FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1997 0-14386
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
(Exact Name of Registrant as specified in its charter)
Delaware 16-1245153
- -------------------- ------------------------------------
(State of Formation) (IRS Employer Identification Number)
2350 North Forest Road
Suite 12 A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-0280
Indicate by a 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 a 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-Q or any
amendment to this Form 10-Q. (X)
As of September 30, 1997 the issuer had 23,365.9 units of limited partnership
interest outstanding.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
INDEX
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PAGE NO.
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PART I: FINANCIAL INFORMATION
- ---------------------------------
Balance Sheets -
September 30, 1997 and December 31, 1996 3
Statements of Operations -
Three Months Ended September 30, 1997 and 1996 4
Statements of Operations -
Nine Months Ended September 30, 1997 and 1996 5
Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 6
Statements of Partners' (Deficit) -
Nine Months Ended September 30, 1997 and 1996 7
Notes to Financial Statements 8 - 18
PART II: MANAGEMENT'S DISCUSSION & ANALYSIS OF
- -------- FINANCIAL CONDITION & RESULTS OF
--------------------------------
OPERATIONS 19 - 21
----------
-2-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
September 30, December 31,
1997 1996
---- ----
ASSETS
Property, at cost:
Land $ 1,773,922 $ 1,773,922
Buildings and improvements 28,106,202 27,898,057
Furniture, fixtures and equipment 2,711,794 2,711,794
------------ ------------
32,591,918 32,383,773
Less accumulated depreciation 13,977,260 13,753,437
------------ ------------
Property, net 18,614,658 18,630,336
Escrow deposits 898,649 764,566
Interest and other receivables 588,524 591,255
Prepaid expenses 144,819 216,629
Prepaid commissions, net of accumulated amortization
of $141,841 and $122,454 29,374 14,932
Mortgage costs, net of accumulated amortization
of $533,118 and $493,159 235,382 265,953
Other assets 19,925 4,455
------------ ------------
Total Assets $ 20,531,331 $ 20,488,126
============ ============
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Cash overdraft $ 375,997 $ 138,032
Mortgages and notes payable 18,734,069 18,939,324
Accounts payable and accrued expenses 1,037,755 864,429
Accounts payable - affiliates 3,529,210 3,167,754
Accrued interest 303,283 172,452
Security deposits and prepaid rents 454,285 395,123
------------ ------------
Total Liabilities 24,434,599 23,677,114
------------ ------------
Minority interest in joint venture 3,498 18,477
------------ ------------
Partners' (Deficit):
General partners (690,182) (669,203)
Limited partners (3,216,584) (2,538,262)
------------ ------------
Total Partners' (Deficit) (3,906,766) (3,207,465)
------------ ------------
Total Liabilities and Partners' (Deficit) $ 20,531,331 $ 20,488,126
============ ============
See notes to financial statements
-3-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
STATEMENTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
---- ----
Income:
Rental $ 1,149,966 $ 1,235,723
Interest and other income 77,585 80,831
----------- -----------
Total income 1,227,551 1,316,554
----------- -----------
Expenses:
Property operations 673,682 846,200
Interest:
Paid to affiliates 88,201 100,261
Other 424,098 378,765
Depreciation and amortization 94,214 434,097
Administrative:
Paid to affiliates 127,929 193,965
Other 150,517 153,536
----------- -----------
Total expenses 1,558,641 2,106,824
----------- -----------
Loss before allocated loss from joint venture (331,090) (790,270)
Loss allocated to minority interest 11,278 35,569
----------- -----------
Net loss $ (319,812) $ (754,701)
=========== ===========
Loss per limited partnership unit $ (13.28) $ (31.33)
=========== ===========
Distributions per limited partnership unit $ -- $ --
=========== ===========
Weighted average number of
limited partnership units
outstanding 23,366 23,366
=========== ===========
See notes to financial statements
-4-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
---- ----
Income:
Rental $ 3,731,658 $ 3,820,605
Interest and other income 253,925 269,222
----------- -----------
Total income 3,985,583 4,089,827
----------- -----------
Expenses:
Property operations 2,120,976 2,182,076
Interest:
Paid to affiliates 243,005 225,701
Other 1,211,068 1,176,821
Depreciation and amortization 279,068 948,388
Administrative:
Paid to affiliates 381,534 381,784
Other 464,212 439,035
----------- -----------
Total expenses 4,699,863 5,353,805
----------- -----------
Loss before allocated loss from joint venture (714,280) (1,263,978)
Loss allocated to minority interest 14,979 55,380
----------- -----------
Net loss $ (699,301) $(1,208,598)
=========== ===========
Loss per limited partnership unit $ (29.03) $ (50.17)
=========== ===========
Distributions per limited partnership unit $ -- $ --
=========== ===========
Weighted average number of
limited partnership units
outstanding 23,366 23,366
=========== ===========
See notes to financial statements
-5-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
STATEMENTS OF PARTNERS' (DEFICIT)
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
Balance, January 1, 1996 $ (678,636) 23,366 $(2,843,271)
Net loss (36,258) -- (1,172,340)
----------- ----------- -----------
Balance, September 30, 1996 $ (714,894) 23,366 $(4,015,611)
=========== =========== ===========
Balance, January 1, 1997 $ (669,203) 23,366 $(2,538,262)
Net loss (20,979) -- (678,322)
----------- ----------- -----------
Balance, September 30, 1997 $ (690,182) 23,366 $(3,216,584)
=========== =========== ===========
See notes to financial statements
-6-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
---- ----
Cash flow from operating activities:
Net loss $ (699,301) $(1,208,598)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization 279,068 948,388
Loss allocated to minority interest (14,979) (55,380)
Changes in operating assets and liabilities:
Escrow deposits (134,083) --
Interest and other receivables 2,731 11,492
Prepaid expenses 71,810 --
Prepaid commissions (33,829) --
Other assets (15,470) (294,874)
Accounts payable and accrued expenses 173,326 252,400
Accrued interest 130,831 (94,380)
Security deposits and prepaid rent 59,162 (14,934)
----------- -----------
Net cash (used in) operating activities (180,734) (455,886)
----------- -----------
Cash flow from investing activities:
Capital expenditures and cash flow (used in)
investing activities (208,145) (268,818)
----------- -----------
Cash flows from financing activities:
Mortgage costs (5,287) (205,060)
Cash overdraft 237,965 (168,690)
Accounts payable - affiliates 361,456 657,800
Principal payments on mortgages and notes (205,255) (340,682)
Proceeds from mortgage -- 781,336
----------- -----------
Net cash (used in) provided by financing activities 388,879 724,704
----------- -----------
Increase (decrease) in cash -- --
Cash - beginning of period -- --
----------- -----------
Cash - end of period $ -- $ --
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,080,237 $ 1,271,202
=========== ===========
See notes to financial statements
-7-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
NOTES TO FINANCIAL STATEMENTS
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1. GENERAL PARTNERS' DISCLOSURE
In the opinion of the General Partners of Realmark Property Investors
Limited Partnership IV, all adjustments necessary for a fair presentation
of the Partnership's financial position, results of operations and changes
in cash flows for the nine month periods ended September 30, 1997 and 1996,
have been made in the financial statements. Such financial statements are
unaudited and subject to any year-end adjustments which may be necessary.
2. FORMATION AND OPERATION OF PARTNERSHIP
Realmark Property Investors Limited Partnership IV (the "Partnership"), a
Delaware Limited Partnership, was formed on February 12, 1985, to invest in
a diversified portfolio of income-producing real estate investments.
In April 1985, the Partnership commenced the public offering of units of
limited partnership interest. Other than matters relating to organization,
it had no business activities and, accordingly, had not incurred any
expenses or earned any income until the first interim closing (minimum
closing) of the offering, which occurred on September 20, 1985. On June 22,
1986 the offering was concluded, at which time 23,362.9 units of limited
partnership interest were outstanding, excluding 3 units held by an
affiliate of the General Partners. The General Partners are Realmark
Properties, Inc., a wholly-owned subsidiary of J.M. Jayson & Company, Inc.
and Joseph M. Jayson, the Individual General Partner. Joseph M. Jayson is
the sole shareholder of J.M. Jayson & Company, Inc.
Under the partnership agreement, the general partners and their affiliates
can receive compensation for services rendered and reimbursement for
expenses incurred on behalf of the Partnership.
Net income or loss and proceeds arising from a sale or refinancing shall be
distributed first to the limited partners in amounts equivalent to a 7%
return on the average of their adjusted capital contributions, then an
amount equal to their capital contributions, then an amount equal to an
additional 5% of the average of their adjusted capital contributions after
the general partners receive a disposition fee, then to all partners in an
amount equal to their respective positive capital balances and, finally, in
the ratio of 87% to the limited partners and 13% to the general partners.
-8-
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
The partnership agreement also provides that distribution of funds,
revenues, costs and expenses arising from partnership activities, exclusive
of any sale or refinancing activities, are to be allocated 97% to the
limited partners and 3% to the general partners.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
Property and Depreciation
-------------------------
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets. Expenditures for maintenance and
repairs are expensed as incurred, and major renewals and betterments are
capitalized. The Accelerated Cost Recovery System and Modified Accelerated
Cost Recovery System are used to determine depreciation expense for tax
purposes.
Rental Income
-------------
Leases for residential properties have terms of one year or less.
Commercial leases have terms of from one to five years. Rental income is
recognized on the straight line method over the term of the lease.
Minority Interest in Consolidated Joint Venture
-----------------------------------------------
The minority interest in a consolidated joint venture is stated at the
amount of capital contributed by the minority investors adjusted for their
share of joint venture losses.
4. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY
In November 1985, the Partnership acquired a 168 unit apartment complex
(Lakeview Village) located in Milwaukee, Wisconsin, for a purchase price of
$4,411,659, which included $320,779 in acquisition fees.
In December 1985, the Partnership acquired a 288 unit apartment complex
(Sutton Park, formerly Bristol Square) located in Lansing, Michigan for a
purchase price of $7,252,858, which included $588,716 in acquisition fees.
-9-
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
In August 1986, the Partnership acquired two office/warehouse buildings
consisting of 62,598 square feet (Airlane I) and 68,300 square feet
(Airlane III), consisting of approximately 25% office space and 75%
warehouse space located in Nashville, Tennessee, for a purchase price of
$6,180,920, which included $383,169 in acquisition fees.
In October 1986, the Partnership acquired an 86 unit apartment complex
(Gold Key Village II) located in Englewood, Ohio for a purchase price of
$2,354,615, which included $152,744 in acquisition fees.
In December 1986, the Partnership acquired two apartment complexes
consisting of 96 and 144 units (Creekside Apartments, formerly Bretton Park
I and II) located in Flat Rock, Michigan, for a purchase price of
$5,462,176, which included $445,964 in acquisition fees.
In December 1986, the Partnership acquired a 215 unit apartment complex
(Willow Creek) located in Greenville, South Carolina, for a purchase price
of $5,040,560, which included $477,987 in acquisition fees.
In December 1986, the Partnership acquired a 72 unit apartment complex
(Evergreen Terrace) located in Lansing, Michigan for a purchase price of
$1,1711,093, which included $314,379 in acquisition fees.
In May 1987, the Partnership acquired a 56 unit apartment complex (Cedar
Court) located in Monroeville, Pennsylvania, for a purchase price of
$1,439,832, which included $370,728 in acquisition fees.
In 1988, the Partnership acquired, upon its dissolution, the net assets and
liabilities of the Willow Lake Joint Venture, which amounted to $1,635,474.
Since the date of the acquisition, the Partnership had capitalized
additional construction costs of $5,059,296 which included capitalized
interest of $151,993. Construction on this project was substantially
complete in early 1991. During September 1992, Willow Lake's lender
foreclosed and took possession of the property because the Partnership had
difficulty in obtaining tenant leases and financing to complete tenant
build-out costs. The disposal generated a $1,328,352 loss for financial
statement purposes.
In October, 1989 the Partnership sold the Gold Key II apartment complex for
$2,881,136 which generated a gain of $911,177 for financial statement
purposes.
-10-
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
In July 1996, the Partnership entered into a plan to dispose of the
property, plant and equipment of the following properties: Lakeview Village
(anticipated sales price of $4,090,000), Sutton Park (anticipated sales
price of $5,800,000), Creekside (anticipated sales price of $5,900,000),
Willow Creek (anticipated sales price of $5,425,000), and Evergreen Terrace
(anticipated sales price of $1,200,000). Management determined that the
sale of the properties was in the best interests of the limited partners.
The contracts for the sale of the above-identified residential properties
(i.e. apartment complexes) were terminated recently. In the cases of the
contracts for Creekside Apartments, Sutton Park Apartments and Evergreen
Apartments, the purchaser was unable to secure the necessary tax credits
and bonds allocated through the state agencies. The sale of Lakeview
Apartments located in Milwaukee, Wisconsin was terminated because the city
was unwilling to use their bond allocations for multi-family housing. The
sale of Willow Creek Apartments was not consummated as the purchaser felt
the extent of the needed rehab work at the property was more than the
economics of the deal could support.
Financial Accounting Standards Statement No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of
(the "Statement") requires that assets to be disposed of be recorded at the
lower of carrying value or fair value, less costs to sell. The Statement
also requires that such assets not be depreciated during the disposal
period, as the assets will be recovered through sale rather than through
operations. In accordance with this Statement, the long-lived assets of the
Partnership, classified as held for sale on the balance sheet, are recorded
at the carrying amount which is the lower of carrying value or fair value
less costs to sell, and have not been depreciated during the disposal
period. Depreciation expense, not recorded during the disposal period, for
the nine months ended September 30, 1997 totaled approximately $300,000.
-11-
5. NOTE RECEIVABLE
In connection with the sale of the Gold Key II apartment complex, the
Partnership took back a second mortgage as security for two notes
receivable. The first note for $155,000 carried an interest rate of 10%
with interest payable monthly and the remaining balance payable at maturity
on October 11, 1995. The second note for $75,000 carried an interest rate
of 10% with principal payments payable in five annual installments of
$15,000 and any remaining interest payable at maturity on October 11, 1995.
Neither of the notes were paid in full by the maturity date, and according
to the provisions of the notes, interest continued to accrue at 15%
annually on the unpaid balances. The Partnership received a settlement in
the amount of $175,000 during 1996. The remainder of the balances were
written off.
6. MORTGAGES AND NOTES PAYABLE
The Partnership has the following mortgages and notes payable:
Lakeview
--------
In January 1996, the Partnership refinanced the mortgage. The refinanced
mortgage, with a balance of $2,490,369 and $2,514,540 at September 30, 1997
and 1996 respectively, provides for annual principal and interest payments
at 8.25% payable in equal monthly installments of $232,924. The term of the
mortgage is ten years with the remaining balance due and payable on
February 1, 2006.
Sutton Park (formerly Bristol Square)
-------------------------------------
The property was refinanced January 11, 1996 with an 8% mortgage for
$3,400,000, and an unsecured $50,000 promissory note. The new mortgage
provides for annual principal and interest payments of $306,168 in equal
monthly installments. The balance outstanding at September 30, 1997 and
1996 was $3,352,465 and $3,377,579 respectively. The term of the mortgage
is 10 years with the remaining balance due and payable on February 1, 2006.
The promissory note provides for monthly principal payments of $2,083 plus
interest accruing at the lenders reference rate plus 2% (total of 10.50% at
September 30, 1997). At September 30, 1997 the outstanding balance was
$10,423. The note is due and payable February 1, 1998.
-12-
MORTGAGES AND NOTES PAYABLE (CONTINUED)
Airlanes I & III
----------------
A 7.625% mortgage with a balance of $3,448,282 and $3,574,383 at September
30, 1997 and 1996 respectively, which provides for annual principal and
interest payments of $369,783 payable in equal monthly installments, with
the remaining balance due January 1, 1999.
Creekside
---------
An adjustable rate mortgage with an outstanding principal balance of
$3,613,360 and $3,694,277 at September 30, 1997 and 1996, respectively. The
interest rate is adjustable quarterly to a maximum rate of 13.5% and a
minimum rate of 7% (7.11% at September 30, 1997). The mortgage is payable
monthly in amounts which vary with the interest rate. Monthly payments at
September 30, 1997 based on 7.11% interest rate were $27,892.20. The
balance of the mortgage is due and payable March 31, 1998.
Willow Creek
------------
A 9.25% mortgage with an original balance of $4,080,000 which provides for
annual principal and interest payments of $393,023 payable in equal monthly
installments with the remaining balance of $3,929, 432 due on September 1,
1996; the maturity was then extended to March 1, 1997. The balance as of
September 30, 1997 and 1996 was $3,895,895 and $3,926,969, respectively.
The mortgage is now in default and therefore payable on demand.
Evergreen Terrace
-----------------
An adjustable rate mortgage with a balance at September 30, 1997 and 1996
of $1,011,763 and $1,024,978, respectively. The interest rate is adjustable
annually to a maximum rate of 15% during the first five years of the loan
term and 17% for the remaining life of the loan with a minimum rate of 9%
(9% at September 30, 1997). The mortgage is payable monthly in amounts
which vary with the interest rate. Monthly payments at September 30, 1997
based on a 9% interest rate were $8,950. The balance of the mortgage is due
and payable May 24, 1998.
-13-
MORTGAGES AND NOTES PAYABLE (CONTINUED)
Chapelwood Estates (formerly Cedar Court)
-----------------------------------------
A 9.25% mortgage with a balance of $894,551 and $895,117 at September 30,
1997 and 1996, respectively, which provides for annual principal and
interest payments of $89,586 payable in equal monthly installments with
remaining balance of $895,117 due September 1, 1996. The mortgage is now in
default and therefore payable on demand. In approximately July of 1997, the
lender took this property back due to the default on the mortgage.
The mortgages described above are secured by the Partnership properties to
which they relate.
The aggregate maturities of mortgages and notes payable for each of the
next five years and thereafter are as follows:
Year Amount
---- ------
1997 $ 5,104,085
1998 4,783,112
1999 3,384,889
2000 82,696
2001 89,653
Thereafter 5,494,889
-------------
TOTAL $ 18,939,324
=============
7. INVESTMENT IN JOINT VENTURE
On September 1, 1992, the Partnership entered into an agreement to form a
joint venture with Realmark Property Investors Limited Partnership VI-B
(RPILP VI-B). The joint venture was formed for the purpose of operating the
Lakeview Apartment complex owned by the Partnership. Under the terms of the
agreement, RPILP VI-B contributed $175,413, with the Partnership
contributing the property net of the first mortgage.
-14-
INVESTMENT IN JOINT VENTURE (CONTINUED)
The joint venture agreement provides that any income, loss, gain, cash
flow, or sale proceeds be allocated 83.78% to the Partnership and 16.22% to
RPILP VI-B. The net loss from the date of inception has been allocated to
the minority interest in accordance with the agreement and has been
recorded as a reduction of the capital contribution.
A reconciliation of the minority interest share in the Lakeview Joint
Venture is as follows:
1997
----
Balance, January 1 $ 18,477
Allocated Loss (14,979)
-----------
Balance, September 30 $ 3,498
===========
8. RELATED PARTY TRANSACTIONS
Management fees for the management of certain of the Partnership's
properties are paid to an affiliate of the General Partners. The management
agreement provides for 5% of gross monthly receipts of the complexes to be
paid as fees for administering the operations of the properties. These fees
totaled $209,648 and $195,859 for the nine months ended September 30, 1997
and 1996, respectively.
The Partnership entered into a management agreement with an unrelated third
party for the management of Airlane I and III on August 15, 1986. The
agreement provides for the payment of a management fee equal to 4% of
monthly gross rental income. An affiliate of the General Partners also
receives a management fee of 2% of monthly gross rental income.
According to the terms of the Partnership Agreement, the Corporate General
Partner is also entitled to receive a partnership management fee equal to
7% of net cash flow (as defined in the Partnership Agreement), 2% of which
is subordinated to the limited partners having received an annual cash
return equal to 7% of their average adjusted capital contributions. No such
fee was paid or accrued by the partnership for the nine months ended
September 30, 1997 and 1996.
-15-
RELATED PARTY TRANSACTIONS (CONTINUED)
Accounts payable to affiliates amounted to $3,529,210 and $2,878,647 at
September 30, 1997 and 1996, respectively. The payable represents fees due
and advances from the Corporate General Partner or an affiliate of the
General Partners. Interest charged on accounts payable to affiliates
totaled $243,005 and $225,701 for the nine months ended September 30, 1997
and 1996.
The General Partners are also allowed to collect a property disposition fee
upon sale of acquired properties. This fee is not to exceed the lesser of
50% of amounts customarily charged in arm's-length transactions by others
rendering similar services for comparable properties, or 3% of the sales
price. The property disposition fee is subordinate to payments to the
limited partners of a cumulative annual return (not compounded) equal to 7%
of their average adjusted capital balances and to repayment to the limited
partners of an amount equal to their original capital contributions. Since
these conditions have not been met, no fees have been recorded or paid on
the sale of the Gold Key II apartment complex.
Computer service charges for the partnerships are paid or accrued to an
affiliate of the General Partner. The fee is based upon the number of
apartment units and totaled $9,900 for both the nine months ended September
30, 1997 and 1996, respectively.
Pursuant to the terms of the Partnership Agreement, the Corporate General
Partner charges the Partnership for reimbursement of certain costs and
expenses incurred by the Corporate General Partner and its affiliates in
connection with the administration of the Partnership. These charges were
for the Partnership's allocated share of such costs and expenses which
include payroll, legal, rent, depreciation, printing, mailing, travel and
communication costs related to Partnership accounting, partner
communication and relations and property marketing. Accounting,
communication and marketing expenses are allocated based on total assets,
number of partners, and the market value of properties respectively.
9. INCOME TAXES
No provision has been made for income taxes since the income or loss of the
partnership is to be included in the tax returns of the Individual
Partners.
-16-
INCOME TAXES (CONTINUED)
The tax returns of the Partnership are subject to examination by the
Federal and state taxing authorities. Under federal and state income tax
laws, regulations and rulings, certain types of transactions may be
accorded varying interpretations and, accordingly, reported partnership
amounts could be changed as a result of any such examination.
The reconciliation of net loss for the nine months ended September 30, 1997
and 1996 as reported in the statements of operations, and as would be
reported for tax purposes, is as follows:
September 30, September 30,
1997 1996
---- ----
Net loss - statement of operations $ (699,301) $ (1,208,598)
Add to (deduct from):
Difference in depreciation (240,420) ( 44,400)
Gain on sale of property 3,303 3,303
Allowance for doubtful accounts 139,329 246,000
----------- ------------
Net loss - tax return purposes $ (797,089) $ (1,003,695)
=========== ============
-17-
INCOME TAXES (CONTINUED)
The reconciliation of Partners' (Deficit) as of September 30, 1997 and
December 31, 1996 as reported in the balance sheet, and as reported for tax
purposes, is as follows:
September 30, December 31,
1997 1996
---- ----
Partners' (Deficit) - balance sheet $ (3,906,766) $ (3,521,907)
Add to (deduct from):
Accumulated difference in
depreciation (5,788,555) (5,548,135)
Accumulated amortization 382,695 382,695
Syndication fees 2,734,297 2,734,297
Difference in book and tax
basis in partnership investments ( 635,737) ( 635,737)
Gain from fire loss ( 706,158) ( 706,158)
Other 1,475,441 1,332,809
------------ -------------
Partners' (Deficit) - tax return purposes $ (6,444,783) $ (5,647,694)
============ =============
10. SUBSEQUENT EVENTS
At the beginning of November of 1997, a receiver was appointed by the
lender for Evergreen Terrace Apartments due to a default on the mortgage.
The receiver is currently operating the property and is responsible for
collecting income and paying expenses. The Partnership continues to
maintain the right to sell this property.
-18-
PART II MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Partnership continues to suffer with cash flow shortages. The residential
apartment buildings in the Partnership are all in need of capital improvement
work in order to increase the attraction of the complexes to potential renters.
This capital improvement work is expected to further put a strain on cash flow.
Management has lost Chapelwood Estates located in Monroeville, Pennsylvania to
the lender who recently took back the property. Additionally, Evergreen Terrace
Apartments in Lansing, Michigan has been taken over by a receiver appointed by
the lender. Management continues to negotiate with the lender, but currently the
receiver is collecting the income and paying the expenses out of such income on
behalf of the property.
The General Partner continues to fund the Partnership's shortfalls in cash flow,
although under no obligation to do so. Such advances to the Partnership are
considered payable on demand to the General Partner, and at this point in time,
there is no assurance that these advances will continue. The Partnership did not
make any distributions thus far in 1997, and is not likely to make any in the
future until all Partnership obligations are satisfied and the General Partner
is reimbursed for the advances it has made to the Partnership.
The General Partner continues its efforts to locate a buyer for the properties
in this Partnership as it is felt that the sale of the properties is in the best
interests of the Limited Partners. Until such time as the properties are sold,
it is highly unlikely that the Limited Partners will receive any return of their
investments. Management is also aggressively seeking refinancing for the
properties in an effort to decrease the interest rates currently being paid;
such a decrease will result in lower monthly payments, thus increasing cash
flow. In order for refinancing to take place, however, occupancies must increase
and stabilize at the residential complexes in the Partnership. Airlanes, the one
commercial building in the Partnership, continues to provide cash to the
Partnership, thus cutting the cash flow shortage resulting from the operations
of the residential complexes.
Results of Operations:
- ----------------------
Net loss for the three month period ended September 30, 1997 amounted to
$319,812 or $13.28 per limited partnership unit versus a net loss for the three
month period ended September 30, 1996 of $754,701 or $31.33 per limited
partnership unit. For the nine month period ended September 30, 1997, the net
loss amounted to $699,301 or $29.03 per limited partnership unit versus a net
loss of $1,208,598 or $50.17 per limited partnership unit for the nine month
period ended September 30, 1996.
-19-
Results of Operations (continued):
- -----------------------------------
On a tax basis, the Partnership generated a loss of $797,089 or $33.09 per
limited partnership unit for the nine month period ended September 30, 1997
versus a tax loss of $1,003,695 or $41.67 per limited partnership unit for the
nine month period ended September 30, 1996.
Partnership revenue for the quarter ended September 30, 1997 totaled $1,227,551,
a decrease of $89,000 from the same period in 1996. For the nine month period
ended September 30, 1997 total income decreased by $104,244 from the
corresponding period in 1996. Rental income for the nine month period ended
September 30, 1997, totaled $3,731,658, which was a decrease of almost $89,000
over the same time period in 1996. The decrease is directly related to the
decrease in occupancy and an increase in delinquencies at several of the
complexes, most notably at Lakeview Apartments and Evergreen Terrace Apartments.
Other income also decreased by just over $15,000 between the nine month periods
ended September 30, 1997 and September 30, 1996 primarily due to a decrease in
month-to-month surcharges at virtually all residential complexes and an almost
$3,000 decrease in laundry income at Sutton Park Apartments.
For the three month period ended September 30, 1997, the Partnership expenses
totaled $1,558,641, a decrease of $548,000 from the quarter ended September 30,
1996. For the nine months ended September 30, 1997, the Partnership expenses
totaled $4,699,863, decreasing almost $654,000 from nine months ended September
30, 1996. There was an decrease in property operations expenses which management
believes reflects their continual cost controlling factors and tight monitoring
of expenses. While payroll and associated costs increased significantly (i.e.,
by more than $90,000) due to the capital improvement work being done at the
residential properties by on-site personnel, repairs and maintenance and
contracted service expenses decreased in total in the Partnership by almost
$105,000. Several of the residential complexes in this Partnership are currently
undergoing much needed capital improvement and "fix-up" work, so it is expected
that cash used to do capital improvements will continue to be higher than in the
previous year, thus making cash flow in this Partnership tighter than ever. The
Partnership did see a large decrease in real estate taxes during the first nine
months of 1997 as compared to the same period during 1996; only Creekside
Apartments had an increase in their real estate taxes between these two periods.
Administrative costs increased by almost $25,000 during the nine months ended
September 30, 1997 as compared to those from the nine months ended September 30,
1996. The increase is primarily related to increased service and finance charges
which are a result of the cash flow shortages in the Partnership. Although such
shortages existed in previous years, more of the Partnership's cash is being
used to pay for capital improvements in an effort to make the properties more
desirable for potential renters, so service charges on utility bills, for
example, are being incurred. Management feels the improvements made to the
complex will eventually increase occupancy and collections thus making up for
the increased charges now being paid.
-20-
Results of Operations (continued):
- -----------------------------------
For the nine month period ended September 30, 1997, the Lakeview Joint Venture
generated a net loss of $92,348, with $14,979 of the loss allocated to the
minority venturer. For the nine months ended September 30, 1996, the joint
venture had a net loss of $122,177, with $19,817 of the loss allocated to the
minority venturer. Total income increased by just under $91,000, with an
increase in rental income being responsible for approximately 67% of the total
increase. Property expenditures also increased by over $61,000; an increase in
property operations expenditures was responsible for most of the increase in the
costs of operations.
-21-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
PART II
-------
OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
- --------------------------
The Partnership is not party to, nor is it the subject of, any material pending
legal proceedings other than ordinary routine litigation incidental to the
Partnership's business.
Item 2, 3, 4 and 5
- ------------------
Not applicable.
Item 6 - Exhibits and reports on Form 8-K
- -----------------------------------------
None.
-22-
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.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP IV
By: /s/Joseph M. Jayson November 12, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: REALMARK PROPERTIES, INC.
Corporate General Partner
/s/Joseph M. Jayson November 12, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
President and Director
/s/Michael J. Colmerauer November 12, 1997
------------------------------ ------------------------
Michael J. Colmerauer Date
Secretary