<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1995
Commission file number 0-14308
Exact name of registrant as specified in its charter: T. ROWE PRICE REALTY
INCOME FUND I, A NO-LOAD LIMITED PARTNERSHIP
State or other jurisdiction of incorporation or organization: Maryland
I.R.S. Employer Identification Number: 52-1363144
Address and zip code of principal executive offices: 100 East Pratt Street,
Baltimore, Maryland 21202
Registrant's telephone number, including area code: 1-800-638-5660
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Units of Limited Partnership Interest
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 X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
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The aggregate market value of the voting stock held by non-affiliates of
the registrant is not determinable because there is no public trading
market for the Units of Limited Partnership Interest.
DOCUMENTS INCORPORATED BY REFERENCE.
Prospectus of the Partnership dated December 7, 1984, File Number 2-93160
and supplement to the Prospectus dated April 24, 1985 filed with the
Commission pursuant to Rule 424(c) are incorporated in Parts I, III and IV
by reference. Annual Report to Limited Partners of the Partnership for the
fiscal year ended September 30, 1995 dated November 10, 1995 and filed with
the Commission as Exhibit 13 is incorporated in Parts II and IV by
reference.
Index to Exhibits is located on page 24.
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T. ROWE PRICE REALTY INCOME FUND I,
A NO-LOAD LIMITED PARTNERSHIP
INDEX
Page
PART I.
Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security
Holders 12
PART II.
Item 5. Market for the Partnership's Limited Partnership 12
Interests and Related Security Holder Matters
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III.
Item 10. Directors and Executive Officers of Registrant 19
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners 23
and Management
Item 13. Certain Relationships and Related Transactions 23
PART IV.
Item 14. Exhibits, Financial Statement Schedules and 24
Reports on Form 8-K
<PAGE>4
PART I
Item 1. Business
T. Rowe Price Realty Income Fund I, A No-Load Limited Partnership (the
"Partnership"), was formed on August 31, 1984, under the Maryland Revised
Uniform Limited Partnership Act for the purpose of acquiring, operating and
disposing of existing income-producing commercial and industrial real
estate properties. On December 7, 1984, the Partnership commenced an
offering of $100,000,000 of Limited Partnership Units ($1,000 per Unit)
pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (Registration No. 2-93160) (the "Registration Statement"). The
Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933
(the "Prospectus") as supplemented on April 24, 1985 (the "Supplement")
sets forth a complete description of the business of the Partnership in the
sections entitled "Investment Objectives" and "Fund Policies," on pages
19-29 of the Prospectus which pages are incorporated by reference herein.
The Gross Proceeds from the offering, combined with the contribution of
$10,000 from the Initial Limited Partners totaled $90,622,000. The
offering terminated in May 1985, and no additional Units will be sold. As
of December 15, 1995 there were 17,758 Limited Partners.
In December of 1991, LaSalle Advisors Limited Partnership ("LaSalle")
entered into a contract with the Partnership and T. Rowe Price Realty
Income Fund I Management, Inc. (the "General Partner") to perform
day-to-day management and real estate advisory services for the Partnership
under the supervision of the General Partner and its Affiliates. LaSalle's
duties under the contract include disposition and asset management
services, including recordkeeping, contracting with tenants and service
providers, and preparation of financial statements and other reports for
management use. The General Partner continues to be responsible for
overall supervision and administration of the Partnership's operations,
including setting policies and making all disposition decisions, and the
General Partner and its Affiliates continue to provide administrative,
advisory, and oversight services to the Partnership. Compensation to
LaSalle from the Partnership consists of accountable expense
reimbursements, subject to a fixed maximum amount per year. All other
compensation to LaSalle is paid out of compensation and distributions paid
to the General Partner by the Partnership.
The Partnership is engaged solely in the business of real estate
investment, therefore, presentation of information about industry segments
is not applicable. In the current period, three of the Partnership's
properties were responsible for 15% or more of revenues from operating
activities. Montgomery Executive Center provided 27%, The Business Park
provided 17%, and Royal Biltmore provided 15%. In fiscal 1994, two
properties were responsible for 15% or more of revenues from operating
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activities: Montgomery Executive Center provided 28%, and The Business
Park provided 15%. In fiscal 1993, only Montgomery Executive Center was
responsible for 15% or more of revenues from operations, providing 25%
thereof.
The Partnership currently owns the properties set forth in Schedule III to
this Report, "Consolidated Real Estate and Accumulated Depreciation," which
is incorporated by reference herein and contains information as to
acquisition date and total cost of each of the properties. In all cases
the interests were purchased for cash, and in all cases land and
improvements are owned 100% in fee simple. Additional information
regarding these properties, including size and percentage leased as of
September 30, 1995, is set forth in Exhibit 28(b) to this Report, "Real
Estate Investments," which is incorporated by reference herein. A brief
narrative description of each property the Partnership currently owns
follows.
Spring Creek (Richardson, Texas)
The Spring Creek building is one of eight similarly designed research and
development buildings that collectively comprise the Spring Creek Business
Park, located in the high-tech area of Richardson, Texas. This 51,000
square foot property became 100% leased in May 1993 when the single tenant,
JM Computers, expanded (as required per their lease) into the entire
building. In 1993 the Partnership approved a plan submitted by LaSalle for
the disposition of Spring Creek, and in 1995 began actively marketing the
property for sale. In connection therewith the property's valuation
allowance which was established in 1993 has been adjusted to $1,437,000 as
of fiscal year-end 1995. This allowance is based on management's estimate
of the net realizable proceeds of such a sale.
The Spring Creek building is part of the Richardson Tech Corridor
industrial submarket which is situated along Dallas' Far North Central
Expressway. This area has the highest concentration of high technology
companies in the Dallas-Ft. Worth marketplace including such firms as Texas
Instruments, MCI, EDS, DSC Communications, and Convex. The current
submarket vacancy of 10% is down somewhat from last year's 12% vacancy
rate. The market has continued to show signs of strengthening with
positive absorption for technology and warehouse space. Thus, rental rates
have risen approximately 6% over the previous year.
This property competes in the Richardson/Plano flex space submarket which
totals approximately 8.0 million square feet. Within that submarket, it
competes directly with a group of facilities ranging from 35,000 square
feet to 108,000 square feet. All are located within a one mile radius of
Spring Creek. Market rates are quoted between $3.55 to $4.55 per square
foot per year for warehouse space and between $6.25 and $7.00 per square
foot for flex space. Market rates for flex space such as that offered by
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Spring Creek are expected to continue to rise. The tenant at Spring Creek
is currently paying $5.25 per square foot per year, and under the terms of
the lease the rental payments increase to $5.50 in 1996. The lease expires
in 1999.
Airport Perimeter Business Center (College Park, Georgia)
This property consists of three multi-tenant office/service/warehouse
buildings containing just under 121,000 square feet and is situated on 9.2
acres of land immediately south of William B. Hartsfield Atlanta
International Airport. This property is part of Airport Perimeter Business
Park, a master-planned, commercial/industrial business park containing
approximately 800,000 square feet of office/service/warehouse facilities on
approximately 137 acres of land, with good access to major north-south and
east-west Interstate highways. This parcel is also located in an area
which has been targeted for the potential expansion of the Hartsfield
Airport. Thus, the possibility exists that the Partnership might be forced
to sell this property to a government agency to accommodate such an
expansion. This uncertainty has made leasing the three buildings difficult
and will continue to do so until the issue is resolved. In fiscal 1995,
the Partnership recorded a provision for value impairment in connection
with Airport Perimeter of $189,000. The General Partner determined that
this adjustment was a prudent course of action based upon the uncertainty
of the Partnership's ability to recover the net carrying value of Airport
Perimeter through future operations and sale. This determination was based
upon current market conditions and future performance expectations of both
the property and the Airport/South Atlanta market.
The property is part of the approximately 15.8 million square foot Service
and Distribution sectors of the Atlanta Airport/South Atlanta submarket
which represents approximately 11% of Atlanta's total service and
distribution space. This sector of the submarket absorbed around 50,000
square feet during the first six calendar months of 1995 as it captured
around 2% of Atlanta's Service and Distribution absorption. Vacancy in the
submarket declined slightly to approximately 7% from the previous year's
8%. In general, the distribution sector is substantially outperforming the
Service Sector, which experienced a small net decrease in absorption.
Airport Perimeter competes in both sectors. Absorption is expected to
continue to be positive, primarily from expansion by existing tenants. For
this reason, more speculative projects for this submarket are expected.
Net effective rental rates for Class B space such as Airport Perimeter
remained around last year's range of $2.50 to $3.75 per square foot,
including taxes, insurance and utilities.
Airport Perimeter Business Center gained two new tenants totaling 10,970
square feet, renewed five tenants (two of which expanded) totalling 34,003
square feet, lost one tenant who did not renew and one tenant due to
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financial problems for a total loss of 7,895 square feet. This resulted in
a net increase in leased space of over 4,800 square feet. Thus, the
property rose to a level of 80% leased at fiscal year end, versus 69% at
the end of the prior fiscal year. The upcoming Olympics are expected to
positively impact absorption, albeit for only a short time. Airport
Perimeter has experienced difficulty in leasing due to the lingering
possibility that the Partnership might be forced to sell this property to a
government agency to accommodate an airport expansion. The Partnership
does not know when the issue will be resolved.
Montgomery Executive Center (Gaithersburg, Maryland)
This property consists of a six-story office building containing 117,200
square feet and is situated on 4.1 acres of land in the City of
Gaithersburg, Maryland, 19 miles northwest of Washington, D.C. Montgomery
Executive Center, whose tenants are principally engaged in providing
services to the local business community, is located at the intersection of
two major thoroughfares with direct access to Interstate 270, which in turn
provides access to the Capital Beltway and the Washington metropolitan
area.
As of September 30, 1995, this property was 67% leased which was down 21
percentage points from last year due to the expiration of one major tenant
lease and one smaller one, totalling 21,807 square feet. Renewals and
expansions combined to total 22,603 square feet on four separate
transactions, while 5,292 square feet of occupancy was lost due to tenant
credit reasons and/or downsizing. The net impact of this activity was a
decline in occupancy totalling 25,071 square feet.
Montgomery Executive Center is in the Gaithersburg submarket and competes
with 80 buildings totaling approximately 3.9 million square feet; it is
part of a suburban office building market extending in both directions
along Interstate 270, including the communities of Germantown to the north
and Rockville to the south. The Gaithersburg submarket's net absorption
for the past twelve months was approximately 140,000 square feet. This
level of absorption is significantly better than the prior year's level
which was negative and reflected the effects of IBM's reduction of its
occupancy by 420,000 square feet. The current vacancy rate in the
submarket has fallen from over 20% in the prior year to its current 18%
level. Asking rental rates increased modestly during the year indicating
that leasing momentum may be increasing in the marketplace and a further
decline in vacancy may be on the horizon. Rates range from $14.00 per
square foot including taxes, insurance, and operating expenses ("gross")
for Class B space to $18.00 gross for Class A space. Montgomery Executive
Center is generally considered to be among the best Class B space in the
market and should begin to benefit from improving market conditions should
they persist.
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Royal Biltmore (Phoenix, Arizona)
This property consists of a two story, garden style office building
containing 71,000 rentable square feet and a parking garage containing
48,000 square feet. It is situated on 2.9 acres of land in the East
Camelback Road Corridor ("Camelback Corridor") of Phoenix, Arizona. This
area of Phoenix has benefited from the improved economic conditions in the
region and the corresponding increase in demand for office space near
executive housing. These factors have generated a great deal of investor
interest in office properties in the Camelback Corridor causing values to
rise. Accordingly the Partnership is considering offering the property for
sale during fiscal 1996.
With the signing of two new tenants totaling 2,807 square feet and renewals
and/or expansions totaling 2,160 square feet, the property experienced only
a two percentage point decline in occupancy over the past fiscal year.
This decline in occupancy reflects the downsizing of one tenant and the
Partnership's decision to market the vacant space at the highest possible
rate as space in the marketplace has continued to become increasingly
scarce.
The Camelback Corridor office submarket contains approximately 5.7 million
square feet of office space and demand has accelerated; positive absorption
during the first six months of the calendar year of approximately 100,000
square feet has been recorded. This positive net absorption has reduced
the market vacancy to approximately 11% as of June 30, 1995. Rents have
risen sharply. Gross office rents in the market for better Class B space,
such as Royal Biltmore, are currently stabilized in the $13.00 to $19.00
per square foot per year range, including taxes, insurance, and utilities
versus a range of $13.00 to $16.00 per square foot the previous year.
Rents are expected to continue to increase as vacancy rates decline.
Springdale Commerce Center (Santa Fe Springs, California)
Springdale Commerce Center consists of two multi-tenant
industrial/warehouse/distribution buildings, containing 144,000 square feet
on 6.9 acres of land. It is located in the City of Santa Fe Springs,
California, 13 miles southeast of downtown Los Angeles. Because of its
central location, Santa Fe Springs is one of the primary industrial centers
in the area with excellent access to major shipping routes.
Springdale Commerce Center was 100% occupied as of September 30, 1995,
unchanged from the prior year level. The one tenant lease which matured
during the year (14,400 square feet) was renewed.
The Santa Fe Springs submarket, of which the property is a part, is one of
four major warehouse distribution centers in the greater Los Angeles basin.
It represents over one-half of the Mid-Counties market which comprises
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approximately 99 million square feet of industrial space in parts of Los
Angeles and Orange Counties. The Santa Fe Springs submarket consists
primarily of small and medium sized, "master planned" business parks with a
number of pockets containing older warehouse facilities. Most of the area
was fully developed by the 1970's, and no new buildings have been
constructed recently. The current vacancy level has declined to
approximately 6% in this submarket versus approximately 8% the previous
year.
There are at least eight projects directly competitive to Springdale
Commerce Center ranging in size from 12,000 square feet to just over
100,000 square feet. Class B rates in the market are being quoted in the
range of $3.55 to $4.20 per square foot, including taxes, insurance, and
utilities, with one month of free rent for each year of the lease term,
approximately 5% over the prior year. Tenant improvement allowances are
ranging from $1.50 to $4.50 per square foot. It appears that the market
has begun to improve and with vacancy levels at their lowest point during
the last several years, further upward pressure on rentals can be expected.
Van Buren Industrial Center (Phoenix, Arizona)
Van Buren Industrial Center consists of five multi-tenant industrial
warehouse/distribution buildings, containing 174,000 square feet, situated
on 9 acres of land, ten minutes from central Phoenix and 20 minutes from
the principal Phoenix airport.
Van Buren Industrial Center was 92% leased as of September 30, 1995 equal
to 1994's level. Leasing activity during the year was strong as over 50,000
square feet of new tenancy and 14,000 square feet of renewals offset 64,000
square feet of expirations.
Van Buren Industrial Center is located in the Southwest submarket of the
Phoenix metro industrial market. The property's occupancy level is
comparable to the approximately 93% average occupancy level for 8 directly
competitive multi-tenant projects representing 1.2 million square feet of
warehouse/distribution space. The current submarket occupancy is 5
percentage points better than the prior year and reflects continued
improvement in the Phoenix area economy and the corresponding increase in
the demand for space. Market rents have also benefited from the improving
economy, rising from a range of $2.90 - $3.50 per square foot per year in
1994 to a range of $3.24 - $3.84 per square foot per year for 1995.
Investor interest in industrial space remains high and the continued
improvement in the Phoenix area markets has drawn considerable attention
and put upward pressure on values. Accordingly, the General Partner is
considering a sale of the property during fiscal 1996, but no firm decision
has yet been made.
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The Business Park (Gwinnett County, Georgia)
The Business Park is located in Gwinnett County, Georgia, approximately 17
miles northeast of downtown Atlanta. The Business Park consists of eight
multi-tenant office/warehouse buildings, containing just over 157,000
square feet, situated on 13 acres of land. It is located in a suburban
area known as the "Peachtree Corridor," which contains a wide selection of
business facilities and homes in a park-like setting. In fiscal 1995, the
Partnership recorded a provision for value impairment in connection with
The Business Park of $165,000. The General Partner determined that this
adjustment was a prudent course of action based upon the uncertainty of the
Partnership's ability to recover the net carrying value of The Business
Park through future operations and sale. This determination was based upon
current market conditions and future performance expectations of both the
property and the Atlanta office/warehouse market.
As of September 30, 1995, The Business Park was 92% leased. The property
experienced a six percentage point increase in occupancy during the year
primarily due to the signing of seven new tenants totaling 22,500 square
feet. Additionally, ten tenants renewed and/or expanded. Only two tenants
totaling 5,400 square feet vacated upon expiration and one 2,500 square
foot tenant was lost after it defaulted on its lease obligations.
The Peachtree Corridor is part of the Gwinnett/I-85 Corridor submarket of
Atlanta, which contains approximately 9.7 million of Service center space
and makes up The Business Park's competitive area. Activity marketwide has
been very strong with net absorption during the first six months of 1995
totaling 353,000 square feet. Net absorption in this market is expected to
continue improving as tenants from other Atlanta sub-markets continue to
relocate to this submarket due to its superior highway access. As a
result, build to suit and speculative construction of distribution
buildings, which began in fiscal 1994, is expected to also continue.
Activity related to the upcoming Olympic games has also contributed to the
increase in absorption, but this is only expected to be of effect over the
short term. Net effective rents in the market for Class A space such as
The Business Park have increased to $5.00 a square foot, up dramatically
from 1994's level.
Newport Center Business Park, Buildings 1 and 2 (Deerfield Beach, Florida)
This property consists of two multi-tenant office/light industrial
buildings containing just over 62,000 square feet, and is situated on
approximately 5.9 acres of land. Newport Center is located in the City of
Deerfield Beach, Florida, immediately south of Palm Beach County and the
City of Boca Raton. It is part of the Newport Center Business Park, a 119
acre development which includes research and development facilities,
warehousing, and corporate offices as well as two hotels.
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As of September 30, 1995, this property was 93% leased, which was up from
the 89% occupancy a year ago. This is primarily due to the signing of two
new tenants totaling 5,500 square feet. These gains were partially offset
by the loss of one 1,300 square foot tenant who vacated after its lease
expired and one 2,000 square foot tenant who experienced financial
difficulties. In addition seven tenants totalling 17,300 renewed their
leases.
Newport Center compares favorably to its competition in the Boca Raton
submarket of the South Florida market. This submarket contains
approximately 5.5 million square feet of office and flex-space,
approximately 12% of which is vacant as of September 30, 1995, down
significantly from the prior year's level. Net absorption for the first
six calendar months of the year totaled approximately 106,000 square feet.
Over the past year, office/service rents have increased to around $8.00 -
$10.00 gross per square foot, $1.00 per square foot higher than 1994 on
both ends of the range. Concessions are minimal and "as is" deals are
frequently being made on second generation space.
The Newport Center/Deerfield area is attractive to developers as it is
close to I-95 and the Turnpike, and is a good location for covering a tri-
county area business. Inexpensive land is being bought up and build-to-
suit facilities are being built, but no speculative construction is
anticipated in the immediate future.
Employees
The Partnership has no employees and, accordingly, the General Partner, the
Partnership's investment adviser, LaSalle, and their affiliates perform
services on behalf of the Partnership in connection with administering the
affairs of the Partnership, and operating and selling the Partnership's
properties. The General Partner, LaSalle, and their affiliates receive
compensation in connection with such activities, as described above.
Compensation to the General Partner and its affiliates and the terms of
transactions between the Partnership and the General Partner and its
Affiliates are set forth in Items 11. and 13. below, to which reference is
made for a description of those terms and the transactions involved.
Item 2. Properties
The Partnership owns the properties discussed in Item 1, to which
reference is made for the name, location and description of each property.
See also Schedule III to the Financial Statements of the Partnership, which
is filed hereinwith as Exhibit 99(c). All properties were acquired on an
all-cash basis.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
<PAGE>12
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters
At December 15, 1995, there were 17,758 Limited Partners. There is no
public market for the Units, and it is not anticipated that a public market
for the Units will develop. T. Rowe Price Investment Services, Inc.
("Investment Services") provides certain information to investors which may
assist Limited Partners desiring to sell their Units, but provides only
ministerial services in connection with such transactions. Since this
arrangement does not constitute a market for the Units, it is possible that
no prospective purchaser will be willing to pay the price specified by a
prospective seller. The Partnership will not redeem or repurchase the
Units.
In 1987 Congress adopted certain rules concerning "publicly traded
partnerships". The effect of being classified as a publicly traded
partnership would be that income produced by the Partnership would be
classified as portfolio income rather than passive income. On November 29,
1995, the Internal Revenue Service adopted final regulations ("Final
Regulations") describing when interests in partnerships will be considered
to be publicly traded. The Final Regulations do not take effect with
respect to existing partnerships until the year 2006. Due to the nature of
the Partnership's income and to the low volume of transfers of Units, it is
not anticipated that the Partnership will be treated as a publicly traded
partnership under currently applicable rules and interpretations or under
the Final Regulations.
<PAGE>13
Cash distributions declared to the Limited Partners during the two most
recent fiscal years are as follows:
Distribution for the Amount of
Quarter Ended Distributions per Unit
December 31, 1993 $ 4.00
March 31, 1994 $37.00
June 30, 1994 $ 4.00
September 30, 1994 $ 5.00
December 31, 1994 $ 4.00
March 31, 1995 $ 4.00
June 30, 1995 $ 4.00
September 30, 1995 $18.00
All of the foregoing distributions were paid from cash flows from operating
activities with the exception of the distribution for the quarter ended
March 31, 1994, which included a distribution of $33.00 per Unit
representing a portion of the sale proceeds of Corporate Square, the
distribution for the quarter ended September 30, 1994, which included a
distribution of $1.00 per Unit representing a portion of the sale proceeds
of Corporate Square, and the distribution for the quarter ended September
30, 1995 which included a distribution with $9.00 per Unit representing
previously retained proceeds from the sales of Corporate Square and Dupont
Business Park and also includes cash flow from operating activities for
prior quarters of 1995.
There are no material legal restrictions on the Partnership's present or
future ability to make distributions in accordance with the provisions of
the Agreement of Limited Partnership, annexed to the prospectus as Exhibit
A thereto. Reference is made to Item 7 below, for a discussion of the
Partnership's ability to continue to make future distributions.
At the end of the 1995 fiscal year, the Partnership conducted its annual
formal unit valuation. The valuation of the Partnership's properties was
performed by the General Partner, and then reviewed and approved by an
independent professional appraiser. The estimated investment value of
limited partnership Units resulting from this process is $424 per Unit.
After a $9 per unit distribution for the September 1995 quarter
representing a portion of the sales proceeds of Corporate Square and Dupont
Business Park, and after the distribution of prior quarter operating cash
flows, the estimated valuation is $411 per unit. There is no assurance
that Units can be sold at a price equal to this estimated value, and this
valuation is not necessarily representative of the value of the Units when
the Partnership ultimately liquidates its holdings.
Item 6. Selected Financial Data
The following table sets forth a summary of the selected financial data for
the Partnership.
<PAGE>14
Years Ended September 30,
(Dollars in thousands except per-unit amounts)
1995 1994 1993
Assets at year
end $46,133 $47,844 $52,710
Revenues $ 6,043 $ 5,993 $ 6,339
Net income (loss) $ 8 $ 165 $(6,610)
Net income (loss)
per L.P. Unit $ 0.08 $ 1.64 $(65.65)
Cash distributions
paid to:
Limited Partners $ 1,540 $ 4,440 $ 1,541
General Partner $ 165 $ 286 $ 171
1992 1991
Assets at year
end $61,260 $68,272
Revenues $ 6,542 $ 7,033
Net income (loss) $(3,012) $ 434
Net income (loss)
per L.P. Unit $(29.91) $ 4.31
Cash distribution
paid to:
Limited Partners $ 3,987 $ 2,900
General Partners $ 305 $ 322
NOTES:
1. The above financial data should be read in conjunction with the
financial statements and the related notes appearing elsewhere in this
report.
2. The figures above for Assets at year end and Net income (loss)include
provisions for value impairment of $189 for Airport Perimeter, and $165 for
the Business Park in 1995, $365 for the Business Park in 1994, $1,682 for
Royal Biltmore and $495 for The Business Park in 1993, and $489 for Spring
Creek and $2,629 for Royal Biltmore in 1992. These figures also include
valuation allowance adjustments for Spring Creek of $193 in 1995, and for
Spring Creek and Corporate Square in 1994 of $(119) and $(248),
respectively, and for Spring Creek and Corporate Square in 1993 of $1,363
and $3,499, respectively.
3. The figures above for Net income (loss) per Limited Partnership Unit
include $(5.43)per Unit attributable to the provisions for value impairment
and valuation allowances discussed at note 2 above in 1995, and $.02 per
Unit attributable to the provision for value impairment and valuation
allowances discussed at note 2 above in 1994, $(69.91) per Unit in 1993,
and $(30.97) in 1992.
<PAGE>15
Distributions declared per unit of limited partnership interest from fiscal
1991 through fiscal 1995 were as follows:
Year Ended Distributions per Unit
September 30, 1991 $32.00
September 30, 1992 $41.00
September 30, 1993 $16.00
September 30, 1994 $50.00
September 30, 1995 $30.00
All of the foregoing distributions were paid from cash flows from operating
activities with the exception of the distributions for 1992, which included
$21.00 of proceeds from the sale of Dupont, the distributions for 1994,
which included $34.00 of proceeds from the sale of Corporate Square, and
the distributions for 1995, which included $9.00 of proceeds from the sale
of Corporate Square and Dupont Business Park.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership sold 90,612 Units for a total of $90,612,000. Combined with
the initial contribution of $10,000 from the Initial Limited Partners, the
total Limited Partners' capital contributions were $90,622,000. The
offering was terminated in May 1985 and no additional Units will be sold.
After deduction of organizational and offering costs of $5,212,617, the
Partnership was left with $85,409,383 available for investment.
The Partnership originally purchased ten properties on an all-cash basis,
completing the initial acquisition phase of its business plan, and has sold
two property investments, its interest in Dupont and the Corporate Square
property. The initial cost of the Partnership's current real estate
investments was $67,024,000. Subsequent to acquisition of the properties,
the Partnership has incurred $8,425,000 in additional capital costs for
these properties. The Partnership has also recorded provisions for value
impairments, and valuation allowances totalling $7,451,000. Accumulated
depreciation and amortization equals $25,613,000. Therefore, investment in
real estate after accumulated depreciation, amortization and valuation
allowances for financial reporting purposes is $42,385,000 as of September
30, 1995.
The Partnership expects to incur capital expenditures during fiscal 1996
totaling approximately $945,000 for tenant improvements, lease commissions,
and other major repairs and improvements; the majority of these
expenditures are dependent on the execution of leases with new and renewing
tenants. These capital costs have been high in recent years, primarily due
to high tenant improvement and leasing commission costs resulting from
leasing concessions made in depressed market conditions. The level of these
expenses is expected to decrease over the near term, if market conditions
continue to improve. In addition, the Partnership anticipates a lower
volume of gross leasing in 1996, due to improved tenant credit quality.
<PAGE>16
The Partnership maintains cash balances to fund its operating and investing
activities including the costs of tenant improvements and leasing
commissions, costs which must be disbursed prior to the collection of any
resultant revenues. The General Partner believes that year-end cash
balances and cash generated from operating activities in 1996 will be
adequate to fund the Partnership's current investing and operating needs.
Based on current expectations, Management expects distributions from
operating activities will be $4.75 per Unit per quarter for the first three
quarters of fiscal 1996, with an adjustment to this rate in the fourth
quarter, if necessary, to reflect operating results.
As of September 30, 1995, the Partnership held cash and cash equivalents
aggregating $2,832,000, an increase of $229,000 from the prior year end.
This increase resulted primarily because of the retention of operating cash
flows during the fiscal year, substantially all of which were distributed
after fiscal year-end. Net cash provided by operating activities increased
by $457,000 from 1994, primarily due to improved operating results. Net
cash provided by investing activities decreased by $3,423,000, primarily
because the Partnership received the proceeds of the Corporate Square sale
in 1994, and did not sell a property in 1995. Cash used in financing
activities decreased by $3,021,000, reflecting the lower distributions
during the current year.
Operations
1995 v. 1994
Rental income from properties owned during all of fiscal 1995 was up
$317,000 over 1994, and expenses, excluding the effect of the Corporate
Square sale and valuation adjustments, were down $62,000. Without the
adjustments, net income from these properties' operations would have
increased by $379,000 over last year to $555,000. Corporate Square, which
was sold in January 1994, contributed $264,000 to rental income and
$234,000 to net income in fiscal 1994 and nothing in the current fiscal
year. In addition, the carrying values of three properties still owned
declined a total of $547,000. At Airport Perimeter, an initial permanent
value impairment of $189,000 was recorded, while at the Business Park there
was permanent impairment of $165,000 in addition to $860,000 of impairment
recorded in 1993 and 1994. Spring Creek, which the Partnership is trying
to sell, incurred a net downward valuation adjustment of $193,000. (This
property had previously recorded $489,000 of permanent impairment in 1992,
and a total of $1,244,000 of net valuation allowances in 1993 and 1994.)
The biggest gain in rental income from the current portfolio of properties
was experienced by Royal Biltmore, whose average leased status was up from
91% in fiscal 1994 to 98% this year, resulting in $123,000 of additional
income. The Business Park, Springdale, and Newport Center also experienced
higher leased levels, while rental rates being paid by new tenants at the
first two properties were also up over those in prior leases.
Bad debt expense was down or flat for all properties relative to 1994, with
Montgomery and Newport Center showing the greatest improvement in tenant
credit quality. Savings in this property operating expense category,
<PAGE>17
excluding Corporate Square, totaled $71,000, and repairs and maintenance
costs at Montgomery declined by $44,000 relative to last year. Increased
tax assessments at The Business Park and Royal Biltmore more than offset
the absence of taxes for Corporate Square, pushing real estate taxes
higher. Excluding the effect of Corporate Square, depreciation on
continuing properties remained flat. There were significant fluctuations
on several properties (Newport Center down $120,000, Van Buren up $56,000,
Montgomery Executive Center up $48,000, and Airport Perimeter up $17,000)
resulting from variations in the write off of tenant improvements for
vacating and expiring leases.
Leases representing 23% of the portfolio's leasable square footage are
scheduled to expire in fiscal 1996. These leases represented approximately
15% of the portfolio's rental income for fiscal 1995. This amount of
potential lease turnover is normal for the types of properties in the
portfolio, which, typically lease to tenants under three to five year
leases. The overall portfolio occupancy was 89% as of the end of fiscal
1995. Management anticipates that occupancy levels will improve modestly
in fiscal 1996. In most markets, newer leases are generally expected to
reflect level to higher market rental rates in comparison to the rates of
expiring leases.
The Spring Creek property is the only single-tenant property in the
Partnership's portfolio. The tenant in this property, JM Computers,
accounted for substantially less than 10% of the Partnership's revenue in
fiscal 1995, and is anticipated to achieve the same result in 1996. In
addition, the Partnership is currently marketing the property for sale.
The Partnership therefore does not expect any material adverse effect on
total partnership revenue on account of this lease in 1996.
As discussed in Item 1, above, Montgomery Executive Center accounted for
27% of the Partnership's revenue from operating activities in fiscal 1995.
Leases covering 7% of the space in this property expire in 1995, and the
property is currently 33% vacant. The Partnership expects that rents
ultimately obtained on this space will in some cases be slightly lower than
that received under the previous leases, which were executed several years
ago in stronger markets. Expenditures for tenant improvement work are
anticipated in connection with any new leases. The Partnership anticipates
that approximately half the vacant space will be leased during fiscal 1996.
Thus, revenues from Montgomery Executive Center are anticipated to decrease
somewhat in the short term, but this decrease is not expected to have a
material effect on total partnership revenue.
Also as noted in Item 1 above, The Business Park provided 17% of the
Partnership's revenue from operations in fiscal 1995. This property did
well in renewing tenants whose leases expired in 1995, and conditions in
its competitive market are expected to continue to improve. Thus, even
though leases covering 47% of the space in this property expire in fiscal
1996, the Partnership does not expect this property to have any material
adverse effect on total partnership revenue in 1996.
Finally, Royal Biltmore provided 15% of the Partnership's revenue from
operations in 1995. Only 1% of its leases expire in 1996, and therefore
<PAGE>18
the Partnership does not expect this property to have any material adverse
effect on total partnership revenue in 1996.
1994 v. 1993
Excluding the operating results of Corporate Square and the effects of
valuation adjustments, income from operations was $176,000 in 1994, up from
$146,000 in 1993. While overall rental income from the currently held
properties was up over the comparable 1993 number, expenses were also
higher, primarily because of noncash depreciation charges on leasing
commissions for and tenant improvements made to Airport Perimeter,
Montgomery Executive Center, and Newport Center.
The leased status of the portfolio increased for the second year in a row,
with the greatest improvement at Royal Biltmore. Occupancy gains at this
property over the course of the year produced increased rental income
which more than offset the decline in rents at Newport Center. Although
the leased status at Newport Center was higher on September 30, 1994, than
on the comparable 1993 date, its average occupancy throughout fiscal 1994
was well below the 1993 level.
Aside from the effects of the sale of Corporate Square and the allowances,
several changes in expense categories were significant. First, the impact
of lower property tax assessments on Royal Biltmore and The Business Park
more than offset the effect of a higher assessment on Montgomery Executive
Center and contributed to the overall decline in real estate taxes.
Second, significant improvements related mainly to renewal and expansion
leases signed with seven tenants caused depreciation at Montgomery
Executive Center, and for the overall portfolio, to rise. Finally, also at
Montgomery Executive Center, additional bad debt expense provisions were
judged to be in order. This latter cost is included in the property
operating expense category.
In addition to the results achieved at the properties which are currently
in the portfolio, the sale of Corporate Square and valuation adjustments
affected performance relative to 1993. Writedowns in 1993 totaled $7
million and resulted in a sharp decline in net income that year. In 1994,
however, there were no additional valuation allowances, and the effect of
an additional $365,000 permanent value impairment at The Business Park was
completely offset by positive adjustments of the valuation allowances for
Spring Creek and Corporate Square.
The Corporate Square sale accounted for the decline in rental income and
contributed to decreases in expenses such as property operating costs and
real estate taxes relative to 1993. Because the sale proceeds remained in
the Partnership's cash account for more than three months it also had a
positive effect on interest income in 1994.
Reconciliation of Financial and Tax Results
For 1995, the Partnership's financial statement net income was $8,000, and
its taxable net income is estimated at $613,000. The primary difference
between the two is allowances for property valuation of $547,000. For
<PAGE>19
1994, the Partnership's financial statement net income was $165,000, and
its taxable net loss is estimated at $2,938,000. The primary difference
between the two is the net loss for tax purposes of $3,133,000 resulting
from the sale of the Corporate Square property. For 1993, the
Partnership's financial statement net loss was $6,610,000, and its taxable
net income was $71,000. The provision for value impairment in connection
with the Royal Biltmore and Business Park properties, and the valuation
allowances for Spring Creek and Corporate Square accounted for most of the
difference. For complete reconciliations, see Note 6 to the Partnership's
financial statements, which note is hereby incorporated by reference
herein.
Item 8. Financial Statements and Supplementary Data
The financial statements together with the report thereon of KPMG Peat
Marwick LLP dated October 20, 1995, appearing on pages 6 through 14 of the
Partnership's 1995 Annual Report to Limited Partners are incorporated by
reference in this Form 10-K Annual Report. Financial Statement Schedule
III, Consolidated Real Estate and Accumulated Depreciation, is filed as
Exhibit 99(c) to this Form 10-K Annual Report, and is hereby incorporated
by reference herein. All other schedules are omitted either because the
required information is not applicable or because the information is shown
in the financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership is T. Rowe Price Realty Income Fund
I Management, Inc., ("Fund I Management"), 100 East Pratt Street,
Baltimore, Maryland 21202. The General Partner has the primary
responsibility for overseeing the selection, evaluation, structuring,
negotiation, management, and liquidation of the Partnership's investments
as well as the cash management of the Partnership's liquid assets and the
administration of investor services of the Partnership including general
communications, periodic reports and distributions to Limited Partners, and
filings with the Securities and Exchange Commission. Fund I Management is
a wholly-owned subsidiary of T. Rowe Price Real Estate Group, Inc. ("Real
Estate Group"), which is, in turn, a wholly-owned subsidiary of T. Rowe
Price Associates, Inc. ("Associates"). Affiliates of the General Partner,
T. Rowe Price Realty Income Fund II Management, Inc. ("Fund II
Management"), T. Rowe Price Realty Income Fund III Management, Inc. ("Fund
III Management"), and T. Rowe Price Realty Income Fund IV Management, Inc.
("Fund IV Management") are the General Partners of other real estate
limited partnerships sponsored by Associates. Real Estate Group, which is
also an affiliate, is investment manager to T. Rowe Price Renaissance Fund,
Ltd., A Sales-Commission-Free Real Estate Investment ("Renaissance Fund"),
<PAGE>20
a real estate investment trust sponsored by Associates. Total assets under
management by Associates and its subsidiaries totalled $71.5 billion at
September 30, 1995.
As more fully discussed in Item 1, above, LaSalle is providing certain real
estate advisory and other services to the Partnership. Upon execution of
the formal contract between the Partnership and LaSalle, Gary C. Younker,
Senior Vice President of LaSalle Partners Asset Management Limited, (an
Affiliate of LaSalle) became the Chief Accounting Officer for the
Partnership. Born in 1948, Mr. Younker has been associated with LaSalle
since 1976, and has served in his current position since 1988.
The directors and executive officers of Fund I Management are as follows:
Position with T. Rowe Price
Name Realty Income Fund I Management, Inc.
James S. Riepe Chairman of the Board, President, also
Principal Executive Officer for the
Partnership
Charles E. Vieth Vice President and Director
Douglas O. Hickman Vice President and Director
Henry H. Hopkins Vice President and Director
Mark E. Rayford Vice President
Lucy B. Robins Vice President and Secretary
Mark B. Ruhe Vice President
Alvin M. Younger, Jr. Treasurer and Director
Joseph P. Croteau Controller, also Principal Financial
Officer for the Partnership
Kenneth J. Rutherford Assistant Vice President
Mr. Riepe was elected President in July, 1991. Ms. Robins was first
elected to her current offices in April, 1987, and Mr. Ruhe was first
elected in May, 1988. Mr. Hopkins was first elected a director in January,
1987. Mr. Vieth was first elected an officer and director in February
1993. Mr. Croteau was first elected as Controller in May, 1988 and
designated as Principal Financial Officer for the Partnership in 1992. Mr.
Rutherford was first elected an officer in 1994. In all other cases these
individuals have served in these capacities since the inception of Fund I
Management in 1984. There is no family relationship among the foregoing
directors or officers.
The background and business experience of the foregoing individuals is as
follows:
James S. Riepe (Born 1943) is Chairman of the Board and President
of Fund I Management, Fund II Management, Fund III Management, Fund IV
Management, the Renaissance Fund, and Real Estate Group. He is also a
Director, Managing Director and member of the Management Committee of
Associates. In addition, Mr. Riepe is President and Director of T. Rowe
Price Investment Services, Inc. ("Investment Services"), T. Rowe Price
Trust Company ("Trust Company"), T. Rowe Price Insurance Agency, Inc. and
T. Rowe Price Services, Inc. ("Price Services") and Chairman of T. Rowe
Price Stable Asset Management, Inc. T. Rowe Price Retirement Plan
Services, Inc. ("Retirement Service"). He is also an Officer and/or
<PAGE>21
Director of all of the mutual funds managed by Associates, and a Director
of Rh ne-Poulenc Rorer Inc. Mr. Riepe joined Associates in 1982.
Charles E. Vieth (Born 1956) is a Managing Director of T. Rowe
Price Associates, Inc., President and Director of T. Rowe Price Retirement
Plan Services ("Retirement Services") and Director and Vice President of
Fund I Management, Fund II Management, Fund III Management, Fund IV
Management, Investment Services and Price Services, and Vice President of
the Renaissance Fund. Mr. Vieth joined Associates in 1982.
Douglas O. Hickman (Born 1949) is President of Threshold Fund
Associates, a Vice President and Investment Manager for Associates. He is
also a Vice President and Director of Fund I Management, Fund II
Management, Fund III Management, and Fund IV Management. He also serves as
a member of the investment committees for the T. Rowe Price Threshold
Funds. Mr. Hickman joined Associates in 1985.
Henry H. Hopkins (Born 1942) is a Managing Director, Director,
and Legal Counsel of Associates. In addition, Mr. Hopkins is Vice
President and Director of Fund I Management, Fund II Management, Fund III
Management, Fund IV Management, Investment Services, Price Services, and
the Trust Company. In addition, Mr. Hopkins is Director of T. Rowe Price
Insurance Agency, Inc., and Director and Vice President of Investment
Services, Price Services, and the Trust Company. He is also a Vice
President of Real Estate, Retirement Services, T. Rowe Price Stable Asset
Management, Inc., and certain of the mutual funds managed by Associates.
Mr. Hopkins joined Associates in 1972.
Mark E. Rayford (Born 1951) is a Managing Director of Associates
and Manager of Retail Operations. In addition, Mr. Rayford is President of
Price Services, and Vice President of the Trust Company, Fund I Management,
Fund II Management, Fund III Management, and Fund IV Management. He is
also Director of T. Rowe Price Insurance Agency, Inc., Investment Services,
and Retirement Services. Mr. Rayford joined Associates in 1982.
Lucy B. Robins (Born 1952) is a Vice President and Associate
Legal Counsel of Associates. In addition, Ms. Robins is Vice President and
Secretary of Fund I Management, Fund II Management, Fund III Management,
and Fund IV Management, and Vice President of the Renaissance Fund. She is
also Vice President of Investment Services and Price Services. Ms. Robins
joined Associates in 1986.
Mark B. Ruhe (Born 1954) is a Vice President of Fund I
Management, Fund II Management, Fund III Management, Fund IV Management,
and the Renaissance Fund. Mr. Ruhe joined Associates in 1987.
Joseph P. Croteau (Born 1954) is a Vice President of Associates
and Controller and Director of Financial Reporting, as well as Controller
of several subsidiaries of Associates, including Fund I Management, Fund II
Management, Fund III Management, Fund IV Management, T. Rowe Price
Insurance Agency, Inc., Real Estate Group, Retirement Services, Price
Services, and T. Rowe Price Stable Asset Management., Inc. Mr. Croteau
joined Associates in 1987.
<PAGE>22
Alvin M. Younger, Jr. (Born 1949) is Treasurer and Director of
Fund I Management, Fund II Management, Fund III Management, and Fund IV
Management and a Managing Director, Secretary and Treasurer of Associates,
and Secretary and Treasurer of T. Rowe Price Insurance Agency, Inc.,
Investment Services, Real Estate Group, Retirement Services, T. Rowe Price
Stable Asset Management, Inc., Price Services, and the Trust Company. He
is also Treasurer of Rowe Price-Fleming International, Inc. Mr. Younger
joined Associates in 1973.
Kenneth J. Rutherford. (Born 1963) is Assistant to the Director
of Associates' Investment Services Division. He is also Assistant Vice
President of Fund I Management, Fund II Management, Fund III Management,
Fund IV Management, and the Renaissance Fund. Mr. Rutherford joined
Associates in 1992. From 1990 to 1992. Mr. Rutherford attended the
Stanford Graduate School of Business, and from 1989 to 1990 he was with
Trans National Services, a marketing firm, as Manager.
No Form 3s, Form 4s, Form 5s, or any amendments to any of them, were
furnished to the Partnership during its most recent fiscal year. Based on
written representations pursuant to Item 405(b)(2)(i) of Regulation S-K,
none of the directors, officers, or beneficial owners of more than 10% of
the Units nor the General Partner failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act during the most recent fiscal
or prior fiscal years.
Item 11. Executive Compensation
The directors and officers of the General Partner receive no current or
proposed remuneration from the Fund.
The General Partner is entitled to receive a share of cash distributions
and a share of profits or losses as described under the captions
"Compensation and Fees," and "Profits and Losses for Tax Purposes,
Depreciation and Cash Distributions" of the Prospectus, on pages 7-9 and
36-50 respectively, which pages are incorporated by reference herein.
For a discussion of compensation and fees to which the General Partner is
entitled, see Item 13., which is incorporated herein by reference.
As discussed in Item 1, above, LaSalle receives reimbursement from the
Partnership for certain expenses incurred in performance of its
responsibilities under its advisory contract with the Partnership and the
General Partner. In addition, under the contract, LaSalle receives from
the General Partner a portion of the compensation and distributions
received by the General Partner from the Partnership. Mr. Younker is a
limited partner of LaSalle and therefore indirectly receives compensation
with respect to payments made to LaSalle by the Partnership or the General
Partner. However, the amount of this compensation attributable to services
he performs for the Partnership is not material.
In addition to the foregoing, certain officers and directors of the General
Partner receive compensation from Associates and/or its affiliates (but not
from the Partnership) for services performed for various affiliated
entities, which may include services performed for the Partnership. Such
<PAGE>23
compensation may be based, in part, on the performance of the Partnership.
Any portion of such compensation which may be attributable to such
performance is not material.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Partnership is a limited partnership which issued units of limited
partnership interest. No limited partner is known by the Partnership to
own beneficially more than 5% of the outstanding interests of the
Partnership.
The percentage of outstanding interests of the Partnership held by all
directors and officers of the General Partner is less than 1%. Certain
officers and/or directors of the General Partner presently own securities
in Associates. As of November 15, 1995, the directors and officers of the
General Partner, as a group, beneficially owned 5.48% of the common stock
of Associates, including options to purchase 279,600 shares exercisable
within 60 days of November 15, 1995, and shares as to which voting power is
shared with others. Of this amount, Mr. Riepe owned 2.27% of such stock
(657,539 shares, including 27,600 shares which may currently be acquired by
Mr. Riepe upon the exercise of stock options, 70,000 shares held in trusts
for members of Mr. Riepe's family as to which Mr. Riepe disclaims
beneficial ownership, 20,000 shares owned by a member of Mr. Riepe's family
as to which Mr. Riepe disclaims beneficial ownership, and 41,000 shares
held in a charitable foundation of which Mr. Riepe is a trustee and as to
which Mr. Riepe has voting and disposition power). Mr. Hopkins owned 1.07%
(310,884 shares, including 45,400 shares which may be acquired by Mr.
Hopkins upon the exercise of stock options within 60 days). Mr. Younger
owned 1.02% (294,000 shares, including 18,000 shares which may be acquired
by Mr. Younger upon the exercise of stock options within 60 days). No
other director or officer owns 1% or more of the common stock of
Associates.
There exists no arrangement known to the Partnership, the operation of
which may at any subsequent date result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
The General Partner and its Affiliates are permitted to engage in
transactions with the Partnership as described under the captions
"Compensation and Fees," and "Conflicts of Interest" of the Prospectus, on
pages 7-11, which pages are hereby incorporated by reference herein.
The General Partner has been reimbursed for expenses incurred by it in the
administration of the Partnership and the operation of the Partnership's
investments, which amounted to $123,000 in fiscal 1995 ($134,000 in fiscal
1994). The General Partner's share of cash distributions declared for
fiscal 1995 was $245,000, of which $211,000 was distributable cash, and
$34,000 was sales proceeds, and for 1994 was $289,000, of which $161,000
was distributable cash and $128,000 was sales proceeds. Another affiliate,
<PAGE>24
T. Rowe Price Associates, Inc., earned $9,000 for cash management services
rendered in 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
PAGES IN
ANNUAL
REPORT*
(1) Financial Statements:
Balance Sheets at September 30, 1995 and 1994 7
Statements of Operations for each of the
three years in the period ended September 30, 1995 8
Statements of Partners' Capital for each of the
three years in the period ended September 30, 1995 8-9
Statements of Cash Flows for each of the
three years in the period ended December 31, 1995 9-10
Notes to Financial Statements 10-14
Independent Auditors' Report 14
* Incorporated by reference from the indicated pages of the
Partnership's 1995 Annual Report to Limited Partners.
(2) Financial Statement Schedules:
III - Consolidated Real Estate and Accumulated Depreciation,
incorporated by reference to Exhibit 99(c) hereof.
All other schedules are omitted because they are not applicable
or the required information is presented in the financial
statements and notes hereto.
(3) Exhibit
3, 4. (a) Prospectus of the Partnership dated December 7,
1984, which includes the Partnership Agreement
File Number 2-93160, and supplement thereto
dated April 24, 1984, filed with the Commission
pursuant to Rule 424(c), incorporated by
reference herein.
(b) Amendment to the Partnership Agreement dated
January 1, 1988, incorporated by reference to
Exhibits 3, 4.(h) of the registrant's report on
Form 10-K for the year ended September 30,
1988, File Number 0-14308 (the "1988 10-K").
(c) Amendment to the Partnership Agreement dated
March 28, 1988, incorporated by reference to
Exhibits 3, 4.(j) of the 1988 10-K.
<PAGE>25
10. Advisory Agreement dated as of July 15, 1991 by and
between the Partnership, the General Partner, and
LaSalle Advisors Limited Partnership, incorporated by
reference to Exhibit 10 of the registrant's report on
Form 10-K for the year ended September 30, 1991.
13. Annual Report for fiscal 1995, distributed to Limited
Partners on or about November 15, 1995.
27. Financial Data Schedule
99. (a) Pages 7-11, 19-29 and 36-50 of the Prospectus
of the Partnership dated December 7, 1984,
incorporated by reference to Exhibit 99(a)of
the registrant's report on Form 10-K for the
year ended September 30, 1994, File Number 0-
14308.
(b) Real Estate Holdings, incorporated by reference
from page 6 of the Partnership's 1995 Annual
Report to Limited Partners.
(c) Financial Statement Schedule III - Consolidated
Real Estate and Accumulated Depreciation.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
<PAGE>26
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:
Dated: December __, 1995 T. ROWE PRICE REALTY INCOME FUND I,
A NO-LOAD LIMITED PARTNERSHIP
By: T. Rowe Price Realty Income Fund
I Management, Inc., General
Partner
/s/ James S. Riepe
By: James S. Riepe,
President
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:
/s/ James S. Riepe Date: December __, 1995
James S. Riepe
Director, Chairman of the
Board and President
T. Rowe Price Realty Income Fund I
Management, Inc.,
Principal Executive Officer
for the Partnership
/s/ Henry H. Hopkins Date: December __, 1995
Henry H. Hopkins,
Director and Vice President,
T. Rowe Price Realty Income Fund I
Management, Inc.
<PAGE>27
/s/ Charles E. Vieth Date: December __, 1995
Charles E. Vieth,
Director and Vice President,
T. Rowe Price Realty Income Fund I
Management, Inc.
/s/ Douglas O. Hickman Date: December __, 1995
Douglas O. Hickman,
Director and Vice President,
T. Rowe Price Realty Income Fund I
Management, Inc.
/s/ Alvin M. Younger, Jr. Date: December __, 1995
Alvin M. Younger, Jr.,
Director and Treasurer,
T. Rowe Price Realty Income
Fund I Management, Inc.
/s/ Joseph P. Croteau Date: December __, 1995
Joseph P. Croteau,
Controller and Principal Financial
Officer for the Partnership
/s/ Gary C. Younker Date: December __, 1995
Gary C. Younker,
Principal Accounting Officer
of the Partnership
PAGE1
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1995
FELLOW PARTNERS:
Rental income from properties owned during all of fiscal 1995 was up
$317,000 over 1994, and expenses, excluding the effect of the Corporate
Square sale and valuation adjustments, were down $62,000. Without the
adjustments, net income from these properties' operations would have
increased by $379,000 over last year to $555,000. Corporate Square, which
was sold in January 1994, contributed $264,000 to rental income and
$234,000 to net income in fiscal 1994 and nothing this year. In addition,
the carrying values of three properties still owned declined a total of
$547,000. At Airport Perimeter, an initial permanent value impairment of
$189,000 was recorded, while at the Business Park there was an additional
permanent impairment of $165,000. Spring Creek, which we are trying to
sell, incurred a net downward valuation adjustment of $193,000. The table
on page 6 will help you put these adjustments in the context of the total
investment in the properties.
The biggest gain in rental income from the current portfolio of properties
was experienced by Royal Biltmore, whose average leased status was up from
91% in fiscal 1994 to 98% this year. The Business Park, Springdale, and
Newport Center also enjoyed higher leased levels, while rental rates being
paid by new tenants at the first two properties are also up over those in
prior leases.
In what we hope is the start of a trend, bad debt expense was down or flat
for all properties relative to 1994, with Montgomery and Newport Center
showing the greatest improvement in tenant credit quality. Savings in this
property operating expense category totaled $71,000, and repairs and
maintenance costs at Montgomery declined by $44,000 relative to last year.
Increased tax assessments at The Business Park and Royal Biltmore more than
offset the absence of taxes for Corporate Square, pushing real estate taxes
higher.
The Fund's cash position increased slightly more in fiscal 1995 than it did
in 1994. Cash from operations was up $457,000 over last year. The Fund did
not sell a property or pay as large a cash distribution - $1,705,000 versus
$4,726,000 - in 1995 as it did in 1994.
Unit Valuation
As you know, at the end of each fiscal year we employ a third-party
appraiser to review and assess the analysis and assumptions we used to
prepare an estimated current unit value. These interim valuations are not
necessarily representative of the value of your units when the Fund
ultimately liquidates its holdings. Nor is there any assurance that you
could sell your units today at a price equal to the current estimated
value.
<PAGE>2
At September 30, 1995, the estimated value of a Fund I unit was $424. The
comparable number for 1994 was $413. Both the $424 and $413 include $9 of
cash proceeds from previous sales which, based on lower projected cash
balance requirements, will be distributed to you in November. In addition,
we determined that the Fund could declare in the fourth fiscal quarter a $9
per-unit distribution from 1995 operations. For the first three quarters of
the year, $12 per unit was declared from operations, so the $9 for the
fourth quarter brings the total for 1995 to $21. Because of the improved
cash flow from operations, we are raising the planned quarterly cash
distribution for fiscal 1996 to $4.75 per unit. This rate will be evaluated
periodically to determine if a further change is warranted based on the
cash position.
After the November distribution, the 1995 unit value will be $411, a 2.0%
increase over the prior year's comparable $403 level. Higher valuations on
a majority of your properties produced the estimated gain. At this time
last year, we also reported modestly higher values and said we believed
even the slight rise indicated that the sharp declines in property values
were behind us. While two back-to-back annual increases cannot be
considered a long-term trend, we are encouraged by the change in direction.
Sincerely,
James S. Riepe
Chairman
November 10, 1995
<PAGE>3
INVESTMENT ADVISOR'S REPORT
As discussed in recent reports, the real estate market is slowly improving,
with some segments such as industrial recovering more rapidly than others
such as office properties. The absence of meaningful new construction
combined with continued net positive absorption in all segments has begun
to attract not only opportunistic capital but also some institutional
capital into the real estate sector, which is a favorable development.
The results of the Russell-NCREIF Index, which measures income returns and
changes in values for real estate investments, reflect the general state of
the market. From 1991 through 1993 property values experienced average
annual declines of approximately 10%. This rate slowed as values decreased
by 5% and 1% for the 12 months ended June 30, 1994 and 1995, respectively.
Income returns of 9% during each of those two years more than offset the
value declines, resulting in positive total returns for the index for the
first time since June 1990.
The index also identifies returns by product type and by geographical
region. As anticipated, because of the weak operating environment, office
buildings have not performed as well as other product types, with value
declines of approximately 4% for the 12 months ended June 30, 1995. This is
an improvement, however, over the average 14% per year drop in each of the
last four years. Industrial properties, on the other hand, appreciated in
value by 2% for the 12 months ended June 30, 1995. In that same period,
other real estate product types such as retail and multi-family, performed
better than they had in prior years.
Property values in geographic regions depend significantly on the local
economy. The South, where values in general depreciated less than 1% for
the 12 months ended June 30, 1995, continues to outperform other regions,
but even its recovery has been prolonged due to the depressed energy
business. Value declines in the East and Midwest have moderated, and the
Western region has experienced a dramatic improvement recently. In 1994,
property values in the West were down significantly but, for the 12 months
ended June 30, 1995, declined only around 1%. In analyzing this
information, it is clear that the multi-family and industrial segments are
heavily influencing the results, since the office segment in the West
declined approximately 5%. Nevertheless, we anticipate this market will
recover in the near term, because we continue to see increased leasing
activity and improved economics for owners.
We are encouraged by the positive annual returns of the Russell-NCREIF
Index for the past two years. We are even more heartened, however, by the
performance of Realty Income Fund I's Portfolio, which experienced an
increase in value in excess of that of the Russell-NCREIF Index. Further,
we believe this trend will continue.
<PAGE>4
Property Highlights
All but two properties maintained or increased their leased status during
the past year. New and renewal leases totaling 235,620 square feet of
space, or 26% of the total leasable area, were signed.
Spring Creek: One tenant continues to occupy the building. Its lease, which
expires in 1999, provides for gradual increases in rental payments through
1996. The occupancy rate in the Richardson, Texas, submarket improved over
the prior year's level and is now at 90%. Rental rates for this type of
property continue to increase at a pace well above inflation and are
expected to rise even further in the coming months as alternatives for flex
space users remain limited. Based on these and other considerations, we are
actively marketing the Spring Creek property.
Real Estate Investments
___________________________________________________________________________
Gross % Leased
Leasable ___________________
Area Prior Current 1996 Lease
Property (Sq. Ft.) Year-End Year-End Expirations
________ ________ ________ ________ __________
Spring Creek 51,400 100% 100% 0%
Airport Perimeter 121,000 69 80 47%
Montgomery 116,300 88 67 7%
Royal Biltmore 71,300 100 98 1%
Springdale 144,000 100 100 31%
The Business
Park 157,200 86 92 47%
Van Buren 173,900 92 92 4%
Newport Center 62,400 89 93 29%
Fund Total 897,500 89% 89% 23%
Airport Perimeter: During the last year, new and renewal leases
covering nearly 45,000 square feet were completed at the property, more
than offsetting the expiration of leases covering 29,000 square feet. As a
result, the leased status rose by nearly 11 percentage points to 80%. The
possibility that the Fund may be forced to sell this property to the local
government to accommodate an airport expansion still exists. The potential
sale makes the increased leased status of the property even more
noteworthy, as prospects who are willing to accept short lease terms are
usually limited.
Montgomery: Expirations and downsizings severely affected occupancy
during the year. Over 42,000 square feet was vacated due to these factors,
bringing the total unleased space up to more than 38,000 square feet. Our
marketing objective is to raise occupancy above the market level, which,
although improved over the prior year, remains low at 82%. Significant
increases in asking rates for competitive space indicate that the market
may be gaining momentum which should positively affect this building in the
coming months.
<PAGE>5
Royal Biltmore: Only 5,000 square feet were leased during the year,
reflecting the property's high occupancy level and minimal rollover. The
small decline in leased status reflects our intent to hold out for the
highest possible rent on the property's last vacant space as the Camelback
corridor market continues to tighten. Investment activity remains strong in
the Camelback area as well. Many investors believe that the rising rents
and falling vacancy levels achieved in the market during the last 12 months
will continue over the near term. The property's operating upside is
limited because of its fully leased status and the potential for new office
development in the Camelback corridor. As a result of these factors and the
increasing investor optimism in the market, we are currently reviewing
possible sale of Royal Biltmore.
Springdale: One renewal lease representing 10% of the property was
completed during the year, keeping Springdale fully leased. Leasing
activity in the Mid-Counties submarket, where the Springdale property
competes, remains strong with vacancy levels down to just above 6%.
Therefore, we are optimistic about our renewal campaign over the coming 12
months. Should demand for space persist, rental rates should continue to
improve.
The Business Park: New and renewal leases totalling 62,000 square
feet, or 39% of the property, were signed during the year, raising the
leased status by over five percentage points. The Northeast I-85 Atlanta
service submarket's vacancy declined from 8% last year to 5.5% currently,
and rental rates have remained attractive versus historical levels.
Van Buren: Despite 64,000 square feet of lease expirations during the
year, there was virtually no change in leased status from the prior year.
New leases were entered into with good quality tenants at rates which
reflect the strength of the Southwest Phoenix industrial submarket. With
only 4% of space expiring in the upcoming year, little additional near-term
value can be created by holding Van Buren. That factor, combined with
continued investor demand for industrial properties, has prompted us to
review this property as a disposition candidate.
Newport Center: Activity at the property was high, as leases totaling
nearly 23,000 square feet and 37% of the total were completed during the
year. Leases expired on 19,000 square feet, and one tenant with 2,000 feet
vacated due to credit problems. The Deerfield Beach/Boca Raton submarket's
vacancy rate fell one percentage point to 12% during the year, while rental
rate growth enjoyed a double digit increase during the period.
Outlook
All portfolio properties are in submarkets with higher occupancy rates than
a year ago. Additionally, rents appear to have stabilized or to be rising
in virtually all of these areas. We feel the Fund's properties are poised
to take advantage of these improving conditions, and we look forward to
reporting on this progress in future reports.
LaSalle Advisors
November 10, 1995
<PAGE>6
REAL ESTATE HOLDINGS
September 30, 1995
(In thousands)
Type Accumu- Valua- Current
Property and Date Total lated tion Carrying
Name Location Acquired Cost* Deprecia- Allow- Amount
tion ances
Airport
Perimeter Industrial 12/85 $5,830 $(2,352) - $3,478
College Park,
Georgia
Montgomery Office 12/85 17,380 (6,701) - 10,679
Gaithersburg,
Maryland
Royal Office
Biltmore 1/86 9,099 (3,991) - 5,108
Phoenix,
Arizona
Springdale Industrial 6/86 7,390 (2,359) - 5,031
Santa Fe
Springs,
California
Van Buren Industrial 7/86 6,217 (1,879) - 4,338
Phoenix,
Arizona
The Office/ 8/86 14,017 (5,629) - 8,388
Business Service
Park
Gwinnett Co.,
Georgia
Newport Office/ 5/87 5,318 (1,181) - 4,137
Center Service
Deerfield
Beach, Florida
_______ _______ ______
$65,251 $(24,092) - 41,159
_______ _______ ______
_______ _______ ______
Held for Sale
Spring Industrial 6/85 $4,184 $(1,521) (1,437) 1,226
Creek
Richardson, Texas
_______ _______ _______ _______
_______ _______ _______ $42,385
_______
_______
<PAGE>7
*Includes original purchase price, subsequent improvements, and, in the
case of Airport Perimeter, Royal Biltmore, The Business Park, and Spring
Creek, reductions for permanent impairments.
BALANCE SHEETS
(In thousands)
September 30, September 30,
1995 1994
Assets
Real Estate Property Investments
Land . . . . . . . . . . . . . . . . . $11,014 $ 11,070
Buildings and Improvements . . . . . . 54,237 54,341
________ ________
65,251 65,411
Less: Accumulated Depreciation
and Amortization . . . . . . . . . . . . (24,092) (22,422)
________ ________
41,159 42,989
Held for Sale . . . . . . . . . . . . . 1,226 1,532
________ ________
42,385 44,521
Cash and Cash Equivalents . . . . . . . . 2,832 2,603
Accounts Receivable (less allowances of $85
and $97) . . . . . . . . . . . . . . . 292 133
Other Assets . . . . . . . . . . . . . . 624 587
________ ________
$46,133 $ 47,844
________ ________
________ ________
Liabilities and Partners' Capital
Security Deposits and Prepaid Rents . . . $ 364 $ 357
Accrued Real Estate Taxes . . . . . . . . 202 258
Accounts Payable and Other Accrued Expenses 281 246
________ ________
Total Liabilities . . . . . . . . . . . . 847 861
Partners' Capital . . . . . . . . . . . . 45,286 46,983
________ ________
$46,133 $47,844
________ ________
________ ________
The accompanying notes are an integral part of the financial statements.
<PAGE>8
STATEMENTS OF OPERATIONS
(In thousands except per-unit amounts)
Years Ended September 30,
1995 1994 1993
Revenues
Rental Income . . . . . . . . . . $5,927 $5,874 $6,302
Interest Income 116 119 37
_______ _______ _______
6,043 5,993 6,339
_______ _______ _______
Expenses
Property Operating Expenses 1,681 1,933 1,966
Real Estate Taxes 632 592 718
Depreciation and Amortization 2,681 2,779 2,678
Decline (Recovery) of Property Values 547 (2) 7,039
Partnership Management Expenses 494 526 548
_______ _______ _______
6,035 5,828 12,949
_______ _______ _______
Net Income (Loss) $ 8 $ 165 $(6,610)
_______ _______ _______
_______ _______ _______
Activity per Limited Partnership Unit
Net Income (Loss) $ 0.08 $1.64 $(65.65)
_______ _______ _______
_______ _______ _______
Cash Distributions Declared
from Operations $21.00 $16.00 $16.00
from Sale Proceeds 9.00 34.00 -
_______ _______ _______
Total Distributions Declared $30.00 $50.00 $16.00
_______ _______ _______
_______ _______ _______
Units Outstanding 90,622 90,622 90,622
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF PARTNERS' CAPITAL
(In thousands)
General Limited
Partner Partners Total
________ ________ ________
Balance, September 30, 1992 . . . $(2,481) $62,347 $59,866
Net Loss (661) (5,949) (6,610)
Cash Distributions (171) (1,541) (1,712)
_______ _______ _______
<PAGE>9
Balance, September 30, 1993 (3,313) 54,857 51,544
Net Income 16 149 165
Cash Distributions (286) (4,440) (4,726)
_______ _______ _______
Balance, September 30, 1994 (3,583) 50,566 46,983
Net Income 1 7 8
Cash Distributions (165) (1,540) (1,705)
_______ _______ _______
Balance, September 30, 1995 $(3,747) $49,033 $45,286
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended September 30,
1995 1994 1993
_______ _______ _______
Cash Flows from Operating Activities
Net Income (Loss) . . . . . . . . $ 8 $ 165 $(6,610)
Adjustments to Reconcile Net Income
(Loss) to Net Cash
Provided by Operating Activities
Depreciation and Amortization . 2,681 2,779 2,678
Decline (Recovery) of Property
Values . . . . . . . . . . . 547 (2) 7,039
Change in Accounts Receivable, Net
of Allowances . . . . . . . . (159) 53 21
Increase in Other Assets . . . (37) (121) (83)
Change in Security Deposits and
Prepaid Rents . . . . . . . . 7 (74) (13)
Decrease in Accrued Real
Estate Taxes . . . . . . . . (56) (229) (87)
Change in Accounts Payable and Other
Accrued Expenses . . . . . . . 35 (2) (128)
_______ _______ _______
Net Cash Provided by Operating
Activities . . . . . . . . . . 3,026 2,569 2,817
_______ _______ _______
Cash Flows from Investing Activities
Proceeds from Property Disposition - 3,379 -
Investments in Real Estate . . . (1,092) (1,048) (1,000)
_______ _______ _______
Net Cash Provided by (Used in) Investing
Activities . . . . . . . . . . (1,092) 2,331 (1,000)
_______ _______ _______
Cash Flows Used in Financing Activities
Cash Distributions . . . . . . . (1,705) (4,726) (1,712)
_______ _______ _______
<PAGE>10
Cash and Cash Equivalents
Net Increase during Year . . . . 229 174 105
At Beginning of Year . . . . . . 2,603 2,429 2,324
_______ _______ _______
At End of Year . . . . . . . . . $2,832 $2,603 $2,429
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
T. Rowe Price Realty Income Fund I, A No-Load Limited Partnership (the
"Partnership"), was formed on August 31, 1984, under the Maryland Revised
Uniform Limited Partnership Act for the purpose of acquiring, operating,
and disposing of existing income-producing commercial and industrial real
estate properties. T. Rowe Price Realty Income Fund I Management, Inc., is
the sole General Partner. A total of 90,622 limited partnership units were
issued at $1,000 per unit and remain outstanding as of September 30, 1995.
In accordance with provisions of the partnership agreement, income
from operations is allocated and related cash distributions are generally
paid to the General and Limited Partners at the rates of 10% and 90%,
respectively. Sale or refinancing proceeds are generally allocated, first
4% to the General Partner, next to the Limited Partners in an amount equal
to their Adjusted Capital Contributions (as defined), next to the Limited
Partners to provide specific returns on their Adjusted Capital
Contributions, with any remaining proceeds allocated 85% to the Limited
Partners and 15% to the General Partner. Gain on property sold is generally
allocated in the same ratio as the distribution of sale proceeds. Cash
distributions, if any, are made quarterly based upon cash available for
distribution, as defined in the partnership agreement. Cash available for
distribution will fluctuate as changes in cash flows and adequacy of cash
balances warrant.
The partnership agreement includes provisions limiting the maximum
contribution the General Partner can be required to fund upon the
dissolution and termination of the Partnership if, at that time, the
General Partner's capital account has a negative balance. The maximum
contribution is approximately $913,000. If after making such a
contribution, the General Partner's capital account still has a negative
balance, a reallocation of income equal to the remaining negative balance
will be made to the General Partner from the Limited Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership's financial statements are prepared in accordance with
generally accepted accounting principles. Certain amounts in the 1994
financial statements have been reclassified to conform with the 1995
presentation.
<PAGE>11
Depreciation is calculated primarily on the straight-line method over
the estimated useful lives of buildings and improvements, which range from
five to 40 years. Lease commissions and tenant improvements are capitalized
and amortized over the life of the lease using the straight-line method.
Cash equivalents consist of money market mutual funds, the cost of
which approximates fair value.
The Partnership uses the allowance method of accounting for doubtful
accounts. Provisions for uncollectible tenant receivables in the amounts of
$20,000, $96,000, and $108,000 were recorded in 1995, 1994, and 1993,
respectively. Bad debt expense is included in Property Operating Expenses.
The Partnership records a provision for impairment of the carrying
value of its real estate investments whenever the estimated future cash
flows from a property's operations and projected sale are less than the
property's net carrying value. The General Partner believes that the
estimates and assumptions used are appropriate in evaluating the carrying
value of the Partnership's properties presented currently in the balance
sheet; however, changes in market conditions and circumstances could occur
in the near-term which will cause these estimates to change.
Rental income is recognized by the Partnership on a straight-line
basis over the term of each lease. Rental income accrued, but not yet
billed, is included in Other Assets and aggregates $435,000 and $420,000 at
September 30, 1995 and 1994, respectively.
Under provisions of the Internal Revenue Code and applicable state
taxation codes, partnerships are generally not subject to income taxes;
therefore, no provision has been made for such taxes in the accompanying
financial statements.
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES AND OTHER
As discussed in Note 1, the General Partner receives 10% of distributable
cash from operations and a portion of the proceeds from property
dispositions as compensation for the services rendered in managing the
affairs of the Partnership. The General Partner earned $211,000, $161,000,
and $161,000 from operations in fiscal 1995, 1994, and 1993, respectively.
In addition, the General Partner earned $34,000 and $128,000 in fiscal 1995
and 1994 from property dispositions.
In accordance with the partnership agreement, certain operating
expenses are reimbursable to the General Partner. The General Partner's
reimbursement of such expenses totaled $123,000, $134,000, and $162,000 for
communications and administrative services performed on behalf of the
Partnership during fiscal 1995, 1994, and 1993, respectively.
An affiliate of the General Partner earned a normal and customary fee
of $9,000, $11,000, and $6,000 from the money market mutual funds in which
the Partnership made its interim cash investments during fiscal 1995, 1994,
and 1993, respectively.
<PAGE>12
LaSalle Advisors Limited Partnership ("LaSalle") is the Partnership's
advisor and is compensated for its advisory services directly by the
General Partner. LaSalle is reimbursed by the Partnership for certain
operating expenses pursuant to its contract with the Partnership to provide
real estate advisory, accounting, and other related services to the
Partnership. LaSalle's reimbursement for such expenses during each of the
last three years totaled $150,000.
An affiliate of LaSalle earned $190,000, $183,000, and $120,000 in
1995, 1994, and 1993, respectively, as property manager for several of the
Partnership's properties.
NOTE 4 - PROPERTY VALUATIONS AND DISPOSITION
On January 31, 1994, the Partnership sold Corporate Square and received net
proceeds of $3,379,000. The net book value of this property at the time of
disposition was also $3,379,000, after accumulated depreciation expense and
previously recorded property valuation allowances. Therefore, no gain or
loss was recognized on the property sale.
The General Partner has approved a plan of disposition for and is
actively marketing the Spring Creek property, the carrying amount of which
is classified as held for sale in the accompanying balance sheets. Results
of operations for Spring Creek and Corporate Square are summarized below
for each of the fiscal years ended September 30:
1995 1994 1993
________ ________ ________
Recovery (Decline) of
Property Values . . . $(193,000) $368,000 $(4,862,000)
Other Components of
Operations . . . . . 41,000 29,000 328,000
________ ________ __________
Results of Operations . $(152,000) $397,000 $(4,534,000)
________ ________ __________
________ ________ __________
In addition, based upon a review of current market conditions, estimated
holding period, and future performance expectations of each property, the
General Partner has determined that the net carrying value of certain other
operating properties may not be fully recoverable from future operations
and disposition. Charges recognized for such impairments in the value of
Airport Perimeter, the Business Park, and Royal Biltmore aggregated
$354,000 in fiscal 1995, $365,000 in fiscal 1994, and $2,177,000 in fiscal
1993.
On October 1, 1995, the Partnership adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which
changes the Partnership's current method of accounting for its real estate
property investments when circumstances indicate that the carrying amount
of a property may not be recoverable. Measurement of an impairment loss on
an operating property will now be based on the estimated fair value of the
<PAGE>13
property rather than the sum of expected future cash flows. Properties held
for sale will continue to be reflected at the lower of historical cost or
estimated fair value less anticipated selling costs. In addition,
properties held for sale will no longer be depreciated. No adjustment of
the carrying values of the Partnership's real estate property investments
was required at October 1, 1995 as a result of adopting SFAS No.121.
NOTE 5 - LEASES
Future minimum rentals to be received by the Partnership under
noncancelable operating leases in effect as of September 30, 1995, are:
Fiscal Year (in thousands)
___________
1996 $ 5,062
1997 4,097
1998 2,835
1999 1,606
2000 1,047
Thereafter 1,377
_______
Total $16,024
_______
_______
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENT TO TAXABLE INCOME
As described in Note 2, the Partnership has not provided for an income tax
liability; however, certain timing differences exist between amounts
reported for financial statement and income tax purposes. These differences
are summarized below for fiscal years ended September 30:
1995 1994 1993
________ ________ ________
(in thousands)
Book net income (loss) . . . $ 8 $ 165 $(6,610)
Allowances for:
Uncollectible accounts
receivable . . . . . . . . (13) 8 (57)
Property valuations . . . . 547 (2) 7,039
Normalized and prepaid rents (45) (112) (136)
Depreciation . . . . . . . . 113 135 (220)
Accrued Expenses . . . . . . 3 1 55
Loss on property sale . . . . - (3,133) -
________ ________ ________
Taxable Income . . . . . . . $ 613 $(2,938) $ 71
________ ________ ________
________ ________ ________
<PAGE>14
NOTE 7 - SUBSEQUENT EVENT
The Partnership declared a quarterly cash distribution of $18.00 per unit
to Limited Partners of the Partnership as of the close of business on
September 30, 1995, the record date. The distribution totals $1,756,000 and
represents $9.00 per unit of cash available for distribution from
operations for fiscal 1995, and $9.00 per unit from previously retained
proceeds from the sales of Corporate Square and Dupont Business Park. The
Limited Partners will receive $1,631,000, and the General Partner will
receive $125,000.
INDEPENDENT AUDITORS' REPORT
To the Partners
T. Rowe Price Realty Income Fund I,
A No-Load Limited Partnership:
We have audited the accompanying balance sheets of T. Rowe Price Realty
Income Fund I, A No-Load Limited Partnership, as of September 30, 1995 and
1994, and the related statements of operations, partners' capital and cash
flows for each of the years in the three-year period ended September 30,
1995. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of T. Rowe Price
Realty Income Fund I, A No-Load Limited Partnership as of September 30,
1995 and 1994, and the results of its operations and its cash flows for
each of the years in the three-year period ended September 30, 1995, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
October 20, 1995
Chicago, Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of T. Rowe Price Realty Income Fund I, A No-Load
Limited
Partnership included in the accompanying Form 10-K Report for the year
ended
September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000752743
<NAME> T. ROWE PRICE REALTY INCOME FUND I, A NO-LOAD LIMITED PARTNE
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 2,832,000
<SECURITIES> 0
<RECEIVABLES> 377,000
<ALLOWANCES> 85,000
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 66,477,000
<DEPRECIATION> 24,092,000
<TOTAL-ASSETS> 46,133,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 45,286,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 46,133,000
<SALES> 0
<TOTAL-REVENUES> 6,043,000
<CGS> 0
<TOTAL-COSTS> 6,015,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 20,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,000
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1>Not contained in registrant's unclassified balance sheet.
<F2>Partners' Capital.
<F3>Not applicable. Net income per limited partnership unit is $.08.
</FN>
PAGE 1
T. Rowe Price Realty Income Fund I, Schedule III
A No-Load Limited Partnership
Consolidated Real Estate and Accumulated Depreciation
September 30, 1995
Dollars in Thousands (000's)
Description Type Encumbrance
Properties Held for Real Estate Investment
Airport Perimeter Industrial $0
Business Center
College Park, Georgia
Montgomery Executive Center Office 0
Gaithersburg, Maryland
Royal Biltmore Office 0
Phoenix, Arizona
Springdale Commerce Center Industrial 0
Santa Fe Springs, California
Van Buren Industrial Center Industrial 0
Phoenix, Arizona
The Business Park Office 0
Gwinnett County, Georgia
Newport Center Business Park Office 0
Deerfield Beach, Florida
_____
Totals $0
Properties Held for Sale
Spring Creek Industrial $0
Richardson, Texas
Portfolio Totals $0
=====
<PAGE>2
Initial Cost to Partnership
Costs
Capitalized
Buildings and Subsequent to
Description Land Improvements Acquisition
Properties Held for Real Estate Investment
Airport Perimeter $ 640 $ 4,824 $ 366
Business Center
College Park, Georgia
Montgomery Executive Center 2,300 12,573 2,507
Gaithersburg, Maryland
Royal Biltmore 3,565 8,052 (2,519)
Phoenix, Arizona
Springdale Commerce Center 1,640 5,325 425
Santa Fe Springs, California
Van Buren Industrial Center 1,260 4,077 880
Phoenix, Arizona
The Business Park 1,625 11,825 568
Gwinnett County, Georgia
Newport Center Business Park 1,377 3,543 398
Deerfield Beach, Florida
______ ______ _____
Totals $12,407 $50,219 $2,625
======= ======= ======
Properties Held for Sale
Spring Creek $1,506 $2,892 ($214)
Richardson, Texas
Portfolio Totals $13,913 $53,111 $2,411
======= ====== =====
<PAGE>3
Gross Amounts at which Carried at Close of
Period
Buildings and
Description Land Improvements Total
Properties Held for Real Estate Investment
Airport Perimeter $ 617 $ 5,213 $ 5,830
Business Center
College Park, Georgia
Montgomery Executive Center 2,300 15,080 17,380
Gaithersburg, Maryland
Royal Biltmore 2,356 6,742 9,098
Phoenix, Arizona
Springdale Commerce Center 1,640 5,750 7,390
Santa Fe Springs, California
Van Buren Industrial Center 1,260 4,957 6,217
Phoenix, Arizona
The Business Park 1,464 12,554 14,018
Gwinnett County, Georgia
Newport Center Business Park 1,377 3,941 5,318
Deerfield Beach, Florida
_______ _______ _______
Totals $11,014 $54,237 $65,251
_______ _______ _______
Properties Held for Sale
Spring Creek $1,349 $2,835 $4,184
Richardson, Texas
Portfolio Totals $12,363 $57,072 $69,435
======= ======= =======
<PAGE>4
Accumulated Date of Date
Description Depreciation Construction Acquired
Properties Held for Real Estate Investment
Airport Perimeter $ 2,352 1982 12/85
Business Center
College Park, Georgia
Montgomery Executive Center 6,701 1982 12/85
Gaithersburg, Maryland
Royal Biltmore 3,991 1982 01/86
Phoenix, Arizona
Springdale Commerce Center 2,359 1985 06/86
Santa Fe Springs, California
Van Buren Industrial Center 1,879 1982 07/86
Phoenix, Arizona
The Business Park 5,629 1985 08/86
Gwinnett County, Georgia
Newport Center Business Park 1,181 1984 05/87
Deerfield Beach, Florida
______
Totals $24,092
=======
Properties Held for Sale
Spring Creek $1,521 1983 06/85
Richardson, Texas
Portfolio Totals $25,613
=======
<PAGE>5
Life on which
Depreciation
in Latest
Statement of
Operations is
Description Computed
Properties Held for Real Estate Investment
Airport Perimeter 5 - 40 years
Business Center
College Park, Georgia
Montgomery Executive Center 5 - 40 years
Gaithersburg, Maryland
Royal Biltmore 5 - 40 years
Phoenix, Arizona
Springdale Commerce Center 5 - 40 years
Santa Fe Springs, California
Van Buren Industrial Center 5 - 40 years
Phoenix, Arizona
The Business Park 5 - 40 years
Gwinnett County, Georgia
Newport Center Business Park 5 - 40 years
Deerfield Beach, Florida
Totals
Properties Held for Sale
Spring Creek 5 - 40 years
Richardson, Texas
<PAGE>6
Notes:
(1) The Partnership recorded provisions for value impairment in connection
with the Airport Perimeter, Royal Biltmore and The Business Park
totaling $354, $365, and $2,177 in 1995, 1994, and 1993 respectively.
See note 4 of Notes to Financial Statements.
(2) Reconciliation of real estate owned for Real Estate Property
Investments:
1995 1994 1993
Balance at beginning of period $65,412 $73,807 $74,984
Additions during period 1,092 1,008 1,000
Corporate Square disposition -- (9,038) --
Reductions during period (899) -- --
Provision for value impairment (354) (365) (2,177)
______ ______ ______
Balance at end of period $65,251 $65,412 $73,807
======= ======= =======
(3) Reconciliation of accumulated depreciation for Real Estate Property
Investments:
1995 1994 1993
Balance at beginning of period $22,422 $22,203 $19,637
Depreciation and amortization 2,569 2,667 2,566
expense
Corporate Square disposition -- (2,448) --
Reductions during period (899) -- --
______ ______ ______
Balance at end of period $24,092 $22,422 $22,203
= ====== ====== ======
Reductions in depreciation during 1995 reflect the write-off of tenant
improvements relating to tenants who have vacated the property.
(4) The Partnership has approved a plan of disposition for and is actively
marketing Spring Creek and is currently carrying the property at its
estimated fair value less selling costs. The Partnership recorded a
net downward adjustment of $193 to Spring Creek's previously
established valuation allowance during the 1995 fiscal year, bringing
the cumulative balance at $1,437 as of September 30, 1995. Thus, the
property's net book value as of September 30, 1995 was $1,226. See
note 4 of Notes to the Financial Statements for further details.
(5) Aggregate cost of real estate owned at September 30, 1995 for Federal
income tax purposes was $73,860.
