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, 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>
September 30, December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,817,414 $ 6,456,209
Real estate:
Land 7,836,072 8,004,189
Buildings and improvements 79,674,587 78,767,318
87,510,659 86,771,507
Accumulated depreciation 21,164,824 19,430,363
66,345,835 67,341,144
Investments in joint ventures 37,222,719 37,325,849
Deferred leasing commissions, net 1,170,350 1,268,490
Other assets 2,843,099 2,629,585
$113,399,417 $115,021,277
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 269,634 $ 213,948
Minority interests in consolidated
joint ventures 25,948,856 26,223,935
26,218,490 26,437,883
Partners' capital (deficiency):
General partners (4,798,678) (4,658,431)
Limited partners ($500 per Unit,
304,437 Units issued) 91,979,605 93,241,825
87,180,927 88,583,394
$113,399,417 $115,021,277
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, 1996 and 1995
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Revenues:
<S> <C> <C> <C> <C>
Rental $2,217,027 $2,096,137 $6,464,537 $6,128,400
Equity in earnings of joint ventures 753,812 554,136 2,177,628 1,826,099
Gain on sale of land 161,883 - 161,883 -
Interest and other 101,656 90,022 239,669 275,236
3,234,378 2,740,295 9,043,717 8,229,735
Expenses:
Property operating 338,937 343,625 1,042,413 1,034,433
Depreciation 580,186 665,143 1,734,461 1,986,935
Amortization 32,714 45,898 98,140 137,821
General and administrative 147,567 143,007 446,911 431,626
1,099,404 1,197,673 3,321,925 3,590,815
Income before minority interests 2,134,974 1,542,622 5,721,792 4,638,920
Minority interests 549,874 383,657 1,416,065 1,096,222
Net income $1,585,100 $1,158,965 $4,305,727 $3,542,698
Net Income allocated to:
Limited Partners $1,426,590 $1,043,068 $3,875,154 $3,188,428
General Partners 158,510 115,897 430,573 354,270
$1,585,100 $1,158,965 $4,305,727 $3,542,698
Net income per Unit of limited
partnership interest $4.69 $3.43 $12.73 $10.47
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, 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 3,875,154 430,573 4,305,727
Cash distributions (5,137,374) (570,820) (5,708,194)
Partners' capital (deficiency)
at September 30, 1996 $ 91,979,605 $(4,798,678) $ 87,180,927
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, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,305,727 $ 3,542,698
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,832,601 2,124,756
Gain from sale of land (161,883) -
Equity in earnings of joint ventures (2,177,628) (1,826,099)
Minority interests in joint ventures' operations1,416,065 1,096,222
Increase in operating assets:
Other assets (213,514) (448,797)
Deferred expenses - (87,142)
Increase in operating liabilities:
Accounts payable and accrued liabilities 30,686 284,769
Net cash provided by operating activities 5,032,054 4,686,407
Cash flows from investing activities:
Additions to buildings & improvements (907,269) (380,948)
Proceeds from sale of land 355,000 -
Investments in joint ventures (831,500) (1,060,988)
Distributions from joint ventures 3,112,258 3,804,212
Net cash provided by investing activities 1,728,489 2,362,276
Cash flows from financing activities:
Additional investments by minority interests 399,198 204,484
Minority interests in joint ventures'
distributions (2,090,342) (1,946,655)
Cash distributions (5,708,194) (5,073,951)
Net cash used in financing activities (7,399,338) (6,816,122)
(Decrease) increase in cash and cash equivalents (638,795) 232,561
Cash and cash equivalents at beginning of period 6,456,209 6,168,565
Cash and cash equivalents at end of period $ 5,817,414 $ 6,401,126
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 third quarter of 1996, the Partnership sold a narrow strip of
land adjacent to the roadway at the Tech Park property for $330,000, net
of closing costs, to Fairfax County, VA., and agreed to grant certain
easements on the Tech Park property to the County. The carrying value
of the land sold was 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 September 30, 1996 and 1995. The Partnership paid
the affiliate management fees of approximately $127,000 and $128,000 for
the nine months ended September 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 nine-month periods ended September
30, 1996 and 1995, the Partnership incurred approximately $302,000 for
these services. These amounts are included in general and administrative
expenses.
As of September 30, 1996, the affiliates were owed approximately $48,000
for these services.
4. Litigation
Various public partnerships sponsored by Dean Witter Realty Inc. (including
the Partnership and its Managing General Partner) are defendants in a
consolidated class action lawsuit pending in state court. The complaint
alleges breach of fiduciary duty and seeks compensatory damages and
equitable relief. The defendants intend to vigorously defend the action.
It is impossible to predict the effect, if any, the outcome of this
action might have on the Partnership's financial statements.
5. Subsequent Event
On October 29, 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. However, in 1996, vacancy
in the overall office market in Westchester County, New York (the
location of Taxter Corporate Park) is approximately 24%. Office vacancy
levels in Pasadena, California (the location of Pasadena Financial
Center) remain essentially unchanged at approximately 15%. Although
vacancy in the office market in suburban Philadelphia (the location of
Chesterbrook Corporate Center) increased to approximately 16%, this
market is expected to improve and demand for quality space is expected
to increase. In most markets, office construction is limited to build-
to-suit projects. The Managing General Partner currently plans to offer
for sale Tech Park Reston and Pasadena Financial Center during the fourth
quarter 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 any sale of
Partnership properties. During the nine months ended September 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.
During the nine months ended September 30, 1996, distributions to
investors, capital expenditures and contributions to joint ventures
exceeded cash flow from operations and distributions from joint ventures.
Pasadena Financial Center has experienced non-critical damage to the
exterior walls. At September 30, 1996, the repair work was substantially
completed; the Partnership's share of the remaining costs to be paid is
approximately $167,000. The partnership which owns the property does not
expect to be able to recover the repair costs through insurance; in 1994,
it initiated a lawsuit against the original building contractor and
architect to seek recovery of these costs.
As of September 30, 1996, the Partnership also has commitments to fund
approximately $806,000 for its share of capital expenditures, primarily
at the Chesterbrook joint venture.
During the nine months ended September 30, 1996, the Partnership incurred
capital expenditures of $507,000 (net of contributions by the minority
interest) primarily for building improvements at Pasadena Financial
Center, and contributed approximately $832,000, 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 (most of which occured in the
second and third quarters) because the extension of the lease with Fuji
Photo USA Inc. (for approximately 25% of the property's space) provided
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. At present, the outcome of these discussions 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 October 29, 1996, the Partnership paid the third 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
nine-months ended September 30, 1996 compared to 1995 are primarily
attributable to the following:
Rental income increased primarily due to increased 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:
Although the current vacancy rate in Valley Forge, Pennsylvania, the
location of Chesterbrook Corporate Center, is approximately 16%, it is
an improving market with increasing demand. During the third quarter of
1996, occupancy at the property increased to 97%, and the joint venture
which owns the property has been able to increase rental rates on new
leases. No leases for a significant amount of space expire before 1998.
The overall vacancy level in the office market in Westchester County, New
York, the location of Taxter Corporate Park, has recently increased to
24%, and the west Westchester market in which the building is located is
approximately 15% vacant. It is unlikely that the vacant space will be
absorbed in the market for several years. However, during the third
quarter of 1996, occupancy at the property remained at 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 the sale of the
property with Sprint.
In Pasadena, California, the location of Pasadena Financial Center, the
office market vacancy rate is approximately 15%. However, during the
third quarter of 1996, occupancy at the property remained at 100%.
Approximately 9% of the property's space is being leased to Countrywide
Credit Inc. on a month-to-month basis. Other leases on approximately 17%
of the space occupied by other tenants 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.
The Schechtman Action, the Dosky Action and the Segal Action have been
consolidated in a single action (the "Consolidated Action") in the
Delaware Court of Chancery for New Castle County. The plaintiffs in the
Young Action and the Grigsby Action have joined the Consolidated Action.
The Grigsby Action remains stayed indefinitely subject to being reopened
for good cause.
On October 7, 1996, the plaintiffs in the Consolidated Action filed a
First Consolidated and Amended Class Action Complaint naming various
public real estate partnerships sponsored by Dean Witter Realty Inc.
("Realty") (including the Partnership and its Managing General Partner),
Realty, Dean Witter, Discover & Co., Dean Witter Reynolds Inc. and others
as defendants. This complaint alleges breach of fiduciary duty and seeks
an accounting of profits, compensatory damages in an unspecified amount,
possible liquidation of the Partnership under a receiver's supervision
and other equitable relief. The defendants have not yet responded to
this 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. None.
<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, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: November 14, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
Quarter Ended September 30, 1996
Exhibit Index
Exhibit
No. Description
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,817,414
<SECURITIES> 0
<RECEIVABLES> 2,843,099
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 113,399,417<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 87,180,927<F2>
<TOTAL-LIABILITY-AND-EQUITY> 113,399,417<F3>
<SALES> 0
<TOTAL-REVENUES> 9,043,717<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,737,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,305,727
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,305,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,305,727
<EPS-PRIMARY> 12.73<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $66,345,835, investments in joint ventures of $37,222,719
and net deferred leasing commissions of $1,170,350.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $269,634
and minority interests in consolidated joint ventures of $25,948,856.
<F4>Total revenue includes rent of $6,464,537, equity in earnings of joint
ventures of $2,177,628, gain on sale of land of $161,883 and interest and
other revenue of $239,669.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
