SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                         Commission file number 33-96716

                      ESSEX HOSPITALITY ASSOCIATES IV L.P.

               (Exact name of registrant as specified in charter)

                                    NEW YORK
         (State or other jurisdiction of incorporation or organization)

                                   16-1485632
                      (I.R.S. Employer Identification No.)

                               100 CORPORATE WOODS
                            ROCHESTER, NEW YORK 14623
                     (Address of principal executive office)

       Registrant's telephone number, including area code: (716) 272-2300

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.


        Yes     X                               No
               ---                                 ---


As of August 11, 1998, a total of 2,945 Limited Partnership Units were
outstanding.




<PAGE>


                                     PART 1
                                     ------

                              FINANCIAL INFORMATION
                              ---------------------

 Item 1.   Financial Statements
---------------------------------------------------------------------

                      Essex Hospitality Associates IV L.P.
                                 Balance Sheets
                             June 30, 1998 and 1997
                                   (Unaudited)
<TABLE>
<CAPTION>

                        ASSETS                            1998           1997
                        -------                           ----           ----
Investments in real estate, at cost:
<S>                                                   <C>             <C>        
        Land and land improvements                    $  1,733,702    $ 2,074,526
        Furniture & fixtures                             1,593,596           --
        Buildings                                        8,845,739           --
        Construction in progress                              --        4,806,188
                                                      ------------    -----------
                                                        12,173,037      6,880,714
        Less accumulated depreciation                     (354,680)          --
                                                      ------------    -----------
           Net investments in real estate               11,818,357      6,880,714
                                                      ------------    -----------

Investment in partnership                                  242,164        529,494

Cash and cash equivalents                                  252,615         11,013

Land held for sale                                         646,981           --

Deferred costs:
        Debt issuance                                      936,745        610,147
        Franchise                                           85,000         85,000
        Other                                               51,544         73,224
                                                      ------------    -----------
                                                         1,073,289        768,371
        Less accumulated amortization                     (274,749)       (97,840)
                                                      ------------    -----------
                                                           798,540        670,531
                                                      ------------    -----------

Other assets                                               301,392          8,411
                                                      ------------    -----------

        Total assets                                  $ 14,060,049    $ 8,100,163
                                                      ============    ===========

                  LIABILITIES AND PARTNERS' CAPITAL
                  ---------------------------------
                                                                     
Liabilities
        Accounts payable - construction               $  1,328,972    $ 1,566,637
        Accounts payable and accrued expenses              169,791           --
        Due to affiliate                                      --          596,156
        Subordinated notes payable                       5,413,000      5,298,000
        Construction loan payable                        2,594,882           --
        Mortgage loan payable                            4,500,000           --
                                                      ------------
            Total liabilities                           14,006,645      7,460,793
                                                      ------------    -----------

Commitments and contingencies (notes 5 and 6)

Partners' capital                                           78,746        677,812
        Less notes receivable from partners                (25,342)       (38,442)
                                                      ------------    -----------
            Total partners' capital                         53,404        639,370
                                                      ------------    -----------

Total liabilities and partners' capital               $ 14,060,049      8,100,163
                                                      ============    ===========




</TABLE>

 See accompanying notes to unaudited financial statements.



<PAGE>






                      Essex Hospitality Associates IV L.P.
                               Statement of Income
                  For the Quarters ended June 30, 1998 and 1997
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                          1998        1997
                                                                          ----        ----
REVENUE:
<S>                                                                    <C>         <C>    
    Rooms                                                                657,609     334,336
    Food and beverage                                                       --        39,413
    Telephone and other commissions                                       38,011      22,268
                                                                        --------    --------
                                                                         695,620     396,017
                                                                        --------    --------

OPERATING EXPENSES:
    Rooms                                                                138,602      92,171
    Food & beverage expenses                                                --        41,576
    Commissions expenses                                                  19,984      11,096
    Advertising & promotion                                               36,351      22,119
    Repairs & maintenance                                                 18,040      20,295
    Utilities                                                             26,728      22,346
    Administrative & general                                              36,506      38,010
    Property taxes                                                        24,524       6,334
    Insurance                                                              3,325
    Royalty fees                                                          22,223      11,403
    Management fees                                                       29,306      17,495
    Partnership management fees                                            4,885       2,916
    Equity loss in partnership                                            34,969      12,763
    Depreciation and amortization                                        120,419     101,727
    Miscellaneous                                                         23,977      13,498
                                                                        --------    --------
                                                                         539,839     413,749
                                                                        --------    --------

        Income (loss) from operations                                    155,781     (17,732)

    Interest expense                                                    (175,857)   (140,513)
    Interest income                                                        1,259      10,666
    Loss on termination of franchise agreement                              --       (40,000)
                                                                        --------    --------
                                                                        (174,598)   (169,847)
                                                                        --------    --------

        Income (loss) before minority interest in loss of partnership    (18,817)   (187,579)
                                                                        --------    --------

Minority interest in income/(loss) of partnership                           --       (22,955)
                                                                        --------    --------

Net income (loss)                                                        (18,817)   (164,624)
                                                                        ========    ========

Net loss - general partners                                                 (188)     (1,646)
         - limited partners                                              (18,628)   (162,978)
                                                                        --------    --------
                                                                         (18,817)   (164,624)
                                                                        ========    ========

Net loss per limited partner unit                                             (6)        (68)
                                                                        ========    ========


</TABLE>




 See accompanying notes to unaudited financial statements.



<PAGE>





                      Essex Hospitality Associates IV L.P.
                            Statements of Cash Flows
                  For the Quarters ended June 30, 1998 and 1997
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                  1998           1997
                                                                                  ----           ----
 Cash flows from operating activities                                  
<S>                                                                            <C>           <C>    
     Cash received from customers                                                 684,952       373,852
     Cash paid to suppliers                                                      (449,719)     (305,672)
     Interest received                                                              1,256        10,666
     Interest paid                                                               (175,857)     (140,513)
                                                                               ----------    ----------
         Net cash from operating activities                                        60,632       (61,667)
                                                                               ----------    ----------

 Cash flows from investing activities
     Payments for land and construction in progress                            (2,665,573)   (2,792,945)
     Proceeds from sale of partnership interest                                      --         105,000
     Cash change with change in controlling
            interest in partnership                                                  --           5,131
     Payments for franchise fees                                                     --         (45,000)
     Payments for deposits                                                         61,400         2,709
                                                                               ----------    ----------
         Net cash used in investing activities                                 (2,604,173)   (2,725,105)
                                                                               ----------    ----------

 Cash flows from financing activities
     Partners' capital contributions                                                1,199       170,234
     Payments for syndication costs                                                (2,500)       (4,788)
     Proceeds from subordinated notes payable                                        --         116,000
     Proceeds from construction loan                                            2,566,375          --
     Advance from affiliate                                                          --         551,156
     Payments for escrow accounts                                                    --         (34,653)
     Payments for debt acquisition costs                                          (62,819)      (52,822)
     Payments for organization costs                                                 (778)      (22,458)
     Payments for distributions                                                  (119,879)      (10,500)
                                                                               ----------    ----------
         Net cash from financing activities                                     2,381,598       712,169
                                                                               ----------    ----------

 Net increase in cash and cash equivalents                                       (161,943)   (2,074,603)

 Cash and cash equivalents - beginning of quarter                                 414,558     2,085,616
                                                                               ----------    ----------

 Cash and cash equivalents - end of quarter                                       252,615        11,013
                                                                               ==========    ==========

 Reconciliation of net income to net cash flows from operating activities:

 Net loss                                                                         (18,817)     (164,624)

 Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                120,419       101,727
     Loss on termination of franchise agreement                                      --          40,000
     Changes in:
         Other assets                                                            (170,905)      (20,699)
         Equity loss of partnership                                                34,969        12,763
         Minority interest in net loss of partnership                                --         (22,955)
         Accounts payable and other expenses                                       94,966        (7,879)
                                                                               ----------    ----------
                                                                                   60,632       (61,667)
                                                                               ==========    ==========
</TABLE>

 See accompanying notes to unaudited financial statements.


<PAGE>







                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998

(1)      ORGANIZATION
         ------------

         Essex Hospitality Associates IV L.P. (the Partnership) is a New York
         limited partnership formed in 1995 for the purpose of acquiring land
         and constructing, owning and operating a series of hotels. The
         Partnership may also invest in and lend funds to other partnerships
         that own hotels. The Partnership financed its activities through a
         public offering of notes and limited partnership units which was
         completed in November 1997. The Partnership's general partner is Essex
         Partners Inc. (Essex Partners), a wholly-owned subsidiary of Essex
         Investment Group, Inc. (Essex).

         The Partnership has acquired land in order to construct and operate
         hotels. A Hampton Inn hotel was constructed in Solon, Ohio and the
         hotel commenced operations in August 1997. In June 1997, land was
         purchased in Erie, Pennsylvania and a Hampton Inn hotel was built which
         opened July 1, 1998. In December 1995, land was purchased in Warwick,
         Rhode Island in anticipation of the construction of a Homewood Suites
         hotel. However, as a result of higher than projected construction costs
         and a change in market conditions, the Partnership has decided not to
         proceed with development of the hotel and is now pursuing the sale of
         the land.

         In 1997 Solon Hotel LLC, a special purpose entity was created to own
         the Solon Hampton Inn. The managing member of the Solon Hotel LLC is
         Essex Hotel LLC, a single purpose entity created to act as the managing
         member. The membership interests of Solon Hotel LLC are owned 99% by
         the Partnership and 1% by Essex Hotel LLC, whose sole member is the
         Partnership.

         In June 1997, the Partnership transferred the Erie property to a single
         purpose entity, Erie Hotel LLC. The managing member of Erie Hotel LLC
         is Essex Hotels II LLC, a single purpose entity created to act as the
         managing member of Erie Hotel LLC. The membership interests in Erie
         Hotel LLC are owned 99% by the Partnership and 1% by Essex Hotels II
         LLC, whose sole member is the Partnership.

         In January 1996, the Partnership acquired a 54.3% limited partnership
         interest in Essex Glenmaura L.P. (Glenmaura) through the purchase of
         12.5 limited partnership units for $1,250,000. The purchase price was
         equal to the pro rata portion of the fair value of the net assets
         acquired. Glenmaura owns and operates a Courtyard by Marriott hotel
         near Scranton, Pennsylvania. Construction of the hotel was completed
         and operations began in September 1996. In June 1997, the Partnership
         sold 1.05 limited partnership units of Glenmaura to Essex Partners for
         $105,000, reducing the Partnership's ownership interest to 49.8%.

         A general description of the allocation of Partnership income, loss,
         and distributions follows. For a more comprehensive description see the
         Partnership Agreement:

         Allocations of income from operations will be allocated 99% to the
         limited partners and 1% to the general partner until the amount
         allocated to the limited partners equals the cumulative annual return
         of 8% of their contribution. Any remaining income from operations is
         allocated 80% to the limited partners and 20% to the general partner.
         Income on the sale of any or all of the hotels is allocated 99% to the
         limited partners until each limited partner has been allocated income
         in an amount equal to his or her pro rata share of the nondeductible
         syndication expenses and sales commission and 1% to the general
         partner. Thereafter, income on the sale of any or all the hotels is
         allocated in the same manner as income from operations.





<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998

(1)      ORGANIZATION, CONTINUED
         -----------------------

         Allocations of losses from operations will be allocated 80% to the
         limited partners and 20% to the general partner in the amounts
         sufficient to offset all income which was allocated 80% to the limited
         partners. Thereafter, operating losses are allocated 99% to the limited
         partners and 1% to the general partner. Loss on the sale of any or all
         of the hotels will be first allocated in the same manner as losses from
         operations, except that the allocation of such loss would be made prior
         to allocations of income from operations. All other losses are
         allocated 99% to the limited partners and 1% to the general partner.

         Cash distributions will initially be made 99% to the limited partners
         and 1% to the general partner. After the limited partners have received
         a cumulative annual return of 8% of their contribution, additional
         distributions may then be made 80% to the limited partners and 20% to
         the general partner. Distributions of the net proceeds of sale or
         refinancing of any or all hotels will be made 1% to the general partner
         and 99% to the limited partners pro rata in accordance with the number
         of units held by each limited partner until the limited partners have
         received distributions from sale or refinance of hotels equal to $1,000
         per unit. Thereafter, distributions shall next be made 1% to the
         general partner and 99% to the limited partners until each limited
         partner has received any unpaid cumulative return accrued through the
         date of the distribution. Additional distributions will then be made
         20% to the general partner and 80% to the limited partners.

         Essex Partners and its affiliates are receiving substantial fees in
         connection with the offering of notes and limited partnership units.
         Additional fees will be paid to them in connection with the
         acquisition, development and operation of the hotels and management of
         the Partnership (see note 6).


(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

         BASIS OF ACCOUNTING
         -------------------

         The financial statements of the Partnership were prepared on the
         accrual basis of accounting in conformity with generally accepted
         accounting principles.

         PRINCIPLES OF CONSOLIDATION
         ---------------------------
         The consolidated financial statements include the accounts of the
         Partnership, Solon Hotel LLC, Essex Hotel LLC, Erie Hotel LLC and Essex
         Hotels II LLC. All significant inter-partnership transactions and
         balances have been eliminated in consolidation.

         The second quarter 1997 consolidated income statement and cash flow
         statement also included the accounts of Glenmaura.

         INVESTMENT IN REAL ESTATE
         -------------------------
         Investment in real estate is stated at cost. Possible impairment of the
         carrying value is evaluated when events or changed circumstances may
         affect the underlying basis of the asset. Depreciation is calculated
         using the





<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
         -----------------------------------------------------

         straight-line method for buildings and accelerated methods for land
         improvements, furniture, fixtures, and equipment over the estimated
         useful lives of the assets as each hotel commences operations:


                Buildings                               39 years
                Land improvements                       15 years
                Furniture, fixtures and equipment       5 - 7 years


         CASH AND CASH EQUIVALENTS
         -------------------------

         Cash investments with maturities of three months or less at the time of
         purchase are considered to be cash equivalents.

         DEFERRED COSTS
         --------------

         Costs of issuing debt are being amortized on a straight-line basis over
         the terms of the debt.

         Franchise fees paid for the right to own and operate the hotels will be
         amortized on a straight-line basis over the term of each franchise
         agreement, once each hotel commences operations.

         SYNDICATION COSTS
         -----------------

         Selling commissions and legal, accounting, printing and other filing
         costs totaling $422,786 related to the offering of the limited
         partnership units were charged against the proceeds of the public
         offering.

         RECOGNITION OF REVENUE
         ----------------------

         Revenues are recognized as earned in accordance with contractual
         arrangements for each transaction.

         LIMITED PARTNERSHIP PER UNIT DATA
         ---------------------------------

         Net loss per limited partner unit is calculated by dividing net loss by
         the weighted average number of units outstanding during the quarter.
         The weighted average number of units outstanding was 2,945 in the
         second quarter of 1998 and 2,397 in the second quarter of 1997.

         USE OF ESTIMATES
         ----------------

         The preparation of the financial statements in conformity with
         generally accepted accounting principles requires the managing general
         partner to make estimates and assumptions that affect the reported
         amounts of





<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998


(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
         -----------------------------------------------------

         assets and liabilities and disclosure of contingent assets and
         liabilities at the date of the financial statements and the reported
         amounts of income and expenses during the reporting period. Actual
         results could differ from those estimates.


(3)      INVESTMENT IN PARTNERSHIP
         -------------------------

         Summarized financial information for Glenmaura as of and for the
         quarters ended June 30, 1998 and 1997 follows:


                                                         JUNE 30,
                                                         --------
                                                1998                 1997
                                                ----                 ----
Net investment in real estate               $ 6,910,000          $ 7,333,000
Net deferred costs                              116,000              171,000
Other assets                                    265,000              154,000
Borrowed funds                                6,694,000            6,500,000
Other liabilities                               113,000              123,000
Partners' capital                               532,000            1,142,000
Revenue                                         571,000              608,000
Operating Income (Loss)                          88,000               40,000
Interest Expense                                160,000              143,000
Net Loss                                         72,000              103,000



The Partnership's ownership interest in Glenmaura was reduced from 54.3% to
49.8% as of June 9, 1997. Therefore, the results of operations of Glenmaura, and
the minority interest thereon, are only reflected in the accompanying financial
statements for the second quarter of 1997 through June 9th.










<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998

(4)      DEBT
         ----

         MORTGAGE NOTE PAYABLE
         ---------------------

         On July 7, 1997, the Partnership obtained permanent financing from GMAC
         Commercial Mortgage Corporation (GMAC) for $4,500,000 for the Solon,
         Ohio hotel. The loan is due July 1, 2001 with a one year extension
         available upon the payment of a fee and if certain debt service
         coverage is attained. Interest accrues at 3.25% over the 30-day LIBOR
         index (8.94% at March 31, 1998). Monthly payments of interest only are
         due until August 1, 1998. Principal and interest payments are due
         thereafter based on a 25-year amortization. Starting in the second year
         of the loan, the Partnership will be required to contribute 2% of
         monthly room revenues to a replacement reserve. The replacement reserve
         payment will increase to 4% of monthly room revenues in the third year
         of the loan. The loan is collateralized by the real and personal
         property and certain other assets of Solon Hotel LLC. The Partnership
         was also required to pledge its limited partnership interest in
         Glenmaura and the loan is thirty percent guaranteed by Essex Partners.

         SUBORDINATED NOTES PAYABLE
         --------------------------

         Subordinated notes payable of $5,413,000 bear interest at a rate of
         10.5% per annum, payable monthly, and mature December 31, 2001, unless
         extended by the Partnership to December 31, 2002 upon payment to
         holders of an extension fee equal to .5% of the principal amount of the
         subordinated notes outstanding. The notes are issued as unsecured
         obligations of the Partnership.

         The future annual principal payments of the debt obligations
         outstanding as of June 30, 1998 are estimated as follows:


                          1998        $   17,500

                          1999            44,500

                          2000            49,000

                          2001         9,801,000
                                       =========

                                       9,798,000
                                       =========
          
         In the second quarter of 1998 and 1997, interest of $73,782 and
         $91,121, respectively, was capitalized in investments in real estate as
         the debt was used to finance construction of hotels.


         CONSTRUCTION LOAN COMMITMENT
         ----------------------------

         In 1998 the Partnership received construction financing from a bank for
         $4,700,000 for the Hampton Inn in Erie, Pennsylvania. The term is for
         twelve months and requires monthly payments of interest only at a rate
         of 2.25% over the LIBOR rate (5.748% at June 30, 1998). The facility is
         guaranteed by Essex Partners and collateralized by the related hotel
         property. Additionally, covenants require minimum net worth and limited




<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998



(4)      DEBT, CONTINUED
         ---------------

         distributions. There was $2,594,882 outstanding on the facility at June
         30, 1998 The Partnership is also negotiating with GMAC for permanent
         financing of the Erie Hampton Inn hotel.


(5)      FRANCHISE FEES
         --------------

         The Solon, Ohio Hampton Inn opened under a license agreement with
         Promus Corporation (Promus). An initial franchise fee of $40,000 was
         paid in 1995. In 1997, the Partnership entered into another license
         agreement with Promus to operate the Hampton Inn in Erie, Pennsylvania.
         An initial franchise fee of $45,000 was required. The term of the
         license agreement is approximately twenty years from the date the hotel
         commences operations. In addition, for each hotel, the Partnership will
         be required to pay Promus a monthly royalty fee of an 4% of gross rooms
         revenues, a monthly marketing/reservation fee of an additional 4% of
         gross room revenue, an initial software license fee of $3,000 plus $85
         per guest room with a monthly maintenance charge of $200 to $400 per
         month, and a monthly amount equal to any sales tax or similar tax
         imposed on Promus on payments received under the license agreement.
         Royalty and marketing/reservation fees were each $22,223 in the second
         quarter of 1998. There were no royalty, marketing/reservation fees for
         the second quarter of 1997 under the Promus license agreements.

         Promus requires the Partnership to establish a capital reserve escrow
         account based on a percentage of room revenues generated by each hotel
         which will be used for product quality requirements of the hotel.
         Cumulative funding of the reserve for the first five years increases
         from 1% to 5% of gross revenues and stabilizes at 5% for the term of
         the agreement. The Promus franchise agreements impose certain
         restrictions on the transfer of limited partnership units. Promus
         restricts the sale, pledge or transfer of units in excess of 25%
         without their consent.

         Glenmaura has a franchise agreement with Marriott International, Inc.
         Under the terms of the agreement, Glenmaura paid an initial franchise
         fee of $48,000 in 1995. The term and amortization period of the
         franchise agreement is twenty years, with an option to renew for an
         additional ten-year period. Glenmaura is required to pay a monthly
         royalty fee in an amount equal to 4% of gross room rentals for the
         first two years of operations and 5% during the remainder of the term
         of the agreement, a marketing fee of 2-3% gross revenues, a reservation
         system fee and a property management system fee. In the second quarter
         1997, these fees totaled $40,976.

         In 1995, the Partnership entered into a license agreement with Promus
         to operate a Homewood Suites hotel in Warwick, Rhode Island. An initial
         franchise fee of $40,000 was paid. The franchise agreement for the
         Homewood Suites in Warwick has expired. The franchise fee has been
         written off since the franchise agreement has expired.

(6)      RELATED PARTY TRANSACTIONS
         --------------------------

         A summary of fees earned by Essex Partners or its affiliates for the
         three months ended June 30, 1998 under the terms of the Partnership
         agreement follows:



<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998


<TABLE>
<CAPTION>
                                                                                        2nd Qtr          2nd Qtr
TYPE OF FEE                   AMOUNT OF FEE                                                1998            1997
-----------                   -------------                                            --------          --------

<S>                         <C>                                                     <C>              <C>    
Selling Commission            Up to $80 per limited partnership unit and              $     -0-         $ 9,740
                              $55 per $1,000 sold

Organization and              3.4% of the gross proceeds of the offering                    -0-           5,374
Offering Fee

Acquisition Fee               $110,000 per hotel site                                       -0-         110,000

Development Fee               $160,000 per hotel, plus 5% of the total cost                 -0-             -0-
                              of the hotel in excess of $2.7 million (not to
                              exceed $325,000 per hotel)

Property Management           4.5% of gross operating revenues from the                  29,306          17,495
Fee                           hotels

Partnership Management        .75% to 1.25% of gross operating revenues                   4,885           2,916
Fee                           from the hotels

Accounting Fee                $800 per month                                              2,400           1,600
                                                                                       ========       =========
                                                                                      $  36,591       $ 147,125
                                                                                       ========       =========


The above fees are reflected in the accompanying financial statements as 
follows:


                                                                                        2nd Qtr        2nd  Qtr
Balance Sheet:                                                                            1998            1997
                                                                                       --------       ---------
     Investment in real estate                                                           $ -0-        $ 110,000

     Deferred debt issuance costs                                                          -0-           10,324

     Syndication costs, charged to partner's capital                                       -0-            4,790

                                                                                      $    -0-        $ 125,114
                                                                                       ========       =========
                                                                                 
                                                                   
</TABLE>



<PAGE>


                       ESSEX HOSPITALITY ASSOCIATES IV L.P
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                  June 30, 1998

(6) RELATED PARTY TRANSACTIONS, CONTINUED
-----------------------------------------

Statements of Operations:

     Management fees to affiliates              $29,306          17,495

     Administrative expense                       2,400           1,600

     Partnership management fees                  4,885           2,916

                                               $ 36,591       $  22,011
                                               ========       =========

 Organization and offering fees are allocated to syndication costs and
 debt issuance costs based on the pro-rata share of limited partner's
 units and notes payable to the total offering.

 Under the terms of the Partnership agreement, Essex Partners or its
 affiliates will also earn other fees as follows:


      TYPE OF FEE                             AMOUNT OF FEE
      -----------                             -------------
Investor Relations Fee           .25% of the gross proceeds of the offering
                                  payable annually in 1998 through 2001

Refinancing Fee                  1% of gross proceeds of refinancing any or all
                                 of the hotels 

Sales Fee                        3% of the gross sale price of any or all of 
                                 the hotels

 The Partnership will also be subject to a number of conflicts of interest
 arising from its relationships with the general partner, its owners and
 affiliates and due to other activities and entities in which the general
 partner and its affiliates have or may have a direct or indirect financial
 interest.


<PAGE>




Item 2.  Management's Discussion and Analysis or Plan of Operation

The Partnership was formed on August 30, 1995. The Partnership completed its
public offering on November 24, 1997, raising $5,413,000 in subordinated notes
and $2,876,000 in limited partnership units for total offering proceeds of
$8,289,000. The Partnership owns two hotels, a Hampton Inn in Solon, Ohio which
opened August 1, 1997 and a Hampton Inn in Erie, PA which opened July 1, 1998.
In addition, the Partnership has a 49.8% interest in Essex Glenmaura L.P. which
owns a Courtyard by Marriott hotel in Scranton, PA which opened September 4,
1996.

The following discussion analyzes the financial statements of the Partnership as
of June 30, 1998 and 1997, which are attached. Investments with a 50% or less
ownership interest are accounted for by the equity method. Ownership interests
exceeding 50% are accounted for under the consolidated method. The Partnership
had a 54.3% ownership interest in Glenmaura until June 9, 1997, at which time
the Partnership's ownership interest was reduced to 49.8%. Accordingly, the
income statement and statement of cash flows for the quarter ended June 30, 1997
include the accounts of the Partnership and Glenmaura until June 9, 1997. In the
financial statements for the quarter ended June 30, 1998 and the balance sheet
for the quarter ended June 30, 1997 the investment in Glenmaura is accounted for
under the equity method. All significant intercompany transactions and balances
have been eliminated in consolidation.

COMPARISON OF THE QUARTER ENDED JUNE 30, 1998 TO THE QUARTER ENDED JUNE 30, 1997
From July 1, 1997 to June 30, 1998, the total assets of the Partnership
increased approximately $6.0 million. The primary reason for the increase is the
completion of the Hampton Inn in Solon, Ohio in the third and fourth quarter,
1997 and the construction of the Hampton Inn in Erie, PA. The investment in the
Solon and Erie Hampton Inns increased by approximately $5.9 million. The
Partnership's cash balance decreased from $529,000 to $253,000 from costs
incurred in the construction of properties. Land held for sale increased
$647,000, which represents the costs incurred for the Warwick site, which is
currently being offered for sale by the Partnership. The assets of the
Partnership at June 30, 1998 include $242,000 of investment in partnership,
which represents the Partnership's investment in Glenmaura. During the period,
the Partnership incurred additional deferred costs of $320,000, representing
additional debt acquisition costs from the offering of the subordinated notes,
costs incurred to obtain the Solon first mortgage loan and costs incurred to
obtain the construction and permanent financing for Erie Hampton Inn.

The Partnership's liabilities increased $6,546,000 from July 1, 1997 to June 30,
1998. There were several items which accounted for the increase. The Partnership
received a $4,500,000 first mortgage loan for Solon from GMAC Commercial
Mortgage Corp. A portion of the proceeds of the Solon first mortgage loan were
used to repay the due to affiliate of $596,000 owed at June 30, 1997. The
Partnership also obtained a $4,700,000 construction loan from a bank for the
Erie Hampton Inn, of which $2,595,000 was outstanding as of June 30,1998. In
addition, subordinated notes of $231,000 were sold in the Partnership's
offering. Limited partners' equity decreased $599,000. From July 1, 1997 through
June 30, 1998 the Partnership incurred net losses of $829,000, raised $546,000
in additional limited partner equity, paid $167,000 in limited partner
distributions and incurred $96,000 in additional syndication costs.

The primary revenue source for the quarter ended June 30, 1998 was room revenues
of $658,000 from the Solon Hampton Inn. The primary revenue source for the
quarter ended June 30, 1997 was room revenues of $334,000 from the Courtyard by
Marriott, which represented room revenues through June 9, 1997, the date the
Partnership's ownership interest dropped below 50%. There are no revenues from
the Solon Hampton Inn in the second quarter 1997 since the Solon Hampton Inn did
not open until August, 1997. Telephone and other commission revenue for the
second quarter 1998 totaled $38,000, for total revenues of $696,000. For the
second quarter, 1997 food and beverage revenue and telephone and other
commission revenue from Glenmaura totaled $62,000 for total revenues of
$396,000. Operating expenses for the quarter ended June 30 1998, before equity
loss in

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partnership and depreciation, totaled $384,000. The equity loss from Glenmaura
for the second quarter, 1998 was $35,000. Depreciation and amortization of
$120,000 was recorded for income from operations of $156,000. Other than
depreciation and amortization, the largest operating expense for the Partnership
was rooms expense of $139,000, followed by administrative and general expenses
of $37,000. Operating expenses for the second quarter 1997 totaled $414,000. The
largest expenses in the second quarter 1997 were depreciation of $102,000, rooms
expenses of $92,000 and food and beverage expenses of $41,000. The loss from
operations in the second quarter 1997 was $18,000. Other income and expense for
the second quarter 1998 includes net interest expense of $175,000, compared to
net interest expense of $170,000 for the same period in 1997. The Partnership's
interest expense in the second quarter 1998 is composed of the interest incurred
on the first mortgage loan for Solon, and interest on the subordinated notes to
the extent the proceeds have not been used for the construction of the Erie
Hampton Inn. Interest incurred on subordinated note proceeds used for the Erie
Hampton Inn and on the Erie Hampton Inn construction loan have been capitalized
as construction period interest. The Partnership's interest expense in the
second quarter 1997 was composed of interest on the first mortgage loan for
Glenmaura and interest on the subordinated notes to the extent the proceeds were
not used for construction. Interest incurred in the second quarter 1997 on the
subordinated note proceeds which were used in construction was capitalized as
construction period interest. The net loss for the Partnership for the second
quarter, 1998 was $19,000. The loss before minority interest in Glenmaura for
the quarter ended June 30, 1997 totaled $188,000. After allocating $23,000 to
the minority interests in Glenmaura, the Partnership's net loss for the second
quarter 1997 was $165,000.

The second quarter operations generated $61,000 in cash, compared to cash used
in operations in the second quarter 1997 of $62,000. More cash was generated in
the second quarter 1998 than the same period in 1997 for two reasons, more
revenue was generated in 1998 and the expenses required to operate the Solon
Hampton Inn are less than the expenses required to operate the Courtyard by
Marriott. Cash required for investing activities in the second quarter 1998 was
$2,604,000, $121,000 lower than for the second quarter 1997, because the second
quarter 1997 included the acquisition of the Erie property as well as
construction costs for the Solon Hampton Inn. The Partnership obtained
$2,382,000 of cash for financing activities in the second quarter 1998 due to
proceeds from the construction loan for the Erie Hampton Inn. Financing
activities for the second quarter 1997 provided $712,000 in cash due to the
advances from affiliates of $551,000 and proceeds of $286,000 from the
Partnership's offering of limited partnership units and subordinated notes. Cash
decreased $162,000 in the second quarter 1998, compared to a decrease of
$2,075,000 in the second quarter 1997.

The Solon Hampton Inn opened on August 1, 1997. The property achieved an average
occupancy of 74% in 1997 after five months of operation, with an average daily
rate of $77.97. The revenue per available room for 1997 was $57.62. The average
occupancy for the second quarter 1998 was 81%, with an average daily rate of
$86.62. The revenue per available room for the second quarter 1998 was $70.16.
The second quarter of the year is typically stronger than the first or fourth
quarters. The Solon, Ohio area also has large tourist demand due to local
attractions such as Sea World of Ohio and Geauga Lake, which open Memorial Day
week-end for the summer season. Occupancies and rates increase when the tourist
demand increases. This is demonstrated by the results achieved in June, 1998,
which was the strongest month the property has had since opening. The average
occupancy was 88.2%, average daily rate was $101.60 and revenue per available
room was $89.61. The results for July, 1998 were even stronger than June, with
average occupancy of 92.5%, an average daily rate of $110.67 and revenue per
available room of $102.37.

The Courtyard by Marriott hotel opened in September 1996. The property achieved
an average occupancy of 67% for the second quarter 1998, lower than the 69%
average occupancy for the second quarter 1997. The average daily rate for the
second quarter 1998 was $66.16, less than the average daily rate of $68.20 for
the second quarter 1997. The revenue per available room for the second quarter
1998 was $45.63 versus $47.06 for the second quarter 1997. A new hotel opened in
the

<PAGE>



Scranton area in June, 1997, a Comfort Inn & Suites which is directly
competitive with the Courtyard by Marriott. Shortly after the opening of the
Comfort Inn & Suites, the occupancies at the Courtyard began to decrease. Rates
at the Courtyard have been decreased to increase demand, which has increased
revenues, but not up to the level achieved prior to the opening of the Comfort
Inn & Suites.


YEAR 2000 DISCLOSURE
The Partnership is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Partnership's
computerized information systems. Based on preliminary information, costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Partnership's financial position, results of operations or
cash flows in future periods. However, if the Partnership, its customers or
vendors are unable to resolve such processing issues in a timely manner, it
could result in a material financial risk. Accordingly, the Partnership plans to
devote the necessary resources to resolve all significant year 2000 issues in a
timely manner.


LIQUIDITY AND FINANCIAL CONDITION
The Solon Hampton Inn is generating sufficient funds from operations to fund all
operating expenses and debt service payments on the first mortgage loan. As of
June 30, 1998 the Partnership has $9,913,000 in outstanding long term
indebtedness comprised of subordinated notes of $5,413,000 and first mortgage
financing of $4,500,000. In addition, the Partnership has construction financing
in the amount of $4,700,000 for the Erie Hampton Inn which it expects will be
replaced by permanent first mortgage financing in the amount of $4,700,000. As
of June 30, 1998, $2,595,000 was outstanding under the construction loan. The
notes are due in December 2001, unless extended by their terms for one year to
December 2002. The Solon first mortgage loan is due July, 2001, unless extended
by its terms for one year to July, 2002. The Erie first mortgage loan is
expected to be due before December, 2002, unless extended by its terms for one
year to December, 2003. Once the Solon Hampton Inn and Erie Hampton Inn reach
more stabilized operations, the Partnership expects to be able to place larger
new first mortgages on the properties, such that when it needs to refinance the
total outstanding indebtedness, (which is expected to total approximately $14.3
million in July, 2001), it can do so through a combination of retained excess
working capital, new first mortgage financing and, if necessary, new
subordinated note financing.

The Partnership believes that it has sufficient funding to complete the
construction of the Erie Hampton Inn. However, given the uncertainty of
construction, it is possible that significant unanticipated cost overruns could
occur that would cause the Partnership to not have sufficient funds to complete
construction. The Partnership has been and intends to continue to monitor
construction costs very closely to minimize the possibility of significant cost
overruns.

The Partnership included a working capital reserve in its total costs for the
Solon Hampton Inn and has included a working capital reserve in its costs for
the Erie Hampton Inn. The Partnership expects that the working capital reserves
will be sufficient to fund any operating deficits.

The General Partner believes good investment opportunities exist in the limited
service segments of the lodging industry. The limited service segment of the
lodging industry has experienced significant growth in recent years as a greater
number of leisure travelers seek to maximize value. The General Partner believes
that the continued success of the lodging industry will depend upon, among other
things, the continued demand for lodging facilities by both business and leisure
travelers, which such demand is affected by general economic conditions,
including, costs of labor and materials, unemployment, inflation and interest
rates. In addition to, but directly affected by, economic trends, is the
availability of financing on favorable terms for the construction and operation
of hotels. In recent years a limited number of institutional lenders have been
more willing to provide

<PAGE>



financing for hotel construction and operations, and hotel franchisors or their
affiliates have established financing programs for construction and operation of
the hotel franchisors' particular hotels. In addition to these industry
considerations, the success of the Partnership's hotels will depend upon the
hotel franchises developed and operated by the Partnership, as well as the
location of the hotels.





<PAGE>


                                     PART II

                                OTHER INFORMATION



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-------  --------------------------------

         a.       EXHIBITS
                  --------

                  None

         b.       REPORTS ON FORM 8-K
                  -------------------

                  None


                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    ESSEX HOSPITALITY ASSOCIATES IV L.P.
                                    ------------------------------------
                                             Registrant



Dated:   August 11, 1998            /S/ LORRIE L. LOFASO
                                    --------------------
                                    Essex Hospitality Associates IV L.P.
                                    Essex Partners Inc.
                                    Lorrie L. LoFaso
                                    Vice President and Chief Accounting Office