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EX-31 - EXHIBIT - CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIPcriiv33113ex31.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2013
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________

Commission file number 0-13523

CAPITAL REALTY INVESTORS-IV
LIMITED PARTNERSHIP
(Exact Name of Issuer as Specified in its Charter)
Maryland
52-1328767
(State of Incorporation)
(I.R.S. Employer Identification No.)
 
 
11200 Rockville Pike
 
Rockville, MD
20852
(Address of Principal Executive Offices)
(ZIP Code)
(301) 468-9200
(Issuer’s Telephone Number, Including Area Code)
____________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes           þ           No           ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of Accelerated filer and large accelerated filer@ in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨     Accelerated filer ¨           Non-accelerated filer ¨     Smaller reporting company þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes           ¨           No           þ

The units of limited partner interest of the Registrant are not traded in any market.  Therefore, the units of limited partner interest had neither a market selling price nor an average bid or asked price.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes     ¨    No     þ

The units of limited partner interest of the Registrant are not traded in any market.  Therefore, the units of limited partner interest had neither a market selling price nor an average bid or asked price. As of June 3, 2013, the issuer had 73,337 outstanding units of limited partner interest.








CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2013


 
Page
 
 
Part I FINANCIAL INFORMATION
 
 
 
Item 1. Financial Statements
 
 
 
 
 
 
 
 
 






Part II OTHER INFORMATION
 


 
 


 
 
 
 
 
 
 
 
























PART I

ITEM 1.                     FINANCIAL STATEMENTS



CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS

 
March 31,
 
December 31,
 
2013
 
2012
 
 
 
 
Investments in partnerships
$
1,251,224

 
$
1,246,665

Cash and cash equivalents
9,513,178

 
9,638,145

Acquisition fees, principally paid to related parties,
 

 
 

net of accumulated amortization of $35,157 and $34,844, respectively
14,941

 
15,254

Property purchase costs,
 

 
 

net of accumulated amortization of $67,672 and $67,421, respectively
11,919

 
12,170

 
 
 
 
Total assets
$
10,791,262

 
$
10,912,234


LIABILITIES AND PARTNERS’ CAPITAL

Due on investments in partnerships
$
1,340,000

 
$
1,340,000

Accrued interest payable
7,855,791

 
7,723,421

Accounts payable and accrued expenses
65,362

 
43,946

Total liabilities
9,261,153

 
9,107,367

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Partners' capital
 

 
 

 
 
 
 
Capital paid-in:
 

 
 

General Partners
2,000

 
2,000

Limited Partners
73,501,500

 
73,501,500

 
73,503,500

 
73,503,500

Less:
 

 
 

Accumulated distributions to partners
(30,553,510
)
 
(30,553,510
)
Offering costs
(7,562,894
)
 
(7,562,894
)
Accumulated losses
(33,856,987
)
 
(33,582,229
)
 
 
 
 
Total partners' capital
1,530,109

 
1,804,867

 
 
 
 
Total liabilities and partners' capital
$
10,791,262

 
$
10,912,234


The accompanying notes are the integral part of these condensed consolidated financial statements.

1



CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED LOSSES
(Unaudited)
 
For the three months ended
 
March 31,
 
2013
 
2012
Share of income from partnerships
$
38,671

 
$
630,393

 
 
 
 
Other revenue and expenses
 

 
 

 
 
 
 
Revenue:
 

 
 

Interest
1,203

 
1,238

 
 
 
 
Expenses:
 

 
 

Interest
132,370

 
124,569

Management fee
93,750

 
93,750

General and administrative
66,265

 
50,523

State tax
7,267

 
300

Professional fees
14,416

 
72,650

Amortization of deferred costs
564

 
821

 
314,632

 
342,613

Total other revenue and (expenses)
(313,429
)
 
(341,375
)
 
 
 
 
Net (loss) income
(274,758
)
 
289,018

 
 
 
 
Accumulated losses, beginning of period
(33,582,229
)
 
(41,526,481
)
 
 
 
 
Accumulated losses, end of period
$
(33,856,987
)
 
$
(41,237,463
)
 
 
 
 
Net (loss) income allocated to General Partners (1.51%)
$
(4,149
)
 
$
4,364

 
 
 
 
Net (loss) income allocated to Initial and
 

 
 

Special Limited Partners (1.49%)
$
(4,094
)
 
$
4,306

 
 
 
 
Net (loss) income allocated to Additional Limited
 

 
 

Partners (97%)
$
(266,515
)
 
$
280,348

 
 
 
 
Net (loss) income per unit of Additional Limited Partner
 

 
 

Interest based on 73,337 units outstanding
$
(3.63
)
 
$
3.82


The accompanying notes are the integral part of these condensed consolidated financial statements.

2



CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the three months ended
 
March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(274,758
)
 
$
289,018

 
 
 
 
Adjustments to reconcile net (loss) income to net cash
 

 
 

used in operating activities:
 

 
 

Share of income from partnerships
(38,671
)
 
(630,393
)
Amortization of deferred costs
564

 
821

Changes in assets and liabilities:
 

 
 

    Increase in accrued interest payable
132,370

 
124,569

    Increase (decrease) in accounts payable and accrued expenses
21,416

 
(16,809
)
Net cash used in operating activities
(159,079
)
 
(232,794
)
 
 
 
 
Cash flows from investing activities:
 

 
 

Receipt of distributions from partnerships
34,112

 
5,364,763

Disposition fee paid

 
(70,000
)
Net cash provided by investing activities
34,112

 
5,294,763

 
 
 
 
Net (decrease) increase in cash and cash equivalents
(124,967
)
 
5,061,969

Cash and cash equivalents, beginning of period
9,638,145

 
3,962,648

 
 
 
 
Cash and cash equivalents, end of period
$
9,513,178

 
$
9,024,617

 
 
 
 
Cash paid for interest
$

 
$

 
 
 
 




The accompanying notes are the integral part of these condensed consolidated financial statements.

3



CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013 and 2012
(Unaudited)


1.     ORGANIZATION


Capital Realty Investors-IV Limited Partnership (the “Partnership”) is a limited partnership which was formed under the Maryland Revised Uniform Limited Partnership Act on December 7, 1983. The Partnership was formed for the purpose of raising capital by offering and selling limited partnership interests and then investing in limited partnerships ("Local Partnerships"), each of which owns and operates an existing rental housing project which was originally financed and/or operated with one or more forms of rental assistance or financial assistance from the U.S. Department of Housing and Urban Development ("HUD"). The Partnership originally made investments in forty-seven Local Partnerships. As of March 31, 2013, the Partnership retained investments in three Local Partnerships. These condensed consolidated financial statements include the accounts of one intermediary limited partnership which has invested in one Local Partnership.

The General Partners of the Partnership are C.R.I., Inc. (“CRI”), which is the Managing General Partner, and current and former shareholders of CRI. Services for the Partnership are performed by CRI, as the Partnership has no employees of its own.


2.     BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q. Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such instructions. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K at December 31, 2012.

In the opinion of CRI, the Managing General Partner of the Partnership, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of the Partnership as of March 31, 2013, and the results of its operations and its cash flows for the three months ended March 31, 2013 and 2012. The results of operations for the interim period ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year.




3.     INVESTMENTS IN PARTNERSHIPS

As of March 31, 2013 and 2012 , the Partnership had limited partnership equity interests in three and four Local Partnerships, respectively, each of which owns an apartment complex.

A schedule of the apartment communities owned by the Local Partnerships at March 31, 2013 in which the Partnership is invested is provided below:

PROPERTY
CITY
STATE
UNITS
Northridge Park
Salinas
CA
104
Tradewinds
Traverse City
MI
122
Westport Village
Freeport
IL
121


4

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2013 and 2012
(Unaudited)



Under the terms of the Partnership's investment in each Local Partnership, the Partnership was required to make capital contributions to the Local Partnerships. These contributions were payable in installments upon each Local Partnership achieving specified levels of construction and/or operations. At March 31, 2013 and 2012, all such capital contributions had been paid to the Local Partnerships.

a.    Summarized financial information

Combined statements of operations for the three and four Local Partnerships in which the Partnership was invested as of March 31, 2013 and 2012, respectively, follow. The combined statements have been compiled based on estimates from the audited financial statements of the Local Partnerships at December 31, 2012 and 2011, and these estimates are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those Local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership's share of income from partnerships related to cash distributions recorded as income, and related to the Partnership's share of income from Local Partnerships.

5

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2013 and 2012
(Unaudited)



 
 
 
 
 
 
 
 
 
 
 
 
 
COMBINED STATEMENTS OF OPERATIONS
 
 
(Unaudited)
 
 
 
 
For the three months ended
 
 
 
 
March 31,
 
 
 
 
2013
 
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method
 
Suspended
Total
 
 
Equity Method
 
Suspended
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Local Partnerships
 
1 (a)
 
2 (b)
3
 
 
1 (a)
 
3 (c)
 
4
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
     Rental
 
$
196,897

 
$
453,302

$
650,199

 
 
$
192,818

 
$
1,047,540

 
$
1,240,358

     Other
 
9,459

 
52,979

62,438

 
 
32,721

 
52,825

 
85,546

          Total revenue
 
206,356

 
506,281

712,637

 
 
225,539

 
1,100,365

 
1,325,904

 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
      Operating
 
160,877

 
309,857

470,734

 
 
160,773

 
593,592

 
754,365

       Interest
 

 
81,430

81,430

 
 

 
156,185

 
156,185

       Depreciation and amortization
 
31,757

 
64,821

96,578

 
 
31,084

 
166,280

 
197,364

            Total expenses
 
192,634

 
456,108

648,742

 
 
191,857

 
916,057

 
1,107,914

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
13,722

 
$
50,173

$
63,895

 
 
$
33,682

 
$
184,308

 
$
217,990

 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distribution
 
$
9,023

 
$
25,089

$
34,112

 
 
$

 
$
597,054

 
597,054

 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distribution recorded as income
 
$

 
$
25,089

$
25,089

 
 
$

 
$
597,054

 
$
597,054

 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership's share of Local
 
 
 
 
 
 
 
 
 
 
 
 
    Partnership net income
 
13,582

 

13,582

 
 
33,339

 

 
33,339

 
 
 
 
 
 
 
 
 
 
 
 
 
Share of income from partnership
 
$13,582
 
$
25,089

$
38,671

 
 
$33,339
 
$
597,054

 
$
630,393

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Tradewinds
 
 
 
 
 
 
 
 
 
 
 
 
(b) Northridge;Westport Village
 
 
 
 
 
 
 
 
 
 
 
 
(c) Fairway Park;Northridge;Westport Village
 
 
 
 
 
 
 
 
 
 
 
 

6

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2013 and 2012
(Unaudited)





Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective condensed consolidated balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective condensed consolidated statements of operations and as cash receipts on the respective condensed consolidated balance sheets. As of March 31, 2013 and 2012, the Partnership's share of cumulative losses to date for two of the three and for three of the four Local Partnerships, respectively, exceeded the amount of the Partnership's investments in those Local Partnerships by $1,206,791 and $1,260,311, respectively. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying condensed consolidated financial statements.



b.    Due on investments in partnerships and accrued interest payable

Purchase money notes

The Partnership executed certain purchase money notes payable as part of the acquisition of its equity interests in certain Local Partnerships. The notes are nonrecourse notes secured by a security interest in the Partnership's interests in the respective Local Partnership. The Partnership's obligations with respect to its investments in Local Partnerships, in the form of nonrecourse purchase money notes having an aggregate principal balance of $1,340,000 plus aggregate accrued interest of $7,855,791 as of March 31, 2013, are payable in full upon the earliest of: (i) sale or refinancing of the respective Local Partnership's rental property; (ii) payment in full of the respective Local Partnership's permanent loan; or (iii) maturity.

The purchase money note related to the following property matured and has not been paid or extended as of March 31, 2013.

Property
Principal
Accrued Interest as of March 31, 2013
Maturity
Westport Village (1)
$840,000
$3,195,445
9/1/1999

(1) In receivership.

The remaining purchase money note related to Northridge Park matures in 2025. On March 4, 2013, the Local Partnership entered into a purchase and sale agreement to sell Northridge Park. The Partnership is negotiating a discounted payoff of this purchase money note. As there can be no assurance as to the ultimate timing of the sale, no adjustments have been made to the purchase money note balance at March 31, 2013.

As of March 31, 2013, principal and accrued interest balances were $500,000 and $4,660,346, respectively.

The purchase money notes, which are nonrecourse to the Partnership, are generally secured by the Partnership's interest in the respective Local Partnerships. There is no assurance that the underlying properties will have sufficient appreciation and equity to enable the Partnership to pay the purchase money notes' principal and accrued interest when due. If a purchase money note is not paid in accordance with its terms, the Partnership will either have to renegotiate the terms of repayment or risk losing its partnership interest in the respective Local Partnership. In the event that a purchase money note remains unpaid upon maturity, the noteholder may have the right to foreclose on the Partnership's interest in the related Local Partnership.

The Partnership's inability to pay certain of the purchase money notes principal and accrued interest balances when due, and the resulting uncertainty regarding the Partnership's continued ownership interest in the related Local Partnerships, does not adversely impact the Partnership's financial condition because the purchase money notes are nonrecourse and secured solely by the Partnership's interest in the related Local Partnerships. Therefore, should the investment in any of the Local Partnerships with matured or maturing purchase money notes not produce sufficient value to satisfy the related purchase money notes, the Partnership's

7

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2013 and 2012
(Unaudited)


exposure to loss is limited because the amount of the nonrecourse indebtedness of each of the matured or maturing purchase money notes exceeds the carrying amount of the investment in each of the related Local Partnerships. Thus, even a complete loss of the Partnership's interest in these Local Partnerships would not have a material adverse impact on the financial condition of the Partnership.

Interest expense on the Partnership's purchase money notes for the three month periods ended March 31, 2013 and 2012 was $132,370 and $124,569, respectively. The accrued interest payable on these purchase money notes of $7,855,791 and$7,723,421 as of March 31, 2012 and December 31, 2012, respectively, is due upon the earliest of: (i) sale or refinancing of the respective Local Partnership's rental property; (ii) payment in full of the respective Local Partnerships' permanent loans; or (iii) maturity.

c.    Pending sales

Westport Village

The mortgage loan encumbering the property associated with the Partnership's investment in Westport Village is in default. As of March 31, 2013, Westport Village was in receivership pending a foreclosure sale of the property. Accordingly, the Partnership's basis in the Local Partnership, which totaled $0 at both March 31, 2013 and December 31, 2012 has been reclassified to investment in partnerships held for sale or transfer in the accompanying condensed consolidated balance sheets. There can be no assurance as to the ultimate timing of the foreclosure sale and/or transfer of ownership of the property.

Northridge Park

On March 4, 2013, a purchase and sale agreement was entered into between the Local Partnership that owns Northridge Park and a third party to sell the property for $10,250,000. The Partnership's basis in this Local Partnership at both March 31, 2013 and December 31, 2012 was $0. The sale is expected to close on or before June 30, 2013.


d.    Completed sales

Fairway Park

On October 26, 2012, a purchase and sale agreement was entered into between the Partnership and Morey Acquisition LLC to sell its limited partner interest in the local Partnership that owns the Fairway Park property for $8,710,000. On December 20, 2012, the sale was completed and the Partnership received proceeds of $8,710,000. The Partnership's basis in this Local Partnership at December 31, 2012 was $0. Net acquisition fees and property purchase costs of $8,294 and $4,130, respectively, were written off and netted against the gain on disposition of investment in partnerships during the three months ended December 31, 2012.

From the sale proceeds, the Partnership incurred and paid CRI, Inc. a fee in the amount of $415,560 for services provided in connection with the sale of the limited partnership interest in the Local Partnership. The net gain incurred on the sale was $8,282,016 for the year ended December 31, 2012.

Mary Allen West Tower

On October 13, 2011, the Mary Allen West Tower property was sold. The investment balance at December 31, 2011 was $4,767,709. This represents the distribution the partnership received from the sale of the property . The distribution proceeds were received on February 22, 2012.

From the sale proceeds, the partnership paid CRI, Inc. a fee in the amount of $70,000 for services provided in connection with the sale of the Mary Allen West Tower property. The fee was paid during the quarter ended March 31, 2012.


8

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2013 and 2012
(Unaudited)



e.    Investment reconciliation

The following is a reconciliation of investments in partnerships at March 31, 2013:

Investments in partnerships at December 31, 2012
 
$
1,246,665

 
 
 
Share of income from partnerships
 
38,671

Distribution from Local Partnerships
 
(34,112
)
 
 
 
Investments in partnerships at March 31, 2013
 
$
1,251,224


4.     RELATED PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for certain direct expenses and payroll expenses in connection with managing the Partnership. Payroll expenses are reimbursed at a factor of 1.75 times base salary. For the three month periods ended March 31, 2013 and 2012, the Partnership paid $31,492 and $24,266, respectively to the Managing General Partner or its affiliates as direct reimbursement of expenses incurred on behalf of the Partnership. In addition, certain employees of the Managing General Partner provided legal and tax accounting services to the Partnership. These are reimbursed comparable to third party service charges. For the three month periods ended March 31, 2013 and 2012, the Partnership paid $29,543 and $30,198, respectively to the Managing General Partner or its affiliates for these services. Such reimbursed expenses are included in the accompanying condensed consolidated statements of operations as general and administrative expenses.

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (“Management Fee”) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner a Management Fee of $93,750 for each of the three month periods ended March 31, 2013 and 2012.

In accordance with the terms of the Partnership Agreement, in February 2012, the Managing General Partner paid a disposition fee of $70,000 related to the sale of Mary Allen West Tower, which was netted against the related gain on disposition of investment in partnerships.

5.    CASH CONCENTRATION RISK
    
Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains four cash accounts with SunTrust Bank. As of March 31, 2013 , the uninsured portion of the cash balances was $9,533,724.

6.     SIGNIFICANT SUBSIDIARIES

The following Local Partnership invested in by the Partnership represents more than 20% of the Partnership’s total assets or equity as of March 31, 2013 and 2012 or net income (loss) for the periods then ended. The following financial information represents the performance of this Local Partnership for the periods ended March 31, 2013 and 2012. The financial information is based on estimates from the audited financial statements of the Local Partnership at December 31, 2012 and 2011 and these estimates are unaudited.

Tradewinds Terrace
2013
 
2012
Total Assets
$
1,309,370

 
$
1,333,958

Total Liabilities
$
53,874

 
$
97,945

Revenue
$
196,897

 
$
225,538

Net Income
$
13,722

 
$
33,682



9

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2013 and 2012
(Unaudited)













7. SUBSEQUENT EVENTS

Events that occur after the balance sheet date but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the balance sheet date are recognized in the accompanying financial statements. Subsequent events which provide evidence about conditions that existed after the balance sheet date require disclosure in the accompanying notes.


10





ITEM 2.                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the condensed consolidated financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.

Critical Accounting Policies

The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in the Partnership's Annual Report on Form 10-K at December 31, 2012. The Partnership accounts for its investments in partnerships (Local Partnerships) by the equity method because the Partnership is a limited partner in the Local Partnerships. As such the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnerships. Environmental and operational trends, events and uncertainties that might affect the properties owned by the Local Partnerships would not necessarily have a significant impact on the Partnership's application of the equity method of accounting, since the equity method has been suspended for three Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those Local Partnerships. The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. If an asset were determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.

Generally accepted accounting principles (GAAP) in the United States provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements and when it should disclose information about its relationship with a VIE.  Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics:  (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity's activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.  The primary beneficiary of a VIE is generally the entity that will receive a majority of the VIE's expected losses, receive a majority of a VIE's expected residual returns, or both.

The Partnership does not consolidate the Partnership's interests in these VIE's under this guidance, as it is not considered to be the primary beneficiary.  Accounting guidance requires continued reconsideration as to the consideration of the primary beneficiary. The Partnership currently records the amount of its investment in these partnerships as an asset on its balance sheet, recognizes its share of partnership income or losses in the condensed consolidated statements of operations, and discloses how it accounts for material types of these investments in its financial statements. 

The Partnership's balance in investment in Local Partnerships represents its maximum exposure to loss.  The Partnership's exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying properties as well as the strength of the local general partners.




11



Financial Condition/Liquidity


The Partnership's liquidity, with unrestricted cash resources of $9,513,178 along with anticipated future cash distributions from Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs.

The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the three month period ended March 31, 2013, existing cash resources, receipt of distributions from Local Partnerships and sale proceeds received were adequate to support operating cash requirements. Cash and cash equivalents decreased $124,967 during the three month period ended March 31, 2013, primarily due to operating expenses.

Results of Operations

The Partnership experienced a net loss for the three month period ended March 31, 2013 compared to net income for the three month period ended March 31, 2012, primarily due to a decrease in the share of income from partnerships.

For financial reporting purposes, the Partnership, as a limited partner in the Local Partnerships, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the three month periods ended March 31, 2013 and 2012 did not include income of $145,418 and $180,853, respectively.

Certain taxing authorities may assert claims against the Partnership for failure to withhold and remit income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the state tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.

No other significant changes in the Partnership's operations have taken place during the three month period ended March 31, 2013.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

None.

















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ITEM 4.                      CONTROLS AND PROCEDURES

a)           Disclosure Controls and Procedures.

The Partnership's management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are not effective to ensure that material information required to be disclosed in the Partnership's periodic report filings with SEC is recorded, processed, summarized and reported within the time frame specified by the SEC's rules and forms, consistent with the definition of "disclosure controls and procedures" under the Securities and Exchange Act of 1934.

b)            Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting.


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PART II

ITEM 1.     LEGAL PROCEEDINGS

The Partnership is unaware of any pending or outstanding litigation involving it or the underlying investment property of the Local Partnerships in which the Partnership invests that are not of a routine nature arising in the ordinary course of business or that would have a material adverse effect on the business of the Partnership.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

See Note 3.b. of the notes to condensed consolidated financial statements contained in Part I, Item 1, hereof, for information concerning the Partnership's defaults on certain purchase money notes.


ITEM 4. MINE SAFETY DISCLOSURES

None.

 
ITEM 5. OTHER INFORMATION

There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended March 31, 2013, but not reported, whether or not otherwise required by this Form 10-Q at March 31,2013.

There is no established market for the purchase and sale of units of limited partner interest (“Units”) in the Partnership, although various informal secondary market services may exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.

ITEM 6.                     EXHIBITS

Exhibit No.      Description

31.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


All other Items are not applicable.

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SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
CAPITAL REALTY INVESTORS-IV
 
 
LIMITED PARTNERSHIP
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
 
 
 
June 3, 2013
 
by: /s/ William B. Dockser
DATE
 
William B. Dockser,
 
 
Director, Chairman of the Board
 
 
and Treasurer
 
 
Principal Executive Officer
 
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
 
 
 
 
 
June 3, 2013
 
by: /s/ H. William Willoughby
DATE
 
H. William Willoughby
 
 
Director, President, Secretary,
 
 
Principal Financial Officer and
 
 
Principal Accounting Officer
 

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