Item 1. Business
General
Prudential-Bache/Watson & Taylor, Ltd.-4 (the 'Registrant'), a Texas limited partnership, was formed on October 11, 1985 and will terminate in accordance with a vote of the Unitholders as described below. The Registrant was formed for the purpose of acquiring, developing, owning and operating business centers, retail shopping centers, mini-storage facilities and other similar commercial real estate and investing in unimproved commercial properties with proceeds raised from the initial sale of depositary units ('Units'). The Registrant's fiscal year for book and tax purposes ends on December 31.
On December 15, 1995, the Management Committee of the Registrant determined to seek bids for all the properties held by the Registrant. On June 13, 1996, the Registrant entered into a contract with Public Storage, Inc., the property manager of the Registrant's properties, for the sale of substantially all the Registrant's properties. This sale was subject to the approval by the Unitholders holding a majority of the depositary units and certain other conditions and potential price adjustments.
In accordance with a consent statement dated September 17, 1996 the Unitholders approved, on October 18, 1996, the sale to Public Storage, Inc. of all five miniwarehouse facilities and four of the six undeveloped land parcels owned by the Registrant and the liquidation and dissolution of the Registrant. The five miniwarehouse facilities and three of the four undeveloped land parcels which were under contract were sold to Public Storage, Inc. and its affiliates on November 13, 1996. The Registrant received, in cash, gross sales proceeds of $12,030,000 reduced by certain selling expenses and pro rations of approximately $440,000. The gross sales price was in excess of the appraised value of the properties. The fourth land parcel, Yancy Camp was sold to Public Storage, Inc. on December 19, 1996. The Registrant received in cash, gross sales proceeds of $175,000 reduced by certain selling expenses and pro rations of approximately $7,000. The fifth land parcel, Dimension, a one-half acre of land, was sold for $5,000 to a third party on November 22, 1996. The Registrant continues to own the remaining undeveloped land parcel, Beltline Central, located in Addison, Texas.
A distribution of $165 per depositary unit was made on November 26, 1996 representing substantially all of the net sales proceeds reduced by a contingency reserve and funds required to meet the anticipated current and future operating costs until the liquidation of the Registrant.
On March 25, 1998, the Registrant entered into an agreement to sell the Beltline Central property to a third party buyer. The purchase price for the property is approximately $390,000 less certain closing costs. The sale is subject to certain contingencies, including a thirty-day due diligence period for the buyer to evaluate the property and complete a feasibility study, and the agreement may be terminated in certain circumstances as defined in the agreement. There can be no assurance as to when or whether a closing on the property will occur.
After the consummation of the proposed sale of the Beltline Central property, the Registrant will have sold all of its real properties, in accordance with the plan of liquidation previously approved by the Unitholders. The Registrant will review its liabilities, set aside amounts needed to dissolve the Registrant's liabilities and will then liquidate the Registrant as soon as practicable thereafter.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc. ('PBP'), George S. Watson and A. Starke Taylor, III (collectively, the 'General Partners'). PBP is the Managing General Partner and is responsible for the day-to-day operations of the Registrant and its investments. See Note E of the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto.
Employees
The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partners and their affiliates pursuant to the Partnership Agreement. See Note E of the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto.
Item 2.
Item 2. Properties
As of December 31, 1997, the Registrant has sold all of its properties except for one undeveloped land parcel, Beltline Central, consisting of 0.77 acres located in Addison, Texas.
Item 3.
Item 3. Legal Proceedings
None
Item 4.
Item 4. Submission of Matters to a Vote of Unitholders
None
PART II
Item 5.
Item 5. Market for the Registrant's Units and Related Unitholder Matters
As of March 5, 1998, there were 4,262 holders of record owning 66,555 Units. A significant secondary market for the Units has not developed, and it is not expected that one will develop in the future. There are also certain restrictions set forth in Section 18.2 of the Partnership Agreement limiting the ability of a Unitholder to transfer Units. Consequently, holders of Units may not be able to liquidate their investments in the event of an emergency or for any other reason.
The following per Unit cash distributions were paid to Unitholders on or about 45 days after the end of the specified quarter and were made from current and previously undistributed cash generated by the operations of the Registrant's properties:
A distribution of $9.75 per limited partnership unit was made in February 1996 representing all the net proceeds from the sale of the 150th and Black Bob property, an undeveloped land parcel.
In addition, a distribution of $165 per limited partnership unit was made on November 26, 1996 representing substantially all of the net proceeds from the sale of substantially all the Registrant's properties, reduced by a contingency reserve and funds required to meet the anticipated current and future operating costs until the liquidation of the Registrant. The Registrant intends to sell its remaining land parcel and liquidate in 1998 and will distribute any remaining funds at such time.
Item 6.
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 2 through 8 of the Registrant's Annual Report which is filed as an exhibit hereto.
* As of October 1, 1996, the Partnership adopted the liquidation basis of accounting in accordance with generally accepted accounting principles and, therefore, there is no reporting of results of operations for the three months ended December 31, 1996 and for the year ended December 31, 1997. Total assets at December 31, 1996 and 1997 were $1,834,327 and $1,400,303, respectively
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This information is incorporated by reference to page 9 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 8 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The Registrant is managed by the Managing General Partner.
Section 16(a) Beneficial Ownership Reporting Compliance
The Registrant, the Registrant's General Partners, PBP's directors and executive officers and any persons holding more than ten percent of the Registrant's Units are required to report their initial ownership of such Units and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Such General Partners, executive officers, directors and other persons who own greater than ten percent of the Registrant's Units are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing requirements were satisfied on a timely basis. In making these disclosures, the Registrant has relied solely on written representations of the General Partners, PBP's directors and executive officers and other persons who own greater
than ten percent of the Registrant's Units or copies of the reports they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year.
Prudential-Bache Properties, Inc., Managing General Partner
The directors and executive officers of PBP and their positions with regard to managing the Registrant are as follows:
Name Position Brian J. Martin President, Chief Executive Officer, Chairman of the Board of Directors and Director Barbara J. Brooks Vice President--Finance and Chief Financial Officer Eugene D. Burak Vice President and Chief Accounting Officer Frank W. Giordano Director Nathalie P. Maio Director
BRIAN J. MARTIN, age 47, is the President, Chief Executive Officer, Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice President of Prudential Securities Incorporated ('PSI'), an affiliate of PBP. Mr. Martin also serves in various capacities for certain other affiliated companies. Mr. Martin joined PSI in 1980. Mr. Martin is a member of the Pennsylvania Bar.
BARBARA J. BROOKS, age 49, is the Vice President--Finance and Chief Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in various capacities for other affiliated companies. She has held several positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 52, is a Vice President of PBP. He is a First Vice President of PSI. Prior to joining PSI in September 1995, he was a management consultant for three years and was with Equitable Capital Management Corporation from March 1990 to May 1992. Mr. Burak is a certified public accountant.
FRANK W. GIORDANO, age 55, is a Director of PBP. He is a Senior Vice President of PSI and an Executive Vice President and General Counsel of Prudential Mutual Fund Management, LLC, an affiliate of PSI. Mr. Giordano also serves in various capacities for other affiliated companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 47, is a Director of PBP. She is a Senior Vice President and Deputy General Counsel of PSI and supervises non-litigation legal work for PSI. She joined PSI's Law Department in 1983; presently, she also serves in various capacities for other affiliated companies.
Thomas F. Lynch, III ceased to serve as President, Chief Executive Officer, Chairman of the Board of Directors and a Director of Prudential-Bache Properties, Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin was elected President, Chief Executive Officer, Chairman of the Board of Directors and a Director of Prudential-Bache Properties, Inc.
There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms.
Individual General Partners
GEORGE S. WATSON, age 57, is a financial specialist and a certified public accountant. He has been instrumental in the success of The Community Minority Business Advancement Program sponsored by the University of Texas at Austin College and Graduate Schools of Business. Mr. Watson is a member of the Advisory Council of the University of Texas at Austin Business School and a member of its Chancellor's Council. Mr. Watson attended the University of Texas at Austin, graduating summa cum laude in 1963 with a BBA in accounting and finance. He received his MBA in accounting and finance from the University of Texas in 1965, graduating first in his class and summa cum laude. He also has received various awards and scholarships and is a member of many fraternal organizations including Phi Kappa Phi, the honorary scholastic society. Mr. Watson has over 25 years of experience in real estate and financial investments.
A. STARKE TAYLOR, III, age 54, holds a bachelor of business administration degree from Southern Methodist University which was awarded in 1966. He is past president of the North Dallas Chamber of Commerce. Mr. Taylor is a member of the boards of the Dallas Theological Seminary and the Northeast Texas Regional Board of Young Life. He is president of Sovereign Corporation, a business investment and finance organization. Mr. Taylor has over 25 years of experience in real estate, insurance and financial investments.
The two individual General Partners are not related.
Item 11.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of compensation to either individual General Partner or to directors and officers of the Managing General Partner for their services. Certain officers and directors of the Managing General Partner receive compensation from affiliates of the Managing General Partner, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the Managing General Partner believes that any compensation attributable to services performed for the Registrant is immaterial. See also Item 13 Certain Relationships and Related Transactions for information regarding reimbursement to the General Partners for services provided to the Registrant.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 5, 1998, no individual General Partner or director or officer of the Managing General Partner owns directly or beneficially any interest in the voting securities of the Managing General Partner.
As of March 5, 1998, no individual General Partner or director or officer of the Managing General Partner owns directly or beneficially any of the Units issued by the Registrant.
As of March 5, 1998, no limited partner beneficially owns more than five percent (5%) of the outstanding Units issued by the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the General Partners and their affiliates. However, there have been no direct financial transactions between the Registrant and the individual General Partners or the directors or officers of the Managing General Partner during 1997.
Reference is made to Notes A and E of the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services.
PART IV
- ------------------ (1) Filed on the Registrant's Proxy Statement on Schedule 14A and incorporated herein by reference.
(2) Filed as an exhibit to Registration Statement on Form S-11 (No. 33-1213) and incorporated herein by reference.
(3) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 and incorporated herein by reference.
CONSENT OF INDEPENDENT AUDITORS
To the Partners Prudential-Bache/Watson & Taylor, Ltd.-4
We consent to the incorporation by reference in this Annual Report (Form 10-K) of Prudential-Bache/Watson & Taylor, Ltd.-4 of our report dated February 18, 1998, except for Note G as to which the date is March 25, 1998, included in the 1997 Annual Report to Limited Partners of Prudential-Bache/Watson & Taylor, Ltd.-4.
Our report also included the financial statement schedules of Prudential-Bache/Watson & Taylor, Ltd.-4 listed in Item 14(a). These schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP New York, New York March 30, 1998
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4 (a limited partnership) SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(1) The Registrant's properties were valued at the lower of the carrying amount or estimated fair value less costs to sell. As a result, a provision for loss on impairment of assets of $900,000, $300,000 and $125,000 was recorded for the years ended December 31, 1995, 1996 and 1997, respectively.
(2) Applicable to property which was sold during the year.
(3) Shown as a direct deduction of carrying value of property held for sale.
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4 (a limited partnership) SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1997
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4 (a limited partnership) NOTES TO SCHEDULE III December 31, 1997
NOTE A--There are no mortgages, deeds of trust or similar encumbrances against the remaining property.
NOTE B--Initial cost represents the initial purchase price of the property including acquisition fees.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Prudential-Bache/Watson & Taylor, Ltd.-4
By: Prudential-Bache Properties, Inc., A Delaware corporation, Managing General Partner
By: /s/ Eugene D. Burak Date: March 31, 1998 ---------------------------------------- Eugene D. Burak Vice President and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the General Partner) and on the dates indicated.
By: Prudential-Bache Properties, Inc., A Delaware corporation, Managing General Partner
By: /s/ Brian J. Martin Date: March 31, 1998 ----------------------------------------- Brian J. Martin President, Chief Executive Officer, Chairman of the Board of Directors and Director
By: /s/ Barbara J. Brooks Date: March 31, 1998 ----------------------------------------- Barbara J. Brooks Vice President-Finance and Chief Financial Officer
By: /s/ Eugene D. Burak Date: March 31, 1998 ----------------------------------------- Eugene D. Burak Vice President
By: /s/ Frank W. Giordano Date: March 31, 1998 ----------------------------------------- Frank W. Giordano Director
By: /s/ Nathalie P. Maio Date: March 31, 1998 ----------------------------------------- Nathalie P. Maio Director