T. ROWE PRICE
REALTY INCOME
FUND IV
AMERICA'S SALES-COMMISSION-FREE
REAL ESTATE LIMITED PARTNERSHIP
QUARTERLY REPORT
FOR THE PERIOD ENDED
MARCH 31, 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:
As you know from our letter dated April 15, 1997, we signed
purchase and sale agreements on April 11 with Glenborough Realty
Trust Incorporated for the sale of all Fund properties at a
contract sales price of $23.9 million before selling expenses.
Glenborough is a real estate investment trust whose shares are
publicly traded on the New York Stock Exchange. The pending sale
to Glenborough, if consummated, will liquidate the Fund's real
estate portfolio.
These developments are in keeping with our previously
announced intention to shift our emphasis from the production of
income to the strategic positioning of Fund properties to
maximize potential sales proceeds. In order for the Fund to
complete the sale of its properties to Glenborough, a majority
in interest of limited partners must consent to the transactions
through a consent solicitation vote, which we expect to take
place in late June or sometime in July. As we cautioned in our
letter of April 15, this sale is subject to further due
diligence by Glenborough, which could result in changes to the
properties in the transaction, the sales proceeds to be
received, or the cancellation of the sale. It is possible that
the Fund may not be liquidated this year if the transaction
falls through.
It is worth mentioning again some of our reasons for
accepting Glenborough's offer:
o The offer represents more than 100% of the property
valuations used in our last estimated unit value of $30.30
and is substantially more per unit than a recent tender
offer from an unaffiliated third party, which was
approximately 75% of the estimated valuation.
o Selling the properties in bulk will reduce transaction and
operating expenses and allow for a more accelerated return
of principal to investors than the original disposition
plan, which contemplated a gradual return of capital over
the next 13 to 21 months.
Real Estate Investments (Dollars in thousands)
__________________________________________________
Average Contri-
Leased bution to
Leased Status Status Net Income
_________ _______ _______
Three Three
Gross Months Months
Leasable Ended Ended
Property Area March 31, March 31, March 31,
Name (Sq. Ft.) 1997 1996 1997 1996 1997
________ ________ ____ ____ ____ ____ ____
Tierrasanta 104,200 62% 100% 62% $ 43 $ 25
Goshen Plaza 45,500 88 75 88 11 57
Westbrook
Commons 121,600 98 94 98 67 116
Burnham
Building 71,200 100 100 100 42 46
Kent Sea Park 138,200 100 99 95 79 91
________ ____ ____ ____ _____ _____
480,700 90 96 89 242 335
Property
Sold - - - - 0 -
Fund Expenses
Less Interest
Income - - - - (41) (58)
________ ____ ____ ____ ___________
Total 480,700 90% 96% 89% $ 201 $ 277
o There is no financing contingency, and Glenborough's financial resources
appear adequate to consummate the transaction.
As we stated in our letter of April 15, we suspended the redemption
program for the Fund after accepting the Glenborough offer. If you recently
presented your units for redemption, please call one of our representatives
at 1-800-962-8300 to confirm your request; otherwise, we will assume that you
want to remain invested in the Fund.
Cash Distributions
Pending the completion of the bulk sale to Glenborough, the Fund has
suspended cash distributions from operations. Assuming all properties are
sold during the next few months, the Fund plans to accrue for anticipated
closing costs and then make a liquidating cash distribution. Based on the
negotiated sale price and other information currently available, we expect
total future distributions to exceed the Fund's most recent estimated unit
value of $30.30.
Results of Operations
The Fund had net income of $277,000 in the quarter, an increase of $76,000
over the comparable 1996 period. The increase was primarily attributable to
an improvement in the average leased status and lower bad debt expenses at
both Westbrook Commons and Goshen Plaza from a year earlier. The absence of
income from Fairchild, which was sold in 1996, led to a decline in both
operating revenues and expenses. However, there was no impact on net income
during the last three months since operating income from the property was
minimal during the same period of 1996. Fund expenses rose during the past
three months, mainly a result of necessary costs incurred in responding to
the recent tender offer for partnership units.
At the property level, we signed a new lease at Kent Sea Park covering
1.4% of the portfolio's total square footage, resulting in an increase of one
percentage point to 90% in the Fund's leased status since December. Average
leased status, however, is seven percentage points lower than at the end of
March 1996 because of the loss of a major tenant at Tierrasanta, which was
discussed in previous reports.
The Fund's cash position decreased slightly, due primarily to a larger
distribution made during the first quarter of 1997 coupled with the
termination of the Fund's reinvestment program in 1996.
Outlook
Our reasons for wanting to liquidate the Fund's portfolio while the real
estate market is strengthening are unchanged. As mentioned previously, our
primary goal is to take advantage of rising property values as the Fund nears
the end of its planned lifespan. Real estate markets have been improving
during the past few years, and we have used this opportunity to capture
higher prices for our investors. Rising real estate values could eventually
lead to an increased supply of new properties, resulting in softer prices
some time later. This is a normal pattern as the real estate cycle runs its
course.
No one can forecast precisely when prices will reach their peak, and it
is possible that by selling Fund properties now we might miss further
advances later on. However, demand from tenants and investors is currently
very strong, causing the supply of properties to grow in many markets. We
believe it is prudent to sell into strength while prices are still advancing.
It is critical that you promptly read the consent solicitation materials
and return the card as soon as you receive them, so that we can minimize Fund
expenses and implement the orderly liquidation of your investment.
Thank you in advance for your cooperation in this matter.
Sincerely,
James S. Riepe
Chairman
May 7, 1997
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
March 31, December 31,
1997 1996
___________ ___________
Assets
Real Estate Property
Investments
Land . . . . . . . . . . $ 7,413 $ 7,413
Buildings and
Improvements . . . . . 15,140 15,818
________ ________
22,553 23,231
Less: Accumulated Depreciation
and Amortization . . . . (3,210) (3,050)
________ ________
19,343 20,181
Cash and Cash
Equivalents. . . . . . . 1,445 1,769
Accounts Receivable (less
allowances of $28
and $28) . . . . . . . . 520 525
Other Assets. . . . . . . . 217 242
________ ________
$ 21,525 $ 22,717
________ ________
________ ________
Liabilities and Partners' Capital
Security Deposits and
Prepaid Rents. . . . . . $ 172 $ 209
Accrued Real Estate
Taxes. . . . . . . . . . 309 358
Accounts Payable and Other
Accrued Expenses . . . . 220 270
Minority Interest . . . . . - 688
________ ________
Total Liabilities . . . . . 701 1,525
Partners' Capital . . . . . 20,824 21,192
________ ________
$ 21,525 $ 22,717
________ ________
________ ________
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands except per-unit amounts)
Three Months Ended
March 31,
1997 1996
____ ____
Revenues
Rental
Income. . . . . . . . . . . $ 798 $ 862
Interest Income . . . . . . . . 22 25
________ ________
820 887
________ ________
Expenses
Property Operating Expenses . . 126 214
Real Estate Taxes . . . . . . . 137 147
Depreciation and Amortization . 160 189
Management Fee to General
Partner . . . . . . . . . . 42 72
Partnership Management
Expenses. . . . . . . . . . 78 64
________ ________
543 686
________ ________
Net Income. . . . . . . . . . . $ 277 $ 201
________ ________
________ ________
Activity per Limited Partnership Unit
Net Income. . . . . . . . . . . $ 0.36 $ 0.26
________ _________
________ _________
Cash Distributions Declared from
Operations. . . . . . . . . - $ 0.40
________ ________
________ ________
Weighted Average Number of
Units Outstanding . . . . . 766,561 772,056
________ ________
________ ________
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Unaudited
(In thousands)
General Limited
Partner Partners Total
_______ _______ ______
Balance,
December 31,
1996 . . . . . . . . $ (75) $ 21,267 $ 21,192
Net Income. . . . . . . 3 274 277
Redemptions of Units. . - (63) (63)
Cash Distributions. . . (6) (576) (582)
_______ _______ _______
Balance, March 31,
1997 . . . . . . . . $ (78) $ 20,902 $ 20,824
_______ _______ _______
_______ _______ _______
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
Three Months Ended
March 31,
1997 1996
________ ________
Cash Flows from Operating
Activities
Net Income. . . . . . . . . . . . $ 277 $ 201
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating Activities
Depreciation and
Amortization . . . . . . . 160 189
Decrease in Accounts Receivable,
Net of Allowances. . . . . . 5 101
Decrease in Other Assets . . . 25 68
Decrease in Security Deposits
and Prepaid Rent . . . . . . (37) (6)
Decrease in Accrued Real
Estate Taxes . . . . . . . . (49) (39)
Change in Accounts Payable and
Other Accrued Expenses . . . (50) 55
________ ________
Net Cash Provided by Operating
Activities . . . . . . . . . . 331 569
________ _________
Cash Flows Used in Investing Activities
Investments in Real Estate. . . . (10) (106)
________ ________
Cash Flows from Financing Activities
Cash Distributions. . . . . . . . (582) (361)
Reinvestments in Units. . . . . . - 151
Redemptions of Units. . . . . . . (63) (141)
________ ________
Net Cash Used in Financing
Activities . . . . . . . . . . (645) (351)
________ ________
Cash and Cash Equivalents
Net Increase (Decrease) during
Period . . . . . . . . . . . . (324) 112
At Beginning of Year. . . . . . . 1,769 1,733
________ ________
At End of Period. . . . . . . . . $ 1,445 $ 1,845
________ ________
________ ________
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
The unaudited interim condensed consolidated 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 consolidated financial statements should be read in
conjunction with the consolidated financial statements contained in the
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 earns a partnership management fee equal
to 9% of net operating proceeds. The General Partner earned a partnership
management fee of $42,000 during the first three months of 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 $19,000 for communications and
administrative services performed on behalf of the Partnership during the
first three months of 1997.
An affiliate of the General Partner earned a normal and customary fee
of $1,000 from the money market mutual funds in which the Partnership made
its interim cash investments during the first three months of 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
three months of 1997 totaled $20,000.
An affiliate of LaSalle earned $19,000 in the first three months of
1997 as property manager for several of the Partnership's properties.
NOTE 2 - REAL ESTATE PROPERTY INVESTMENTS
On April 11, 1997, the Partnership and its consolidated ventures entered
into contracts with a buyer for the sale of all properties in which the
Partnership holds an interest at a sales price of $23,877,000 before
selling expenses. The transactions are subject to further due diligence by
the buyer and approval of the Limited Partners which could result in
changes to or the cancellation of the contracts. If the transactions are
closed, the Partnership will have sold all of its real estate property
investments and will begin liquidation.
