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 March 31, 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
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
March 31,
December 31,
1998 1997
<S> <C>
<C>
ASSETS
Cash and cash equivalents $ 936,705 $
1,868,422
Investments in joint ventures 36,154,386
35,449,866
Other assets 170,438
164,238
$37,261,529
$37,482,526
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 342,822 $
389,627
Partners' capital (deficiency):
General partners (5,434,565)
(5,417,146)
Limited partners ($500 per Unit, 304,437 Units issued)
42,353,272 42,510,045
36,918,707
37,092,899
$37,261,529
$37,482,526
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C>
<C>
Revenues:
Equity in earnings of joint ventures $1,166,615 $
698,952
Rental - 877,627
Interest and other 15,364
191,080
1,181,979
1,767,659
Expenses:
Property operating - 362,028
Amortization - 5,729
General and administrative 118,127
132,639
118,127
500,396
Income before minority interests 1,063,852
1,267,263
Minority interests - 227,045
Net income $1,063,852
$1,040,218
Net income allocated to:
Limited partners $ 957,467 $
936,196
General partners 106,385
104,022
$1,063,852
$1,040,218
Net income per Unit of limited partnership interest $ 3.15
$ 3.08
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended March 31, 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 957,467
106,385 1,063,852
Cash distributions (1,114,240)
(123,804) (1,238,044)
Partners' capital (deficiency)
at March 31, 1998 $42,353,272
$(5,434,565) $36,918,707
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1998 and 1997
<CAPTION>
1998 1997
<S> <C>
<C>
Cash flows from operating activities:
Net income $ 1,063,852 $
1,040,218
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of joint ventures (1,166,615)
(698,952)
Amortization -
5,729
Minority interests in joint ventures' operations -
227,045
(Increase) decrease in other assets (6,200)
151,058
(Decrease) increase in accounts payable and accrued
liabilities (46,805)
273,180
Net cash (used in) provided by operating activities
(155,768) 998,278
Cash flows from investing activities:
Distributions from joint ventures 864,415
1,146,286
Additional investments in joint ventures (402,320)
(85,493)
Net cash provided by investing activities
462,095 1,060,793
Cash flows from financing activities:
Cash distributions (1,238,044)
(34,676,967)
Minority interests in joint ventures' distributions -
(17,983,025)
Additional investments by minority interests -
4,233
Net cash used in financing activities (1,238,044)
(52,655,759)
Decrease in cash and cash equivalents (931,717)
(50,596,688)
Cash and cash equivalents at beginning of period
1,868,422 56,199,072
Cash and cash equivalents at end of period $ 936,705 $
5,602,384
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 owns
an interest in Chesterbrook Corporate Center, are
accounted for on the equity method.
The Partnership's records are maintained on the accrual
basis of accounting for financial and tax reporting
purposes.
Net income per Unit amounts are calculated by dividing
net income allocated to Limited Partners, in accordance
with the Partnership Agreement, by the weighted average
number of Units outstanding.
In the opinion of management, the accompanying
financial statements, which have not been audited,
include all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the
results for the interim period.
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 dated as of
February 10, 1998 (the "Agreement"), as amended,
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 on
April 1, 1998. 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
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
($168.94 per Unit) on April 30, 1998. At March 31,
1998, the Partnership's investment in Associates
approximated $27.2 million.
Summarized financial information of Associates is as
follows:
<TABLE>
<CAPTION>
Quarter ended March
31,
1998 1997
<S> <C> <C>
Revenues $3,626,521
$3,368,965
Expenses 1,122,426
1,932,089
Net income $2,504,095
$1,436,876
</TABLE>
In 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 expense
was approximately $730,000 in 1997).
Summarized financial information of Taxter Park
Associates, the general partnership which owns the
Taxter Corporate Park property, is as follows:
<TABLE>
<CAPTION> Quarter ended March
31,
1998 1997
<S> <C> <C>
Revenues $1,409,492
$1,327,022
Expenses 1,077,158
1,063,577
Net income $ 332,334 $
263,445
</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
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Notes to Consolidated Financial Statements
$25,000 and $31,000 for the three months ended March
31, 1998 and 1997, respectively. These amounts were
recorded as expenses of the joint ventures. In
addition, in 1997, the Partnership paid this affiliate
approximately $14,000 (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 three-month periods ended March
31, 1998 and 1997, the Partnership incurred
approximately $71,000 and $75,000, respectively for
these services. These amounts are included in general
and administrative expenses.
As of March 31, 1998, the affiliates were owed
approximately $30,000 for these services.
4. Litigation
Various public partnerships sponsored by Dean Witter
Realty Inc. (including the Partnership and its Managing
General Partner) are defendants in purported class
action lawsuits pending in state and federal courts.
The complaints allege a number of claims, including
breach of fiduciary duty, fraud, misrepresentation and
related claims, and seek compensatory and other damages
and equitable relief. The defendants intend to
vigorously defend against these actions. It is
impossible to predict the effect, if any, the outcome
of these actions might have on the Partnership's
financial statements.
5. Distributions
On April 30, 1998, the Partnership paid the first
quarter cash distribution of $2.74 per Unit to the
Limited Partners. The cash distribution aggregated
$926,841 with $834,157 distributed to the Limited
Partners and $92,684 to the General Partners.
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 has
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 to an unaffiliated party on April 1, 1998 (see
Note 2 to the consolidated financial statements).
Partnership cash flows from this property interest were
approximately $555,000 and $895,000 during the three
months ended March 1998 and 1997, respectively. 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 which owns the Taxter Corporate Park is
currently marketing the property for sale, with the
objective of completing a sale of the property during
the third quarter of 1998. There is no assurance that
the Partnership will be able to achieve this objective.
Employment growth, especially in the communications,
technology and financial services industries, has
increased demand for space in many office markets.
Such increasing demand and a controlled amount of
speculative construction has resulted in falling
vacancies and rising rents. Improved property
performance along with an influx of capital from REITs,
pension funds and foreign investors are increasing
property values. Some office markets,
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
especially suburban markets, are faring better than
others and, in certain areas, improved market
conditions can support new construction. Currently,
the office vacancy rates in both the west Westchester
County, New York market, the location of Taxter
Corporate Park, and the Valley Forge, Pennsylvania
market, the location of Chesterbrook Corporate Center,
are less than 10% and rental rates in these markets are
increasing.
Currently, the Partnership's liquidity is primarily
affected by sales of properties by the partnerships in
which the Partnership has invested; as property
interests are sold, the Partnership has fewer income
producing investments, Partnership cash from operations
decreases and Partnership distributions to investors
will decline. The Partnership will also require less
cash reserves to fund capital expenditures and leasing
commissions. Effective April 1, 1998, the
Partnership's interest in the Taxter property is the
Partnership's sole property interest. Future cash
distribution levels will fluctuate based on the
Partnership's share of this property's cash flow from
operations, requirements for capital expenditures and
leasing commissions, and sales proceeds.
During the three months ended March 31, 1998, the
Partnership's investments in the Chesterbrook and
Taxter properties 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 three months ended March 31, 1998,
distributions to investors and contributions to joint
ventures exceeded cash flow from operations and
distributions from joint ventures. This shortfall was
funded from cash reserves. The Partnership reduced the
first quarter distribution (paid April 30, 1998) to
$2.74 per Unit.
The Partnership currently has minimal cash reserves,
and the Managing General Partner expects that future
quarterly distributions will be paid only to the extent
that the Partnership receives distributions from the
Taxter joint venture.
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
During the three months ended March 31, 1998, the
Partnership contributed approximately $402,000 to the
joint ventures, primarily for its share of capital
expenditures at the Chesterbrook joint venture.
As of March 31, 1998, the Partnership had commitments
to fund approximately $225,000, its share of capital
expenditures to the Taxter Corporate Park joint
venture.
On April 30, 1998, the Partnership paid the first
quarter cash distribution to Limited Partners. The
total cash distribution aggregated $926,841 with
$834,157 distributed to the Limited Partners and
$92,684 to the General Partners.
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-months ended March 31, 1998 compared to the
three-months ended March 31, 1997 were primarily
attributable to the following:
The absence of rental income, property operating
expenses, amortization expense and minority interests
for the three-months ended March 31, 1998 were due to
the April 10, 1997 sale of Pasadena Financial Center.
Since the partnership which owned the Chesterbrook
Corporate Center classified the property as real estate
held for sale on December 31, 1997, no depreciation
expense was recorded at the property in 1998. As a
result, the Partnership's equity in earnings of joint
venture increased by approximately $300,000 in 1998.
Interest and other income decreased in 1998 primarily
because of lower average cash balances in 1998. In
1997, the Partnership received interest on the
investment of the cash proceeds from the
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
December 1996 sale of the Technology Park Reston office
park until such proceeds were distributed to Limited
Partners on January 31, 1997.
There were no other individually significant factors
which caused changes in revenues or expenses.
During the first 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 decreased from
11% to 9%. During the first quarter of 1998, occupancy
at the property remained at 100%. Leases aggregating
approximately 15% and 11% of the property's space are
scheduled to expire in 1999 and 2000, 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 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: May 14, 1998 By: /s/E. Davisson
Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: May 14, 1998 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
Quarter Ended March 31, 1998
Exhibit Index
Exhibit
No. Description
27 Financial Data Schedule
E1
[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.
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] MAR-31-1998
[CASH] 936,705
[SECURITIES] 0
[RECEIVABLES] 170,438
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 0
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 37,261,529<F1>
[CURRENT-LIABILITIES] 0
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 36,918,707<F2>
[TOTAL-LIABILITY-AND-EQUITY] 37,261,529<F3>
[SALES] 0
[TOTAL-REVENUES] 1,181,979<F4>
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 118,127
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 1,063,852
[INCOME-TAX] 0
[INCOME-CONTINUING] 1,063,852
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1,063,852
[EPS-PRIMARY] 3.15<F5>
[EPS-DILUTED] 0
<FN>
<F1>In addition to cash and receivables, total assets include investments in
joint ventures of $36,154,386.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $342,822.
<F4>Total revenues include equity in earnings of joint ventures of $1,166,615
and interest and other revenue of $15,364.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
