T. ROWE PRICE
REALTY INCOME
FUND I
AMERICA'S SALES-COMMISSION-FREE
REAL ESTATE LIMITED PARTNERSHIP
QUARTERLY REPORT
FOR THE PERIOD ENDED
JUNE 30, 1997
For information on your
Realty Income Fund account, call:
1-800-962-8300 toll free
410-625-6500 Baltimore area
For information on your
mutual fund account, call:
1-800-225-5132 toll free
410-625-6500 Baltimore area
T. Rowe Price Real Estate Group
100 East Pratt Street
Baltimore, Maryland 21202
Invest With Confidence(registered trademark)
T. Rowe Price
FELLOW PARTNERS:
By now you should have received materials requesting your
consent to sell T. Rowe Price Realty Income Fund I's interests
in its remaining five properties to Glenborough Realty Trust
Incorporated for $27,408,000, and also to complete the
liquidation of the Fund. A majority of the Fund's outstanding
units must be voted in favor of the proposal for the transaction
to proceed.
As mentioned previously, the Fund has held the properties
for the period anticipated when the Fund was organized, and
current market conditions appear favorable for a sale. The Fund
expects to benefit substantially by selling all of the
properties in bulk instead of individually. In particular, the
costs of selling each property individually-including sales
commissions and other closing-related costs-could be materially
higher. Our experience indicates that there could be more
negative price adjustments as a result of each buyer's due
diligence activities. Also considered was the advantage of
limited partners receiving their sales proceeds immediately
rather than having them spread over the next several years.
The price offered by Glenborough should allow the Fund to
liquidate its investment for an amount that exceeds the most
recent adjusted estimated aggregate value.
Under the heading "THE TRANSACTION-Recommendations of the
General Partner" in the consent materials you received, we
discussed in detail the advantages and disadvantages of the
Glenborough transaction. After carefully weighing the facts and
circumstances associated with this transaction against
alternative courses of action, we concluded that the bulk sale
to Glenborough and subsequent liquidation of the Fund is an
outstanding opportunity to maximize value for investors.
Therefore, we recommend that you consent to the proposed
transaction by voting now and returning the consent card in the
postage-paid envelope, if you have not already done so. Your
participation is extremely important, and your response to the
solicitation will save your Fund the substantial costs
associated with a follow-up mailing. If you have not received
your materials, or if you need an additional consent card,
please call one of our real estate representatives at
1-800-962-8300.
Real Estate Investments (Dollars in Thousands)
______________________________________________________________
Average Contri-
Leased Leased bution to
Status Status Net Income
_________ _______ _______
Nine Nine
Gross Months Months
Properties Leasable Ended Ended
Held for Area June 30, June 30, June 30,
Sale (Sq. Ft.) 1997 1996 1997 1996 1997
_______ ________ _____ ___ ___ ___ ___
Airport
Perimeter 121,000 81% 72% 76% $ 18 $ 179
Montgomery 116,300 90 72 71 (69) 226
Springdale 144,000 100 100 98 244 276
The Business
Park 157,200 97 96 99 168 488
Newport
Center 62,400 100 93 99 125 228
________ ____ ____ ____ _____ ______
600,900 93 87 89 486 1,397
Properties Sold - - - - 578 1,769
Fund Expenses
Less Interest
Income - - - - (334) (436)
________ ____ ____ ____ _____ ______
Total 600,900 93% 87% 89% $ 730 $2,730
Cash Distributions
Pending the completion of the sale to Glenborough, the Fund has suspended
cash distributions from operations. Net proceeds from the sale of Royal
Biltmore were distributed in May, and net proceeds from the disposition of
Van Buren were distributed on July 15. Deducting the combined distributions
of $108.92 per unit from the December 1996 estimated unit value of $398
results in $289. Assuming all remaining properties are sold during the next
few months, the General Partner will determine the amount it believes
sufficient for the payment of Fund liabilities; the balance of the assets
will then be promptly distributed. Based on the negotiated sales prices and
other information currently available, we expect total future distributions
to exceed the figure mentioned above.
Results of Operations
For the nine months ended June 30, 1997, the Fund's net income was
$2,730,000, an increase of $2,000,000 over the same period last year. Of the
increase, $1,210,000 was attributable to the gain for financial statement
purposes on Royal Biltmore, for which the Fund received proceeds of
$6,286,000. The Fund also received proceeds of $3,996,000 from the Van Buren
sale. The remaining increase in net income of $790,000 was due primarily to
the $925,000 decline in depreciation expense, which was a result of stopping
the depreciation of the Fund's remaining properties now Held for Sale. The
absence of net income from Spring Creek, which was sold last year, partly
offset the reduced expenses.
Net income for the third quarter increased $1,947,000 over the third
quarter of 1996. Of this amount, $1,210,000 came from the gain on the Royal
Biltmore sale, while $487,000 resulted from ceased depreciation.
At the property level, the average leased status of Fund properties
increased to 89% from 87% in the comparable 1996 nine-month period. During
the third quarter, a lease was signed at Montgomery for 16,879 square feet,
boosting occupancy 15% at the property.
Outlook
As the real estate market has been improving in recent years, we have taken
advantage of the opportunity to capture higher prices for portfolio
properties. We believe it is in the best interests of investors to liquidate
the Fund's portfolio while real estate values continue to strengthen, since
the Fund is nearing the end of its planned lifespan. In the normal course of
events, as the real estate cycle runs its course, rising property prices
usually lead to an increased supply of new properties, which could lead to
softer prices sometime later.
No one can forecast exactly when the real estate market will peak, but we
believe it is likely that there will be less capital available to real estate
investors in the future and that speculative construction may commence in
several markets in which the Fund owns properties. Each of these factors, if
they occur, could have a negative impact on the value of our properties.
Once again we urge you to read the consent solicitation materials and
return the card as quickly as possible so that we can proceed with the
orderly liquidation of your investment.
Thank you for your cooperation.
Sincerely,
James S. Riepe
Chairman
August 7, 1997
CONDENSED BALANCE SHEETS
Unaudited
(In thousands)
June 30, September 30,
1997 1996
___________ ____________
Assets
Real Estate Property
Investments
Land . . . . . . . . . . . $ 6,759
Buildings and
Improvements . . . . . . 29,588
________
36,347
Less: Accumulated
Depreciation and
Amortization . . . . . . . (9,519)
________
26,828
Held for Sale . . . . . . . . $ 26,872 8,965
________ ________
26,872 35,793
Cash and Cash Equivalents . . . 5,773 2,290
Accounts Receivable (less
allowances of $22
and $175) . . . . . . . . . . 57 154
Other Assets. . . . . . . . . . 78 492
________ ________
$ 32,780 $ 38,729
________ ________
________ ________
Liabilities and Partners' Capital
Security Deposits and
Prepaid Rents . . . . . . . . $ 411 $ 418
Accrued Real Estate Taxes . . . 119 231
Accounts Payable and Other
Accrued Expenses. . . . . . . 170 266
________ ________
Total Liabilities . . . . . . . 700 915
Partners' Capital . . . . . . . 32,080 37,814
________ ________
$ 32,780 $ 38,729
________ ________
________ ________
See the accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF OPERATIONS
Unaudited
(In thousands except per-unit amounts)
Three Months Nine MonthsEnded
Ended
June 30, June 30,
1997 1996 1997 1996
____ ____ ____ ____
Revenues
Rental Income . . . . $ 1,402 $ 1,495 $ 4,369 $ 4,517
Interest Income . . . 35 29 76 74
________ ________ ________________
1,437 1,524 4,445 4,591
________ ________ ________________
Expenses
Property Operating
Expenses. . . . . 366 465 1,195 1,322
Real Estate
Taxes . . . . . . 130 162 397 489
Depreciation and
Amortization. . . - 487 782 1,707
Decline (Recovery)
of Property
Values. . . . . . 39 237 39 (66)
Partnership Management
Expenses. . . . . 140 148 512 409
________ ________ ________________
675 1,499 2,925 3,861
________ ________ ________________
Income from Operations
before Gain on
Real Estate
Sold. . . . . . . 762 25 1,520 730
Gain on Real
Estate Sold . . . 1,210 - 1,210 -
________ ________ ________ ________
Net Income. . . . . . $ 1,972 $ 25 $ 2,730 $ 730
________ ________ ________ ________
________ ________ ________ ________
Activity per Limited
Partnership Unit
Net Income . . . . . $ 19.58 $ 0.25 $ 27.11 $ 7.25
________ ________ ________________
________ ________ ________________
Cash Distributions Declared
from Sale
Proceeds. . . . $108.92 $ 108.92 $ 17.79
from
Operations. . . - $ 4.75 1.00 14.25
________ ________ ________________
Total Distributions
Declared. . . . . $108.92 $ 4.75 $ 109.92 $ 32.04
________ ________ ________________
________ ________ ________________
Units
Outstanding . . . 90,622 90,622 90,622 90,622
________ ________ ________________
________ ________ ________________
See the accompanying notes to condensed financial statements.
CONDENSED STATEMENT OF PARTNERS' CAPITAL
Unaudited
(In thousands)
General Limited
Partner Partners Total
________ ________ ________
Balance, September 30,
1996. . . . . . . . . . . $ (4,342)$ 42,156 $37,814
Net Income. . . . . . . . . . 273 2,457 2,730
Cash Distributions. . . . . . (386) (8,078) (8,464)
_______ _______ _______
Balance, June 30,
1997. . . . . . . . . . . $ (4,455)$ 36,535 $32,080
_______ _______ _______
_______ _______ _______
See the accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
Nine Months Ended
June 30,
1997 1996
_________ _________
Cash Flows from Operating
Activities
Net Income. . . . . . . . . . . . . $ 2,730 $ 730
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating Activities
Depreciation and
Amortization. . . . . . . . . 782 1,707
Decline (Recovery) of
Property Values . . . . . . . 39 (66)
Gain on Real Estate Sold. . . . (1,210) -
Decrease in Accounts
Receivable, Net of
Allowances . . . . . . . . 64 28
Decrease in Other Assets. . . . 145 76
Decrease in Security
Deposits and
Prepaid Rents. . . . . . . (7) (50)
Decrease in Accrued Real
Estate Taxes. . . . . . . . . (112) (6)
Decrease in Accounts Payable
and Other Accrued
Expenses . . . . . . . . . (96) (48)
________ ________
Net Cash Provided by Operating
Activities. . . . . . . . . . . 2,335 2,371
________ ________
Cash Flows from Investing Activities
Proceeds from Property
Dispositions. . . . . . . . . . 10,282 1,679
Investments in Real Estate. . . . . (670) (455)
________ ________
Net Cash Provided by Investing
Activities. . . . . . . . . . . 9,612 1,224
________ ________
Cash Flows Used in Financing
Activities
Cash Distributions. . . . . . . . . (8,464) (4,391)
________ ________
Cash and Cash Equivalents
Net Increase (Decrease) during
Period. . . . . . . . . . . . . 3,483 (796)
At Beginning of Year. . . . . . . . 2,290 2,832
________ ________
At End of Period. . . . . . . . . . $ 5,773 $ 2,036
________ ________
________ ________
See the accompanying notes to condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
The unaudited interim condensed financial statements reflect
all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the interim
periods presented. All such adjustments are of a normal,
recurring nature.
The unaudited interim financial information contained in
the accompanying condensed financial statements should be read
in conjunction with the financial statements contained in the
fiscal 1996 Annual Report to Partners.
NOTE 1 - TRANSACTIONS WITH RELATED PARTIES AND OTHER
As compensation for services rendered in managing the affairs
of the Partnership, the General Partner receives 10% of cash
available for distribution from operations and a portion of
the proceeds from property dispositions. The General Partner's
share of cash available for distribution from operations
totaled $10,000 and from property dispositions totaled
$411,000 for the first nine months of fiscal 1997.
In accordance with the partnership agreement, certain
operating expenses are reimbursable to the General Partner.
The General Partner's reimbursement of such expenses totaled
$148,000 for communications and administrative services
performed on behalf of the Partnership during the first nine
months of fiscal 1997.
An affiliate of the General Partner earned a normal and
customary fee of $2,000 from the money market mutual funds in
which the Partnership made its interim cash investments during
the first nine months of fiscal 1997.
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
the first nine months of fiscal 1997 totaled $113,000.
An affiliate of LaSalle earned $190,000 in the first nine
months of fiscal 1997 for property management fees and leasing
commissions on tenant renewal and extensions for several of
the Partnership's properties.
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 - PROPERTY DISPOSITIONS
On April 30, 1997, the Partnership sold Royal Biltmore for net
proceeds of $6,286,000. The net book value of the property at
the date of sale was $5,076,000 after accumulated depreciation
expense and previously recorded permanent impairments.
Accordingly, the Partnership recognized a $1,210,000 gain on
the sale of this property in the third quarter of fiscal 1997.
On June 26, 1997, the Partnership sold Van Buren for net
proceeds of $3,996,000. The net book value of the property at
the date of sale was also $3,996,000 after accumulated
depreciation expense and previously recorded property
valuation allowances. Therefore, no gain or loss was
recognized on the property sale.
NOTE 3 - PROPERTIES HELD FOR SALE
On April, 11, 1997, the Partnership entered into a contract
with a buyer for the sale of all of its real estate property
investments at a price of $27,408,000 before selling expenses.
The transaction is subject to the approval of the Limited
Partners. If the transaction closes, the Partnership will have
sold all of its real estate properties and will begin
liquidation.
NOTE 4 - SUBSEQUENT EVENT
On July 15, 1997, the Partnership distributed the sales
proceeds from Van Buren-96% to the Limited Partners of record
at June 30, 1997 ($3,836,000) and 4% to the General Partner
($160,000).
