5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1998
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number: 0-18147
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3378315
(State of organization) (IRS Employer
Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)
392-1054
Former name, former address and former fiscal year, if changed
since last report: not applicable
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30,
December 31,
1998 1997
<S> <C>
<C>
ASSETS
Cash and cash equivalents $ 831,262 $
1,868,422
Investments in joint ventures 8,869,374
35,449,866
Other assets 147,597
164,238
$ 9,848,233
$37,482,526
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 320,040 $
389,627
Partners' capital (deficiency):
General partners (5,504,169)
(5,417,146)
Limited partners ($500 per Unit, 304,437 Units issued)
15,032,362 42,510,045
9,528,193
37,092,899
$ 9,848,233
$37,482,526
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED INCOME STATEMENTS
Three and six months ended June 30, 1998 and 1997
<CAPTION>
Three months ended Six
months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C>
<C>
Revenues:
Equity in earnings of joint ventures $24,806,573 $
786,243 $25,973,188 $1,485,195
Rental - 119,345 -
996,972
Gain on sale of real estate - 4,184,529
- - 4,184,529
Interest and other 233,387 103,578
248,751 294,658
25,039,960 5,193,695
26,221,939 6,961,354
Expenses:
Property operating - 30,965 -
392,993
Amortization - 550 -
6,279
General and administrative 72,047 95,657
190,174 228,296
72,047 127,172
190,174 627,568
Income before minority interests 24,967,913 5,066,523
26,031,765 6,333,786
Minority interest - 2,664,030 -
2,891,075
Net income $24,967,913 $2,402,493
$26,031,765 $3,442,711
Net income allocated to:
Limited partners $24,944,833 $2,318,385
$25,902,300 $3,254,581
General partners 23,080 84,108
129,465 188,130
$24,967,913 $2,402,493
$26,031,765 $3,442,711
Net income per Unit of limited
partnership interest $ 81.94 $ 7.62 $
85.08 $ 10.69
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Six months ended June 30, 1998
<CAPTION>
Limited General
Partners Partners
Total
<S> <C> <C>
<C>
Partners' capital (deficiency)
at January 1, 1998 $ 42,510,045
$(5,417,146) $ 37,092,899
Net income 25,902,300
129,465 26,031,765
Cash distributions (53,379,983)
(216,488) (53,596,471)
Partners' capital (deficiency)
at June 30, 1998 $ 15,032,362
$(5,504,169) $ 9,528,193
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1998 and 1997
<CAPTION>
1998 1997
<S> <C>
<C>
Cash flows from operating activities:
Net income $ 26,031,765 $
3,442,711
Adjustments to reconcile net income to net cash provided
By operating activities:
Equity in earnings of joint ventures (25,973,188)
(1,485,195)
Gain on sale of real estate -
(4,184,529)
Minority interests in joint venture -
2,891,075
Amortization -
6,279
Decrease (increase) in other assets 16,641
(8,891)
(Decrease) increase in accounts payable and accrued
liabilities (69,587)
51,513
Net cash provided by operating activities
5,631 712,963
Cash flows from investing activities:
Distributions from joint ventures 53,050,666
2,400,267
Additional investments in joint ventures (496,986)
(168,433)
Proceeds from sale of real estate -
26,372,099
Net cash provided by investing activities
52,553,680 28,603,933
Cash flows from financing activities:
Cash distributions (53,596,471)
(50,990,588)
Minority interests in distributions from consolidated
joint ventures -
(29,804,110)
Additional investments by minority interests -
263,494
Net cash used in financing activities (53,596,471)
(80,531,204)
Decrease in cash and cash equivalents (1,037,160)
(51,214,308)
Cash and cash equivalents at beginning of period
1,868,422 56,199,072
Cash and cash equivalents at end of period $ 831,262 $
4,984,764
See accompanying notes to consolidated financial
statements.
</TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
1. The Partnership
Dean Witter Realty Income Partnership IV, L.P. (the
"Partnership") is a limited partnership organized under
the laws of the State of Delaware on October 31, 1986.
The consolidated financial statements include the
accounts of the Partnership and its majority-controlled
subsidiaries, Technology Park Associates (inactive in
1998) and Lake Colorado Associates, the owner of
Pasadena Financial Center. The Partnership's interests
in Taxter Corporate Park and DWR Chesterbrook
Associates ("Associates"), the partnership which owned
an interest in Chesterbrook Corporate Center, are
accounted for on the equity method.
The Partnership's records are maintained on the accrual
basis of accounting for financial and tax reporting
purposes.
Net income per Unit amounts are calculated by dividing
net income allocated to Limited Partners, in accordance
with the Partnership Agreement, by the weighted average
number of Units outstanding.
In the opinion of management, the accompanying
financial statements, which have not been audited,
include all adjustments necessary to present fairly the
results for the interim period. Except for the gain on
the sale of the Chesterbrook property included in
equity in earnings of joint ventures in the second
quarter of 1998 and the gain on the sale of Pasadena
Financial Center in 1997, such adjustments consist only
of normal recurring accruals.
The Partnership adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive
Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information"
during the first quarter of 1998. Adoption of these
standards had no impact on the Partnership's
computation or presentation of net income per Unit of
Limited Partnership interest or other disclosures.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
These financial statements should be read in
conjunction with the annual financial statements and
notes thereto included in the Partnership's annual
report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31,
1997. Operating results of interim periods may not be
indicative of the operating results for the entire
year.
2. Investments in Joint Ventures
Pursuant to a Purchase and Sale Agreement (the
"Agreement"), on April 1, 1998, Associates sold the
Chesterbrook Corporate Park (the "Property") to FV
Office Partners, L.P., an unaffiliated party. As part
of the Agreement, Dean Witter Income Partnership III,
L.P., an affiliated public partnership, and Dean Witter
Realty Income Partnership II, L.P., an affiliated
public partnership, also sold certain other properties.
The aggregate negotiated sales price of the properties
sold was approximately $168 million, of which
approximately $126.1 million was allocated in the
Agreement to the Property.
Pursuant to the Agreement, escrows were established for
the costs of certain building improvements and tenant
improvements (the "Improvements"). In addition to
payment of the purchase price, at closing, the
purchaser deposited into these escrows approximately
$3.9 million, of which approximately $2.3 million
relates to the Property. Any balances remaining in the
portion of the escrows relating to the Property after
the Improvements are completed will be delivered to
Associates. If the costs of Improvements at the
Property exceed the escrow established therefor, the
Partnership, through Associates, will be required to
fund the excess costs.
The purchase price was received in cash at closing.
The Partnership's 41.2% share of the cash received by
Associates, net of closing costs, was approximately
$51.4 million; such proceeds were distributed 100% to
the Limited Partners ($168.94 per Unit) on April 30,
1998. The Partnership's share of the gain on this sale
was approximately $24.7 million; such gain was
allocated 100% to the Limited Partners in accordance
with the Partnership Agreement.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
Summarized financial information of Associates is as
follows:
<TABLE>
<CAPTION>
Three months ended Six
months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating revenues $ 16,463 $3,357,307
$ 3,642,984 $6,726,272
Gain on sale 61,926,876 -
61,926,876 -
Expenses 67,758 1,793,740
1,190,184 3,725,829
Net income $61,875,581 $1,563,567
$64,379,676 $3,000,443
</TABLE>
During the first quarter of 1998, Associates accounted
for its investment in the property as real estate held
for sale. Accordingly, Associates did not record
depreciation expense on the property and related
improvements in 1998 (such expenses were approximately
$730,000 and $1,460,000 during the three- and six-month
periods ended June 30, 1997, respectively).
Summarized financial information of Taxter Park
Associates, the general partnership which owns the
Taxter Corporate Park property, is as follows:
<TABLE>
<CAPTION>
Three months ended Six
months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $1,302,877 $1,491,817
$2,712,369 $2,818,839
Expenses 1,079,746 1,141,930
2,156,904 2,205,507
Net income $ 223,131 $ 349,887 $
555,465 $ 613,332
</TABLE>
3. Related Party Transactions
In 1998 and 1997, an affiliate of the Managing General
Partner provided property management services for
Taxter Corporate Park and five buildings at the
Chesterbrook Corporate Center. The Partnership paid
the affiliate management fees of approximately $43,000
and $50,000 for the six months ended June 30, 1998 and
1997, respectively. These amounts were recorded as
expenses of the
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
joint ventures. In addition, in 1997, the Partnership
paid this affiliate approximately $26,000 (included in
property operating expenses) for managing Pasadena
Financial Center.
Another affiliate of the Managing General Partner
performs administrative functions, processes investor
transactions and prepares tax information for the
Partnership. For the six-month periods ended June 30,
1998 and 1997, the Partnership incurred approximately
$108,000 and $149,000, respectively for these services.
These amounts are included in general and
administrative expenses.
As of June 30, 1998, the affiliates were owed
approximately $21,000 for these services.
4. Litigation
Various public partnerships sponsored by Realty
(including the Partnership and its Managing General
Partner) were defendants in a class action lawsuit. On
July 17, 1998, the Delaware Chancery Court granted the
defendants' motion to dismiss the complaint in the
lawsuit. The Plaintiffs have thirty days during which
to file a notice of appeal from the Court's order; the
Partnership does not know whether they intend to do so.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $152,218,500 in a public
offering of 304,437 units which was terminated in 1988.
The Partnership has no plans to raise additional
capital.
The Partnership made four investments in partnerships
which own interests in properties on an all-cash basis.
The Partnership's acquisition program is completed. No
additional investments are planned.
One of the partnerships in which the Partnership
invested sold its property interest in 1996 and another
sold its property interest in 1997. The partnership
which owns the Chesterbrook Corporate Center sold the
property on April 1, 1998 (see Note 2 to the
consolidated financial statements). On April 30, 1998,
the Partnership distributed approximately $51.4 million
($168.94 per Unit), its share of net proceeds from the
sale, 100% to Limited Partners.
The Partnership's share of 1998 operating cash flow
from the Chesterbrook property was approximately
$1,059,000. The Partnership stopped receiving cash
flow from operations from the Chesterbrook property
once the property was sold; as a result, Partnership
cash flow from operations significantly decreased
during the second quarter of 1998.
Effective April 1, 1998, the Partnership's interest in
the Taxter property is the Partnership's sole property
interest. The partnership which owns the Taxter
Corporate Park is currently marketing the property for
sale, with the objective of completing a sale later in
1998. There can be no assurance that the Taxter
property will be sold.
The Partnership's liquidity depends on its share of
cash flow generated by the Taxter property and cash
required to fund capital expenditures and leasing
commissions. Generally, future cash distributions will
be paid from proceeds from the sale of the Taxter
property and cash reserves.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
During the six months ended June 30, 1998, the
Partnership's property interests generated positive
cash flow from operations, and it is anticipated that
the Taxter property will continue to provide operating
cash flow to the Partnership during the period the
Partnership continues to own the property interest.
During the six months ended June 30, 1998, the
Partnership contributed approximately $363,000 and
$134,000 to the Chesterbrook and Taxter joint ventures,
respectively, for its share of capital expenditures and
leasing commissions.
During the six months ended June 30, 1998,
distributions to investors (excluding the distribution
of sales proceeds) and contributions to joint ventures
exceeded cash flow from operations and distributions
from joint ventures (excluding the distribution of
sales proceeds). This shortfall was funded from cash
reserves.
The Managing General Partner believes that the
Partnership did not have sufficient cash reserves at
June 30, 1998 to fully fund its maximum liability for
capital expenditures and leasing commissions at the
Taxter property ($89,000), potential final settlements
with the buyer of the Chesterbrook property and other
Partnership cash requirements. Therefore, in order to
accumulate sufficient cash reserves, the Partnership
did not pay its second quarter distribution in July
1998.
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.
Operations
Fluctuations in the Partnership's operating results for
the three- and six-month periods ended June 30, 1998
compared to 1997 were primarily attributable to the
following:
There was no rental income, gain on sale of real
estate, property operating expenses, amortization
expense and minority interest expense due to the April
10, 1997 sale of Pasadena Financial Center.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Equity in earnings of joint ventures increased in 1998
as a result of the Partnership's share of the gain from
the sale of the Chesterbrook property in April 1998.
See Note 2 to the consolidated financial statements.
Equity in earnings from the Chesterbrook joint venture
also increased by approximately $300,000 during the six
months ended June 30, 1998 because no depreciation
expense was recorded at the property during the first
quarter of 1998 (because the partnership which owned
the property reclassified it to real estate held for
sale as of December 31, 1997). The Partnership's
equity in earnings of the Taxter joint venture was
approximately $91,000 and $225,000 during the three-
and six-month periods ended June 30, 1998,
respectively.
Interest and other income decreased slightly during the
six months ended June 30, 1998 primarily because of
lower average cash balances in 1998. During the three
months ended June 30, 1998, interest and other income
increased primarily because the Partnership's interest
earned in 1998 on the proceeds from the sale of the
Chesterbrook property (until such proceeds were
distributed to Limited Partners) exceeded interest
earned in 1997 on the proceeds from the sale of
Pasadena Financial Center.
There were no other individually significant factors
which caused changes in revenues or expenses.
During the second quarter of 1998, the overall vacancy
level in the office market in Westchester County, New
York, the location of Taxter Corporate Park, remained
at 17% and the vacancy level in the west Westchester
market in which the building is located also remained
at 9%. During the six months ended June 30, 1998,
occupancy at the property remained at 100%. Leases
aggregating approximately 11%, 11% and 29% of the
property's space are scheduled to expire in 1999, 2000
and 2001, respectively.
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.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 17, 1998, the Delaware Chancery Court
granted the defendants' motion to dismiss the
complaint in the Consolidated Action.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
An exhibit index has been filed as part of
this Report on Page E1.
b) Reports on Form 8-K.
Report dated April 1, 1998
regarding the sale of the Chesterbrook
property.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
DEAN WITTER REALTY INCOME
PARTNERSHIP IV, L.P.
By: Dean Witter Realty
Fourth Income Properties
Inc.
Managing General Partner
Date: August 13, 1998 By: /s/E. Davisson
Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 13, 1998 By: /s/Charles M.
Charrow
Charles M. Charrow
Controller
(Principal Financial and
Accounting Officer)
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Quarter Ended June 30, 1998
Exhibit Index
Exhibit
No. Description
27 Financial Data Schedule
E1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information, refer to the accompanying
unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 831,262
<SECURITIES> 0
<RECEIVABLES> 147,597
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,848,233<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,528,193<F2>
<TOTAL-LIABILITY-AND-EQUITY> 9,848,233<F3>
<SALES> 0
<TOTAL-REVENUES> 26,221,939<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 190,174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,031,765
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,031,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,031,765
<EPS-PRIMARY> 85.08<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include investments in
joint ventures of $8,869,374.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $320,040.
<F4>Total revenues include equity in earnings of joint ventures of $25,973,188
and interest and other revenue of $248,751.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
