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 March 31, 1996
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
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 6,612,189 $ 6,456,209
Real estate, at cost:
Land 8,004,189 8,004,189
Buildings and improvements 78,944,896 78,767,318
86,949,085 86,771,507
Accumulated depreciation 20,006,491 19,430,363
66,942,594 67,341,144
Investments in joint ventures 37,185,668 37,325,849
Deferred expenses, net 1,235,777 1,268,490
Other assets 2,605,444 2,629,585
$114,581,672 $115,021,277
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 371,666 $ 213,948
Minority interests in consolidated
joint ventures 26,017,244 26,223,935
26,388,910 26,437,883
Partners' capital (deficiency):
General partners (4,697,494) (4,658,431)
Limited partners ($500 per Unit,
304,437 Units issued) 92,890,256 93,241,825
88,192,762 88,583,394
$114,581,672 $115,021,277
See accompanying notes to consolidated financial statements.
/TABLE
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 1996 and 1995
1996 1995
<S> <C> <C>
Revenues:
Rental $2,061,952 $1,909,898
Equity in earnings of joint ventures 679,178 607,755
Interest and other 82,739 90,565
2,823,869 2,608,218
Expenses:
Property operating 347,528 334,252
Depreciation 576,128 660,882
Amortization 32,713 43,869
General and administrative 153,686 151,105
1,110,055 1,190,108
Income before minority interests 1,713,814 1,418,110
Minority interests 413,129 313,915
Net income $1,300,685 $1,104,195
Net income allocated to:
Limited partners $1,170,616 $ 993,775
General partners 130,069 110,420
$1,300,685 $1,104,195
Net income per Unit of limited
partnership interest $ 3.85 $ 3.26
See accompanying notes to consolidated financial statements.
/TABLE
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended March 31, 1996
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1996 $ 93,241,825 $(4,658,431) $ 88,583,394
Net income 1,170,616 130,069 1,300,685
Cash distributions (1,522,185) (169,132) (1,691,317)
Partners' capital (deficiency)
at March 31, 1996 $ 92,890,256 $(4,697,494) $ 88,192,762
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1996 and 1995
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,300,685 $ 1,104,195
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 576,128 660,882
Amortization 32,713 43,869
Minority interest in joint ventures' operations 413,129 313,915
Equity in earnings of joint ventures (679,178) (607,755)
Decrease (increase) in operating assets:
Other assets 24,141 (142,844)
Increase in operating liabilities:
Accounts payable and accrued liabilities 157,718 189,673
Net cash provided by operating activities 1,825,336 1,561,935
Cash flows from investing activities:
Additions to buildings & improvements (177,578) (133,477)
Additional investments in joint ventures (389,036) (276,483)
Distributions from joint ventures 1,208,395 1,420,025
Net cash provided by investing activities 641,781 1,010,065
Cash flows from financing activities:
Cash distributions (1,691,317) (1,691,317)
Additional investments by minority interests 31,934 57,479
Minority interests in joint ventures' distributions (651,754) (657,957)
Net cash used in financing activities (2,311,137) (2,291,795)
Increase in cash and cash equivalents 155,980 280,205
Cash and cash equivalents at beginning of period 6,456,209 6,168,565
Cash and cash equivalents at end of period $ 6,612,189 $ 6,448,770
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.
These financial statements should be read in conjunction with the annual
financial statements and notes thereto included in the Partnership's
annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Operating results of
interim periods may not be indicative of the operating results for the
entire year.
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 March 31, 1996 and 1995. The Partnership paid the
affiliate management fees of approximately $42,000 and $46,000 for the
three months ended March 31, 1996 and 1995, respectively. These amounts
are included in property operating expenses.
Another affiliate of the Managing General Partner performs administrative
functions, processes investor transactions and prepares tax information
for the Partnership. For each of the three-month periods ended March 31,
1996 and 1995, the Partnership incurred approximately $100,000 for these
services. These amounts are included in general and administrative
expenses.
As of March 31, 1996, the affiliates were owed approximately $48,000 for
these services.
3. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in certain cases, its Managing General Partner) are
defendants in five class action lawsuits pending in state and federal
courts. The complaints allege a variety of claims, including breach of
fiduciary duty, fraud, misrepresentation and related claims, and seek
compensatory and other damages and equitable relief. The defendants have
not yet responded to the complaints and intend to vigorously defend the
actions. It is impossible to predict the effect, if any, the outcome of
these actions might have on the Partnership's financial statements.
4. Subsequent Event
On April 29, 1996, 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>
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 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, primarily due to the continued
absence of significant construction activity. For example, vacancies in
the office markets in suburban Philadelphia (the location of Chesterbrook
Corporate Center) and Westchester County, New York (the location of
Taxter Corporate Park) have recently decreased by 4% and 3%,
respectively. However, office vacancy levels in Pasadena, California
(the location of Pasadena Financial Center) remain essentially unchanged
and may worsen in the near term as certain large corporations and
financial companies continue to restructure and consolidate their
operations. In most markets, office construction is limited to build-to-
suit projects. The Managing General Partner currently plans to offer for
sale Pasadena Financial Center in the second half of 1996, with the
objective of completing sales of all of the Partnership's properties by
1998. However, there can be no assurance that all properties will be
sold.
The Partnership's liquidity depends upon cash flow from operations of its
properties (including those in which it is an equity investor) and
expenditures for tenant improvements and leasing commissions in
connection with the leasing of vacant space. In addition, the
Partnership's liquidity will be affected by the sale of the Partnership's
properties. During the three months ended March 31, 1996, all of the
Partnership's property investments generated positive cash flow from
operations, and it is anticipated that they will continue to do so.
Also, during the three months ended March 31, 1996, cash flow from
operations and distributions from joint ventures exceeded distributions
to investors, capital expenditures and contributions to joint ventures.
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 be approximately $560,000; the repair work is
expected to begin during the third quarter of 1996. The partnership
which owns the property does not expect to be able to recover the repair
costs through insurance; however, in 1994, it initiated a lawsuit against
the original building contractor and architect to seek recovery of these
costs.
As of March 31, 1996, the Partnership has commitments to fund
approximately $720,000, its share of capital expenditures, most of which
relate to the Chesterbrook joint venture.
The Partnership expects that for the remainder of 1996, it will need to
draw upon its cash reserves, in addition to cash flow from operations and
distributions from joint ventures, to fund capital expenditures,
contributions to joint ventures and cash distributions.
During the three months ended March 31, 1996, the Partnership made
capital expenditures of $146,000 (net of contributions by the minority
interest) primarily for building improvements at Pasadena Financial
Center, and contributed approximately $361,000, its share of capital
expenditures needed to re-lease a significant portion of vacant space,
to the Chesterbrook joint venture.
The Partnership expects that cash flow from the Taxter joint venture will
decrease by approximately $485,000 in 1996 because the extension of the
lease with Fuji Photo USA Inc. (for approximately 24% of the property's
space) provides for six months of free rent beginning April 1, 1996 and
reduced rent during the remaining term of the extension.
The joint venture which owns Tech Park Reston is discussing a
restructuring of its leases with Sprint Communications, the property's
sole tenant. At present, it is uncertain whether the leases will be
restructured and, if they are, what the effect of the restructuring on
the Partnership's cash flow and income will be.
Except as discussed herein and in the consolidated financial statements,
the Managing General Partner is not aware of any trends or events,
commitments or uncertainties that will have a material impact on
liquidity.
On April 29, 1996, the Partnership paid the first 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 three months
ended March 31, 1996 compared to 1995 are primarily attributable to the
following:
The increase in rental income was primarily due to an increase in
occupancy at Pasadena Financial Center.
The increase in equity in earnings of joint ventures was primarily
attributable to lower depreciation charges from the Chesterbrook joint
venture (due to the writedown of the property in the fourth quarter of
1995).
The decrease in depreciation and amortization expenses was primarily due
to the writedown of Pasadena Financial Center in the fourth quarter of
1995.
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,
an improving market with increasing demand and a current vacancy rate of
approximately 12%. During the first quarter of 1996, average occupancy
at the property was 89%, and currently, the property is 95% leased
(including three tenants which will move into their space in the second
quarter of 1996). No leases for a significant amount of space expire
before 1998.
The vacancy level in the office market in Westchester County, New York,
the location of Taxter Corporate Park has recently improved slightly to
19%. It is unlikely that the vacant space will be absorbed in the market
for several years. However, during the first quarter of 1996, average
occupancy at the property was 98%. Leases aggregating approximately 12%
of the space are scheduled to expire in 1997.
The Reston market in Virginia, the location of Tech Park Reston, has a
vacancy rate of approximately 10%. The leases with Sprint Communications,
which occupies 100% of the space, expire in 2003. Sprint has the option
to terminate its leases on approximately 96% of the property's space
beginning in 1997 and 1998. As discussed above, the joint venture which
owns the property is discussing a modification of its leases with Sprint.
In Pasadena, California, the location of Pasadena Financial Center, the
office market vacancy rate is approximately 15%. However, during the
first quarter of 1996, occupancy at the property increased from 91% to
100% as Countrywide Credit Industries, Inc, the largest tenant at the
property, leased the remaining vacant space for a minimum of six months.
Leases on approximately 17% of the property's space are scheduled to
expire in 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
Item 1. Legal Proceedings
On March 13, 1996, a class action lawsuit (the "Young Action") naming
Dean Witter Realty Income Partnership III, L.P., other unidentified
limited partnerships, Dean Witter, Discover & Co., Dean Witter Reynolds
Inc., and others as defendants was filed in the Circuit Court for
Baltimore City in Baltimore, Maryland. The defendants have removed the
case to the United States District Court for the District of Maryland.
The complaint alleges fraud, negligent misrepresentation, breach of
fiduciary duty, unjust enrichment and related claims and seeks an
accounting of records, compensatory and punitive damages in unspecified
amounts and other equitable relief. The defendants have not yet
responded to the complaint and intend to vigorously defend the action.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An exhibit index has been filed as part of this Report
on Page E1.
(b) Reports on Form 8-K - 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: May 15, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: May 15, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
Dean Witter Realty Income Partnership IV, L.P.
Quarter Ended March 31, 1996
Exhibit Sequentially
No. Description Numbered Page
<C> <S>
27 Financial Data Schedule
E1
</TABLE>
<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
unaudited financial statements.
</LEGEND>
<CIK> 0000819342
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP IV L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,612,189
<SECURITIES> 0
<RECEIVABLES> 2,605,444
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 114,581,672<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 88,192,762<F2>
<TOTAL-LIABILITY-AND-EQUITY> 114,581,672<F3>
<SALES> 0
<TOTAL-REVENUES> 2,823,869<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,523,184
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,300,685
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,300,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,300,685
<EPS-PRIMARY> 3.85<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $66,942,594, investments in joint ventures of $37,185,668
and net deferred expenses of $1,235,777.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $371,666
and minority interests in consolidated joint ventures of $26,017,244.
<F4>Total revenue includes rent of $2,061,952, equity in earnings of joint
ventures of $679,178 and interest and other revenue of $82,739.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
