EXHIBIT 13
CONAM REALTY INVESTORS 4 L.P.
1998 ANNUAL REPORT
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CONAM REALTY INVESTORS 4 L.P.
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ConAm Realty Investors 4 L.P. is a California limited partnership
formed in 1984 to acquire, operate and hold for investment multifamily
residential properties. At December 31, 1998, the Partnership's
portfolio consisted of two apartment properties located in Florida and
Arizona. On January 29, 1999, with the consent of the Unitholders, the
two remaining properties were sold for a price of $ 9,350,000 (before
closing costs) and substantially all of the cash, less a contingency
amount, was distributed to the Unitholders on February 26, 1999.
CONTENTS
1 Message to Investors
2 Performance Summary
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to the Consolidated Financial Statements
13 Independent Auditors' Report
14 Report of Former Independent Accountants
15 Net Asset Valuation
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ADMINISTRATIVE INQUIRIES PERFORMANCE INQUIRIES/FORM 10Ks
ADDRESS CHANGES/TRANSFERS Brock, Tibbitts and Snell
MAVRICC Management Systems, Inc. 625 Broadway, Suite 911
1845 Maxwell, Suite 101 San Diego, California 92101
Troy, MI 48084-4510
Attn: Financial Communications
248-637-7897 619-232-0365
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CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
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MESSAGE TO INVESTORS
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Presented for your review is the 1998 Annual Report for ConAm Realty
Investors 4 L.P. (the "Partnership"). In this report we have included a
performance summary which addresses operations at each of the properties (the
"Properties") and the financial highlights for the year.
We are pleased to announce that the proposed sale of the Partnership's two
remaining Properties to DOC Investors, L.L.C., a Delaware limited liability
company, was approved by a majority in interest of the Unitholders as of
January 15, 1999 and that the sale was completed on January 29, 1999.
Following the close of the sale of the Properties, a distribution of $78.06
per Unit, representing the majority of the net proceeds from the sale and
other cash from operations, was paid to Unitholders on February 26, 1999.
This distribution included the net proceeds from the sale of the
Partnership's Properties in January 1999 of $71.60 per Unit, and cash from
operations of $6.46 per Unit.
CASH DISTRIBUTIONS
The Partnership paid quarterly cash distributions of operating cashflow
totaling $3.00 per Unit for the year ended December 31, 1998. The General
Partner elected not to make a fourth quarter distribution pending the outcome
of the solicitation of the consent of the Unitholders to the sale of the
Partnership's Properties. Including the distribution of sale proceeds and
cash from operations on February 26, 1999, since inception, the Partnership
has paid distributions totaling $587.07 per original $500 Unit.
OPERATIONS OVERVIEW
In 1998, operations at the Partnership's Properties continued to be impacted
to varying degrees by strong competition for residents in the markets where
the two Properties are located. Population and job growth escalated in
Arizona and Florida, but these factors fueled construction of new apartment
complexes which in turn put pressure on rental rate increases and overall
vacancy rates. Despite these pressures, average occupancy at Shadowood
Village was 96% for 1998 compared to 93% in 1997, which is approximately 4%
above the average in the Jacksonville area. Average occupancy at Village at
the Foothills II was 94% for 1998, unchanged from last year, and rental rates
also increased, due in part to the continuance of rent concessions and
maintenance of the attractive appearance of the property. Although the Tucson
market has improved from its previous overbuilt condition, over 1,900 new
units are under construction or in planning. This new construction may put
downward pressure on rents and occupancy in the future. Moreover, many
renters have taken advantage of low mortgage rates to buy homes.
SUMMARY
The sale of the Properties on January 29, 1999 and the initial distribution
of net sales proceeds and cash from operations on February 26, 1999,
represents a major step toward the liquidation of the Partnership that is
expected to be completed in August 1999. A final distribution of remaining
Partnership cash, if any, will be made shortly thereafter.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein, President
Continental American Development Inc.
General Partner of ConAm Property Services IV, Ltd.
March 30, 1999
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
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PERFORMANCE SUMMARY
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VILLAGE AT THE FOOTHILLS II TUCSON, ARIZONA
Village at the Foothills II is a 120-unit apartment community located in the
northwest area of Tucson. The property maintained an average occupancy rate
of 94% during 1998, unchanged from 1997. Apartment vacancy rates remain high
in this market, but significant population and job growth in Tucson over the
last few years is slowly reducing the number of available units. Low interest
rates and affordable home prices have also increased competition by luring
many renters to purchase homes. This competition led to the use of rental
incentives and other concessions in the marketplace to attract residents.
SHADOWOOD VILLAGE JACKSONVILLE, FLORIDA
Shadowood Village is a 110-unit luxury apartment complex located in a
residential area in Jacksonville. The property's average occupancy level
increased to 96% in 1998, from 93% in 1997, while rental income increased 8%
from the prior year. Favorable market conditions in the Jacksonville area led
to an increase in new multifamily construction throughout the year. This
increase in construction was partially due to the city's 1996 ranking as one
of the fastest growing labor markets in the country. Although population and
job growth in the Jacksonville area remains high, this new construction
softened the market by outpacing population and job growth and will continue
to affect the region as new units become available. Vacancy rates remained
low in 1998, due to increased use of rental concessions in the marketplace to
attract and retain residents.
2
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
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FINANCIAL HIGHLIGHTS
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SELECTED FINANCIAL DATA
For the years ended December 31, 1998 1997 1996 1995 1994
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DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA
Total Income $1,741 $4,485 $4,926 $6,597 $7,633
Gain on Sale of Properties -- 4,907 -- 2,855 --
Net Income 73 6,019 1,023 3,260 985
Net Cash Provided by
Operating Activities 430 1,741 2,137 2,363 3,034
Long-term Obligations at Year End -- -- -- -- 5,051
Total Assets at Year End 8,772 22,770 26,010 27,247 44,686
Net Income per
Limited Partnership Unit* 0.24 45.32 6.32 22.28 2.12
Distributions per Limited
Partnership Unit* 3.00 15.00 15.00 11.25 9.00
Special Distributions per Limited
Partnership Unit* -- 158.00 -- 111.25 --
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* 128,110 UNITS OUTSTANDING
CASH DISTRIBUTIONS
PER LIMITED PARTNERSHIP UNIT 1998 1997
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Special Distributions* $ -- $158.00
First Quarter 1.00 3.75
Second Quarter 1.00 3.75
Third Quarter 1.00 3.75
Fourth Quarter -- 3.75
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TOTAL $ 3.00 $173.00
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Cash distributions were reduced in 1998 due to a suspension of distributions
in the fourth quarter pending the outcome of the solicitation of the consent
the Unitholders to the sale of the Properties.
* On October 31, 1997, the Partnership paid a special cash distribution of
$55.00 per Unit, representing net proceeds from the sale of River Hill
Apartments on August 6, 1997. On January 21, 1998, the Partnership paid a
special cash distribution of $103.00 per Unit which was declared in 1997.
This special cash distribution represented the net proceeds from the
December 30, 1997 sale of Pelican Landing.
3
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
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CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, AT DECEMBER 31,
1998 1997
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ASSETS
Investments in real estate:
Land $ 2,153,239 $ 2,153,239
Buildings and improvements 11,023,211 11,015,879
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13,176,450 13,169,118
Less accumulated depreciation (5,968,023) (5,552,827)
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7,208,427 7,616,291
Cash and cash equivalents 1,403,143 15,150,595
Other assets 160,534 3,300
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TOTAL ASSETS $ 8,772,104 $ 22,770,186
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 239,393 $ 144,530
Distribution payable -- 13,729,122
Due to general partner and affiliates 6,853 15,471
Security deposits 34,109 35,573
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Total Liabilities 280,355 13,924,696
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Partners' Capital:
General Partner -- --
Limited Partners (128,110 Units outstanding) 8,491,749 8,845,490
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Total Partners' Capital 8,491,749 8,845,490
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,772,104 $ 22,770,186
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SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
4
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
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INCOME
Rental $ 1,623,889 $ 4,272,753 $ 4,778,238
Interest and other 117,236 212,589 148,102
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Total Income 1,741,125 4,485,342 4,926,340
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EXPENSES
Property operating 998,052 2,465,118 2,545,471
Depreciation 422,811 695,023 1,184,781
General and administrative 240,495 213,479 173,535
Write-off of assets 6,475 -- --
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Total Expenses 1,667,833 3,373,620 3,903,787
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INCOME FROM OPERATIONS 73,292 1,111,722 1,022,553
Gain on sale of properties, net -- 4,907,439 --
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NET INCOME $ 73,292 $ 6,019,161 $ 1,022,553
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NET INCOME ALLOCATED:
To the General Partner $ 42,703 $ 213,517 $ 213,517
To the Limited Partners 30,589 5,805,644 809,036
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NET INCOME $ 73,292 $ 6,019,161 $ 1,022,553
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PER LIMITED PARTNERSHIP UNIT
(128,110 UNITS OUTSTANDING):
Income from operations $ 0.24 $ 7.32 $ 6.32
Gain on sale of properties, net -- 38.00 --
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NET INCOME $ 0.24 $ 45.32 $ 6.32
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CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996 GENERAL LIMITED
PARTNER PARTNERS TOTAL
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BALANCE AT DECEMBER 31, 1995 $ -- $ 26,315,490 $ 26,315,490
Net income 213,517 809,036 1,022,553
Distributions ($15.00 per Unit) (213,517) (1,921,650) (2,135,167)
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BALANCE AT DECEMBER 31, 1996 $ -- $ 25,202,876 $ 25,202,876
Net income 213,517 5,805,644 6,019,161
Distributions ($173.00 per Unit) (213,517) (22,163,030) (22,376,547)
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BALANCE AT DECEMBER 31, 1997 $ -- $ 8,845,490 $ 8,845,490
Net income 42,703 30,589 73,292
Distributions ($3.00 per Unit) (42,703) (384,330) (427,033)
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BALANCE AT DECEMBER 31, 1998 $ -- $ 8,491,749 $ 8,491,749
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SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
5
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 73,292 $ 6,019,161 $ 1,022,553
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 422,811 695,023 1,184,781
Write-off of assets 6,475 -- --
Gain on sale of properties, net (4,907,439) --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Other assets (157,234) 12,070 836
Accounts payable and accrued expenses 94,863 36,261 (73,169)
Due to general partner and affiliates (8,618) (4,972) 841
Security deposits (1,464) (108,647) 1,180
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Net cash provided by operating activities 430,125 1,741,457 2,137,022
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property -- 20,279,729 --
Additions to real estate (21,422) (4,250) (69,956)
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Net cash provided by (used in) investing activities (21,422) 20,275,479 (69,956)
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CASH FLOWS FROM FINANCING ACTIVITIES-
Distributions to partners (14,156,155) (9,181,217) (2,188,546)
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Net increase (decrease) in cash and cash equivalents (13,747,452) 12,835,719 (121,480)
Cash and cash equivalents, beginning of period 15,150,595 2,314,876 2,436,356
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,403,143 $ 15,150,595 $2,314,876
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SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (14,090) $ -- $ --
Write-off of accumulated depreciation $ 7,615 $ -- $ --
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SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
6
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
Notes to the Consolidated Financial Statements
DECEMBER 31, 1998, 1997 AND 1996
1. ORGANIZATION
ConAm Realty Investors 4 L.P. (formerly Hutton/ConAm Realty Investors 4) (the
"Partnership") was organized as a Limited Partnership under the laws of the
State of California pursuant to a Certificate and Agreement of Limited
Partnership (as subsequently amended, the "Partnership Agreement") dated May
10, 1984. The Partnership was formed for the purpose of acquiring and
operating multifamily residential real estate. The general partners of the
Partnership were RI 3-4 Real Estate Services, Inc. ("RI 3-4"), an affiliate
of Lehman Brothers, Inc. (see below), and ConAm Property Services IV, Ltd.
("CPS IV"), an affiliate of Continental American Properties, Ltd. (the
"General Partners"). On October 8, 1997, CPS IV acquired RI 3-4's co general
partner interest in the Partnership, effective July 1, 1997, pursuant to a
purchase agreement between CPS IV and RI 3-4 dated August 29, 1997. As a
result, CPS IV now serves as the sole general partner (the "General Partner")
of the Partnership. In conjunction with this transaction, the name of the
Partnership was changed from Hutton/ConAm Realty Investors 4 to ConAm Realty
Investors 4 L.P. On January 15, 1999, a majority in interest of Unitholders
agreed to the sell the Partnership's remaining properties and liquidate the
Partnership. The Partnership sold its properties on January 29, 1999 (Note 9)
and expects to liquidate during 1999.
2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
FINANCIAL STATEMENTS The consolidated financial statements are prepared on
the accrual basis of accounting and include the accounts of the Partnership
and its affiliated ventures when the Partnership has a controlling interest
in the ventures. The effect of transactions between the Partnership and its
ventures have been eliminated in consolidation.
INVESTMENTS IN REAL ESTATE Investments in real estate are recorded at cost
less accumulated depreciation and include the initial purchase price of the
property, legal fees, acquisition and closing costs.
Revenue is recognized when earned and expenses (including depreciation) are
recognized when incurred in accordance with generally accepted accounting
principles. Leases are generally for terms of one year or less.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the properties (25 years). Maintenance and repairs
are charged to operations as incurred. Costs incurred for significant
betterments and improvements are capitalized and depreciated over their
estimated useful lives.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in net income for the period.
IMPAIRMENT OF LONG-LIVED ASSETS The Partnership assesses its real estate
investments for impairment whenever events or changes in circumstances
indicate that the carrying amount of the real estate may not be recoverable.
Recoverability of real estate to be held and used is measured by a comparison
of the carrying amount of the real estate to future net cash flows
(undiscounted and without interest) expected to be generated by the real
estate. If the real estate is considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying amount of the real
estate exceeds the fair value of the real estate. At December 31, 1998, the
Partnership's properties were assets to be held and used as the Partnership
did not have the ability to sell the properties without the approval of a
majority of the Unitholders.
INCOME TAXES No provision for income taxes has been made in the financial
statements as the liability for such taxes is that of the partners rather
than the Partnership.
7
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of highly liquid
short-term investments with original maturities of three months or less.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institution's federally
insured limits. The Partnership invests its cash and cash equivalents with
high credit quality federally insured financial institutions or treasury
based money market funds.
USE OF ESTIMATES Management of the Partnership has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
3. THE PARTNERSHIP AGREEMENT
The Partnership Agreement provides that net cash from operations, as defined,
is to be distributed quarterly, 90% to the limited partners and 10% to the
General Partner.
Net loss and all depreciation for any year is to be allocated 99% to the
limited partners and 1% to the General Partner.
Net income before depreciation is to be allocated as follows:
(a) To the extent that net income from operations before depreciation
does not exceed the amount of net cash from operations
distributable to the partners with respect to such year, net income
from operations before depreciation is to be allocated among the
partners, pro rata in accordance with the amount of net cash from
operations distributable to each partner with respect to such year
to the extent thereof; and
(b) To the extent that net income from operations before depreciation
exceeds the amount of net cash from operations distributable to the
partners with respect to such year, such excess is to be allocated
(1) first, 100% to the General Partner, pro rata, in an amount
equal to the excess, if any, of the General Partner's deficit, if
any, in its capital account, over an amount equal to 1% of the
aggregate capital contributions to the Partnership as reduced by
the amount of the General Partner's capital contributions, and (2)
second, 99% to the limited partners and 1% to the General Partner.
Net proceeds from sales or refinancing are to be distributed 100% to the
limited partners until each limited partner has received an amount equal to
his adjusted capital value (as defined) and an annual, cumulative 7% return
thereon. The balance, if any, is to be distributed 85% to the limited
partners and 15% to the General Partner.
Effective July 1, 1997, all General Partner allocations were made solely to
CPS IV.
8
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
4. INVESTMENTS IN REAL ESTATE
The Partnership owns two remaining residential apartment complexes acquired
through investments in joint ventures and limited partnerships as follows:
APARTMENT DATE PURCHASE
PROPERTY NAME UNITS LOCATION ACQUIRED PRICE
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Village at the Foothills II 120 Tucson, AZ 5/30/85 $ 7,216,400
Shadowood Village 110 Jacksonville, FL 7/3/86 5,400,000
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Village at the Foothills II was acquired through a joint venture with an
unaffiliated developer and Shadowood Village was acquired through a limited
partnership with an unaffiliated developer. To each limited partnership and
joint venture, the Partnership assigned its rights to acquire the above
properties and contributed cash equal to the purchase price of the
properties. The Partnership's partners did not make initial capital
contributions to these entities.
On July 20, 1995, the Partnership sold Trails at Meadowlakes and Cypress
Lakes. Trails at Meadowlakes and Cypress Lakes were sold for $8,940,000 and
$8,825,000, respectively, to an unaffiliated institutional buyer. The
Partnership received net proceeds of $17,551,351 from the transaction of
which $5,057,952, representing outstanding principal and interest, was used
to fully satisfy the Partnership's mortgage obligation on Trails at
Meadowlakes. The transaction resulted in a gain on sale of $2,854,884, which
is reflected in the Partnership's consolidated statements of operations for
the year ended December 31, 1995.
On August 22, 1995, the Partnership paid a special distribution of
$14,252,238 to the limited partners. The special distribution was comprised
of net proceeds from the sale of Trails at Meadowlakes and Cypress Lakes and
from Partnership cash reserves.
In 1995, the Partnership recorded a write-down of $477,170 to reduce the
carrying value of River Hill Apartments to its estimated fair value. The
impairment was caused by the need for necessary property improvements and
changing market conditions.
On August 6,1997, the Partnership sold River Hill Apartments to an
unaffiliated institutional buyer for a sales price of $7,275,000. The
Partnership received net proceeds from the sale totaling $7,108,356 and the
transaction resulted in a loss of $249,944, which is reflected in the
Partnership's consolidated statements of operations for the year ended
December 31, 1997. On October 31, 1997, the General Partners paid a special
distribution to Limited Partners representing the net proceeds from the sale.
On December 30, 1997, the Partnership sold Pelican Landing to an unaffiliated
institutional buyer for a sales price of $13,400,000. The Partnership
received net proceeds from the sale totaling $13,171,373 and the transaction
resulted in a net gain of $5,157,383, which is reflected in the Partnership's
consolidated statements of operations for the year ended December 31, 1997. A
distribution in the amount of $103 per Unit was paid to limited partners on
January 21, 1998, and was reflected on the Partnership's Balance Sheet as
"Distribution payable" at December 31, 1997. Distribution payable was
$13,195,330 at December 31, 1997.
The limited partnership agreement of River Hill Apartments substantially
provides that:
a. Net cash from operations of River Hill Apartments is to be
distributed 100% to the Partnership until it has received an
annual, noncumulative return of 10% on its adjusted capital
contribution. Any remaining balance is to be distributed 60% to the
Partnership and 40% to the co-venturer.
9
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
b. Net income of the limited partnership is to be allocated to the
Partnership and the co-venturers basically in accordance with the
distribution of net cash from operations. All net losses and
depreciation are to be allocated to the Partnership.
c. Net proceeds from a sale or refinancing of River Hill Apartments
are to be distributed 100% to the Partnership, until it has
received an amount equal to 110% of its adjusted capital
contribution. Distributions are to then be made 75% to the
Partnership and 25% to the co-venturer, until the Partnership has
received an additional 110% of the Partnership's adjusted capital
contribution. Any remaining balance is to be distributed 50% to the
Partnership and 50% to the co-venturer. In 1997, 100% of the net
proceeds from sale were distributed to the Partnership.
The joint venture and limited partnership agreements of Village at the
Foothills II and Shadowood Village substantially provide that:
a. Available cash from operations is to be distributed 100% to the
Partnership until it has received its annual, noncumulative
preferred return, as defined. Any remaining balance is to be
distributed 99% to the Partnership and 1% to the General Partner.
b. Net income is to be allocated first, proportionately to partners
with negative capital accounts, as defined, until such capital
accounts, as defined, have been increased to zero; then, to the
Partnership up to the amount of any payments made on account of its
preferred return; thereafter, 99% to the Partnership and 1% to the
General Partner. All losses are to be allocated first to the
partners with positive capital accounts, as defined, until such
accounts have been reduced to zero and, then, 99% to the
Partnership and 1% to the General Partner.
c. Income from a sale is to be allocated to the Partnership until the
Partnership's capital accounts, as defined, are equal to the fair
market value of the venture's assets at the date of the amendments;
then, any remaining balance is to be allocated 99% to the
Partnership and 1% to the General Partner. Net proceeds from a sale
or refinancing are to be distributed first to the partners with a
positive capital account balance, as defined; thereafter, 99% to
the Partnership and 1% to the General Partner.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that the fair values be disclosed
for the Partnership's financial instruments. The carrying amount of cash and
cash equivalents, accounts payable and accrued expenses, distributions
payable, due to general partner and affiliates, and security deposits are
reasonable estimates of their fair values due to the short-term nature of
those instruments.
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CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
6. TRANSACTIONS WITH RELATED PARTIES
The following is a summary of fees earned and reimbursable expenses to the
General Partners and affiliates for the years ended December 31, 1998, 1997
and 1996, and the unpaid portion at December 31, 1998:
EARNED AND
UNPAID AT EARNED
DECEMBER 31, ----------------------------------------------------
1998 1998 1997 1996
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RI 3-4 Real Estate Services, Inc.
and affiliates -
Out-of-pocket expenses $ -- $ 298 1,236 724
ConAm and affiliates:
Property operating salaries -- 147,532 298,398 307,565
Property management fees 6,853 81,849 220,820 239,560
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TOTAL $ 6,853 $ 229,679 520,454 547,849
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7. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION
The following is a reconciliation of the net income for financial statement
purposes to net income for federal income tax purposes for the years ended
December 31, 1998, 1997 and 1996:
1998 1997 1996
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Net income per financial statements $ 73,292 $ 6,019,161 $ 1,022,553
Depreciation deducted for tax purposes in excess
of depreciation expense per financial
statements (unaudited) -- (144,847) (92,628)
Tax basis joint venture net income (loss)
in excess of GAAP basis joint
venture net income (unaudited) (58,334) 1,916,863 (104,176)
Gain on sale of properties
For tax purposes in excess of gain per
Financial statements (unaudited) -- 3,487,244 --
Other (unaudited) (10,850) 10,820 (2,213)
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TAXABLE NET INCOME (UNAUDITED) $ 4,108 $ 11,289,241 $ 823,536
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11
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital for federal income tax purposes as of December 31,
1998, 1997 and 1996:
1998 1997 1996
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Partners' capital per financial statements $ 8,491,749 $ 8,845,490 $ 25,202,876
Accrued distribution from sale
of Pelican Landing (unaudited) -- 13,195,330 --
Adjustment for cumulative difference between
tax basis net income and net income
per financial statements (unaudited) 3,366,730 3,435,914 (1,834,166)
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PARTNERS' CAPITAL PER INCOME TAX RETURN (UNAUDITED) $ 11,858,479 $ 25,476,734 $ 23,368,710
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At December 31, 1998, the tax basis of the Partnership's assets was
$12,011,848 and the tax basis of the Partnership's liabilities was $153,369.
The Partnership does not consolidate its investment in joint ventures for
income tax purposes.
8. DISTRIBUTIONS PAID
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognizes specific record dates for
payments within each year. The consolidated statements of cash flows
recognize actual cash distributions paid during the year. The following table
discloses the annual amounts as presented on the consolidated financial
statements:
DISTRIBUTIONS DISTRIBUTIONS
PAYABLE DISTRIBUTIONS DISTRIBUTIONS PAYABLE
BEGINNING OF YEAR DECLARED PAID DECEMBER 31,
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1998 $ 13,729,122 $ 427,033 $ 14,156,155 $ --
1997 533,792 22,376,547 9,181,217 13,729,122
1996 587,171 2,135,167 2,188,546 533,792
- -------------------------------------------------------------------------------------------------------------------
9. SALE OF PROPERTIES
On January 29, 1999, the Partnership consummated the sale of the Village at
the Foothills II and Shadowood Village to DOC Investors, L.L.C., a Delaware
limited liability company, for a sales price of $9,350,000 (before selling
costs and prorations). As required by the Partnership's Partnership
Agreement, the General Partner solicited the consent of a majority in
interest of the Unitholders to the sale pursuant to a Consent Solicitation
Statement dated December 16, 1998. The requisite consent was obtained on
January 15, 1999.
The Partnership received approximately $9,318,000 of cash proceeds from the
sale, net of closing costs of approximately $32,000.
On February 26, 1999, the Partnership distributed $10,000,267 ($78.06 per
Unit) to the Unitholders and $91,887 to the General Partner.
12
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 4 L.P.:
We have audited the accompanying consolidated balance sheets of ConAm Realty
Investors 4 L.P. (a California limited partnership) and consolidated ventures
(the Partnership), as of December 31, 1998 and 1997, and the related
consolidated statements of operations, partners' capital, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As further discussed in Note 9 to the consolidated financial statements, the
Partnership sold substantially all of its assets on January 29, 1999.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ConAm
Realty Investors 4 L.P. and consolidated ventures as of December 31, 1998 and
1997, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
KPMG LLP
San Diego, California
March 12, 1999
13
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Partners of
ConAm Realty Investors 4 L.P.:
We have audited the consolidated balance sheet of ConAm Realty Investors 4
L.P. (formerly Hutton/ConAm Realty Investors 4), a California Limited
Partnership, and Consolidated Ventures as of December 31, 1996 and the
related consolidated statements of operations, partners' capital (deficit)
and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ConAm Realty Investors 4 L.P., a California Limited Partnership, and
Consolidated Ventures as of December 31, 1996, and the consolidated results
of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
14
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUATION
- -----------------------------------------------------------------------------------------------------------------------
COMPARISON OF ACQUISITION COSTS TO DECEMBER 31, 1998 PROPERTY VALUES AND
DETERMINATION OF NET ASSET VALUE PER UNIT AT DECEMBER 31, 1998 (UNAUDITED)
ACQUISITION COST
(PURCHASE PRICE
PLUS GENERAL
DATE OF PARTNERS' NET ASSET VALUE
PROPERTY ACQUISITION ACQUISITION FEES) SALES PRICE (1) DETERMINATION
- -----------------------------------------------------------------------------------------------------------------------
Village at the Foothills II 05-30-85 $ 7,376,000 $ 4,800,000
Shadowood Village 07-03-86 5,649,540 4,550,000
--------------------
Aggregate Property Value at 12-31-98 $9,350,000
Less estimated transaction costs in escrow (32,000)
------------------
Sales Proceeds 9,318,000
Cash and cash equivalents 1,403,143
Other assets 160,534
------------------
Total assets 10,881,677
------------------
Less:
Liabilities (280,355)
Contingency amounts (2) (509,168)
------------------
Total liabilities (789,523)
------------------
Partnership Net Asset Value (3) 10,092,154
------------------
Net Asset Value Allocated:
Limited Partners 10,000,267
General Partner 91,887
------------------
10,092,154
------------------
NET ASSET VALUE PER UNIT
(128,110) UNITS OUTSTANDING $78.06
- -----------------------------------------------------------------------------------------------------------------------
(1) Represents the Partnership's share of the fair market value of the
properties as reflected in the purchase and sale agreements pursuant to
which the properties were sold on January 29, 1999. The purchase prices
contained in such agreements were negotiated and agreed to in
December 1998.
(2) Includes an amount for estimated future costs related to the sale of the
properties and liquidation of the Partnership and an amount the General
Partner determined to set aside for contingencies.
(3) The Partnership Net Asset Value assumes a sale at December 31, 1998 of all
the Partnership's properties at prices equal to the sales prices set forth
in the purchase and sale agreements described in Note (1), payment of all
Partnership liabilities, and the distribution of the proceeds of such sale
and other Partnership cash to the partners.
Since the Partnership sold all of its real property assets in January 1999,
is in dissolution, and is in the process of winding up and liquidating, the
foregoing Partnership Net Asset Value is intended to approximate the
liquidation value of the Partnership and the Net Asset Value Per Unit is
intended to approximate the per Unit amount which is expected to be
distributed to the Limited Partners in connection with the Partnership's
liquidation. The Net Asset Valuation does not take into account the illiquid
nature of an investment in the Units or the fact that at December 31, 1998 a
holder of Units would likely not have been able to sell its Units for the Net
Asset Value Per Unit set forth above. Fiduciaries of Limited Partners which
are subject to ERISA or other provisions of law requiring valuation of Units
should consider all relevant factors, including but not limited to Net Asset
Value Per Unit, in determining the fair market value of the investment in the
Partnership for such purposes.
15
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1998
CONSOLIDATED VENTURES
-------------------------------------------------------------
VILLAGE AT THE
RESIDENTIAL PROPERTY: FOOTHILLS II SHADOWOOD VILLAGE TOTAL
- --------------------------------------------------------------------------------------------------------------------------
Location Tucson, AZ Jacksonville, FL na
Construction date 1984-1985 1985-1986 na
Acquisition date 05-30-85 07-03-86 na
Life on which depreciation in latest
income statements is computed 25 years 25 years na
Initial cost to Partnership -
Land $ 1,584,049 $ 566,000 $ 2,150,049
Buildings and improvements 5,838,595 5,125,065 10,963,660
Costs capitalized subsequent to acquisition -
Land, buildings and improvements 32,557 44,274 76,831
Write-off of building and improvements (14,090) -- (14,090)
Gross amount at which carried at close of period: (1)
Land $ 1,583,965 $ 569,274 $ 2,153,239
Buildings and improvements 5,857,146 5,166,065 11,023,211
- --------------------------------------------------------------------------------------------------------------------------
7,441,111 5,735,339 13,176,450
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation $ 3,270,299 $ 2,697,724 $ 5,968,023
- --------------------------------------------------------------------------------------------------------------------------
(1) The aggregate costs for land, buildings and improvements for federal
income tax purposes are $ 12,011,848.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1998, 1997 and 1996 follows:
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN REAL ESTATE:
Beginning of period $ 13,169,118 $ 33,434,084 $ 33,752,728
Additions 21,422 4,250 69,956
Dispositions and disposals (14,090) (20,269,216) (388,600)
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 13,176,450 $ 13,169,118 $ 33,434,084
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION:
Beginning of period $ 5,552,827 $ 9,754,730 $ 8,958,549
Depreciation expense 422,811 695,023 1,184,781
Elimination of accumulated depreciation -- -- (388,600)
Dispositions and disposals (7,615) (4,896,926) --
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 5,968,023 $ 5,552,827 $ 9,754,730
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT.
F-1
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 4 L.P.:
Under date of March 12, 1999, we reported on the consolidated balance sheets
of ConAm Realty Investors 4 L.P. (a California limited partnership) and
consolidated ventures (the Partnership) as of December 31, 1998 and 1997, and
the related consolidated statements of operations, partners' capital, and
cash flows for the years then ended, as contained in the 1998 annual report
to Unitholders. These consolidated financial statements and our report
thereon are incorporated by reference in the 1998 annual report on Form 10-K.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule III. This consolidated financial statement schedule is the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on this consolidated financial statement schedule based on
our audits.
In our opinion, the consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.
KPMG LLP
San Diego, California
March 12, 1999
F-2
CONAM REALTY INVESTORS 4 L.P.
AND CONSOLIDATED VENTURES
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Our report on the consolidated financial statements of ConAm Realty Investors
4 L.P. (formerly Hutton/ConAm Realty Investors 4), a California Limited
Partnership, and Consolidated Ventures has been incorporated by reference in
this Form 10-K from the Annual Report to Unitholders of ConAm Realty
Investors 4 L.P. for the year ended December 31, 1996. In connection with our
audit of such financial statements, we have also audited the related
financial statement schedule listed in the index of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
F-3