FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934. (NO FEE
REQUIRED)
Commission File Number 0-14386
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - IV
(Exact Name of Registrant as specified in its Charter)
Delaware 16-1245153
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(State of Formation) (IRS Employer Identification No.)
2350 North Forest Road
Suite 12-A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-9090
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
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-K or any
amendment to this Form 10-K.(X)
DOCUMENTS INCORPORATED BY REFERENCE
See page 13 for a list of all documents incorporated by reference
PART I
ITEM 1: BUSINESS
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The Registrant, Realmark Property Investors Limited Partnership IV (the
"Partnership"), is a Delaware limited partnership organized in February 1985,
pursuant to an Agreement and Certificate of Limited Partnership (the
"Partnership Agreement"), under the Revised Delaware Uniform Limited Partnership
Act. The Partnership's general partners are Realmark Properties, Inc. (the
"Corporate General Partner"), a Delaware corporation, and Joseph M. Jayson (the
"Individual General Partner"). During 1988, Realmark Properties IV Associates
("Associates") and RPI Investors-IV, Inc. (formerly the "Corporate General
Partner") were merged with Realmark Properties, Inc. (the "Corporate General
Partner").
The Registrant commenced the public offering of its limited partnership
units, registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on April 22, 1985, and concluded the
offering on June 22, 1986, having raised a total of $23,365,900 before deducting
sales commissions and expenses of the offering.
The Partnership's primary business and its only industry segment is to
own and operate income-producing real property for the benefit of its limited
partners. As of December 31, 1998, the Partnership owns two (2) apartment
complexes totaling 503 units. Each Partnership property is located in a
relatively stable community with a solid base from which to draw residents.
There remains however, strong competition from other complexes in the respective
areas. See also item 7. Each of the apartment complexes are managed for the
Partnership by Realmark Corporation, an affiliate of the General Partners.
The business of the Partnership is not seasonal. As of December 31,
1998, the Partnership did not directly employ any persons in a full-time
position. All persons who regularly rendered services on behalf of the
Partnership through December 31, 1998 were employees of the Corporate General
Partner or its affiliates.
The Registrant's objectives are to acquire, operate and hold existing
income-producing properties to (1) provide long-term capital appreciation, (2)
provide cash distributions from operations, (3) provide investors with a
diversified real estate portfolio, and (4) preserve and protect Partnership
capital.
Occupancy for each complex as of December 31, 1998, 1997 and 1996 was as
follows:
1998 1997 1996
---- ---- ----
Woodbridge Manor Apartments 68% 77% 85%
Creekside Apartments * 88% 90%
Andover Park Apartments 81% 87% 92%
Evergreen Terrace Apartments ** 89% 92%
Chapelwood Estates - - 75%
Airlane Office Warehouse * 90% 97%
Lakeview Apartments (Joint Venture) * 49% 82%
* This property was sold during 1998.
** The mortgagor put this property into receivership during 1998 and foreclosed
on the property in November 1998. No year-end occupancy is available.
2
ITEM 1: BUSINESS (Con't.)
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The percentage of total Partnership revenue generated from each complex
as of December 31, 1998, 1997 and 1996 was as follows:
1998 1997 1996
---- ---- ----
Woodbridge Manor Apartments 41% 25% 24%
Creekside Apartments 7% 22% 21%
Andover Park Apartments 31% 17% 18%
Evergreen Terrace Apartments 8% 6% 6%
Chapelwood Estates - 2% 4%
Airlane Office Warehouse 3% 15% 14%
Lakeview Apartments (Joint Venture) 10% 13% 13%
This annual report contains certain forward-looking statements
concerning the Partnership's current expectations as to future results. Such
forward-looking statements are contained in Item 7: Management's Discussion and
Analysis of Financial Conditions and Results of Operations. Words such as
"believes", "forecasts", "intends", "possible", "expects", "estimates",
"anticipates" or "plans" and similar expressions are intended to identify
forward-looking statements.
ITEM 2: PROPERTIES
- ------------------
Name and Location General Character of Property Purchase Date
- ----------------- ----------------------------- -------------
Lakeview Village Apts. Property was sold in December 1998.
Joint Venture
Milwaukee, WI
Woodbridge Manor Apts. Apartment complex; 12 buildings on 23 December 1985
(formerly Sutton acres; 288 units. An 8% mortgage with a
Park Apts.) balance of $3,291,726 at December 31,
Lansing, MI 1998, which provides for annual principal
and interest payments of $306,168 in equal
monthly installments. The term of the
mortgage is ten (10) years with the
remaining balance due and payable on
February 1, 2006.
Airlane I & III Property was sold in February 1998.
Nashville, TN
Evergreen Terrace Apts. Foreclosed on in November 1998.
(formerly Sunset Hills
Apts.)
Lansing, MI
3
ITEM 2: PROPERTIES (Con't.)
- ------------------ --------
Name and Location General Character of Property Purchase Date
- ----------------- ----------------------------- -------------
Andover Park Apts. Apartment complex; 18 buildings on 12.4 December 1986
(formerly Willow acres; 215 units. The property's mortgage
Creek Apts.) was refinanced in June 1998 with a variable
Greenville, SC rate (equal to the LIBOR rate plus 300 basis points),
mortgage with a balance of $3,950,000 at December
31, 1998, which provides for monthly interest only
payments until maturity. The term of the mortgage
is two (2) years with the remaining balance due and payable
on July 25, 2000.
Creekside Apts. Property was sold in March 1998.
(formerly Bretton Park
Phase I and II)
Flat Rock, MI
ITEM 3: LEGAL PROCEEDINGS
- -------------------------
The Partnership is not a party to, nor is any of the Partnership's
property the subject of, any material pending legal proceedings that would
impact the future financial position and operations of the Partnership.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
None.
PART II
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ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST.
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There is currently no established trading market for the units of
Limited Partnership Interest of the Partnership and it is not anticipated that
any will develop in the future.
The Partnership did not make any distributions for the years ended
December 31, 1998, 1997 or 1996. See also Item 6.
As of December 31, 1998, there were 2,496 record holders of units of
Limited Partnership Interest.
4
ITEM 6: SELECTED FINANCIAL DATA
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Realmark Properties Investors Limited Partnership-IV
----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
----------------------------------------------------------------------------------------
Total assets $ 8,385,069 $ 19,088,920 $ 20,488,126 $ 19,982,793 $ 21,439,199
============== ============= ============== ============== ==============
Notes payable and
long-term obligations $ 7,241,726 $ 17,740,913 $ 18,939,324 $ 19,414,288 $ 19,881,483
============== ============= ============== ============== ==============
- -------------------------------------------------------------------------------------------------------------------------
Income $ 3,005,495 $ 5,177,463 $ 5,536,412 $ 5,753,559 $ 5,062,606
Expenses 5,067,279 6,755,566 6,759,234 7,225,672 7,020,306
-------------- ------------- -------------- -------------- --------------
Loss before loss allocated
to minority interest, gain on
sale of properties, and
extraordinary items (2,061,784) (1,578,103) (1,222,822) (1,472,113) (1,957,700)
Loss allocated to
minority interest 8,277 47,154 36,106 42,625 51,247
Gain on sale of properties 3,509,473 - - - -
Extraordinary items 477,871 150,771 1,501,158 - -
-------------- ------------- -------------- -------------- --------------
Net income (loss) $ 1,933,837 $ (1,380,178) $ 314,442 $ (1,429,488) $ (1,906,453)
============== ============= ============== ============== ==============
- -----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided
by operating activities $ (2,654,306) $ 388,408 $ (984,095) $ (875,686) $ (460,660)
Principal payments on
long-term debt (10,761,617) (303,860) (5,658,964) (467,195) (266,817)
Proceeds from refinancing 3,950,000 - - - -
Principal payments at refinancing (3,434,411) - - - -
-------------- ------------- -------------- -------------- --------------
Net cash (used in) provided
by operating activities
plus proceeds less principal
payments on on long-term debt $(12,900,334) $ 84,548 $ (6,643,059) $ (1,342,881) $ (727,477)
============== ============= ============== ============== ==============
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) per limited
partnership unit before
extraordinary gains $ 54.53 $ (63.55) $ (49.26) $ (59.34) $ (79.14)
Extraordinary gains per
limited partnership unit 20.45 6.26 62.32 - -
-------------- ------------- -------------- -------------- --------------
Income (loss) per limited
partnership unit $ 74.98 $ (57.29) $ 13.06 $ (59.34) $ (79.14)
============== ============= ============== ============== ==============
Weighted average number
of limited partnership
units outstanding 23,366 23,366 23,366 23,366 23,366
============== ============= ============== ============== ==============
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5
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
-------------
Liquidity and Capital Resources:
- --------------------------------
The Partnership continues to incur cash flow deficits (excluding gains
from property sales and extraordinary gains) and large losses from operations as
has been noted in prior years. The Corporate General Partner and its affiliates
have regularly advanced funds and/or not taken payment of fees otherwise
entitled to whenever it was necessary to cover its shortfalls. The Corporate
General Partner is under no obligation to make advances, and there is no
assurance that such advances will continue. As of December 31, 1998, the
Corporate General Partner (and affiliate) advances totaled $2,780,685, all of
which is payable on demand and accruing interest at 11% per annum. Due to the
operating shortfalls, the Partnership did not make any distributions in the
years ended December 31, 1998, 1997 and 1996. Until such time as the Partnership
can satisfy its obligations and repay the Corporate General Partner and
affiliate advances, which is not expected to happen prior to the sale of the
remaining properties in the Partnership, no distributions are anticipated.
Management was successful in negotiating sales contracts on Airlanes
Office/Warehouse, the Creekside Apartments and Lakeview Village Apartments,. The
Airlanes Office/Warehouse Building(s) sold on February 12, 1998 for a sales
price of $4,700,000, while the Creekside Apartments sold on March 18, 1998 for
$5,075,000. The Lakeview Village Apartments were sold on December 29, 1998 for a
sales price of $3,400,000. These sales were felt to be in the best interests of
the Limited Partners. The sales resulted in a total gain for financial statement
purposes totaling $3,509,473. In addition, the sale of the Lakeview Village
Apartments resulted in an extraordinary gain from extinguishment of debt which
amounted to $253,159 as the lender forgave a portion of the mortgage and/or
accrued interest on the debt.
During 1998, Evergreen Apartments, located in Lansing, Michigan, was
foreclosed on by the lender. The property was in default of its mortgage and
management felt it was in the best interests of the Limited Partners to give
this property back to the bank. As a result of the foreclosure, the bank took
back the building and any personal property which the mortgage was secured by,
they kept all escrow account balances and other deposits which were in their
possession, and they forgave the mortgage and any accrued interest. The
foreclosure resulted in an extraordinary gain of $224,712 for the year ended
December 31, 1998.
Management has once again implemented a corrective action plan in
response to the going concern consideration discussed in Note 12. These plans
include the closer monitoring of expenses such as payroll and maintenance, which
have typically been the expenses that have increased from year to year.
Management, however, realizes that with the physical improvements needed at the
properties, cutting expenses drastically is not very likely. More attention has
to be centered on increasing revenues. Management must decrease vacancies and
improve on its collection policies. This will be a major area of focus in the
coming year. Management's plans also include increased efforts to sell the two
remaining properties in the Partnership. Marketing efforts will include
advertising in national newspapers, such as The Wall Street Journal, and mailing
of sales packages and follow-up telephone calls to brokers. Management has
received offers on these properties, but either the offers have been lower than
what management feels the properties are worth in the current marketplace or the
sales were subject to a number of contingencies and were eventually canceled by
the buyer.
6
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS (Con't.)
----------------------
Liquidity and Capital Resources (Con't.):
- -----------------------------------------
Although at December 31, 1998 the Partnership was not in compliance with
certain debt covenants, the General Partner(s) have been in contact with the
lender(s) and have informed them of the covenants which they are not in
compliance with. After discussing this issue with the lender(s), the General
Partners do not expect there to be any material adverse repercussions from the
lack of compliance.
The Partnership has conducted a review of its computer systems to
identify the systems that could be affected by the "year 2000 issue" and has
substantially developed an implementation plan to resolve such issues. The year
2000 issue is the result of computer programs being written using two digits
rather than four digits to define the applicable year. Computer programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. Management has discussed with outside
independent computer consultants its readiness for the Year 2000. The majority
of the software in use is either "2000 compliant" or will be with little
adaptation and at no significant cost per information provided by their software
providers. Management has also engaged a computer firm to re-write its tax
software making it Year 2000 compliant. This work began May 1, 1999 and is
expected to take three months. Management has a complete inventory of its
computers and feels that the cost of replacing those which will not be "2000
compliant" will be relatively minor (i.e., most likely under $20,000).
Non-informational systems have also been evaluated and management feels that
there will be little, if any, cost to preparing these for the Year 2000 (i.e.,
most likely under $20,000). Management expects to be fully Year 2000 compliant
with all testing done by September 30, 1999. The Partnership is working on a
contingency plan in the unlikely event that its systems do not operate as
planned. It is management's belief that in the unlikely event that its
informational systems do not operate as planned in the year 2000, all records
could be maintained manually until the problems with its systems are resolved.
Management feels that its external vendors, suppliers and customers, for the
most part, will be unaffected by the Year 2000 as most do not rely on
information systems in their businesses.
Results of Operations:
- ----------------------
For the year ended December 31, 1998, the Partnership had net income of
$1,933,837 or $74.98 per limited partnership unit. This Partnership had income
from extraordinary gains due to the foreclosure on Evergreen Terrace Apartments
by the mortgagee totaling $224,712 and from debt forgiveness totaling $253,159.
Additionally, the Partnership sold three properties during 1998 resulting in a
gain for financial statement purposes totaling $3,509,473. Before such gains,
the loss incurred by the Partnership was $2,053,507 or $85.25 per limited
partnership unit. For the year ended December 31, 1997, the Partnership incurred
a net loss totaling $1,380,178; extraordinary income resulting from the
foreclosure on Chapelwood Estates Apartments totaled $150,771 in 1997. For the
year ended December 31, 1996, net income of $314,442 was recorded. Such income
included extraordinary gains totaling $1,501,158 from extinguishment of debt by
one of the lenders on the Sutton Park Apartments totaling $795,000 and from a
fire at the Sutton Park Apartments which resulted in property destruction
estimated at a net book value of $170,235, but for which insurance proceeds
totaling $876,393 were received, resulting in a gain of $706,158.
7
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS (Con't.)
----------------------
Results of Operations (Con't.):
- -------------------------------
Partnership revenues for the year ended December 31, 1998 totaled
$3,005,495, consisting of rental income of $2,766,367 and other income, which
includes interest, laundry income, and other miscellaneous sources of income of
$239,128. Rental income for the years ended December 31, 1997 and 1996 totaled
$4,861,019 and $5,163,212, respectively. The primary reason for the decrease in
total revenue when comparing the year ended December 31, 1998 to both 1997 and
1996 is that the Partnership sold two properties (one residential and one
commercial property) at the beginning of 1998 which reported income for the full
years of 1997 and 1996 (i.e., in 1997 these properties reported rental income of
approximately $1,911,000 and other income of approximately $108,000; in 1996
these properties reported rental income of approximately $1,863,000 and other
income of approximately $86,000). The decrease in rental revenue from that of
the previous two years is also evidence of low occupancy levels at those
residential properties in the Partnership throughout much of 1998. Occupancies
at the two properties remaining in the Partnership at December 31, 1998
decreased significantly when compared to those of the two previous years, with
the most significant decreases occurring when compared to 1996. Additionally,
occupancies at Lakeview Apartments, which was sold in December 1998, and
Evergreen Apartments, which was foreclosed on by the lender in November 1998,
were extremely low up until the time of their disposal(s). As an example,
Lakeview's occupancy dropped to approximately 60% just prior to its sale. In
order to increase occupancies, management continued to offer incentive programs
throughout the year. The other significant cause of the decrease in revenues was
a large increase in bad debts at Woodbridge Manor Apartments (formerly Sutton
Park Apartments) and Andover Park Apartments (formerly Willow Creek Apartments).
Increasing occupancy, as well as decreasing delinquencies, continues to be the
major focus of management. Tighter credit policies and attractive incentive
programs will be management's means of reaching the income levels needed to
improve the cash flow in the Partnership.
Partnership expenses for the year ended December 31, 1998 totaled
$5,067,279, a decrease over the expenses of the years ended December 31, 1997
and 1996 when expenses totaled $6,755,566 and $6,759,234, respectively. Once
again, the primary reason for the decrease in total expenses is attributed to
there being less properties reporting expenses in the Partnership. For the years
ended December 31, 1997 and 1996, expenses related to the two properties which
were sold at the beginning of 1998 (i.e., Creekside Apartments and Airlanes
Office/Warehouse) totaled approximately $2,130,000 and $2,016,000, respectively.
The majority of the remaining decrease is attributable to a large decrease in
depreciation expense. No depreciation was taken during the year ended December
31, 1998 since the properties were considered to be "held for sale" (see Note 3
to the financial statements). Other administrative operations expenses increased
even though the Partnership had less properties in 1998 as compared to the two
previous years. A large portion of this increase is attributable to higher
advertising and legal expenses. The advertising is a direct result of the
decrease in occupancy, while the increase in legal expense is related to the
increased delinquencies.
8
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS (Con't.)
----------------------
Results of Operations (Con't.):
- -------------------------------
The Partnership expects to continue incurring higher than "normal"
property operations expenses in the near future as a considerable amount of
capital improvement work is still necessary to make the remaining properties
more attractive to new tenants. The work planned includes interior and exterior
painting and woodwork, replacing of carpeting and appliances at several of the
complexes, and structural work such as repairs to roofs and decks/patios.
Although this work is necessary in order to increase rental revenue(s) generated
in the Partnership, management continues to keep in mind that expenditures must
be closely monitored so as not to worsen the cash flow situation of the
Partnership.
For the year ended December 31, 1998, the tax basis income was
$3,048,632 or $126.56 per limited partnership unit compared to a tax loss of
$1,127,838 or $46.82 per unit for the year ended December 31, 1997 and a tax
loss of $522,104 or $21.67 per limited partnership unit for the year ended
December 31, 1996. The Partnership agreement provides for the taxable income or
losses to be allocated 97% to the Limited Partners and 3% to the General
Partners, and in accordance with this and the Internal Revenue Code, the loss
for the year ended December 31, 1998 was allocated in this fashion.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Partnership does not have investments in instruments which are
subject to market risk (e.g., derivatives, options or other interest sensitive
instruments).
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
Listed under Item 14 of the report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
None.
9
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
The Partnership, as an entity, does not have any directors or officers.
The Individual General Partner of the Partnership is Joseph M. Jayson. The
directors and executive officers of Realmark Properties, Inc., the Partnership's
Corporate General Partner, as of March 1, 1999, are listed below. Each director
is subject to election on an annual basis.
Title of All Positions Year First
Name Held With the Company Elected Director
- ---- --------------------- ----------------
Joseph M. Jayson President and Director 1979
Judith P. Jayson Vice President and Director 1979
Michael J. Colmerauer Secretary N/A
Joseph M. Jayson, President and Director of Realmark Properties, Inc.
and Judith P. Jayson, Vice President and Director of Realmark Properties, Inc.,
are married to each other.
The Director and Executive Officers of the Corporate General Partner and
their principal occupations and affiliations during the last five years or more
are as follows:
Joseph M. Jayson, age 60, is Chairman and Director and sole stockholder
of J.M. Jayson & Company, Inc. and certain of its affiliated companies: U.S.
Apartments LLC, Westmoreland Capital Corporation, Oilmark Corporation and U.S.
Energy Development Corporation. In addition, Mr. Jayson is President and
Director of Realmark Corporation and Realmark Properties, Inc., wholly owned
subsidiaries of J.M. Jayson & Company, Inc. and co-general partner of Realmark
Property Investors Limited Partnership, Realmark Property Investors Limited
Partnership-II, Realmark Property Investors Limited Partnership-III, Realmark
Property Investors Limited Partnership-IV, Realmark Property Investors Limited
Partnership-V, Realmark Property Investors Limited Partnership-VI A and Realmark
Property Investors Limited Partnership-VI B. Mr. Jayson is a member of the
Investment Advisory Board of the Corporate General Partner. Mr. Jayson has been
engaged in the real estate business for the last 36 years and is a Certified
Property manager as designated by the Institute of Real Estate Management
("I.R.E.M."). Mr. Jayson received a B.S. Degree in Education in 1961 from
Indiana University, a Masters Degree from the University of Buffalo in 1963, and
has served on the Educational Faculty of the Institute of Real Estate
Management. Mr. Jayson has for the last 36 years been engaged in various aspects
of real estate brokerage and investment. He brokered residential properties from
1962 to 1964, commercial and investment properties from 1964 to 1967, and in
1967, left commercial real estate to form his own investment firm. Since that
time, Mr. Jayson and J.M. Jayson & Company, Inc. have formed, or participated in
various ways, in forming over 30 real estate related limited partnerships. For
the past seventeen years, Mr. Jayson and J.M. Jayson & Company, Inc. and an
affiliate have also engaged in developmental drilling for gas and oil.
10
Judith P. Jayson, age 59, is currently Vice-President and Director of
Realmark Properties, Inc. She is also a Director of the property management
affiliate, Realmark Corporation. Mrs. Jayson has been involved in property
management for the last 27 years and has extensive experience in the hiring and
training of property management personnel and in directing, developing and
implementing property management systems and programs. Mrs. Jayson, prior to
joining the firm in 1973, taught business in the Buffalo, New York high school
system. Mrs. Jayson graduated from St. Mary of the Woods College in Terre Haute,
Indiana, with a degree in Business Administration. Mrs. Jayson is the wife of
Joseph M. Jayson, the Individual General Partner.
Michael J. Colmerauer, 40, is Secretary and in-house legal counsel for
J.M. Jayson & Company, Inc., Realmark Corporation, Realmark Properties, Inc. and
other companies affiliated with the General Partners. He received a Bachelor's
Degree (BA) from Canisius College in 1980 and a Juris Doctors (J.D.) from the
University of Tulsa in 1983. Mr. Colmerauer is a member of the American and Erie
County Bar Association and has been employed by the Jayson group of companies
for the last 15 years.
ITEM 11: EXECUTIVE COMPENSATION.
- -------- -----------------------
No direct remuneration was paid or payable by the Partnership to
directors and officers (since it has no directors or officers) for its fiscal
years ended December 31, 1998, 1997 or 1996; nor was any direct remuneration
paid or payable by the Partnership to directors or officers of Realmark
Properties, Inc., the Corporate General Partner and sponsor for the years ended
December 31, 1998, 1997 or 1996.
The following table sets forth for the years ended December 31, 1998,
1997 and 1996 the compensation paid by the Partnership, directly or indirectly,
to affiliates of the General Partners:
Entity Receiving Type of
Compensation Compensation 1998 1997 1996
------------ ------------ ---- ---- ----
Realmark Properties, Inc.
(The Corporate
General Partner) Interest charged on
accounts payable -
affiliates $ 268,880 $ 306,514 $ 281,944
------------- -------------- ------------
Reimbursement for
allocated partnership
operational expenses:
Investor Service Expenses 15,090 16,031 14,275
Brokerage Expense 27,202 36,235 24,200
Portfolio Management
& Accounting Expenses 133,093 197,401 193,548
Realmark Corporation Property Management Fees 129,086 264,396 280,167
Computer Service Charges 9,942 20,394 20,394
------------ -------------- ------------
314,413 534,457 532,584
------------ -------------- ------------
Total $ 583,293 $ 840,971 $ 814,528
============= ============== ============
11
The Corporate General Partner is entitled to a continuing Partnership
Management Fee equal to 7% of net cash flow (as defined in the Partnership
Agreement), of which 2% is subordinated to the receipt by the Limited Partners
of a non-cumulative annual cash return equal to 7% of the average of their
adjusted Capital Contributions (as defined in the Partnership Agreement). The
Corporate General Partner is paid its 5% Partnership Management Fee annually as
cash flow allows. The 2% subordinated fee will not be paid or accrued until such
time as the Limited Partners have received their 7% return and payment of the
fee becomes probable. The General Partners are also entitled to 3% of
Distributable Cash (as defined in the Partnership Agreement) and to certain
expense reimbursements with respect to Partnership operations.
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, 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.
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 in 1990 and the Airlane Office Warehouse, Creekside
Apartments, and Lakeview Village Apartments in 1998.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
No person owns of record or beneficially more than five percent (5%) of
the units of Limited Partnership Interests of the Partnership. Except for the
General Partner's Interest in the Partnership ($3,000 initial capital
contribution), the General Partners, as of December 31, 1998, owned no units of
Limited Partnership Interest.
Affiliates of the General Partners own of record or beneficially 23.1 units of
Limited Partnership Interest constituting approximately .10% of the total
Partnership Interest.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
- -------- -----------------------------------------------
(a) Transactions with Management and Others.
---------------------------------------
During 1998, no transactions occurred between the Partnership and those
in the management of Realmark Properties, Inc. All transactions between the
Partnership and Realmark Properties, Inc. (the Corporate General Partner) and
any other affiliated organization are described in Item 11 of this report and in
Note 6 to the Financial Statements.
12
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
- -------- ------------------------------------------------------------------
(a) Financial Statements and Schedules
----------------------------------
FINANCIAL STATEMENTS PAGE
-------------------- ----
(i) Independent Auditors' Report 14
(ii) Balance Sheets at December 31, 1998 and 1997 15
(iii) Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 16
(iv) Statements of Partners' Deficit for the
years ended December 31, 1998, 1997 and 1996 17
(v) Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 18
(vi) Notes to Financial Statements 19 - 31
FINANCIAL STATEMENT SCHEDULES
-----------------------------
(i) Schedule III - Real Estate and Accumulated Depreciation 32 - 33
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.
(c) Exhibits
--------
4. Instruments defining the rights of security holders, including
indentures
(a) Certificate of Limited Partners filed with the
Registration Statement of the Registrant Form S-11, filed
February 14, 1985, and subsequently amended incorporated
herein by reference.
(b) Partnership Agreement included with the Registration
Statement of the Registrant as filed and amended to date
incorporated herein by reference.
10. Material contracts
(a) Property Management Agreement with Realmark Corporation
included with the Registration Statement of the Registrant
as filed and amended to date incorporated herein by
reference.
(b) Joint Venture Agreement with Realmark Property Investors
Limited Partnership VI B as filed and amended to date
incorporated herein by reference.
27. Financial Data Schedule
(a)Schedule is included herewith.
13
INDEPENDENT AUDITORS' REPORT
The Partners
Realmark Property Investors Limited Partnership-IV:
We have audited the accompanying balance sheets of Realmark Property Investors
Limited Partnership-IV as of December 31, 1998 and 1997, and the related
statements of operations, partners' deficit, and cash flows for each of the
three years in the period ended December 31, 1998. Our audits also included the
financial statement schedule listed in the index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
General Partners. Our responsibility is to express an opinion on the financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the
General Partners, 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 Realmark Property Investors Limited
Partnership-IV at December 31, 1998 and 1997 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
The accompanying financial statements and financial statement schedule have been
prepared assuming that the Partnership will continue as a going concern. As
discussed in Note 12 to the financial statements, the Partnership's recurring
losses, continuing cash flow deficiencies and partners' deficit, raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 12. The financial
statements and financial statement schedule do not include any adjustments that
might result from the outcome of this uncertainty.
Buffalo, New York
June 16, 1999
14
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1998 AND 1997
--------------------------
Assets 1998 1997
- ------
----------------- ----------------
Property, at cost (including assets held for sale, see Note 3):
Land $ 626,300 $ 1,722,672
Buildings and improvements 11,385,396 27,450,004
Furniture, fixtures and equipment 1,237,500 2,571,795
----------------- ----------------
13,249,196 31,744,471
Less accumulated depreciation 5,598,075 13,950,395
----------------- ----------------
Property, Net 7,651,121 17,794,076
Cash 29,981 -
Escrow deposits 437,505 819,397
Interest and other receivables - 5,829
Prepaid expenses 69,613 232,506
Mortgage costs, net of accumulated amortization
of $69,127 in 1998 and $475,463 in 1997 182,879 217,287
Other assets 13,970 19,825
----------------- ----------------
Total Assets $ 8,385,069 $ 19,088,920
================= ================
Liabilities and Partners' Deficit
- ---------------------------------
Liabilities:
Mortgages and note payable $ 7,241,726 $ 17,740,913
Notes payable - other 208,331 -
Cash overdraft - 526,439
Accounts payable and accrued expenses 670,189 1,146,631
Accounts payable - affiliates 2,780,685 3,666,949
Interest payable 27,781 203,119
Security deposits and prepaid rents 147,117 421,189
----------------- ----------------
Total liabilities 11,075,829 23,705,240
----------------- ----------------
Minority interest in joint venture (36,954) (28,677)
----------------- ----------------
Partners' deficit:
General partners (528,652) (710,608)
Limited partners (2,125,154) (3,877,035)
----------------- ----------------
Total Partners' deficit (2,653,806) (4,587,643)
----------------- ----------------
Total Liabilities and Partners' Deficit $ 8,385,069 $ 19,088,920
================= ================
See notes to financial statements
15
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
Income:
Rental $ 2,766,367 $ 4,861,019 $ 5,163,212
Interest and other 239,128 316,444 373,200
---------------- ---------------- ----------------
Total income 3,005,495 5,177,463 5,536,412
---------------- ---------------- ----------------
Expenses:
Property operations 2,142,224 2,890,229 2,737,139
Interest:
To affiliates 268,880 306,514 281,944
Other 1,510,108 1,536,158 1,587,480
Depreciation and amortization 211,127 927,860 902,222
Administrative:
To affiliates 314,413 534,457 532,584
Other 620,527 560,348 717,865
---------------- ---------------- ----------------
Total expenses 5,067,279 6,755,566 6,759,234
---------------- ---------------- ----------------
Loss before loss allocated to minority interest, gain on
sale of properties and extraordinary items (2,061,784) (1,578,103) (1,222,822)
Loss allocated to minority interest 8,277 47,154 36,106
Gain on sale of properties 3,509,473 - -
Extraordinary items:
Gain on extinguishment of debt 477,871 150,771 795,000
Gain from insurance proceeds on fire loss - - 706,158
---------------- ---------------- ----------------
Net income (loss) $ 1,933,837 $(1,380,178) $ 314,442
================ ================ ================
Income (loss) per limited partnership unit before
extraordinary gains $ 54.53 $ (63.55) $ (49.26)
Extraordinary gains per limited partnership unit 20.45 6.26 62.32
---------------- ---------------- ----------------
Income (loss) per limited partnership unit $ 74.98 $ (57.29) $ 13.06
================ ================ ================
Weighted average number of limited partnership
units outstanding 23,366 23,366 23,366
================ ================ ================
See notes to financial statements
16
INSERT STATEMENT OF PARTNERS' EQUITY
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
STATEMENTS OF PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
General
Partners Limited Partners
Amount Units Amount
------ ----- ------
Balance, January 1, 1996 $ (678,636) 23,366 $(2,843,271)
Net income 9,433 - 305,009
---------------- -------------- ----------------
Balance, December 31, 1996 (669,203) 23,366 (2,538,262)
Net loss (41,405) - (1,338,773)
---------------- -------------- ----------------
Balance, December 31, 1997 (710,608) 23,366 (3,877,035)
Net income 181,956 - 1,751,881
---------------- -------------- ----------------
Balance, December 31, 1998 $ (528,652) 23,366 $(2,125,154)
================ ============== ================
See notes to financial statements
17
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1998 1997 1996
-------------- ------------- -------------
Cash flows from operating activities:
Net income (loss) $ 1,933,837 $(1,380,178) $ 314,442
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 211,127 927,860 902,222
Loss allocated to minority interest (8,277) (47,154) (36,106)
Gain on sale of properties (3,509,473) - -
Extraordinary gains (477,871) (150,771) (1,501,158)
Changes in operating assets and liabilities:
Interest and other receivables 5,829 585,426 (526,229)
Prepaid expenses 162,893 (945) (7,093)
Other assets (46,519) (15,370) -
Accounts payable and accrued expenses (476,442) 298,734 (126,752)
Interest payable (175,338) 120,032 15,927
Security deposits and prepaid rent (274,072) 50,774 (19,348)
-------------- ------------- -------------
Net cash (used in) provided by operating activities (2,654,306) 388,408 (984,095)
-------------- ------------- -------------
Cash flows from investing activities:
Escrow deposits 381,892 (122,780) (425,906)
Collection of principal on notes receivable - - 154,875
Proceeds from disposition of properties 13,880,685 - -
Property acquisitions and additions (3,545) (823,423) (548,871)
Insurance proceeds on fire loss - - 876,393
-------------- ------------- -------------
Net cash provided by (used in) investing activities 14,259,032 (946,203) 56,491
-------------- ------------- -------------
Cash flows from financing activities:
Increase (decrease) in cash overdraft (526,439) 388,407 (114,773)
Principal payments on mortgages (10,761,617) (303,860) (5,658,964)
Principal payments at refinancing (3,434,411) - -
Proceeds from refinancings 3,950,000 - 5,979,000
Mortgage costs (124,345) (25,947) (224,566)
(Decrease) increase in accounts payable - due to
affiliates (886,264) 499,195 946,907
Notes payable - other 208,331 - -
-------------- ------------- -------------
Net cash (used in) provided by financing activities (11,574,745) 557,795 927,604
-------------- ------------- -------------
Increase in cash 29,981 - -
Cash - beginning of year - - -
-------------- ------------- -------------
Cash - end of year $ 29,981 $ - $ -
============== ============= =============
As discussed in Footnote 7, the bank foreclosed on Evergreen Terrace Apartments
in November 1998. The bank took over fixed assets, with a net book value of
$907,854, that had served as collateral on the mortgage. The bank kept $28,343
of escrow balances and $23,923 of cash and other deposits and forgave $1,184,832
of liabilities, including the mortgage balance and accrued interest. This
transaction resulted in an extraordinary gain on foreclosure of $224,712.
As discussed in Footnote 7, the bank foreclosed on Chapelwood Estates in June
1997. The bank took over fixed assets, with a net book value of $806,437, that
had served as collateral on the mortgage. The bank kept $67,949 of escrow
balances and forgave $1,025,156 of liabilities, including the mortgage balance
and accrued interest. This transaction resulted in an extraordinary gain on
foreclosure of $150,771.
See notes to financial statements
18
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1. 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 23,363 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 (See Note 6).
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.
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, 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
(a) Use of Estimates
-----------------
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.
19
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
---------------------------------------------------
(b) Property and Depreciation
-------------------------
Expenditures for maintenance and repairs are expensed as incurred, and
major renewals and betterments are capitalized. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets and totaled $853,248 and $770,643 for the years ended December 31, 1997
and 1996, respectively. No depreciation was recorded during the year ended
December 31, 1998. Generally, buildings and improvements are depreciated over 25
years, and furniture, fixtures, and equipment are depreciated over 5 years. The
Accelerated Cost Recovery System and Modified Accelerated Cost Recovery System
are used to determine depreciation expense for tax purposes. For further
discussion, see Footnote 3.
(c) 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.
(d) Mortgage Costs
--------------
Mortgage costs incurred in obtaining property mortgage financing have
been deferred and are being amortized over the terms of the respective
mortgages.
(e) Minority Interest in Consolidated Joint Venture
-----------------------------------------------
The minority interest in Lakeview Joint Venture, a consolidated joint
venture, is stated at the amount of capital contributed by the minority
investors adjusted for their share of joint venture losses. Lakeview Joint
Venture is consolidated in the Partnership's financial statements because the
Partnership is the majority owner.
(f) Rents Receivable
----------------
Due to the nature of these accounts, residential rent receivables are
fully reserved for at December 31, 1998 and 1997.
20
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
---------------------------------------------------
(g) Comprehensive Income
--------------------
The Partnership has adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. Comprehensive income is defined as
"the change in equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources". Other than net
income (loss), the Partnership has no other sources of comprehensive income.
(h) Segment Information
-------------------
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information establishes standards for the way public business enterprises report
information about operating segments in annual financial statements. The
Partnership's only operating segment is the ownership and operation of
income-producing real property for the benefit of its partners.
3. ACQUISITION AND DISPOSITIONS OF RENTAL PROPERTY:
-----------------------------------------------
In November 1985, the Partnership acquired a 168 unit apartment complex
(Lakeview Village Apartments) 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
(Woodbridge Manor Apartments, formerly Sutton Park Apartments) located in
Lansing, Michigan for a purchase price of $7,252,858, which included $588,716 in
acquisition fees.
In August 1986, the Partnership acquired two office/warehouse buildings
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 Apts., 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.
21
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
3. ACQUISITION AND DISPOSITIONS OF RENTAL PROPERTY (Con't.)
--------------------------------------------------------
In December 1986, the Partnership acquired a 215 unit apartment complex
(Andover Park Apartments, formerly Willow Creek Apartments) 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
$1,711,093, which included $314,379 in acquisition fees.
In May 1987, the Partnership acquired a 56 unit apartment complex
(Chapelwood Estates, formerly Cedar Court Apartments) 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.
The net assets acquired were equivalent to the carrying value of the
Partnership's investment in the joint venture at the time of the dissolution.
Since the date of the acquisition, the Partnership had capitalized additional
construction costs of $5,059,296, which includes 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 loss on disposal generated
a $1,328,352 loss for financial statement purposes.
In October, 1990 the Partnership sold the Gold Key II apartment complex
for $2,881,136 which generated a gain of $911,177 for financial statement
purposes.
22
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
3. ACQUISITION AND DISPOSITIONS OF RENTAL PROPERTY (Con't.)
--------------------------------------------------------
In July 1997, the mortgage holder on Chapelwood Estates foreclosed on
the property resulting in an extraordinary gain of $150,771. See Note 7.
In February 1998, the Partnership sold the Airlane Office Warehouse for
$4,700,000 which generated a gain of $755,306 for financial statement purposes.
In March 1998, the Partnership sold The Creekside Apartments for
$5,075,000 which generated a gain of $1,902,850 for financial statement
purposes.
In November 1998, the mortgage holder on Evergreen Terrace Apartments
foreclosed on the property resulting in an extraordinary gain of $224,712. See
Note 7.
In December 1998, the Partnership sold the Lakeview Village Apartment
Complex for $3,400,000 which generated a gain of $851,317 for financial
statement purposes.
In addition to the properties sold during the year ended December 31,
1998, management entered into a plan to dispose of the property, plant, and
equipment of the following:
Carrying amount Net loss for
of property at the year ended
December 31, 1998 December 31, 1998
----------------- -----------------
Woodbridge Manor
(formerly Sutton Park) $ 4,898,044 $ 171,340
Andover Park
(formerly Willow Creek) $ 2,753,077 $ 99,549
23
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
3. ACQUISITION AND DISPOSITIONS OF RENTAL PROPERTY (Con't.)
--------------------------------------------------------
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 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. Fair
value is determined based on estimated future cash flows. Depreciation expense,
not recorded during the disposal period, for the years ended December 31, 1998,
1997 and 1996 totaled approximately $753,000, $265,000 and $346,000,
respectively.
4. MORTGAGES AND NOTE PAYABLE:
--------------------------
The Partnership has the following mortgages and note payable:
Lakeview Village Apartments
- ---------------------------
The mortgage with a balance of $2,481,119 at December 31, 1997 was
satisfied when the property was sold in December 1998. See Note 7.
Woodbridge Manor Apartments (formerly Sutton Park Apartments)
- -------------------------------------------------------------
An 8% mortgage with a balance of $3,291,726 and $3,332,761 at December
31, 1998 and 1997 respectively, which provides annual principal and interest
payments of $306,168 payable in equal monthly installments with the remaining
balance due February 1, 2006.
The property also had an unsecured promissory note with a balance of
$4,174 at December 31, 1997. The note was fully repaid in 1998.
Airlanes I & III
- ----------------
The mortgage with a balance of $3,421,399 at December 31, 1997 was
repaid when the property was sold in February 1998.
Creekside
- ---------
The mortgage with a balance of $3,593,860 at December 31, 1997 was
repaid when the property was sold in March 1998.
24
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
4. MORTGAGES AND NOTE PAYABLE (Con't.):
------------------------------------
Andover Park Apartments (formerly Willow Creek Apartments)
- ----------------------------------------------------------
The mortgage with a balance of $3,898,595 at December 31, 1997 was
refinanced during 1998 with a variable rate (equal to the LIBOR rate plus 300
basis points) mortgage with a balance of $3,950,000 at December 31, 1998. The
mortgage has monthly interest only payments, with a remaining balance due and
payable in July 2000.
Evergreen Terrace
- -----------------
The mortgage with a balance of $1,009,005 at December 31, 1997 was
forgiven by the lender when it foreclosed on the property in November 1998. See
Note 7.
The mortgages described above are secured by the Partnership properties
to which they relate.
The Partnership is currently not in compliance with certain of its debt
covenants for the Woodbridge Manor and Andover Park properties.
The aggregate maturities of mortgages and notes payable, assuming
payments are not accelerated, are as follows:
Year Amount
- ---- ------
1999 $ 44,441
2000 3,998,130
2001 52,125
2002 56,451
2003 61,137
Thereafter 3,029,442
-----------------
TOTAL $ 7,241,726
=================
5. MINORITY INTEREST OF RELATED PARTY IN LAKEVIEW 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. The interests of the Partnerships in the
property were determined based on the fair value of the property as estimated by
the General Partners. The Partnership has all the rights and responsibilities of
a General Partner in the project.
25
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
5. MINORITY INTEREST OF RELATED PARTY IN LAKEVIEW JOINT VENTURE (Con't.)
----------------------------------------------------------------------
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:
1998 1997 1996
---- ---- ----
Balance, beginning of year $ (28,677) $ 18,477 $ 54,583
Allocated loss (8,277) (47,154) (36,106)
------------- ------------- -------------
Balance, end of year $ (36,954) $ (28,677) $ 18,477
============= ============= =============
The Partnership sold the Lakeview Village Apartments in December 1998.
Now that the Lakeview Joint Venture no longer operates the property, it is
expected that the joint venture will be dissolved in 1999.
6. PROPERTY MANAGEMENT FEES AND 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 residential complexes
and 6% of gross monthly receipts for commercial properties to be paid as fees
for administering the operations of the properties. These fees totaled $129,086,
$264,396 and $280,167 for the years ended December 31, 1998, 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. The results of operations include $47,772 and $30,245 of
such fees in 1997 and 1996, respectively. No such fees were incurred in 1998
since the property was sold in February 1998.
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 years ended December 31, 1998, 1997 and 1996.
26
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
6. PROPERTY MANAGEMENT FEES AND RELATED PARTY TRANSACTIONS (Con't.):
-----------------------------------------------------------------
Accounts payable to affiliates amounted to $2,780,685 and $3,666,949 at
December 31, 1998 and 1997, respectively. The payables represent fees due and
advances from the Corporate General Partner or an affiliate of the General
Partners. Interest on accounts payable - affiliates, charged at a rate of 11% on
the average outstanding balance, totaled $268,880, $306,514 and $281,944 for the
years ended December 31, 1998, 1997, and 1996, respectively. All amounts payable
to affiliates are due upon demand.
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 in 1990, and the Airlane Office Warehouse, Creekside
Apartments and Lakeview Village Apartments in 1998.
Computer service charges for the partnership are paid or accrued to an
affiliate of the General Partners. The fee is based, in part, upon the number of
apartment units and complexes. The fee totaled $9,942 for the year ended
December 31, 1998 and $20,394 for each of the years ended December 31, 1997 and
1996, respectively.
Pursuant to the terms of the Partnership Agreement, the Corporate
General partner charged the Partnership for reimbursement of certain costs and
expenses costs and expenses incurred on behalf of or in connection with the
Partnership. These charges were for the Partnership's allocated share of costs
and expenses related to, among other things, partnership accounting, partner
communication and relations, and disposition of properties. Certain expenses are
allocated based on total assets, number of partners and number of units,
respectively. These charges totaled $175,385, $249,667 and $232,023 in 1998,
1997 and 1996, respectively.
27
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
7. EXTRAORDINARY GAINS:
-------------------
In November 1998, the mortgage holder on Evergreen Terrace Apartments
foreclosed on the property. They seized fixed assets that had a carrying value
of $907,854. In return, the property wrote off the mortgage balance and accrued
interest of $1,144,244. In addition, $40,588 of other liabilities were forgiven
in the foreclosure. The lender retained approximately $28,348 of escrow balances
and $23,923 of cash and other deposits. An extraordinary gain of $224,712 was
recognized on the foreclosure in 1998.
The Partnership sold the Lakeview Village Apartments in December 1998.
The Partnership satisfied the majority of its mortgage liability using the
proceeds from the sale of the property. The remaining obligation was forgiven by
the lender, resulting in an extraordinary gain of $253,159 in 1998.
In July 1997, the mortgage holder on Chapelwood Estates foreclosed on
the property. They seized fixed assets that had a carrying value of $806,437,
which served as collateral on the loan. In return, the property wrote off the
mortgage balance and accrued interest of $894,551 and $89,365, respectively. In
addition, approximately $41,240 of other liabilities were forgiven in the
foreclosure. The lender retained $67,948 of escrow balances. An extraordinary
gain of $150,771 was recognized on the foreclosure in 1997.
On January 11, 1996, two mortgages held by Sutton park were refinanced
with a mortgage of $3,400,000 and an unsecured $50,000 promissory note. See Note
4. As a result of the refinancing, a portion of one of the original mortgages
was forgiven and an extraordinary gain of $795,000 was recognized in 1996.
On July 16, 1996, the Sutton Park Apartments experienced a fire in one
of its buildings resulting in property destruction estimated at a net book value
of $170,235. It was estimated that the Partnership would receive insurance
proceeds totaling $876,393, which resulted in an extraordinary gain for
financial statement purposes of $706,158 in 1996.
28
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
8. 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.
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 years ended December 31, 1998,
1997 and 1996, as reported in the statement of operations, and as would be
reported for tax return purposes is as follows:
1998 1997 1996
---------------- ----------------- ----------------
Net income (loss) -
Statement of operations $1,933,837 $ (1,380,178) $ 314,442
Add to (deduct from):
Difference in depreciation (465,668) (267,715) (320,560)
Gain on sale of property 1,453,577 - 4,402
Gain from fire loss - - (706,158)
Gain from foreclosure 481,306 212,573 -
Other, primarily increase in
allowance for doubtful accounts
and joint venture adjustment(s) (354,420) 307,482 185,770
---------------- ----------------- ----------------
Net income (loss) - tax return purposes $3,048,632 $ (1,127,838) $ (522,104)
================ ================= ================
29
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Continued)
The reconciliation of Partners' (Deficit) as of December 31, 1998, 1997 and
1996, as reported in the balance sheet and as reported for tax return purposes,
is as follows:
1998 1997 1996
----------------- ---------------- ----------------
Partners' Deficit - Balance Sheet $(2,653,806) $ (4,587,643) $ (3,207,465)
Add to (deduct from):
Accumulated difference in depreciation (6,281,518) (5,815,850) (5,548,135)
Accumulated amortization of
discounts on mortgages payable 382,695 382,695 382,695
Syndication fees 2,734,297 2,734,297 2,734,297
Difference in book and tax basis in
Partnership investments (635,737) (635,737) (635,737)
Gain from sale of properties 1,453,577 - -
Gain from fire loss (706,158) (706,158) (706,158)
Gain on foreclosure 693,879 212,573 -
Other, primarily allowance for
doubtful accounts and
joint venture adjustment(s) 1,285,871 1,640,291 1,332,809
----------------- ---------------- ----------------
Partners' Deficit - tax return purposes $ (3,726,900) $ (6,775,532) $ (5,647,694)
================= ================ ================
9. LEASES:
-------
Airlanes, the Partnership's only commercial property, was sold in
February 1998. Therefore, there are no minimum future rentals to be received
under noncancelable operating leases at December 31, 1998.
30
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Continued)
-----------
10. FAIR VALUE OF FINANCIAL INSTRUMENTS:
-----------------------------------
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair value of accounts
receivable, notes payable - other, accounts payable, accounts payable
affiliates, accrued expenses and deposit liabilities approximate the carrying
value due to the short-term nature of these instruments.
Management has estimated that the fair value of the mortgage payable on
Andover Park (formerly Willow Creek) approximates its carrying value of
$3,950,000 since the mortgage was obtained in 1998 and has a variable interest
rate.
Management has estimated that the fair value of the mortgage payable on
Woodbridge Manor (formerly Sutton Park), based on currently available rates for
mortgages of similar terms, approximates its carrying value of $3,300,000.
See footnote 4 for a description of the terms of the mortgages payable.
11. SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
----------------------------------------------
1998 1997 1996
--------------- -------------- --------------
Cash paid for interest $1,685,446 $ 1,416,126 $ 1,571,553
=============== ============== ==============
12. GOING CONCERN CONSIDERATIONS:
----------------------------
The Partnership continued to experience operating losses and cash flow
difficulties in 1998. These factors and the foreclosure of Evergreen Terrace
during the current year, combined with significant partners' deficits, have
raised substantial doubt about the Partnership's ability to continue as a going
concern. Management is continuing its efforts to reduce expenses by closer
monitoring of expenditures and increase rents, decrease vacancies and improve
collections. Management has committed to a plan to sell the Partnership's two
remaining properties, Woodbridge Manor and Andover Park. Marketing efforts to
sell these properties will intensify and will include advertising in national
newspapers, mailing of sales packages to brokers and follow-up telephone calls
to brokers.
13. PROFORMA FINANCIAL INFORMATION:
------------------------------
In 1998, the Partnership sold the Creekside Apartments, Airlane Office
Warehouse and Lakeview Village Apartments. The sales resulted in a total gain
for financial statement purposes of $3,509,473. In addition, the Evergreen
Terrace Apartments was foreclosed on in 1998 which resulted in an extraordinary
gain of $224,712 for financial statement purposes. These properties contributed
revenues of $1,731,713 and incurred expenses totaling $4,314,342 during the year
ended December 31, 1998.
31
SCHEDULE III
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-IV
--------------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1998
-----------------
Initial Cost to
Partnership Cost
-------------------------- Capitalized
Property Subsequent to
Description Encumbrances Land Buildings Acquisition Dispositions
----------- ------------ ---- --------- ----------- ------------
Lakeview Village Apts.
Milwaukee, WI $ - $ 200,000 $ 3,785,880 $ 176,455 $ (4,162,335)
Woodbridge Manor Apts.
(formerly Sutton Park Apts.)
Lansing, MI 3,291,726 400,000 6,139,297 891,545 -
Airlanes Office Whse.
Nashville, TN - 576,500 5,604,420 344,541 (6,525,461)
Creekside Apts.
Flat Rock, MI - 250,500 4,491,688 202,698 (4,944,886)
Andover Park Apts.
(formerly Willow Creek Apts.)
Greenville, SC 3,950,000 226,300 4,276,760 77,793 -
Evergreen Terrace
Lansing, MI - 69,372 1,462,471 - (1,531,843)
------------ ------------ ------------- ------------ --------------
$ 7,241,726 $1,722,672 $ 25,760,516 $ 1,693,032 $ (17,164,525)
============ ============ ============= ============ ==============
(RESTUBBED TABLE)
Life on Which
Gross amounts at which Depreciation
Carried at Close of Period In Latest
--------------------------------------- (3) Statement
(1)(2) Accumulated Date of Of Operations
Land Buildings Total Depreciation Construction Is Computed
---- --------- ----- ------------ ------------ -----------
Lakeview Village Apts.
Milwaukee, WI $ - $ - $ - $ - Nov-85 25 Years
Woodbridge Manor Apts.
(formerly Sutton Park Apts.)
Lansing, MI 400,000 7,030,843 7,430,843 2,532,799 Dec-85 25 Years
Airlanes Office Whse.
Nashville, TN - - - - Aug-86 25 Years
Creekside Apts.
Flat Rock, MI - - - - Dec-86 25 Years
Andover Park Apts.
(formerly Willow Creek Apts.)
Greenville, SC 226,300 4,354,553 4,580,853 1,827,776 Dec-86 25 Years
Evergreen Terrace
Lansing, MI - - - - Dec-86 25 Years
----------- ------------ ------------ ------------
$ 626,300 $11,385,396 $ 12,011,696 $ 4,360,575
=========== ============ ============ ============
32
SCHEDULE III
(Continued)
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1998
-----------------
(1) Cost for Federal income tax purposes is $12,011,696.
(2) A reconciliation of the carrying amount of land and buildings as of
December 31, 1998, 1997 and 1996 follows:
1998 1997 1996
---- ---- ----
Balance at beginning of period $ 29,172,676 $ 29,671,979 $ 29,414,937
Additions 3,545 823,425 548,871
Dispositions (17,164,525) (1,322,728) (291,829)
------------------ ----------------- --------------------
Balance at end of period $ 12,011,696 $ 29,172,676 $ 29,671,979
================== ================= ====================
(3) A reconciliation of accumulated depreciation for the years ended
December 31, 1998, 1997 and 1996 follows:
1998 1997 1996
---- ---- ----
Balance at beginning of period $11,384,428 $ 11,049,042 $ 10,400,447
Additions charged to cost and expenses
during the period - 851,676 770,187
Dispositions (7,023,853) (516,290) (121,592)
----------------- ----------------- ------------------
Balance at end of period (a) $ 4,360,575 $11,384,428 $11,049,042
================= ================= ==================
(a) Balance applies entirely to buildings.
33
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.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP - IV
By: /s/ Joseph M. Jayson 07/02/99
--------------------- --------
JOSEPH M. JAYSON, Date
Individual General Partner
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.
By: REALMARK PROPERTIES, INC.
Corporate General Partner
/s/ Joseph M. Jayson 07/02/99
--------------------- --------
JOSEPH M. JAYSON, Date
President and Director
/s/ Judith P. Jayson 07/02/99
--------------------- --------
JUDITH P. JAYSON, Date
Director
/s/ Michael J. Colmerauer 07/02/99
--------------------- --------
MICHAEL J. COLMERAUER Date
Secretary
34