<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number 0-17636
Exact Name of Registrant as Specified in Its Charter: T. ROWE
PRICE REALTY INCOME FUND IV, AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
State or Other Jurisdiction of Incorporation or Organization:
Delaware
I.R.S. Employer Identification No.: 95-4147931
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
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
<PAGE>2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
1997 1996
____________ ____________
Assets
Real Estate Property Investments
Land . . . . . . . . . . . . $ 7,413
Buildings and Improvements . 15,818
________
23,231
Less: Accumulated Depreciation
and Amortization . . . . . (3,050)
________
20,181
Cash and Cash Equivalents . . . . $ 6,432 1,769
Receivables (less allowance of $28
in 1996) . . . . . . . . . . 11 525
Other Assets . . . . . . . . . . - 242
________ ________
$ 6,443 $ 22,717
________ ________
________ ________
Liabilities and Partners' Capital
Security Deposits and Prepaid Rents $ 209
Accrued Real Estate Taxes . . . . 358
Accounts Payable and Other
Accrued Expenses . . . . . . $ 53 270
Minority Interest . . . . . . . . - 688
________ ________
Total Liabilities . . . . . . . . 53 1,525
Partners' Capital . . . . . . . . 6,390 21,192
________ ________
$ 6,443 $ 22,717
________ ________
________ ________
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per-unit amounts)
January 1 Years Ended
through December 31,
September 30,
____________________
1997 1996 1995
__________ _________ _________
Revenues
Rental Income . . . . $ 2,153 $ 3,366 $ 3,616
Interest Income . . . 94 99 90
________ ________ ________
2,247 3,465 3,706
________ ________ ________
Expenses . . . . . .
Property Operating
Expenses . . . . 404 709 940
Real Estate Taxes . . 345 568 589
Depreciation and
Amortization . . 159 745 786
Decline of Property
Values . . . . . - 1,099 -
Partnership Management
Expenses . . . . 433 511 347
________ ________ ________
1,341 3,632 2,662
________ ________ ________
Income (Loss) from Operations
before Real Estate
Sold . . . . . . 906 (167) 1,044
Gain on Real Estate
Sold . . . . . . 4,004 582 -
________ ________ ________
Net Income . . . . . $ 4,910 $ 415 $ 1,044
________ ________ ________
________ ________ ________
<PAGE> 4
January 1 Years Ended
through December 31,
September 30,
_________________
1997 1996 1995
______ ________ _______
Activity per Limited
Partnership Unit
Net Income . . . . . $ 6.40 $ 0.53 $ 1.35
________ ________ ________
________ ________ ________
Cash Distributions Declared
from Operations . $ 1.34 $ 1.95 $ 1.88
as Return of
Capital . . . . 0.94 - -
from Sale
Proceeds . . . 22.71 2.53 -
________ ________ ________
Total Distributions
Declared . . . . $ 24.99 $ 4.48 $ 1.88
________ ________ ________
________ ________ ________
Weighted Average Number of
Units Outstanding 765,320 773,703 766,443
________ ________ ________
________ ________ ________
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In thousands)
General Limited
Partner Partners Total
________ ________ ________
Balance, December 31,
1994 . . . . . . $ (58) $ 24,733 $ 24,675
Net Income . . . . . 10 1,034 1,044
Reinvestments in Units - 999 999
Redemptions of Units - (299) (299)
Cash Distributions . (24) (2,285) (2,309)
_______ _______ _______
Balance, December 31,
1995 . . . . . . (72) 24,182 24,110
Net Income . . . . . 4 411 415
Reinvestments in Units - 421 421
Redemptions of Units - (502) (502)
Cash Distributions . (7) (3,245) (3,252)
_______ _______ ______
Balance, December 31,
1996 . . . . . . (75) 21,267 21,192
Net Income . . . . . 9 4,901 4,910
Redemptions of Units - (96) (96)
Cash Distributions . (15) (19,682) (19,697)
Capital Contribution 81 - 81
_______ _______ _______
Balance, September 30,
1997 . . . . . . $ 0 $ 6,390 $ 6,390
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
January 1 Years Ended
through December 31,
September 30, _________
1997 1996 1995
_____________ ________ __________
Cash Flows from
Operating Activities
Net Income . . . . . $ 4,910 $ 415 $ 1,044
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities
Depreciation and
Amortization 159 745 786
Decline of Property
Values . . . - 1,099 -
Gain on Real Estate
Sold . . . . (4,004) (582) -
Change in
Receivables . 452 94 (1)
Change in Other
Assets . . . 52 35 (125)
Change in Security
Deposits and
Prepaid Rents (209) 9 3
Change in Accrued
Real Estate
Taxes . . . . (358) 5 27
Change in Accounts
Payable and
Other Accrued
Expenses . . (178) 36 (86)
________ ________ ________
Net Cash Provided
by Operating
Activities . . . . 824 1,856 1,648
________ ________ ________
<PAGE> 7
January 1 Years Ended
through December 31,
September 30, __________
1997 1996 1995
_____________ ________ __________
Cash Flows from Investing
Activities
Proceeds from Property
Dispositions . . . 23,749 1,956 -
Investments in Real
Estate . . . . . . (198) (443) (633)
________ ________ ________
Net Cash Provided by
(Used in) Investing
Activities . . . . 23,551 1,513 (633)
________ ________ ________
Cash Flows from Financing
Activities
Capital Contribution 81 - -
Cash Distributions . (19,697) (3,252) (2,309)
Reinvestments in Units - 421 999
Redemptions of Units (96) (502) (299)
________ ________ ________
Net Cash Used in Financing
Activities . . . . (19,712) (3,333) (1,609)
________ ________ ________
Cash and Cash Equivalents
Net Change during
Period . . . . . . 4,663 36 (594)
At Beginning of Year 1,769 1,733 2,327
________ ________ ________
At End of Period . . $ 6,432 $ 1,769 $ 1,733
________ ________ ________
________ ________ ________
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP AND ITS LIQUIDATION
T. Rowe Price Realty Income Fund IV, America's
Sales-Commission-Free Real Estate Limited Partnership (the
Partnership) was formed in 1987 under the Delaware 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 IV Management, Inc. is the General Partner.
The Partnership had a reinvestment plan whereby Limited
Partners could elect to have cash distributions automatically
reinvested in additional units of the Partnership. The price of
units sold through the plan was established at least annually by
the General Partner based upon the estimated value of a unit. The
plan was terminated in 1996.
The Partnership also had a redemption plan whereby Limited
Partners could request that the Partnership redeem their units.
The redemption price of a unit was 90% of the estimated value per
unit as determined by the General Partner. The plan was
terminated in 1997.
In accordance with the provisions of the partnership
agreement, income and cash distributions from operations have
been allocated and paid, and gains on real estate sold before
September 12, 1997, allocated, to the General and Limited
Partners at rates of 1% and 99%, respectively. All sales proceeds
were paid, and the gain on the liquidating sale of the
Partnership's interests in its five remaining properties on
September 12, 1997, were allocated, 100% to the Limited Partners.
After the sale of its remaining properties on September 12,
1997, the Partnership entered into its final liquidating phase.
Later in September, the Partnership made a partial liquidating
distribution of $19,106,000 to the Limited Partners and a final
distribution to the General Partner of $10,000.
The Partnership will declare and make a final liquidating
distribution of its remaining net assets based on final balances
in the partners' capital accounts. This final distribution will
be made by December 31, 1997, to Limited Partners only and,
thereafter, the Partnership will be dissolved.
The accompanying financial statements for 1997 include
estimates of the costs of liquidating the Partnership. Results of
operations from October 1, 1997, until the date of the final
liquidating distribution are not expected to be significant and
will consist primarily of interest income and the settlement of
receivables and payables.
<PAGE> 9
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership's financial statements are prepared in accordance
with generally accepted accounting principles which requires the
use of estimates and assumptions by the General Partner.
The consolidated financial statements include the accounts of
the Partnership and its pro-rata share of the partnership
accounts of Tierrasanta 234 and Penasquitos 34 (Westbrook
Commons) in which the Partnership had 40% and 50% interests,
respectively. They also include the Partnership's 20% pro-rata
share of the partnership accounts of Fairchild 234 until the
property's disposition in 1996. The other partners in these
ventures are affiliates of the Partnership. Additionally, the
accounts of Goshen Road Limited Partnership in which the
Partnership had a 90% interest have been consolidated. All
intercompany accounts and transactions have been eliminated in
consolidation.
The Partnership reviewed its real estate property investments
for impairment whenever events or changes in circumstances
indicated that the property carrying amounts may not have been
recoverable. Such a review resulted in the Partnership recording
a provision for impairment of the carrying value of its real
estate property investments whenever the estimated future cash
flows from a property's operations and projected sale were less
than the property's net carrying value.
Depreciation was calculated primarily on the straight-line
method over the estimated useful lives of buildings and
improvements, which range from 5 to 40 years. Lease commissions
and tenant improvements were 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 is equivalent to fair value.
The Partnership used the allowance method of accounting for
doubtful accounts. Provisions for uncollectible tenant
receivables in the amounts of $19,000, $34,000, and $269,000,
were recorded in 1997, 1996, and 1995, respectively. Bad debt
expense is included in Property Operating Expenses.
Rental income was recognized on a straight-line basis over the
term of each lease. Rental income accrued, but not yet billed,
was included in Other Assets and aggregated $188,000 at December
31, 1996.
<PAGE> 10
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 any
income taxes in the accompanying consolidated financial
statements.
NOTE 3 - PROPERTY VALUATIONS
On January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," which changed the Partnership's method of
accounting for its real estate property investments when
circumstances indicated that the carrying amount of a property
might not have been recoverable. Measurement of an impairment
loss on an operating property subsequent to adoption was based on
the estimated fair value of the property, which became the
property's new cost basis, rather than the sum of expected future
cash flows. Properties held for sale subsequent to adoption were
no longer depreciated but continued to be reflected at the lower
of historical cost or estimated fair value less anticipated
selling costs.
Based upon a review of market conditions, estimated holding
period and future performance expectations of each Partnership
property, the General Partner determined that the net carrying
value of Tierrasanta was not fully recoverable from future
operations and disposition, and recognized an impairment charge
of $1,099,000 in 1996.
NOTE 4 - PROPERTY DISPOSITIONS
On August 28, 1996, Fairchild Corporate Center was sold and the
Partnership received net proceeds of $1,956,000. The net book
value of the Partnership's 20% interest at the date of sale was
$1,374,000, after deduction of accumulated depreciation, and
previously recorded declines in property value. Accordingly, the
Partnership recognized a $582,000 gain on the sale of this
property.
On September 12, 1997, the Partnership sold its interests in
its five remaining properties-Burnham Building, Goshen Plaza,
Kent Sea Park, Tierrasanta and Westbrook Commons-to a single,
third-party buyer for net proceeds of $23,749,000. The sale was
approved by a majority of the Limited Partners on September 11,
1997. The net book value of the Partnership's interests in the
five properties was $19,745,000 after accumulated depreciation
expense and previously recorded declines in property values.
Accordingly, the Partnership recognized a $4,004,000 gain on the
sale of its interests in these properties.
<PAGE> 11
NOTE 5 - TRANSACTIONS WITH RELATED PARTIES
As compensation for services rendered in managing the
Partnership, the General Partner earns a partnership management
fee equal to 9% of net operating proceeds. The General Partner
earned partnership management fees of $94,000, $191,000, and
$85,000 in 1997, 1996, and 1995, respectively. In addition, the
General Partner's share of cash available for distribution from
operations, as discussed in Note 1, totaled $10,000, $15,000, and
$15,000 in 1997, 1996, and 1995, respectively.
In accordance with the partnership agreement, certain
operating expenses are reimbursable to the General Partner. The
General Partner's reimbursement of such expenses totaled $78,000,
$74,000, and $58,000 for communications and administrative
services performed on behalf of the Partnership in 1997, 1996,
and 1995, respectively.
An affiliate of the General Partner earned a normal and
customary fee of approximately $3,000, $3,000, and $6,000 from
the money market mutual funds in which the Partnership made its
interim cash investments during 1997, 1996, and 1995,
respectively.
The partnership agreement includes provisions requiring that
the General Partner make a capital contribution upon the
liquidation of the Partnership if, at that time, the General
Partner's capital account has a deficit balance. On September 24,
1997, the General Partner contributed $81,000 to the Partnership
thereby increasing its capital account from a deficit balance to
zero.
LaSalle Advisors Limited Partnership (LaSalle) was the
Partnership's advisor and was compensated for its advisory
services directly by the General Partner. LaSalle was 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 totaled $49,000,
$80,000, and $80,000 during 1997, 1996, and 1995, respectively.
An affiliate of LaSalle earned $58,000, $84,000, and $78,000
in 1997, 1996, and 1995, respectively, for property management
fees and leasing commissions on tenant renewals and extensions at
several of the Partnership's properties.
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENT TO TAXABLE INCOME
As described in Note 2, the Partnership has not incurred any
income tax liability; however, certain timing differences exist
between amounts reported in net income (loss) for financial
<PAGE> 12
statement and federal income tax purposes. These differences (in
thousands) are summarized below:
1997 1996 1995
_________ ________ _________
Net income reported
in financial
statements . . . $ 4,910 $ 415 $ 1,044
Allowances for
Doubtful accounts (51) (320) 246
Declines of
property
values . . . . (1,833) (2,218) -
Interest income . . . - - 252
Other items . . . . . 56 39 (128)
________ _________ ________
Taxable income (loss) $ 3,082 $ (2,084) $ 1,414
________ _________ ________
________ _________ ________
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Partners
T. Rowe Price Realty Income Fund IV,
America's Sales-Commission-Free Real Estate Limited Partnership:
We have audited the consolidated balance sheets of T. Rowe Price
Realty Income Fund IV, America's Sales-Commission-Free Real
Estate Limited Partnership and its consolidated ventures as of
September 30, 1997 and December 31, 1996, and the related
consolidated statements of operations, partners' capital and cash
flows for the period January 1, 1997 through September 30, 1997
and for the years ended December 31, 1996 and 1995. These
consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principals used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of T. Rowe Price Realty Income Fund IV,
America's Sales-Commission-Free Real Estate Limited Partnership
and its consolidated ventures as of September 30, 1997 and
December 31, 1996, and the results of their operations and their
cash flows for the period January 1, 1997 through September 30,
1997 and for the years ended December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
October 23, 1997
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources and Results of Operations
The Partnership s net income for its final nine months was
$4,910,000, which included a gain of $4,004,000. Net income
amounted to $6.40 per unit. For the year ended December 31,
1996, the Partnership reported net income of $415,00 or $0.53 per
unit, which included a net loss of $167,000 from operations and a
gain of $582,000 from the sale of Fairchild. The Partnership s
remaining properties were sold on September 12, 1997, for net
proceeds of $23,551,000 and the gain of $4,004,000.
The Partnership paid $25 per unit on September 19, 1997,
which was a substantial portion of the total liquidating
distributions. The Partnership anticipates making a final
liquidating distribution in early December of 1997.
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders
On September 11, 1997, the limited partners of the
Partnership approved a proposal to sell all of the Partnership s
remaining real estate properties to Glenborough Realty Trust, and
thereafter dissolve and liquidate the Partnership. Under the
terms of the Partnership s Agreement of Limited Partnership, no
meeting was required in connection with the proposal, and the
vote was taken through a written consent solicitation.
Limited partners holding 85% (653,158) of the outstanding
units of limited partnership interest ("Units") cast votes on the
proposal. Of these, 621,651 Units were voted in favor of the
proposal, 27,655 against, and 3,852 abstained.
Item 6.Exhibits and Reports on Form 8-K:
(a)Exhibits.
27 - Financial Data Schedule
(b)Reports on Form 8-K
Report on Form 8-K dated September 12, 1997, reporting the
sale of the Partnership s real estate properties and a
distribution of a portion of the proceeds.
All other items are omitted because they are not applicable
or the answers are none.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
T. ROWE PRICE REALTY INCOME FUND
IV, AMERICA'S SALES-COMMISSION-
FREE REAL ESTATE LIMITED
PARTNERSHIP
By: T. Rowe Price Realty Income
Fund IV Management, Inc.,
General Partner
Date: November 13, 1997 By: /s/ Lucy B. Robins
Lucy B. Robins
Vice President
Date: November 13, 1997 By: /Mark S. Finn
Mark S. Finn
Chief Accounting Officer
for the Partnership
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated financial statements of T. Rowe Price
Realty Income Fund IV, America's Sales-Commission-Free Real
Estate Limited Partnership included in the accompanying Form 10-Q
for the period ended September 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000826315
<NAME> T. ROWE PRICE REALTY INCOME FUND IV, AMERICA'S
SALES-COMMISS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,432,000
<SECURITIES> 0
<RECEIVABLES> 11,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,443,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,390,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 6,443,000
<SALES> 0
<TOTAL-REVENUES> 2,247,000
<CGS> 0
<TOTAL-COSTS> 1,341,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,910,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,910,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,910,000
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1>Not contained in registrants' unclassified balance sheet.
<F2>Partners' capital.
<F3>Not applicable. Net income per limited partnership unit is
$6.40.
</FN>
