UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 its charter)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. N/A
DOCUMENTS INCORPORATED BY REFERENCE
None
Page 1 of 43<PAGE>
PART I.
ITEM 1. BUSINESS.
The Registrant, Dean Witter Realty Income Partnership IV, L.P.
(the "Partnership"), is a limited partnership formed in October 1986
under the Uniform Limited Partnership Act of the State of Delaware for
the purpose of investing primarily in income-producing office,
industrial and retail properties.
The Managing General Partner of the Partnership is Dean Witter
Realty Fourth Income Properties Inc. (the "Managing General Partner"),
a Delaware corporation which is wholly owned by Dean Witter Realty
Inc. ("Realty"). The Associate General Partner is Dean Witter Realty
Income Associates IV, L.P. (the "Associate General Partner"), a
Delaware limited partnership, the general partner of which is the
Managing General Partner. The Managing General Partner manages and
controls all aspects of the business of the Partnership. The terms
of transactions between the Partnership and its affiliates are set
forth below in footnote 7 to the consolidated financial statements in
Item 8 and in Item 13.
The Partnership issued 304,437 units of limited partnership
interest (the "Units") for $152,218,500. The offering has been
terminated and no additional Units will be sold.
The proceeds from the offering were used to make equity
investments in four office properties which were acquired without
permanent mortgage debt. The properties are described below in Item
2.
The Partnership considers its business to include one industry
segment, investment in real property. Financial information regarding
the Partnership is in the Partnership's financial statements in Item
8 below.
The Partnership's real property investments are subject to
competition from similar types of properties in the vicinities in
which they are located. Further information regarding competition and
market conditions where the Partnership's properties are located is
set forth in Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
The Partnership has no employees.
All of the Partnership's business is conducted in the United
States.
ITEM 2. PROPERTIES.
The Partnership's principal offices are located at Two World
Trade Center, New York, New York, 10048. The Partnership has no other
offices.
The Partnership owns through partnership interests the following
four property interests, none of which is encumbered by indebtedness.
Generally, the leases pertaining to the properties provide for
pass-throughs to the tenants of their pro-rata share of certain
operating expenses. In the opinion of the Managing General Partner,
all of the properties are adequately covered by insurance.
<TABLE>
<CAPTION>
Year Acquisition Net Rentable Type of Ownership
Completed/ Cost Area of land and
Property and Location Acquired ($000) (000 sq. ft.) Improvements
<S> <C> <C> <C> <S>
Technology Park Reston,
Reston, VA 1983-1985/1987 $37,460 374 65.0% General Partner-
3 Office buildings ship interest1
Chesterbrook Corp. Center,
Valley Forge, PA 1982-1987/1987 $50,000 621 41.2% General Partner-
8 Office buildings ship interest2
Taxter Corporate Park,
Westchester, NY 1987-1988/ $21,002 345 40.6% General Partner-
2 Office buildings 1988 ship interest3
Pasadena Financial Center, 1983/1989 $17,055 147 56% General Partner-
Pasadena, CA ship interest4
Office building
<footnotes>
1. The remaining general partnership ("GP") interest is held by Dean Witter Realty Income
Partnership III, L.P. The total cost of the property was $57.6 million.
2. The remaining GP interests are held by Dean Witter Realty Income Partnership III, L.P.
(26.7%) and an affiliate of the Managing General Partner (32.1%). The total cost of the
property was $121.3 million.
3. The remaining GP interests are held by Dean Witter Realty Income Partnership II, L.P.
(14.8%) and Dean Witter Realty Income Partnership III, L.P. (44.6%). The total cost of
the property was $51.8 million.
4. The Partnership owns a 56% GP interest in Pasadena Lake Associates ("PLA"); the
remaining GP interest in PLA is held by an affiliate of the Managing General Partner.
PLA acquired, for $30.4 million, an 85% interest in the partnership which owns the
property; the remaining GP interest in the partnership which owns the property is held
by an affiliate of the original seller of the property who, by agreement, does not
receive any cash flow from the property.
</TABLE>
Each property has been built with on-site parking facilities.
In 1995, the Partnership recorded a loss on impairment of the
Pasadena Financial Center property of approximately $7.8 million ($4.4
million after minority interest). See Note 4 to the consolidated
financial statements. Also, in 1995, the partnership which owns the
Chesterbrook Corporate Center recorded a loss on impairment of the
property. The Partnership's share (approximately $16.0 million) of
this loss is included in equity in earnings (losses) of joint
ventures. See note 5 to the consolidated financial statements.
Affiliates of the Partnership are the property manager for Taxter
Corporate Park and Pasadena Financial Center and the co-property
manager of five buildings at the Chesterbrook Corporate Center.
Further information relating to the Partnership's properties is
included below in Item 7 and footnotes 4, 5 and 6 to the consolidated
financial statements included in Item 8.
ITEM 3. LEGAL PROCEEDINGS.
On December 27, 1995, a class action lawsuit (the "Grigsby Action")
naming various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner and
Associate General Partner), Realty, Dean Witter Reynolds Inc. and
others as defendants was filed in Superior Court in California. The
complaint alleges fraud, negligent misrepresentation, intentional and
negligent breach of fiduciary duty, unjust enrichment and related
claims and seeks compensatory and punitive damages in unspecified
amounts and injunctive and other equitable relief. The defendants
have removed the case to the United States District Court for the
Southern District of California. The parties have signed a
stipulation requesting that the action be transferred to the United
States District Court for the Southern District of New York. The
defendants have not yet responded to the complaint and intend to
vigorously defend the action.
On February 14, 1996, a class action lawsuit (the "Schectman Action")
naming various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner), Realty,
Dean Witter Discover & Co., and Dean Witter Reynolds Inc. as
defendants was filed in the Chancery Court of Delaware for New Castle
County. The complaint alleges reckless and/or negligent
misrepresentation and nondisclosure, breach of fiduciary duty and
related claims and seeks an accounting of profits and recissory and/or
compensatory damages in unspecified amounts. The defendants have not
yet responded to the complaint and intend to vigorously defend the
action.
On February 23, 1996, a class action lawsuit (the "Dosky Action")
naming various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner), Realty,
Dean Witter Discover & Co., Dean Witter Reynolds Inc. and others as
defendants was filed in the Chancery Court of Delaware for New Castle
County. The complaint alleges breach of fiduciary duty and seeks an
accounting of profits, compensatory damages in unspecified amounts,
possible liquidation of the Partnership under a receiver's supervision
and other equitable relief. The defendants have not yet responded to
the complaint and intend to vigorously defend the action.
On February 29, 1996, a class action lawsuit (the "Segel Action")
naming various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner), Realty,
Dean Witter Reynolds Inc., Dean Witter Discover & Co. and others as
defendants was filed in the Chancery Court of Delaware for New Castle
County. The complaint alleges breach of fiduciary duty and seeks an
accounting of profits, compensatory damages in unspecified amounts,
possible liquidation of the Partnership under a receiver's supervision
and other equitable relief. The defendants have not yet responded to
the complaint and intend to vigorously defend the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal
year to a vote of Unit holders.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
An established public trading market for the Units does not exist,
and it is not anticipated that such a market will develop in the
future. Accordingly, information as to the market value of a Unit at
any given date is not available. However, the Partnership does allow
its limited partners (the "Limited Partners") to transfer their Units
if a suitable buyer can be located.
As of March 18, 1996, there were 18,218 holders of limited
partnership interests.
The Partnership is a limited partnership and, accordingly, does
not pay dividends. It does, however, make quarterly distributions of
cash to its partners. Pursuant to the partnership agreement,
distributable cash, as defined, is paid 90% to the Limited Partners
and 10% to the general partners (the "General Partners").
During each of the years ended December 31, 1995 and 1994, the
Partnership paid cash distributions aggregating $6,765,268, with
$6,088,740 distributed to the Limited Partners and $676,528 to the
General Partners. The distributions aggregated $20.00 per Unit to the
Limited Partners.
On January 29, 1996, the Partnership paid the fourth 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.
The Partnership anticipates making regular distributions to its
partners in the future.
Sale or financing proceeds will be distributed, to the extent
available, first, to each Limited Partner, until there has been a
return of the Limited Partner's capital contribution plus cumulative
distributions of distributable cash and sale or refinancing proceeds
in an amount sufficient to provide a 9% cumulative annual return on
the Limited Partner's adjusted capital contribution. Thereafter, any
remaining sale or financing proceeds will be distributed 85% to the
Limited Partners and 15% to the General Partners after the Managing
General Partner receives a brokerage fee, if earned, of up to 3% of
the selling price of any equity investment.
Taxable income generally will be allocated in the same proportions
as distributions of distributable cash or sale or financing proceeds
(except that the General Partners must be allocated at least 1% of
taxable income from the sale or financing). In the event there is no
distributable cash or sale or financing proceeds, taxable income will
be allocated 90% to the Limited Partners and 10% to the General
Partners. Any tax loss will be allocated 90% to the Limited Partners
and 10% to the General Partners.
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth a summary of selected financial data for the
Partnership:
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Years ended December 31, 1995, 1994, 1993, 1992, and 1991
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
3
Total revenues $ (4,999,134)1 $11,219,617 $3,378,022 $11,967,169 $9,039,327
2 3
Net income (loss) $ (15,490,563) $4,588,878 $(2,932,582) $5,694,967 $5,588,914
Net income (loss) per Unit of
limited partnership
interest $(45.79) $13.57 $(8.67) $16.84 $16.52
Cash distributions paid
per Unit of limited
partnership interest4 $20.00 $20.00 $20.00 $22.50 $30.00
Total assets at December 31 $115,021,277 $141,476,185 $144,340,130 $154,985,388 $144,245,371
<footnotes>
1. Includes the Partnership's share ($16,027,387) of loss on impairment of the Chesterbrook property (see Item 7 and Note 5 to
the consolidated financial statements).
2. Includes a loss on impairment of Pasadena Financial Center ($4,348,954, net of minority interest) in addition to the
Chesterbrook loss described in Note 1 (see item 7 and Notes 4 and 5 to the consolidated financial statements).
3. Includes the Partnership's share ($8,644,627) of loss on impairment of the Taxter property (see Item 7 and Note 5 to the
consolidated financial statements).
4. Distributions paid to Limited Partners include returns of capital per Unit of limited partnership interest of $20.00, $6.43,
$20.00, $5.66 and $13.48 for the years ended December 31, 1995, 1994, 1993, 1992 and 1991, respectively, calculated as the
excess of cash distributed per Unit over accumulated earnings per Unit not previously distributed.
The above financial data should be read in conjunction with the consolidated financial statements in Item 8.
</TABLE>
ITEM 7. 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, vacancy in the office market in
suburban Philadelphia (the location of Chesterbrook Corporate
Center) decreased from 16% to 12% during the second half of
1995. However, office vacancy levels in Westchester County,
New York (the location of Taxter Corporate Park) and Southern
California (the location of Pasadena Financial Center) remain
essentially unchanged from the prior year 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
certain of the Partnership's office properties over the next
several years 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), 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. In 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.
In 1995, cash flow from operations and distributions
from joint ventures exceeded distributions to investors,
capital expenditures and contributions to the joint ventures.
Effective January 1, 1995, the Partnership and
Countrywide Credit Industries, Inc. ("Countrywide"), the
largest tenant at Pasadena Financial Center, restructured
Countrywide's lease. Current rents were reduced and
Countrywide gave back certain of its space in exchange for an
extension of the lease term on the remaining space for ten
years, to September 2011. 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.
The Partnership completed this restructuring without
incurring any new tenant improvement costs, and at below-
market leasing commission rates.
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 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.
The Partnership also expects to fund at least $260,000 at
Pasadena Financial Center to upgrade the building's fire/life
safety system, elevators, main lobby, common areas and
entrance.
In 1995, the Partnership made capital expenditures of
$436,000 (net of contributions by the minority interest) at
Pasadena Financial Center and, at December 31, 1995, has
commitments to fund approximately $244,000 of capital
expenditures in addition to those needed to repair the
exterior walls.
In 1995, the Partnership contributed approximately
$781,000, its share of capital expenditures needed to re-
lease a significant portion of vacant space, to the
Chesterbrook joint venture, and $470,000, its share of
building improvements and tenant-related capital
expenditures, to the Taxter joint venture.
As of December 31, 1995, the Partnership has
commitments to fund approximately $1,000,000, its share of
capital expenditures, primarily to the Chesterbrook joint
venture.
The Partnership expects that in 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.
At the Taxter property, Fuji Photo USA, Inc. ("Fuji"),
which occupies approximately 24% of the property's space,
exercised its option to extend its leases through March 2001,
at an effective rent which is approximately ninety percent of
current rental rates in the Westchester market. In addition,
Fuji will not pay any rent for the six months beginning April
1, 1996. The renewal was accomplished without incurring any
expenditures for tenant improvements or significant leasing
commissions. Because market rates have declined 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. As a result of this
renewal, the Partnership expects that cash distributions from
the Taxter Joint Venture will be reduced by approximately
$485,000 in 1996 compared to 1995.
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 above 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.
The increase in Other Assets in 1995 primarily results
from increases in the accrual to recognize rental revenue on
a straight-line basis.
On January 29, 1996, the Partnership paid the fourth
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 year ended December 31, 1995 compared to 1994 and for
1994 compared to 1993 are primarily attributable to the
following:
The increase in rental income in 1995 compared to 1994
and the decrease in 1994 compared to 1993 was primarily due
to the write-off in 1994 of approximately $613,000 of
receivables related to the accrual to recognize rental
revenue on a straight-line basis. This write-off was
attributable to the above-mentioned restructuring of the
lease with Countrywide at Pasadena Financial Center.
The decrease in equity in earnings (losses) of joint
ventures in 1995 compared to 1994 was primarily attributable
to the following costs and losses in 1995 at the Chesterbrook
property: a) recognition by the Partnership of its
approximately $16.0 million share of the impairment writedown
of the property (see Note 5 to the consolidated financial
statements); b) increased depreciation and amortization on
increased capital expenditures; and c) decreased pass-through
income from new tenants. These decreases were partially
offset by increased rental income.
The increase in equity in earnings (losses) of joint
ventures in 1994 compared to 1993 was primarily attributable
to the loss incurred in 1993 when the Partnership recorded
its share (approximately $8.6 million) of the loss on
impairment of the Taxter property. Excluding the 1993 loss,
the equity in earnings (losses) of joint ventures decreased
by approximately $425,000 in 1994 compared to 1993, primarily
because of lower rental income from the Chesterbrook joint
venture, partially offset by lower depreciation charges from
the Taxter joint venture (due to the writedown of the
property in 1993).
In 1994, the Partnership received other income of
$143,000 due to a lease termination at Pasadena Financial
Center. No lease termination income was received in 1995 or
1993.
The decrease in property operating expenses in 1995
compared to 1994 is primarily due to a refund received in
1995 of prior year real estate taxes at Pasadena Financial
Center. The increase in property operating expenses in 1994
compared to 1993 is due to increased costs incurred at
Pasadena Financial Center.
The decrease in depreciation and amortization expenses
in 1995 compared to 1994 and the increase in these costs in
1994 compared to 1993 are primarily due to the write-off in
1994 of approximately $600,000 of tenant improvements and
leasing commissions at Pasadena Financial Center relating to
the space which Countrywide gave back pursuant to the
restructuring of its leases.
In 1995, the Partnership recorded a loss on impairment
of the Pasadena Financial Center property of approximately
$7.8 million ($4.4 million after minority interest). See
Note 4 to the consolidated financial statements.
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 1995, average occupancy at the property was 91%, and
currently, the property is 93% leased to 25 tenants
(including two tenants which will move into their spaces in
1996). The leases of Philadelphia Electric Company (for
approximately 23% of the space), Aetna Health Plans (for
approximately 11% of the space), Dun and Bradstreet (for
approximately 12% of the space) and Hewlett-Packard (for
approximately 10% of the property's space) expire in 1998,
1999, 2000 and 2001, respectively. No leases for a
significant amount of space expire before 1998.
The office market in Westchester County, New York, the
location of Taxter Corporate Park, has recently stabilized,
and the current vacancy level in this market is approximately
22%. It is unlikely that this vacant space will be absorbed
in the market for several years. However, during 1995,
average occupancy at the property was 98%, and at December
31, 1995, the property was 99% leased to 24 tenants. KLM
Royal Dutch Airlines owns a long-term leasehold interest in
approximately 20% of the space at the property. As discussed
above in "Liquidity and Capital Resources", the leases of
Fuji Photo Film, the other major tenant (for approximately
24% of the property's space) have been renewed through 2001.
Other 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 two of the three buildings (for approximately 96%
of the property's space) beginning in 1997 and 1998. As
discussed above in "Liquidity and Capital Resources", 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 overall vacancy rate is
approximately 15%, and it is expected to remain constant as
there has been a noticeable lack of movement in this market.
However, during 1995, average occupancy at the property was
87%, and at December 31, 1995, the property was 91% occupied
by 13 tenants. Leases totalling 17% of the property' 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>
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
INDEX
(a) Financial Statements
Page
<S> <C>
Independent Auditors' Report 13
Consolidated Balance Sheets at December 31, 1995 and 1994 14
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 15
Consolidated Statements of Partners' Capital for the years ended
December 31, 1995, 1994 and 1993 16
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 17
Notes to Consolidated Financial Statements 18-26
(b) Financial Statement Schedule Schedule
Real Estate and Accumulated Depreciation III 33-34
All schedules other than those indicated above have been omitted
because either the required information is not applicable or the
information is shown in the consolidated financial statements or
notes thereto.
</TABLE>
<PAGE>
Independent Auditors' Report
To The Partners of
Dean Witter Realty Income Partnership IV, L.P.:
We have audited the accompanying consolidated balance sheets
of Dean Witter Realty Income Partnership IV, L.P. and
consolidated partnerships (the "Partnership") as of December
31, 1995 and 1994, and the related consolidated statements of
operations, partners' capital, and cash flows for each of the
three years in the period ended December 31, 1995. Our
audits also included financial statement schedule III. These
financial statements and the financial statement schedule are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial
statements and the financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of Dean Witter
Realty Income Partnership IV, L.P. and consolidated
partnerships as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
Also, in our opinion, financial statement schedule III, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 20, 1996
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 6,456,209 $ 6,168,565
Real estate, at cost:
Land 8,004,189 8,984,865
Buildings and improvements 78,767,318 84,844,156
86,771,507 93,829,021
Accumulated depreciation 19,430,363 16,766,957
67,341,144 77,062,064
Investments in joint ventures 37,325,849 55,074,536
Deferred leasing commissions, net 1,268,490 1,364,966
Other assets 2,629,585 1,806,054
$115,021,277 $141,476,185
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 213,948 $ 443,389
Minority interest in consolidated
joint ventures 26,223,935 30,193,571
26,437,883 30,636,960
Partners' capital (deficiency):
General partners (4,658,431) (2,432,847)
Limited partners ($500 per Unit,
304,437 Units issued) 93,241,825 113,272,072
88,583,394 110,839,225
$115,021,277 $141,476,185
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L .P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Rental $ 8,272,320 $ 7,722,477 $8,271,049
Equity in earnings (losses) of
joint ventures (13,630,960) 3,039,383 (5,180,123)
Interest and other 359,506 457,757 287,096
(4,999,134) 11,219,617 3,378,022
Expenses:
Property operating 1,082,243 1,531,831 1,212,710
Depreciation 2,663,406 3,326,776 2,747,963
Amortization 183,618 349,853 186,920
General and administrative 585,574 533,801 605,323
Loss on impairment of real estate 7,765,989 - -
12,280,830 5,742,261 4,752,916
Income (loss) before minority
interests (17,279,964) 5,477,356 (1,374,894)
Minority interests (1,789,401) 888,478 1,557,688
Net income (loss) $(15,490,563) $ 4,588,878 $(2,932,582)
Net income (loss) allocated to:
Limited partners $(13,941,507) $ 4,129,990 $(2,639,324)
General partners (1,549,056) 458,888 (293,258)
$(15,490,563) $ 4,588,878 $(2,932,582)
Net income (loss) per Unit of limited
partnership interest $(45.79) $13.57 $(8.67)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1993 $123,958,886 $(1,245,421) $122,713,465
Net loss (2,639,324) (293,258) (2,932,582)
Cash distributions (6,088,740) (676,528) (6,765,268)
Partners' capital (deficiency)
at December 31, 1993 115,230,822 (2,215,207) 113,015,615
Net income 4,129,990 458,888 4,588,878
Cash distributions (6,088,740) (676,528) (6,765,268)
Partners' capital (deficiency)
at December 31, 1994 113,272,072 (2,432,847) 110,839,225
Net loss (13,941,507) (1,549,056) (15,490,563)
Cash distributions (6,088,740) (676,528) (6,765,268)
Partners' capital (deficiency)
at December 31, 1995 $ 93,241,825 $(4,658,431) $ 88,583,394
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(15,490,563) $ 4,588,878 $ (2,932,582)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 2,663,406 3,326,776 2,747,963
Amortization 183,618 349,853 186,920
Equity in (earnings) losses of joint ventures 13,630,960 (3,039,383) 5,180,123
Minority interest in earnings of
consolidated joint ventures (1,789,401) 888,478 1,557,688
Loss on impairment of real estate 7,765,989 - -
(Increase) decrease in operating assets:
Deferred expenses (87,142) (336,405) (158,621)
Other assets (823,531) 307,350 (336,920)
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities (229,441) 165,997 (38,859)
Net cash provided by operating activities 5,823,895 6,251,544 6,205,712
Cash flows from investing activities:
Additions to buildings and improvements (708,475) (1,257,454) (115,645)
Investments in joint ventures (1,250,865) (2,580,120) (927,018)
Distributions from joint ventures 5,368,592 5,094,896 5,733,475
Net cash provided by investing
activities 3,409,252 1,257,322 4,690,812
Cash flows from financing activities:
Cash distributions (6,765,268) (6,765,268) (6,765,268)
Additional investments by minority interests 348,595 701,265 133,395
Minority interests in distributions
from consolidated joint ventures (2,528,830) (2,443,294) (2,599,632)
Net cash used in financing activities (8,945,503) (8,507,297) (9,231,505)
Increase (decrease) in cash and cash equivalents 287,644 (998,431) 1,665,019
Cash and cash equivalents at beginning
of year 6,168,565 7,166,996 5,501,977
Cash and cash equivalents at end of year $ 6,456,209 $ 6,168,565 $ 7,166,996
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
Partnership is managed by Dean Witter Realty Fourth Income
Properties Inc. (the "Managing General Partner").
In 1987 and 1988, the Partnership issued 304,437 units of
limited partnership interest (the "Units") for $152,218,500.
No additional Units will be sold. The proceeds of the
offering were used to make investments in income-producing
office properties which were not encumbered by debt.
2. Summary of Significant Accounting Policies
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 40.6% general partnership interest in
Taxter Corporate Park and 41.2% general partnership interest
in the partnership which owns interests 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 reporting and tax purposes. The
preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
The carrying value of real estate includes the purchase price
paid by the Partnership and acquisition fees and expenses.
Costs of improvements to the properties are capitalized, and
repairs are expensed. Depreciation is recorded on the
straight-line method.
At least annually, and more often if circumstances dictate,
the Partnership evaluates the recoverability of the net
carrying value of its real estate. As part of this
evaluation, the fair values of each of the properties are
estimated (in some cases with the assistance of outside real
estate consultants) based on discounted cash flows. The fair
values are compared to the properties' carrying amounts in
the financial statements. A deficiency in fair value
relative to carrying amount is
an indication of the need for a writedown due to impairment.
In such case, the expected future net cash flows from the
property are estimated for a period of approximately five
years (or a shorter period if the Partnership expects that
the property may be disposed of sooner), along with estimated
sales proceeds at the end of the period. If the total of
these future undiscounted cash flows were less than the
carrying amount of the property, the property would be
written down to its fair value, and a loss on impairment
recognized by a charge to earnings. The Partnership's
accounting policy complies with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of".
Because the determination of fair value is based upon
projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and
market capitalization rates which are inherently subjective,
the amounts ultimately realized at disposition may differ
materially from the net carrying value as of December 31,
1995. The cash flows used to determine fair value are based
on good faith estimates and assumptions developed by the
Managing General Partner. Unanticipated events and
circumstances may occur and some assumptions may not
materialize; therefore actual results may vary from the
estimates and the variances may be material. The Partnership
may provide additional writedowns, which could be material in
subsequent years if real estate markets or local economic
conditions change.
Deferred leasing commissions are amortized over the
applicable lease terms.
Rental income is accrued on a straight-line basis over the
terms of the leases. Accruals in excess of amounts payable
by tenants pursuant to their leases (resulting from rent
concessions or rents which periodically increase over the
term of a lease) are recorded as receivables and included in
other assets.
Cash and cash equivalents consist of cash and highly liquid
investments with maturities, when purchased, of three months
or less.
Net income (loss) 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.
No provision for income taxes has been made in the financial
statements since the liability for such taxes is that of the
partners rather than the Partnership.
The accounting policies used for tax reporting purposes
differ from those used for financial reporting as follows:
(a) depreciation is calculated using accelerated methods; (b)
rental income is recognized based on the payment terms in the
applicable leases; and (c) writedowns for impairment of real
estate are not deductible. In addition, offering costs are
treated differently for tax and financial reporting purposes.
The tax basis of the Partnership's assets and liabilities is
approximately $21.7 million higher than the amounts reported
for financial statement purposes.
3. Partnership Agreement
The Partnership Agreement provides that distributable cash,
as defined, will be paid 90% to the Limited Partners and 10%
to the General Partners.
Sale or financing proceeds will be distributed, to the extent
available, first, to each Limited Partner, until there has
been a return of the Limited Partner's capital contribution
plus cumulative distributions of distributable cash and sale
or refinancing proceeds in an amount sufficient to provide a
9% cumulative annual return on the Limited Partner's adjusted
capital contribution. Thereafter, any remaining sale or
financing proceeds will be distributed 85% to the Limited
Partners and 15% to the General Partners after the Managing
General Partner receives a brokerage fee, if earned, of up to
3% of the selling price of any equity investment.
Taxable income generally is allocated in the same proportions
as distributions of distributable cash or sale or financing
proceeds (except that the General Partners must be allocated
at least 1% of taxable income from the sale or financing).
In the event there is no distributable cash or sale or
financing proceeds, taxable income is allocated 90% to the
Limited Partners and 10% to the General Partners. Any tax
loss is allocated 90% to the Limited Partners and 10% to the
General Partners.
Distributions paid to Limited Partners include returns of
capital per Unit of limited partnership interest of $20.00,
$6.43, and $20.00 for the years ended December 31, 1995, 1994
and 1993, respectively, calculated as the excess of cash
distributed per Unit over accumulated earnings per Unit not
previously distributed.
<TABLE>
4. Real Estate
The location, year of acquisition and net carrying values of
the properties are as follows:
<CAPTION>
Year of December 31,
Property Acquisition 1995 1994
<S> <C> <C> <C>
Technology Park
Reston, VA 1987 $47,341,144 $48,901,234
Pasadena Financial
Center, Pasadena, CA 1989 20,000,000 28,160,830
$67,341,144 $77,062,064
</TABLE>
The Partnership owns a 65% general partnership interest in
Technology Park Associates; the remaining general partnership
interest is held by an affiliate, Dean Witter Realty Income
Partnership III, LP.
The Technology Park buildings are 100% leased to a single
tenant, which is responsible for all operating costs,
including real estate taxes. Accordingly, there are no
property operating expenses for this property in the
consolidated statements of operations.
The Partnership owns a 56% general partnership interest in
Pasadena Lake Associates ("PLA"); the remaining general
partnership interest in PLA is held by LS Lake Associates, an
affiliate of the Managing General Partner. PLA owns an 85%
general partnership interest in Lake Colorado Associates
("LCA"); the remaining general partnership interest in LCA is
held by an affiliate of the original seller of the property
("PFC").
LCA's partnership agreement provides for PLA to receive all
profits, losses and cash flow from both operations and
capital transactions (except for a special allocation of
taxable income to PFC in an amount not to exceed $159,000 per
year), until PLA has received a return of its equity
investment and a preferred return thereon as defined in the
partnership agreement. Any additional profits and cash flow
will be distributed 85% to PLA and 15% to PFC.
In 1995, the Partnership concluded that, based on a revised
expectation as to the holding period of Pasadena Financial
Center, the Partnership will be unable to recover its
investment. Accordingly, the Partnership has written down
the property to fair value (based on an independent
appraisal), and recorded a loss on impairment of
approximately $7.8 million ($4.4 million after minority
interest).
In 1994, the Partnership wrote-off approximately $457,000 of
tenant improvements and $143,000 of leasing commissions at
Pasadena Financial Center relating to space given back by the
property's largest tenant under a restructuring of its lease.
5. Investments in Joint Ventures
Chesterbrook Corporate Center, Valley Forge, Pennsylvania
The general partnership which owns the property is owned
41.2% by the Partnership. Income Partnership III and
affiliates of the Managing General Partner own the remaining
interests. The partners receive cash flow and profits and
losses according to their pro rata shares.
The partnership which owns the Chesterbrook property has
recently re-leased a substantial amount of space as a result
of the departure of the property's largest tenant, which had
occupied approximately 36% of the property's space. Although
office vacancy levels in the suburban Philadelphia market
have been stagnant for several years, the high quality of the
Chesterbrook property has made it possible to re-lease
substantially all of the vacated space. However, current
market rents are lower than previous rents received at the
property, which will result in reduced future cash flow
therefrom. Also, because of its amenities, size and
configuration, the Chesterbrook property has been able to
command a rental premium over other properties in the market;
however, this premium has been substantially eroded because
of the continuing high vacancy in the market. As a result,
the general partners of the partnership which owns the
property concluded the property's value is impaired and, in
accordance with its policy for evaluating the recoverability
of its real estate, which is the same as the Partnership's,
the partnership which owns the property recorded a loss on
impairment of the property of approximately $38.9 million at
October 31, 1995. The Partnership's share of this loss
(approximately $16.0 million) was included in equity in
earnings (losses) of joint ventures in 1995.
<TABLE>
Summarized balance sheet information of the joint venture is
as follows:
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Land and buildings, net $ 64,230,400 $106,190,152
Other 3,588,262 3,736,496
Total assets $ 67,818,662 $109,926,648
Liabilities $ 2,242,262 $ 1,634,104
Partners' capital 65,576,400 108,292,544
Total liabilities and capital $ 67,818,662 $109,926,648
</TABLE>
<PAGE>
<TABLE>
Summarized results of operations of the joint venture are as
follows:
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Rental income $ 13,286,086 $12,768,003 $14,615,384
Other income 25,255 (41,561) 180,671
13,311,341 12,726,442 14,796,055
Property operating expenses 4,684,258 4,021,495 4,187,715
Depreciation and amortization 4,663,290 3,929,508 3,727,652
Loss on impairment of real
estate 38,901,405 - -
48,248,953 7,951,003 7,915,367
Net income (loss) $(34,937,612) $ 4,775,439 $ 6,880,688
</TABLE>
Taxter Corporate Park, Westchester County, New York
The general partnership which owns the property is owned
40.6% by the Partnership. Affiliates of the Partnership,
Dean Witter Realty Income Partnership II, L.P., and Income
Partnership III, own the remaining interests. The partners
receive cash flow and profits and losses according to their
pro rata shares.
In 1993, in accordance with its policies for evaluating the
recoverability of its real estate (which are the same as the
Partnership's), the partnership which owns the property
concluded that the value of the property was impaired.
Accordingly, the partnership which owns the property recorded
a loss on impairment of the property of approximately $21.3
million at October 31, 1993. The Partnership's share of this
loss, approximately $8.6 million, was included in equity in
earnings (losses) of joint ventures in 1993.
<PAGE>
<TABLE>
Summarized balance sheet information of the Taxter joint
venture is as follows:
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Land and building, net $18,526,663 $18,510,985
Other 1,381,243 1,810,505
Total assets $19,907,906 $20,321,490
Liabilities $ 285,866 $ 333,273
Partners' capital 19,622,040 19,988,217
Total liabilities and capital $19,907,906 $20,321,490
</TABLE>
<TABLE>
Summarized results of operations are as follows:
<CAPTION>
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Rental income $6,078,785 $ 6,120,192 $ 6,237,174
Other income 94,757 78,764 95,916
6,173,542 6,198,956 6,333,090
Property operating expenses 3,197,884 2,542,248 2,953,161
Depreciation and
amortization 1,095,519 1,016,555 1,829,042
Loss on impairment of real
estate - - 21,292,185
4,293,403 3,558,803 26,074,388
Net income $1,880,139 $ 2,640,153 $(19,741,298)
</TABLE>
<TABLE>
Activity in Investments in Joint Ventures is as follows:
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Investments at beginning
of year $ 55,074,536 $54,549,929 $64,536,509
Equity in earnings (losses) (13,630,960) 3,039,383 (5,180,123)
Distributions (5,368,592) (5,094,896) (5,733,475)
Contributions 1,250,865 2,580,120 927,018
Investments at end of year $37,325,849 $55,074,536 $54,549,929
</TABLE>
<TABLE>
6. Leases
Minimum future rental income under noncancellable operating
leases as of December 31, 1995 is as follows:
<CAPTION>
Year ending December 31:
<C> <C>
1996 $ 7,789,200
1997 7,617,867
1998 7,997,190
1999 8,003,143
2000 7,643,025
Thereafter 25,810,448
Total $64,860,873
</TABLE>
The Partnership has determined that all leases relating to
its properties are operating leases. The terms range from
five to seventeen years, and generally provide for fixed
minimum rents with rental escalation and/or expense
reimbursement clauses.
7. Related Party Transactions
An affiliate of the Managing General Partner provides
property management services for two properties and for five
buildings at Chesterbrook Corporate Center. The Partnership
paid the affiliate management fees of approximately
$172,000, $178,000 and $129,000 for the years ended December
31, 1995, 1994 and 1993, 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 years ended December 31, 1995, 1994 and 1993, the
Partnership incurred approximately $402,000 for such
services. These amounts are included in general and
administrative expenses.
As of December 31, 1995, the affiliates were owed
approximately $48,000 in total for these services.
8. Litigation
Various public partnerships sponsored by Dean Witter Realty
Inc. (including the Partnership and its Managing General
Partner) have been named as defendants in four class actions
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.
9. Subsequent Event
On January 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 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership is a limited partnership and has no directors
or executive officers.
The directors and executive officers of the Managing General
Partner are as follows:
<TABLE>
<S> <S>
Position with the
Name Managing General Partner
William B. Smith Chairman of the Board of Directors
E. Davisson Hardman, Jr. President and Director
Lawrence Volpe Controller, Assistant Secretary and
Director
Ronald T. Carman Secretary and Director
</TABLE>
All of the directors have been elected to serve until the next
annual meeting of the shareholders of the Managing General Partner or
until their successors are elected and qualify. Each of the executive
officers has been elected to serve until his successor is elected and
qualifies.
William B. Smith, age 52, is a Managing Director of Dean Witter
Realty Inc. and has been with Dean Witter Realty Inc. since 1982. He is
an Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr,, age 46, is a Managing Director of
Dean Witter Realty Inc. and has been with Dean Witter Realty since 1982.
Lawrence Volpe, age 48, is a Director and the Controller of
Dean Witter Realty Inc. He is a Senior Vice President and Controller of
Dean Witter Reynolds Inc., which he joined in 1983.
Ronald T. Carman, age 44, is a Director and the Secretary of
Dean Witter Realty Inc. He is a Senior Vice President and Associate
General Counsel of Dean Witter, Discover & Co. and Dean Witter Reynolds
Inc., which he joined in 1984.
There is no family relationship among any of the foregoing
persons.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash
distributions, when and as cash distributions are made to the Limited
Partners, and a share of taxable income or tax loss. Descriptions of
such distributions and allocations are contained in Item 5 above. The
General Partners received cash distributions of $676,528 during each of
the three years ended December 31, 1995, 1994 and 1993.
The General Partners and their affiliates were paid certain
fees and reimbursed for certain expenses. Information concerning such
fees and reimbursements is contained in Note 7 to the Consolidated
Financial Statements in Item 8 above.
The directors and executive officers of the Managing General
Partner received no renumeration from the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) No person is known to the Partnership to be the beneficial
owner of more than five percent of the Units.
(b) The executive officers and directors of the Managing
General Partner own the following Units as of March 31, 1996:
<TABLE>
<CAPTION>
Amount and
Nature of
Title of Class Name of Beneficial Owner Beneficial Ownership
<S> <S> <S>
Limited William B. Smith *
Partnership
Interests E. Davisson Hardman, Jr. *
All directors and executive *
officers of the Managing
General Partner, as a group
</TABLE>
*Own, by virtue of ownership of limited partnership interests in the
Associate General Partner, less than 1% of the Units of the Partnership.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As a result of their being partners of a limited partnership
which is the Limited Partner of the Associate General Partner, Realty and
certain current and former executive officers and directors of the
Managing General Partner also own indirect general partnership interests
in the Partnership. The Partnership Agreement of the Partnership
provides that cash distributions and allocations of income and loss to
the General Partners shall be distributed or allocated 50% to the
Managing General Partner and 50% to the Associate General Partner. The
General Partners' share of cash distributions and income or loss is
described in Item 5 above.
All of the outstanding shares of common stock of the Managing
General Partner are owned by Realty, a Delaware Corporation which is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The general
partner of the Associate General Partner is the Managing General Partner.
The limited partner of the Associate General Partner is LSA 86 L.P., a
Delaware limited partnership. Realty and certain current and former
executive officers and directors of the Managing General Partner are
partners of LSA 86 L.P. Additional information with respect to the
directors and executive officers and compensation of the Managing General
Partner and affiliates is contained in Items 10 and 11 above.
The General Partners and their affiliates were paid certain
fees and reimbursed for certain expenses. Information concerning such
fees and reimbursements is contained in Note 7 to the Consolidated
Financial Statements in Item 8 above. The Partnership believes that the
payment of fees and the reimbursement of expenses to the General Partners
and their affiliates are on terms as favorable as would be obtained from
unrelated third parties.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed as
part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial Statements
filed as part of Item 8 of this Annual Report).
3. Exhibits
(2) Not applicable
(3)a Certificate of Limited Partnership included in the
Registration Statement Number 33-16054 is incorporated by
reference.
(3)b Amended and Restated Agreement of Limited Partnership dated
as of October 22, 1987 set forth in Exhibit A to the
Prospectus included in the Registration Statement Number
33-16054 is incorporated herein by reference.
(4)a Certificate of Limited Partnership included in the
Registration Statement Number 33-16054 is incorporated by
reference.
(4)b Amended and Restated Agreement of Limited Partnership dated
as of October 22, 1987 set forth in Exhibit A to the
Prospectus included in the Registration Statement Number
33-16054 is incorporated herein by reference.
(6) Not applicable
(7) Not applicable.
(9) Not applicable.
(10) Not applicable.
(11) Not applicable.
(12) Not applicable.
(14) Not applicable.
(16) Not applicable.
(21) Subsidiaries: Technology Park Associates, a Virginia
general partnership.
Lake Colorado Associates, a California general
partnership.
(24) Not applicable.
(27) Financial Data Schedule
(28) Not applicable.
(99) Not applicable.
(b) No Forms 8-K were filed by the Partnership during the last quarter
of the period covered by this report.
(c) See paragraph (a) (3) above.
(d) (1) See paragraph (a) (2) above.
(2) Financial statements of DWR Chesterbrook Associates, the
joint venture which owns Chesterbrook Corporate Center.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/E. Davisson Hardman, Jr. Date: March 29, 1996
E. Davisson Hardman, Jr.
President
By: /s/Lawrence Volpe Date: March 29, 1996
Lawrence Volpe
Controller
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
DEAN WITTER REALTY FOURTH INCOME PROPERTIES INC.
Managing General Partner
/s/William B. Smith Date: March 29, 1996
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: March 29, 1996
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: March 29, 1996
Lawrence Volpe
Director
/s/Ronald T. Carman Date: March 29, 1996
Ronald T. Carman
Director
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Real Estate and Accumulated Depreciation
December 31, 1995
Initial cost to Partnership (A)
Costs
Capitalized
Buildings and Subsequent to
Description Land Improvements Total Acquisition
<S> <C> <C> <C> <C>
Tech Park Reston
Reston, VA $6,004,189 $54,037,697 $60,041,886 $ 16,405
Pasadena
Financial
Center
Pasadena, CA 2,980,676 27,369,324 30,350,000 4,129,205
$8,984,865 $81,407,021 $90,391,886 $4,145,610
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at which
Carried at End of Period (B)
Loss on
Impairment of Buildings and
Description Real Estate Land Improvements Total
<S> <C> <C> <C> <C>
Tech Park Reston
Reston, VA $ - $6,004,189 $54,054,102 $60,058,291
Pasadena
Financial
Center
Pasadena, CA 7,765,989 2,000,000 24,713,216 26,713,216
$7,765,898 $8,004,189 $78,767,318 86,771,507
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III (CONTINUED)
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Life on which
Depreciation
in Latest
Accumulated Income
Depreciation Date of Date Statement is
Description (c) Construction Acquired Computed
<S> <C> <C> <C> <C>
Tech Park Reston
Reston, VA $12,717,147 1983-1985 December 1987 15-40 Years
Pasadena
Financial
Center
Pasadena, CA 6,713,216 1983 December 1989 5-40 Years
$19,430,363
</TABLE>
<TABLE>
<CAPTION>
Notes:
(A) The initial cost includes the purchase price paid by the Partnership and
acquisition fees and expenses. The aggregate cost for Federal income tax purposes
was $86,505,439.
(B) Reconciliation of real estate owned
at December 31: 1993 1994 1995
<S> <C> <C> <C>
Balance at beginning of period $93,077,932 $93,193,577 $93,829,021
Additions during period:
Purchases 115,645 1,257,454 708,475
Write-off due to termination
of lease - (622,010) -
Loss on impairment of real estate - - (7,765,989)
Balance at end of period $93,193,577 $93,829,021 $86,771,507
(C) Reconciliation of accumulated depreciation:
Balance at beginning of period $11,314,228 $14,062,191 $16,766,957
Depreciation expense 2,747,963 2,869,978 2,663,406
Write-off due to termination
of lease - (165,212) -
Balance at end of period $14,062,191 $16,766,957 $19,430,363
</TABLE>
<PAGE>
Independent Auditors' Report
To The Partners of
DWR Chesterbrook Associates
We have audited the accompanying balance sheets of DWR Chesterbrook
Associates (the "Partnership") as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital, and cash flows for
each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of DWR Chesterbrook Associates as of
December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 20, 1996
<PAGE>
<TABLE>
<CAPTION>
DWR CHESTERBROOK ASSOCIATES
BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 831,280 $ 529,976
Real estate, at cost:
Land 6,420,000 14,436,604
Buildings and improvements 85,531,102 115,078,332
91,951,102 129,514,936
Accumulated depreciation 27,720,702 23,324,784
64,230,400 106,190,152
Deferred leasing commissions, net 978,141 892,344
Other assets 1,778,841 2,314,176
$ 67,818,662 $109,926,648
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 829,095 $ 220,937
Due to affiliate 1,413,167 1,413,167
2,242,262 1,634,104
Partners' capital 65,576,400 108,292,544
$ 67,818,662 $109,926,648
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DWR CHESTERBROOK ASSOCIATES
STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Revenue:
Rental $ 13,286,086 $12,768,003 $14,615,384
Interest 25,255 (41,561) 180,671
13,311,341 12,726,442 14,796,055
Expenses:
Property operating 4,684,258 4,021,495 4,187,715
Depreciation 4,395,918 3,800,511 3,633,393
Amortization 267,372 128,997 94,259
Loss on impairment of real
estate 38,901,405 - -
48,248,953 7,951,003 7,915,367
Net income (loss) $(34,937,612) $ 4,775,439 $ 6,880,688
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DWR CHESTERBROOK ASSOCIATES
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1995, 1994 and 1993
<S> <C>
Partners' capital at January 1, 1993 $110,839,640
Net income 6,880,688
Capital contributions 952,975
Cash distributions (11,108,572)
Partners' capital at December 31, 1993 107,564,731
Net income 4,775,439
Capital contributions 5,175,874
Cash distributions (9,223,500)
Partners' capital at December 31, 1994 108,292,544
Net loss (34,937,612)
Capital contributions 1,894,550
Cash distributions (9,673,082)
Partners' capital at December 31, 1995 $65,576,400
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DWR CHESTERBROOK ASSOCIATES
STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(34,937,612) $ 4,775,439 $ 6,880,688
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 4,395,918 3,800,511 3,633,393
Amortization 267,372 128,997 94,259
Loss on impairment of real estate 38,901,405 - -
(Increase) decrease in operating assets:
Deferred expenses (353,169) (725,764) (76,132)
Other assets 535,335 (171,482) 265,002
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities 608,158 (410,681) 264,525
Net cash provided by operating activities 9,417,407 7,397,020 11,061,735
Cash flows from investing activities:
Additions to real estate (1,337,571) (4,265,818) (876,843)
Cash flows from financing activities:
Capital contributions 1,894,550 5,175,874 952,975
Cash distributions (9,673,082) (9,223,500) (11,108,572)
Net cash used in financing activities (7,778,532) (4,047,626) (10,155,597)
Increase (decrease) in cash and
cash equivalents 301,304 (916,424) 29,295
Cash and cash equivalents at beginning
of year 529,976 1,446,400 1,417,105
Cash and cash equivalents at end of year $ 831,280 $ 529,976 $ 1,446,400
See accompanying notes to financial statements.
/TABLE
<PAGE>
DWR CHESTERBROOK ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. Organization
DWR Chesterbrook Associates (the "Partnership") was formed in 1987
under the laws of the Commonwealth of Pennsylvania, to purchase eight
of nine office buildings, a parking lot and 75 acres of underlying
land in the Chesterbrook Corporate Center in Valley Forge,
Pennsylvania. The buildings consist of 621,271 net rentable square
feet. The property is not encumbered by debt.
The general partners of the Partnership are Chesterbrook Investment
Partners, L.P. (67.9%) and Duportail Investment Partners, L.P.
(32.1%).
The Partnership Agreement provides that all cash flow, profits,
losses and credits of the Partnership shall be allocated in
proportion to the Partners' original capital contributions.
2. Summary of Significant Accounting Policies
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes. The preparation
of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The carrying value of real estate includes the purchase price paid by
the Partnership and acquisition fees and expenses. Costs of
improvements to the properties are capitalized, and repairs are
expensed. Depreciation is recorded on the straight-line method.
At least annually, and more often if circumstances dictate, the
Partnership evaluates the recoverability of the net carrying value of
its real estate. As part of this evaluation, the fair value of the
property is estimated (in some cases with the assistance of outside
real estate consultants) based on discounted cash flows. The fair
value is compared to the property's carrying amount in the financial
statements. A deficiency in fair value relative to carrying amount
is an indication of the need for a writedown due to impairment. In
such case, the expected future net cash flows from the property are
estimated for a period of approximately five years (or a shorter
period if the Partnership expects that the property may be disposed
of sooner), along with estimated sales proceeds at the end of the
period. If the total of these future undiscounted cash flows were
less than the carrying amount of the property, the property would be
written down to its fair value, and a loss on impairment recognized
by a charge to earnings. The Partnership's accounting policy
complies with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of".
Because the determination of fair value is based upon projections of
future economic events such as property occupancy rates, rental
rates, operating cost inflation and market capitalization rates which
are inherently subjective, the amounts ultimately realized at
disposition may differ materially from the net carrying value as of
December 31, 1995. The cash flows used to determine fair value are
based on good faith estimates and assumptions developed by the
Managing General Partner. Unanticipated events and circumstances may
occur and some assumptions may not materialize; therefore actual
results may vary from the estimates and the variances may be
material. The Partnership may provide additional writedowns, which
could be material in subsequent years if real estate markets or local
economic conditions change.
Deferred leasing commissions are amortized over the applicable lease
terms.
Rental income is accrued on a straight-line basis over the terms of
the leases. Accruals in excess of amounts payable by tenants
pursuant to their leases (resulting from rent concessions or rents
which periodically increase over the term of a lease) are recorded as
receivables and included in other assets.
Cash and cash equivalents consist of cash and highly liquid
investments with maturities, when purchased, of three months or less.
No provision for income taxes has been made in the financial
statements since the liability for such taxes is that of the partners
rather than the Partnership.
The accounting policies used for tax reporting purposes differ from
those used for financial reporting as follows: (a) depreciation is
calculated using accelerated methods; (b) rental income is recognized
based on the payment terms in the applicable leases; (c) payments
made by the seller of the property in prior years under a rental
income guaranty were accounted for as rental income; and (d)
writedowns for impairment of real estate are not deductible. The tax
basis of the Partnership's assets and liabilities is approximately
$38.3 million higher than the amount reported for financial statement
purposes.
Certain 1994 amounts have been reclassified to conform to 1995
presentation.
3. Real Estate
The Partnership has recently re-leased a substantial amount of space
as a result of the departure of the property's largest tenant, which
had occupied approximately 36% of the property's space. Although
office vacancy levels in the suburban Philadelphia market have been
stagnant for several years, the high quality of the Chesterbrook
property had made it possible to re-lease substantially all of the
vacated space. However, current market rents are lower than previous
rents received at the property, which will result in reduced future
cash flow therefrom. Also, because of its amenities, size and
configuration, the Chesterbrook property has been able to command a
rental premium over other properties in the market; however, this
premium has been substantially eroded because of the continuing high
vacancy in the market. As a result, the general partners of the
Partnership concluded that the property's value is impaired and, in
accordance with its policy for evaluating the recoverability of its
real estate, the Partnership wrote the property down to its fair
value (based on an independent appraisal) and recorded a loss on
impairment of approximately $38.9 million at October 31, 1995.
4. Lease Commitments
Minimum future rental income under noncancellable operating leases as
of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<C> <C>
1996 $11,123,967
1997 10,371,104
1998 6,752,417
1999 4,770,708
2000 1,878,652
Thereafter 1,004,212
Total $35,901,060
</TABLE>
The Partnership has determined that all leases relating to the
Property are operating leases. The terms range from three to ten
years, and generally provide for fixed minimum rents with rental
escalation and/or expense reimbursement clauses.
5. Related Party Transactions
An affiliate of the partners co-manages five buildings at the
property. The Partnership paid the affiliate management fees of
approximately $63,000, $58,000 and $61,000 in 1995, 1994 and 1993,
respectively, for such services.
Another affiliate of the general partners earned a fee in 1987 for the
acquisition of the properties in the amount of $4,258,703. Of this
amount, $1,413,167 remains unpaid.
<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
audited financial statements.
</LEGEND>
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP IV L.P.
<CIK> 0000819342
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,456,209
<SECURITIES> 0
<RECEIVABLES> 2,629,585
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,021,277<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 88,583,394<F2>
<TOTAL-LIABILITY-AND-EQUITY> 115,021,277<F3>
<SALES> 0
<TOTAL-REVENUES> (4,999,134)<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,491,429
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,490,563)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,490,563)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,490,563)
<EPS-PRIMARY> (45.79)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $67,341,144, investments in joint ventures of $37,325,849
and net deferred expenses of $1,268,490.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $213,948
and minority interests in consolidated joint ventures of $26,223,935.
<F4>Total revenues include rent of $8,272,320, equity in losses of joint
ventures of $(13,630,960) and interest and other revenue of $359,506.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
