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 June 30, 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
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 6,636,114 $ 6,456,209
Real estate:
Land 8,004,189 8,004,189
Buildings and improvements 79,163,118 78,767,318
87,167,307 86,771,507
Accumulated depreciation 20,584,638 19,430,363
66,582,669 67,341,144
Investments in joint ventures 37,117,696 37,325,849
Deferred leasing commissions, net 1,203,064 1,268,490
Other assets 2,714,478 2,629,585
$114,254,021 $115,021,277
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 309,727 $ 213,948
Minority interests in consolidated
joint ventures 26,022,907 26,223,935
26,332,634 26,437,883
Partners' capital (deficiency):
General partners (4,724,632) (4,658,431)
Limited partners ($500 per Unit,
304,437 Units issued) 92,646,019 93,241,825
87,921,387 88,583,394
$114,254,021 $115,021,277
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and six months ended June 30, 1996 and 1995
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
<S> <C> <C> <C> <C>
Rental $2,185,558 $2,122,365 $4,247,510 $4,032,263
Equity in earnings of joint ventures 744,638 664,208 1,423,816 1,271,963
Interest and other 55,274 94,649 138,013 185,214
2,985,470 2,881,222 5,809,339 5,489,440
Expenses:
Property operating 355,948 356,556 703,476 690,808
Depreciation 578,147 660,910 1,154,275 1,321,792
Amortization 32,713 48,054 65,426 91,923
General and administrative 145,658 137,514 299,344 288,619
1,112,466 1,203,034 2,222,521 2,393,142
Income before minority interests 1,873,004 1,678,188 3,586,818 3,096,298
Minority interests 453,062 398,650 866,191 712,565
Net income $1,419,942 $1,279,538 $2,720,627 $2,383,733
Net Income allocated to:
Limited Partners $1,277,948 $1,151,584 $2,448,564 $2,145,360
General Partners 141,994 127,954 272,063 238,373
$1,419,942 $1,279,538 $2,720,627 $2,383,733
Net income per Unit of limited
partnership interest $4.20 $3.79 $8.04 $7.05
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Six months ended June 30, 1996
<CAPTION>
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 2,448,564 272,063 2,720,627
Cash distributions (3,044,370) (338,264) (3,382,634)
Partners' capital (deficiency)
at June 30, 1996 $ 92,646,019 $(4,724,632) $ 87,921,387
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,720,627 $ 2,383,733
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,154,275 1,321,792
Amortization 65,426 91,923
Minority interests in joint ventures' operations 866,191 712,565
Equity in earnings of joint ventures (1,423,816) (1,271,963)
Increase in operating assets:
Other assets (84,893) (300,483)
Deferred expenses - (87,142)
Increase in operating liabilities:
Accounts payable and accrued liabilities 95,779 298,274
Net cash provided by operating activities 3,393,589 3,148,699
Cash flows from investing activities:
Additions to buildings & improvements (395,800) (135,977)
Investments in joint ventures (643,083) (804,851)
Distributions from joint ventures 2,275,052 2,704,359
Net cash provided by investing activities 1,236,169 1,763,531
Cash flows from financing activities:
Additional investments by minority interests 174,156 96,696
Minority interests in joint ventures'
distributions (1,241,375) (1,245,807)
Cash distributions (3,382,634) (3,382,634)
Net cash used in financing activities (4,449,853) (4,531,745)
Increase in cash and cash equivalents 179,905 380,485
Cash and cash equivalents at beginning of period 6,456,209 6,168,565
Cash and cash equivalents at end of period $ 6,636,114 $ 6,549,050
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. Real Estate
During the second quarter of 1996, the Partnership agreed to sell a
narrow strip of land adjacent to the roadway at the Tech Park property
for $355,000 to Fairfax County, VA. In connection therewith, the
Partnership agreed to grant certain easements on the Tech Park property
to the County. The carrying value of the land sold is approximately
$168,000. The Partnership believes that the transaction will not affect
the future value of the remaining Tech Park property.
3. 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 June 30, 1996 and 1995. The Partnership paid the
affiliate management fees of approximately $86,000 and $87,000 for the
six months ended June 30, 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 six-month periods ended June 30,
1996 and 1995, the Partnership incurred approximately $203,000 for these
services. These amounts are included in general and administrative
expenses.
As of June 30, 1996, the affiliates were owed approximately $48,000 for
these services.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in certain cases, its Managing General Partner) are
defendants in a number of 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 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.
5. Subsequent Event
On July 30, 1996, the Partnership paid a cash distribution of $6.875 per
Unit to the Limited Partners. The total cash distribution amounted to
$2,325,560, with $2,093,004 distributed to the Limited Partners and
$232,556 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, 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) decreased by approximately 4% and 3%,
respectively, in 1995. However, office vacancy levels in Pasadena,
California (the location of Pasadena Financial Center) remain essentially
unchanged. 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 building improvements and 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 six months ended June 30, 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 six months ended June 30, 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 repair work is expected to be completed during the
third quarter of 1996, and the Partnership's share of the remaining costs
to complete the repairs is approximately $430,000. 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 June 30, 1996, the Partnership also has commitments to fund
approximately $560,000 for its share of capital expenditures, primarily
at the Chesterbrook joint venture.
During the six months ended June 30, 1996, the Partnership made capital
expenditures of $222,000 (net of contributions by the minority interest)
primarily for building improvements at Pasadena Financial Center, and
contributed approximately $527,000, 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 in 1996 by approximately $485,000 (approximately half of which
occured in the second quarter) because the extension of the lease with
Fuji Photo USA Inc. (for approximately 25% 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.
Based on an assessment of the projected cash flow from operations of the
Partnership's properties and anticipated future cash needs, the
Partnership has determined that it can utilize a portion of its existing
cash reserves to fund capital expenditures and to increase distributions.
Accordingly, the Partnership increased its quarterly distribution rate
from $5.00 per unit (4% annual distribution rate) to $6.875 per unit
(5.5% annual distribution rate) beginning with the 1996 second quarter
distribution paid July 30, 1996.
The joint venture which owns Tech Park Reston is discussing with Sprint
Communications, the property's sole tenant, a possible sale of the
property or a restructuring of its leases. At present, the outcome of
these discussions and their effect on the Partnership's cash flow and
income is uncertain.
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 July 30, 1996, the Partnership paid the second quarter distribution
of $6.875 per Unit to the Limited Partners. The total cash distribution
amounted to $2,325,560, with $2,093,004 distributed to the Limited
Partners and $232,556 to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the three and
six-months ended June 30, 1996 compared to 1995 are primarily
attributable to the following:
Rental income increased primarily due to increases in occupancy at
Pasadena Financial Center.
Equity in earnings of joint ventures increased primarily due to lower
depreciation charges from the Chestbrook joint venture (due to the
writedown of the property in the fourth quarter of 1995), partially
offset by lower rental income recognized at the Taxter joint venture.
Depreciation and amortization expenses decreased 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 second quarter of 1996, average occupancy
at the property was 90% and currently, the property is 95% occupied. 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 second quarter of 1996, occupancy
at the property slightly increased to 99%. 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 with Sprint a sale
of the building or a modification of its leases.
In Pasadena, California, the location of Pasadena Financial Center, the
office market vacancy rate is approximately 15%. However, during the
second quarter of 1996, occupancy at the property remained at 100%.
Leases on approximately 9% of the property's space with Countrywide
Credit Inc. may expire by year-end and other leases on approximately 17%
of the 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The following developments have occurred since the filing of the
Partnership's most recent quarterly report on Form 10-Q with respect to
the purported class actions filed against the Partnership.
Pursuant to an order to the U.S. District Court for the Southern District
of California entered May 24, 1996, the Grigsby Action was transferred
to the U.S. District Court for the Southern District of New York.
The parties in the Schechtman Action, the Dosky Action and the Segal
Action intend to ask the Delaware Court of Chancery that such Actions be
consolidated in a single matter. The Grigsby Action has been stayed
indefinitely subject to being reopened for good cause. The Young Action
has been dismissed without prejudice. The defendants in the Young Action
understand that the plaintiffs in the Young Action intend to join the
Schechtman Action, the Dosky Action and the Segal Action if such Actions
are consolidated.
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.
Report dated May 14, 1996 of the Valuation per Unit of Limited
Partnership Interest at December 31, 1995.
<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: August 14, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 14, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
Quarter Ended June 30, 1996
Exhibit Index
Exhibit Sequentially
No. Description Numbered Page
27 Financial Data Schedule
E1
<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>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,636,114
<SECURITIES> 0
<RECEIVABLES> 2,714,478
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 114,254,021<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 87,921,387<F2>
<TOTAL-LIABILITY-AND-EQUITY> 114,254,021<F3>
<SALES> 0
<TOTAL-REVENUES> 5,809,339<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,088,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,720,627
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,720,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,720,627
<EPS-PRIMARY> 8.04<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $66,582,669, investments in joint ventures of $37,117,696
and net deferred leasing commissions of $1,203,064.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $309,727
and minority interests in consolidated joint ventures of $26,022,907.
<F4>Total revenue includes rent of $4,247,510, equity in earnings of joint
ventures of $1,423,816 and interest and other revenue of $138,013.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
