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, 1999 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, 1999 the issuer had 23,365.9 units of limited partnership
interest outstanding.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
INDEX
-----
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
September 30, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended September 30, 1999 and 1998 4
Statements of Operations -
Nine Months Ended September 30, 1999 and 1998 5
Statements of Partners' (Deficit) -
Nine Months Ended September 30, 1999 and 1998 6
Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 7
Notes to Financial Statements 8 - 19
PART II: MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF
--------------------------------
OPERATIONS 20 - 23
----------
-2-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
BALANCE SHEETS
--------------
September 30, 1999 and December 31, 1998
----------------------------------------
(Unaudited)
September 30, December 31,
1999 1998
---- ----
ASSETS
- ------
Property, at cost:
Land and improvements $ 244,300 $ 626,300
Buildings and improvements 4,336,553 11,385,396
Furniture, fixtures and equipment 537,500 1,237,500
------------ ------------
5,118,353 13,249,196
Less accumulated depreciation 2,497,351 5,598,075
------------ ------------
Property, net 2,621,002 7,651,121
Cash 127,114 29,981
Investment in mutual funds 2,623,308 --
Escrow deposits 141,717 437,505
Prepaid expenses 1,924 69,613
Mortgage costs, net of accumulated amortization
of $31,970 and $69,127 95,909 182,879
Other assets 20,131 13,970
------------ ------------
Total Assets $ 5,631,105 $ 8,385,069
============ ============
LIABILITIES AND PARTNERS' (DEFICIT)
- -----------------------------------
Liabilities:
Mortgages and notes payable $ 3,950,000 $ 7,241,726
Note payable - other 98,331 208,331
Accounts payable and accrued expenses 734,602 670,189
Accounts payable - affiliates 3,393,832 2,780,685
Accrued interest 5,860 27,781
Security deposits and prepaid rents 67,483 147,117
------------ ------------
Total Liabilities 8,250,108 11,075,829
------------ ------------
Minority interest in joint venture (36,954) (36,954)
------------ ------------
Partners' (Deficit):
General partners (526,499) (528,652)
Limited partners (2,055,550) (2,125,154)
------------ ------------
Total Partners' (Deficit) (2,582,049) (2,653,806)
------------ ------------
Total Liabilities and Partners' (Deficit) $ 5,631,105 $ 8,385,069
============ ============
See notes to financial statements
-3-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended September 30, 1999 and 1998
----------------------------------------------
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
Income:
Rental $ 395,015 $ 689,977
Interest and other income 35,337 98,195
----------- -----------
Total income 430,352 788,172
----------- -----------
Expenses:
Property operations 472,942 513,604
Interest:
To affiliates 60,774 58,080
Other 303,596 200,099
Depreciation and amortization 124,782 90,874
Administrative:
To affiliates 84,837 90,251
Other 119,082 150,058
----------- -----------
Total expenses 1,166,013 1,102,966
----------- -----------
Loss before allocated loss from joint venture
and gain on sale (735,661) (314,794)
Loss allocated to minority interest -- 27,495
Gain on sale 1,367,450 --
----------- -----------
Net income (loss) $ 631,789 $ (287,299)
=========== ===========
Loss per limited partnership unit before gain on sale $ (31.48) $ (12.33)
Gain on sale per limited partnership unit 56.77 --
----------- -----------
Income (loss) per limited partnership unit $ 25.28 $ (12.33)
=========== ===========
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, 1999 and 1998
---------------------------------------------
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
Income:
Rental $ 1,355,456 $ 2,145,038
Interest and other income 95,929 166,316
----------- -----------
Total income 1,451,385 2,311,354
----------- -----------
Expenses:
Property operations 1,095,975 1,761,063
Interest:
To affiliates 365,014 205,223
Other 601,131 825,376
Depreciation and amortization 219,044 520,249
Administrative:
To affiliates 249,363 295,213
Other 216,551 492,971
----------- -----------
Total expenses 2,747,078 4,100,095
----------- -----------
Loss before allocated loss from joint venture and
gain on sale (1,295,693) (1,788,741)
Loss allocated to minority interest -- 60,797
Gain on sale 1,367,450 3,559,333
----------- -----------
Net income $ 71,757 $ 1,831,389
=========== ===========
Loss per limited partnership unit before gain on sale $ (53.79) $ (71.73)
Gain on sale per limited partnership unit 56.77 147.76
----------- -----------
Income per limited partnership unit $ 2.98 $ 76.03
=========== ===========
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, 1999 and 1998
---------------------------------------------
(Unaudited)
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
Balance, January 1, 1998 $ (710,608) 23,366 $(3,877,035)
Net income 54,942 -- 1,776,447
----------- ----------- -----------
Balance, September 30, 1998 $ (655,666) 23,366 $(2,100,588)
=========== =========== ===========
Balance, January 1, 1999 $ (528,652) 23,366 $(2,125,154)
Net loss 2,153 -- 69,604
----------- ----------- -----------
Balance, September 30, 1999 $ (526,499) 23,366 $(2,055,550)
=========== =========== ===========
See notes to financial statements
-6-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Nine Months Ended September 30, 1999 and 1998
---------------------------------------------
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
Cash flow from operating activities:
Net income $ 71,757 $ 1,831,389
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 219,044 520,249
Loss allocated to minority interest -- (60,797)
Gain on sale(s) (1,367,450) (3,559,333)
Changes in operating assets and liabilities:
Escrow deposits 295,788 18,862
Interest and other receivables -- 5,829
Prepaid expenses 67,689 232,506
Other assets (6,161) --
Accounts payable and accrued expenses 64,413 87,415
Accrued interest (21,921) 243,562
Security deposits and prepaid rent (79,634) (178,840)
----------- -----------
Net cash used in operating activities (756,475) (859,158)
----------- -----------
Cash flow from investing activities:
Capital dispositions 6,265,495 9,873,904
Investment in mutual funds (2,623,308) --
----------- -----------
Net cash provided by investing activities 3,642,187 9,873,904
----------- -----------
Cash flows from financing activities:
Mortgage costs -- 282,970
Cash overdraft -- (330,379)
Accounts payable - affiliates 613,147 (1,975,933)
Principal payments on mortgages and notes (3,401,726) (6,991,404)
----------- -----------
Net cash used in financing activities (2,788,579) (9,014,746)
----------- -----------
Increase in cash 97,133 --
Cash - beginning of period 29,981 --
----------- -----------
Cash - end of period $ 127,114 $ --
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 623,052 $ 581,814
=========== ===========
See notes to financial statements
-7-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(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, 1999 and 1998,
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
------------------------------------------
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.
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.
-9-
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.
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
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.
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 limited partners.
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
(Woodbridge Manor, formerly Sutton Park) 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
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.
-10-
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
- ----------------------------------------------------------
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
(Andover Park, formerly 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.
In February 1998 Airlane Office Warehouse was sold for a sales price of
$4,700,000. The sale resulted in a gain for financial statement purposes of
$1,148,604.
In March 1998 Creekside Apartments was sold for a sales price of $5,075,000. The
sale generated a gain for financial statement purposes of $2,410,729.
-11-
ACQUISTION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
- ---------------------------------------------------------
In August 1999 Woodbridge Manor (formerly Sutton Park ) was sold for a
sales price of $6,400,000. The sale generated a gain for financial
statements purposes of $1,367,450.
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.
-12-
5. 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 $2,481,746 and $2,490,369 at September 30, 1998
and 1997 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. As a result of the Partnership's failure to make regular
principal and interest payments, the property was placed in receivership in
early 1998.
Woodbridge Manor (formerly Sutton Park)
- ---------------------------------------
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, 1998 and
1997 was $3,302,288 and $3,352,465 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, 1998 and 1997, the outstanding
balance was $0 and $10,423, respectively. This property was sold August
1999 and the mortgage was paid in full.
Airlanes I & III
- ----------------
A 7.625% mortgage with a balance of $3,448,282 at September 30, 1997, which
provided for annual principal and interest payments of $369,783 payable in
equal monthly installments, with the remaining balance due January 1, 1999.
This property was sold in February 1998 and the mortgage was paid in full.
-13-
MORTGAGES AND NOTES PAYABLE (CONTINUED)
- ---------------------------------------
Creekside
- ---------
An adjustable rate mortgage with an outstanding principal balance of
$3,613,360 at September 30, 1997. 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 was payable monthly in amounts which vary with the
interest rate. Monthly payments at June 30, 1997 based on 7.01% interest
rate were $27,671.90. The balance of the mortgage was due and payable March
31, 1998. The Partnership sold this property in March 1998 and the mortgage
was paid in full.
Andover Park (formerly Willow Creek)
- ------------------------------------
A mortgage with a balance of $3,948,450 at September 30, 1998. The mortgage
has a two-year term with a variable interest rate set at a rate equivalent
to 300 basis points over the thirty-day LIBOR rate (8.6875% at September
30, 1998). The loan may at any time during the two years be converted to a
thirty year fixed mortgage.
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 was $3,895,895. This mortgage was refinanced in June
1998 and paid off in full.
Evergreen Terrace
- -----------------
An adjustable rate mortgage with a balance at September 30, 1998 and 1997
of $1,009,005 and $1,011,763, 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%.
The mortgage is payable monthly in amounts which vary with the interest
rate. The balance of the mortgage was due and payable May 24, 1998. As a
result of the Partnership's failure to make regular principal and interest
payments, the property was placed in receivership in October 1997. There is
a pending foreclosure action with respect to the property. Management was
given until September 1998 to either pay off the mortgage or sell the
property, or the mortgagor will foreclose on the property. Foreclosure
proceedings have been initiated by the lender; at September 30, 1998, no
gain or loss on foreclosure has been recorded and the property has not been
written off.
-14-
MORTGAGES AND NOTES PAYABLE (CONTINUED)
- ---------------------------------------
Chapelwood Estates (formerly Cedar Court)
- ------------------------------------------
A 9.25% mortgage with a balance of $894,551 at September 30, 1997, which
provided 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 property was foreclosed on during 1997 and is no longer owned
by the Partnership. The foreclosure resulted in a gain for financial
statement purposes of $150,771.
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 $ 0
1998 3,950,000
1999 0
2000 0
2001 0
Thereafter 0
-----------
TOTAL $ 3,950,000
===========
6. 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.
-15-
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:
1999
----
Balance, January 1 $ ( 36,954)
Allocated Loss -
-----------
Balance, September 30 $ ( 36,954)
===========
7. 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 $82,735 and $130,488 for the nine months ended September 30, 1999
and 1998, 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 provided for the payment of a management fee equal to 4% of
monthly gross rental income. An affiliate of the General Partners' also
received a management fee of 2% of monthly gross rental income. This
property was sold during the first quarter of 1998 and the management
agreement was thereafter terminated.
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, 1999 and 1998.
-16-
RELATED PARTY TRANSACTIONS (CONTINUED)
- --------------------------------------
Accounts payable to affiliates amounted to $3,393,832 and $1,691,016 at
September 30, 1999 and 1998, 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 $365,014 and $205,223 for the nine months ended September 30, 1999
and 1998.
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 $8,262 and $8,550 for the nine months ended
September 30, 1999 and 1998, 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.
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.
-17-
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 income (loss) for the nine months ended September
30, 1999 and 1999 as reported in the statements of operations, and as would
be reported for tax purposes, is as follows:
September 30, September 30,
1999 1998
---- ----
Net income (loss) - statement of operations $ 71,757 $ 1,831,389
Add to (deduct from):
Difference in depreciation (219,044) (200,787)
Gain on sale of property 150,000
Allowance for doubtful accounts 217,400 230,000
--------- -----------
Net income (loss) - tax return purposes $ 220,113 $ 1,860,602
=========
-18-
INCOME TAXES (CONTINUED)
- -------------------------
The reconciliation of Partners' (Deficit) as of September 30, 1999 and
December 31, 1998 as reported in the balance sheet, and as reported for tax
purposes, is as follows:
September 30, December 31,
1999 1998
---- ----
Partners' (Deficit) - balance sheet $(2,582,049) $(2,653,806)
Add to (deduct from):
Accumulated difference in
depreciation (6,500,562) (6,281,518)
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 on Sale 1,603,577 1,453,577
Gain from fire loss (706,158) (706,158)
Gain on foreclosure 693,879 693,8793
Other 1,068,471 1,285,871
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Partners' (Deficit) - tax return purposes $(3,941,587) $ (3,726,900)
=========== =============
-19-
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
-------------
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 during either of the first three quarters of 1999 or
1998, 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 several of
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. The General Partner was successful in refinancing the Andover Park
Apartment Building (formerly Willow Creek) in Greenville, South Carolina at the
end of June 1998. This refinancing was deemed crucial as the lender was
threatening foreclosure if the mortgage was not paid in full by June 30, 1998.
Management successfully sold Woodbridge Manor (formerly Sutton Park Apartments)
near the end of August 1999. The sales price in the contract dated July 1, 1999
was $6.4 million. The sale resulted in a gain being recorded on the
Partnership's financial statements during the third quarter of 1999.
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 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 it tax software making it Year 2000 compliant. This
work began May 1, 1999 and is almost completed.
-20-
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- -------------------------------------------
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 testing done by October 31, 1999.
The Partnership is working on a contingency plan in the unlikely event that its
informational systems do not operate as planned in the year 2000, all records
could be maintained until the problems with its systems are resolved. Management
feels 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:
- ----------------------
Net loss for the three month period ended September 30, 1999 amounted to
$735,661 or $31.48 per limited partnership unit versus a net loss for the three
month period ended September 30, 1998 of $314,794 or $12.33 per limited
partnership unit. For the nine month period ended September 30, 1998, the net
income amounted to $71,757 or $2.98 per limited partnership unit, versus income
of $1,831,389 or $76.03 per limited partnership unit for the nine month period
ended September 30, 1998. The net income generated during the nine month period
ended September 30, 1998 was due to the gain resulting from the sales of
Airlanes and Creekside which amounted to $3,559,333. Without such gain, the
Partnership incurred a net loss of $1,788,741 or $71.73 per limited partnership
unit for the nine months ended September 30, 1998.
On a tax basis, the Partnership generated income of $220,113 or $9.14 per
limited partnership unit for the nine month period ended September 30, 1998
versus income of $1,860,602 or $77.24 per limited partnership unit for the nine
month period ended September 30, 1998. Again, without considering the gain on
sale, the tax basis loss which would have been reported for the first nine
months of 1998 was approximately $1,698,731 or $70.52 per limited partnership
unit.
Partnership revenue for the quarter ended September 30, 1999 totaled $430,352, a
decrease of almost $357,820 from the same period in 1998. For the nine month
period ended September 30, 1999 total income decreased by $859,969 from the
corresponding period in 1998; total income for the nine months ended September
30, 1999 and 1998 was $1,451,385 and $2,311,354, respectively. Rental income for
the nine month period ended September 30, 1999, totaled $1,355,456, a decrease
of just over $2,145,038 over the same time period in 1998. All the above
decreases are primarily related to the sales
-21-
RESULTS OF OPERATIONS (CONTINUED)
- ---------------------------------
of Airlanes Office/Warehouse Building in February 1998 and Creekside Apartments
during March 1998 (i.e., there are two less complexes in the Partnership
generating revenue). Woodbridge Manor (formerly Sutton Park) was not sold until
August of 1999.
For the three month period ended September 30, 1999, the Partnership expenses
totaled $1,166,013, a increase of approximately $63,017 from the quarter ended
September 30, 1998. For the nine months ended September 30, 1999, the
Partnership expenses totaled $2,747,078, decreasing almost $1,353,017 from the
same nine month period in the previous year. This is mostly due to the sale of
two properties (Creekside and Airlanes) . Payroll and associated costs and
repairs and maintenance expenses saw large increases between the two nine month
periods, and it is management's expectation that such costs will continue to be
relatively high through the remaining months of 1999 due to necessary capital
improvement work at the properties. Several capital improvements projects are
continuing and exterior painting. As was noted in the previous quarter,
depreciation and amortization increased dramatically between the nine months
ended September 30, 1999 and 1998. The increase was due to two factors: 1)
accounting pronouncements resulted in the ceasing of depreciation on several
properties in 1997 due to existing sales contracts, which were either
subsequently canceled or acted upon; and 2) additional amortization taken on
fees paid to extend the Andover Park (formerly Willow Creek) mortgage and hold
off on a pending foreclosure; this mortgage was subsequently paid in full when a
new mortgage was negotiated. Administrative costs also remained relatively high
due to increased brokerage fees incurred and being accrued as a result of
management's increased efforts to sell the properties in this partnership.
Again, management continues to put forth great effort to control and manage the
Partnership's expenses while also focusing heavily on increasing occupancies..
-22-
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP IV
--------------------------------------------------
PART II
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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.
-23
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 September 30, 1999
--------------------- ------------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer