UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-16171
USAA Income Properties IV Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 74-2449334
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 Robert F. McDermott Fwy., IH 10 West, Suite 600
San Antonio, Texas 78230-3884
(Address of principal executive offices) (Zip Code)
(210) 498-7391
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
1
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Balance Sheets
<CAPTION>
September 30,
1995 December 31,
(Unaudited) 1994
<S> <C> <C>
Assets
Rental properties, net $ 46,482,513 47,806,604
Temporary investments, at cost
which approximates market value:
USAA Mutual Fund, Inc. -- 13,920
Money market fund 2,519,211 2,180,318
2,519,211 2,194,238
Cash 44,579 14,506
Cash and cash equivalents 2,563,790 2,208,744
Accounts receivable 62,260 63,505
Deferred charges and other assets, at amortized cost 217,722 351,189
$ 49,326,285 50,430,042
Liabilities and Partners' Equity
Mortgages payable $ 16,690,503 16,839,334
Note payable to affiliate 6,000,000 6,000,000
Accounts payable, including amounts due
to affiliates of $34,563 and $34,886 51,503 59,971
Accrued expenses and other liabilities 290,919 250,852
Total liabilities 23,032,925 23,150,157
Minority interest in joint venture 4,322,349 4,581,924
Partners' equity
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 54,958 55,353
Cumulative distributions (119,585) (112,710)
(63,627) (56,357)
Limited Partners (60,495 interests):
Capital contributions, net of
offering costs 28,432,650 28,432,650
Cumulative net income 5,440,859 5,479,971
Cumulative distributions (11,838,871) (11,158,303)
22,034,638 22,754,318
Total Partners' equity 21,971,011 22,697,961
$ 49,326,285 50,430,042
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1995 1994
<S> <C> <C>
Income
Rental income $ 911,721 1,279,709
Less direct expenses, including depreciation
of $469,079 and $467,667 545,629 504,436
Net operating income 366,092 775,273
Interest income (note 1) 37,021 20,962
Total income 403,113 796,235
Expenses
General and administrative (note 1) 41,603 57,005
Management fee (note 1) 21,201 22,756
Interest (note 1) 534,517 538,994
Minority interest in joint venture earnings 45,479 45,393
Total expenses 642,800 664,148
Net income (loss) $ (239,687) 132,087
Net income (loss) per limited partnership interest $ (3.92) 2.16
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1995 1994
<S> <C> <C>
Income
Rental income $ 3,352,412 3,839,963
Less direct expenses, including depreciation
of $1,403,826 and $1,399,457 1,533,225 1,474,534
Net operating income 1,819,187 2,365,429
Interest income (note 1) 109,920 45,947
Total income 1,929,107 2,411,376
Expenses
General and administrative (note 1) 163,529 185,910
Management fee (note 1) 66,134 70,554
Interest (note 1) 1,601,087 1,614,172
Minority interest in joint venture earnings 137,864 134,963
Total expenses 1,968,614 2,005,599
Net income (loss) $ (39,507) 405,777
Net income (loss) per limited partnership interest $ (0.65) 6.64
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (39,507) 405,777
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,403,826 1,399,457
Amortization 18,081 18,081
Decrease (increase) in accounts receivable 1,245 (14,872)
Decrease in deferred charges and other
assets 115,386 111,488
Increase in accounts payable, accrued expenses
and other liabilities 31,599 153,929
Minority interest in joint venture earnings 137,864 134,963
Cash provided by operating activities 1,668,494 2,208,823
Cash flows used in investing activities-
Additions to rental properties (79,735) (28,758)
Cash flows from financing activities:
Repayment of mortgages payable (148,831) (135,746)
Distributions to co-venturer (397,439) (397,441)
Distributions to partners (687,443) (687,444)
Cash used in financing activities (1,233,713) (1,220,631)
Net increase in cash and cash equivalents 355,046 959,434
Cash and cash equivalents at beginning of period 2,208,744 1,007,862
Cash and cash equivalents at end of period $ 2,563,790 1,967,296
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Consolidated Financial Statements
September 30, 1995
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the
nine-month period ended September 30, 1995:
Quorum
USAA USAA Real Estate
Mutual Real Estate Services
Fund, Inc. Company Corporation
Reimbursement of
expenses (a) $ 85,580 25,416
Interest income (27) -- --
Management fees -- 66,134 42,723
Lease commissions -- -- 7,090
Interest expense (b) -- 448,767 --
Total $ (27) 600,481 75,229
(a) Reimbursement of expenses represents amounts paid or
accrued as reimbursement of expenses incurred on behalf of
the Partnership at actual cost and does not include any
mark-up or items normally considered as overhead.
(b) Represents interest expense at market rate on a mortgage
loan.
2. Other
Reference is made to the consolidated financial statements in
the Annual Report filed with the Form 10-K for the year ended
December 31, 1994 with respect to significant accounting and
financial reporting policies as well as to other pertinent
information concerning the Partnership. Information furnished
in this report reflects all normal recurring adjustments which
are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented.
Further, the operating results presented for these interim
periods are not necessarily indicative of the results which may
occur for the remaining three months of 1995 or any other future
period.
The financial information included in this interim report as of
September 30, 1995 and for the three months and nine months
ended September 30, 1995 and 1994 has been prepared by
management without audit by independent certified public
accountants who do not express an opinion thereon. The
Partnership's annual report includes audited financial
statements.
5
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Partnership had cash of $44,579 and
temporary investments of $2,519,211. Included in these amounts was
the working capital reserve and funds held for payment of
obligations of the Partnership. Accounts receivable consisted of
amounts due from tenants. Deferred charges and other assets
consisted primarily of deferred rent resulting from recognition of
income as required by generally accepted accounting principles,
lease commissions, and prepaid insurance. Accounts payable
consisted of amounts due to affiliates for reimbursable expenses
and management fees, and amounts due to third parties for expenses
incurred for operations. Accrued expenses and other liabilities
consisted primarily of prepaid rent, security deposits and property
tax accruals.
During the quarter ended September 30, 1995, the Partnership
distributed $226,856 to Limited Partners and $2,292 to the General
Partner for a total of $229,148.
The lease with Linear Technology Corporation expired in June 1995
and during October, negotiations resulted in a five year renewal.
The tenant renewed at a monthly rate of $.75 per square foot for
the 42,130 square foot building, down from the previous monthly
rate of $1.15. This new rate reflects the current market
conditions in the area surrounding the property. An allowance for
tenant improvements has been provided at a total of approximately
$168,500 to be paid out of the working capital reserve.
At the Kodak Building, the Invitrogen lease expires in April 1996,
and the tenant has expressed a need for additional space and is
considering available market opportunities. Invitrogen's need for
additional space cannot be accommodated at the Kodak property.
Kodak has made no commitment to take Invitrogen's space.
Invitrogen is also seeking a possible six-month lease extension
which has postponed active marketing of the space. The building is
currently 100% leased by Kodak and Invitrogen.
During May, MagneTek vacated the Century Electric Building in St.
Louis, Missouri. This property will undergo some improvements to
prepare the building for new tenants and will be marketed as the
1881 Pine Street property. These expenditures will be paid from
the Partnership's cash reserves. The current rental rates in the
market are lower than the rate MagneTek was paying.
In July, negotiations with the Hewlett-Packard Company, the single
tenant at the Apollo Building in Chelmsford, Massachusetts,
resulted in the renewal of their lease which was to expire in
December 1996. The tenant has agreed to renew for an additional
forty-one months at a monthly rate of $.57 per square foot for the
6
<PAGE>
291,425 square foot building. This is lower than the previous rate
of approximately $.76 per square foot and reflects current market
conditions in the area surrounding the property. An allowance for
tenant improvements will be provided at a total of approximately
$565,000 to be paid out of the working capital reserve.
Future liquidity is expected to result from cash generated from
operations of the properties, interest on temporary investments and
ultimately through the sale of the properties.
Results of Operations
For the periods ended September 30, 1995 and 1994, income was
generated from rental income from the income-producing real estate
properties and interest income earned on the funds in temporary
investments.
Expenses incurred during the same periods were associated with the
operation of the Partnership's properties, interest on the
mortgages payable and various other costs required for
administration of the Partnership.
Rental properties decreased as of September 30, 1995 as compared to
December 31, 1994 due to depreciation offset by tenant improvement
costs. The increase in cash and cash equivalents reflected the
reduction in distributions that was made in order to build the
working capital reserve for future operations.
Rental income decreased for the three-month and nine-month periods
ended September 30, 1995 as compared to the same periods ended
September 30, 1994 as a result of MagneTek vacating the 1881 Pine
Street property in May and a rent reduction at Linear.
Depreciation increased for the periods ended September 30, 1995 as
compared to the periods ended September 30, 1994 due to Kodak
tenant improvements. Direct expenses were higher for the three
months and nine months ended September 30, 1995 as compared to the
same periods ended September 30, 1994 as a result of sidewalk
repairs, property tax accruals and demolition costs in certain
interior space at the 1881 Pine Street property to enhance the
appearance of the space for showing to prospective tenants.
An increase in cash reserves and higher interest rates accounted
for the increase in interest income for the three months and nine
months ended September 30, 1995 as compared to the three months and
nine months ended September 30, 1994.
General and administrative expenses decreased for the periods ended
September 30, 1995 as compared to the periods ended September 30,
1994 due to a reduction in charges for preparation of federal and
state tax returns and a reduction in a partnership earnings tax
paid to the City of St. Louis. The management fee is based on cash
flow from operations of the Partnership adjusted for cash reserves
and fluctuated accordingly. Interest expense for the periods ended
September 30, 1995 was lower than the periods ended September 30,
1994 due to principal balance reductions. Minority interest in
joint venture earnings increased for the nine months ended
September 30, 1995 as compared to the nine months ended September
30, 1994 due to a decrease in interest expense at Apollo.
7
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
No. Description Page
4 Restated Certificate and Agreement of
Limited Partnership dated as of June 8,
1987, attached as Exhibit A to the
Partnership's Prospectus dated June 8,
1987 filed pursuant to Rule 424(b),
Registration No. 33-11892 incorporated
herein by this reference. --
27 Financial Data Schedule 10
(b) During the quarter ended September 30, 1995, there
were no Current Reports on Form 8-K filed.
8
<PAGE>
FORM 10-Q
SIGNATURES
USAA INCOME PROPERTIES IV LIMITED PARTNERSHIP
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
USAA INCOME PROPERTIES IV
LIMITED PARTNERSHIP (Registrant)
BY: USAA PROPERTIES IV, INC.,
General Partner
November 9, 1995 By: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
November 9, 1995 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration
and Finance/Treasurer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,563,790
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 46,482,513
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,326,285
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 21,971,011
<TOTAL-LIABILITY-AND-EQUITY> 49,326,285
<SALES> 0
<TOTAL-REVENUES> 3,352,412
<CGS> 0
<TOTAL-COSTS> 1,533,225
<OTHER-EXPENSES> 367,527
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,601,087
<INCOME-PRETAX> (39,507)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,507)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,507)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> 0
</TABLE>
