured for Rental Percentage
Property Name, Location Number and Subsidized Assistance Under for the Year Ended
and Partnership Name of Units Under Section 8 (D) December 31, 1997
- ----------------------- -------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Royal Towers 233 (A) 233 61%
Kansas City, Missouri
(Royal Towers Limited
Partnership)
Trinity Apartments 496 (C) None 95%
Irving, Texas
(Wholly-owned)
</TABLE>
(A) The mortgage is insured by the Federal Housing Administration under
the provisions of Section 236 of the National Housing Act.
(B) The mortgage is insured by the Federal Housing Administration under
the provisions of Section 221(d)(3) of the National Housing Act.
(C) Property is conventionally financed.
(D) Section 8 of Title II of the Housing and Community Development Act of
1974.
Although each Local Limited Partnership in which the Partnership has
invested owns an apartment complex which must compete with other apartment
complexes for tenants, government mortgage interest and rent subsidies make it
possible to rent units to eligible tenants at below market rates. In general,
this insulates the Properties from market competition.
The Federal Housing Administration (FHA) has contracted with the four
subsidized rental projects under Section 8 of Title II of the Housing and
Community Development Act of 1974 to make housing assistance payments to the
Local Limited Partnerships on behalf of qualified tenants. The terms of the
agreements are five years with one or two five year renewal options. The
agreements expire at various dates ranging from 1998 to 2008 as follows:
The following table indicates the year within the Section 8 rent
subsidy contracts expire:
<TABLE>
<CAPTION>
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
-------- ------------------- ----------------
<S> <C> <C> <C>
1998 619 69% 67%
2006 and thereafter 277 31% 30%
--- --- --
Total 896 100% 97%
=== === ==
</TABLE>
Of the contracts above expiring during 1998, contracts for 496 units
expire on or prior to September 30, 1998. Congress has passed legislation which
will provide a one-year renewal contract to replace those contracts. The
contract covering the remaining 123 units expires in October, 1998. It is
uncertain whether the agreement will be renewed, as well as the remaining
contracts expiring after 1998, and if so, on what terms.
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, 97 percent of the total units owned by the properties in which the
Partnership has invested (excluding Trinity Apartments), receive rental
subsidies. On October 27, 1997, the President signed into law the Multifamily
Assisted
4
<PAGE> 6
Housing Reform and Affordability Act of 1997 (the "1997 Housing Act"). Under the
1997 Housing Act, 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 potentially reducing
rent subsidies, and lowering required debt service costs as needed to ensure
financial viability at the reduced rents and rent subsidies. 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 such tenants have the
financial ability to pay the difference between the selected properties' monthly
rent and the value of the vouchers, 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. With
respect to Housing Assistance Payments Contracts ("HAP Contracts") expiring
before October 1, 1998, Congress has elected to renew them 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.
Trinity Apartments (Trinity), which is wholly-owned by the
Partnership, is conventionally financed and is a market rate project which
receives no government assistance and must compete directly with other apartment
complexes in its rental market. The local economy and competitive conditions in
the Dallas area, historically, have adversely affected operations at Trinity
Apartments.
The mortgage note payable on Trinity provided by General Electric
Capital Corporation ("GECC") was due June 30, 1995. On March 15, 1996, a
modification agreement to the mortgage agreement was signed which, among other
provisions, extended the due date to March 15, 1999. As a condition of the
modification, a principal payment of $560,000 was made to reduce the mortgage
note payable to $13,140,000. In order to make the required payment and to pay
additional financing fees, the General Partner made a loan of $667,202 to
Trinity. On December 29,1997, Trinity refinanced the mortgage note payable. GECC
was paid $13,093,546 to pay off the note along with a $1,300,000 prepayment
penalty representing 50% of the fair market value of the project above the
amount of refinanced debt as required under the GECC mortgage agreement.
Proceeds from the refinancing along with a loan of $6,121,479 from an affiliate
of the General Partner, AIMCO Properties L.P., were used to retire the existing
mortgage note, pay the prepayment penalty of $1,300,000 and to pay accrued
interest and other deferred finance costs of $925,930. The new mortgage note
payable of $9,620,000 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.
The General Partner has made substantial loans to Trinity. During
1996, Trinity made payments to the General Partner for principal and interest of
$5,764 and $438, respectively. Given the competitive nature of the Dallas
market, it is still uncertain as to whether the property will continue to
generate sufficient cash flow to repay the remaining loans and interest to the
General Partner.
On December 1, 1996, a fire occurred at the Royal Towers Limited
Partnership project site. Management believes that all damages will be recovered
through insurance proceeds less a $2,500 deductible. As of December 31, 1996, an
insurance receivable was recorded for $1,880,289 which included $1,784,685 for
fire loss damages net of the deductible, and $95,604 for loss of rent for the
month of December, 1996.
During 1997, Royal Towers Limited Partnership received approximately
$2,756,000 in insurance proceeds relating to the fire and used approximately
$2,485,000 of these proceeds as of December 31, 1997, to repair the damages. Use
of the remaining $271,000 held in escrow by the mortgage company and the final
insurance award have
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not been determined or approved. During 1997, HUD approved withdrawals of
$249,365 from the reserve for replacements to pay outstanding fire related
payables. This is considered a loan from the reserve for replacements and must
be repaid to the reserve for replacements when reimbursement is received from
the insurance company.
In addition to amounts reimbursed from insurance proceeds, Royal
Towers Limited Partnership has incurred costs of $190,761 which are fire related
and have been included in the accompanying combined statements of operations and
$95,164 of costs which have been capitalized. Royal Towers Limited Partnership
anticipates that an additional $1,000,000 is needed to repair the property to
its pre-fire condition and is seeking insurance funds to cover such costs.
During 1996, NHPMC, an affiliate of the General Partner, was
management agent under an agreement which ended on October 31,1996. At December
31, 1996, the Royal Towers Limited Partnership had accrued costs due to NHPMC
consisting of management fees, bookkeeping and accounting fees, payroll and
miscellaneous reimbursement items totaling $167,762. During 1997, NHPMC informed
Royal Towers Limited Partnership that these amounts totaling $167,762 do not
have to be paid and therefore this amount is shown as an extraordinary gain in
the accompanying 1997 combined statements of operations.
Additionally, Royal Towers has entered into a grant agreement with
HUD under the Drug Elimination Grant Program to assist in the elimination of
illegal drugs and the associated crime at the property. The grant agreement is
dated July 7, 1994. During 1995, the Partnership incurred $156,034 of costs
under the Program of which $120,867 have been capitalized in rental property.
Drug Elimination Grant revenue of $156,034 is included in other revenue in 1995
(Note 12 to the Local Limited Partnership Combined Financial Statements).
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.
Except for Trinity, all the properties in which the Partnership has
invested carry deferred acquisition notes due to the original owners of the
properties (as discussed in Note 6 to the Local Limited Partnerships' Combined
Financial Statements). In the event of a default on these notes, the note
holders would assume NHP's and the Partnership's interests in the Local Limited
Partnerships. Due to the 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 sale or refinancing opportunities. The
deferred acquisition notes mature in 2001.
The following details the Partnership's ownership percentages of the
Local Limited Partnerships, the cost of acquisition of such ownership and the
cost of Trinity Apartments. All interests in the Local Limited Partnerships are
limited partner interests. Also included is the total mortgage encumbrance and
deferred acquisition notes and accrued interest on each property for each of the
Local Limited Partnerships and Trinity Apartments as of December 31, 1997.
6
<PAGE> 8
<TABLE>
<CAPTION>
Deferred
NHP Realty Acquisition
Fund IV Cost of Notes
Percentage Ownership Mortgage and Accrued
Partnership Ownership Interest Notes Interest
- ----------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C>
Capital Park L.P. 99% $1,985,450 $3,796,821 $5,385,985
Kennedy Homes L.P. 99% 1,113,509 997,367 3,974,011
Loring Towers L.P. 99% 1,476,049 2,521,549 5,671,744
Royal Towers L.P. 99% 1,163,958 2,481,065 5,270,792
Trinity Apartments Wholly-owned 5,971,034 9,620,000 -
</TABLE>
Item 2. Properties
See Item 1 for the real estate owned by the Partnership either
directly or through the ownership of limited partnership interests in Local
Limited Partnerships.
Item 3. Legal Proceedings
The Partnership is not involved in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted.
PART II
Item 5. Market for the Registrant's Partnership Interests and Related
Partnership Matters
(a) Interests in the Partnership were sold through a public
offering managed by Dean Witter Reynolds, Inc. There is no
established market for resale of interests in the
Partnership. Accordingly, an investor may be unable to sell
or otherwise dispose of his or her interest in the
Partnership.
(b) As of December 31, 1997, there were 1,293 registered
holders of 15,414 limited partnership interests (in
addition to 1133 Fifteenth Street Four Associates - See
Item 1).
(c) No cash dividends or distributions have been declared from
the inception of the Partnership to December 31, 1997.
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Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental revenues $ 3,441,744 $ 3,338,241 $ 3,221,978 $ 3,162,772 $ 3,090,840
Rental expenses (4,917,615) (3,479,816) (3,712,415) (3,281,501) (3,374,984)
---------- ---------- ---------- ---------- ----------
Loss from rental operations (1,475,871) (141,575) (490,437) (118,729) (284,144)
Distributions in excess of
investment in Local Limited
Partnerships and interest income 38,963 69,297 23,963 52,408 45,697
Loss on reduction in carrying
value of rental property - - - - (4,091,000)
Loss on investment in Local
Limited Partnerships - - - - (12,400)
Share of losses from Local
Limited Partnerships (A) - - - - (169,765)
Partnership operating expenses (560,711) (447,992) (423,453) (368,904) (341,189)
---------- ---------- ---------- ---------- ----------
Net loss $(1,997,619) $ (520,270) $ (889,927) $ (435,225) $(4,852,801)
========== ========== ========== ========== ==========
Loss per unit of limited partnership
interest based on the units
outstanding during the period $ (127) $ (33) $ (58) $ (28) $ (315)
========== ========== ========== ========== ==========
Total long-term debt -
mortgage notes payable $ 9,620,000 $13,140,000 $13,700,000 $13,700,000 $13,700,000
========== ========== ========== ========== ==========
Total assets $15,451,497 $14,448,508 $14,496,556 $14,892,187 $15,274,435
========== ========== ========== ========== ==========
Cash distributions per unit of
limited partnership interest $ - $ - $ - $ - $ -
========== ========== ========== ========== ==========
</TABLE>
(A) The Partnership holds limited partnership interests in the Local
Limited Partnerships, and since its liability for obligations is
limited to its original investment, its investment account is not
reduced below zero (creating a liability) for the investments in
Local Limited Partnerships. As a result, during 1997, 1996, 1995,
1994 and 1993, $1,716,194, $6,379,470, $1,313,743, $1,447,892 and
$1,242,218, respectively, of losses from four, four, four, four and
three, respectively, Local Limited Partnerships have not been
recognized by the Partnership (see Note 3 to the Partnership's
financial statements).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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
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<PAGE> 10
owned by the Local Limited Partnerships operate, the availability of working
capital and dispositions of properties owned by the Partnership.
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 the Federal Government. 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 terms of these government assistance programs. These restrictions
have had an impact on the Partnership's ability to meet its cash obligations.
Net cash provided by operations for the year ended December 31, 1997,
was $126,447 ,as compared to cash provided by operations of $217,420 in 1996 and
to cash used in operations of $20,181 in 1995. The decrease in cash provided by
operations from 1996 to 1997 resulted from a decrease in distributions received
form Local Limited Partnerships, a decrease in real estate tax refunds received,
partially offset by an increase in rental collections and an increase in
mortgage interest paid, offset by a decrease in taxes and insurance payments in
1997. The increase in cash provided by operations from 1995 to 1996 resulted
from an increase in rental collections and from a real estate tax refund
received in 1996, partially offset by an increase in other operational expenses.
Distributions in excess of investment in 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 investment in Local Limited
Partnerships, investment carrying values for each of the Local Limited
Partnerships has decreased to zero. Cash distributions received are recorded in
revenues as distributions received in excess of investment in Local Limited
Partnerships. Cash distributions totaling $34,016, $63,756 and $20,296 were
received from two, three and two Local Limited Partnerships, respectively,
during the years ended December 31, 1997, 1996 and 1995. The receipt of these
distributions in future years is dependent on the operations of the underlying
properties of the Local Limited Partnerships.
Cash and cash equivalents amounted to $45,275 at December 31, 1997.
The ability of the Partnership to meet its on-going cash requirements, in excess
of cash on hand at December 31, 1997, is dependent on operations of Trinity
Apartments, distributions received from the Local Limited Partnerships, and
proceeds from the sales or refinancing of the underlying Properties. As of
December 31, 1997, the Partnership owes the General Partner $1,222,366 for
administrative and reporting services performed. In addition, at December 31,
1997, the Partnership owed NHP $626,696 for other advances. Additionally, NHP
and AIMCO have made advances totaling $7,451,013 to Trinity Apartments to cover
costs associated with the refinancing of the Partnership's mortgage note payable
for Trinity Apartments and to cover operating deficits for Trinity Apartments.
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 as defined by the Partnership agreement, 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. NHP
will evaluate lending the Partnership additional funds as such funds are needed,
but is in no way legally obligated to make such loans.
Trinity Apartments, a rental property wholly-owned by the
Partnership, has generated substantial losses from operations which have
resulted in the accumulation of significant accounts payable and accrued
expenses at December 31, 1997 and has also 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 mortgage note payable on Trinity provided by GECC, was due June
30, 1995. On March 15, 1996, a modification agreement to the loan agreement was
signed which, among other provisions, extended the due date to March 15, 1999.
As a condition of the modification, a principal payment of $560,000 was made to
reduce the mortgage note payable to $13,140,000. In order to make the required
payment and to pay additional financing fees, the General Partner made a loan of
$667,202 to Trinity. On December 29,1997, Trinity refinanced the mortgage note
payable. GECC was paid $13,093,546 to pay off the note along with a $1,300,000
prepayment penalty representing 50% of the
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fair market value of the project above the amount of refinanced debt as required
under the GECC mortgage agreement. Proceeds from the refinancing along with a
loan of $6,121,479 from an affiliate of the General Partner, AIMCO Properties
L.P., were used to retire the existing mortgage note, pay the prepayment penalty
of $1,300,000 and to pay accrued interest and other deferred finance costs of
$925,930. The new mortgage note payable of $9,620,000 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.
On December 1, 1996, a fire occurred at the Royal Towers Limited
Partnership project site. Management believes that all damages will be recovered
through insurance proceeds less a $2,500 deductible. As of December 31, 1996, an
insurance receivable was recorded for $1,880,289 which includes $1,784,685 for
fire loss damages net of the deductible, and $95,604 for loss of rent for the
month of December, 1996.
During 1997, Royal Towers Limited Partnership received approximately
$2,756,000 in insurance proceeds relating to the fire and used approximately
$2,485,000 of these proceeds as of December 31, 1997. Use of the remaining
$271,000 held in escrow by the mortgage company and the final insurance award
have not been determined or approved.
During 1997, HUD approved withdrawals of $249,365 from the reserve
for replacements to pay outstanding fire related payables. This is considered a
loan from the reserve for replacements and must be repaid to the reserve for
replacements when reimbursement is received from the insurance company.
In addition to amounts reimbursed from insurance proceeds, Royal
Towers Limited Partnership has incurred costs of $190,761 which are fire related
and have been included in the accompanying combined statements of operations and
$95,164 of costs which have been capitalized. Royal Towers Limited Partnership
anticipates that an additional $1,000,000 is needed to repair the property to
its pre-fire condition and is seeking insurance funds to fund such costs.
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.
During 1996, NHPMC, an affiliate of the General Partner, was
management agent under an agreement which ended on October 31,1996. At December
31, 1996, the Royal Towers Limited Partnership had accrued costs due to NHPMC
consisting of management fees, bookkeeping and accounting fees, payroll and
miscellaneous reimbursement items. In addition to the $131,027 shown as due to
management agent on the 1996 combined statements of financial position, there
was $36,735 due to NHPMC included in trade payables. During 1997, NHPMC informed
Royal Towers Limited Partnership that these amounts totaling $167,762 do not
have to be paid and therefore this amount is shown as an extraordinary gain in
the accompanying 1997 combined statements of operations.
Except for Trinity, all the properties in which the Partnership has
invested carry deferred acquisition notes due to the original owners of the
properties. In the event of a default on these notes, the noteholders would
assume NHP's and the Partnership's interests in the Local Limited Partnerships.
Due to the 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 sale or refinancing opportunities. The deferred
acquisition notes mature in 2001.
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 Apartments. The Partnership's results of
operations are significantly impacted by the rental operations of Trinity
Apartments. In prior years, results of operations
10
<PAGE> 12
were also affected by the Partnership's share of losses from the Local Limited
Partnerships in which it has invested to the extent the Partnership still had a
carrying basis in a respective Local Limited Partnership. As of December 31,
1997 and 1996, the Partnership had no carrying value in any of the Local Limited
Partnerships and therefore, reflected no share of losses from the four Local
Limited Partnerships.
The Partnership's net loss increased to $1,997,619 in 1997 from a net
loss of $520,270 in 1996. The net loss per unit of limited partnership interest
increased to $127 in 1997 from net loss per unit of $33 in 1996 for the 15,414
units outstanding throughout both years. The primary reasons for this increase
in net loss include a $1,300,000 prepayment penalty resulting from the Trinity
mortgage refinancing in 1997 and approximately $100,000 increase in interest on
partner loans.
The Partnership did not recognize $1,716,194 of its allocated share
of losses from the four Local Limited Partnerships in 1997, as the Partnership's
net book investment in them was reduced to zero (see Note 3 to the Partnership's
financial statements). The Partnership's share of losses from the Local Limited
Partnerships, if not limited to its investment account balance, would have
decreased $4,663,276 between years. The decrease was primarily due to impairment
losses on rental property of $2,700,000 and $1,960,000 for Loring Towers and
Royal Towers, respectively, taken in 1996. There were no such impairment losses
recorded in 1997. Additionally, there was a decrease in rental income and an
increase in operating expenses of the rental properties, which were offset by an
extraordinary gain on forgiveness of debt recorded in 1997.
The Partnership's net loss decreased to $520,270 in 1996 from a net
loss of $889,927 in 1995. The net loss per unit of limited partnership interest
decreased to $33 in 1996 from net loss per unit of $58 in 1995 for the 15,414
units outstanding throughout both years. The primary reasons for this decrease
in net loss include an increase in rental income of approximately $147,000, an
increase in distributions in excess of investment in Local Limited Partnerships
of approximately $43,000 and decreases in real estate taxes and mortgage
interest of approximately $214,000 and $76,000, respectively. The decrease in
real estate taxes was the result of a reassessment of Trinity apartments which
resulted in tax refund of approximately $124,000.
The Partnership did not recognize $6,379,470 of its allocated share
of losses from the four Local Limited Partnerships in 1996, as the Partnership's
net book investment in them was reduced to zero (see Note 3 to the Partnership's
financial statements). The Partnership's share of losses from the Local Limited
Partnerships, if not limited to its investment account balance, would have
increased $5,065,727 between years. The increase was primarily due to impairment
losses on rental property of $2,700,000 and $1,960,000 for Loring Towers and
Royal Towers, respectively, taken in 1996, and from a decrease in rental income
and an increase in operating expenses of the rental properties.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary schedule of the
Partnership are included on pages 12 through 33 of this report.
11
<PAGE> 13
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund IV
Indianapolis, IN
We have audited the accompanying statements of financial position of National
Housing Partnership Realty Fund IV (the Partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' deficit, and cash
flows for each of the three years in the period ended December 31, 1997, and the
financial statement schedule listed in the Index at Item 14. These financial
statements and schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of National Housing Partnership Realty Fund IV
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects,
the information set forth therein.
Deloitte & Touche LLP
McLean, VA
March 3, 1998
12
<PAGE> 14
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents (Note 2) $ 45,275 $ 70,382
Accounts receivable 2,591 25,148
Prepaid insurance, taxes and tenant security deposits 121,534 87,420
Mortgage escrow deposits 962,616 583,265
Reserve for insurance premiums 87,240 70,043
Investments in and advances to Local Limited Partnerships (Note 3) - -
Land 3,650,000 3,650,000
Building and improvements - less accumulated
depreciation of $4,671,875 and $4,294,768 9,656,311 9,883,988
Deferred finance cost 925,930 78,262
---------- ----------
$15,451,497 $14,448,508
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable and accrued
expenses from rental operations (Note 4) $ 797,882 $ 921,041
Administrative and reporting fees payable
to General Partner (Note 6) 1,222,366 1,106,762
Due to General Partner (Note 6) 8,077,709 1,927,518
Accrued interest on partner loans (Note 6) 1,838,021 1,461,334
Other accrued expenses 40,030 38,745
Mortgage note payable (Note 5) 9,620,000 13,140,000
---------- ----------
21,596,008 18,595,400
---------- ----------
Partners' deficit:
General Partner - The National
Housing Partnership (NHP) (191,139) (171,163)
Original Limited Partner - 1133
Fifteenth Street Four Associates (196,039) (176,063)
Other Limited Partners - 15,414 investment units (5,757,333) (3,799,666)
---------- ----------
(6,144,511) (4,146,892)
---------- ----------
$15,451,497 $14,448,508
========== ==========
</TABLE>
See notes to financial statements.
13
<PAGE> 15
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
RENTAL REVENUES:
Rental of apartments $ 3,355,210 $ 3,250,799 $ 3,104,124
Other rental revenue 86,534 87,442 117,854
---------- ----------- -----------
3,441,744 3,338,241 3,221,978
---------- ----------- -----------
RENTAL EXPENSES:
Interest 1,174,373 1,215,317 1,291,537
Prepayment penalty 1,300,000 - -
Renting and administrative 135,034 137,080 190,602
Operating and maintenance 575,237 563,438 545,230
Management and other services
from related party (Note 6) 197,577 218,751 205,756
Salaries and related benefits
to related party (Note 6) 293,380 290,613 230,283
Depreciation and amortization 455,369 393,736 405,177
Taxes and insurance 786,645 660,881 843,830
---------- ----------- -----------
4,917,615 3,479,816 3,712,415
---------- ----------- -----------
LOSS FROM RENTAL OPERATIONS (1,475,871) (141,575) (490,437)
---------- ----------- -----------
COSTS AND EXPENSES:
Interest on partner loans (Note 6) 376,687 278,198 250,478
Administrative and reporting fees
to General Partner (Note 6) 115,604 115,604 115,604
Other operating expenses 68,420 54,190 57,371
---------- ----------- -----------
560,711 447,992 423,453
---------- ----------- -----------
OTHER INCOME:
Interest income 4,947 5,541 3,667
Distributions in excess of
investment in Local Limited Partnerships (Note 3) 34,016 63,756 20,296
---------- ----------- -----------
38,963 69,297 23,963
---------- ----------- -----------
NET LOSS $(1,997,619) $ (520,270) $ (889,927)
========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner - NHP $ (19,976) $ (5,203) $ (8,899)
Original Limited Partner - 1133
Fifteenth Street Four Associates (19,976) (5,203) (8,899)
Other Limited Partners - 15,414
investment units (1,957,667) (509,864) (872,129)
---------- ----------- -----------
$(1,997,619) $ (520,270) $ (889,927)
========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP INTEREST $ (127) $ (33) $ (58)
========== =========== ============
</TABLE>
See notes to financial statements.
14
<PAGE> 16
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>
The 1133
National Fifteenth
Housing Street Other
Partnership Four Limited
(NHP) Associates Partners Total
----- ---------- -------- ----------
<S> <C> <C> <C> <C>
Deficit at
January 1, 1995 $(157,061) $(161,961) $(2,417,673) $(2,736,695)
Net loss (8,899) (8,899) (872,129) (889,927)
-------- -------- ---------- ----------
Deficit at
December 31, 1995 (165,960) (170,860) (3,289,802) (3,626,622)
Net loss (5,203) (5,203) (509,864) (520,270)
-------- -------- ---------- ----------
Deficit at
December 31, 1996 (171,163) (176,063) (3,799,666) (4,146,892)
Net loss (19,976) (19,976) (1,957,667) (1,997,619)
-------- -------- ---------- ----------
Deficit at
December 31, 1997 $(191,139) $(196,039) $(5,757,333) $(6,144,511)
======== ======== ========== ==========
Percentage interest at
December 31, 1995,
1996 and 1997 1% 1% 98%
-------- -------- ----------
(A) (B) (C)
======== ======== ==========
</TABLE>
(A) General Partner
(B) Original Limited Partner
(C) Consists of 15,414 investment units held by 1,293 investors. Each
unit represents 0.0064% ownership interest.
See notes to financial statements.
15
<PAGE> 17
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Rent collections $ 3,329,478 $ 3,260,049 $ 3,057,908
Distributions in excess of investment
in Local Limited Partnerships 34,016 63,756 20,296
Interest received 6,345 5,541 3,667
Other income 66,196 63,848 110,348
Payments of taxes and insurance (783,591) (849,134) (856,288)
Payments of other expenses (1,252,505) (1,228,882) (1,070,591)
Payment of interest on partner loans - (438) -
Mortgage interest paid (1,273,492) (1,221,547) (1,285,521)
Real estate tax refund received - 124,227 -
---------- ---------- ----------
Net cash provided by (used in) operating activities 126,447 217,420 (20,181)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (151,767) (115,916) (116,436)
Deposits to real estate tax escrow (660,941) (662,109) (587,270)
Withdrawals from real estate tax escrow 606,930 625,080 670,171
Payments to mortgage escrow deposits (962,616) - -
Refund of tax escrow funds 637,276 - -
Deposits to reserve for insurance premiums (90,787) (69,354) (33,164)
Withdrawals from reserve for insurance premiums 73,590 41,894 69,224
---------- ---------- ----------
Net cash (used in) provided by investing activities (548,315) (180,405) 2,525
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from partner 6,142,691 669,881 38,907
Repayment of loans from partner - (5,764) -
Payments of principal on mortgage note (46,454) (560,000) -
Proceeds from mortgage note 9,620,000 - -
Payment of deferred finance costs (925,930) (106,318) -
Payment of principal on mortgage note from
refinance proceeds (13,093,546) - -
Payment of mortgage prepayment penalty (1,300,000) - -
---------- ---------- ----------
Net cash provided by financing activities 396,761 (2,201) 38,907
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (25,107) 34,814 21,251
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 70,382 35,568 14,317
---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 45,275 $ 70,382 $ 35,568
========== ========== ==========
</TABLE>
See notes to financial statements.
16
<PAGE> 18
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net loss $(1,997,619) $ (520,270) $ (889,927)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation 377,107 365,680 361,092
Amortization of deferred finance costs 78,262 28,056 44,085
Payment of mortgage prepayment penalty 1,300,000 - -
Increase in accrued partnership administrative
fee payable to General Partner 7,500 7,500 7,500
Increase in administrative and reporting fee
payable to General Partner 115,604 115,604 115,604
Decrease (increase) in accounts receivable 22,557 (25,148) -
(Increase) decrease in prepaid insurance, taxes
and security deposits (34,114) (4,016) 12,390
(Decrease) increase in accounts payable and
accrued expenses from rental operations (21,703) (18,551) 68,248
Increase (decrease) in other accrued expenses 1,285 (2,965) 4,335
Increase in accrued interest on partner loans 376,687 277,760 250,476
(Decrease) increase in accrued interest on
mortgage note payable (99,119) (6,230) 6,016
---------- ---------- ----------
Total adjustments 2,124,066 737,690 869,746
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 126,447 $ 217,420 $ (20,181)
========== ========== ==========
</TABLE>
See notes to financial statements.
17
<PAGE> 19
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
Organization
National Housing Partnership Realty Fund IV (the Partnership) is a
limited partnership organized under the Maryland Revised Uniform Limited
Partnership Act on January 8, 1986. The Partnership was formed for the purpose
of raising capital by offering and selling limited partnership interests, and
then using that capital to acquire and operate (either directly or through
investment as a limited partner in Local Limited Partnerships) multi-family
rental apartments, some of which are financed and/or operated with one or more
forms of rental or financial assistance from the U.S. Department of Housing and
Urban Development (HUD). On February 21, 1986, inception of operations, the
Partnership began raising capital and acquiring interests in Local Limited
Partnerships.
The General Partner was authorized to raise capital for the
Partnership by offering and selling to additional limited partners not more than
35,000 interests at a price of $1,000 per interest. During 1986, 15,414
interests were sold to additional limited partners. The offering was terminated
on October 14, 1986.
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 acquisitions were 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" or "Partnership"). 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.
During 1986, the Partnership acquired 99% limited partnership
interests in four limited partnerships (Local Limited Partnerships) which were
organized in 1986 to operate existing rental housing projects. In addition,
during 1986, the Partnership directly purchased Trinity Apartments (Trinity), a
conventionally financed rental apartment project.
Significant Accounting Policies
The financial statements of the Partnership are prepared on the
accrual basis of accounting. Public offering costs were recorded as a direct
reduction to the capital accounts of the limited partners. Direct costs of
acquisition, including acquisition fees and reimbursable acquisition expenses
paid to the General Partner, have been capitalized as investments in Trinity or
the Local Limited Partnerships. Other fees and expenditures of the Partnership
are recognized
18
<PAGE> 20
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
as expenses in the period the related services are performed. Deferred finance
costs are amortized over the appropriate loan period on a straight-line basis.
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.
Depreciation of the buildings and improvements is computed using the
straight-line method, assuming a 50 year life from the date of initial occupancy
and depreciation of equipment is calculated using accelerated methods over
estimated useful lives of 5 to 27 years.
The Partnership recognizes rental revenue in the month earned in
accordance with signed resident tenant lease agreements.
The financial statements include the accounts of the Partnership and
its wholly-owned subsidiary, Trinity. All significant intercompany transactions
have been eliminated.
Investments in Local Limited Partnerships are accounted for using the
equity method and thus are carried at cost less the Partnership's share of the
Local Limited Partnerships' losses and distributions (see Note 3). An investment
account is maintained for each of the limited partnership investments and losses
are not taken once an investment account has decreased to zero. Cash
distributions are limited by the Regulatory Agreements between the Local Limited
Partnerships and HUD to the extent of surplus cash as defined by HUD.
Undistributed amounts are cumulative and may be distributed in subsequent years
if future operations provide surplus in excess of current requirements.
Distributions received from Local Limited Partnerships in which the
Partnership's investment account has decreased to zero are recorded as revenue
in the year received.
For purposes of the Statements of Cash Flows, the Partnership
considers all highly liquid debt instruments purchased with initial maturities
of three months or less to be cash equivalents.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash in demand accounts $ 605 $ 1,580
Money market account 44,670 68,802
------ ------
$45,275 $70,382
====== ======
</TABLE>
19
<PAGE> 21
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
3. INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS
The Partnership owns a 99% limited partnership interest in Loring
Towers Apartments Limited Partnership, Kennedy Homes Limited Partnership,
Capital Park Limited Partnership, and Royal Towers Limited Partnership. These
investments are accounted for using the equity method because, as a limited
partner, the liability of the Partnership is limited to its investment in the
Local Limited Partnerships. As a limited partner, the Partnership does not
exercise control over the activities of the Local Limited Partnerships in
accordance with the partnership agreements. Thus, the investments are carried at
cost less the Partnership's share of the Local Limited Partnerships' losses and
distributions. However, since the Partnership is neither legally liable for the
obligations of the Local Limited Partnerships, nor otherwise committed to
provide additional support to them, it does not recognize losses once its
investment in each of the individual Local Limited Partnerships, reduced for its
share of losses and cash distributions, reaches zero. As a result, during 1997,
1996 and 1995, the Partnership did not recognize $1,716,194, $6,379,470 and
$1,313,743, respectively of its allocated share of losses from four Local
Limited Partnerships. As of December 31, 1997 and 1996, the Partnership had not
recognized $14,346,578 and $12,630,384, respectively, of its cumulative
allocated share of losses from four of the Local Limited Partnerships.
During 1996, one Local Limited Partnership repaid $200 and $107
principal and accrued interest to the Partnership. No working capital advances
or recoveries occurred between the Partnership and the Local Limited
Partnerships during 1997 or 1995. As of December 31, 1997 and 1996, $12,200 was
owed by one Local Limited Partnerships to the Partnership. During 1993, the
Partnership re-evaluated the timing of the collectibility of these advances and
determined, based on the Local Limited Partnerships' operations, that such
advances were not likely to be collected; therefore, the Partnership treated the
advance balance as additional investments. Due to the cumulative losses incurred
but not recognized on the investments, the balance was then reduced to zero,
with the corresponding charge to operations, shown as "Share of Losses in Local
Limited Partnerships" in the Statement of Operations. To the extent these
advances are repaid by the Local Limited Partnerships in the future, operations
will be credited upon repayment.
Summaries of the combined financial position of the aforementioned
Local Limited Partnerships as of December 31, 1997 and 1996 and the combined
results of operations for the years ended December 31, 1997, 1996, and 1995 are
as follows:
20
<PAGE> 22
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
COMBINED FINANCIAL POSITION
OF THE LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996
---- ----
<S> <C> <C>
Assets:
Land $ 756,247 $ 756,247
Building and improvements, net of accumulated depreciation
of $5,193,200 and $7,588,641 and impairment losses of
$7,764,857 and $4,660,000 13,819,318 14,133,713
Other assets 2,095,211 3,702,785
----------- ----------
$ 16,670,776 $18,592,745
=========== ==========
Liabilities and Partners' Deficit:
Liabilities:
Mortgage notes payable $ 9,796,802 $10,168,368
Deferred acquisition notes payable 7,174,900 7,174,900
Other liabilities 14,499,124 14,281,638
----------- ----------
31,470,826 31,624,906
Partners' Deficit:
National Housing Partnership Realty Fund IV (14,590,927) (12,840,717)
The National Housing Partnership (209,123) (191,444)
----------- ----------
$ 16,670,776 $18,592,745
=========== ==========
</TABLE>
21
<PAGE> 23
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
COMBINED RESULTS OF OPERATIONS
OF THE LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Revenue $ 4,693,668 $ 4,787,017 $ 4,978,626
---------- ---------- ----------
Expenses:
Operating expenses 3,998,628 3,912,107 3,779,189
Financial expenses - primarily interest 149,297 167,128 188,182
Interest on acquisition notes 1,713,132 1,566,533 1,450,521
Depreciation 733,902 925,158 887,747
Impairment losses on rental
property - 4,660,000 -
---------- ---------- ----------
Total expenses 6,594,959 11,230,926 6,305,639
---------- ---------- ----------
Net loss before extraordinary item (1,901,291) (6,443,909) (1,327,013)
Gain on forgiveness of debt 167,762 - -
---------- ---------- ----------
Net loss $(1,733,529) $(6,443,909) $(1,327,013)
========== ========== ==========
</TABLE>
The combined financial statements of the Local Limited Partnerships
are prepared on the accrual basis of accounting. Each Local Limited Partnership
was formed during 1986 for the purpose of acquiring and operating a rental
housing project originally organized under Section 236 or Section 221(d)(3) of
The National Housing Act. All four projects receive rental assistance from HUD.
The following table indicates the year within which the Section 8
rent subsidy contracts expire:
<TABLE>
<CAPTION>
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
-------- ------------------- ----------------
<C> <C> <C> <C>
1998 619 69% 67%
2006 and thereafter 277 31% 30%
--- --- --
Total 896 100% 97%
=== === ==
</TABLE>
Of the contracts above expiring during 1998, contracts for 496 units
expire on or prior to September 30, 1998. Congress has passed legislation which
will provide a one-year renewal contract to replace those contracts. The
contract covering the remaining 123 units expires in October, 1998. It is
uncertain whether the agreement will be renewed, as well as the remaining
contracts expiring after 1998, and if so, on what terms.
22
<PAGE> 24
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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, 97 percent of the total units owned by the properties in which the
Partnership has invested (excluding Trinity Apartments), receive rental
subsidies. 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, 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 potentially
reducing rent subsidies, and lowering required debt service costs as needed to
ensure financial viability at the reduced rents and rent subsidies. 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 such tenants have
the financial ability to pay the difference between the selected properties'
monthly rent and the value of the vouchers, 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.
With respect to Housing Assistance Payments Contracts ("HAP Contracts") expiring
before October 1, 1998, Congress has elected to renew them 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.
Depreciation of the buildings and improvements is computed using the
straight-line method, assuming a 50-year life from the date of initial occupancy
and depreciation of equipment is calculated using accelerated methods over
estimated useful lives ranging from 5 to 27 years.
The mortgage notes payable are insured by the Federal Housing
Administration (FHA) and secured by first deeds of trust on the rental
properties. The notes bear interest at rates ranging from 6% to 8.5% per annum.
For the three rental housing projects insured under Section 236, FHA makes
subsidy payments directly to the mortgage lenders reducing the monthly principal
and interest payments of the project owner to an effective interest rate of 1%
over the 40-year term of the notes. The liability of the Local Limited
Partnerships under the mortgage notes is limited to the underlying value of the
real estate collateral plus other amounts deposited with the lenders.
Deferred acquisition notes of $7,174,900 bear interest at the rate of
9% per annum, compounded semi-annually. These notes are nonrecourse and are
secured by security interests in all partnership interests of the Local Limited
Partnerships. Neither principal nor interest is payable currently; all principal
and accrued interest are payable upon the earlier of the sale, transfer, or
refinancing of the projects or 2001. The notes may be prepaid in whole or in
part at any time without penalty.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting For The
Impairment Of Long-Lived Assets And For Long-Lived Assets To Be
23
<PAGE> 25
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Disposed Of" (the "Statement") effective for financial statements for fiscal
years beginning after December 15, 1995. This Statement requires an impairment
loss to be recognized if the sum of estimated future cash flows (undiscounted
and without interest charges) is less than the carrying amount of rental
property. The impairment loss would be the amount by which the carrying value
exceeds the fair value of the rental property. If the rental property is to be
disposed of, fair value is calculated net of costs to sell.
During 1996, two Local Limited Partnerships recognized impairment
losses on their rental properties in the amount of $2,700,000 and $1,960,000.
Because the Local Limited Partnerships' deferred acquisition notes were due
March 27, 2001, the Local Limited Partnerships' estimated net cash flow was only
for the period January 1, 1997 to March 27, 2001. As a result of this limited
holding period, the estimated net cash flow was less than the carrying amount at
December 31, 1996. The Local Limited Partnership used the Direct Capitalization
Method to estimate the fair value of the rental property. Using this Method,
estimated annual cash flow generated by the property is divided by an overall
capitalization rate to estimate the rental property's fair value. The impairment
losses had no impact on the Partnership's operations, since the Partnership's
investments in the Local Limited Partnerships had been reduced to zero in a
prior year.
Additionally, regardless of whether the impairment loss of an
individual property has been recorded or not, the carrying value of each of the
rental properties may still exceed their fair market value as of December 31,
1997. Should a Local Limited Partnership be forced to dispose of any if its
properties, it could incur a loss.
During 1996, NHPMC, an affiliate of the General Partner, was
management agent for each of the properties, except that for Royal Towers the
agreement ended on October 31,1996. At December 31, 1996, the Royal Towers
Limited Partnership had accrued costs due to NHPMC consisting of management
fees, bookkeeping and accounting fees, payroll and miscellaneous reimbursement
items totaling $167,762. During 1997, NHPMC informed Royal Towers Limited
Partnership that these amounts totaling $167,762 do not have to be paid and
therefore this amount is shown as an extraordinary gain in the accompanying 1997
combined statements of operations.
On December 1, 1996, a fire occurred at the Royal Towers Limited
Partnership project site. Management believes that all damages will be recovered
through insurance proceeds less a $2,500 deductible. As of December 31, 1996, an
insurance receivable was recorded for $1,880,289 which includes $1,784,685 for
fire loss damages net of the deductible, and $95,604 for loss of rent for the
month of December, 1996.
During 1997, Royal Towers Limited Partnership received approximately
$2,756,000 in insurance proceeds relating to the fire and used approximately
$2,485,000 of these proceeds as of December 31, 1997. Use of the remaining
$271,000 held in escrow by the mortgage company and the final insurance award
have not been determined or approved. During 1997, HUD approved withdrawals of
$249,365 from the reserve for replacements to pay outstanding fire related
payables. This is considered a loan from the reserve for replacements and must
be repaid to the reserve for replacements when reimbursement is received from
the insurance company.
In addition to amounts reimbursed from insurance proceeds, Royal
Towers Limited Partnership has incurred costs of $190,761 which are fire related
and have been included in the accompanying combined statements of operations and
$95,164 of costs which have been capitalized. Royal Towers Limited Partnership
anticipates that an additional $1,000,000 is needed to repair the property to
its pre-fire condition and is seeking insurance funds to fund such costs.
24
<PAGE> 26
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 Local Limited Partnership's ability to continue as a
going concern. Royal Towers Limited partnership 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.
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES FROM RENTAL OPERATIONS
Accounts payable and accrued expenses from rental operations consist
of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
Trade payables $ 60,419 $111,892
Accrued interest on mortgage notes - 99,119
Accrued real estate taxes 659,616 608,302
Tenant security deposits 77,847 77,589
Due to management agent (Note 6) - 14,274
Rent received in advance - 9,865
------- -------
$797,882 $921,041
======= =======
</TABLE>
5. MORTGAGE NOTE PAYABLE
Since July 2, 1990, Trinity had operated under a mortgage loan
provided by General Electric Capital Corporation ("GECC") in the amount of
$13,700,000. The mortgage note payable was secured by an assignment of leases,
and by a deed of trust on the rental property. The loan had a term of five years
during which no principal payments were required. A modification agreement was
executed on March 15, 1996, extending the maturity date of the loan to March 15,
1999. As a condition of the modification, the Partnership paid principal of
$560,000 during 1996. This reduced the mortgage note payable to $13,140,000,
which was the outstanding balance at December 31, 1996.
Interest only, at the Contract Index Rate, on the mortgage was
payable monthly beginning April 1, 1996 through March 1, 1999. In addition,
beginning April 1, 1996 and continuing each July, October, December and April,
installments of principal in the amount equal to 100% of the net cash flow (as
defined) were due and payable. During 1997, Trinity made principal payments of
$46,454 from net cash flow as required. On March 15, 1999, the entire unpaid
principal and interest was due and payable. The Contract Index Rate is equal to
3.25% per annum in excess of the GECC Composite Commercial Paper Rate.
On December 29,1997, Trinity refinanced the mortgage. GECC was paid
$13,093,546 to pay off the note along with $1,300,000 prepayment penalty
representing 50% of the fair market value of the project above the amount of
refinanced debt as required under the GECC mortgage agreement. Proceeds from the
refinancing along with a loan of $6,121,479 from an affiliate of the General
Partner, AIMCO Properties L.P., were used to retire the existing
25
<PAGE> 27
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
mortgage note, pay the prepayment penalty of $1,300,000 and to pay accrued
interest and other deferred finance costs of $925,930.
The new mortgage note payable of $9,620,000 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.
Principal payments are due as follows:
1998 $ 390,024
1999 416,381
2000 444,519
2001 474,558
2002 506,627
Thereafter 7,387,891
---------
$9,620,000
=========
Under the agreement with the new mortgage lender, Trinity was
required to establish a repair escrow of $303,000 and is required to make
monthly escrow deposits with the lender for taxes, hazard and liability
insurance.
The liability of the Partnership under the mortgage note is limited
to the underlying value of the real estate collateral plus other amounts
deposited with the lender.
6. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL
PARTNER
The Partnership accrued administrative and reporting fees payable to
the General Partner of $115,604 in 1997, 1996 and 1995. No payments for these
fees were made during 1997, 1996 or 1995. The balance owed to the General
Partner at December 31, 1997 and 1996 was $1,222,366 and $1,106,762,
respectively.
During 1997, 1996 and 1995, the General Partner made working capital
advances of $21,212, $669,881 and $38,907, respectively, to the Partnership and
to Trinity Apartments. In addition, AIMCO advanced $6,121,479 for the
refinancing of Trinity's mortgage. During 1996, the Partnership repaid advances
of $5,764 to the General Partner. No repayments of working capital advances were
made in 1997 or 1995. The balance owed to the General Partner and AIMCO at
December 31, 1997 and 1996 was $8,055,209. and $1,912,518, respectively.
Interest is charged at the Chase Manhattan Bank rate of prime plus 2%. Chase
Manhattan Bank prime was 8.5% at December 31, 1997. During 1997, 1996 and 1995,
interest of $376,687, $278,198 and $250,478, respectively was accrued and
expensed. During 1996, interest of $438 was repaid to the General Partner. The
interest balance owed to the General Partner at December 31,
26
<PAGE> 28
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1997 and 1996 was $1,838,021 and $1,461,334, respectively. Additionally, annual
partnership administrative fees of $7,500 were accrued by Trinity Apartments
during 1997, 1996 and 1995, respectively. These fees are payable to the General
Partner without interest from cash available for distribution to partners. No
payments for these fees were made during 1997, 1996 or 1995. As of December 31,
1997 and 1996, $22,500 and $15,000, respectively, was owed to the General
Partner for these fees.
NHP Management Company ("NHPMC"), formerly a wholly owned subsidiary
of NHP Incorporated ("NHPI"), is the project management agent for the projects
operated by the Local Limited Partnerships, except for Royal Towers Limited
Partnership which changed management agent on November 1, 1996. In 1996, NHPI,
which at that time owned 100% of NHPMC, paid an affiliate of NHP $400,321 to
secure the rights to manage Trinity for the three years ending March 31, 1999.
During May 1997, AIMCO acquired approximately 51% of the voting stock of NHPI.
An additional 3% of the voting stock was acquired by AIMCO in August 1997. On
December 8, 1997, the NHPI stockholders elected to merge with AIMCO. After the
merger, NHPMC became a wholly owned subsidiary of AIMCO. NHPMC and other
affiliates of NCHP earned $494,836, $517,575 and $501,645 from the Local Limited
Partnerships and $197,577, $218,751 and $205,756 from Trinity for management
fees and other services provided to the Local Limited Partnerships during 1997,
1996 and 1995, respectively. At December 31, 1997 and 1996, amounts due NHPMC
and unpaid by the Local Limited Partnerships amounted to $4,920 and $163,637,
respectively.
Personnel working at the project sites, which are managed by NHPMC,
were employees of NHPI during the period January 1, 1996 through December 8,
1997 and became employees of NHPMC (as a successor employer) as of December 8,
1997 and, therefore, the projects reimbursed NHPI and NHPMC for the actual
salaries and related benefits. Prior to January 1, 1996, project employees were
employees of NCHP. Total reimbursements earned for salaries and benefits for the
years ended December 31, 1997, 1996 and 1995, were approximately $462,000,
$714,000 and $642,000, respectively, from the Local Limited Partnerships and
approximately $293,000, $291,000 and $230,000, respectively, from Trinity. At
December 31, 1997 and 1996 account payable included $501 and $16,413 due to
NHPMC and NCHP, respectively.
7. INCOME TAXES
The Partnership is not taxed on its income. The partners are taxed in
their individual capacities upon their distributive share of the Partnership's
taxable income and are allowed the benefits to be derived from off-setting their
distributive share of the tax losses against taxable income from other sources
subject to application of passive loss rules. The taxable income or loss differs
from amounts included in the statement of operations because of different
methods used in computing depreciation and determining the losses of the Local
Limited Partnerships. The tax loss is allocated to the partner groups in
accordance with Section 704(b) of the Internal Revenue Code and therefore is not
necessarily proportionate to the interest percentage owned.
For Federal income tax purposes, both the Partnership and the four
Local Limited Partnerships compute depreciation of the buildings and
improvements using the Accelerated Cost Recovery System (ACRS) and the Modified
Accelerated Cost Recovery System (MACRS), while for financial statement
purposes, depreciation is computed using the straight-line method, assuming a
50-year life from the date of initial occupancy. Rent received in advance is
included as income in determining the taxable income or loss for Federal income
tax purposes, while for
27
<PAGE> 29
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
financial statement purposes, it is shown as a liability. Other differences
result from the allocation of tax losses in accordance with Section 704(b) of
the Internal Revenue Code.
A reconciliation follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net loss per financial statements $(1,997,619) $ (520,270) $ (889,927)
Timing difference - depreciation (400,866) (402,653) (402,215)
Timing differences in determining losses of Local Limited Partnerships:
Depreciation (518,072) (327,580) (353,959)
Interest on partner loans 4,247 16,793 2,580
Impairment losses on rental property - 4,613,400 -
Losses taken in excess of financial
statement investment account (1,654,454) (6,358,746) (1,255,387)
Other 276,020 217,384 104,556
---------- ---------- ----------
Loss per tax return $(4,290,744) $(2,761,672) $(2,794,352)
========== ========== ==========
</TABLE>
As discussed in Note 3, one of the Local Limited Partnerships in
which the Partnership has invested may not be able to continue as a going
concern. Should a Local Limited Partnership not continue as a going concern or
the Partnership itself not continue as a going concern (see Note 8), there could
be adverse tax consequences to the partners in the Partnership. The impact of
the tax consequences is dependent upon each partner's individual tax situation.
8. FUTURE OPERATIONS
Trinity Apartments, a rental property wholly-owned by the
Partnership, has generated substantial losses from operations in prior years
which has necessitated significant funding from the General Partner as described
in Note 6.
The Partnership's intentions are to manage Trinity Apartments
prudently so that the property can maintain positive cash flows in order to pay
its expenses and to repay its loans as operations permit. NHP will evaluate
loaning Trinity Apartments additional funds as such funds are needed, but it is
not legally obligated to make such loans.
9. ALLOCATION OF RESULTS OF OPERATIONS, CASH DISTRIBUTIONS AND GAINS AND
LOSSES FROM SALE OR REFINANCING
Cash received from sales or refinancing of any underlying property of
the Local Limited Partnerships, after payment of the applicable mortgage debt
and the payment of all expenses related to the transaction, is to be distributed
in the following manner:
28
<PAGE> 30
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
First, to the General Partner for any unrepaid loans to the
Partnership or a Local Limited Partnership (other than operating
guarantee loans) and any unpaid fees (other than disposition and
refinancing fees);
Second, to the establishment of any reserves which the General
Partner deems reasonably necessary for contingent, unmatured or
unforeseen liabilities of obligations of the Partnership.
Third, to the General Partner to repay any unrepaid operating
guarantee loans made to the Property sold or refinanced;
Fourth, to the Limited Partners until the Limited Partners have
received a return of their capital contribution to the Partnership
allocable to the Property sold or refinanced after deduction for
prior cash distributions from sales or refinancing, but without
deduction for prior cash distribution from operations;
Fifth, to the General Partner to repay any unrepaid operating
guarantee loans made to Properties other than the Property sold or
refinanced;
Sixth, to the Limited Partners until the Limited Partners have
received a return of the unrecovered amount of their capital
contributions, after deduction for prior cash distributions from
sales or refinancings, but without deduction for prior cash
distributions from operations;
Seventh, to the Limited Partners, until each Limited Partner has
received an amount equal to a cumulative noncompounded 9% annual
return on its capital contribution, after deduction of (a) an amount
equal to 35% of the tax losses allocated to the Limited Partner and
(b) prior cash distributions from operations;
Eighth, to the General Partner until the General Partner has received
a return of its capital contributions, after deduction for prior cash
distributions from sales or refinancing, but without deduction for
prior cash distributions from operations;
Ninth, to the General Partner for disposition and refinancing fees,
including prior disposition and refinancing fees which have been
accrued but are unpaid;
Tenth, to the partners with positive capital accounts to bring such
accounts to zero; and
Finally, 85% of the remaining sales proceeds to the Limited Partners
and 15% to the General Partner.
Net income or loss from operations is allocated 98% to the Limited
Partners, 1% to the General Partner and 1% to the Original Limited Partner. Cash
distributions from operations, after payment of certain obligations including
reimbursement on a cumulative basis of direct expenses incurred by the General
Partner or its affiliate in managing the properties and payment of annual
cumulative administrative and reporting fees, is distributed 98% to the Limited
Partners, 1% to the General Partner and 1% to the Original Limited Partner.
Gain for federal income tax purposes realized in the event of
dissolution of the Partnership or upon sale of interests in a Local Limited
Partnership or underlying property will be allocated in the following manner:
29
<PAGE> 31
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
First, to the Limited Partners in an amount up to the negative
balances of the capital accounts of Limited Partners in the same
proportion as each Limited Partner's negative capital account bears
to such aggregate negative capital accounts;
Second, to the General Partner in an amount up to the General
Partner's negative capital account, if any;
Third, to the Limited Partners up to the aggregate amount of capital
contributions of the Limited Partners, after deduction for prior cash
distributions from sales or refinancing, but without deduction for
prior cash distributions from operations, in the same proportion that
such Limited Partner's capital contribution bears to the aggregate of
all Limited Partners' capital contributions;
Fourth, to the Limited Partners, until each Limited Partner has been
allocated in such an amount equal to a cumulative noncompounded 9%
annual return on their capital contribution, after deduction of (a)
an amount equal to 35% of the tax losses allocated to the Limited
Partner and (b) prior cash distributions from operations;
Fifth, to the General Partner up to the aggregate amount of capital
contributions made by the General Partner, after deduction for prior
cash distributions from sales or refinancing, but without deduction
for prior cash distributions from operations and
Finally, 85% of the remaining gain to the Limited Partners and 15% to
the General Partner.
Losses for federal income tax purposes realized in the event of
dissolution of the Partnership or upon sale of interests in a Local Limited
Partnership or underlying property will be allocated 85% to the Limited Partners
and 15% to the General Partner.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information about significant
financial instruments, when it is practicable to estimate that value and
excessive costs would not be incurred. To estimate the fair value of the
balances due to the General Partner and accrued interest thereon, excessive
costs would be incurred and, therefore, no estimate has been made. The
Partnership believes that the carrying value of other assets and liabilities
reported on the statement of financial position that require such disclosure
approximates fair value.
11. NONCASH INVESTING ACTIVITY
During 1997 and 1996, the Partnership incurred costs of $1,947 and
$4,284, respectively, for additions to building and equipment which are included
in accounts payable as of December 31, 1997 and 1996, respectively.
30
<PAGE> 32
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL LIMITED PARTNERSHIPS IN WHICH NHP REALTY FUND IV HAS INVESTED
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Local Limited Cost Capitalized Subsequent
Partnership to Acquisition
--------------------------------------------------------------
Buildings and Carrying Cost
Partnership Name Encumbrances Land Improvements Improvements Adjustments
- ----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Capital Park Limited
Partnership (1) $ 110,000 $ 7,634,451 $ 1,902,296 $ -
Kennedy Homes
Limited Partnership (1) 150,000 3,130,682 1,156,670 -
Loring Towers
Limited Partnership (1) 290,000 5,875,841 595,321 (4,361,046)
Royal Towers
Limited Partnership (1) 360,000 5,453,177 1,028,937 (3,557,564)
Trinity Apartments
(wholly-owned) (1) 3,650,000 18,809,468 (390,282) (4,091,000)
--------------------------------------------------------------
TOTAL,
December 31, 1997 $ 4,560,000 $ 40,903,619 $ 4,292,942 $(12,009,610)
==============================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at which Carried at Close of
Period
----------------------------------------------
Life upon which
depreciation in
latest
Accumulated statement of
Buildings and Depreciation Date of Date operations is
Partnership Name Land Improvements Total (2) (3) (3) Construction Acquired computed (years)
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
Capital Park Limited
Partnership $ 110,000 $ 9,536,747 $ 9,646,747 $ 2,907,030 1969 3/86 5-50
Kennedy Homes
Limited Partnership 150,000 4,287,352 4,437,352 1,494,417 1968 3/86 5-50
Loring Towers
Limited Partnership 290,000 2,110,116 2,400,116 273,402 1970 3/86 5-50
Royal Towers
Limited Partnership 206,247 3,078,303 3,284,550 518,351 1973 4/86 5-50
Trinity Apartments
(wholly-owned) 3,650,000 14,328,186 17,978,186 4,671,875 1985 4/86 5-50
----------------------------------------------------------------
TOTAL,
December 31, 1997 $ 4,406,247 $ 33,340,704 $ 37,746,951 $ 9,865,075 .
================================================================
</TABLE>
See notes to Schedule III.
31
<PAGE> 33
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO SCHEDULE III - REAL ESTATE AND
ACCUMULATED DEPRECIATION OF PARTNERSHIP AND LOCAL LIMITED
PARTNERSHIPS IN WHICH NHP REALTY FUND IV HAS INVESTED
DECEMBER 31, 1997
(1) Schedule of Encumbrances
<TABLE>
<CAPTION>
Deferred
Acquisition
Notes and
Mortgage Accrued
Partnership Name Notes Interest Total
---------------- ----------- ----------- -----------
<C> <C> <C> <C>
Capital Park
Limited Partnership $ 3,796,821 $ 5,385,985 $ 9,182,806
Kennedy Homes
Limited Partnership 997,367 3,974,011 4,971,378
Loring Towers Apartments
Limited Partnership 2,521,549 5,671,744 8,193,293
Royal Towers
Limited Partnership 2,481,065 5,270,792 7,751,857
Trinity Apartments
(wholly-owned) 9,620,000 - 9,620,000
---------- ---------- ----------
TOTAL $19,416,802 $20,302,532 $39,719,334
========== ========== ==========
</TABLE>
(2) The aggregate cost of land for Federal income tax purposes is
$4,560,000 and the aggregate costs of buildings and improvements for
Federal income tax purposes is $42,803,738. The total of the
above-mentioned items is $47,363,738.
32
<PAGE> 34
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO SCHEDULE III - REAL ESTATE AND
ACCUMULATED DEPRECIATION OF PARTNERSHIP AND LOCAL LIMITED
PARTNERSHIPS IN WHICH NHP REALTY FUND IV HAS INVESTED
DECEMBER 31, 1997
(CONTINUED)
(3) Reconciliation of real estate
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $40,307,357 $44,660,705 $44,152,250
Improvements during the period 544,451 306,652 508,455
Decrease due to prior year impairment
losses on rental property (3,104,857) - -
Impairment loss on rental property - (4,660,000) -
---------- ---------- ----------
Balance at end of period $37,746,951 $40,307,357 $44,660,705
========== ========== ==========
</TABLE>
Reconciliation of accumulated depreciation
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $11,883,409 $10,612,976 $ 9,364,137
Depreciation expense for the period 1,086,523 1,270,433 1,248,839
Decrease due to prior year impairment
losses on rental property (3,104,857) - -
---------- ---------- ----------
Balance at end of period $ 9,865,075 $11,883,409 $10,612,976
========== ========== ==========
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
33
<PAGE> 35
PART III
Item 10. Directors and Executive Officers of the Registrant
(a), (b) and (c). The Partnership has no directors, executive
officers or significant employees of its own.
(a), (b), (c), (e) and (f). The names, ages, business experience and
involvement in legal proceedings of the directors and executive
officers of National Corporation for Housing Partnerships (NCHP), the
sole general partner of The National Housing Partnership, the sole
general partner of the Partnership, and certain of its affiliates,
are as follows:
Directors of NCHP
Six individuals comprise the Board of Directors of NCHP. Two
directors were appointed by the President of the United States, by and with the
advice and consent of the Senate.
Terry Considine (age 50) was elected Chairman, Chief Executive
Officer and a Director of NCHP in 1997. Mr. Considine has been Chairman of the
Board of Directors and Chief Executive Officer of AIMCO since July 1994, and was
President until July 1997. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of Property Asset Management,
L.L.C., Limited Liability Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of the AIMCO Predecessors. On
October 1, 1996, Mr. Considine was appointed Co-Chairman and director of Asset
Investors Corp. and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of Financial Assets
Management, LLC, a real estate investment trust manager. Mr. Considine has been
involved as a principal in a variety of real estate activities, including the
acquisition, renovation, development and disposition of properties. Mr.
Considine has also controlled entities engaged in other businesses such as
television broadcasting, gasoline distribution and environmental laboratories.
Mr. Considine received a B.A. from Harvard College, a J.D. from Harvard Law
School and is admitted as a member of the Massachusetts Bar. He served as a
Colorado State Senator from 1987 - 1992 and in 1992 was the Republican nominee
for election to the United States Senate from Colorado.
Peter K. Kompaniez (age 52) was elected Vice Chairman, President and
a Director of NCHP in 1997. Mr. Kompaniez has been Vice President and a Director
of AIMCO since July 1994 and was appointed President in July 1997. Mr. Kompaniez
has also served as Chief Operating Officer of NHP and President of NHP Partners
since June 1997. Since September 1993, Mr. Kompaniez has owned 75% of PDI Realty
Enterprises, Inc., a Delaware corporation ("PDI"), one of AIMCO's predecessors,
and serves as its President and Chief Executive Officer. From 1986 to 1993, he
served as President and Chief Executive Officer of Heron Financial Corporation
("HFC"), a United States holding company for Heron International, N.V.'s real
estate and related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately 8,150 apartment units
(including 6,217 units that have been acquired by AIMCO) and 3.1 million square
feet of commercial real estate. Prior to joining HFC, Mr. Kompaniez was a senior
partner with the law firm of Loeb and Loeb where he had extensive real estate
and REIT experience. Mr. Kompaniez received a B.A. from Yale College and a J.D.
from the University of California (Boalt Hall).
Susan R. Baron (age 46) is an attorney specializing in conventional
and government-assisted real estate development and finance in the residential
and commercial markets. From 1978 to 1993 she was with the Washington, D.C. law
firm of Dunnells, Duvall & Porter. Ms. Baron serves on the of Seeds of Peace
Advisory Board and is a past president of the National Leased Housing
Association. She was appointed to the Board of Directors by the President of the
United States in September 1994 to complete a term expiring in October 1994 and
continues to serve until the appointment of a successor.
Alan A. Diamonstein (age 66) has been a member of the Virginia House
of Delegates since 1967, currently serving as Chairman of the General Laws
Committee and a member of the standing committees on Appropriations, Education
and Rules. He is Chairman of the Virginia Housing Study Commission and is a
member of the Peninsula Board of Advisors for Signet Bank, the
Jamestown-Yorktown Board of Trustees, as well as a number of educational
34
<PAGE> 36
and civic organizations. Mr. Diamonstein is the senior partner in the law firm
of Diamonstein, Becker and Staley. He was appointed to the Board of Directors by
the President of the United States in October 1994 and continues to serve until
the appointment of a successor.
Leeann Morein (age 43) was elected Senior Vice President Investor
Services and a Director of NCHP in 1997. Ms Morein has served as Senior Vice
President Investor Services AIMCO since November 1997. Ms. Morein has served as
Secretary of AIMCO since July 1994 and from July 1994 until October 1997 also
served as Chief Financial Officer. From September 1990 to March 1994, Ms.
Morein served as Chief Financial Officer of the real estate subsidiaries of
California Federal Bank, including the general partner of CF Income Partners,
L.P., a publicly-traded master limited partnership. Ms. Morein joined
California Federal in September 1988 as Director of Real Estate Syndications
Accounting and became Vice President--Financial Administration in January 1990.
From 1983 to 1988, Ms. Morein was Controller of Storage Equities, Inc., a real
estate investment trust, and from 1981 to 1983, she was Director of Corporate
Accounting for Angeles Corporation, a real estate syndication firm. Ms. Morein
worked on the audit staff of Price Waterhouse from 1979 to 1981. Ms. Morein
received a B.A. from Pomona College and is a Certified Public Accountant.
Thomas W. Toomey (age 37) was elected Executive Vice President
Finance and Administration and a Director of NCHP in 1997. Mr. Toomey has served
as Senior Vice President--Finance and Administration of AIMCO since January 1996
and was promoted to Executive Vice President--Finance and Administration in
March 1997. From 1990 until 1995, Mr. Toomey served in a similar capacity with
Lincoln Property Company ("LPC") as Vice President/Senior Controller and
Director of Administrative Services of Lincoln Property Services where he was
responsible for LPC's computer systems, accounting, tax, treasury services and
benefits administration. From 1984 to 1990, he was an audit manager with Arthur
Andersen & Co. where he served real estate and banking clients. From 1981 to
1983, Mr. Toomey was on the audit staff of Kenneth Leventhal & Company. Mr.
Toomey received a B.S. in Business Administration/Finance from Oregon State
University and is a Certified Public Accountant.
EXECUTIVE OFFICERS
The current executive officers of NCHP and a description of their
principal occupations in recent years are listed below.
Terry Considine (age 50). See "Directors of NCHP."
Peter K. Kompaniez (age 52). See "Directors of NCHP."
Leeann Morein (age 43). See "Directors of NCHP."
Thomas W. Toomey (age 37). See "Directors of NCHP."
Joel F. Bonder (age 49) was appointed Executive Vice President,
General Counsel and Secretary of NCHP and AIMCO effective with the NHP merger.
Prior to joining AIMCO, Mr. Bonder served as Senior Vice President and General
Counsel of NCHP since April 1994. Mr. Bonder also served as Vice President and
Deputy General Counsel from June 1991 to March 1994, as Associate General
Counsel from 1986 to 1991, and as Assistant General Counsel from 1985 to 1986.
From 1983 to 1985, he was with the Washington, D.C. law firm of Lane & Edson,
P.C. From 1979 to 1983, Mr. Bonder practiced with the Chicago law firm of Ross
and Hardies.
Steven D. Ira (age 47) has served as Executive Vice President of NCHP
since 1997 and of AIMCO since 1994. From 1987 until July 1994, he served as
President of PAM. Prior to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977 and 1981 he supervised
the property management of over 3,000 apartment and mobile home units in
Colorado, Michigan, Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and Ira. Mr. Ira served
for several years on the National Apartment Manager Accreditation Board and is a
former president of the National Apartment Association and the Colorado
Apartment Association. Mr. Ira is the sixth individual elected to the Hall of
Fame of the National Apartment Association in its 54-year history. He holds a
Certified Apartment Property
35
<PAGE> 37
Supervisor (CAPS) and a Certified Apartment Manager designation from the
National Apartment Association, a Certified Property Manager (CPM) designation
from the National Institute of Real Estate Management (IREM) and he is a member
of the Boards of Directors of the National Multi-Housing Council, the National
Apartment Association and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
David L. Williams (age 52) has served as Executive Vice
President--Operations of NCHP and AIMCO since 1997. Prior to joining AIMCO, Mr.
Williams was Senior Vice President of Operations at Evans Withycombe
Residential, Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties Trust from October
1989 to December 1995. He has served on National Multi-Housing Council Boards
and NAREIT committees. Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from 1983 to 1989. Mr.
Williams has been involved in the property management, development and
acquisition of real estate properties since 1973. Mr. Williams received his B.A.
in education and administration from the University of Washington in 1967.
Troy D. Butts (age 33) has served as Senior Vice President and Chief
Financial Officer of NCHP and AIMCO since November 1997. Prior to joining AIMCO,
Mr. Butts served as a Senior Manager in the audit practice of the Real Estate
Services Group for Arthur Andersen LLP in Dallas, Texas. Mr. Butts was employed
by Arthur Andersen LLP for ten years and his clients were primarily
publicly-held real estate companies, including office and multi-family real
estate investment trusts. Mr. Butts holds a Bachelor of Business Administration
degree in Accounting from Angelo State University and is a Certified Public
Accountant.
(d) There is no family relationship between any of the foregoing
directors and executive officers.
Item 11. Executive Compensation
National Housing Partnership Realty Fund IV has no officers or
directors. However, as outlined in the prospectus, various fees and
reimbursements are paid to the General Partner and its affiliates. Following is
a summary of such fees paid or accrued during the year ended December 31, 1997:
(i) Administrative and reporting fees of $115,604 accrued during
the year but not yet paid to the General Partner for managing
the affairs of the Partnership and for investor services. No
payments were made in 1997.
(ii) Annual partnership administration fee of $30,000 to the
General Partner for its services as General Partner of the
four Local Limited Partnerships. Payments of $15,011 were
made in 1997. Trinity Apartments also accrued $7,500 in such
fees during 1997.
(iii) An affiliate of the General Partner, NHP Management Company
(NHPMC) is the project management agent for three of the
projects operated by the Local Limited Partnerships, as well
as Trinity Apartments. During 1997, NHPMC and other
affiliates of NCHP earned $494,836 and $197,577 for management
fees and other services provided to the Local Limited
Partnerships and Trinity Apartments, respectively. In 1996,
NHPI, which at that time owned 100% of NHPMC, paid on
affiliate of NHP $400,321 to secure the rights to manage
Trinity for the three years ending March 31, 1999.
(iv) In 1997, personnel working at the project sites which were
managed by NHPMC were NHP Incorporated employees and
subsequent to December 8, 1997 NHPMC employees, and therefore
the project reimbursed NHPI and NHPMC for the actual salaries
and related benefits. Total reimbursements for salaries and
benefits earned for the year ended December 31, 1997, were
approximately $462,000 for the Local Limited Partnerships and
$293,000 for Trinity Apartments.
36
<PAGE> 38
Item 12. Security Ownership of Certain Beneficial Owners and Management
1133 Fifteenth Street Four Associates, a Maryland Limited
Partnership, whose general partner is NHP and whose limited partners were key
employees of NCHP at the time the Partnership was formed, owns a 1% interest in
the Partnership.
Item 13. Certain Relationships and Related Transactions
The Partnership has had no material transactions or business
relationships with NHP or its affiliates except as described in Items 8, 10, and
11, above.
37
<PAGE> 39
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as a part of this report:
1. Financial Statements
The financial statements, notes, and reports listed below
are included herein:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 12
Statements of Financial Position,
December 31, 1997 and 1996 13
Statements of Operations for the Years
Ended December 31, 1997, 1996 and 1995 14
Statements of Partners'
Deficit for the Years Ended
December 31, 1997, 1996 and 1995 15
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 16
Notes to Financial Statements 18
Schedule III - Real Estate and
Accumulated Depreciation of Partnership and
Local Limited Partnerships in which NHP
Realty Fund IV has Invested, December 31, 1997 31
</TABLE>
2. Financial statement schedules
Financial statement schedules for the Registrant:
Schedule III is included in the financial statements listed
under Item 14(a)(1) above. All other schedules have been
omitted as the required information is inapplicable or the
information is presented in the financial statements or
notes thereto.
Financial statements required by Regulation S-X which are
excluded from the annual report to shareholders by Rule
14a-3(b): See 3 below.
38
<PAGE> 40
3. Exhibits
The following combined financial statements of the Local
Limited Partnerships in which the Partnership has invested
funds are included as an exhibit to this report and are
incorporated herein by reference:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 42
Combined Statements of Financial
Position, December 31, 1997 and 1996 43
Combined Statements of Operations for the Years
Ended December 31, 1997, 1996 and 1995 44
Combined Statements of Partners'
Deficit for the Years
Ended December 31, 1997, 1996 and 1995 45
Combined Statements of Cash
Flows for the Years Ended
December 31, 1997, 1996 and 1995 46
Notes to Combined Financial Statements 49
Exhibit (24) Power of Attorney
</TABLE>
(b) Reports on Form 8-K
None.
39
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
National Housing Partnership Realty Fund IV
By: The National Housing Partnership, its sole general
partner
By: National Corporation for Housing Partnerships, its
sole general partner
March 30, 1998 /s/ Troy D. Butts
- -------------- ----------------------------------
Date Troy D. Butts
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
March 30, 1998 /s/ Troy D. Butts
- -------------- ----------------------------------
Date Troy D. Butts
Senior Vice President and Chief
Financial Officer
40
<PAGE> 42
March 30, 1998 *
- -------------- ----------------------------------
Date Terry Considine, Director
March 30, 1998 *
- -------------- ----------------------------------
Date Susan R. Baron, Director
March 30, 1998 *
- -------------- ----------------------------------
Date Peter K. Kompaniez, Director
March 30, 1998 *
- -------------- ----------------------------------
Date Leeann Morein, Director
March 30, 1998 *
- -------------- ----------------------------------
Date Thomas W. Toomey, Director
March 30, 1998 *
- -------------- ----------------------------------
Date Alan A. Diamonstein, Director
This registrant is a limited partnership whose sole general partner,
The National Housing Partnership, is also a limited partnership. The sole
general partner of The National Housing Partnership is National Corporation for
Housing Partnerships. The persons indicated are Directors of National
Corporation for Housing Partnerships. Powers of Attorney are on file in
Registration Statement No. 33-1141 and as Exhibit 24 to the Partnership's Form
10-K for the fiscal year ended December 31, 1997. Other than the Form 10-K
report, no annual report or proxy materials have been sent to security holders.
*By Troy D. Butts pursuant to Power of Attorney.
/s/ Troy D. Butts
-----------------
41
<PAGE> 43
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund IV
Indianapolis, IN
We have audited the accompanying combined statements of financial position of
the Local Limited Partnerships in which National Housing Partnership Realty Fund
IV (the Partnership) holds a limited partnership interest as of December 31,
1997 and 1996, and the related combined statements of operations, partners'
deficit, and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the Local Limited Partnerships in
which National Housing Partnership Realty Fund IV holds a limited partnership
interest as of December 31, 1997 and 1996 and the combined results of their
operations and cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
McLean, VA
March 3, 1998
42
<PAGE> 44
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 409,688 $ 227,865
Accounts receivable, net (Note 2 and 16) 43,269 1,951,957
Tenants' security deposits held in trust funds 99,861 109,542
Prepaid taxes and insurance 21,995 16,952
Reserve for painting and decorating 119,285 98,946
Deferred costs 24,486 24,486
Mortgage escrow deposits (Note 5) 1,376,627 1,273,037
Rental property, net (Note 4) 14,575,565 14,889,960
----------- -----------
$ 16,670,776 $ 18,592,745
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Liabilities:
Trade payables $ 826,274 $ 2,204,193
Accrued real estate taxes 270,500 257,200
Due to management agent - NHPMC (Note 9) 4,920 163,637
Accrued interest on mortgage notes 6,519 8,865
Due to partners (Note 7) 139,738 116,429
Accrued interest on partner loans 21,093 16,870
----------- -----------
1,269,044 2,767,194
Tenants' security deposits payable 102,448 99,111
Deferred income - 833
Deferred acquisition notes payable (Note 6) 7,174,900 7,174,900
Accrued interest on deferred acquisition notes (Note 6) 13,127,632 11,414,500
Mortgage notes payable (Note 5) 9,796,802 10,168,368
Partners' deficit (14,800,050) (13,032,161)
----------- -----------
$ 16,670,776 $ 18,592,745
=========== ===========
</TABLE>
See notes to combined financial statements.
43
<PAGE> 45
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Rental income (Note 3) $ 4,532,040 $ 4,613,768 $ 4,665,078
Interest income 46,158 51,018 55,367
Other income 115,470 122,231 258,181
---------- ---------- ----------
4,693,668 4,787,017 4,978,626
---------- ---------- ----------
EXPENSES:
Administrative expenses 360,059 227,599 229,382
Utilities and operating expenses 2,037,743 1,794,706 1,786,705
Management and other services
from related party (Note 9) 494,836 517,575 501,645
Salaries and related benefits
to related party (Note 9) 461,887 713,687 642,425
Depreciation and amortization 733,902 925,158 887,747
Taxes and insurance 614,103 628,540 589,032
Financial expenses - primarily interest (Note 5) 149,297 167,128 188,182
Interest on acquisition notes (Note 6) 1,713,132 1,566,533 1,450,521
Annual partnership administrative fees
to General Partner (Note 7) 30,000 30,000 30,000
Impairment losses on rental property (Note 14) - 4,660,000 -
---------- ---------- ----------
6,594,959 11,230,926 6,305,639
---------- ---------- ----------
NET LOSS BEFORE EXTRAORDINARY ITEM (1,901,291) (6,443,909) (1,327,013)
EXTRAORDINARY ITEM - GAIN ON
FORGIVENESS OF DEBT 167,762 - -
---------- ---------- ----------
NET LOSS $(1,733,529) $(6,443,909) $(1,327,013)
========== ========== ==========
</TABLE>
See notes to combined financial statements.
44
<PAGE> 46
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>
National
Housing The
Partnership National
Realty Fund Housing
IV Partnership Total
----------- ----------- -----------
<S> <C> <C> <C>
Deficit at January 1, 1995 $ (5,063,451) $(112,886) $ (5,176,337)
Distributions (20,296) (205) (20,501)
Net loss (1,313,743) (13,270) (1,327,013)
----------- -------- -----------
Deficit at December 31, 1995 (6,397,490) (126,361) (6,523,851)
Distributions (63,757) (644) (64,401)
Net loss (6,379,470) (64,439) (6,443,909)
----------- -------- -----------
Deficit at December 31, 1996 (12,840,717) (191,444) (13,032,161)
Distributions (34,016) (344) (34,360)
Net loss (1,716,194) (17,335) (1,733,529)
----------- -------- -----------
Deficit at December 31, 1997 $(14,590,927) $(209,123) $(14,800,050)
=========== ======== ===========
Percentage interest at
December 31, 1995, 1996 and 1997 (A) (B)
=========== ========
</TABLE>
(A) Holds a 99% limited partnership interest in four Local Limited
Partnerships.
(B) Holds a 1% general partnership interest in four Local Limited
Partnerships.
See notes to combined financial statements.
45
<PAGE> 47
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Rental receipts $4,501,761 $4,567,289 $4,596,918
Interest receipts 43,433 51,594 55,768
Other receipts 111,785 106,311 310,478
Administrative expenses paid (220,191) (216,703) (243,969)
Administrative salaries paid (278,142) (345,001) (319,584)
Management fees paid to related party (426,834) (391,982) (382,452)
Computer and accounting fees paid (49,693) (50,963) (46,327)
Utilities paid (829,947) (863,393) (775,058)
Operating and maintenance expenses paid (1,143,517) (1,037,509) (915,996)
Operating and maintenance payroll paid (336,995) (368,686) (322,841)
Real estate taxes paid (328,700) (328,429) (321,803)
Payroll taxes paid (51,534) (63,564) (62,884)
Miscellaneous taxes paid (17,957) (29,984) (9,526)
Property insurance paid (140,539) (99,470) (109,621)
Miscellaneous insurance paid (67,150) (94,552) (101,782)
Interest on mortgage notes paid (86,258) (110,724) (133,050)
Mortgage insurance premium paid (49,683) (51,494) (53,176)
Miscellaneous financial expenses paid (634) (40) (106)
Payment of annual partnership administrative fees
to General Partner in lieu of distributions (15,011) (88,750) (15,000)
Payment of interest on partner loans - (107) (205)
Insurance proceeds for lost rents 93,104 - -
Interest earned on entity funds 234 219 -
--------- --------- ---------
Net cash provided by rental operating activities 707,532 584,062 1,149,784
Insurance proceeds received from escrow 2,663,145 - -
Payment of fire damage construction related
payables (2,391,997) - -
Decrease (increase) in tenants' security deposits
held in trust fund 9,681 (19,083) 1,967
Increase in tenants' security deposits payable 3,337 7,624 196
--------- --------- ---------
Net cash provided by operating activities 991,698 572,603 1,151,947
--------- --------- ---------
</TABLE>
See notes to combined financial statements.
46
<PAGE> 48
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases $ (280,181) $ (220,821) $ (358,346)
Payments to mortgage escrow deposits (1,018,453) (750,741) (896,472)
Disbursements from mortgage escrow deposits 944,079 637,588 717,820
Interest earned on mortgage escrow deposits (29,216) (35,713) (35,795)
Payments to reserve for painting and decorating (18,000) (18,000) (18,000)
Interest earned on reserve for painting and decorating (2,339) (2,391) (1,454)
Payment of deferred costs (24,486) (24,486) (20,405)
Decrease (increase) in due from mortgagee 24,647 96,470 (85,433)
----------- ----------- -----------
Net cash used in investing activities (403,949) (318,094) (698,085)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (34,360) (64,401) (20,501)
Payments of principal on mortgage notes (371,566) (345,312) (320,952)
Repayment of loans from partners - (200) (667)
----------- ----------- -----------
Net cash used in financing activities (405,926) (409,913) (342,120)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 181,823 (155,404) 111,742
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 227,865 383,269 271,527
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 409,688 $ 227,865 $ 383,269
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
47
<PAGE> 49
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $(1,733,529) $(6,443,909) $(1,327,013)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 733,902 925,158 887,747
Mortgagor entity expenses 1,755,441 1,600,356 1,483,332
Extraordinary gain on forgiveness of debt (167,762) - -
Impairment losses on rental property - 4,660,000 -
(Increase) decrease in receivable from tenants, net (3,050) 1,202 4,642
Decrease (increase) in receivable for FHA subsidy 5,989 (24,180) 6,143
Decrease (increase) in insurance proceeds receivable 1,881,144 (1,881,144) -
(Increase) decrease in other receivable (42) 2,776 976
(Increase) decrease in prepaid taxes and insurance (5,043) 3,379 11,329
Increase in trade payables 68,483 41,043 87,859
(Decrease) increase in fire damage payable (1,516,037) 1,787,185 -
Decrease in accrued interest on mortgage note (2,346) (1,416) (1,598)
Increase (decrease) in accrued real estate taxes 13,300 9,425 (17,427)
(Decrease) increase in management fee payable (36,160) 3,035 (21,211)
Payment of annual partnership administrative fees
to General Partner in lieu of distributions (15,011) (88,750) (15,000)
Payment of interest on partner loans (74) (107) (205)
(Decrease) increase in deferred income (833) (10,210) 8,210
Decrease (increase) in tenants' security deposits
held in trust funds 9,681 (19,083) 1,967
Decrease in other receivable - - 42,000
Increase in tenants' security deposits payable 3,337 7,624 196
Interest earned on entity funds 308 219 -
---------- ---------- ----------
Total adjustments 2,725,227 7,016,512 2,478,960
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 991,698 $ 572,603 $ 1,151,947
========== ========== ==========
</TABLE>
48
<PAGE> 50
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF PARTNERSHIP ORGANIZATION, BASIS OF COMBINATION AND
SIGNIFICANT ACCOUNTING POLICIES
Organization
National Housing Partnership Realty Fund IV (the Partnership) is a
limited partnership organized under the Maryland Revised Uniform Limited
Partnership Act on January 8, 1986. The Partnership was formed for the purpose
of raising capital by offering and selling limited partnership interests, and
then using that capital to acquire and operate (either directly or through
investment as a limited partner in Local Limited Partnerships) existing
multi-family rental apartments, some of which are financed and/or operated with
one or more forms of rental or financial assistance from the U.S. Department of
Housing and Urban Development (HUD). On February 21, 1986, inception of
operations, the Partnership began raising capital and acquiring interests in
Local Limited Partnerships.
During 1986, the Partnership acquired 99% Limited Partnership
interests in four limited partnerships (the Local Limited Partnerships) which
were organized in 1986 to acquire and operate existing rental housing projects.
The rental housing projects were originally organized under Sections 236 or
221(d)(3) of the National Housing Act. As a limited partner, the Partnership
does not exercise control over the activities of the Local Limited Partnerships
in accordance with the partnership agreements.
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 acquisitions were 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" or "Partnership"). 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.
Basis of Combination
The combined financial statements include the accounts of the
following four Local Limited Partnerships in which the Partnership holds a
limited partnership interest:
Capital Park Limited Partnership
Kennedy Homes Limited Partnership
Loring Towers Apartments Limited Partnership
Royal Towers Limited Partnership
49
<PAGE> 51
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Significant Accounting Policies
The financial statements of the Local Limited Partnerships are
prepared on the accrual basis of accounting. Depreciation of the buildings and
improvements is computed using the straight-line method, assuming a 50-year life
from the date of initial occupancy. Cash distributions are limited by the
Regulatory Agreements between the Local Limited Partnerships and HUD to the
extent of surplus cash as defined by HUD. Undistributed amounts are cumulative
and may be distributed in subsequent years if future operations provide surplus
cash in excess of current requirements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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.
For purposes of the statements of cash flows, the Partnership
considers all highly liquid debt instruments purchased with initial maturities
of three months or less to be cash equivalents.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
---- ----
<S> <C> <C>
Due from tenants $ 17,358 $ 16,801
Insurance loss claim receivable - 1,881,144
FHA 30,697 36,686
Due from mortgagee 2,899 27,546
Other 790 748
---------- ---------
51,744 1,962,925
Less allowance for doubtful accounts (8,475) (10,968)
---------- ---------
Net accounts receivable $ 43,269 $1,951,957
========== =========
</TABLE>
3. HOUSING ASSISTANCE AGREEMENTS
The Federal Housing Administration (FHA) has contracted with the four
subsidized rental projects under Section 8 of Title II of the Housing and
Community Development Act of 1974 to make housing assistance payments to the
Local Limited Partnerships on behalf of qualified tenants. The terms of the
agreements are five years with one or two five-year renewal options. The
agreements expire at various dates ranging from 1997 to 2008 as follows:
50
<PAGE> 52
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
The following table indicates the year within which the Section 8
rent subsidy contracts expire:
<TABLE>
<CAPTION>
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
-------- ------------------- ----------------
<S> <C> <C> <C>
1998 619 69% 67%
2006 and thereafter 277 31% 30%
--- --- --
Total 896 100% 97%
=== === ==
</TABLE>
Of the contracts above expiring during 1998, contracts for 496 units
expire on or prior to September 30, 1998. Congress has passed legislation which
will provide a one-year renewal contract to replace those contracts. The
contract covering the remaining 123 units expires in October, 1998. It is
uncertain whether the agreement will be renewed, as well as the remaining
contracts expiring after 1998, and if so, on what terms.
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, 97 percent of the total units owned by the properties in which the
Partnership has invested, receive rental subsidies. 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,
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 potentially reducing rent subsidies,
and lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. 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 such tenants have the financial ability to
pay the difference between the selected properties' monthly rent and the value
of the vouchers, 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. With respect to
Housing Assistance Payments Contracts ("HAP Contracts") expiring before October
1, 1998, Congress has elected to renew them 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.
The Local Limited Partnerships received a total of $3,217,164,
$3,337,702 and $3,407,079 during 1997, 1996 and 1995, respectively, in the form
of housing assistance payments which is included in "Rental Income" in the
combined statements of operations.
51
<PAGE> 53
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
4. RENTAL PROPERTY
Rental property consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1996
---- ----
<S> <C> <C>
Land $ 756,247 $ 756,247
Buildings and improvements 15,865,796 18,970,653
Furniture and equipment 3,146,722 2,751,701
---------- ----------
19,768,765 22,478,601
Less accumulated depreciation (5,193,200) (7,588,641)
---------- ----------
Rental property, net $14,575,565 $14,889,960
========== ==========
</TABLE>
5. MORTGAGE NOTES PAYABLE
The mortgage notes payable are insured by FHA and secured by first
deeds of trust on the rental properties. The notes bear interest at rates
ranging from 6% to 8.5% per annum. FHA, under an interest reduction contract
with the three Section 236 properties, makes subsidy payments directly to the
mortgage lender reducing the monthly principal and interest payments of the
project owner to an effective interest rate of 1% over the 40-year terms of the
notes. The liability of the Local Limited Partnerships under the mortgage notes
is limited to the underlying value of the real estate collateral, plus other
amounts deposited with the lenders.
Under agreements with the mortgage lenders and FHA, the Local Limited
Partnerships are required to make monthly escrow deposits for taxes, insurance
and a reserve for the replacement of project assets, and are subject to
restrictions as to operating policies, rental charges, operating expenditures
and distributions to partners.
Approximate maturities of mortgage notes payable for the next five
years and thereafter are as follows:
<TABLE>
<S> <C>
1998 $ 401,000
1999 431,000
2000 464,000
2001 500,000
2002 538,000
Thereafter 7,463,000
---------
$9,797,000
=========
</TABLE>
52
<PAGE> 54
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
6. DEFERRED ACQUISITION NOTES PAYABLE
The deferred acquisition notes bear interest at the rate of 9% per
annum, compounded semi-annually. These notes are nonrecourse and are
collateralized by partnership interests in all Local Limited Partnerships.
Neither principal nor interest are payable currently; all principal and accrued
interest are payable upon the earlier of the sale, transfer, or refinancing of
the project or 2001. The notes may be prepaid in whole or in part at any time
without penalty.
7. DUE TO PARTNERS
Annual partnership administration fees of $30,000 were accrued for
1997, 1996 and 1995. The Local Limited Partnerships paid $15,011, $88,750 and
$15,000 in such fees during 1997, 1996 and 1995, respectively. These fees are
payable to the General Partner without interest from surplus cash available for
distribution to partners. The accumulated fees owed to the General Partner were
$118,114 and $103,125 at December 31, 1997 and 1996, respectively.
During 1997 and 1996, the General Partner advanced $8,320 and $1,104,
respectively to four and one Local Limited Partnership to fund the Local Limited
Partnership's entity expenses. There were no advances made during 1995. No
repayments were made during 1997 and 1996. During 1995, one Local Limited
Partnership repaid principal and interest of $667 and $205 to the General
Partner. The balance owed to the General Partner by the Local Limited
Partnerships at December 31, 1997 and 1996, was $9,424 and $1,104, respectively.
Interest is charged at a rate equal to the Chase Manhattan Bank prime interest
rate plus 2%. Chase Manhattan Bank prime was 8.5% at December 31, 1997.
During 1996, one Local Limited Partnership repaid principal and
interest in the amounts of $200 and $107, respectively, to the Partnership. As
of December 31, 1997 and 1996, the Partnership had outstanding advances of
$12,200 to one Local Limited Partnership. Interest is charged at the rate of
Chase Manhattan prime plus 2%. Chase Manhattan Bank prime was 8.5% at December
31, 1997. The advance and interest will be paid in conformity with HUD and/or
other regulatory requirements and applicable partnership agreements.
8. FEDERAL AND STATE INCOME TAXES
The Local Limited Partnerships are not taxed on their income. The
partners are taxed in their individual capacities upon their distributive share
of the Local Limited Partnerships' taxable income and are allowed the benefits
to be derived from offsetting their distributive share of the tax losses against
taxable income from other sources subject to passive loss rule limitations. The
taxable income or loss differs from amounts included in the statement of
operations primarily because of different methods used in determining
depreciation expense for tax purposes. The tax loss is allocated to partner
groups in accordance with Section 704(b) of the Internal Revenue Code and
therefore is not necessarily proportionate to the interest percentage owned.
For Federal income tax purposes, the Local Limited Partnerships
compute depreciation of the buildings and improvements using the Accelerated
Cost Recovery System (ACRS) and the Modified Accelerated Cost Recovery System
(MACRS), while for financial statements purposes, depreciation is computed using
the straight-line method, assuming a 50-year life from the date of initial
occupancy. Rent received in advance is included as income in determining the
taxable income or loss for Federal income tax purposes, while for financial
statement purposes it is shown as a liability. Other differences result from the
allocation of tax losses in accordance with Section 704(b) of the Internal
Revenue Code.
53
<PAGE> 55
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
A reconciliation follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net loss per combined financial statements $(1,733,529) $(6,443,909) $(1,327,013)
Depreciation (523,305) (330,888) (357,534)
Impairment losses on rental property - 4,660,000 -
Other (148,234) 56,367 (95,355)
---------- ---------- ----------
Loss per tax returns $(2,405,068) $(2,058,430) $(1,779,902)
========== ========== ==========
</TABLE>
9. RELATED PARTY TRANSACTIONS
An affiliate of the General Partner, NHP Management Company
("NHPMC"), formerly a wholly owned subsidiary of NHP Incorporated ("NHPI"), is
the project management agent for the projects operated by the Local Limited
Partnerships, except for Royal Towers which changed management agent on November
1, 1996. During May 1997, AIMCO acquired approximately 51% of the voting stock
of NHPI. An additional 3% of the voting stock was acquired by AIMCO in August
1997. On December 8, 1997, the NHPI stockholders elected to merge with AIMCO.
After the merger, NHPMC became a wholly owned subsidiary of AIMCO. NHPMC and
other affiliates of NCHP earned $494,836, $517,575 and $501,645 from the Local
Limited Partnerships for management fees and other services provided to the
Local Limited Partnerships during 1997, 1996 and 1995, respectively. At December
31, 1997 and 1996, amounts due NHPMC and unpaid by the Local Limited
Partnerships amounted to $4,920 and $163,637, respectively.
Personnel working at the project sites, which are managed by NHPMC,
were employees of NHPI during the period January 1, 1996 through December 8,
1997 and became employees of NHPMC (as a successor employer) as of December 8,
1997 and, therefore, the projects reimbursed NHPI and NHPMC for the actual
salaries and related benefits. Prior to January 1, 1996, project employees were
employees of NCHP. Total reimbursements earned for salaries and benefits for the
years ended December 31, 1997, 1996 and 1995, were approximately $462,000,
$714,000 and $642,000, respectively. At December 31, 1997 and 1996 account
payable included $501 and $16,413 due to NHPMC and NCHP, respectively.
10. NON-CASH INVESTING ACTIVITIES
At December 31, 1997, three of the Local Limited Partnerships had
purchased $136,785 in additions to rental property and at December 31, 1996, two
Local Limited Partnership had purchased $21,945 of additions to rental property
which are included in trade payables.
54
<PAGE> 56
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
11. FUTURE OPERATIONS AND CASH FLOWS
One Local Limited Partnership, 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 Limited
Partnership 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 total assets, deficit, revenues and net loss of Royal Towers
represent 18%, 37%, 16% and 39% of the applicable amounts included in the
accompanying combined financial statements as of December 31, 1997 and for the
year then ended.
12. DRUG ELIMINATION GRANT PROGRAM
Two Local Limited Partnerships have entered into grant agreements
with HUD under the Drug Elimination Grant Program (the "Program") to assist in
the elimination of illegal drugs and the associated crime at the properties. The
grant agreements are dated August 1993 and July 1994, and the amounts awarded
are $175,000 and $164,387, respectively. During 1995, one of the Local Limited
Partnerships received $156,034 for costs incurred under the program, of which
$35,167 is included in miscellaneous operating expenses and $120,867 has been
capitalized in rental property.
13. EXTRAORDINARY ITEM
At December 31, 1996, the Royal Towers Limited Partnership had
accrued costs due to NHPMC consisting of management fees, bookkeeping and
accounting fees, payroll and miscellaneous reimbursement items. In addition to
the $131,027 shown as due to management agent on the 1996 combined statements of
financial position, there was $36,735 due to NHPMC included in trade payables.
During 1997, NHPMC informed Royal Towers Limited Partnership that these amounts
totaling $167,762 do not have to be paid and therefore this amount is shown as
an extraordinary gain in the accompanying 1997 combined statements of
operations.
14. IMPAIRMENT LOSS ON RENTAL PROPERTY
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting For The
Impairment of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of"
(the "Statement") effective for financial statements for fiscal years beginning
after December 15, 1995. This Statement requires an impairment loss to be
recognized if the sum of estimated future cash flows (undiscounted and without
interest charges) is less than the carrying amount of rental property. The
impairment loss would be the amount by which the carrying value exceeds the fair
value of the rental property. If the rental property is to be disposed of, fair
value is calculated net of costs to sell.
During 1996, Royal Towers Limited Partnership and Loring Tower
Associates Limited Partnership, recognized impairment losses on their rental
properties in the amounts of $1,960,000 and $2,700,000, respectively. Because
the Local Limited Partnerships' deferred acquisition notes are due March 27,
2001(Note 6), the Local Limited Partnerships estimated net cash flow is only for
the period January 1, 1997 to March 27, 2001. As a result of this limited
55
<PAGE> 57
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
holding period, the estimated net cash flow was less than the carrying amount at
December 31, 1996. The Local Limited Partnerships used the Direct Capitalization
Method to estimate the fair value of the rental property. Using this Method,
estimated annual cash flow generated by the property is divided by an overall
capitalization rate to estimate the rental property's fair value.
Additionally, regardless of whether a impairment loss of an
individual property has been recorded or not, the carrying value of each of the
rental properties may still exceed their fair market value as of December 31,
1997. Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, when it is practicable to estimate that value. The mortgage notes
payable are insured by the FHA and are secured by the rental property. The
operations generated by the rental property are subject to various government
rules, regulations and restrictions which make it impracticable to obtain the
information to estimate the fair value of the mortgage note and the partner
loans and related accrued interest. For the deferred acquisition notes and
related accrued interest, a reasonable estimate of fair value could not be made
without incurring excessive costs. The carrying amount of other assets and
liabilities reported on the statement of financial position that require such
disclosure approximates fair value.
16. FIRE LOSS CONTINGENCY
On December 1, 1996, a fire occurred at the Royal Towers Limited
Partnership project site. Management believes that all damages will be recovered
through insurance proceeds less a $2,500 deductible. As of December 31, 1996, an
insurance receivable was recorded for $1,880,289 which includes $1,784,685 for
fire loss damages net of the deductible, and $95,604 for loss of rent for the
month of December, 1996.
During 1997, Royal Towers Limited Partnership received approximately
$2,756,000 in insurance proceeds relating to the fire and used approximately
$2,485,000 of these proceeds as of December 31, 1997. Use of the remaining
$271,000 held in escrow by the mortgage company and the final insurance award
have not been determined or approved.
During 1997, HUD approved withdrawals of $249,365 from the reserve
for replacements to pay outstanding fire related payables. This is considered a
loan from the reserve for replacements and must be repaid to the reserve for
replacements when reimbursement is received from the insurance company.
In addition to amounts reimbursed from insurance proceeds, Royal
Towers Limited Partnership has incurred costs of $190,761 which are fire related
and have been included in the accompanying combined statements of operations and
$95,164 of costs which have been capitalized. Royal Towers Limited Partnership
anticipates that an additional $1,000,000 is needed to repair the property to
its pre-fire condition and is seeking insurance funds to fund such costs.
56
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
NHP REALTY FUND IV LIMITED PARTNERSHIP
KNOW ALL MEN BY THESE PRESENTS
THAT I, the undersigned member of the Board of Directors of National
Corporation for Housing Partnerships, hereby make, constitute and appoint
Troy D. Butts, Chief Financial Officer of NCHP, my attorney-in-fact, with full
power of substitution, in my name, place and stead to execute and sign my name
upon and documents, paper releases, consents and the like, including federal
and state securities registration statements and amendments and Form 10-K
annual reports and other post-sale and periodic reports pertaining to NHP
Realty Fund IV Limited Partnership as may be appropriate.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal on the date
set forth below.
Date: 3-20-98 /s/ Alan A. Diamonstein
-------------- ------------------------
SIGNATURE
State of Virginia
City of Newport News
Before me, Allan R. Staley, on this day personally appeared Alan A. Diamonstein
known to me to be the person whose name is subscribed in the foregoing
instrument, and who, after being duly sworn, stated that the content of said
instrument is to the best of his knowledge and belief true and correct, and who
acknowledged that he executed same for the purposes therein expressed.
Given under my hand and official seal at 10 AM this 20th day of March 1998.
/s/ Allan R. Staley
- -------------------
Notary Public
My Commission expires: 5-31-98
-----------
<PAGE> 2
POWER OF ATTORNEY
NHP REALTY FUND IV LIMITED PARTNERSHIP
KNOW ALL MEN BY THESE PRESENTS
THAT I, the undersigned member of the Board of Directors of National
Corporation for Housing Partnerships, hereby make, constitute and appoint
Troy D. Butts, Chief Financial Officer of NCHP, my attorney-in-fact, with full
power of substitution, in my name, place and stead to execute and sign my name
upon and documents, paper releases, consents and the like, including federal
and state securities registration statements and amendments and Form 10-K
annual reports and other post-sale and periodic reports pertaining to NHP
Realty Fund IV Limited Partnership as may be appropriate.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal on the date
set forth below.
Date: 3-12-98 /s/ Susan R. Baron
-------------- -------------------
SIGNATURE
State of District of Columbia
County of ___________
Before me, James M. Reed, on this day personally appeared Susan R. Baron known
to me to be the person whose name is subscribed in the foregoing instrument,
and who, after being duly sworn, stated that the content of said instrument is
to the best of his knowledge and belief true and correct, and who acknowledged
that he executed same for the purposes therein expressed.
Given under my hand and official seal at 11 AM this 12th day of March 1998.
/s/ James M. Reed
- -----------------
Notary Public
My Commission expires: 6-30-2002
-----------
<PAGE> 3
POWER OF ATTORNEY
NHP REALTY FUND IV LIMITED PARTNERSHIP
KNOW ALL MEN BY THESE PRESENTS
THAT I, the undersigned member of the Board of Directors of National
Corporation for Housing Partnerships, hereby make, constitute and appoint
Troy D. Butts, Chief Financial Officer of NCHP, my attorney-in-fact, with full
power of substitution, in my name, place and stead to execute and sign my name
upon and documents, paper releases, consents and the like, including federal
and state securities registration statements and amendments and Form 10-K
annual reports and other post-sale and periodic reports pertaining to NHP
Realty Fund IV Limited Partnership as may be appropriate.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal on the date
set forth below.
Date: 3-30-98 /s/ Terry Considine
-------------- --------------------
SIGNATURE
State of Colorado
City of Denver
Before me, ____________, on this day personally appeared Terry Considine known
to me to be the person whose name is subscribed in the foregoing instrument,
and who, after being duly sworn, stated that the content of said instrument is
to the best of his knowledge and belief true and correct, and who acknowledged
that he executed same for the purposes therein expressed.
Given under my hand and official seal at _____ this ____ day of _______ 1998.
/s/
- ---
Notary Public
My Commission expires: -
---
<PAGE> 4
POWER OF ATTORNEY
NHP REALTY FUND IV LIMITED PARTNERSHIP
KNOW ALL MEN BY THESE PRESENTS
THAT I, the undersigned member of the Board of Directors of National
Corporation for Housing Partnerships, hereby make, constitute and appoint
Troy D. Butts, Chief Financial Officer of NCHP, my attorney-in-fact with full
power of substitution, in my name, place and stead to execute and sign my name
upon and documents, paper releases, consents and the like, including federal
and state securities registration statements and amendments and Form 10-K
annual reports and other post-sale and periodic reports pertaining to NHP
Realty Fund IV Limited Partnership as may be appropriate.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal on the date
set forth below.
Date: 3-30-98 /s/ Peter K. Kompaniez
-------------- -----------------------
SIGNATURE
State of Colorado
City of Denver
Before me, _________, on this day personally appeared Peter K. Kompaniez known
to me to be the person whose name is subscribed in the foregoing instrument,
and who, after being duly sworn, stated that the content of said instrument is
to the best of his knowledge and belief true and correct, and who acknowledged
that he executed same for the purposes therein expressed.
Given under my hand and official seal at _____ this ____ day of _______ 1998.
/s/
- ---
Notary Public
My Commission expires: -
---
<PAGE> 5
POWER OF ATTORNEY
NHP REALTY FUND IV LIMITED PARTNERSHIP
KNOW ALL MEN BY THESE PRESENTS
THAT I, the undersigned member of the Board of Directors of National
Corporation for Housing Partnerships, hereby make, constitute and appoint
Troy D. Butts, Chief Financial Officer of NCHP, my attorney-in-fact, with full
power of substitution, in my name, place and stead to execute and sign my name
upon and documents, paper releases, consents and the like, including federal
and state securities registration statements and amendments and Form 10-K
annual reports and other post-sale and periodic reports pertaining to NHP
Realty Fund IV Limited Partnership as may be appropriate.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal on the date
set forth below.
Date: 3-30-98 /s/ Leeann Morein
-------------- ------------------
SIGNATURE
State of Colorado
City of Denver
Before me, ________, on this day personally appeared Leeann Morein known
to me to be the person whose name is subscribed in the foregoing instrument,
and who, after being duly sworn, stated that the content of said instrument is
to the best of his knowledge and belief true and correct, and who acknowledged
that he executed same for the purposes therein expressed.
Given under my hand and official seal at _____ this ____ day of ______ 1998.
/s/
- ---
Notary Public
My Commission Expires: -
---
<PAGE> 6
POWER OF ATTORNEY
NHP REALTY FUND IV LIMITED PARTNERSHIP
KNOW ALL MEN BY THESE PRESENTS
THAT I, the undersigned member of the Board of Directors of National
Corporation for Housing Partnerships, hereby make, constitute and appoint Troy
D. Butts, Chief Financial Officer of NCHP, my attorney-in-fact, with full power
of substitution, in my name, place and stead to execute and sign my name upon
and documents, paper releases, consents and the like, including federal and
state securities registration statements and amendments and Form 10-K annual
reports and other post-sale and periodic reports pertaining to NHP Realty Fund
IV Limited Partnership as may be appropriate.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal on the date
set forth below.
Date: 3-30-98 /s/ Thomas W. Toomey
-------------- ---------------------
SIGNATURE
State of Colorado
City of Denver
Before me, _____________, on this day personally appeared Thomas W. Toomey known
to me to be the person whose name is subscribed in the foregoing instrument,
and who, after being duly sworn, stated that the content of said instrument is
to the best of his knowledge and belief true and correct, and who acknowledged
that he executed same for the purposes therein expressed.
Given under my hand and official seal at _____ this ____ day of _____ 1998.
/s/
- ---
Notary Public
My Commission Expires: -
---
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,095,131
<SECURITIES> [BLANK]
<RECEIVABLES> 2,591
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,219,256
<PP&E> 17,978,186
<DEPRECIATION> 4,671,875
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<BONDS> 9,620,000
0
0
<COMMON> 0
<OTHER-SE> (6,144,511)
<TOTAL-LIABILITY-AND-EQUITY> 15,451,497
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<OTHER-EXPENSES> 1,484,024
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<INTEREST-EXPENSE> 1,551,060
<INCOME-PRETAX> (1,997,619)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,997,619)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,997,619)
<EPS-PRIMARY> (127)
<EPS-DILUTED> (127)
</TABLE>
