UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 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: 0-18147
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3378315
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
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. Yes X No
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents, at cost,
which approximates market $ 6,401,126 $ 6,168,565
Real estate, at cost:
Land 8,984,865 8,984,865
Buildings and improvements 85,225,104 84,844,156
94,209,969 93,829,021
Accumulated depreciation 18,753,892 16,766,957
75,456,077 77,062,064
Investments in joint ventures 54,157,411 55,074,536
Deferred expenses, net 1,314,287 1,364,966
Other assets 2,254,851 1,806,054
$139,583,752 $141,476,185
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 728,158 $ 443,389
Minority interests in consolidated
joint ventures 29,547,622 30,193,571
30,275,780 30,636,960
Partners' capital (deficiency):
General partners (2,585,973) (2,432,847)
Limited partners ($500 per Unit,
304,437 Units issued) 111,893,945 113,272,072
109,307,972 110,839,225
$139,583,752 $141,476,185
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and nine months ended September 30, 1995 and 1994
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental $2,074,814 $2,174,827 $6,074,499 $6,492,006
Equity in earnings of joint ventures 554,136 948,066 1,826,099 2,342,904
Interest and other 111,345 76,258 329,137 194,720
2,740,295 3,199,151 8,229,735 9,029,630
Expenses:
Property operating 343,625 393,112 1,034,433 1,179,342
Depreciation 665,143 718,299 1,986,935 2,152,427
Amortization 45,898 51,541 137,821 153,953
General and administrative 143,007 82,309 431,626 384,971
1,197,673 1,245,261 3,590,815 3,870,693
Income before minority interests 1,542,622 1,953,890 4,638,920 5,158,937
Minority interests 383,657 370,742 1,096,222 1,099,128
Net income $1,158,965 $1,583,148 $3,542,698 $4,059,809
Net income allocated to:
Limited partners $1,043,068 $1,424,833 $3,188,428 $3,653,828
General partners 115,897 158,315 354,270 405,981
$1,158,965 $1,583,148 $3,542,698 $4,059,809
Net income per Unit of limited
partnership interest $3.43 $4.68 $10.47 $12.00
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended September 30, 1995
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C>
Partners' capital (deficiency)
at January 1, 1995 $113,272,072 $(2,432,847) $110,839,225
Net income 3,188,428 354,270 3,542,698
Cash distributions (4,566,555) (507,396) (5,073,951)
Partners' capital (deficiency)
at September 30, 1995 $111,893,945 $(2,585,973) $109,307,972
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1995 and 1994
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,542,698 $ 4,059,809
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,986,935 2,152,427
Amortization 137,821 153,953
Minority interest in joint ventures' operations 1,096,222 1,099,128
Equity in earnings of joint ventures (1,826,099) (2,342,904)
Increase in operating assets:
Other assets (448,797) (474,465)
Deferred expenses (87,142) (51,783)
Increase in operating liabilities:
Accounts payable and accrued liabilities 284,769 8,903
Net cash provided by operating activities 4,686,407 4,605,068
Cash flows from investing activities:
Additions to buildings & improvements (380,948) (1,255,661)
Investments in joint ventures (1,060,988) (769,855)
Distributions from joint ventures 3,804,212 3,829,182
Net cash provided by investing activities 2,362,276 1,803,666
Cash flows from financing activities:
Cash distributions (5,073,951) (5,073,951)
Additional investments by minority interests 204,484 575,275
Minority interests in joint ventures' distributions (1,946,655) (1,861,686)
Net cash used in financing activities (6,816,122) (6,360,362)
Increase in cash and cash equivalents 232,561 48,372
Cash and cash equivalents at beginning of period 6,168,565 7,166,996
Cash and cash equivalents at end of period $ 6,401,126 $ 7,215,368
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
1. The Partnership
Dean Witter Realty Income Partnership IV, L.P. (the "Partnership") is a
limited partnership organized under the laws of the State of Delaware on
October 31, 1986.
The consolidated financial statements include the accounts of the
Partnership and its majority-controlled subsidiaries, Technology Park
Associates and Lake Colorado Associates, the owner of Pasadena Financial
Center. The Partnership's interests in Taxter Corporate Park and the
partnership which owns an interest in Chesterbrook Corporate Center are
accounted for on the equity method.
The Partnership's records are maintained on the accrual basis of
accounting for financial and tax reporting purposes.
Net income per Unit amounts are calculated by dividing net income
allocated to Limited Partners, in accordance with the Partnership
Agreement, by the weighted average number of Units outstanding.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the results for
the interim periods.
The Partnership does not expect that adoption of SFAS 121 regarding
impairment of the Partnership's assets will have a significant impact on
the Partnership's financial statements.
2. Related Party Transactions
An affiliate of the Managing General Partner provided property management
services for two properties and for five buildings at the Chesterbrook
Corporate Center as of September 30, 1995 and 1994. The Partnership paid
the affiliate management fees of approximately $128,000 and $130,000 for
the nine months ended September 30, 1995 and 1994, respectively.
Another affiliate of the Managing General Partner performs administrative
functions, processes investor transactions and prepares tax information
for the Partnership. For each of the nine-month periods ended September
30, 1995 and 1994, the Partnership incurred approximately $302,000 for
these services.
As of September 30, 1995, the affiliates were owed approximately $48,000
for these services.
3. Subsequent Event
On October 30, 1995, the Partnership paid a cash distribution of $5.00
per Unit to the Limited Partners. The total cash distribution amounted
to $1,691,317, with $1,522,185 distributed to the Limited Partners and
$169,132 to the General Partners.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership raised $152,218,500 in a public offering of 304,437 units
which was terminated in 1988. The Partnership has no plans to raise
additional capital.
The Partnership has made four investments in partnerships, which own
interests in properties, on an all-cash basis. The Partnership's
acquisition program has been completed. No additional investments are
planned.
Many real estate markets are stabilizing. Continued space absorption and
restrained construction have reduced vacancy levels of office properties
in certain markets. With the substantial amount of office space still
available however, office rental rates are improving only modestly and
in select regions. At current rental rates, significant office
construction activity is considered unlikely in the near-term in all but
a few markets.
Real estate markets are generally divided into sub-markets by geographic
location and property type. Not all sub-markets have been affected
equally by the above factors.
The Partnership's liquidity depends upon cash flow from operations of its
properties (including those in which it is an equity investor, as well
as those it owns), expenditures for tenant improvements and leasing
commissions in connection with the leasing of vacant space. During the
nine months ended September 30, 1995, all of the Partnership's property
investments generated positive cash flow from operations, and it is
anticipated that they will continue to do so.
During the nine months ended September 30, 1995, the Partnership's cash
flow from operations and distributions from joint ventures exceeded
distributions to investors and capital expenditures.
Countrywide Credit Industries, Inc., the largest tenant at Pasadena
Financial Center, is consolidating its operations in Pasadena, and the
partnership which owns the property agreed to a restructuring of its
lease with Countrywide. Effective January 1, 1995, Countrywide was
allowed to give back approximately 35% of the space it leased, and its
base rent was slightly reduced on its remaining space (approximately 36%
of the property) over the next six years, in exchange for an extension
of the lease term on the remaining space for ten years, to September
2011. The Partnership completed this restructuring without incurring any
new tenant improvement obligations on the space, and at below-market
leasing commission rates. After 2004, rents will increase ten percent
for the remainder of the lease term. Considering the market and economic
conditions in Pasadena, CA at the time of the extension and the credit-
worthiness of Countrywide, the Managing General Partner considers the
terms of the new agreement favorable. The cash flow from this property
is expected to be stable for a total of sixteen years at a higher level
than comparable current market rents.
Pasadena Financial Center has experienced non-critical damage to the
exterior walls. The Partnership's share of the costs to repair such
damage is anticipated to exceed $420,000; the repair work is expected to
begin in 1996. The partnership which owns the property does not expect
to receive any insurance proceeds for this damage; however, in 1994, it
initiated a lawsuit against the original building contractor and
architect to seek recovery of these costs. The Partnership also expects
to fund up to $238,000 at Pasadena Financial Center to upgrade the
building's fire/life safety system, elevators, main lobby and entrance.
During the nine months ended September 30, 1995, the Partnership has
funded capital expenditures of $252,000 (net of contributions by the
minority interest) at Pasadena Financial Center, and, at September 30,
1995, has commitments to fund approximately $350,000 of capital
expenditures in addition to those needed for the repairs to the exterior
walls.
At the Chesterbrook property, the Vanguard Group will vacate its
remaining space upon the expiration of its leases in November 1995.
During the nine months ended September 30, 1995, the Partnership
contributed approximately $729,000 for its share of capital expenditures
needed to re-lease a significant portion of vacant space at the
Chesterbrook property.
At the Taxter property, the lease of Fuji Photo USA, Inc., which occupies
approximately 24% of the property's space was scheduled to terminate in
March 1996; however, Fuji has exercised its renewal option which extends
through March 2002 at a rent to be agreed upon which is approximately
equal to ninety percent of current rental rates in the Westchester
market. Because market rates have deteriorated in this market since Fuji
signed its original lease, rental revenue and cash flow from Fuji during
the renewal term will be significantly lower than what the Partnership
currently receives.
During the nine months ended September 30, 1995, the Partnership
contributed approximately $330,000 to the Taxter Joint Venture for the
Partnership's share of lease-related capital expenditures ($195,000) and
building improvements ($135,000), and, at September 30, 1995, has
commitments to contribute an additional $185,000 to the joint venture for
the Partnership's share of remaining building improvements ($125,000) and
expected leasing commissions to be incurred from Fuji's lease renewal
($60,000).
The Partnership also expects to fund significant capital expenditures in
order to attract new tenants to vacant space at the Chesterbrook property
and Pasadena Financial Center.
The Partnership expects that for the remainder of 1995 and in 1996,
capital expenditures and cash distributions will be funded from operating
cash flows, distributions from joint ventures and existing cash reserves.
The increase in other assets during the nine months ended September 30,
1995 primarily results from increases in the accrual to recognize rental
revenue on a straight-line basis.
The increase in accounts payable and accrued liabilities during the nine
months ended September 30, 1995 is due to normal accrual of real estate
taxes and an accrual for an unpaid distribution payable to the minority
interest in the partnership which owns Tech Park Reston.
The Partnership does not expect that adoption of SFAS 121 regarding
impairment of the Partnership's assets will have a significant impact on
the Partnership's financial statements.
On October 30, 1995, the Partnership paid the third quarter distribution
of $5.00 per Unit to the Limited Partners. The total cash distribution
amounted to $1,691,317, with $1,522,185 distributed to the Limited
Partners and $169,132 to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the nine and
three-month periods ended September 30, 1995 compared to 1994 are
primarily attributable to the following:
The decreases in rental income are due to the above-mentioned
restructuring of the lease with Countrywide at Pasadena Financial Center.
The decreases in equity in earnings of joint ventures are primarily due
to increased depreciation and amortization expenses on increased capital
expenditures at the Chesterbrook property, and decreased pass-through
income from the tenants which leased the space vacated by the Vanguard
Group in December 1994. These decreases are partially offset by
increased rental income at the Chesterbrook property.
The increases in interest and other income are primarily due to an
increase in interest rates on the Partnership's cash equivalent
investments and higher other operating income earned at Pasadena
Financial Center.
The decreases in property operating expenses are primarily due to
decreased costs incurred at Pasadena Financial Center.
Depreciation expense decreased because there has been no depreciation on
the tenant improvements on the space at Pasadena Financial Center which
Countrywide gave back effective January 1, 1995. These assets were
written-off by the Partnership in 1994.
A summary of the markets in which the Partnership's office properties are
located and the performance of each property is as follows:
Chesterbrook Corporate Center is located in Valley Forge, Pennsylvania,
a market in which the vacancy rate is approximately 16%. At September
30, 1995, occupancy at the property was 93%. Vanguard has been vacating
its space to move into its own newly-constructed space in this market.
This, and other new construction in the Valley Forge area, will likely
cause the office market to deteriorate. Leases totaling 14% of the space
are scheduled to expire during the remainder of 1995 and in 1996.
The office market in Westchester County, New York, the location of Taxter
Corporate Park, has a current vacancy level of approximately 22%. It is
unlikely that this vacant space will be absorbed in the market for
several years. However, during the third quarter of 1995, average
occupancy at the property remained stable at 99%. No significant leases
are scheduled to expire before 1997.
The Reston market in Virginia, the location of Tech Park Reston, has a
vacancy rate of 16% due to the contraction of the high-tech and defense
firms which are the major tenants in the market. The leases with Sprint
Communications, which occupies 100% of the space, expire in 2003. Sprint
has the option to terminate its leases on two of the three buildings
beginning in 1997 and 1998.
In Pasadena, California, the location of Pasadena Financial Center, the
office market overall vacancy rate is approximately 15%. At September
30, 1995, occupancy at the property was approximately 91%. No
significant leases are scheduled to expire before 1997.
Inflation
Inflation has been consistently low during the periods presented in the
financial statements and, as a result, has not had a significant effect
on the operations of the Partnership or its properties.
<PAGE>
PART II - OTHER INFORMATION
Not applicable.
<PAGE>
SIGNATURES
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.
DEAN WITTER REALTY INCOME
PARTNERSHIP IV, L.P.
By: Dean Witter Realty Fourth
Income Properties Inc.
Managing General Partner
Date: November 14, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: November 14, 1995 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information, refer to the accompanying
financial statements.
</LEGEND>
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP IV L.P.
<CIK> 0000819342
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,401,126
<SECURITIES> 0
<RECEIVABLES> 2,254,851
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 139,583,752<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 109,307,972<F2>
<TOTAL-LIABILITY-AND-EQUITY> 139,583,752<F3>
<SALES> 0
<TOTAL-REVENUES> 8,229,735<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,687,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,542,698
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,542,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,542,698
<EPS-PRIMARY> 10.47<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $75,456,077, investments in joint ventures of $54,157,411
and net deferred expenses of $1,314,287.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $728,158
and minority interests in consolidated joint ventures of $29,547,622.
<F4>Total revenue includes rent of $6,074,499, equity in earnings of joint
ventures of $1,826,099 and interest and other revenue of $329,137.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
