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 September 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>
September 30,
December 31,
1998 1997
<S> <C>
<C>
ASSETS
Cash and cash equivalents $ 1,172,229 $
1,868,422
Investments in joint ventures 8,830,544
35,449,866
Other assets 21,428
164,238
$10,024,201
$37,482,526
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 197,787 $
389,627
Partners' capital (deficiency):
General partners (5,474,347)
(5,417,146)
Limited partners ($500 per Unit, 304,437 Units issued)
15,300,761 42,510,045
9,826,414
37,092,899
$10,024,201
$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 nine months ended September 30, 1998 and 1997
<CAPTION>
Three months ended Nine
months ended
September 30,
September 30,
1998 1997 1998 1997
<S> <C> <C> <C>
<C>
Revenues:
Equity in earnings of joint ventures $366,284 $694,061
$26,339,472 $2,267,356
Gain on sale of real estate - - -
4,184,529
Rental - - - 1,019,935
Interest and other 13,218 50,382 261,969
349,417
379,502 744,443 26,601,441
7,821,237
Expenses:
Property operating - - - 420,333
Amortization - - - 6,279
General and administrative 81,280 115,501
271,454 343,797
81,280 115,501 271,454
770,409
Income before minority interests 298,222 628,942
26,329,987 7,050,828
Minority interest - - - 2,979,175
Net income $298,222 $628,942 $26,329,987
$4,071,653
Net income allocated to:
Limited partners $268,400 $557,433 $26,170,700
$3,812,014
General partners 29,822 71,509 159,287
259,639
$298,222 $628,942 $26,329,987
$4,071,653
Net income per Unit of limited
partnership interest $ 0.88 $ 1.83 $ 85.96 $
12.52
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended September 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 26,170,700
159,287 26,329,987
Cash distributions (53,379,984)
(216,488) (53,596,472)
Partners' capital (deficiency)
at September 30, 1998 $ 15,300,761
$(5,474,347) $ 9,826,414
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1998 and 1997
<CAPTION>
1998 1997
<S> <C>
<C>
Cash flows from operating activities:
Net income $ 26,329,987 $
4,071,653
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Equity in earnings of joint ventures (26,339,472)
(2,267,356)
Gain on sale of real estate -
(4,184,529)
Minority interests in consolidated joint ventures'
operations -
2,979,175
Amortization -
6,279
Decrease in other assets 142,810
- -
(Decrease) increase in accounts payable and accrued
liabilities (191,840)
213,075
Net cash (used in) provided by operating activities
(58,515) 818,297
Cash flows from investing activities:
Distributions from joint ventures 53,531,776
3,469,675
Investments in joint ventures (572,982)
(292,647)
Proceeds from sale of real estate -
26,372,099
Net cash provided by investing activities
52,958,794 29,549,127
Cash flows from financing activities:
Cash distributions (53,596,472)
(54,343,261)
Minority interests in distributions from consolidated
joint ventures -
(29,892,208)
Additional investments by minority interests -
263,494
Net cash used in financing activities (53,596,472)
(83,971,975)
Decrease in cash and cash equivalents (696,193)
(53,604,551)
Cash and cash equivalents at beginning of period
1,868,422 56,199,072
Cash and cash equivalents at end of period $ 1,172,229 $
2,594,521
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 former 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 the second quarter
of 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.
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
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
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. and Dean Witter Realty Income
Partnership II, L.P., affiliated public partnerships, 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:
Three months ended Nine months
ended
September 30, September 30,
1998 1997 1998 1997
Operating revenues $ - $3,465,216 $
3,642,984 $10,191,488
Gain on sale - - 61,926,876 -
Expenses - 1,934,638 1,190,184
5,660,467
Net income $ - $1,530,578 $64,379,676
$ 4,531,021
In October 1998, Taxter Park Associates, the general
partnership which owns the Taxter Corporate Park property,
entered into an agreement with KLM Royal Dutch Airlines
("KLM"), a tenant who owns a long-term leasehold interest in
approximately 20% of the space at the property, to purchase
KLM's space for $6.75 million. The Partnership's share of
this purchase price is approximately $2.74 million. The
closing of the purchase is expected to occur in December
1998.
Summarized financial information of Taxter Park Associates,
the general partnership which owns the Taxter Corporate Park
property, is as follows:
Three months ended Nine months
ended
September 30, September
30,
1998 1997 1998 1997
Revenues $1,531,349 $1,374,685 $4,243,718
$4,193,524
Expenses 625,090 1,001,380 2,781,994
3,206,887
Net income $ 906,259 $ 373,305 $1,461,724
$ 986,637
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 $62,000 and $79,000 for the
nine months ended September 30, 1998 and 1997, respectively.
These amounts were recorded as expenses of the joint
ventures. In addition, in 1997, the
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
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
nine-month periods ended September 30, 1998 and 1997, the
Partnership incurred approximately $154,000 and $223,000,
respectively for these services. These amounts are included
in general and administrative expenses.
As of September 30, 1998, the affiliates were owed
approximately $22,000 for these services.
4. Litigation
Various public partnerships sponsored by Dean Witter Realty
Inc. (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 filed a notice of appeal from the Court's
order.
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.
One of the partnerships in which the Partnership invested
sold its property in 1996 and another sold its property in
1997. The partnership which owns the Chesterbrook Corporate
Center sold its 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 the 1998 operating cash flow from
the Chesterbrook property was approximately $903,000.
Partnership cash flow from operations significantly
decreased beginning in the second quarter of 1998 as a
result of the sale of the Chesterbrook property.
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 (the
"Taxter Partnership") is currently marketing the property
for sale, with the objective of completing a sale during the
fourth quarter of 1998 or early 1999. There can be no
assurance that the Taxter property will be sold.
To maximize the value of the Taxter property to the partners
of the Taxter Partnership, the Taxter Partnership has
entered into an agreement with KLM Royal Dutch Airlines
("KLM"), to purchase KLM's property interest (see Note 2 to
the consolidated financial statements). The purchase is
expected to close in December 1998, and the Partnership
plans to fund its share of the purchase price (approximately
$2.74 million) from either its share of the proceeds from
the sale of the Taxter property or otherwise.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
During the nine months ended September 30, 1998, all of the
Partnership's remaining property interests generated
positive cash flow from operations, and it is anticipated
that the Taxter property will continue to do so during the
period the Partnership continues to own the property
interest.
During the nine months ended September 30, 1998, the
Partnership contributed approximately $363,000 and $210,000
to the Chesterbrook and Taxter joint ventures, respectively,
for its share of capital expenditures and leasing
commissions.
During the nine months ended September 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.
In order to increase cash reserves to fully funds its
maximum liability for capital expenditures and leasing
commissions at the Taxter property ($86,000), potential
final settlements with the buyer of the Chesterbrook
property and other Partnership cash requirements, the
Partnership did not pay its second and third quarter
distribution to investors. Generally, future cash
distributions will be paid from proceeds received from the
sale of the Taxter property and cash reserves.
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 nine-month periods ended September 30, 1998
compared to 1997 were primarily attributable to the
following:
Equity in earnings of joint ventures increased during the
nine-month period ended September 30, 1998 and decreased
during the three-month period then ended as a result of the
sale of the Chesterbrook property in April 1998. See Note 2
to the consolidated financial statements.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
During the three- and nine-month periods ended September 30,
1998, the Partnership's equity in the earnings of the Taxter
Partnership was approximately $367,000 and $593,000,
respectively. During the same periods in 1997, the
Partnership's equity in the earnings of the Taxter
partnership was approximately $152,000 and $401,000,
respectively. The 1998 increases in income are primarily due
to the Partnership's share ($217,000) of a refund of prior
years real estate taxes received by the Taxter Partnership
in the third quarter of 1998.
There were no other individually significant factors which
caused changes in revenues or expenses.
During the third 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 increased from 9% to 13%. During the
nine months ended September 30, 1998, occupancy at the
property decreased to 98%. If the Taxter Partnership had
owned the KLM leasehold interest at September 30, 1998,
occupancy at the property would have been approximately 85%.
The Taxter Partnership is discussing leasing the vacant KLM
space to several existing tenants at the property. Leases
aggregating approximately 11%, 11% and 29% of the property's
space (before addition of the KLM 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 August 14, 1998, the plaintiff in the
Consolidated Action filed a notice of appeal from
the order of the Delaware Chancery Court which
granted the defendants' motion to dismiss the
complaint.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
An exhibit index has been filed as part of this
Report on Page E1.
b) Reports on Form 8-K.
None.
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: November 13, 1998 By: /s/E. Davisson Hardman,
Jr.
E. Davisson Hardman, Jr.
President
Date: November 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 September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,172,229
<SECURITIES> 0
<RECEIVABLES> 21,428
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,024,201<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,826,414<F2>
<TOTAL-LIABILITY-AND-EQUITY> 10,024,201<F3>
<SALES> 0
<TOTAL-REVENUES> 26,601,441<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 271,454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,329,987
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,329,987
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,329,987
<EPS-PRIMARY> 85.96<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include investments in
joint ventures of $8,830,544.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $197,787.
<F4>Total revenues include equity in earnings of joint ventures of $26,339,472
and interest and other revenue of $261,969.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
