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, 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 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 40<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 Note 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 (one of which was sold in 1996) 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. below.
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.
As of December 31, 1996, the Partnership owned through partnership
interests the following three 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> <C>
Chesterbrook Corp. Center,
Valley Forge, PA 1982-1987/1987 $50,000 621 41.2% General Partner-
8 Office buildings ship interest1
Taxter Corporate Park,
Westchester, NY 1987-1988/ $21,002 345 40.6% General Partner-
2 Office buildings 1988 ship interest2
Pasadena Financial Center, 1983/1989 $17,055 147 56% General Partner-
Pasadena, CA ship interest3
Office building
1. 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.
2. 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.
3. 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 was built with on-site parking facilities.
On December 31, 1996, the Partnership and Dean Witter Realty Income
Partnership III, L.P., an affiliated public partnership, sold the
buildings and land they owned at the Technology Park Reston
property. See Note 4 to the consolidated financial statements in
Item 8.
In February 1997, the partnership which owns the Pasadena Financial
Center office building agreed to sell the property for $26,700,000.
Closing of the sale is expected to occur in the second quarter of
1997.
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 purported 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.
("DWR") and others as defendants was filed in Superior Court in
California. The complaint alleged fraud, negligent
misrepresentation, intentional and negligent breach of fiduciary
duty, unjust enrichment and related claims and sought compensatory
and punitive damages in unspecified amounts and injunctive and other
equitable relief. The defendants removed the case to the United
States District Court for the Southern District of California.
Pursuant to an order of the U.S. District Court for the southern
District of California entered May 24, 1996, the Grigsby Action was
transferred to the U.S. District Court for the Southern District of
New York.
On February 14, 1996, a purported 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. ("DWD") and
DWR as defendants was filed in the Chancery Court of Delaware for
New Castle County (the "Delaware Chancery Court"). On February 23,
1996, a purported class action lawsuit (the "Dosky Action") naming
various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner),
Realty, DWD, DWR and others as defendants was filed in the Delaware
Chancery Court. On February 29, 1996, a purported class action
lawsuit (the "Segal Action') naming various public real estate
partnerships sponsored by Realty (including the Partnership and its
Managing General Partner), Realty, DWR, DWD and others as defendants
was filed in the Delaware Chancery Court. On March 13, 1996, a
purported class action lawsuit (the "Young Action") naming the
partnership, other unidentified limited partnerships, DWD, DWR and
others as defendants was filed in the Circuit Court for Baltimore
City in Baltimore, Maryland. The defendants removed the Young
Action to the United States District Court for the District of
Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal
Action were consolidated in a single action (the "Consolidated
Action") in the Delaware Chancery Court. The Young Action was
dismissed without prejudice. The plaintiffs in the Young Action and
the Grigsby Action 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 Realty
(including the Partnership and its Managing General Partner),
Realty, DWD, DWR 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 filed a motion to dismiss this
complaint on December 10, 1996.
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 17, 1997, there were 17,305 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 the year ended December 31, 1996, the Partnership paid
quarterly cash distributions aggregating $23.75 per Unit. Total
distributions were $8,032,230, with $7,229,007 distributed to the
Limited Partners and $803,223 to the General Partners. During the
year ended December 31, 1995, the Partnership paid quarterly cash
distributions aggregating $6,765,268, with $6,088,740 distributed to
Limited Partners and $676,528 to the General Partners.
On January 29, 1997, the Partnership paid the fourth quarter
distribution of $6.875 per Unit to the Limited Partners. The total
cash distribution amounted to $2,325,498, with $2,092,948
distributed to the Limited Partners and $232,550 to the General
Partners. On January 31, 1997, the Partnership distributed
$32,351,457 ($106.27 per Unit), from its share of the net proceeds
from the sale of the Technology Park Reston office park. The
distribution was paid 100% to Limited 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.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for
the Partnership:
<TABLE>
<CAPTION>
19961 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total revenues $15,185,608 $ (4,999,134)2 $ 11,219,617 $ 3,378,0224 $ 11,967,169
Net income $ 7,977,890 $(15,490,563)2,3 $ 4,588,878 $ (2,932,582)4 $ 5,694,967
Net income (loss)
per Unit of
Limited partner-
ship interest $24.32 $(45.79) $13.57 $(8.67) $16.84
Cash distributions
paid per Unit of
limited partner-
ship interest5 $23.75 $20.00 $20.00 $20.00 $22.50
Total assets of
December 31 $115,446,796 $115,021,277 $141,476,185 $144,340,130 $154,985,388
</TABLE>
1. Revenues and net income include $3.2 million gain on sale of
Tech Park Reston office park.
2. 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.
3. Includes loss on impairment of Pasadena Financial Center
($4,348,954, net of minority interest). See item 7 and Note 4
to the consolidated financial statements.
4. 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.
5. Distributions paid to Limited Partners include returns of
capital per Unit of limited partnership interest of $23.75,
$20.00, $6.43, $20.00, and $5.66 for the years ended December
31, 1996, 1995, 1994, 1993 and 1992, 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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. One of such
partnerships sold its property interest in 1996, and another has
agreed to sell its real estate in 1997. The Partnership's
acquisition program has been completed. No additional investments
are planned.
Real estate markets continued to stabilize in 1996, primarily due to
decreased new office construction and continued strong leasing
efforts causing a reduction in oversupply in many office markets.
In most markets, office construction is limited to build-to-suit
projects.
On December 31, 1996, Technology Park Associates, (which is owned
65% by the Partnership) sold the Technology Park Reston office park.
(See Note 4 to the consolidated financial statements). The
Partnership's share of the net sales proceeds was approximately
$32.9 million of which approximately $32.4 million ($106.27 per
Unit) was distributed to the Limited Partners in January 1997
representing a return of invested capital; the remaining $.5 million
of proceeds was added to Partnership cash reserves. Net income from
the property in 1996 was approximately $6.5 million (including gain
on the sale of the property of approximately $3.2 million) and cash
flow from operations (including the gain) was approximately $5.0
million.
In February 1997, the partnership which owns Pasadena Financial
Center agreed to sell the building for $26.7 million. The
Partnership's share of the sales proceeds, net of closing costs, is
expected to be approximately $25.9 million (of which, the minority
interest share will be approximately $11.4 million). Cash flow from
this property (net of minority interest) was approximately $1
million in 1996.
The Partnership's liquidity depends upon cash flow from operations
of its property investments and expenditures for building
improvements and tenant improvements and leasing commissions in
connection with the leasing of vacant space. In 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
in 1997.
In addition, the Partnership's liquidity has been and will be
affected by the sale of properties. The Managing General Partner
currently plans to market for sale the Partnership's remaining
property investments in 1997 and 1998, with the objective of
completing sales of all of the Partnership's office properties by
the end of 1998. There is no assurance the Partnership will be able
to achieve these objectives. As the Partnership has fewer income-
producing investments, Partnership cash from operations will
decline, as will Partnership distributions. The Partnership will
also require less cash reserves to fund capital expenditures and
leasing commissions.
Cash flow from operations and distributions from joint ventures
exceeded distributions to investors, capital expenditures and
contributions to the joint ventures in 1996 and the Partnership
expects that its cash flow from operations and distributions
received from joint ventures will exceed distributions to its
investors (other than distributions of net proceeds from property
sales) in 1997. The Partnership expects to fund a portion of
capital expenditures, leasing commissions and contributions to its
joint ventures from cash reserves in 1997, and also plans to
distribute a portion of its cash reserves in 1997. The Managing
General Partner believes cash reserves will be sufficient for the
Partnership's future needs.
In 1996, the Partnership contributed approximately $1.3 million to
its joint ventures, primarily for its share of capital expenditures
needed to re-lease a significant portion of vacant space at the
Chesterbrook Corporate Center.
As of December 31, 1996, the Partnership has commitments to fund
approximately $442,000, its share of capital expenditures, primarily
to the Chesterbrook joint venture.
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 may have a material
impact on liquidity.
The decrease in deferred leasing commissions and other assets is due
to the elimination of these assets as a result of the sale of the
Technology Park Reston property.
On January 29, 1997, the Partnership paid the fourth quarter
distribution of $6.875 per Unit to the Limited Partners. The total
cash distribution amounted to $2,325,498, with $2,092,948
distributed to the Limited Partners and $232,550 to the General
Partners. On January 31, 1997, the Partnership distributed
$32,351,457 ($106.27 per Unit) of the net proceeds from the sale of
the Technology Park Reston office park representing a return of
capital. The distribution was paid 100% to Limited Partners.
Operations
Fluctuations in the Partnership's operating results for the year
ended December 31, 1996 compared to 1995 and for 1995 compared to
1994 are primarily attributable to the following:
The increase in rental income in 1996 compared to 1995 was primarily
due to increased rental income at Pasadena Financial Center. The
increase in rental income in 1995 compared to 1994 was primarily due
to the writeoff in 1994 of approximately $613,000 of receivables
related to the accrual to recognize rental revenue on a straight-
line basis at the Pasadena Financial Center.
The gain on sale of real estate in 1996 resulted from the sale of
the Technology Park Reston property.
The increase in equity in earnings (losses) of joint ventures in
1996 compared to 1995 and decrease in 1995 compared to 1994 was
primarily attributable to the $16.0 million impairment writedown in
1995 on the Chesterbrook property. Excluding this writedown, the
equity in earnings (losses) decreased by approximately $670,000 in
1995 compared to 1994 due to the following at the Chesterbrook
property: (a) increased depreciation and amortization on increased
capital expenditures and (b) decreased pass-through income from new
tenants. These decreases were partially offset by increased rental
income.
The lower property operating expenses in 1995 compared to 1996 and
1994 is primarily due to a real estate tax refund received at
Pasadena Financial Center in 1995.
The decreases in depreciation and amortization in 1996 compared to
1995 were primarily due to the $7.8 million impairment writedown of
Pasadena Financial Center in the fourth of quarter of 1995. (see
Note 4 to the consolidated financial statements). The decreases in
depreciation and amortization in 1995 compared to 1994 were
primarily due to the write-off in 1994 of approximately $600,000 of
tenant improvements and leasing commissions at Pasadena Financial
Center relating to space which Countrywide gave back pursuant to the
restructuring of its leases.
A summary of the markets in which the Partnership's office
properties are located and the performance of each property is as
follows:
Current market conditions in Valley Forge, Pennsylvania, where the
Chesterbrook Corporate Center is located have improved, especially
during the second half of 1996. Market occupancy is approximately
88%. At December 31, 1996, the property was approximately 99%
leased to 26 tenants, compared to 93% at the prior year-end. The
average occupancy during 1996 was approximately 96%. Leases for
approximately 19% of total space expire in 1998 including
Philadelphia Electric Company (for approximately 15% of total
space). The leases of Aetna Health Plan (for approximately 12% of
total space) and Dun & Bradstreet (for approximately 12% of total
space) expire in 1999 and 2000, respectively.
The overall vacancy level in the office market in Westchester
County, New York, the location of Taxter Corporate Park increased
from 22% to 24% in 1996. The vacancy level in the west Westchester
market in which the building is located is currently 15%, and it is
unlikely that this vacant space will be absorbed in the market for
several years. However, during 1996, average occupancy at the
property was approximately 99%, and at December 31, 1996, occupancy
at the property was 99%, essentially unchanged from the prior year.
The property is leased to 22 tenants. KLM Royal Dutch Airlines owns
a long-term leasehold in approximately 20% of the space at the
property. Leases aggregating approximately 12% and 10% of the
property's space expire in 1997 and 1998, respectively. The lease
of Fuji Photo Film (for approximately 25% of the property's space)
expires in 2001. No other tenants occupy more than 10% of the
property.
Technology Park Reston, located in the Reston, Virginia market was
100% leased during fiscal year 1996 to Sprint Communications. The
property was sold on December 31, 1996. See Note 4 to the
consolidated financial statements.
Pasadena Financial Center, located in Pasadena, California was 100%
leased at December 31, 1996. An agreement to sell the property was
entered into on February 28, 1997. See Note 4 to the consolidated
financial statements.
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>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
INDEX
(a) Financial Statements
Page
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Partners' Capital for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(b) Financial Statement Schedule Schedule
Real Estate and Accumulated Depreciation III
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.
<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, 1996 and 1995, and the related
consolidated statements of operations, partners' capital, and cash flows
for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 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 26, 1997
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 56,199,072 $ 6,456,209
Real estate held for sale 20,322,459 -
Real estate:
Land - 8,004,189
Buildings and improvements - 78,767,318
- 86,771,507
Accumulated depreciation - 19,430,363
- 67,341,144
Investments in joint ventures 36,899,178 37,325,849
Deferred leasing commissions, net 567,184 1,268,490
Other assets 1,458,903 2,629,585
$115,446,796 $115,021,277
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 268,202 $ 213,948
Minority interest in consolidated joint ventures 26,649,540 26,223,935
26,917,742 26,437,883
Partners' capital (deficiency):
General partners (4,887,822) (4,658,431)
Limited partners ($500 per Unit, 304,437 Units issued) 93,416,876 93,241,825
88,529,054 88,583,394
$115,446,796 $115,021,277
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L .P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Rental $ 8,669,237 $ 8,272,320 $ 7,722,477
Equity in earnings (losses) of joint ventures 3,041,184 (13,630,960) 3,039,383
Gain on sale of real estate 3,169,132 - -
Interest and other 306,055 359,506 457,757
15,185,608 (4,999,134) 11,219,617
Expenses:
Property operating 1,414,012 1,082,243 1,531,831
Depreciation 2,312,930 2,663,406 3,326,776
Amortization 130,853 183,618 349,853
General and administrative 596,945 585,574 533,801
Loss on impairment of real estate - 7,765,989 -
4,454,740 12,280,830 5,742,261
Income (loss) before minority interests 10,730,868 (17,279,964) 5,477,356
Minority interests 2,752,978 (1,789,401) 888,478
Net income (loss) $ 7,977,890 $(15,490,563) $ 4,588,878
Net income (loss) allocated to:
Limited partners $ 7,404,058 $(13,941,507) $ 4,129,990
General partners 573,832 (1,549,056) 458,888
$ 7,977,890 $(15,490,563) $ 4,588,878
Net income (loss) per Unit of limited partnership
interest $24.32 $(45.79) $13.57
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, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1994 $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
Net income 7,404,058 573,832 7,977,890
Cash distributions (7,229,007) (803,223) (8,032,230)
Partners' capital (deficiency)
at December 31, 1996 $ 93,416,876 $(4,887,822) $ 88,529,054
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,977,890 $(15,490,563) $ 4,588,878
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 2,312,930 2,663,406 3,326,776
Amortization 130,853 183,618 349,853
Equity in earnings of joint ventures (3,041,184) 13,630,960 (3,039,383)
Gain on sale of land and building (3,169,132) - -
Minority interest in earnings of
consolidated joint ventures 2,752,979 (1,789,401) 888,478
Loss on impairment of real estate - 7,765,989 -
(Increase) decrease in operating assets:
Deferred expenses - (87,142) (336,405)
Other assets (274,617) (823,531) 307,350
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities 60,690 (229,441) 165,997
Net cash provided by operating activities 6,750,409 5,823,895 6,251,544
Cash flows from investing activities:
Additions to buildings and improvements (1,058,880) (708,475) (1,257,454)
Proceeds from sale of real estate 50,943,086 - -
Investments in joint ventures (1,277,336) (1,250,865) (2,580,120)
Distributions from joint ventures 4,745,191 5,368,592 5,094,896
Net cash provided by investing activities 53,352,061 3,409,252 1,257,322
Cash flows from financing activities:
Cash distributions (8,032,230) (6,765,268) (6,765,268)
Additional investments by minority interests 465,907 348,595 701,265
Minority interests in distributions from
consolidated joint ventures (2,793,284) (2,528,830) (2,443,294)
Net cash used in financing activities (10,359,607) (8,945,503) (8,507,297)
Increase (decrease) in cash and cash equivalents 49,742,863 287,644 (998,431)
Cash and cash equivalents at beginning of year 6,456,209 6,168,565 7,166,996
Cash and cash equivalents at end of year $ 56,199,072 $ 6,456,209 $ 6,168,565
Supplemental disclosure of non-cash investing activities:
Reclassification of real estate held for sale:
Real estate
Land $ 2,000,000
Buildings and improvements 25,772,096
Accumulated depreciation (7,449,637)
Real estate held for sale $20,322,459
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 in 1986 to invest primarily in income-producing office,
industrial and retail properties. 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.
Cash and cash equivalents consist of cash and highly liquid
investments with maturities, when purchased, of three months or
less.
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 and any related assets. As part of this
evaluation, the Partnership assesses, among other things, whether
there has been a significant decrease in the market value of any of
its properties. If events or circumstances indicate that the net
carrying value of a property may not be recoverable, 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 as determined (in some cases with the assistance of
outside real estate consultants) based on discounted cash flows, 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, 1996. The cash flows used to evaluate the
recoverability of the assets and 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 write-downs, 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.
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 $17 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 sales or financings). 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 $23.75, $20.00, and
$6.43, for the years ended December 31, 1996, 1995 and 1994,
respectively, calculated as the excess of cash distributed per Unit
over accumulated earnings per Unit not previously distributed.
4. Real Estate and Real Estate Held for Sale
The location, year of acquisition and net carrying values of the
properties are as follows:
<TABLE>
<CAPTION>
Year of December 31,
Property Acquisition 1996 1995
<S> <C> <C> <C>
Technology Park Reston
Reston, VA 1987 $ - $47,341,144
Pasadena Financial Center 20,322,459 20,000,000
Pasadena, CA 1989 $20,322,459 $67,341,144
</TABLE>
Technology Park Reston
The Partnership owns a 65% general partnership interest in
Technology Park Associates ("TPA"), which owned three office
buildings in the Technology Park Reston office park. The remaining
general partnership interest is held by an affiliate of the
Partnership, Dean Witter Realty Income Partnership III, LP. The
partners receive cash flow and profits and losses according to their
interests.
Pursuant to an agreement dated as of November 19, 1996, TPA and an
affiliate of the Managing General Partner (the "Affiliate"), which
owned the fourth building at the property, agreed to sell the office
park to Sprint Communications Company, L.P., which was the sole
tenant at the property, for a negotiated sales price of $76,300,000.
$51,483,000 of the sales price was allocated to TPA and $24,817,000
was allocated to the Affiliate, based on the relative square footage
of the buildings each owned at the property.
The closing of the sale took place on December 31, 1996. The
purchase price was received in cash at closing. The Partnership
received approximately $32.9 million of such cash, representing its
65% share of the cash received by TPA, net of closing costs.
Sprint Communications Company, L.P. was responsible for all
operating costs, including real estate taxes, at the property.
Accordingly, there are no property operating expenses for this
property in the consolidated statements of operations.
Pasadena Financial Center
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 would be unable to recover its investment.
Accordingly, the Partnership wrote the property down 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.
In February 1997, LCA agreed to sell the property for $26,700,000.
Closing of the sale is expected to occur in the second quarter of
1997. At December 31, 1996, the carrying value of the property
(approximately $20.3 million) was reclassified to real estate held
for sale.
5. Investments in Joint Ventures
Chesterbrook Corporate Center, Valley Forge, Pennsylvania
In 1987, the Partnership and Dean Witter Realty Income Partnership
III, L.P. (through a partnership), and an affiliate of the Managing
General Partner acquired 41.2%, 26.7% and 32.1% interests,
respectively, in DWR Chesterbrook Associates, the general
partnership which owns the property. The partners receive cash flow
and profits and losses according to their interests.
In 1995, the general partners in DWR Chesterbrook Associates
concluded that the property's value was impaired. Accordingly, in
accordance with its policy for evaluating the recoverability of its
real estate, which is the same as the Partnership's, DWR
Chesterbrook Associates recorded a loss on impairment of the
property of approximately $38.9 million. The Partnership's share of
this loss (approximately $16 million) was included in equity in
earnings (losses) of joint ventures in 1995.
Summarized financial information of DWR Chesterbrook Associates is
as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Land and buildings, net $63,746,527 $ 64,230,400
Other 3,482,813 3,588,262
Total assets $67,229,340 $ 67,818,662
Liabilities $ 2,323,803 $ 2,242,262
Partners' capital 64,905,537 65,576,400
Total liabilities and capital $67,229,340 $ 67,818,662
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Rental income $13,590,397 $ 13,286,086 $12,768,003
Other income 52,854 25,255 (41,561)
13,643,251 13,311,341 12,726,442
Property operating expenses 4,681,584 4,684,258 4,021,495
Depreciation and amortization 3,161,268 4,663,290 3,929,508
Loss on impairment of real estate - 38,901,405 -
7,842,852 48,248,953 7,951,003
Net income $ 5,800,399 $(34,937,612) $ 4,775,439)
</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 Dean Witter Realty Income
Partnership III, own the remaining interests. The partners receive
cash flow and profits and losses according to their interests.
Summarized financial information of the Taxter joint venture is as
follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Land and building, net $17,709,794 $18,526,663
Other 1,817,522 1,381,243
Total assets $19,527,316 $19,907,906
Liabilities $ 273,240 $ 285,866
Partners' capital 19,254,076 19,622,040
Total liabilities and capital $19,527,316 $19,907,906
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Rental income $ 5,741,566 $ 6,078,785 $ 6,120,192
Other income 270,626 94,757 78,764
6,012,192 6,173,542 6,198,956
Property operating expenses 3,204,335 3,197,884 2,542,248
Depreciation and amortization 1,203,375 1,095,519 1,016,555
4,407,710 4,293,403 3,558,803
Net income $ 1,604,482 $ 1,880,139 $ 2,640,153
Activity in Investments in Joint Ventures is as follows:
1996 1995 1994
Investments at beginning of year $ 37,325,849 $ 55,074,536 $54,549,929
Equity in earnings (losses) 3,041,184 (13,630,960) 3,039,383
Distributions (4,745,191) (5,368,592) (5,094,896)
Contributions 1,277,336 1,250,865 2,580,120
Investments at end of year $ 36,899,178 $ 37,325,849 $55,074,536
</TABLE>
6. Leases
Minimum future rental income under noncancellable operating leases
as of December 31, 1996 is as follows:
Year ending December 31:
1997 $ 3,185,901
1998 2,568,593
1999 2,574,546
2000 2,214,428
2001 1,546,003
Thereafter 13,407,250
Total $25,496,721
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 $161,000, $172,000
and $178,000 for the years ended December 31, 1996, 1995 and 1994,
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, 1996, 1995 and 1994, the Partnership
incurred approximately $402,000 for such services. These amounts
are included in general and administrative expenses.
As of December 31, 1996, the affiliates were owed approximately
$47,000 in total for these services.
8. Litigation
Various public partnerships sponsored by Dean Witter Realty Inc.
(including the Partnership and its Managing General Partner) are
defendants in purported class action lawsuits pending in state and
federal courts. The complaints allege a number of claims, including
breach of fiduciary duty, fraud and misrepresentation, and seek an
accounting of profits, compensatory and other damages in an
unspecified amount, possible liquidation of the Partnership under a
receiver's supervision and other equitable relief. The defendants
are vigorously defending these actions. It is impossible to predict
the effect, if any, the outcome of these actions might have on the
Partnership's financial statements.
9. Distributions After Year-End
On January 29, 1997, the Partnership paid a cash distribution of
$6.875 per Unit to the Limited Partners. The total cash
distribution amounted to $2,325,498, with $2,092,948 distributed to
the Limited Partners and $232,550 to the General Partners. On
January 31, 1997, the Partnership distributed $32,351,457 ($106.27
per Unit) of the net proceeds from the sale of the Technology Park
Reston office park. The distribution was paid 100% to Limited
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:
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 and Director
Ronald T. Carman Secretary and Director
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 53, 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 47, is a Managing Director of Dean
Witter Realty Inc. and has been with Dean Witter Realty since 1982.
Lawrence Volpe, age 49, 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 45, 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 $803,223, $676,528
and $676,528 during the years ended December 31, 1996, 1995 and
1994.
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 17, 1997:
Amount and
Nature of
Title of Class Name of Beneficial Owner Beneficial
Ownership
Limited William B. Smith *
Partnership
Interests E. Davisson Hardman, Jr. *
All directors and executive *
officers of the Managing
General Partner, as a group
*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, certain
current and former 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 87 L.P., a Delaware limited partnership. Realty and
certain current and former officers and directors of the Managing
General Partner are partners of LSA 87 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
(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.
(21) Subsidiaries: Technology Park Associates, a Virginia
general partnership.
Lake Colorado Associates, a California
general partnership.
(27) Financial Data Schedule
(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 26, 1997
E. Davisson Hardman, Jr.
President
By: /s/Lawrence Volpe Date: March 26, 1997
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 26, 1997
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: March 26, 1997
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: March 26, 1997
Lawrence Volpe
Director
/s/Ronald T. Carman Date: March 26, 1997
Ronald T. Carman
Director<PAGE>
SCHEDULE III
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Real Estate and Accumulated Depreciation
December 31, 1996
<TABLE>
<CAPTION>
Initial cost to Partnership (A)
Costs
Capitalized
Buildings & 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
Gross Amount at which Carried at End of Period (B)
Loss on Reclassifi-
Impairment of Buildings and cation to
Description Real Estate Land Improvements Held for Sale Total
Tech Park Reston
Reston, VA $ - $ - $ - $ - $ -
Pasadena Financial
Center
Pasadena, CA 7,765,989 2,000,000 25,772,096 (27,772,096) -
$7,765,898 $2,000,000 $25,772,096 $(27,772,096) $ -
/TABLE
<PAGE>
SCHEDULE III (continued)
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
<TABLE>
<CAPTION>
Life on which
Reclassifi- Depreciation
Accumulated cation to Latest in
Depreciation Real Estate Date of Date Income
Description (c) Held for Sale Total Construction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C>
Tech Park Reston
Reston, VA $ - $ - $ - 1983 - 1985 December 1987 15-40 years
Pasadena Financial
Center
Pasadena, CA 7,449,637 (7,449,637) - 1983 December 1989 5-40 years
$7,449,637 $(7,449,637) $ -
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning period $ 86,771,507 $93,829,021 $93,193,577
Additions during period:
Purchases 465,907 708,475 1,257,454
Decrease due to sale of real estate (59,465,318) - -
Write-off due to termination of lease - - (622,010)
Loss on impairment of real estate - (7,765,989) -
Decrease due to reclassification to
real estate held for sale (27,772,096) - -
Balance at end of period $ - $86,771,507 $93,829,021
(C) Reconciliation of accumulated depreciation:
Balance at end of period $ 19,430,363 $16,766,957 $14,062,191
Depreciation expense 2,312,930 2,663,406 2,869,978
Write-off due to termination of lease - - (165,212)
Decrease due to sale of real estate (14,293,656) - -
Decrease due to reclassification to
real estate held for sale (7,449,637) - -
Balance at end of period $ - $19,430,363 $16,766,957
/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, 1996 and 1995, and
the related statements of operations, partners' capital, and cash
flows for each of the three years in the period ended December 31,
1996. 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, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
March 26, 1997
New York, New York
<PAGE>
DWR CHESTERBROOK ASSOCIATES
BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 778,240 $ 831,280
Real estate, at cost:
Land 6,420,000 6,420,000
Buildings and improvements 87,891,077 85,531,102
94,311,077 91,951,102
Accumulated depreciation 30,564,550 27,720,702
63,746,527 64,230,400
Deferred leasing commissions, net 1,046,485 978,141
Other assets 1,658,088 1,778,841
$67,229,340 $67,818,662
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 910,636 $ 829,095
Due to affiliate 1,413,167 1,413,167
2,323,803 2,242,262
Partners' capital 64,905,537 65,576,400
$67,229,340 $67,818,662
See accompanying notes to financial statements.
</TABLE>
DWR CHESTERBROOK ASSOCIATES
STATEMENTS OF OPERATIONS
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenue:
Rental $13,590,397 $ 13,286,086 $12,768,003
Interest 52,854 25,255 (41,561)
13,643,251 13,311,341 12,726,442
Expenses:
Property operating 4,681,584 4,684,258 4,021,495
Depreciation 2,843,848 4,395,918 3,800,511
Amortization 317,420 267,372 128,997
Loss on impairment of real estate - 38,901,405 -
7,842,852 48,248,953 7,951,003
Net income (loss) $ 5,800,399 $(34,937,612) $ 4,775,439
See accompanying notes to financial statements.
/TABLE
<PAGE>
DWR CHESTERBROOK ASSOCIATES
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<S> <C>
Partners' capital at January 1, 1994 $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
Net income 5,800,399
Capital contributions 2,745,738
Cash distributions (9,217,000)
Partners' capital at December 31, 1996 $ 64,905,537
See accompanying notes to financial statements.
/TABLE
<PAGE>
DWR CHESTERBROOK ASSOCIATES
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,800,399 $(34,937,612) $ 4,775,439
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 2,843,848 4,395,918 3,800,511
Amortization 317,420 267,372 128,997
Loss on impairment of real estate - 38,901,405 -
(Increase) decrease in operating assets:
Deferred expenses (385,764) (353,169) (725,764)
Other assets 120,753 535,335 (171,482)
Increase (decrease) in operating liabilities:
Accounts payable and accrued
liabilities 81,541 608,158 (410,681)
Net cash provided by operating
activities 8,778,197 9,417,407 7,397,020
Cash flows from investing activities:
Additions to real estate (2,359,975) (1,337,571) (4,265,818)
Cash flows from financing activities:
Capital contributions 2,745,738 1,894,550 5,175,874
Cash distributions (9,217,000) (9,673,082) (9,223,500)
Net cash used in financing activities (6,471,262) (7,778,532) (4,047,626)
Increase (decrease) in cash and cash
equivalents (53,040) 301,304 (916,424)
Cash and cash equivalents at beginning of year 831,280 529,976 1,446,400
Cash and cash equivalents at end of year $ 778,240 $ 831,280 $ 529,976
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%) (which is owned 60.7% by Dean Witter Realty
Income Partnership III, L.P. and 39.3% by Dean Witter Realty Income
Partnership IV, L.P.) 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 and any related assets. As part of this
evaluation, the Partnership assesses, among other things, whether
there has been a significant decrease in the market value of any of
its properties. If events or circumstances indicate that the net
carrying value of a property may not be recoverable, 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 as determined (in some cases with the assistance of
outside real estate consultants) based on discounted cash flows, 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, 1996. The cash flows used to evaluate the
recoverability of the assets and 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 write-downs, 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 $37 million higher than the amount reported for
financial statement purposes.
3. Real Estate
In 1995, the Partnership 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 had 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, at the time of the re-leasing market rents
were lower than previous rents received at the property, which were
expected to result in reduced future cash flow therefrom. Also,
because of its amenities, size and configuration, the Chesterbrook
property had been able to command a rental premium over other
properties in the market; however, this premium was 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 was 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 in 1995.
4. Lease Commitments
Minimum future rental income under noncancellable operating leases
as of December 31, 1996 is as follows:
Year ending December 31:
1997 $11,950,221
1998 10,882,476
1999 9,756,179
2000 4,876,047
2001 2,943,713
Thereafter 4,765,505
Total $45,174,141
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 $37,000, $63,000 and $58,000 in 1996, 1995 and 1994,
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.
Exhibit Index for Dean Witter Realty Income Partnership IV, L.P.
Exhibit No. Description
(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.
(27) Financial Data Schedule
(99) Financial statements of DWR Chesterbrook Associates,
the joint venture which owns Chesterbrook Corporate
Center.
<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>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 56,199,072
<SECURITIES> 0
<RECEIVABLES> 1,458,903
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,446,796<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 88,529,054<F2>
<TOTAL-LIABILITY-AND-EQUITY> 115,446,796<F3>
<SALES> 0
<TOTAL-REVENUES> 15,185,608<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,207,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,977,890
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,977,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,977,890
<EPS-PRIMARY> 24.32<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include Real Estate held
for sale of $20,322,459 investments in joint ventures of $36,899,178 and
net deferred expenses of $567,184.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $268,202
and minority interests in consolidated joint ventures of $26,649,540.
<F4>Total revenues include rent of $8,669,237, equity in earnings of joint
ventures of $3,041,184, gain on sale of real estate of $3,169,132, and interest
and other revenue of $306,055.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
