<PAGE>
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, 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 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 nonaffiliates of
the registrant. Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
None
<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 6 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
investments in real property.
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 Notes 4
and 5 to the consolidated financial statements.
As of 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 in 1999. There can be no
assurance that the Taxter property will be sold.
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.
<PAGE>
The Partnership's real property investment is subject to competition from
similar office properties in the market in which it is located. Further
information regarding competition and market conditions 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, 1998, the Partnership owned, through a partnership interest,
the following property interest, which is not encumbered by indebtedness. The
leases of space in the property provide for pass-throughs to the tenants of
their pro-rata share of certain operating expenses. In the opinion of the
Managing General Partner, the property is adequately covered by insurance.
<TABLE>
<CAPTION>
Year Acquisition Net Rentable Type of
Completed/ Cost Area Ownership of Land
Property and Location Acquired ($000) (000 sq. ft.) and Improvements
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Taxter Corporate Park, 1987-1988/1988 $21,002 345 40.6% General
Westchester, NY Partnership interest1
2 Office buildings
</TABLE>
________________________
1. The remaining GP interests are owned 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.
The property was built with on-site parking facilities.
On April 1, 1998, DWR Chesterbrook Associates, in which the Partnership had a
41.2% general partnership interest, sold the Chesterbrook Corporate Park. See
Note 5 to the consolidated financial statements.
An affiliate of the Partnership was the property manager for Taxter Corporate
Park in 1998 and the co-property manager for five buildings at the Chesterbrook
Corporate Center until it was sold.
3
<PAGE>
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 Associated 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 Stated 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. (now known as Morgan Stanley Dean Witter & Co., "MWD") 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, MWD, 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, MWD 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, MWD, 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.
4
<PAGE>
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 and the Grigsby Action were 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, MWD, 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.
On July 17, 1998, the Delaware Chancery Court granted the defendants' motion to
dismiss the complaint in the Consolidated Action. The plaintiffs filed a notice
of appeal from the Chancery Court's order on August 14, 1998. Oral argument on
the appeal was heard by the Delaware Supreme Court on January 5, 1999. The
Delaware Supreme Court affirmed the Chancery Court's dismissal of the
Consolidated Action on January 6, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
No matter was submitted during the fourth quarter of the 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.
5
<PAGE>
As of February 28, 1999, there were 16,305 holders of limited partnership
interests.
The Partnership is a limited partnership and, accordingly, does not pay
dividends. It does, however, make 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, 1998, the Partnership paid quarterly cash
distributions for the fourth quarter of 1997 and the first quarter of 1998
aggregating $2,164,885, with $1,948,397 ($6.40 per Unit) distributed to the
Limited Partners and $216,488 to the General Partners. In addition, the
Partnership distributed $51,431,587 ($168.94 per Unit) from its share of the net
proceeds from the sale of the Chesterbrook Corporate Park. The sales proceeds
distribution was paid 100% to Limited Partners.
The Partnership did not pay any regular distribution after the first quarter
distribution made in April 1998 and does not anticipate making regular
distributions in the future. Future cash distributions will be paid from
proceeds received from the sale of the Taxter property and cash reserves.
During the year ended December 31, 1997, the Partnership paid quarterly cash
distributions aggregating $6,377,908, with $5,740,052 ($18.85 per Unit)
distributed to the Limited Partners and $637,856 to the General Partners. In
addition, the Partnership distributed $32,881,031 ($108.01 per Unit) and
$14,737,795 ($48.41 per Unit), from its shares of the net proceeds from the
sales of the Technology Park and Pasadena Financial Center properties. The
sales proceeds distributions were paid 100% to Limited Partners. On August 28,
1997, the Partnership paid a cash distribution from cash reserves aggregating
$2,114,145, with $1,902,731 ($6.25 per Unit) distributed to the Limited Partners
and $211,414 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
6
<PAGE>
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>
For the years ended December 31,
--------------------------------
1998/1/ 1997/2/ 1996/3/ 1995 1994
<S> <C> <C> <C> <C> <C>
Total revenues $26,768,386 $ 8,574,341 $ 15,185,608 $ (4,999,134)/4/ $11,219,617
Net income $26,464,164 $ 4,674,724 $ 7,977,890 $(15,490,563)/4,5/ $ 4,588,878
Net income (loss)
per Unit of
Limited partner-
ship interest $ 86.36 $ 14.30 $ 24.32 $ (45.79) $ 13.57
Cash distributions
paid per Unit
of limited
partnership
interest/6/ $ 175.34 $ 181.52 $ 23.75 $ 20.00 $ 20.00
Total assets of
December 31 $10,104,468 $37,482,526 $115,446,796 $ 115,021,277 $141,476,185
- ------------------
</TABLE>
1. Revenues and net income include the Partnership's share ($24,733,077) of gain
on sale of the Chesterbrook property.
2. Revenues and net income include $4.2 million gain on sale of Pasadena
Financial Center.
3. Revenues and net income include $3.2 million gain on sale of Tech Park Reston
office park.
4. Includes the Partnership's share ($16,027,387) of loss on impairment of the
Chesterbrook property.
7
<PAGE>
5. Includes loss on impairment of Pasadena Financial Center ($4,348,954, net of
minority interest).
6. Distributions paid to Limited Partners include returns of capital per Unit of
limited partnership interest of $96.15, $181.52, $23.75, $20.00,and $15.10
for the years ended December 31, 1998, 1997, 1996, 1995 and 1994,
respectively, calculated as the excess of cash distributed per Unit over
accumulated earnings per Unit not previously distributed.
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 or owned
interests in properties, on an all-cash basis. The Partnership's acquisition
program has been completed. No additional investments are planned.
One of the partnerships in which the Partnership invested sold its property in
1996 and another sold its property in 1997. The partnership which owned the
Chesterbrook Corporate Center sold its property on April 1, 1998. 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. See
Notes 4 and 5 to the consolidated financial statements.
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.
After the sale of the Chesterbrook property, 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 in
1999. There can be no assurance that the Taxter property will be sold.
8
<PAGE>
On February 8, 1999, an affiliate of the Managing General Partner, as an
accommodation to the Taxter Partnership, purchased the leasehold interest of KLM
in approximately 20% of the property's space. See Note 5 to the consolidated
financial statements.
During 1998, the overall vacancy level in the office market in Westchester
County, New York, the location of Taxter Corporate Park, increased slightly from
17% to 18%. Also during 1998, the vacancy level in the west Westchester market
in which the building is located increased from 11% to 14%. The average
occupancy at the property during 1998 was approximately 99%, and at December 31,
1998, the property was 98% occupied and leased to 17 tenants. However, in
February 1999, KLM entered into a new lease (pursuant to which it occupies
approximately 10% of the property's space through 2001) and vacated
approximately 10% of the property's space, and another tenant vacated
approximately 7% of the property's space. Also, the ability of Cityscape, which
occupies approximately 12% of the property's space, to satisfy its future
obligations under its leases (which expire in 2000) is uncertain because
Cityscape filed for bankruptcy protection in 1998. Leases aggregating
approximately 5% of the property's space expire 1999. The lease of Fuji Photo
Film (for approximately 28% of the property's space) expires in 2001. No other
tenants occupy more than 10% of the property.
During 1998, the Taxter property generated positive cash flow from operations,
and it is anticipated that it will continue to do so during 1999.
During 1998, the Partnership made cash distributions of cash flow from
operations and proceeds from sales of properties. See Item 5. The
Partnership's distributions to investors (excluding distributions of sales
proceeds) and contributions to its joint ventures exceeded cash flow from
operations and distributions received from its joint venture. This shortfall
was funded from Partnership cash reserves. Generally, future cash distributions
will be paid from proceeds received from the sale of the Taxter property and
cash reserves.
The Taxter partnership expects to pay for its share of the purchase price of the
former KLM leasehold interest from its share of the proceeds from the sale of
the Taxter property. As of December 31, 1998 the Partnership had commitments to
fund approximately $40,000 for its share of capital expenditures and leasing
commissions at the Taxter property. The Partnership, through DWR Chesterbrook
Associates, may also be required to
9
<PAGE>
fund costs of capital expenditures at the Chesterbrook property, if the
aggregate of such costs, when all projects have been completed, exceeds the
escrow deposit made when the property was sold.
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 year ended December
31, 1998 compared to 1997 and for 1997 compared to 1996 are primarily
attributable to the following:
In 1998, the Partnership's equity in the earnings of the Taxter partnership was
approximately $745,000 compared to approximately $509,000 in 1997. The increase
was primarily due to the Partnership's share ($217,000) of a refund of prior
year real estate taxes received in the third quarter. The remaining 1998
increase resulted from the gain on sale of the Chesterbrook property. No
individual factor accounted for a significant portion of the decrease in equity
in earnings of joint ventures in 1997 compared to 1996,
Rental income, property operating expenses and depreciation and amortization
expenses decreased in 1998 compared to 1997 and 1997 compared to 1996 due to the
December 31, 1996 sale of the Technology Park Reston office park and the April
10, 1997 sale of Pasadena Financial Center.
The gains on sales of real estate resulted from the property sales described
above.
General and administrative expenses decreased in 1998 compared to 1997 and 1997
compared to 1996 primarily because of sales of properties.
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.
10
<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, 1998 and 1997
Consolidated Income Statements for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Partners' Capital for the years
ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
All schedules have been omitted because either the required information is not
applicable or the information is shown in the consolidated financial statements
or notes thereto.
11
<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, 1998 and 1997, and the related consolidated
statements of income, partners' capital, and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these 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 consolidated 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, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 18, 1999
12
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 1,531,647 $ 1,868,422
Investments in joint ventures 8,552,095 35,449,866
Other assets 20,726 164,238
- ----------------------------------------------------------------------------------------
$10,104,468 $37,482,526
=========================================================================================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable and accrued liabilities $ 143,877 $ 389,627
- -----------------------------------------------------------------------------------------
Partners' capital (deficiency):
General partners (5,460,525) (5,417,146)
Limited partners ($500 per Unit, 304,437 Units issued) 15,421,116 42,510,045
- ------------------------------------------------------------------------------------------
9,960,591 37,092,899
- ------------------------------------------------------------------------------------------
$10,104,468 $37,482,526
==========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED INCOME STATEMENTS
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
- --------------------------------------------------------------------------------
Revenues:
Equity in earnings of joint
ventures $26,491,104 $2,995,878 $ 3,041,184
Rental - 1,019,935 8,669,237
Gains on sales of real estate - 4,184,529 3,169,132
Interest and other 277,282 373,999 306,055
- --------------------------------------------------------------------------------
26,768,386 8,574,341 15,185,608
- --------------------------------------------------------------------------------
Expenses:
Property operating - 420,334 1,414,012
Depreciation - - 2,312,930
Amortization - 6,279 130,853
General and administrative 304,222 493,830 596,945
- --------------------------------------------------------------------------------
304,222 920,443 4,454,740
- --------------------------------------------------------------------------------
Income before minority interests 26,464,164 7,653,898 10,730,868
Minority interests - 2,979,174 2,752,978
- --------------------------------------------------------------------------------
Net income $26,464,164 $4,674,724 $ 7,977,890
- --------------------------------------------------------------------------------
Net income allocated to:
Limited partners $26,291,055 $4,354,778 $ 7,404,058
General partners 173,109 319,946 573,832
- --------------------------------------------------------------------------------
$26,464,164 $4,674,724 $ 7,977,890
================================================================================
Net income per Unit of limited
partnership interest $86.36 $14.30 $24.32
================================================================================
See accompanying notes to consolidated financial statements.
14
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1998, 1997 and 1996
Limited General
Partners Partners Total
- --------------------------------------------------------------------------------
Partners' capital (deficiency) at
January 1, 1996 $ 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
Net income 4,354,778 319,946 4,674,724
Cash distributions (55,261,609) (849,270) (56,110,879)
- --------------------------------------------------------------------------------
Partners' capital (deficiency) at
December 31, 1997 42,510,045 (5,417,146) 37,092,899
Net income 26,291,055 173,109 26,464,164
Cash distributions (53,379,984) (216,488) (53,596,472)
- --------------------------------------------------------------------------------
Partners' capital (deficiency)
at December 31, 1998 $ 15,421,116 $(5,460,525) $ 9,960,591
================================================================================
See accompanying notes to consolidated financial statements.
15
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP IV, L.P.),,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 26,464,164 $ 4,674,724 $ 7,977,890
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Equity in earnings of joint ventures (26,491,104) (2,995,878) (3,041,184)
Gains on sales of land and buildings - (4,184,529) (3,169,132)
Minority interests in earnings of
consolidated joint ventures - 2,979,174 2,752,979
Depreciation - - 2,312,930
Amortization - 6,279 130,853
Decrease (increase) in other assets 143,512 (45,810) (274,617)
(Decrease) increase in accounts payable
and accrued liabilities (245,750) 157,694 60,690
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities (129,178) 591,654 6,750,409
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Distributions from joint ventures 53,961,857 4,935,902 4,745,191
Investments in joint ventures (572,982) (490,712) (1,277,336)
Proceeds from sale of real estate - 26,372,099 50,943,086
Additions to buildings and improvements - - (1,058,880)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 53,388,875 30,817,289 53,352,061
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Cash distributions (53,596,472) (56,110,879) (8,032,230)
Additional investments by minority interests - 263,494 465,907
Minority interests in distributions from
consolidated joint ventures - (29,892,208) (2,793,284)
- ---------------------------------------------------------------------------------------------------------
Net cash used in financing activities (53,596,472) (85,739,593) (10,359,607)
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (336,775) (54,330,650) 49,742,863
Cash and cash equivalents at beginning of year 1,868,422 56,199,072 6,456,209
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,531,647 $ 1,868,422 $ 56,199,072
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
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.
The Partnership expects to sell its remaining real estate investment in 1999.
Pursuant to the Partnership Agreement, the sale of the Partnership's last such
investment will cause the dissolution of the Partnership. Thereafter, the
Partnership will wind up its affairs, make a final cash distribution, and
terminate.
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 former 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.
17
<PAGE>
At least annually, and more often if circumstances dictate, the Partnership
evaluates the recoverability of the net carrying value of its real estate
(including that held by its investor partnerships) 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.
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, 1998. The cash flows used to evaluate the
recoverability of the properties 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 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.
18
<PAGE>
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 $24 million higher than the amounts reported for
financial statement purposes.
The implementation in 1998 of Financial Accounting Standards Board Statement No.
130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" did not have any impact on
the Partnership's financial statements.
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.
19
<PAGE>
$96.15 of distributions paid in 1998 represented return of capital. All
distributions paid to Limited Partners during 1997 and 1996 represented returns
of capital, calculated as the excess of cash distributed per Unit over
accumulated earnings per Unit not previously distributed.
4. Real Estate
-----------
Pasadena Financial Center
- -------------------------
The Partnership owns a 56% general partnership interest in Pasadena Lake
Associates ("PLA"); the remaining general partnership interest in PLA was 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 was held by an affiliate of the
original seller of the property.
On April 10, 1997, LCA sold the property to an unaffiliated party for
$26,700,000. The sale price was received in cash at closing. The Partnership
received approximately $14.7 million of such cash, representing its 56% share of
the cash received by PLA, net of closing costs. In accordance with LCA's
partnership agreement, all of the income, gain and cash from the property were
allocated to PLA. The Partnership's 56% share of the gain on this sale
($2,343,336) was allocated 100% to the Limited Partners in accordance with the
Partnership Agreement. The Partnership distributed the net sales proceeds
($48.41 per Unit), 100% to Limited Partners.
Technology Park Reston
- ----------------------
The Partnership owned 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 was held by an
affiliate of the Partnership, Dean Witter Realty Income Partnership III, LP.
The partners received cash flow and profits and losses according to their
percentage ownership interests.
On December 31, 1996, TPA and an affiliate of the Managing General Partner (the
"Related Party"), which owned the fourth building at the property, sold 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
20
<PAGE>
Related Party, based on the relative square footage of the buildings each owned
at the property.
The sale price was received in cash at closing. The Partnership received
$32,881,031 of such cash, representing its 65% share of the cash received by
TPA, net of closing costs. The Partnership's 65% share of the gain on this sale
($2,059,936) was allocated 100% to the Limited Partners in accordance with the
Partnership Agreement. The Partnership distributed the net sales proceeds
($108.01 per Unit), 100% to Limited Partners.
5. Investments in Joint Ventures
-----------------------------
Chesterbrook Corporate Center, Valley Forge, Pennsylvania
Pursuant to a Purchase and Sale Agreement (the "Agreement"), on April 1, 1998,
DWR Chesterbrook Associates ("Associates") sold its sole property, Chesterbrook
Corporate Park (the "Property"), to FV Office Partners, L.P. an unaffiliated
party. As part of the Agreement, Dean Witter Realty 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 balance 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 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.
21
<PAGE>
The Partnership, Dean Witter Realty Income Partnership III, L.P. and an
affiliate of the Managing General Partner had acquired 41.2%, 26.7% and 32.1%
interests, respectively, in Associates in 1987.
Summarized financial information of DWR Chesterbrook Associates is as follows:
December 31,
1997
- --------------------------------------------------------------------------------
Land and buildings, net $61,345,220
Other 2,802,758
- --------------------------------------------------------------------------------
Total assets $64,147,978
================================================================================
Liabilities $ 1,964,881
Partners' capital 62,183,097
- --------------------------------------------------------------------------------
Total liabilities and capital $64,147,978
================================================================================
Years ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------
Rental income $ 3,619,970 $13,625,596 $13,590,397
Other income 23,204 47,097 52,854
Gain on sale of land and building 61,917,072 - -
- --------------------------------------------------------------------------------
65,560,246 13,672,693 13,643,251
- --------------------------------------------------------------------------------
Property operating expenses 1,117,711 4,418,602 4,681,584
Depreciation and amortization 66,803 3,217,884 3,161,268
- --------------------------------------------------------------------------------
1,184,514 7,636,486 7,842,852
- --------------------------------------------------------------------------------
Net income $64,375,732 $ 6,036,207 $ 5,800,399
================================================================================
22
<PAGE>
Taxter Corporate Park, Westchester County, New York
- ---------------------------------------------------
The joint venture which owns the Taxter Corporate Park is a general partnership
which is owned 40.6% by the Partnership. Dean Witter Realty Income Partnership
II, L.P., and Dean Witter Realty Income Partnership III, L.P. own the remaining
interests. The partners receive cash flow and profits and losses according to
their interests.
In 1987, the joint venture which owns Taxter Corporate Park sold a leasehold
interest in approximately 20% of the property's space to KLM. In 1998, KLM
accepted a $6.75 million purchase offer for the leasehold interest, which the
joint venture had the right to match. The partners of the joint venture believe
that inclusion of the KLM space improves the value and salability of the
property; however, the joint venturers did not have sufficient cash to fund the
purchase. Therefore, an affiliate of the Managing General Partner (the
"Affiliate"), as an accommodation, purchased the leasehold interest on February
8, 1999 for $6.75 million and assumed the rights and obligations of KLM
thereunder.
On February 4, 1999, the joint venture and KLM entered into a new lease which
allows KLM to continue to occupy 50% of the space subject to the leasehold
interest. On February 8, 1999, the Affiliate also assumed the rights and
obligations of the joint venture under this new lease.
As part of the purchase of the leasehold interest, the joint venture received an
option to purchase the leasehold interest and assume the new lease from the
Affiliate for a purchase price of $6.75 million plus any tenant improvements,
leasing commissions and capital expenditures incurred by the Affiliate in
connection with the leasehold interest (collectively, the "Resale Price"). The
joint venture also granted the Affiliate an option to require the joint venture
to purchase the leasehold interest and assume the new lease for the Resale
Price. When the property is sold, the joint venture will be obligated to
purchase the leasehold interest and assume the new lease from the Affiliate for
the Resale Price.
23
<PAGE>
Summarized financial information of the Taxter joint venture is as follows:
December 31,
1998 1997
- --------------------------------------------------------------------------------
Land and buildings, net $16,337,983 $17,185,315
Other 1,516,564 1,545,107
- --------------------------------------------------------------------------------
Total assets $17,854,547 $18,730,422
================================================================================
Liabilities $ 640,028 $ 281,092
Partners' capital 17,214,519 18,449,330
- --------------------------------------------------------------------------------
Total liabilities and capital $17,854,547 $18,730,422
================================================================================
Years ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------
Rental income $5,684,312 $ 5,568,140 $ 5,741,566
Other income 68,706 114,082 270,626
- --------------------------------------------------------------------------------
5,753,018 5,682,222 6,012,192
- --------------------------------------------------------------------------------
Property operating expenses 2,439,845 3,168,784 3,204,334
Depreciation and amortization 1,478,048 1,259,841 1,203,375
- --------------------------------------------------------------------------------
3,917,893 4,428,625 4,407,709
- --------------------------------------------------------------------------------
Net income $1,835,125 $ 1,253,597 1,604,483
================================================================================
Activity in Investments in Joint Ventures is as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Investments at beginning of year $ 35,449,866 $36,899,178 $37,325,849
Equity in earnings 26,491,104 2,995,878 3,041,184
Distributions (53,961,857) (4,935,902) (4,745,191)
Contributions 572,982 490,712 1,277,336
- --------------------------------------------------------------------------------
Investments at end of year $ 8,552,095 $35,449,866 $36,899,178
================================================================================
24
<PAGE>
6. Related Party Transactions
--------------------------
An affiliate of the Managing General Partner provided property management
services for Taxter Corporate Park and Pasadena Financial Center (until Pasadena
Financial Center was sold in 1997) and for five buildings at Chesterbrook
Corporate Center (until Chesterbrook Corporate Center was sold in April 1998).
The Partnership paid the affiliate management fees of approximately
$80,000, $125,000 and $161,000 for the years ended December 31, 1998, 1997 and
1996, 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. The Partnership incurred approximately $213,000 $276,000 and
$400,000 for such services in each of the years ended December 31, 1998, 1997
and 1996. These amounts are included in general and administrative expenses.
As of December 31, 1998, the affiliates were owed approximately $15,000 in total
for these services.
7. 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. On August 14, the Plaintiffs filed a
notice of appeal from the court's order. On January 6, 1999, the Delaware
Supreme Court affirmed the Chancery Court's dismissal of the complaint.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------ -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
25
<PAGE>
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 55, has been a Managing Director of Morgan Stanley and co-
Head of Morgan Stanley Realty Incorporated since July 1997, and a Managing
Director of Dean Witter Realty Inc., which he joined in 1982. He is an
Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 49, has been a Managing Director of Morgan
Stanley, Asia, Ltd. since 1997, and a Managing Director of Dean Witter Realty
Inc., which he joined in 1982.
Lawrence Volpe, age 51, is a Senior Vice President of Dean Witter Reynolds, Inc.
which he joined in 1983. Since June 1998, he has served in an advisory capacity
in connection with Dean Witter Realty Inc. and related entities. Prior to June
1998, he was the Controller of Dean Witter Reynolds Inc. and the Managing
General Partner, and the Controller and a Director of Dean Witter Realty Inc.
Ronald T. Carman, age 47, is a Director and the Secretary of Dean Witter Realty
Inc. He has been an Assistant Secretary of MWD and a Managing Director of
Morgan Stanley & Co. Inc. since July 1998. Previously, he was
26
<PAGE>
Senior Vice President and Associate General Counsel of 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
$216,488,$849,270, and $803,223 during the years ended December 31, 1998, 1997
and 1996.
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 6 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 December 31, 1998:
Amount and
Nature of
Title of Class Name of Beneficial Owner Beneficial Ownership
- -------------- ------------------------ --------------------
Limited All directors and executive *
Partnership officers of the Managing
Interests 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.
27
<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 Morgan Stanley Dean Witter & 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 6 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.
28
<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 incorporated 33-16054 is herein by
reference.
(10)a Purchase and Sale Agreement between Technology Park Associates, Dean
Witter/Technology Park II Associates, L.P., and Sprint Communications
Company, L.P., a Delaware Limited Partnership filed as exhibit 2 to
the Registrant's Report on Form 8-K on December 31, 1996 is
incorporated herein by reference.
(10)b Purchase and Sale Agreement between Lake Colorado Associates, L.P.,
and Spieker Properties, L.P., and unaffiliated party filed as exhibit
to the Registrant's Report on Form 8-K on April 10, 1997 is
incorporated herein by reference.
29
<PAGE>
(c) Purchase and Sale Agreement, dated as of February 10, 1998 between DWR
Chesterbrook Associates, Glenhardie Corporation, Dean Witter Realty
Income Partnership II, L.P., Dean Witter Realty Income Partnership
III, L.P. and Part Six Associates as seller and FV Office Partners,
L.P. as Buyer .
(d) Assignment and Option Agreement dated February 8, 1999 between Taxter
Park Associates and DW Taxter Special Corp.
(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 Taxter Park Associates, the joint
venture which owns Taxter Corporate Park.
30
<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 24, 1999
-----------------------------
E. Davisson Hardman, Jr.
President
By: /s/Charles M. Charrow Date: March 24, 1999
-----------------------------
Charles M. Charrow
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 24, 1999
- ----------------------------------
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: March 24, 1999
- ----------------------------------
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: March 24, 1999
- ----------------------------------
Lawrence Volpe
Director
/s/Ronald T. Carman Date: March 24, 1999
- ----------------------------------
Ronald T. Carman
Director
31
<PAGE>
TAXTER PARK ASSOCIATES
Financial Statements
For the years ended December 31, 1998, 1997 and 1996
Independent Auditors' Report
<PAGE>
EXHIBIT 99
Independent Auditors' Report
To The Partners of
Taxter Park Associates
We have audited the accompanying balance sheets of Taxter Park Associates
(the "Partnership") as of December 31, 1998 and 1997, and the related statements
of income, partners' capital, and cash flows for the years ended December 31,
1998 and 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
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 Taxter Park Associates as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the two years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 18, 1999
1
<PAGE>
TAXTER PARK ASSOCIATES
BALANCE SHEETS
December 31, 1998 and 1997
1998 1997
- --------------------------------------------------------------------------------
ASSETS
------
Cash and cash equivalents $ 35,847 $ 43,477
Real estate, at cost:
Land 1,798,825 1,798,825
Buildings and improvements 27,558,482 27,121,440
- --------------------------------------------------------------------------------
29,357,307 28,920,265
Accumulated depreciation 13,019,324 11,734,950
- --------------------------------------------------------------------------------
16,337,983 17,185,315
Deferred leasing commissions, net 193,292 306,070
Other assets 1,287,425 1,195,560
- --------------------------------------------------------------------------------
$17,854,547 $18,730,422
================================================================================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable and accrued liabilities $ 640,028 $ 281,092
Partners' capital 17,214,519 18,449,330
- --------------------------------------------------------------------------------
$17,854,547 $18,730,422
================================================================================
See accompanying notes to financial statements.
2
<PAGE>
TAXTER PARK ASSOCIATES
INCOME STATEMENTS
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
(unaudited)
- --------------------------------------------------------------------------------
Revenue:
Rental $5,752,318 $5,676,522 $6,005,538
Interest 700 5,700 6,654
- --------------------------------------------------------------------------------
5,753,018 5,682,222 6,012,192
- --------------------------------------------------------------------------------
Expenses:
Property operating 2,439,845 3,168,784 3,204,334
Depreciation 1,311,491 1,093,264 1,049,794
Amortization 166,557 166,577 153,581
- --------------------------------------------------------------------------------
3,917,893 4,428,625 4,407,709
- --------------------------------------------------------------------------------
Net income $1,835,125 $1,253,597 $1,604,483
================================================================================
See accompanying notes to financial statements.
3
<PAGE>
TAXTER PARK ASSOCIATES
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1998, 1997, and 1996
Partners' capital at January 1, 1996 (unaudited) $19,622,040
Net income 1,604,483
Capital contributions 359,831
Cash distributions (2,332,278)
- --------------------------------------------------------------------------------
Partners' capital at December 31, 1996 19,254,076
Net income 1,253,597
Capital contributions 652,219
Cash distributions (2,710,562)
- --------------------------------------------------------------------------------
Partners' capital at December 31, 1997 18,449,330
Net income 1,835,125
Capital contributions 517,939
Cash distributions (3,587,875)
- --------------------------------------------------------------------------------
Partners' capital at December 31, 1998 $17,214,519
================================================================================
See accompanying notes to financial statements.
4
<PAGE>
TAXTER PARK ASSOCIATES
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
(unaudited)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,835,125 $ 1,253,597 $ 1,604,483
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 1,311,491 1,093,264 1,049,794
Amortization 166,557 166,577 153,581
(Increase) decrease in operating assets:
Other assets (91,865) 212,801 (492,440)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities 358,936 7,852 (12,626)
- -------------------------------------------------------------------------------------------
Net cash provided by operating
activities 3,580,244 2,734,091 2,302,792
- -------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to real estate (517,938) (652,218) (338,267)
- -------------------------------------------------------------------------------------------
Cash flows from financing activities:
Capital contributions 517,939 652,219 359,831
Cash distributions (3,587,875) (2,710,562) (2,332,278)
- -------------------------------------------------------------------------------------------
Net cash used in financing activities (3,069,936) (2,058,343) (1,972,447)
- -------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (7,630) 23,530 (7,922)
Cash and cash equivalents at beginning of year 43,477 19,947 27,869
- -------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 35,847 $ 43,477 $ 19,947
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
TAXTER PARK ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. Organization
------------
Taxter Park Associates the "Partnership") was formed in 1986 under the laws of
the State of New York, to acquire interests in the Taxter Corporate Park in
Westchester County, New York. The buildings consist of 344,741 net rentable
square feet. The property is not encumbered by debt.
The general partners of the Partnership are Dean Witter Realty Income
Partnership II, L.P. (14.8%), Dean Witter Realty Income Partnership III, L.P.
(44.6%) and Dean Witter Realty Income Partnership IV, L.P. (40.6%).
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
6
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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.
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, 1998. 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.
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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 $19 million
higher than the amount reported for financial statement purposes.
The implementation in 1998 of Financial Accounting Standards Board Statement
No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosure
about Segments of an Enterprise and Related Information", effective for the
Partnership's 1998 year-end, did not have any impact on the Partnership
financial statements.
3. Lease Commitments
-----------------
Minimum future rental income under noncancellable operating leases as of
December 31, 1998 is as follows:
Year ending December 31:
------------------------
1999 $ 4,602,953
2000 4,276,691
2001 2,356,954
2002 1,481,086
2003 562,494
Thereafter 13,402
-----------
Total $13,293,580
===========
The Partnership has determined that all leases relating to the Property are
operating leases. The terms range from three to six years, and generally
provide for fixed minimum rents with rental escalation and/or expense
reimbursement clauses.
4. Related Party Transactions
--------------------------
An affiliate of the partners co-manages the buildings at the property. The
Partnership paid the affiliate management fees of approximately $175,700,
$179,000 and $150,600 in 1998, 1997 and 1996, respectively, for such services.
8
<TABLE> <S> <C>
<PAGE>
<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 FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,531,647
<SECURITIES> 0
<RECEIVABLES> 20,726
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,104,468<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,960,591<F2>
<TOTAL-LIABILITY-AND-EQUITY> 10,104,468<F3>
<SALES> 0
<TOTAL-REVENUES> 26,768,386<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 304,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,464,164
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,464,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,464,164
<EPS-PRIMARY> 86.36<F5>
<EPS-DILUTED> 0
<FN>
<F1>IN ADDITION TO CASH AND RECEIVABLES, TOTAL ASSETS INCLUDE INVESTMENTS IN JOINT
VENTURES OF $8,552,095.
<F2>REPRESENTS PARTNERS' CAPITAL.
<F3>LIABILITIES INCLUDE ACCOUNTS PAYABLE AND ACCRUED LIABILITIES OF $143,877.
<F4>TOTAL REVENUES INCLUDE EQUITY IN EARNING OF JOINT VENTURE OF $26,491,104 AND
INTEREST AND OTHER REVENUE OF $277,282.
<F5>REPRESENTS NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST.
</FN>
</TABLE>
