UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
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>
INTRODUCTORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q of
USAA Income Properties IV Limited Partnership is being filed
for the purpose of changing the method for accounting for
the Partnership's 55.84% interest in USAA Chelmsford
Associates Joint Venture. Prior financial statements of the
Partnership were prepared on a consolidated basis with USAA
Chelmsford Associates Joint Venture. For all periods
presented in the accompanying financial statements, the
Partnership's 55.84% interest in USAA Chelmsford Associates
Joint Venture is accounted for using the equity method.
2
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Balance Sheets
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
<S> <C> <C>
Assets
Rental properties, net $ 21,102,934 20,743,237
Investment in joint venture 5,064,691 5,183,456
Temporary investments, at cost
which approximates market value -
Money market fund 1,206,441 753,756
Cash 69,016 33,233
Cash and cash equivalents 1,275,457 786,989
Accounts receivable 159,862 5,600
Deferred charges and other assets, at amortized cost 708,992 634,161
$ 28,311,936 27,353,443
Liabilities and Partners' Equity
Mortgage payable $ 1,115,052 1,131,500
Note payable to affiliate 7,200,000 6,000,000
Accounts payable, including amounts due
to affiliates of $27,205 and $29,082 212,559 88,517
Accrued expenses and other liabilities 184,570 102,743
Total liabilities 8,712,181 7,322,760
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 40,717 43,804
Cumulative distributions (129,056) (127,834)
(87,339) (83,030)
Limited Partners (60,495 interests):
Capital contributions, net of
offering costs 28,432,650 28,432,650
Cumulative net income 4,030,988 4,336,617
Cumulative distributions (12,776,544) (12,655,554)
19,687,094 20,113,713
Total Partners' equity 19,599,755 20,030,683
$ 28,311,936 27,353,443
See accompanying notes to condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Statements of Operations
Three months ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Income
Rental income $ 499,484 267,394
Equity in earnings of joint venture (68,509) 54,560
Interest income 7,685 21,920
Total income 438,660 343,874
Expenses
Direct expenses, $16,215 and $15,409
to affiliates (note 1) 204,720 92,344
Depreciation 264,223 242,566
General and administrative, $48,231 and
$36,613 to affiliates (note 1) 86,130 79,880
Management fee to affiliate (note 1) 13,557 11,665
Interest, $152,022 and $149,180
to affiliate (note 1) 178,746 177,591
Total expenses 747,376 604,046
Net loss $ (308,716) (260,172)
Net loss per limited partnership interest $ (5.05) (4.26)
See accompanying notes to condensed financial statements.
</TABLE>
4
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Statements of Cash Flows
Three months ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (308,716) (260,172)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 264,223 242,566
Amortization 17,368 10,441
Earnings from joint venture 68,509 (54,560)
Distributions from joint venture 50,256 --
Decrease (increase) in accounts receivable (154,262) 7,000
Decrease (increase) in deferred charges and
other assets (92,199) 19,795
Increase in accounts payable, accrued
expenses and other liabilities 205,869 4,467
Cash provided by (used in) operating activities 51,048 (30,463)
Cash flows used in investing activities-
Additions to rental properties (623,920) --
Cash flows from financing activities:
Repayment of mortgage payable (16,448) (14,762)
Distributions to partners (122,212) (229,148)
Proceeds from issuance of note payable 1,200,000 --
Cash provided by (used in) financing activities 1,061,340 (243,910)
Net increase (decrease) in cash and cash equivalents 488,468 (274,373)
Cash and cash equivalents at beginning of period 786,989 1,932,720
Cash and cash equivalents at end of period $ 1,275,457 1,658,347
See accompanying notes to condensed financial statements.
</TABLE>
5
<PAGE>
Notes to Condensed Financial Statements
March 31, 1997
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the
three-month period ended March 31, 1997:
Quorum
USAA Real Estate
Real Estate Services
Company Corporation
Reimbursement of
expenses (a) $ 41,502 10,557
Management fees 13,557 5,658
Lease commissions -- 6,729
Interest expense (b) 152,022 --
Total $ 207,081 22,944
(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 note
payable.
2. Other
Reference is made to the financial statements in the Annual
Report filed as part of the Form 10-K for the year ended
December 31, 1996 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 nine months of 1997 or any other
future period.
The financial information included in this interim report as
of March 31, 1997 and for the three months ended March 31,
1997 and 1996 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.
Certain 1996 balances have been reclassified to conform to the
1997 presentation.
Prior financial statements of the Partnership were prepared on
a consolidated basis with USAA Chelmsford Associates Joint
Venture. For all periods presented in the accompanying
financial statements, the Partnership's 55.84% interest in
USAA Chelmsford Associates Joint Venture is accounted for
using the equity method.
6
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At March 31, 1997, the Partnership had cash of $69,016 and
temporary investments of $1,206,441. These funds were held in
the working capital reserve for the 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 and lease
commissions. 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 security deposits, property tax accruals and prepaid
rent.
During the quarter ended March 31, 1997, the Partnership
distributed $120,990 to Limited Partners and $1,222 to the
General Partner for a total of $122,212.
A significant amount of the working capital reserve was used
during 1996 and will be needed in 1997 for leasing costs at the
Partnership properties. During the first quarter of 1997, the
Partnership borrowed $1,200,000 from USAA Real Estate Company
(the Adviser) to fund working capital needs in 1997. The
$6,000,000 note payable was thereby increased to $7,200,000 with
a decrease in the interest rate from 10% to 9%. The maturity
date of the note payable was extended from September 1, 1997 to
March 1, 1999.
At March 31, 1997, the Kodak Building was 61% occupied by Eastman
Kodak. Eastman Kodak's lease is scheduled to expire February
1998. Discussions continue with Eastman Kodak regarding early
renewal and the possibility of leasing the entire building. The
lease with Invitrogen Corporation was scheduled to expire
December 31, 1996; however, Invitrogen remained in the building
until February 1997 paying holdover rent (200% of December 1996
rent) for January and February. Water infiltration has been
discovered at the Kodak Building which has caused damage to a
portion of the ground floor tiles, exterior walls and slab
joints. Remediation alternatives are being sought with costs
estimated to be approximately $120,000 to be funded from the
working capital reserve of the Partnership.
During the first quarter of 1997, a sixty-two month lease was
signed at 1881 Pine Street for 8,350 rentable square feet. This
resulted in 90% of the building being leased at March 31, 1997.
The lease commenced May 1, 1997 and will terminate on June 30,
2002. The lease provides for an annual rental rate beginning at
$16.00 per square foot. In addition, this tenant will pay their
pro rata share of operating expenses in excess of a 1997 base
year. The Partnership provided approximately $133,600 of tenant
improvements to be paid out of the working capital reserve of
the Partnership.
7
<PAGE>
During 1995, the lease with Hewlett-Packard Company, the single
tenant at the Apollo Building in Chelmsford, Massachusetts was
renewed for an additional 41 months. The new monthly rental rate
of approximately $.57 per square foot net for the 291,454 square
foot building began January 1, 1997. This rate is lower than the
rate paid in 1996 of approximately $.76 per square foot net and
reflects the market conditions in the area surrounding the
property at the time of the lease renewal. An allowance for
tenant improvements was provided for a total of $565,000 to be
paid from the joint venture working capital. During the first
quarter of 1997, Hewlett-Packard used approximately $81,000 of
the allowance. Approximately $116,000 of the allowance remains.
Hewlett-Packard has announced plans to relocate its workstation
group out of Massachusetts. They also announced plans to
sublease the top floor of the Apollo Building.
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 three-month periods ended March 31, 1997 and 1996, income
was generated from rental income from the income-producing real
estate properties, interest income earned on the funds in
temporary investments and earnings from the joint venture
interest.
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 increased as of March 31, 1997 as compared to
December 31, 1996 due to tenant improvements at 1881 Pine Street
for Busch Creative Services, Inc. offset by depreciation. The
investment in joint venture decreased as of March 31, 1997 due to
a net loss on the joint venture property. Cash and cash
equivalents and the note payable to affiliate increased as of
March 31, 1997 due to borrowing from the Adviser to fund working
capital needs. See "Liquidity and Capital Resources". Accounts
receivable was higher at March 31, 1997 due to a receivable from
a tenant at 1881 Pine Street for tenant improvements over the
allowance. Deferred charges and other assets increased as a
result lease commissions paid at 1881 Pine Street. Accounts
payable was higher at March 31, 1997 due to timing in the payment
of tenant improvements. Accrued expenses and other liabilities
increased primarily due to an increase in property taxes at 1881
Pine Street.
Rental income increased for the three-month period ended March
31, 1997 as compared to the three-month period ended March
31,1996. Rental income at the Kodak Building increased by
approximately $14,000 due to Invitrogen paying holdover rent for
January and February 1997. Rental income at 1881 Pine Street
8
<PAGE>
increased by approximately $219,000 due to occupancy going from
100% vacant to 82% occupied at March 31, 1997.
Equity in joint venture earnings decreased for the three-month
period ended March 31, 1997 as compared to the three-month period
ended March 31, 1996 due to a net loss for the joint venture
property for the three-month period ended March 31, 1997. Rental
income at the Apollo Building decreased based on the lease
renewal effective January 1, 1997.
Interest income decreased due to lower cash balances for the
three-month period ended March 31, 1997 as compared to the three-
month period ended March 31, 1996.
Direct expenses were higher for the three-month period ended
March 31, 1997 as compared to the three-month period ended March
31, 1996 due to operating expenses at 1881 Pine Street. Expenses
were minimal for the three-month period ended March 31, 1996 due
to the building being 100% vacant. For the three-month period
ended March 31, 1997, 1881 Pine Street incurred expenses for
utilities, heating and air conditioning repairs, cleaning and
other building services. Also contributing to the increase was
an increase in the property tax accrual. 1881 Pine Street was
under a redevelopment real estate tax incentive program which
expired December 31, 1996. The 1996 tax payment was
approximately $23,000 compared to an estimate for 1997 taxes of
approximately $212,000.
Depreciation increased for the three-month period ended March 31,
1997 as compared to the three-month period ended March 31, 1996
due to tenant improvements at 1881 Pine Street offset by a
decrease at Kodak caused by tenant improvements for Invitrogen
being fully depreciated in April 1996.
General and administrative expenses increased for the three-month
period ended March 31, 1997 as compared to the three-month period
ended March 31, 1996 due to lease commission expense at 1881 Pine
Street for the new leases. The management fee is based on cash
flow from operations of the Partnership adjusted for cash
reserves and fluctuated accordingly.
9
<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 12
(b) During the quarter ended March 31, 1997, there
were no Current Reports on Form 8-K filed.
10
<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 4, 1997 By: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
November 4, 1997 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration
and Finance/Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,275,457
<SECURITIES> 0
<RECEIVABLES> 159,862
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,102,934
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,311,936
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,599,755
<TOTAL-LIABILITY-AND-EQUITY> 28,311,936
<SALES> 0
<TOTAL-REVENUES> 499,484
<CGS> 0
<TOTAL-COSTS> 468,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,746
<INCOME-PRETAX> (308,716)
<INCOME-TAX> 0
<INCOME-CONTINUING> (308,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (308,716)
<EPS-PRIMARY> (5.05)
<EPS-DILUTED> 0
</TABLE>
