<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, 1998 ..... Commission file number 0-15731
----------------- -------
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV (A MARYLAND LIMITED PARTNERSHIP)
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 52-1473440
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 KEYSTONE CROSSING, SUITE 500 46240
--------------------------------- -----
INDIANAPOLIS, INDIANA (Zip Code)
---------------------
(Address of principal executive offices)
</TABLE>
<TABLE>
<S> <C>
Registrant's telephone number, including area code: (317) 817-7500
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act: 15,414 LIMITED PARTNERSHIP INTERESTS
------------------------------------
</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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days prior to the date of
filing. No market for the Registrant's limited partnership interests exists,
and, therefore, a market value for such interests cannot be determined.
Documents incorporated by reference. NONE
----
<PAGE> 2
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
----
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
Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters 8
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 36
PART III
Item 10. Directors and Executive Officers of the Registrant 37
Item 11. Executive Compensation 39
Item 12. Security Ownership of Certain Beneficial
Owners and Management 39
Item 13. Certain Relationships and Related Transactions 39
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 41
1
<PAGE> 3
PART I
INTRODUCTION
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Item 1. Business
National Housing Partnership Realty Fund IV, a Maryland Limited
Partnership (the "Partnership" or the "Registrant"), 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" or the "General Partner"). Together, NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Registrant. As a result of these transactions, the AIMCO
Group acquired control of the general partner of the Registrant and, therefore,
may be deemed to have acquired control of the Registrant.
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 agreement whereby NHP or any of its
affiliates provides or has provided compensation to owners (or their
affiliates) of HUD-assisted properties in connection with management of a
HUD-assisted property (the "Transactions"). This matter has been disclosed in
all filings by NHP with the Securities and Exchange Commission. Documents were
produced which may have been responsive to the HUD subpoena and submitted to
the HUD Inspector General in 1998.
On or about February 26, 1998, Counsel for NHP and the U.S. government
entered into a Tolling Agreement with respect to any applicable statues of
limitations related to certain civil claims the government may have against NHP
in connection with the Transactions. The Tolling Agreement expired in August
1998.
NHP believes its operations are in compliance, in all material respects
with all laws, rules, and regulations related to HUD-assisted or HUD-insured
properties and has retained counsel in connection with NHP's response to the
subpoena. 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.
2
<PAGE> 4
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 a multi-family rental housing property (Properties). With the exception
of Trinity Apartments, all of these Properties receives one or more forms of
assistance from the Federal Government.
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. See "Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations" for information relating to the
Registrant's rights and obligations to make additional contributions or loans to
Local Limited Partnerships.
The Partnership's investment objectives are:
(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:
3
<PAGE> 5
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, 1998
-------------------- -------- ----- ------------- -----------------
<S> <C> <C> <C> <C>
Capital Park 316 (A) 316 99%
Columbus, Ohio
(Capital Park
Limited Partnership)
Kennedy Homes 172 (B) 172 92%
Gainesville, Florida
(Kennedy Homes
Limited Partnership)
Loring Towers Apartments 208 (A) 187 97%
Minneapolis, Minnesota
(Loring Towers Apartments
Limited Partnership)
Royal Towers 233 (A) 233 74%
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.
On December 29, 1997, the Partnership refinanced its mortgage
indebtedness encumbering Trinity Apartments with a new $9,620,000 mortgage loan.
The loan bears interest at the rate of 6.557% per annum and is scheduled to
mature on December 1, 2012, at which time the loan will be fully amortized. The
Partnership is required to make monthly payments of principal and interest of
$84,102 on the loan. See "Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information with
respect to this refinancing.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's wholly owned property. The number and quality of competitive
properties, including those which may be managed by an affiliate of the General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Partnership's wholly owned property and the rents that
may be charged for such apartments. While the General Partner and its affiliates
are a significant factor in the United States in the apartment industry,
competition for apartments is local. In addition, various limited
4
<PAGE> 6
partnerships have been formed by the General Partner and/or affiliates to engage
in business which may be competitive with the Partnership. With respect to the
Local Limited Partnerships' Properties, these apartment complex must also
compete with other apartment complexes for tenants. However, government mortgage
interest and rent subsidies make it possible to rent units to eligible tenants
at below market rates. In general, this insulates the Local Limited
Partnerships' 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.
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
908 units, 98 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. With
respect to Housing Assistance Payments Contracts ("HAP Contracts") expiring
before October 1, 1998, Congress 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 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>
1999 736 81% 79%
2006 and thereafter 172 19% 19%
--- --- --
Total 908 100% 98%
=== === ==
</TABLE>
Of the units (908 in total) receiving rent subsidies from Section 8, 736
of the units have their contracts expiring during the year ending December 31,
1999. HUD has issued new regulations that govern the continuance of
project-based subsidies. Under the new regulations, owners with HAP contracts
expiring after September 30, 1998 may elect to (1) renew the contract without
restructuring for one year, (2) opt out of the contract, or (3) enter into the
Mark-to Market program, which includes a potential restructuring of the mortgage
and renewal of the contract. At this time it is not possible to determine which
option each of the Local Limited Partnerships will elect, and accordingly, it is
not possible to determine the ultimate impact on the operations of the Local
Limited Partnerships.
5
<PAGE> 7
REGULATION
General
Multifamily apartment properties are subject to various laws, ordinances
and regulations, including regulations relating to recreational facilities such
as swimming pools, activity centers and other common areas. Changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions, as
well as changes in laws effecting development, construction and safety
requirements, may result in significant unanticipated expenditures, which would
adversely affect the Partnership's cash flow from operating activities. In
addition, future enactment of rent control or rent stabilization laws or other
laws regulating multi-family housing may reduce rental revenue or increase
operating costs in particular markets.
HUD Approval and Enforcement
A significant number of properties owned by the Partnership are subject
to regulations by HUD. Under its regulations, HUD reserves the right to approve
the owner, and the manager of HUD-insured and HUD-assisted properties, as well
as their "principals" (e.g. general partners, stockholders with 10% or greater
interest, officers and directors) in connection with the acquisition of a
property, participation in HUD programs or the award of a management contract.
This approval process is commonly referred to as "2530 Clearance." HUD monitors
the performance of properties with HUD-insured mortgage loans. HUD also monitors
compliance with applicable regulations, and takes performance and compliance
into account in approving the acquisition of management of HUD-assisted
properties. In the event of instances of unsatisfactory performances or
regulatory violations, the HUD office with jurisdiction over the applicable
property has the authority to enter a "flag" into the computerized 2530
Clearance system. If one or more flags have been entered, a decision whether to
grant 2530 Clearance is then subject to review by HUD's Multifamily
Participation Review Committee in Washington, D.C., (the 2530 Committee). As a
result of certain mortgage defaults and unsatisfactory ratings received by NHP
Incorporated in years prior to its acquisition by AIMCO in December, 1997, HUD
believes that the 2530 Committee must review any application for 2530 Clearance
filed by AIMCO. On December 18, 1998, AIMCO received approval of approximately
fifty 2530 applications and had no unresolved flags in the 2530 system as of
December 31, 1998.
AIMCO believes that the 2530 Committee will continue to apply the 2530
Clearance process to large management portfolios such as AIMCO's with discretion
and flexibility. While there can be no assurance, AIMCO believes that the
unsatisfactory reviews and the mortgage defaults will not have a material impact
on its results of operations or financial condition.
Laws Benefiting Disabled Persons
Under the Americans with Disabilities Act of 1990, all places of public
accommodations are required to meet certain Federal requirements related to
access and use by disabled persons. These requirements became effective in 1992.
A number of additional Federal, state and local laws may also require
modifications to the Properties, or restrict certain further renovations of the
Properties, with respect to access thereto by disabled persons. For example, the
Fair Housing Amendments Act of 1988 requires apartment properties first occupied
after March 13, 1990 to be accessible to the handicapped. Noncompliance with
these laws could result in the imposition of fines or an award of damages to
private litigants and also could result in an order to correct any non-complying
feature, which could result in substantial capital expenditures. Although the
Partnership believes that its properties are substantially in compliance with
present requirements, it may incur unanticipated expenses to comply with these
laws.
Regulation of Affordable Housing
As of December 31, 1998, the Partnership held an equity interest in 4
properties that benefit from government programs intended to provide housing to
people of low or moderate incomes. These programs, which are usually
administered by the HUD or state housing finance agencies, typically provide
mortgage insurance, favorable financing terms or rental assistance payments to
the property owners. As a condition to the receipt of assistance under these
programs, the properties must comply with various requirements, which typically
limit rents to pre-approved amounts. If permitted rents on a property are
insufficient to cover costs, a sale of the property may become necessary, which
could result in a loss of the Partnership's interest in the property, as well as
any benefits flowing from the
6
<PAGE> 8
property. The Partnership must obtain the approval of HUD in order to acquire a
significant interest in a HUD-assisted or HUD-insured property. The Partnership
can make no assurance that it will always receive such approval.
Environmental
Various Federal, state and local laws subject property owners or
operators to liability for the costs of removal or remediation of certain
hazardous substances present on a property. Such laws often impart liability
without regard to whether the owner or operator knew of, or was responsible for,
the release of the hazardous substances. The presence of, or failure to properly
remediate, hazardous substances may adversely affect occupancy at contaminated
apartment communities and the Partnership's ability to sell or borrow against
contaminated properties. In addition to the costs associated with investigation
and remediation actions brought by governmental agencies, the presence of
hazardous wastes on a property could result in personal injury or similar claims
by private plaintiffs. Various laws also impose liability for the cost of
removal or remediation of hazardous or toxic substances is potentially liable
under such laws. These laws often impose liability whether or not the person
arranging for the disposal ever owned or operated the disposal facility. In
connection with the ownership or operation of properties, the Partnership could
potentially be liable for environmental liabilities or costs associated with its
properties or properties it may acquire in the future.
Management believes that the Partnership's properties are covered by
adequate fire, flood and property insurance provided by reputable companies and
with commercially reasonable deductibles and limits.
Ownership Percentages
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
notes payable and accrued interest on each property for each of the Local
Limited Partnerships and Trinity Apartments as of December 31, 1998.
<TABLE>
<CAPTION>
NHP Realty Original Notes
Fund IV Cost of Payable
Percentage Ownership Mortgage and Accrued
Partnership Ownership Interest Notes Interest
- ----------- --------- -------- ----- --------
<S> <C> <C> <C> <C>
Capital Park L.P. 99% $1,985,450 $3,640,371 $5,891,630
Kennedy Homes L.P. 99% 1,113,509 937,673 4,339,720
Loring Towers L.P. 99% 1,476,049 2,423,941 6,173,059
Royal Towers L.P. 99% 1,163,958 2,393,782 5,755,837
Trinity Apartments Wholly-owned 5,971,034 9,229,976 -
</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.
7
<PAGE> 9
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, 1998, 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, 1998.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental revenues $ 3,551,339 $ 3,441,744 $ 3,338,241 $ 3,221,978 $ 3,162,772
Rental expenses (2,976,596) (4,917,615) (3,479,816) (3,712,415) (3,281,501)
----------- ----------- ----------- ----------- -----------
Profit (loss) from
rental operations 574,743 (1,475,871) (141,575) (490,437) (118,729)
Distributions in excess of
investment in Local Limited
Partnerships and interest income 56,473 38,963 69,297 23,963 52,408
Partnership operating expenses (1,340,936) (560,711) (447,992) (423,453) (368,904)
----------- ----------- ------------ ----------- -----------
Net loss $ (709,720) $ (1,997,619) $ (520,270) $ (889,927) $ (435,225)
=========== =========== ============ =========== ===========
Net loss per unit of other limited
partnership interest based on the
units outstanding during the period $ (45) $ (127) $ (33) $ (58) $ (28)
=========== =========== ============ =========== ===========
Total long-term debt -
mortgage notes payable $ 9,229,976 $ 9,620,000 $ 13,140,000 $ 13,700,000 $ 13,700,000
=========== =========== ============ =========== ===========
Total assets $ 16,091,817 $ 15,451,497 $ 14,448,508 $ 14,496,556 $ 14,892,187
=========== =========== ============ =========== ===========
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 1998, 1997, 1996, 1995 and 1994,
$1,493,875, $1,716,194, $6,379,470, $1,313,743 and $1,447,892,
respectively, of losses from four Local Limited Partnerships have not
been recognized by the Partnership (see Note 3 to the Partnership's
financial statements).
8
<PAGE> 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. The
Partnership is dependent upon the Managing General Partner and its affiliates
for management and administrative services ("Managing Agent"). Any of the
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Over the past two years, the Managing Agent has determined that it will
be required to modify or replace significant portions of its software and
certain hardware so that those systems will properly utilize dates beyond
December 31, 1999. The Managing Agent presently believes that with modifications
or replacements of existing software and certain hardware, the Year 2000 issue
can be mitigated. However, if such modifications and replacements are not made
or not completed in time, the Year 2000 issue could have a material impact on
the operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four
Phases: assessment, remediation, testing, and implementation. To date, the
Managing Agent has fully completed its assessment of all the information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phases on both hardware and software
systems. Assessments are continuing in regards to embedded systems. The status
of each is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer
systems at risk and formulated a plan to repair or replace each of the affected
systems. In August 1998, the mainframe system used by the Managing Agent became
fully functional. In addition to the mainframe, PC-based network servers and
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of December 31, 1998, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network
servers, routers and desktop PCs is expected to be approximately $1.5 million of
which $1.3 million has been incurred to date. The remaining network connections
and desktop PCs are expected to be upgraded to Year 2000 compliant systems by
March 31, 1999.
9
<PAGE> 11
Computer software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at all
properties, is $200,000, and the implementation and the testing process is
expected to be completed by March 31, 1999.
The final software area is the office software and server operating
systems. The Managing Agent has upgraded all non-compliant office software
systems on each PC and has upgraded 80% of the server operating systems. The
remaining server operating systems are planned to be upgraded to be Year 2000
compliant by March 31, 1999.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property
sites, which needed to be evaluated for Year 2000 compliance. In September 1997,
the Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon
security systems, elevators, heating, ventilating and air conditioning systems,
telephone systems and switches, and sprinkler systems. While this area is the
most difficult to fully research adequately, management has not yet found any
major non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an audit
of these systems and report their findings by March 31, 1999.
Any of the above operating equipment that has been found to be
non-compliant to date has been replaced or repaired. To date, these have
consisted only of security systems and phone systems. As of December 31, 1998
the Managing Agent has evaluated approximately 86% of the operating equipment
for the Year 2000 compliance.
The total cost incurred for all properties managed by the Managing Agent
as of December 31, 1998 to replace or repair the operating equipment was
approximately $400,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $325,000, which is
expected to be completed by April 30, 1999.
The Managing Agent continues to have "awareness campaigns" throughout
the organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within our enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other
vendor relationships to assess risks regarding their Year 2000 readiness. The
Managing Agent has banking relationships with three major financial
institutions, all of which have indicated their compliance efforts will be
complete before May 1999. The Managing Agent has updated data transmission
standards with two of the three financial institutions. The Managing Agent's
contingency plan in this regard is to move accounts from any institution that
cannot be certified Year 2000 compliant by June 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the
10
<PAGE> 12
Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external
agents to complete their Year 2000 remediation process in a timely manner will
have a material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is
estimated at $3.5 million and is being funded from operating cash flows. To
date, the Managing Agent has incurred approximately $2.8 million ($0.6 million
expensed and $2.2 million capitalized for new systems and equipment) related to
all phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred. The
Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Managing
Agent has not yet completed all necessary phases of the Year 2000 program. In
the event that the Managing Agent does not complete any additional phases,
certain worst case scenarios could occur. The worst case scenarios could include
elevators, security and heating, ventilating and air conditioning systems that
read incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year
2000 issues could also adversely affect the Partnership. The Partnership could
be subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical
applications and is working on such plans for others. These contingency plans
involve, among other actions, manual workarounds and selecting new relationships
for such activities as banking relationships and elevator operating systems.
Liquidity and Capital Resources
The Partnership generates cash from net income from its wholly-owned
property and from distributions from the Local Limited Partnerships. The
Partnership's only other source of liquidity is from the General Partners Loans.
The General Partner, however, is under no legal obligation to make such loans
and will evaluate lending the Partnership additional funds as needed.
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.
The Partnership's Trinity Apartments property does not receive government
assistance.
Net cash provided by operations for the year ended December 31, 1998,
was $754,932 as compared to $126,447 in 1997 and $217,420 in 1996. The increase
in net cash provided by operations from 1997 to 1998, resulted from an increase
in rental income and a decrease in rental expenses. The decrease in cash
provided by operations from 1996 to 1997 resulted from a decrease in
distributions received form Local Limited Partnerships, an increase in rental
11
<PAGE> 13
expenses, 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.
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 $42,868, $34,016 and $63,756 were
received from two, two and three Local Limited Partnerships, respectively,
during the years ended December 31, 1998, 1997 and 1996. 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 $24,387 at December 31, 1998. The
ability of the Partnership to meet its on-going cash requirements, in excess of
cash on hand at December 31, 1998, 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, 1998, the Partnership owes the General Partner $1,337,970 for
administrative and reporting services performed. In addition, at December 31,
1998, the Partnership owed NHP $629,489 for other advances. Additionally, NHP
and AIMCO have made advances totaling $7,976,131 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 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, the Partnership refinanced this
mortgage note payable. GECC was paid $13,093,546 to satisfy its obligation 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.
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, 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.
During 1998 and 1997, Royal Towers Limited Partnership received
approximately $1,055,000 and $2,756,000, respectively in insurance proceeds
relating to the fire and used approximately $3,700,000 of these proceeds as of
December 31, 1998. Use of the remaining $111,000 held in escrow by the mortgage
company and the final insurance award have not been determined or approved.
Royal Towers Limited Partnership, has experienced cash flow difficulties
in meeting its current obligations. Continuation of the Partnership's operations
in the present form is dependent upon its ability to achieve positive cash flow
or obtaining other funds. 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
12
<PAGE> 14
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 notes payable 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 notes payable may exceed the value which would be
obtained by sale or refinancing opportunities. The notes payable mature in 2001.
If the properties are not able to be refinanced or sold for sufficient amounts
or the terms of the notes can not be extended, the Partnership could lose its
interest in the applicable Local Limited Partnership.
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 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, 1998 and 1997, 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 decreased to $709,720 for the year ended
December 31, 1998 from a net loss of $1,997,619 for the year ended December 31,
1997. 1997. The net loss per unit of limited partnership interest decreased from
$127 in 1997 to $45 in 1998. The primary reasons for this decrease in net loss
include an increase in rental revenues of approximately $100,000, a decrease in
mortgage interest of approximately $560,000, a decrease in prepayment penalty of
$1,300,000, which resulted from the Trinity mortgage refinancing in 1997,
partially offset by an approximately $760,000 increase in interest on partner
loans.
The Partnership did not recognize $1,493,875 of its allocated share of
losses from the four Local Limited Partnerships in 1998, 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 $222,319 between years. The decrease was primarily due an increase in
rental income and a decrease in operating expenses of the rental properties,
which were partially offset by an extraordinary gain on forgiveness of debt
recorded in 1997.
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 an 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.
13
<PAGE> 15
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Partnership is exposed to market risks from adverse changes in
interest rates. In this regard, changes in U.S. interest rates affect the
interest earned on the Partnership's cash and cash equivalents as well as
interest paid on indebtedness. As a policy, the Partnership does not engage in
speculative or leveraged transactions, nor does it hold or issue financial
instruments for trading purposes. The Partnership is exposed to changes in
interest rates primarily as a result of its borrowing activities used to
maintain liquidity and fund business operations. Based on interest rates at
December 31, 1998, a 1% increase or decrease in market rates would not have a
material impact on the Partnership.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary schedule of the Partnership
are included on pages 15 through 36 of this report.
14
<PAGE> 16
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund IV
Indianapolis, Indiana
We have audited the accompanying statement of financial position of National
Housing Partnership Realty Fund IV (the Partnership) as of December 31, 1998,
and the related statements of operations, partners' deficit, and cash flows for
the year then ended, 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Housing Partnership
Realty Fund IV as of December 31, 1998, and the results of its operations and
its cash flows for the year then ended 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,
presents fairly in all material respects, the information set forth therein.
Ernst & Young LLP
Indianapolis, Indiana
February 22, 1999
15
<PAGE> 17
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund IV
Indianapolis, IN
We have audited the accompanying statement of financial position of National
Housing Partnership Realty Fund IV (the Partnership) as of December 31, 1997,
and the related statements of operations, partners' deficit, and cash flows for
each of the two years in the period ended December 31, 1997, and Schedule III
listed in the Index at Item 14 for the two years in the period ended December
31, 1997. These financial statements and Schedule III are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and Schedule III 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 the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles. Also, in our opinion, such
Schedule III for the two years in the period ended December 31, 1997, 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
16
<PAGE> 18
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
------
Cash and cash equivalents (Note 2) $ 24,387 $ 45,275
Accounts receivable 2,999 2,591
Prepaid insurance, taxes and tenant security deposits 87,499 121,534
Mortgage escrow deposits 1,022,052 1,049,856
Investments in and advances to Local Limited Partnerships (Note 3) - -
Land 3,650,000 3,650,000
Building and improvements - less accumulated
depreciation of $5,034,923 and $4,671,875 9,991,282 9,656,311
Deferred finance cost 1,313,598 925,930
---------- ----------
$16,091,817 $15,451,497
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Liabilities:
Accounts payable and accrued
expenses from rental operations (Note 4) $ 1,314,394 $ 797,882
Administrative and reporting fees payable
to General Partner (Note 6) 1,337,970 1,222,366
Due to General Partner (Note 6) 8,605,620 8,077,709
Accrued interest on partner loans (Note 6) 2,402,087 1,838,021
Other accrued expenses 56,001 40,030
Mortgage note payable (Note 5) 9,229,976 9,620,000
---------- ----------
22,946,048 21,596,008
---------- ----------
Partners' deficit:
General Partner - The National
Housing Partnership (NHP) (198,236) (191,139)
Original Limited Partner - 1133
Fifteenth Street Four Associates (203,136) (196,039)
Other Limited Partners - 15,414 investment units (6,452,859) (5,757,333)
---------- ----------
(6,854,231) (6,144,511)
---------- ----------
$16,091,817 $15,451,497
========== ==========
</TABLE>
See notes to financial statements.
17
<PAGE> 19
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
RENTAL REVENUES:
Rental income $ 3,484,992 $ 3,355,210 $ 3,250,799
Other rental revenue 66,347 86,534 87,442
----------- ----------- -----------
3,551,339 3,441,744 3,338,241
----------- ----------- -----------
RENTAL EXPENSES:
Interest 617,069 1,174,373 1,215,317
Prepayment penalty - 1,300,000 -
Renting and administrative 146,711 135,034 137,080
Operating and maintenance 430,251 575,237 563,438
Management and other services
from related party (Note 6) 177,847 197,577 218,751
Salaries and related benefits
to related party (Note 6) 356,182 293,380 290,613
Depreciation and amortization 529,668 455,369 393,736
Taxes and insurance 718,868 786,645 660,881
----------- ----------- -----------
2,976,596 4,917,615 3,479,816
---------- ----------- -----------
PROFIT (LOSS) FROM RENTAL OPERATIONS 574,743 (1,475,871) (141,575)
----------- ----------- -----------
COSTS AND EXPENSES:
Interest on partner loans (Note 6) 1,133,056 376,687 278,198
Administrative and reporting fees
to General Partner (Note 6) 115,604 115,604 115,604
Other operating expenses 92,276 68,420 54,190
----------- ----------- -----------
1,340,936 560,711 447,992
----------- ----------- -----------
OTHER INCOME:
Interest income 13,605 4,947 5,541
Distributions in excess of investment
in Local Limited Partnerships (Note 3) 42,868 34,016 63,756
----------- ----------- -----------
56,473 38,963 69,297
----------- ----------- -----------
NET LOSS $ (709,720) $ (1,997,619) $ (520,270)
=========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner - NHP $ (7,097) $ (19,976) $ (5,203)
Original Limited Partner - 1133
Fifteenth Street Four Associates (7,097) (19,976) (5,203)
Other Limited Partners - 15,414
investment units (695,526) (1,957,667) (509,864)
----------- ---------- ----------
$ (709,720) $ (1,997,619) $ (520,270)
=========== ========== ===========
NET LOSS PER OTHER LIMITED
PARTNERSHIP INTEREST $ (45) $ (127) $ (33)
=========== ============ =============
</TABLE>
See notes to financial statements.
18
<PAGE> 20
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, 1996 $(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)
Net loss (7,097) (7,097) (695,526) (709,720)
-------- -------- ---------- ----------
Deficit at
December 31, 1998 $(198,236) $(203,136) $(6,452,859) $(6,854,231)
======== ======== ========== ==========
Percentage interest at
December 31, 1996,
1997 and 1998 1% 1% 98%
-------- -------- ----------
(A) (B) (C)
======== ======== ==========
</TABLE>
(A) General Partner
(B) Original Limited Partner
(C) Consists of 15,414 investment units
See notes to financial statements.
19
<PAGE> 21
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Revenue:
Rental income $ 3,490,590 $ 3,329,478 $ 3,260,049
Interest 13,605 6,345 5,541
Other 63,694 66,196 63,848
Distributions in excess of investment
in Local Limited Partnerships 42,868 34,016 63,756
------------ ------------ ------------
3,610,757 3,436,035 3,393,194
Expenses:
Taxes and insurance (690,880) (783,591) (724,907)
Operating expenses (1,029,317) (1,252,505) (1,228,882)
Interest on partner loans (566,861) - (438)
Mortgage interest (568,767) (1,273,492) (1,221,547)
------------ ------------ ------------
(2,855,825) (3,309,588) (3,175,774)
------------ ------------ ------------
Net cash provided by operating activities 754,932 126,447 217,420
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (379,723) (151,767) (115,916)
Net change in escrow deposits 27,804 (396,548) (64,489)
------------ ------------ ------------
Net cash used in by investing activities (351,919) (548,315) (180,405)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (390,024) (46,454) (560,000)
Proceeds from partner loans 573,016 6,142,691 669,881
Principal payments on partner loans (52,605) - (5,764)
Proceeds from mortgage note - 9,620,000 -
Payment of deferred finance costs (554,288) (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 (used in) provided by financing activities (423,901) 396,761 (2,201)
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (20,888) (25,107) 34,814
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 45,275 70,382 35,568
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 24,387 $ 45,275 $ 70,382
============ ============ ============
</TABLE>
See notes to financial statements.
20
<PAGE> 22
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (709,720) $ (1,997,619) $ (520,270)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 363,048 377,107 365,680
Amortization of deferred finance costs 166,620 78,262 28,056
Payment of mortgage prepayment penalty - 1,300,000 -
Changes in operating assets and liabilities:
Accounts receivable (408) 22,557 (25,148)
Prepaid insurance, taxes and security deposits 34,035 (34,114) (4,016)
Administrative and reporting fee
payable to General Partner 115,604 115,604 115,604
Accrued partnership administrative
fee payable to General Partner 7,500 7,500 7,500
Accounts payable and accrued expenses
from rental operations 147,783 (21,703) (18,551)
Other accrued expenses 15,971 1,285 (2,965)
Accrued interest on partner loans 564,066 376,687 277,760
Accrued interest on mortgage note payable 50,433 (99,119) (6,230)
------------ ------------ ------------
Total adjustments 1,464,652 2,124,066 737,690
------------ ------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 754,932 $ 126,447 $ 217,420
============ ============ ============
</TABLE>
See notes to financial statements.
21
<PAGE> 23
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" or the
"Registrant") 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" or the "General Partner"). Together, NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Registrant. As a result of these transactions, the AIMCO
Group has acquired control of the general partner of the Registrant and,
therefore, may be deemed to have acquired control of the Registrant.
The Original Limited Partner of the Partnership is 1133 Fifteenth Street
Four Associates, whose limited partners were key employees of NCHP at the time
the Partnership was formed and whose general partner is NHP.
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 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.
22
<PAGE> 24
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
Certain reclassifications of prior years' amounts have been made to
conform with the current year's presentation.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
<S> <C> <C>
Cash in demand accounts $ - $ 605
Money market account 24,387 44,670
------ ------
$24,387 $45,275
====== ======
</TABLE>
23
<PAGE> 25
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 1998, 1997 and 1996, the
Partnership did not recognize $1,493,875, $1,716,194 and $6,379,470,
respectively of its allocated share of losses from four Local Limited
Partnerships. As of December 31, 1998 and 1997, the Partnership had not
recognized $15,840,453 and $14,346,578, 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 1998 or 1997. As of December 31, 1998 and 1997, $12,200 was
owed by one Local Limited Partnerships to the Partnership. During 1993, the
Partnership reevaluated 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, 1998 and 1997 and the combined results
of operations for the years ended December 31, 1998, 1997, and 1996 are as
follows:
24
<PAGE> 26
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,
----------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Assets:
Land $ 806,059 $ 756,247
Building and improvements, net of accumulated depreciation
of $5,899,688 and $5,193,200 and impairment losses of
$7,764,857 13,496,856 13,819,318
Other assets 2,231,226 2,095,211
------------ ------------
$ 16,534,141 $ 16,670,776
=========== ===========
Liabilities and Partners' Deficit:
Liabilities:
Mortgage notes payable $ 9,395,767 $ 9,796,802
Notes payable 7,174,900 7,174,900
Accrued interest on notes payable 14,985,346 13,127,632
Other liabilities 1,330,443 1,371,492
----------- -----------
32,886,456 31,470,826
Partners' Deficit:
National Housing Partnership Realty Fund IV (16,127,670) (14,590,927)
The National Housing Partnership (224,645) (209,123)
----------- -----------
(16,352,315) (14,800,050)
----------- -----------
$ 16,534,141 $ 16,670,776
=========== ===========
</TABLE>
COMBINED RESULTS OF OPERATIONS
OF THE LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue $ 5,007,934 $ 4,693,668 $ 4,787,017
---------- ---------- ----------
Expenses:
Operating expenses 3,826,893 3,998,628 3,912,107
Financial expenses - primarily interest 119,349 145,074 167,114
Interest on notes payable 1,864,168 1,717,355 1,566,547
Depreciation 706,488 733,902 925,158
Impairment losses on rental properties - - 4,660,000
----------- ---------- ----------
Total expenses 6,516,898 6,594,959 11,230,926
----------- ---------- ----------
Loss before extraordinary item (1,508,964) (1,901,291) (6,443,909)
Gain on forgiveness of debt - 167,762 -
----------- ---------- ----------
Net loss $(1,508,964) $(1,733,529) $(6,443,909)
========== ========== ==========
</TABLE>
25
<PAGE> 27
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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.
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
908 units, 98 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. With
respect to Housing Assistance Payments Contracts ("HAP Contracts") expiring
before October 1, 1998, Congress 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 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>
1999 736 81% 79%
2006 and thereafter 172 19% 19%
--- ---- --
Total 908 100% 98%
=== === ==
</TABLE>
Of the units (908 in total) receiving rent subsidies from Section 8, 736
of the units have their contracts expiring during the year ending December 31,
1999. HUD has issued new regulations that govern the continuance of
project-based subsidies. Under the new regulations, owners with HAP contracts
expiring after September 30, 1998 may elect to (1) renew the contract without
restructuring for one year, (2) opt out of the contract, or (3) enter into the
Mark-to Market program, which includes a potential restructuring of the mortgage
and renewal of the contract. At
26
<PAGE> 28
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
this time it is not possible to determine which option each of the Local Limited
Partnerships will elect, and accordingly, it is not possible to determine the
ultimate impact on the operations of the Local Limited Partnerships.
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.
Notes payable were executed by the Local Limited Partnerships with the
former owners as part of the acquisition of the properties by the Local Limited
Partnerships. The notes are nonrecourse notes secured by a security interest in
all partnership interests in the respective Local Limited Partnerships. These
notes bear interest at the rate of 9% per annum, compounded semi-annually. These
notes are subordinated to the respective mortgage note for as long as the
mortgage note is insured by HUD. Any payments due from project income are
payable from the respective Local Limited Partnership's surplus cash, as defined
by the respective HUD Regulatory Agreement. The notes may be prepaid in whole or
in part at any time without penalty. Neither the respective Local Limited
Partnership nor any partner thereof, present or future, assumes any personal
liability for the payment of these notes.
These notes mature as follows:
<TABLE>
<CAPTION>
Local Partnership Due Date Note Amount Accrued Interest
----------------- -------- ----------- ----------------
<S> <C> <C> <C>
Capital Park Limited
Partnership February 28, 2001 $ 1,900,000 $ 3,991,630
Kennedy Homes Limited
Partnership February 28, 2001 1,401,900 2,937,820
Loring Towers Apartments
Limited Partnership February 28, 2001 2,000,000 4,173,059
Royal Towers Limited
Partnership March 27, 2001 1,873,000 3,882,837
---------- ----------
Total Due 2001 $ 7,174,900 $14,985,346
========== ==========
</TABLE>
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.
27
<PAGE> 29
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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' notes payable 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, 1998.
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 and 1998, Royal Towers Limited Partnership received
approximately $1,055,000 and $2,756,000, respectively in insurance proceeds
relating to the fire and used approximately $3,700,000 of these proceeds as of
December 31, 1998. Use of the remaining $111,000 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.
Royal Towers Limited Partnership has experienced cash flow difficulties
in meeting its current obligations. Continuation of the Partnership's operations
in the present form is dependent upon its ability to achieve positive cash flow
or obtaining other funds. The General Partner's intentions are to continue
managing the property prudently so that it can maintain positive cash flows and
decrease its debts.
28
<PAGE> 30
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Trade payables $ 485,063 $ 60,419
Accrued interest on mortgage notes 50,433 -
Accrued real estate taxes 657,674 659,616
Tenant security deposits 74,088 77,847
Due to management agent (Note 6) 44,129 -
Rent received in advance 3,007 -
--------- ----------
$1,314,394 $ 797,882
========= ==========
</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 would have been 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 mortgage note,
pay the prepayment penalty of $1,300,000 and to pay accrued interest and other
deferred finance costs of $925,930. During 1998, the General Partner advanced an
additional $438,250 and the deferred finance costs by $438,250.
29
<PAGE> 31
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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:
<TABLE>
<S> <C>
1999 $ 416,381
2000 444,519
2001 474,558
2002 506,627
2003 540,863
Thereafter 6,847,028
---------
$9,229,976
=========
</TABLE>
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 1998, 1997 and 1996. No payments for these fees
were made during 1998, 1997 or 1996. The balance owed to the General Partner at
December 31, 1998 and 1997 was $1,337,970 and $1,222,366, respectively.
During 1998, 1997 and 1996, the General Partner made working capital
advances of $134,766, $21,212 and $669,881, respectively, to the Partnership and
to Trinity Apartments. In addition, during 1998 and 1997, AIMCO advanced
$573,016 and $6,121,479 for the refinancing of Trinity's mortgage. During 1998
and 1996, the Partnership repaid advances of $52,605 and $5,764 to the General
Partner. No repayments of working capital advances were made in 1997. The
balance owed to the General Partner and AIMCO at December 31, 1998 and 1997 was
$8,575,620 and $8,055,209, respectively. Interest is charged at the Chase
Manhattan Bank rate of prime plus 2%. Chase Manhattan Bank prime was 7.75% at
December 31, 1998. During 1998, 1997 and 1996, interest of $1,133,056, $376,687
and $278,198, respectively was accrued and expensed. During 1998, 1997 and 1996,
interest of $566,861, zero and $438 was repaid to the General Partner and AIMCO.
The interest balance owed to the General Partner and AIMCO at December 31, 1998
and 1997 was $2,402,087 and $1,838,021, respectively. Additionally, annual
partnership administrative fees of $7,500 were accrued by Trinity Apartments
during 1998, 1997 and 1996, 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 1998, 1997 or 1996. As of December 31,
1998 and 1997, $30,000 and $22,500, 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 agents 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
30
<PAGE> 32
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NHPI stockholders elected to merge with AIMCO. After the merger, NHPMC became a
preferred stock subsidiary of AIMCO. NHPMC and other affiliates of NCHP earned
$381,555, $494,836 and $517,575 from the Local Limited Partnerships and
$177,847, $197,577 and $218,751 from Trinity for management fees and other
services provided to the Local Limited Partnerships during 1998, 1997 and 1996,
respectively. At December 31, 1997, amounts due NHPMC and unpaid by the Local
Limited Partnerships amounted to $4,920.
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, 1998, 1997 and 1996, were approximately $645,000, $462,000 and
$714,000, respectively, from the Local Limited Partnerships and approximately
$356,000, $293,000 and $291,000, respectively, from Trinity. At December 31,
1997, account payable included $501 due to NHPMC.
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.
A reconciliation follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss per financial statements $ (709,720) $(1,997,619) $ (520,270)
Add (deduct):
Depreciation (350,965) (400,866) (402,653)
Interest on partner loans 452,513 - -
Other 147,730 - -
Partnership's share of Local Limited
Partnerships' losses (636,360) (1,892,259) (1,838,749)
---------- ---------- ----------
Loss per tax return $(1,096,802) $(4,290,744) $(2,761,672)
========== ========== ==========
</TABLE>
31
<PAGE> 33
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following is a reconciliation between the Partnership's reported amounts and
the federal tax basis of net assets:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
<S> <C>
Net deficit as reported $ (6,854,231)
Add (deduct):
Investment in Partnerships (18,620,538)
Investment Property (4,590,655)
Other 600,242
-----------
Net deficit - federal tax basis $(29,465,182)
===========
</TABLE>
8. 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:
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 or 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;
32
<PAGE> 34
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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:
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.
9. 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.
33
<PAGE> 35
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, 1998
<TABLE>
<CAPTION>
Initial Cost to Local Limited Cost Capitalized Subsequent to
Partnership Acquisition
---------------------------------------------------------------------------
Buildings and Carrying Cost
Partnership Name Encumbrances Land Improvements Improvements Adjustments
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Park Limited
Partnership (1) $ 110,000 $ 7,634,451 $ 2,031,848 $ -
Kennedy Homes Limited
Partnership (1) 150,000 3,130,682 1,360,946 -
Loring Towers Limited
Partnership (1) 290,000 5,875,841 653,597 (4,361,046)
Royal Towers Limited
Partnership (1) 360,000 5,453,177 1,070,671 (3,557,564)
Trinity Apartments
(wholly-owned) (1) 3,650,000 18,809,468 307,737 (4,091,000)
---------------------------------------------------------------------------
TOTAL,
December 31, 1998 $ 4,560,000 $ 40,903,619 $ 5,424,799 $ (12,009,610)
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at which Carried at Close of Period
-------------------------------------------------------
Buildings and Accumulated
Partnership Name Land Improvements Total (2) (3) Depreciation (3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Park Limited
Partnership $ 143,969 $ 9,632,330 $ 9,776,299 $ 3,212,651
Kennedy Homes Limited
Partnership 164,434 4,477,194 4,641,628 1,655,610
Loring Towers Limited
Partnership 291,409 2,166,983 2,458,392 381,043
Royal Towers Limited
Partnership 206,247 3,120,037 3,326,284 650,384
Trinity Apartments
(wholly-owned) 3,650,000 15,026,205 18,676,205 5,034,923
-------------------------------------------------------------------------
TOTAL,
December 31, 1998 $ 4,456,059 $ 34,422,749 $ 38,878,808 $ 10,934,611
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Life upon which
depreciation in
latest statement
Date of of operations is
Partnership Name Construction Date Acquired computed (years)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Park Limited
Partnership 1969 3/86 5-50
Kennedy Homes Limited
Partnership 1968 3/86 5-50
Loring Towers Limited
Partnership 1970 3/86 5-50
Royal Towers Limited
Partnership 1973 4/86 5-50
Trinity Apartments
(wholly-owned) 1985 4/86 5-50
TOTAL,
December 31, 1998 .
</TABLE>
See notes to Schedule III.
34
<PAGE> 36
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, 1998
(1) Schedule of Encumbrances
<TABLE>
<CAPTION>
Notes
Payable and
Mortgage Accrued
Partnership Name Notes Interest Total
---------------- -------- -------- -----
<S> <C> <C> <C>
Capital Park
Limited Partnership $ 3,640,371 $ 5,891,630 $ 9,532,001
Kennedy Homes
Limited Partnership 937,673 4,339,720 5,277,393
Loring Towers Apartments
Limited Partnership 2,423,941 6,173,059 8,597,000
Royal Towers
Limited Partnership 2,393,782 5,755,837 8,149,619
Trinity Apartments
(wholly-owned) 9,229,976 - 9,229,976
---------- ---------- ----------
TOTAL $18,625,743 $22,160,246 $40,785,989
========== ========== ==========
</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 $43,915,218. The total of the above-mentioned items is
$48,475,218.
35
<PAGE> 37
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, 1998
(CONTINUED)
(3) Reconciliation of real estate
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $37,746,951 $40,307,357 $44,660,705
Improvements during the period 1,131,857 544,451 306,652
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 $38,878,808 $37,746,951 $40,307,357
========== ========== ==========
</TABLE>
Reconciliation of accumulated depreciation
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ 9,865,075 $11,883,409 $10,612,976
Depreciation expense for the period 1,069,536 1,086,523 1,270,433
Decrease due to prior year impairment
losses on rental property - (3,104,857) -
---------- ---------- ----------
Balance at end of period $10,934,611 $ 9,865,075 $11,883,409
========== ========== ==========
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
36
<PAGE> 38
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
Four individuals comprise the Board of Directors of NCHP. One director
was appointed by the President of the United States, by and with the advice and
consent of the Senate.
Thomas W. Toomey (age 38) 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.
Susan R. Baron (age 47) 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.
Joel F. Bonder (age 50) was elected as a Director of NCHP in 1998 and
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.
Roberta Ujakovich (age 46) was elected President and a Director of NCHP
in 1998. Ms. Ujakovich has served as Senior Vice President of AIMCO since July,
1997. Prior to joining AIMCO, Ms. Ujakovich was Vice President of NHP serving as
the Director of Transactions in NHP's Asset Management Department. Previously,
Ms. Ujakovich worked as a developer for three successive, affiliated real estate
development companies: The Cafritz / Freeman Group, The Investment Group and
Rosenberg, Freeman and Associates. She holds a B.A. from Allegheny College and a
Masters in Public Policy from John F. Kennedy School of Government at Harvard
university.
37
<PAGE> 39
EXECUTIVE OFFICERS
The current executive officers of NCHP and a description of their
principal occupations in recent years are listed below.
Thomas W. Toomey (age 38). See "Directors of NCHP."
Joel F. Bonder (age 50). See "Directors of NCHP."
Roberta Ujakovich (age 46). See "Directors of NCHP."
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 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.
Leeann Morein (age 44) was elected Senior Vice President Investor
Services 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.
Patrick J. Foye (Age 41) has been Executive Vice President of NCHP
since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO
since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through
1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and
serves as a member of the New York State Privatization Council. He received a
B.A. from Fordham College and a J.D. from Fordham University Law School.
Troy D. Butts (age 34) 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.
38
<PAGE> 40
Item 11. Executive Compensation
National Housing Partnership Realty Fund IV has no officers or
directors. No direct form of compensation or remuneration was paid by the
Partnership to any officer or director of the General Partner. However,
reimbursements and other payments have been made to the Partnership's General
Partner and its affiliates, as described in "Item 13. Certain Relationships and
Related Transactions."
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.
The following table sets forth certain information regarding limited
partnership units of the Registrant owned by each person or entity is known by
the Registrant to own beneficially or exercise voting or dispositive control
over more than 5% of the Registrant's limited partnership units as of December
31, 1998.
<TABLE>
<S> <C> <C>
Name of
Beneficial Owner Number of Units % of Class
AIMCO and affiliates 1,233.5 10.49%
(affiliates of the General Partner)
</TABLE>
The business address of AIMCO is 3410 South Galena Street, Suite 200, Denver, CO
80231
Item 13. Certain Relationships and Related Transactions
The Partnership accrued administrative and reporting fees payable to
the General Partner of $115,604 in 1998, 1997 and 1996. No payments for these
fees were made during 1998, 1997 or 1996. The balance owed to the General
Partner at December 31, 1998 and 1997 was $1,337,970 and $1,222,366,
respectively.
During 1998, 1997 and 1996, the General Partner made working capital
advances of $134,766, $21,212 and $669,881, respectively, to the Partnership and
to Trinity Apartments. In addition, during 1998 and 1997, AIMCO advanced
$438,250 and $6,121,479 for the refinancing of Trinity's mortgage. During 1998
and 1996, the Partnership repaid advances of $52,605 and $5,764 to the General
Partner. No repayments of working capital advances were made in 1997. The
balance owed to the General Partner and AIMCO at December 31, 1998 and 1997 was
$8,575,620 and $8,055,209, respectively. Interest is charged at the Chase
Manhattan Bank rate of prime plus 2%. Chase Manhattan Bank prime was 7.75% at
December 31, 1998. During 1998, 1997 and 1996, interest of $1,078,995, $376,687
and $278,198, respectively was accrued and expensed. During 1998, 1997 and 1996,
interest of $514,931, zero and $438 was repaid to the General Partner and AIMCO.
The interest balance owed to the General Partner and AIMCO at December 31, 1998
and 1997 was $2,402,087 and $1,838,021, respectively. Additionally, annual
partnership administrative fees of $7,500 were accrued by Trinity Apartments
during 1998, 1997 and 1996, 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 1998, 1997 or 1996. As of December 31,
1998 and 1997, $30,000 and $22,500, 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 preferred stock subsidiary of AIMCO. NHPMC and other
affiliates of NCHP earned $381,555, $494,836 and $517,575 from the Local Limited
Partnerships and $177,847, $197,577 and $218,751 from Trinity for management
fees and other services provided to
39
<PAGE> 41
the Local Limited Partnerships during 1998, 1997 and 1996, respectively. At
December 31, 1997, amounts due NHPMC and unpaid by the Local Limited
Partnerships amounted to $4,920.
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, 1998, 1997 and 1996, were approximately $645,000,
$462,000 and $714,000, respectively, from the Local Limited Partnerships and
approximately $356,000, $293,000 and $291,000, respectively, from Trinity. At
December 31, 1997, account payable included $501 due to NHPMC.
40
<PAGE> 42
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 15
Statements of Financial Position,
December 31, 1998 and 1997 17
Statements of Operations for the Years
Ended December 31, 1998, 1997 and 1996 18
Statements of Partners' Deficit
for the Years Ended
December 31, 1998, 1997 and 1996 19
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 20
Notes to Financial Statements 22
Schedule III - Real Estate and
Accumulated Depreciation of Partnership and
Local Limited Partnerships in which NHP
Realty Fund IV has Invested, December 31, 1998 34
</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
NOs 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.
41
<PAGE> 43
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 45
Combined Statements of Financial
Position, December 31, 1998 and 1997 47
Combined Statements of Operations for the Years
Ended December 31, 1998, 1997 and 1996 48
Combined Statements of Partners'
Deficit for the Years
Ended December 31, 1998, 1997 and 1996 49
Combined Statements of Cash
Flows for the Years Ended
December 31, 1998, 1997 and 1996 50
Notes to Combined Financial Statements 52
Exhibit (24) Power of Attorney
</TABLE>
(b) Reports on Form 8-K
The Partnership filed form 8-K on October 30, 1998 and form 8-Ka on
November 12, 1998 in connection with a change in
independent auditors from Deloitte & Touche LLP to Ernst
& Young LLP effective for the year ended December 31, 1998.
42
<PAGE> 44
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 31, 1999 /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 31, 1999 /s/ Troy D. Butts
- -------------- --------------------------------------
Date Troy D. Butts
Senior Vice President and Chief
Financial Officer
43
<PAGE> 45
March 31, 1999 *
- -------------- -----------------------------------
Date Thomas W. Toomey, Director
March 31, 1999 *
- -------------- -----------------------------------
Date Susan R. Baron, Director
March 31, 1999 *
- -------------- -----------------------------------
Date Joel F. Bonder, Director
March 31, 1999 *
- -------------- -----------------------------------
Date Roberta Ujakovich, 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, 1998. 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
-----------------
44
<PAGE> 46
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund IV
Indianapolis, Indiana
We have audited the accompanying combined statement 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, 1998,
and the related combined statements of operations, partners' deficit, and cash
flows for the year then ended. These combined financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above 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, 1998, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Indianapolis, Indiana
February 22, 1999
45
<PAGE> 47
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund IV
Indianapolis, IN
We have audited the accompanying combined statement 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 the related combined statements of operations, partners' deficit, and
cash flows for each of the two 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 the combined results of their operations
and cash flows for each of the two years in the period ended December 31, 1997
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
McLean, VA
March 3, 1998
46
<PAGE> 48
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1998 1997
---- ----
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 392,647 $ 409,688
Accounts receivable, net (Note 2 and 16) 109,685 43,269
Tenants' security deposits held in trust funds 112,814 99,861
Prepaid taxes and insurance 18,156 21,995
Deferred costs 24,486 24,486
Mortgage escrow deposits and other reserves (Note 5) 1,573,438 1,495,912
Rental property, net (Note 4) 14,302,915 14,575,565
----------- -----------
$ 16,534,141 $ 16,670,776
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
--------------------------------
Liabilities:
Accounts payable and other accrued liabilities $ 702,532 $ 832,793
Accrued real estate taxes 297,849 270,500
Due to management agent - NHPMC (Note 9) - 4,920
Due to partners (Note 7) 192,406 139,738
Accrued interest on partner loans 26,423 21,093
----------- -----------
1,219,210 1,269,044
Tenants' security deposits payable 111,233 102,448
Notes payable (Note 6) 7,174,900 7,174,900
Accrued interest on notes payable (Note 6) 14,985,346 13,127,632
Mortgage notes payable (Note 5) 9,395,767 9,796,802
Partners' deficit (16,352,315) (14,800,050)
----------- -----------
$ 16,534,141 $ 16,670,776
=========== ===========
</TABLE>
47
<PAGE> 49
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Rental income (Note 3) $ 4,737,972 $ 4,532,040 $ 4,613,768
Interest income 56,634 46,158 51,018
Other income 213,328 115,470 122,231
----------- ---------- ----------
5,007,934 4,693,668 4,787,017
---------- ---------- ----------
EXPENSES:
Administrative expenses 502,715 360,059 227,599
Utilities and operating expenses 1,669,310 2,037,743 1,794,706
Management and other services
from related party (Note 9) 381,555 494,836 517,575
Salaries and related benefits
to related party (Note 9) 644,772 461,887 713,687
Depreciation and amortization 706,488 733,902 925,158
Taxes and insurance 598,541 614,103 628,540
Financial expenses - primarily interest (Note 5) 119,349 145,074 167,114
Interest on notes payable (Note 6) 1,864,168 1,717,355 1,566,547
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
----------- ----------- ----------
6,516,898 6,594,959 11,230,926
----------- ----------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (1,508,964) (1,901,291) (6,443,909)
EXTRAORDINARY ITEM - GAIN ON
FORGIVENESS OF DEBT - 167,762 -
----------- ----------- ----------
NET LOSS $(1,508,964) $ (1,733,529) $(6,443,909)
=========== =========== ==========
</TABLE>
48
<PAGE> 50
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>
National V
Housing The
Partnership National
Realty Fund Housing
IV Partnership Total
----------- ----------- ---------------
<S> <C> <C> <C>
Deficit at January 1, 1996 $ (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)
Distributions (42,868) (433) (43,301)
Net loss (1,493,875) (15,089) (1,508,964)
----------- --------- ------------
Deficit at December 31, 1998 $(16,127,670) $(224,645) $(16,352,315)
=========== ======== ===========
Percentage interest at
December 31, 1996, 1997 and 1998 (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.
49
<PAGE> 51
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts:
Rental receipts $4,786,492 $4,501,761 $4,567,289
Interest receipts 56,634 43,433 51,594
Other operating receipts 216,949 204,889 106,311
Insurance escrow proceeds 1,215,098 2,663,145 -
Tenant security deposits 212 13,940 702
Entity receipts:
Interest receipts 428 234 219
--------- --------- ---------
Total Receipts 6,275,813 7,427,402 4,726,115
Disbursements:
Administrative (348,126) (269,884) (267,666)
Management fees (404,052) (426,834) (391,982)
Utilities (699,326) (829,947) (863,393)
Salaries and wages (892,488) (615,137) (713,687)
Operating and maintenance (993,294) (1,143,517) (1,037,509)
Real estate taxes (312,902) (328,700) (328,429)
Property insurance (108,956) (140,539) (99,470)
Miscellaneous taxes and insurance (145,495) (136,641) (188,100)
Tenant security deposits (4,380) (922) (12,161)
Other operating disbursements (75,153) - -
Interest on mortgage (67,645) (86,258) (110,724)
Mortgage insurance premium (47,903) (49,683) (51,494)
Miscellaneous financial expenses (2,308) (634) (40)
Fire damage construction related payables (1,055,311) (2,391,997) -
Entity disbursements:
Interest on notes payable (1,125) - (107)
Miscellaneous disbursements (10,230) (15,011) (88,750)
---------- ---------- -----------
Total disbursements (5,168,694) (6,435,704) (4,153,512)
---------- ---------- -----------
Net cash provided by operating activities 1,107,119 991,698 572,603
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in mortgage escrow deposits
and other reserves $ (237,313) $ (123,929) $ (169,257)
Net purchase of fixed assets (433,839) (280,181) (220,821)
Other investing (38,840) 161 71,984
----------- ---------- -----------
Net cash used in investing activities (709,992) (403,949) (318,094)
----------- ---------- -----------
</TABLE>
50
<PAGE> 52
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (401,035) (371,566) (345,312)
Principal payments on loans or notes payable (13,773) - (200)
Proceeds from loans or notes payable 43,941 - -
Distributions (43,301) (34,360) (64,401)
----------- ----------- -----------
Net cash used in financing activities (414,168) (405,926) (409,913)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (17,041) 181,823 (155,404)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 409,688 227,865 383,269
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 392,647 $ 409,688 $ 227,865
=========== =========== ===========
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $(1,508,964) $(1,733,529) $(6,443,909)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 706,488 733,902 925,158
Extraordinary gain on forgiveness of debt - (167,762) -
Impairment losses on rental property - - 4,660,000
Changes in operating assets and liabilities:
Tenant accounts receivable (6,410) (3,050) 1,202
Accounts receivable - other (29,540) 1,887,091 (1,902,548)
Accrued receivables (1,688) - -
Prepaid expenses 3,839 (5,043) 3,379
Cash restricted for tenants' security deposits (12,953) 9,681 (19,083)
Accounts payable trade (205,037) 68,483 41,043
Accrued liabilities 48,271 (1,541,243) 1,798,229
Accrued interest notes payable 1,861,749 1,717,281 1,569,364
Tenant security deposits held in trust 8,785 3,337 7,624
Prepaid revenue 60,292 - -
Deferred income - (833) (10,210)
Other reserves 159,787 - -
Entity liability accounts 22,500 23,383 (57,646)
---------- ---------- ------------
Total adjustments 2,616,083 2,725,227 7,016,512
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,107,119 $ 991,698 $ 572,603
============= =========== ===========
</TABLE>
51
<PAGE> 53
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" or the
"Registrant") 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" or the "General Partner").
Together, NCHP and NHP Partners Two own all of the outstanding partnership
interests in NHP. NHP is the general partner of the Registrant. As a result of
these transactions, the AIMCO Group has acquired control of the general partner
of the Registrant and, therefore, may be deemed to have acquired control of the
Registrant.
52
<PAGE> 54
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
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
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.
Certain reclassifications of prior years' amounts have been made to
conform with the current year's presentation.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
------ ----
<S> <C> <C>
Net tenant accounts receivable $ 15,901 $ 8,883
Housing assistance receivable (Note 3) 63,262 30,697
Interest reduction payment receivable 1,688 -
Reserve releases receivable 28,086 2,899
Other 748 790
--------- ---------
Net accounts receivable $ 109,685 $ 43,269
========= =========
</TABLE>
53
<PAGE> 55
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
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.
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
908 units, 98 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. With
respect to Housing Assistance Payments Contracts ("HAP Contracts") expiring
before October 1, 1998, Congress 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 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>
1999 736 81% 79%
2006 and thereafter 172 19% 19%
--- --- --
Total 908 100% 98%
=== === ==
</TABLE>
Of the units (908 in total) receiving rent subsidies from Section 8,
736 of the units have their contracts expiring during the year ending December
31, 1999. HUD has issued new regulations that govern the continuance of
project-based subsidies. Under the new regulations, owners with HAP contracts
expiring after September 30, 1998 may elect to (1) renew the contract without
restructuring for one year, (2) opt out of the contract, or (3) enter into the
54
<PAGE> 56
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Mark-to Market program, which includes a potential restructuring of the mortgage
and renewal of the contract. At this time it is not possible to determine which
option each of the Local Limited Partnerships will elect, and accordingly, it is
not possible to determine the ultimate impact on the operations of the Local
Limited Partnerships.
The Local Limited Partnerships received a total of $3,314,550,
$3,217,164 and $3,337,702 during 1998, 1997 and 1996, respectively, in the form
of housing assistance payments which is included in "Rental Income" in the
combined statements of operations.
4. RENTAL PROPERTY
Rental property consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997
---- ----
<S> <C> <C>
Land $ 806,059 $ 756,247
Buildings and improvements 17,619,701 15,865,796
Furniture and equipment 1,776,843 3,146,722
---------- ----------
20,202,603 19,768,765
Less accumulated depreciation (5,899,688) (5,193,200)
---------- ----------
Rental property, net $14,302,915 $14,575,565
========== ==========
</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>
1999 $ 419,000
2000 451,000
2001 486,000
2002 523,000
2003 563,000
Thereafter 6,954,000
----------
$ 9,396,000
==========
</TABLE>
55
<PAGE> 57
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
6. NOTES PAYABLE
Notes payable were executed by the Local Limited Partnerships with the
former owners as part of the acquisition of the properties by the Local Limited
Partnerships. The notes are nonrecourse notes secured by a security interest in
all partnership interests in the respective Local Limited Partnerships. These
notes bear interest at the rate of 9% per annum, compounded semi-annually. These
notes are subordinated to the respective mortgage note for as long as the
mortgage note is insured by HUD. Any payments due from project income are
payable from the respective Local Limited Partnership's surplus cash, as defined
by the respective HUD Regulatory Agreement. The notes may be prepaid in whole or
in part at any time without penalty. Neither the respective Local Limited
Partnership nor any partner thereof, present or future, assumes any personal
liability for the payment of these notes.
These notes mature as follows:
<TABLE>
<CAPTION>
Local Partnership Due Date Note Amount Accrued Interest
----------------- -------- ----------- ----------------
<S> <C> <C> <C>
Capital Park Limited
Partnership February 28, 2001 $ 1,900,000 $ 3,991,630
Kennedy Homes Limited
Partnership February 28, 2001 1,401,900 2,937,820
Loring Towers Apartments
Limited Partnership February 28, 2001 2,000,000 4,173,059
Royal Towers Limited
Partnership March 27, 2001 1,873,000 3,882,837
---------- ----------
Total Due 2001 $ 7,174,900 $14,985,346
========== ==========
</TABLE>
7. DUE TO PARTNERS
Annual partnership administration fees of $30,000 were accrued for
1998, 1997 and 1996. The Local Limited Partnerships paid $15,000, $15,011 and
$88,750 in such fees during 1998, 1997 and 1996, 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
$133,114 and $118,114 at December 31, 1998 and 1997, respectively.
During 1998, 1997 and 1996, the General Partner advanced $43,941,
$8,320 and $1,104, respectively to one, four and one Local Limited Partnership
to fund the Local Limited Partnership's entity expenses. During 1998, three
Local Limited Partnerships made payments of principal of $6,273 and interest of
$1,125 to the General Partner. No repayments were made during 1997 and 1996. The
balance owed to the General Partner by the Local Limited Partnerships at
December 31, 1998 and 1997, was $47,092 and $9,424, respectively. Interest is
charged at a rate equal to the Chase Manhattan Bank prime interest rate plus 2%.
Chase Manhattan Bank prime was 7.75% at December 31, 1998.
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, 1998 and 1997, 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 7.75% at December
31, 1998. The advance and interest will be paid in conformity with HUD and/or
other regulatory requirements and applicable partnership agreements.
56
<PAGE> 58
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
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.
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 preferred stock subsidiary of AIMCO. NHPMC and other
affiliates of NCHP earned $381,555, $494,836 and $517,575 from the Local Limited
Partnerships for management fees and other services provided to the Local
Limited Partnerships during 1998, 1997 and 1996, respectively. At December 31,
1997 amounts due NHPMC and unpaid by the Local Limited Partnerships amounted to
$4,920.
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, 1998, 1997 and 1996, were approximately $645,000,
$462,000 and $714,000, respectively. At December 31, 1997, account payable
included $501 due to NHPMC.
10. FUTURE OPERATIONS AND CASH FLOWS
One Local Limited Partnership, Royal Towers Limited Partnership, has
experienced cash flow difficulties in meeting its current obligations.
Continuation of the Partnership's operations in the present form is dependent
upon its ability to achieve positive cash flow or obtaining other funds.
4
11. 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.
12. 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
57
<PAGE> 59
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED 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, 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' notes payable 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 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, 1998.
Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
13. 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. For the notes
payable 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.
14. 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 1998 and 1997, Royal Towers Limited Partnership received
approximately $1,055,000 and $2,756,000, respectively in insurance proceeds
relating to the fire and used approximately $3,700,000 of these proceeds as of
December 31, 1998. Use of the remaining $111,000 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.
58
<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: 3-30-99 /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: -
<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: 3-30-99 /s/ Susan R. Baron
-------------- --------------------
SIGNATURE
State of District of Columbia
County of
---------------
Before me, ______ , 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_______ this_______ day of _______ 1998.
/s/
- --------------------
Notary Public
My Commission Expires:
---------------
<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: 3-30-99 /s/ Joel F. Bonder
----------------- -----------------------------
SIGNATURE
State of District of Columbia
County of
-----------------
Before me, ______ , on this day personally appeared Joel F. Bonder 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: 3-30-99 /s/ Roberta Ujakovich
------------------- ---------------------------
SIGNATURE
State of District of Columbia
County of
--------------------
Before me, _______ , on this day personally appeared Roberta Ujakovich 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:
--------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,046,439
<SECURITIES> 0
<RECEIVABLES> 2,999
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,136,937
<PP&E> 18,676,205
<DEPRECIATION> 5,034,923
<TOTAL-ASSETS> 16,091,817
<CURRENT-LIABILITIES> 13,716,072
<BONDS> 9,229,976
0
0
<COMMON> 0
<OTHER-SE> (6,854,231)
<TOTAL-LIABILITY-AND-EQUITY> 16,091,817
<SALES> 0
<TOTAL-REVENUES> 3,607,812
<CGS> 0
<TOTAL-COSTS> 2,359,527
<OTHER-EXPENSES> 207,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,750,125
<INCOME-PRETAX> (709,720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (709,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (709,720)
<EPS-PRIMARY> (45)
<EPS-DILUTED> (45)
</TABLE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 30, 1998
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV (a Maryland
Limited Partnership) (Exact name of registrant
as specified in its charter)
<TABLE>
<CAPTION>
Maryland 0 15731 52 1473440
-------- ------- ----------
<S> <C> <C>
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
9200 Keystone Crossing
Suite 500
Indianapolis, Indiana 46240-7602
(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (317) 817-7500
Not Applicable
(Former Name or Former Address, if changed since last report)
<PAGE> 2
Item 4. Changes in Registrant's Certifying Accountant
(a) Previous independent accountants.
(i) On or about October 28, 1998, National Housing Partnership
Realty Fund IV (the "Registrant") dismissed Deloitte & Touche LLP as the
Registrant's independent accountants and engaged Ernst & Young LLP as its
independent accountants.
(ii) Deloitte & Touche LLP's reports on the financial statements
of the Registrant for the past two fiscal years did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
(iii) The decision to change independent accountants from
Deloitte & Touche LLP to Ernst & Young LLP was recommended by the general
partner of the Registrant.
(iv) During the Registrant's fiscal years ending December 31,
1996 and December 31, 1997 and the subsequent interim period preceding the
dismissal, there were no disagreements with Deloitte & Touche LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the satisfaction of
Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference
to the subject matter of the disagreement(s) in connection with their report.
(v) During the periods listed in item (iv) above, there have been
no "reportable events" (as defined in paragraph (a)(1)(v) of Item 304 of
Regulation S-K).
(vi) The Registrant has provided Deloitte & Touche LLP with a
copy of this disclosure and requested that Deloitte & Touche LLP furnish it with
a letter addressed to the Securities and Exchange Commission (the "Commission")
stating whether it agrees with the above statements. (A copy of the Deloitte &
Touche LLP letter addressed to the Commission will be filed by amendment to this
Form 8-K within 10 business days).
(b) New independent accountants.
(i) On or about the date of dismissal of Deloitte & Touche LLP,
the Registrant engaged Ernst & Young LLP as independent accountants for the
fiscal year ending December 31, 1998.
(ii) Prior to the appointment of Ernst & Young LLP, the
Registrant did not engage or consult with Ernst & Young LLP regarding any of the
matters described in Item 304(a)(2) of Regulation S-K.
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
The required letter of Deloitte & Touche LLP regarding a
change in certifying accountant will be filed by amendment within 10
business days.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NATIONAL HOUSING PARTNERSHIP
REALTY FUND IV (a Maryland Limited
Partnership)
By: The National Housing Partnership,
its general partner
By: National Corporation for Housing
Partnerships, its general partner
Date: October 30, 1998 By: /s/ Troy D. Butts
--------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 30, 1998
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV (a Maryland Limited Partnership
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 0 15731 52-1473440
-------- ------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
</TABLE>
9200 Keystone Crossing
Suite 500
Indianapolis, Indiana 46240-7602
--------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (317) 817-7500
Not Applicable
--------------
(Former Name or Former Address, if changed since last report)
<PAGE> 2
Item 4. Changes in Registrant's Certifying Accountant
(a) Previous independent accountants.
(i) On or about October 28, 1998, National Housing Partnership
Realty Fund IV (the "Registrant") dismissed Deloitte & Touche LLP as the
Registrant's independent accountants and engaged Ernst & Young LLP as its
independent accountants.
(ii) Deloitte & Touche LLP's reports on the financial
statements of the Registrant for the past two fiscal years did not contain
an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope, or accounting principles.
(iii) The decision to change independent accountants from
Deloitte & Touche LLP to Ernst & Young LLP was recommended by the general
partner of the Registrant.
(iv) During the Registrant's fiscal years ending December
31, 1996 and December 31, 1997 and the subsequent interim period preceding
the dismissal, there were no disagreements with Deloitte & Touche LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Deloitte & Touche LLP, would have caused Deloitte & Touche
LLP to make reference to the subject matter of the disagreement(s) in
connection with their report.
(v) During the periods listed in item (iv) above, there
have been no "reportable events" (as defined in paragraph (a)(1)(v) of Item
304 of Regulation S-K).
(vi) The Registrant has provided Deloitte & Touche LLP with a
copy of the original Form 8-K and requested that Deloitte & Touche LLP
furnish it with a letter addressed to the Securities and Exchange Commission
(the "Commission") stating whether it agrees with the statements made by the
Registrant in response to this Item 4. A copy of the Deloitte & Touche LLP
letter addressed to the Commission is filed as Exhibit 16.1 to this Form
8-K/A.
(b) New independent accountants.
(i) On or about the date of dismissal of Deloitte & Touche LLP,
the Registrant engaged Ernst & Young LLP as independent accountants for the
fiscal year ending December 31, 1998.
(ii) Prior to the appointment of Ernst & Young LLP, the
Registrant did not engage or consult with Ernst & Young LLP regarding any
of the matters described in Item 304(a)(2) of Regulation S-K.
<PAGE> 3
Item 7.
(c) Exhibits
16.1 Letter of Deloitte & Touche LLP dated November 10, 1998
regarding change in certifying accountant.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NATIONAL HOUSING PARTNERSHIP
REALTY FUND IV (a Maryland Limited Partnership)
By: The National Housing Partnership,
its general partner
By: National Corporation for Housing
Partnerships, its general partner
Date: November 12, 1998 By: /s/ Troy D. Butts
---------------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX TO FORM 8-K/A
Exhibit
Number Description
16.1 Letter of Deloitte & Touche LLP dated
November 10, 1998 regarding change in
certifying accountant.
<PAGE> 4
EXHIBIT 16.1
November 10, 1998
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, DC 20549
Dear Sirs/Madams:
We have read and agree with the comments in Items 4(a)(i), 4(a)(ii),
4(a)(iv), 4(a)(v) and 4(a)(vi) of Form 8-K of the entities listed below
dated October 30, 1998. We have no basis for agreement or disagreement with
the comments in Items 4(a)(iii), 4(b)(i) and 4(b)(ii).
National Housing Partnership Realty Fund Two (Commission File No. 0-14458)
National Housing Partnership Realty Fund III (Commission File No. 0-14457)
National Housing Partnership Realty Fund IV (Commission File No. 0-15731)
Yours truly,
Deloitte & Touche LLP
