SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the fiscal year ended December 31, 1999 .Commission file number 0-15731
National Housing Partnership Realty Fund IV (A Maryland Limited Partnership)
(Exact name of registrant as specified in its charter)
Maryland 52-1473440
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 Keystone Crossing, Suite 46240
500 Indianapolis, Indiana (Zip Code)
(Address of principal executive
offices)
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: 15,394 Limited
Partnership Interests
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-KSB or any amendment to
this Form 10-KSB.
[X]
State issuer's revenues for its most recent fiscal year. $3,708,000
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>
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
(A MARYLAND LIMITED PARTNERSHIP)
1999 FORM 10-KSB 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 8
PART II
Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters 9
Item 6. Management's Discussion and Analysis or Plan of
Operations 9
Item 7. Financial Statements and Supplementary Data 13
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 33
PART III
Item 9. Directors and Executive Officers of the Registrant 34
Item 10. Executive Compensation 35
Item 11. Security Ownership of Certain Beneficial
Owners and Management 35
Item 12. Certain Relationships and Related Transactions 36
PART IV
Item 13. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 37
<PAGE>
PART I
Introduction
The matters discussed in this Form 10-KSB 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-KSB 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 ("IG")
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"). 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.
In July 1999, NHP received a grand jury subpoena requesting documents
relating to the same subject matter as the HUD IG subpoenas and NHP's operation
of a group purchasing program created by NHP, known as Buyers Access. To date,
neither the HUD IG nor the grand jury has initiated any action against NHP or
Apartment Investment and Management Company ("AIMCO"), the ultimate controlling
entity of NHP or, to NHP's or AIMCO's knowledge, any owner of a HUD property
managed by NHP. AIMCO believes that NHP's operations and programs are in
compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. NHP and AIMCO are
cooperating with investigations and does not believe that the investigations
will result in a material adverse impact on its operations. However, as with any
similar investigation, there can be no assurance that these will not result in
material fines, penalties or other costs.
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 the Partnership, NHP, or
AIMCO or, to AIMCO's knowledge, any owner of a HUD property managed by NHP or
AIMCO, if any such action is taken in the future, it could ultimately affect
existing arrangements with respect to HUD projects or otherwise have a material
adverse affect on the results of operations of AIMCO.
The Partnership's business is to own directly one multi-family housing
property, Trinity Apartments, and to hold limited partnership interests in four
limited partnerships ("Local Limited Partnerships"), which in turn, own and
operate 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 6, Management's Discussion and Analysis or
Plan 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:
<PAGE>
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>
Occupancy
Units Authorized Percentage
Financed, Insured for Rental for the Year Ended
Property Name, Location Number of and Subsidized Assistance Under December 31,
and Partnership Name Units Under Section 8(D) 1999 1998
<S> <C> <C> <C> <C> <C>
Capital Park 316 (A) 316 99% 99%
Columbus, Ohio
(Capital Park Limited
Partnership)
Kennedy Homes 172 (B) 172 89% 92%
Gainesville, Florida
(Kennedy Homes
Limited Partnership)
Loring Towers 208 (A) 187 98% 97%
Apartments
Minneapolis, Minnesota
(Loring Towers
Apartments)
Royal Towers 233 (A) 233 74% 74%
Kansas City, Missouri
(Royal Towers
Limited Partnership)
Trinity Apartments 496 (C) None 94% 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.
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
own and/or control a significant number of apartment units in the Unites States,
such units represent an insignificant percentage of total units in the United
States and, competition for apartments is local. With respect to the Local
Limited Partnerships' Properties, these apartment complexes 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
904 units, 97 percent of the total units owned by the properties in which the
Partnership has invested (excluding Trinity Apartments), receive rental
subsidies. On October 27, 1997, the President signed into law the Multifamily
Assisted Housing Reform and Affordability Act of 1997 (the "1997 Housing Act").
Under the 1997 Housing Act, certain properties assisted under Section 8, with
rents above market levels and financed with HUD-insured mortgage loans, will be
restructured by adjusting subsidized rents to market levels, thereby potentially
reducing rent subsidies, and lowering required debt service costs as needed to
ensure financial viability at the reduced rents and rent subsidies. The 1997
Housing Act retains project-based subsidies for most properties (properties in
rental markets with limited supply, properties serving the elderly, and certain
other properties). The 1997 Housing Act phases out project-based subsidies on
selected properties servicing families not located in rental markets with
limited supply, converting such subsidies to a tenant-based subsidy. Under a
tenant-based system, rent vouchers would be issued to qualified tenants who then
could elect to reside at properties of their choice, provided such tenants have
the financial ability to pay the difference between the selected properties'
monthly rent and the value of the vouchers, which would be established based on
HUD's regulated fair market rent for the relevant geographical areas. 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:
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
1999 125 14% 13%
2000 779 86% 84%
Total 904 100% 97%
Of the units (904 in total) receiving rent subsidies from Section 8, 779
of the units have their contracts expiring during the year ending December 31,
2000. 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. Loring Towers has applied to HUD to renew their
expiring contracts without restructuring. HUD has elected to combine the
expiring contracts into one contract and as of December 31, 1999, the renewal
application has been submitted and is pending HUD approval. Kennedy Homes and
Capital Park have both elected to enter HUD's Mark- to-Market program, which
could potentially restructure their existing debt and/or HAP contracts to
support market based rents. Extensions of the existing contract have been
granted until the office of Multifamily Housing Assistance Restructuring has
approved the restructuring. Royal Towers had elected to renew the contracts
without restructuring as allowed by HUD Regulations governing the continuance of
project based subsidiaries (see Item 6. Subsequent Event).
<PAGE>
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 affecting 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. As a result of HUD's review of 2530 applications during 1999
two unresolved flags existed at December 31, 1999. Subsequent to December 31,
1999 one of these flags was resolved and the other is currently being addressed.
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, 1999, the Partnership held an equity interest in four
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 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, 1999.
NHP Realty Original Notes
Fund IV Cost of Payable
Percentage Ownership Mortgage and Accrued
Partnership Ownership Interest Notes Interest
(in thousands) (in thousands) (in thousands)
Capital Park Limited
Partnership 99% $1,985 $3,472 $6,422
Kennedy Homes Limited
Partnership 99% 1,114 874 4,739
Loring Towers Limited
Partnership 99% 1,476 2,319 6,744
Royal Towers Limited
Partnership (1) 99% 1,164 2,300 6,286
Trinity Apartments Wholly-owned 5,971 8,814 -
(1) See "Item 7. Financial Statements - Note 2".
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
In 1997, NHP received subpoenas from the HUD Inspector General ("IG")
requesting documents relating to arrangements whereby NHP or any of its
affiliates provided compensation to owners of HUD-assisted or HUD-insured
multi-family projects in exchange for or in connection with property management
of a HUD project.
In July 1999, NHP received a grand jury subpoena requesting documents
relating to the same subject matter as the HUD IG subpoenas and NHP's operation
of a group purchasing program created by NHP, known as Buyers Access. To date,
neither the HUD IG nor the grand jury has initiated any action against NHP or
Apartment Investment and Management Company ("AIMCO"), the ultimate controlling
entity of NHP or, to NHP's or AIMCO's knowledge, any owner of a HUD property
managed by NHP. AIMCO believes that NHP's operations and programs are in
compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. NHP and AIMCO are
cooperating with investigations and does not believe that the investigations
will result in a material adverse impact on its operations. However, as with any
similar investigation, there can be no assurance that these will not result in
material fines, penalties or other costs.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted.
<PAGE>
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, 1999, there were 1,141 registered holders of
15,394 limited partnership interests (in addition to 1133
Fifteenth Street Four Associates - See "Item 7. Financial
Statements - Note 1"). In 1999, the number of Limited Partnership
Units decreased by 20 units due to Limited Partners abandoning
his or her units. In abandoning his or her Limited Partnership
Unit(s), a Limited Partner relinquishes all rights, title and
interest in the Partnership as of the date of abandonment.
(c) No cash dividends or distributions have been declared from the
inception of the Partnership to December 31, 1999.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The matters discussed in this Form 10-KSB 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-KSB 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.
This item should be read in conjunction with the financial statements and
other items contained elsewhere in this report.
Year 2000 Compliance
General Description
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 General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted 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.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
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 Partner's
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 Local Limited Partnership's properties, receive one or more forms of
assistance from Federal, state, or local government or agencies. As a result,
the Local Limited Partnerships' ability to transfer funds either to the
Partnership or among themselves in the form of cash distributions, loans or
advances is generally restricted by terms of these government assistance
programs. These restrictions, however are not expected to impact 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, 1999, was
approximately $688,000 as compared to approximately $755,000 in 1998. The
decrease in net cash provided by operations from 1998 to 1999, resulted from an
increase in rental expenses slightly offset by an increase in rental income.
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 approximately $69,000 and
approximately $43,000 were received from two Local Limited Partnerships,
respectively, during the years ended December 31, 1999 and 1998. 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 approximately $69,000 at December
31, 1999 as compared to approximately $24,000 at December 31, 1998. The increase
of approximately $45,000 is due to approximately $688,000 of cash provided by
operating activities partially offset by approximately $286,000 of cash used in
financing activities and approximately $357,000 of cash used in investing
activities. Cash used in financing activities consisted of mortgage payments
partially offset by the net receipt of partner loans. Cash used in investing
activities consisted of property improvements partially offset by net receipts
from restricted escrows. The ability of the Partnership to meet its on-going
cash requirements, in excess of cash on hand at December 31, 1999, is dependent
on the 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, 1999, the Partnership owes the General
Partner approximately $1,454,000 for administrative and reporting services
performed. In addition, at December 31, 1999, the Partnership owed NHP
approximately $629,000 for other advances. Additionally, NHP and AIMCO have made
advances totaling approximately $8,114,000 to Trinity Apartments to cover costs
associated with the refinancing of the Partnership's mortgage note payable for
Trinity Apartments and to cover operating deficits for Trinity Apartments. The
payment of the unpaid administrative and reporting fees and advances from the
Partnership and NHP to the Local Limited Partnerships will most likely result
from the sale or refinancing of the underlying Properties of the Local Limited
Partnerships as defined by the Partnership agreement, rather than through
recurring operations. The General Partner will continue to manage the
Partnership's assets prudently in an effort to achieve positive cash flow and
will evaluate lending the Partnership additional funds as such funds are needed,
but is in no way legally obligated to make such loans.
Royal Towers Limited Partnership has experienced cash flow difficulties in
meeting its current obligations and has transferred control of all of the
property used in the Royal Towers Apartments to HUD under a
Mortgagee-In-Possession Arrangement in January 2000. Royal Towers Limited
Partnership is pursuing a sale of the property to a third party.
The mortgage note payable of approximately $8,814,000 encumbering Trinity
Apartments at December 31, 1999 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 and matures
December 1, 2012.
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, 1999 and 1998, 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 recognized a net loss of approximately $320,000 for the
year ended December 31, 1999 compared to a net loss of approximately $710,000
for the year ended December 31, 1998. The decrease in net loss is due to an
increase in profit from rental operations, and a decrease in both rental and
non-rental costs and expenses. Also contributing to the increase in net income
is the receipt of cash distributions from two of the Local Limited Partnerships
during the year ended December 31, 1999. Profit from rental operations increased
due to an increase in rental revenues resulting from an increase in rental rates
at Trinity Apartments and a decrease in total expenses relating to such
property. Property expenses decreased primarily due to a decrease in tax and
insurance expense which more than offset an increase in depreciation expense.
Property tax expense decreased as a result of a refund of previously paid taxes
due to a reassessment of Trinity Apartments at a lower value. Depreciation
expense increased as a result of property improvements made during the last
year.
The Partnership did not recognize approximately $3,690,000 of its
allocated share of losses from the four Local Limited Partnerships in 1999, as
the Partnership's net book investment in them was reduced to zero (see Note 2 to
the Partnership's financial statements). The Partnership's share of losses from
the Local Limited Partnerships, if not limited to its investment account
balance, would have increased approximately $2,196,000 between years. The
increase was primarily due to an impairment loss on rental property of
approximately $2,100,000 for Royal Towers recognized in 1999. There were no such
impairment losses recorded in 1998. Additionally there was an increase in total
expenses slightly offset by an increase in total revenues.
Item 7. Financial Statements and Supplementary Data
The financial statements and supplementary schedule of the Partnership are
included on pages 13 through 32 of this report.
<PAGE>
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, 1999,
and the related statements of operations, partners' deficit and cash flows for
each of the two years in the period ended December 31, 1999 and the financial
statement schedule listed in the index at Item 13. These financial statements
and schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 the Partnership's 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, the financial statements referred to above present fairly, in
all material respects, the financial position of National Housing Partnership
Realty Fund IV at December 31, 1999, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
March 6, 2000
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
(in thousands, except unit data)
December 31, 1999
ASSETS
Cash and cash equivalents $ 69
Accounts receivable
51
Prepaid insurance, taxes and tenant security deposits
95
Mortgage escrow deposits
828
Investments in and advances to Local Limited
Partnerships (Note 2)
--
Land
3,650
Buildings and improvements - less accumulated
depreciation of $5,475
9,854
Deferred finance costs
1,150
$15,697
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable and accrued expenses from rental
operations (Note 3) $ 845
Administrative and reporting fee payable to
General Partner (Note 5)
1,454
Due to General Partner (Note 5)
8,743
Accrued interest on partner loans (Note 5)
2,980
Other accrued expenses 35
Mortgage note payable (Note 4) 8,814
22,871
Partners' deficit:
General partner -- The National Housing
Partnership (NHP) (201)
Original limited partner -- 1133 Fifteenth
Street Four Associates (206)
Other limited partners -- 15,394 investment
units (6,767)
(7,174)
$15,697
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1999 1998
RENTAL REVENUES
Rental income $ 3,629 $ 3,485
Other rental revenue 79 66
3,708 3,551
RENTAL EXPENSES:
Interest 593 617
Renting and administrative 150 147
Operating and maintenance 467 430
Management and other services from related party
(Note 5) 186 178
Salaries and related benefits to related party
(Note 5) 325 356
Depreciation and amortization
604 529
Taxes and insurance 499 719
2,824 2,976
PROFIT FROM RENTAL OPERATIONS 884 575
COSTS AND EXPENSES:
Interest on partner loans (Note 5) 1,122 1,133
Administrative and reporting fees to General
Partner (Note 5) 116 116
Other operating expenses 55 92
1,293 1,341
OTHER INCOME:
Interest income 20 13
Distributions received in excess of investment in
Local Limited
Partnerships (Note 2) 69 43
89 56
NET LOSS $ (320) $ (710)
ALLOCATION OF NET LOSS:
General Partner - NHP $ (3) $ (7)
Original Limited Partner - 1133 Fifteenth Street
Four Associates (3) (7)
Other Limited Partners - 15,394 investment
units (314) (696)
$ (320) $ (710)
NET LOSS PER OTHER LIMITED PARTNERSHIP
INTEREST $ (20) $ (45)
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' DEFICIT
(in thousands, except unit data)
<TABLE>
<CAPTION>
The National 1133
Housing Fifteenth Other
Partnership Street Four Limited
(NHP) Associates Partners Total
<S> <C> <C> <C> <C>
Deficit at December 31, 1997 $ (191) $ (196) $ (5,757) $ (6,144)
Net loss (7) (7) (696) (710)
Deficit at December 31, 1998 $ (198) $ (203) $ (6,453) $ (6,854)
Net loss (3) (3) (314) (320)
Deficit at December 31, 1999 $ (201) $ (206) $ (6,767) $ (7,174)
Percentage interest at December
31, 1999 1% 1% 98%
(A) (B) (C)
</TABLE>
(A) General Partner
(B) Original Limited Partner
(C) Consists of 15,394 investment units at December 31, 1999 and 15,414
investment units at December 31, 1998.
During 1999, 20 units were abandoned (Note 8)
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Revenue:
Rental income $ 3,625 $ 3,490
Interest 20 14
Other 32 64
Distributions in excess of investment in Local Limited
Partnerships 69 43
3,746 3,611
Expenses:
Operating expenses paid, including rental expense (1,921) (1,720)
Interest on partner loans (544) (567)
Mortgage interest (593) (569)
(3,058) (2,856)
Net cash provided by operating activities 688 755
CASH FLOWS FROM INVESTING ACTIVITIES:
Property improvements (551) (380)
Net receipts from restricted escrows 194 28
Net cash used in investing activities (357) (352)
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (416) (390)
Proceeds from partner loans 349 573
Principal payments on partner loans (219) (53)
Payment of deferred finance costs -- (554)
Net cash used in financing activities (286) (424)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 45 (21)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24 45
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 69 $ 24
See Accompanying Notes to Financial Statements
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in thousands)
(Continued)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (320) $ (710)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 440 362
Amortization of deferred finance costs 164 167
Changes in operating assets and liabilities:
Accounts receivable (49) --
Prepaid insurance, taxes and security deposits (19) 35
Administrative and reporting fee payable to General
Partner 116 116
Accrued partnership administrative fee payable to
General Partner 7 7
Accounts payable and accrued expenses from rental
operations (198) 148
Other accrued expenses (31) 16
Accrued interest on partner loans 578 564
Accrued interest on mortgage note payable -- 50
Total adjustments 1,008 1,465
Net cash provided by operating activities $ 688 $ 755
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
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.
<PAGE>
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 2). 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.
Cash and Cash Equivalents
Includes cash on hand, in banks and money market accounts. At certain
times, the amount of cash deposited at a bank may exceed the limit on insured
deposits.
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.
Segment Reporting
Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of an Enterprise and Related Information established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Partnership has only one reportable
segment.
2. 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 1999, and 1998, the Partnership
did not recognize approximately $3,690,000 and $1,494,000, respectively of its
allocated share of losses from four Local Limited Partnerships. As of December
31, 1999 and 1998, the Partnership had not recognized approximately $19,530,000
and $15,840,000, respectively, of its cumulative allocated share of losses from
four of the Local Limited Partnerships.
No working capital advances or recoveries occurred between the Partnership
and the Local Limited Partnerships during 1999 or 1998. As of December 31, 1999
and 1998, $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, 1999 and the combined results of
operations for the years ended December 31, 1999 and 1998 are as follows:
<PAGE>
CONDENSED COMBINED FINANCIAL POSITION
OF THE LOCAL LIMITED PARTNERSHIPS
(in thousands)
December 31, 1999
Assets:
Land $ 862
Building and improvements, net of accumulated depreciation
of $6,239
and impairment losses of $2,100 11,302
Other assets 2,407
$ 14,571
Liabilities and Partners' Deficit:
Liabilities:
Mortgage notes payable $ 8,965
Notes payable 7,175
Accrued interest on notes payable 17,016
Other liabilities 1,563
34,719
Partners' Deficit:
National Housing Partnership Realty Fund IV (19,886)
The National Housing Partnership
(262)
(20,148)
$ 14,571
CONDENSED combined results of operations
of the local limited partnerships
(in thousands)
Years Ended December 31,
1999 1998
Revenue $ 5,038 $ 5,008
Expenses:
Operating expenses
3,747 3,827
Financial expenses - primarily interest
118 119
Interest on notes payable
2,053 1,864
Depreciation and amortization
746 707
Impairment loss on rental property
2,100 --
Total expenses
8,764 6,517
Net loss $ (3,726) $ (1,509)
<PAGE>
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.
During the year ended December 31, 1999 and 1998 the projects received a total
of approximately $3,316,000 and $3,315,000, respectively of 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
904 units, 97 percent of the total units owned by the properties in which the
Partnership has invested (excluding Trinity Apartments), receive rental
subsidies. On October 27, 1997, the President signed into law the Multifamily
Assisted Housing Reform and Affordability Act of 1997 (the "1997 Housing Act").
Under the 1997 Housing Act, certain properties assisted under Section 8, with
rents above market levels and financed with HUD-insured mortgage loans, will be
restructured by adjusting subsidized rents to market levels, thereby potentially
reducing rent subsidies, and lowering required debt service costs as needed to
ensure financial viability at the reduced rents and rent subsidies. The 1997
Housing Act retains project-based subsidies for most properties (properties in
rental markets with limited supply, properties serving the elderly, and certain
other properties). The 1997 Housing Act phases out project-based subsidies on
selected properties servicing families not located in rental markets with
limited supply, converting such subsidies to a tenant-based subsidy. Under a
tenant-based system, rent vouchers would be issued to qualified tenants who then
could elect to reside at properties of their choice, provided such tenants have
the financial ability to pay the difference between the selected properties'
monthly rent and the value of the vouchers, which would be established based on
HUD's regulated fair market rent for the relevant geographical areas. 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:
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
1999 125 14% 13%
2000 779 86% 84%
Total 904 100% 97%
Of the units (904 in total) receiving rent subsidies from Section 8, 779 of the
units have their contracts expiring during the year ending December 31, 2000.
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. Loring Towers has applied to HUD to renew their expiring contracts
without restructuring. HUD has elected to combine the expiring contracts into
one contract and as of December 31, 1999, the renewal application has been
submitted and is pending HUD approval. Kennedy Homes and Capital Park have both
elected to enter HUD's Mark- to-Market program, which could potentially
restructure their existing debt and/or HAP contracts to support market based
rents. Extensions of the existing contract have been granted until the office of
Multifamily Housing Assistance Restructuring has approved the restructuring.
Royal Towers had elected to renew the contracts without restructuring as allowed
by HUD Regulations governing the continuance of project based subsidiaries.
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:
Local Partnership Due Date Note Amount Accrued Interest
(in thousands)
Capital Park Limited
Partnership February 28, 2001 $ 1,900 $ 4,522
Kennedy Homes Limited
Partnership February 28, 2001 1,402 3,337
Loring Towers Apartments
Limited Partnership February 28, 2001 2,000 4,744
Royal Towers Limited
Partnership March 27, 2001 1,873 4,413
Total Due 2001 $ 7,175 $17,016
The Financial Accounting Standards Board 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") 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 1999, Royal
Towers Limited Partnership recognized an impairment loss on its rental property
in the amount of $2,100,000.
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, 1999.
Should a Local Limited Partnership be forced to dispose of any if its
properties, it could incur a loss.
Royal Towers Limited Partnership has experienced cash flow difficulties in
meeting its current obligations and has transferred control of all of the
property used in the Royal Towers Apartments to HUD under a
Mortgagee-In-Possession Arrangement in January 2000. Royal Towers Limited
Partnership is pursuing a sale of the property to a third party.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES FROM RENTAL OPERATIONS
Accounts payable and accrued expenses from rental operations consist of
the following:
December 31, 1999
(in thousands)
Trade payables $ 137
Accrued interest on mortgage notes 51
Accrued real estate taxes 597
Tenant security deposits 59
Rent received in advance 1
$ 845
<PAGE>
4. MORTGAGE NOTE PAYABLE
The Trinity mortgage note payable 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 the property and leases with the tenants. The note bears
interest at the rate of 6.557% per annum. In connection with obtaining the
mortgage note payable, Trinity incurred a hedge loss which was deferred and is
being amortized over the life of the mortgage note payable. The amortization of
the hedge loss yields an effective rate of 8.647%. 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 (in thousands):
2000 $ 445
2001 475
2002 506
2003 541
2004 577
Thereafter 6,270
$ 8,814
Pursuant to the loan documents, 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.
5. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL PARTNER
The Partnership accrued administrative and reporting fees payable to the
General Partner of approximately $116,000 in 1999 and 1998. No payments for
these fees were made during 1999 or 1998. The balance owed to the General
Partner at December 31, 1999 was approximately $1,454,000.
During 1999 and 1998, the General Partner made working capital advances of
approximately $349,000, and $135,000, respectively, to the Partnership and to
Trinity Apartments. In addition, during 1998, AIMCO advanced approximately
$438,000 for the refinancing of Trinity's mortgage. During 1999 and 1998, the
Partnership repaid advances of approximately $219,000 and $53,000 to the General
Partner. The balance owed to the General Partner and AIMCO at December 31, 1999
was approximately $8,706,000. Interest is charged at the Chase Manhattan Bank
rate of prime plus 2%. Chase Manhattan Bank prime was 8.25% at December 31,
1999. During 1999 and 1998, interest of approximately $1,122,000, and
$1,133,000, respectively was accrued and expensed. During 1999 and 1998,
interest of approximately $544,000 and $567,000 was repaid to the General
Partner and AIMCO. The interest balance owed to the General Partner and AIMCO at
December 31, 1999 was approximately $2,980,000. Additionally, annual partnership
administrative fees of $7,500 were accrued by Trinity Apartments during 1999 and
1998, 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 1999 or 1998. As of December 31, 1999, $37,500 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.
NHPMC and other affiliates of NCHP earned approximately $372,000, and $382,000
from the Local Limited Partnerships and approximately $186,000 and $178,000 from
Trinity for management fees and other services provided to the Local Limited
Partnerships during 1999 and 1998, respectively.
Personnel working at the project sites, which are managed by NHPMC, were
employees of NHPI during the period January 1, 1996 through December 8, 1997 and
became employees of NHPMC (as a successor employer) as of December 8, 1997 and,
therefore, the projects reimbursed NHPI and NHPMC for the actual salaries and
related benefits. Prior to January 1, 1996, project employees were employees of
NCHP. Total reimbursements earned for salaries and benefits for the years ended
December 31, 1999 and 1998, were approximately $638,000 and $645,000,
respectively, from the Local Limited Partnerships and approximately $325,000 and
$356,000, respectively, from Trinity.
6. INCOME TAXES
The Partnership is not taxed on its income. The partners are taxed in
their individual capacities based 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:
Years Ended December 31,
1999 1998
(in thousands)
Net loss per financial statements $ (320) $ (710)
Add (deduct):
Depreciation (792) (351)
Interest on partner loans 487 452
Other 206 148
Partnership's share of Local Limited
Partnership's losses (2,490) (636)
Loss per tax return $(2,909) $(1,097)
<PAGE>
The following is a reconciliation between the Partnership's reported amounts and
the federal tax basis of net assets (in thousands):
December 31, 1999
Net deficit as reported $ (7,174)
Add (deduct):
Investment in Partnerships (25,138)
Investment Property (5,383)
Other 5,284
Net deficit - federal tax basis $(32,411)
7. 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;
<PAGE>
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.
<PAGE>
52
8. REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL LIMITED PARTNERSHIPS IN
WHICH NHP REALTY FUND IV HAS INVESTED
<TABLE>
<CAPTION>
Initial Cost Cost
To Local Limited Capitalized
Partnership (Removed)
(in thousands) Subsequent
to Acquisition
(in thousands)
Buildings
and Related
Personal Carrying Cost
Description Encumbrances Land Property Improvements Adjustments
<S> <C> <C> <C> <C> <C>
Capital Park $ (1) $110 $7,634 $ 2,111 $ --
Limited
Partnership
Kennedy Homes (1) 150 3,131 1,742 --
Limited
Partnership
Loring Towers (1) 290 5,876 753 (4,361)
Limited
Partnership
Royal Towers (1) 360 5,543 1,218 (6,065)
Limited
Partnership
Trinity Apartments (1) 3,650 18,810 610 (4,091)
(wholly-owned)
Totals $4,560 $40,904 $6,434 $(14,517)
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And
Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total(2)(3) Depreciation(3) Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Park $153 $9,702 $9,855 $3,519 1969 3/86 5-50
Limited
Partnership
Kennedy Homes 204 4,819 5,023 1,833 1968 3/86 5-50
Limited
Partnership
Loring Towers 298 2,260 2,558 511 1970 3/86 5-50
Limited
Partnership
Royal Towers 206 760 966 375 1973 4/86 5-50
Limited
Partnership
Trinity Apartments 3,650 15,329 18,979 5,475 1985 4/86 5-50
(wholly-owned)
Totals $4,511 $32,870 $37,381 $11,713
</TABLE>
(1) Schedule of Encumbrances
Notes Payable
and Accrued
Partnership Name Mortgage Notes Interest Total
Capital Park Limited Partnership $ 3,472 $ 6,422 $ 9,894
Kennedy Homes Limited Partnership 874 4,739 5,613
Loring Towers Apartments Limited
Partnership 2,319 6,744 9,063
Royal Towers Limited Partnership 2,300 6,286 8,586
Trinity Apartments (wholly-owned) 8,814 -- 8,814
TOTAL $17,779 $24,191 $41,970
(2) The aggregate cost of land for Federal income tax purposes is
approximately $4,408,000 and the aggregate costs of buildings and
improvements for Federal income tax purposes is approximately $44,909,000.
The total of the above-mentioned items is approximately $49,317,000.
(3) Reconciliation of real estate
Years Ended December 31,
1999 1998
(in thousands)
Balance at beginning of period
$38,879 $37,747
Improvements during the period
1,009 1,132
Impairment loss on rental property
(2,507) --
Balance at end of period $ 37,381 $38,879
Reconciliation of accumulated depreciation
Years Ended December 31,
1999 1998
(in thousands)
Balance at beginning of period
$10,935 $ 9,865
Depreciation expense for the period 1,185 1,070
Decrease due to impairment losses on rental
property (407) --
Balance at end of period $11,713 $10,935
9. Abandonment of Limited Partnership Units
In 1999, the number of Limited Partnership Units decreased by 20 units due
to limited partners abandoning their units. In abandoning his or her Limited
Partnership Unit(s), a limited partner relinquishes all right, title, and
interest in the partnership as of the date of abandonments. However, the limited
partner is allocated his or her share of net income or loss for that year. The
income or loss per Limited Partnership Unit in the accompanying consolidated
statements of operations is calculated based on the number of units outstanding
at the beginning of the year. There were no such abandonments in 1998.
10. LEGAL PROCEEDINGS
In 1997, NHP received subpoenas from the HUD Inspector General ("IG")
requesting documents relating to arrangements whereby NHP or any of its
affiliates provided compensation to owners of HUD-assisted or HUD-insured
multi-family projects in exchange for or in connection with property management
of a HUD project. In July 1999, NHP received a grand jury subpoena requesting
documents relating to the same subject matter as the HUD IG subpoenas and NHP's
operation of a group purchasing program created by NHP, known as Buyers Access.
To date, neither the HUD IG nor the grand jury has initiated any action against
NHP or Apartment Investment and Management Company ("AIMCO"), the ultimate
controlling entity of NHP or, to NHP's or AIMCO's knowledge, any owner of a HUD
property managed by NHP. AIMCO believes that NHP's operations and programs are
in compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. NHP and AIMCO are
cooperating with investigations and does not believe that the investigations
will result in a material adverse impact on its operations. However, as with any
similar investigation, there can be no assurance that these will not result in
material fines, penalties or other costs.
<PAGE>
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 9. 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
Two 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 39) 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 from January 1996 to March
1997, when he was promoted to Executive Vice President--Finance and
Administration until December 1999, when he was appointed Chief Operating
Officer. 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. Mr. Toomey
received a B.S. in Business Administration/Finance from Oregon State University.
Patrick J. Foye (age 42) has been Executive Vice President of NCHP since October
1, 1998 and was appointed President in September 1999. 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.
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 39). See "Directors of NCHP."
Patrick J. Foye (age 42). See "Directors of NCHP."
Steven D. Ira (age 48) 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 Property Asset Management ("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.
Joel F. Bonder (age 57) was appointed Executive Vice President, General Counsel
and Secretary of NCHP and AIMCO effective December 1997. Prior to jointing the
Company, Mr. Bonder served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as Vice President and
Deputy General Counsel of NHP from June 1991 to March 1994 and as Associate
General Counsel of NHP Incorporated from 1986 to 1991. From 1983 to 1985, Mr.
Bonder practiced with the Washing, D.C. law firm of Lane & Edson, P.C. and from
1979 to 1983 practiced with the Chicago law firm of Ross and Hardines. Mr.
Bonder received a B.A. from the University of Rochester and a J.D. from
Washington University School of Law.
Paul J. McAuliffe (age 43) has been Executive Vice President of NCHP and AIMCO
since February 1999 and was appointed Chief Financial Officer in October 1999.
Prior to joining the Company, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a Managing Director of
Smith Barney, Inc. from 1993 to 1996, where he was senior member of the
underwriting team that lead AIMCO's initial public offering in 1994. Mr.
McAuliffe was also a Managing Director and head of the real estate group at CS
First Boston from 1990 to 1993 and he was a Principal in the real estate group
at Morgan Stanley & Co., Inc. where he worked from 1983 to 1990. Mr. McAuliffe
received a B.A. from Columbia College and an M.B.A. from University of Virginia,
Darden School.
Martha L. Long (age 40) has been Senior Vice President and Controller of
NCHP and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
(d) There is no family relationship between any of the foregoing directors and
executive officers.
Item 10. 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 11. 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, 1999.
Name of
Beneficial Owner Number of Units% of Class
AIMCO and affiliates 1,676.0 10.89%
(affiliates of the General Partner)
The business address of AIMCO is 2000 South Colorado Boulevard, Denver, CO
80222.
Item 12. Certain Relationships and Related Transactions
The Partnership accrued administrative and reporting fees payable to the
General Partner of approximately $116,000 in 1999 and 1998. No payments for
these fees were made during 1999 or 1998. The balance owed to the General
Partner at December 31, 1999, was approximately $1,454,000.
During 1999 and 1998, the General Partner made working capital advances of
approximately $349,000, and $135,000, respectively, to the Partnership and to
Trinity Apartments. In addition, during 1998, AIMCO advanced approximately
$438,000 for the refinancing of Trinity's mortgage. During 1999 and 1998, the
Partnership repaid advances of approximately $219,000 and $53,000 to the General
Partner. The balance owed to the General Partner and AIMCO at December 31, 1999
was approximately $8,706,000. Interest is charged at the Chase Manhattan Bank
rate of prime plus 2%. Chase Manhattan Bank prime was 8.25% at December 31,
1999. During 1999 and 1998, interest of approximately $1,122,000, and
$1,133,000, respectively was accrued and expensed. During 1999 and 1998,
interest of approximately $544,000 and $567,000 was repaid to the General
Partner and AIMCO. The interest balance owed to the General Partner and AIMCO at
December 31, 1999 was approximately $2,980,000. Additionally, annual partnership
administrative fees of $7,500 were accrued by Trinity Apartments during 1999 and
1998, 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 1999 or 1998. As of December 31, 1999, $37,500 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.
NHPMC and other affiliates of NCHP earned approximately $372,000, and $382,000
from the Local Limited Partnerships and approximately $186,000 and $178,000 from
Trinity for management fees and other services provided to the Local Limited
Partnerships during 1999 and 1998, respectively.
Personnel working at the project sites, which are managed by NHPMC, were
employees of NHPI during the period January 1, 1996 through December 8, 1997 and
became employees of NHPMC (as a successor employer) as of December 8, 1997 and,
therefore, the projects reimbursed NHPI and NHPMC for the actual salaries and
related benefits. Prior to January 1, 1996, project employees were employees of
NCHP. Total reimbursements earned for salaries and benefits for the years ended
December 31, 1999 and 1998, were approximately $638,000 and $645,000,
respectively, from the Local Limited Partnerships and approximately $325,000 and
$356,000, respectively, from Trinity.
<PAGE>
PART IV
Item 13. Exhibits Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule, is filed as an exhibit to
this report.
Exhibit 99.1 Audited Combined Financial Statements of the
Local Limited Partnerships in which the
Partnership has invested are included as an
exhibit to this report:
(b) Reports on Form 8-K filed during the fourth quarter of 1999:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
National Housing Partnership Realty Fund IV
By: The National Housing
Partnership, its sole general partner
By: National Corporation for Housing
Partnerships, its sole general partner
March 30, 2000 /s/Patrick J. Foye
Date President
March 30, 2000 /s/Martha L. Long
Date Senior Vice President -
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
March 30, 2000 /s/Patrick J. Foye
Date President and Director
March 30, 2000 /s/Martha L. Long
Date Senior Vice President -
Controller
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERS REALTY FUND IV
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
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, 1999,
and the related combined statements of operations, partners' deficit, and cash
flows for each of the two years in the period ended December 31, 1999. These
combined financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined 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, 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, 1999, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/Ernst & Young LLP
Indianapolis, Indiana
March 6, 2000
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF FINANCIAL POSITION
(in thousands)
December 31, 1999
ASSETS
Cash and cash equivalents $ 795
Accounts receivable, net (Note 2) 340
Tenants' security deposits held in trust funds 126
Prepaid taxes and insurance 37
Deferred costs 24
Mortgage escrow deposits and other reserves (Note 5) 1,085
Rental property, net (Note 4) 12,164
14,571
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable and other accrued liabilities $ 592
Accrued real estate taxes 271
Due to partners (Note 7) 536
Accrued interest on partner loans 46
1,445
Tenant security deposits payable 118
Notes payable (Note 6) 7,175
Accrued interest on notes payable (Note 6) 17,016
Mortgage notes payable (Note 5) 8,965
Partners' deficit (20,148)
$ 14,571
See Accompanying Notes to Financial Statements
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
(in thousands)
Years Ended December 31,
1999 1998
REVENUES:
Rental income (Note 3) $ 4,655 $ 4,738
Interest income 72 57
Other income 311 213
5,038 5,008
EXPENSES:
Administrative expenses 476 503
Utilities and operating expenses 1,696 1,669
Management and other services from
related party (Note 9) 372 382
Salaries and related benefits to related
party (Note 9) 638 645
Depreciation and amortization 746 706
Taxes and insurance 535 599
Financial expenses - primarily interest
(Note 5) 118 119
Interest on notes payable (Note 6) 2,053 1,864
Annual partnership administrative fees
to General Partner (Note 7) 30 30
Impairment losses on rental property 2,100 --
(Note 11)
8,764 6,517
NET LOSS $ (3,726) $ (1,509)
See Accompanying Notes to Financial Statements
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' DEFICIT
(in thousands)
National
Housing The
Partnership National Housing
Realty Fund Partnership Total
IV
Deficit at January 1, 1998 $ (14,591) $ (209) $ (14,800)
Distributions (43) -- (43)
Net loss (1,494) (15) (1,509)
Deficit at December 31, 1998 (16,128) (224) (16,352)
Distributions (69) (1) (70)
Net loss (3,689) (37) (3,726)
Deficit at December 31, 1999 $ (19,886) $ (262) $ (20,148)
Percentage interest at December
31, 1999 (A) (B)
(A) Holds a 99% limited partnership interest in four Local Limited Partnerships.
(B) Holds a 1% general partnership interest in four Local Limited Partnerships.
See Accompanying Notes to Financial Statements
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts:
Rental receipts $ 4,649 $ 4,786
Interest receipts 72 57
Other operating receipts 218 217
Insurance escrow proceeds 85 1,215
Entity receipts:
Interest receipt 1 1
Total Receipts 5,025 6,276
Disbursements:
Administrative (321) (348)
Management fees (413) (404)
Utilities (758) (699)
Salaries and wages (895) (893)
Operating and maintenance (875) (993)
Real estate taxes (345) (313)
Property insurance (93) (109)
Miscellaneous taxes and insurance (143) (146)
Tenant security deposits (6) (5)
Service expenses (37) --
Other operating disbursements (125) (75)
Interest on mortgage (59) (68)
Mortgage insurance premium (44) (48)
Miscellaneous financial expenses (4) (2)
Fire damage construction related payables -- (1,055)
Entity disbursements:
Interest on notes payable -- (1)
Miscellaneous disbursements (1) (10)
Total disbursements (4,119) (5,169)
Net cash provided by operating activities 906 1,107
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in mortgage escrow deposits and
other reserves 403 (237)
Net purchase of fixed assets (708) (434)
Other investing -- (39)
Net cash used in investing activities (305) (710)
See Accompanying Notes to Financial Statements
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND IV
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
(Continued)
Years Ended December 31,
1999 1998
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments $ (429) $ (401)
Principal payments on loans or notes
payable -- (14)
Proceeds from loans or notes payable 300 44
Distributions (70) (43)
Net cash used in financing activities (199) (414)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 402 (17)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 393 410
CASH AND CASH EQUIVALENTS, END OF YEAR $ 795 $ 393
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (3,726) $ (1,509)
Adjustments to reconcile net loss to net
cash provided by
operating activities:
Depreciation and amortization 746 706
Impairment losses on rental property 2,100 --
Changes in operating assets and liabilities:
Tenant accounts receivable (13) (6)
Accounts receivable - other (216) (30)
Accrued receivables (1) (2)
Prepaid expenses (19) 4
Cash restricted for tenants' security
deposits (13) (13)
Accounts payable trade (124) (205)
Accrued liabilities (17) 48
Accrued interest notes payable 2,053 1,862
Tenant security deposits held in trust 7 9
Prepaid revenue 3 60
Other reserves 85 160
Entity liability accounts 41 23
Total adjustments 4,632 2,616
NET CASH PROVIDED BY OPERATIONS ACTIVITIES $ 906 $ 1,107
See Accompanying Notes to Financial Statements
<PAGE>
EXHIBIT 99.1
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.
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
<PAGE>
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 and furniture and equipment is depreciated over 5 to 27
years using accelerated methods. 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:
December 31, 1999
(in thousands)
Net tenant accounts receivable $ 29
Housing assistance receivable (Note 3) 303
Interest reduction payment receivable 3
Other 5
Net accounts receivable $340
<PAGE>
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
904 units, 97 percent of the total units owned by the properties in which the
Partnership has invested (excluding Trinity Apartments), receive rental
subsidies. On October 27, 1997, the President signed into law the Multifamily
Assisted Housing Reform and Affordability Act of 1997 (the "1997 Housing Act").
Under the 1997 Housing Act, certain properties assisted under Section 8, with
rents above market levels and financed with HUD-insured mortgage loans, will be
restructured by adjusting subsidized rents to market levels, thereby potentially
reducing rent subsidies, and lowering required debt service costs as needed to
ensure financial viability at the reduced rents and rent subsidies. The 1997
Housing Act retains project-based subsidies for most properties (properties in
rental markets with limited supply, properties serving the elderly, and certain
other properties). The 1997 Housing Act phases out project-based subsidies on
selected properties servicing families not located in rental markets with
limited supply, converting such subsidies to a tenant-based subsidy. Under a
tenant-based system, rent vouchers would be issued to qualified tenants who then
could elect to reside at properties of their choice, provided such tenants have
the financial ability to pay the difference between the selected properties'
monthly rent and the value of the vouchers, which would be established based on
HUD's regulated fair market rent for the relevant geographical areas. 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:
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
1999 125 14% 13%
2000 779 86% 84%
Total 904 100% 97%
Of the units (904 in total) receiving rent subsidies from Section 8, 779
of the units have their contracts expiring during the year ending December 31,
2000. 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. Loring Towers has applied to HUD to renew their
expiring contracts without restructuring. HUD has elected to combine the
expiring contracts into one contract and as of December 31, 1999, the renewal
application has been submitted and is pending HUD approval. Kennedy Homes and
Capital Park have both elected to enter HUD's Mark-to-Market program, which
could potentially restructure their existing debt and/or HAP contracts to
support market based rents. Extensions of the existing contract have been
granted until the office of Multifamily Housing Assistance Restructuring has
approved the restructuring. Royal Towers had elected to renew the contracts
without restructuring as allowed by HUD Regulations governing the continuance of
project based subsidiaries (See Note 10).
The Local Limited Partnerships received a total of approximately
$3,316,000 and $3,315,000 during 1999 and 1998, 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:
December 31, 1999
(in thousands)
Land $ 862
Buildings and improvements 16,014
Furniture and equipment 1,527
18,403
Less accumulated depreciation (6,239)
Rental property, net $ 12,164
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.
<PAGE>
Approximate maturities of mortgage notes payable for the next five years
and thereafter are as follows (in thousands):
2000 $ 464
2001 500
2002 538
2003 580
2004 624
Thereafter 6,259
$ 8,965
6. NOTES PAYABLE
The notes below were executed by the Partnership with the seller as part of the
acquisition of the property by the Partnership. The notes are subordinated to
the mortgage note for as long as the mortgage note is insured by HUD. Any
payments due from project income are payable from surplus cash, as defined by
the HUD Regulatory Agreement. The notes may be prepaid in whole or in part at
any time without penalty. Neither the Partnership nor any partner thereof,
present or future, assumes any personal liability for the payment of these
notes.
These notes mature as follows:
Local Partnership Due Date Note AmountAccrued Interest
(in thousands)
Capital Park Limited
Partnership February 28, 2001 $ 1,900 $ 4,522
Kennedy Homes Limited
Partnership February 28, 2001 1,402 3,337
Loring Towers Apartments
Limited PartnershipFebruary 28, 2001 2,000 4,744
Royal Towers Limited
Partnership March 27, 2001 1,873 4,413
Total Due 2001 $ 7,175 $17,016
7. DUE TO PARTNERS
Annual partnership administration fees of $30,000 were accrued for 1999
and 1998. The Local Limited Partnerships paid $15,000 in such fees during 1998.
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 approximately $163,000 at December 31, 1999.
During 1999 and 1998, the General Partner advanced approximately $250,000
and $44,000, respectively to 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. The balance owed to the General Partner by the Local Limited
Partnerships at December 31, 1999, was approximately $297,000. Interest is
charged at a rate equal to the Chase Manhattan Bank prime interest rate plus 2%.
Chase Manhattan Bank prime was 8.25% at December 31, 1999.
As of December 31, 1999 the Partnership had outstanding advances of $12,200 to
one Local Limited Partnership. Interest is charged at the rate of Chase
Manhattan prime plus 2%. Chase Manhattan Bank prime was 8.25% at December 31,
1999. The advance and interest will be paid in conformity with HUD and/or other
regulatory requirements and applicable partnership agreements.
8. FEDERAL AND STATE INCOME TAXES
The Local Limited Partnerships are not taxed on their income. The partners
are taxed in their individual capacities based 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 approximately $372,000, and $382,000 from the Local
Limited Partnerships for management fees and other services provided to the
Local Limited Partnerships during 1999 and 1998, respectively.
Personnel working at the project sites, which are managed by NHPMC, were
employees of NHPI during the period January 1, 1996 through December 8, 1997 and
became employees of NHPMC (as a successor employer) as of December 8, 1997 and,
therefore, the projects reimbursed NHPI and NHPMC for the actual salaries and
related benefits. Prior to January 1, 1996, project employees were employees of
NCHP. Total reimbursements earned for salaries and benefits for the years ended
December 31, 1999 and 1998, were approximately $638,000, and $645,000,
respectively.
10. SUBSEQUENT EVENT
Royal Towers Limited Partnership has experienced cash flow difficulties in
meeting its current obligations and has transferred control of all of the
property used in the Royal Towers Apartments to HUD under a
Mortgagee-In-Possession Arrangement in January 2000. Royal Towers Limited
Partnership is pursuing a sale of the property to a third party.
<PAGE>
11. IMPAIRMENT LOSS ON RENTAL PROPERTY
The Financial Accounting Standards Board 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") 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 1999, Royal
Towers Limited Partnership recognized an impairment loss on its rental property
in the amount of $2,100,000.
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, 1999.
Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
12. 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Housing Partnership Realty IV 1999 Fourth Quarter 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000780149
<NAME> National Housing Partnership Realty IV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 69
<SECURITIES> 0
<RECEIVABLES> 51
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 18,979
<DEPRECIATION> 5,475
<TOTAL-ASSETS> 15,697
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 8,814
0
0
<COMMON> 0
<OTHER-SE> (7,174)
<TOTAL-LIABILITY-AND-EQUITY> 15,697
<SALES> 0
<TOTAL-REVENUES> 3,708
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 593
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (320)
<EPS-BASIC> (20.00)<F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
