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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 December 31, 1996
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
IRS Employer Identification Number: 95-4147931
Address of principal executive offices: 100 East Pratt Street,
Baltimore, Maryland 21202
Registrant's telephone number: 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:
Units of Limited Partnership.
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
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]
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.
<PAGE>2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Partnership dated February 26,
1988, File Number 33-18965 filed with the Commission pursuant to
Rule 424(b) are incorporated herein in Parts I, III, and IV by
reference.
Portions of the Annual Report to Limited Partners of the
Partnership for the fiscal year ended December 31, 1996 dated
February 7, 1997 and filed with the Commission as Exhibit 13 is
incorporated in Parts I, II and IV by reference.
Index to Exhibits is located on page 21.
<PAGE>3
T. ROWE PRICE REALTY INCOME FUND IV,
AMERICA'S SALES-COMMISSION-FREE REAL ESTATE
LIMITED PARTNERSHIP
INDEX
Page
PART I.
Item 1. Business 4
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a 10
Vote of Security Holders
PART II.
Item 5. Market for the Partnership's Limited 10
Partnership Interests and
Related Security Holder Matters
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis 13
of Financial Condition and Results of
Operations
Item 8. Financial Statements and Supplementary 17
Data
Item 9. Changes in and Disagreements with 17
Accountants on Accounting and
Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the 17
Partnership
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial 20
Owners and Management
Item 13. Certain Relationships and Related 21
Transactions
PART IV.
Item 14. Exhibits, Financial Statement Schedules 21
and Reports on Form 8-K
<PAGE>4
PART I
Item 1. Business
T. Rowe Price Realty Income Fund IV, America's Sales-Commission-Free
Real Estate Limited
Partnership (the "Partnership"), was
formed on November 17, 1987, under the Delaware Revised Uniform
Limited Partnership Act for the purpose of acquiring, operating
and disposing of primarily existing income-producing commercial
and industrial real properties. On February 26, 1988, the
Partnership commenced an offering of $75,000,000 of Limited
Partnership Units ($50 per Unit) pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933
(Registration No. 33-18965) (the "Registration Statement"). The
Prospectus filed pursuant to Rule 424(b) under the Securities Act
of 1933 (the "Prospectus") sets forth a complete description of
the business of the Partnership in the sections entitled
"Investment Objectives" and "Fund Policies" on pages 17 - 24 of
the Prospectus, which pages are incorporated by reference
herein. The Gross Proceeds from the offering totaled
$34,605,000, and an additional $25,000 was contributed by the
initial limited partner, T. Rowe Price Real Estate Group, Inc.
There were 4,657 Limited Partners as of March 17, 1997. The
offering terminated on September 30, 1988, and no additional
Units will be sold. The Partnership had a reinvestment plan,
which was terminated in August of 1996. As of the termination of
the plan, 167,874 additional Units had been sold at prices
ranging from $31 to $50 per Unit, for a total of $6,947,000.
Pursuant to the Partnership's Redemption Plan, 95,050 Units have
been redeemed as of March 17, 1997 for a total of $3,287,000. As
of March 17, 1997 there were 765,422 Units outstanding.
In December of 1991, LaSalle Advisors Limited Partnership
("LaSalle") entered into a contract with the Partnership's
general partner, T. Rowe Price Realty Income Fund IV Management,
Inc. ("the General Partner") and the Partnership 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.
<PAGE>5
The Partnership is engaged solely in the business of real estate
investment, therefore, presentation of information about industry
segments is not applicable. In 1996, three of the Partnership's
properties produced 15% or more of the Partnership's revenue:
Westbrook Commons (32%), Kent Sea Park (22%), and Goshen Plaza
(19%). In 1995, three of the Partnership's investments produced
15% or more of the Partnership's revenue: Westbrook Commons
(32%), Kent Sea Park (21%), and Goshen Plaza (19%). In 1994,
three of the Partnership's investments produced 15% or more of
the Partnership's revenue: Westbrook Commons (27%), Goshen Plaza
(22%), and Kent Sea Park (16%). In none of these periods did any
tenant produce more than 10% of the Partnership's revenues from
real estate operations.
The Partnership owned a 20% interest in a general partnership,
Fairchild 234, the other general partners of which were certain
other affiliated partnerships. Fairchild 234 owned a note
secured by a deed of trust on Fairchild Corporate Center, located
in Irvine, California. This property was acquired outright in
February, 1994 by a corporation, the stockholders of which are
the partners of Fairchild 234. Prior to February, 1994, the
Partnership's investment in the property was accounted for as an
in-substance foreclosed property. In August, 1996, Fairchild 234
sold its interest in this property for a total sales price of $10
million. The purchaser, Spieker Properties, L.P. is not an
affiliate of the Partnership, its general partners, or the
Partnership's investment adviser. Net book value of the
Partnership's interest at the date of sale was $1.4 million,
which represented approximately 6.0% of the Partnership's assets.
Net proceeds to the Partnership were $1,956,000.
During 1996, the Partnership reviewed its portfolio and operating
plans with the intent to dispose of all its operating properties
by the end of 1998, and to thereafter distribute all of the
Partnership's net assets to the partners. In this regard, the
Partnership has received solicited and unsolicited offers to
purchase one or more of its properties, and is pursuing some of
these offers. Although there is no assurance that the
Partnership will achieve the disposition of all its operating
properties during the proposed time frame, the disposition of
operating properties is expected to cause a significant decrease
in the Partnership's operating activities in future periods.
The Partnership also sold one of its investment properties,
Metropolitan Industrial, in 1994 for a net sales price of
$5,870,000 resulting in a gain of approximately $577,000. The
Partnership owns directly and through joint venture partnerships
the properties or interests listed in Schedule III to this
Report, "Real Estate and Accumulated Depreciation," which is set
forth in Exhibit 99(b) to this Report, and which is incorporated
<PAGE>6
by reference herein and contains information as to acquisition
date and total cost of each of the properties. Additional
information regarding these properties and/or interests,
including percentage leased as of December 31, 1996 is set forth
in the table, "Real Estate Holdings," appearing on page 4 of the
Partnership's 1996 Annual Report to Limited Partners which is
hereby incorporated by reference herein. A brief narrative
description of each investment follows.
Tierrasanta
The Partnership owns a 40% interest in Tierrasanta 234, a joint
venture with its affiliates, T. Rowe Price Realty Income Fund II,
America's Sales-Commission-Free Real Estate Limited Partnership
("RIF II") and T. Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership ("RIF
III"). Tierrasanta 234 owns a 100% interest in Tierrasanta
Research Park in San Diego, California. The project contains
four buildings utilized for research and development purposes,
for a total of 104,000 square feet of space. It is located in
the Kearny Mesa market area, north of San Diego, which is part of
the larger "Interstate 15" commercial corridor.
The property lost one 39,971 square-foot tenant when the tenant's
lease expired, and one tenant was renewed for 8,305 square-foot
space to bring the leased status to 62% at year-end versus 100%
at year-end 1995. During 1997, only one lease covering 8,900
square feet expires. There has been interest in the vacant
space, and the market is tightening but several competitive
properties have comparable space available.
Tierrasanta Research Park is part of the Kearny Mesa research and
development ("R&D")/office market. The Park competes against
both R&D and office buildings. Overall activity in the submarket
has been good, with approximately 1,475,000 square feet of gross
absorption for the year in R&D space, and slightly higher rents
than year-end 1995, as discussed below. Vacancy rates at year-end 1996
were approximately 8.0%
and 15.4% for R&D space and
office space, respectively, versus approximately 13% and 19%,
respectively, for the previous year.
Rental rates in this submarket at year-end for R&D space range
between $6.60 and $9.00 per square foot net of expenses, with
tenant improvements ranging between $5.00 and $15.00 per square
foot. Office rents are ranging between $10.80 and $16.20 per
square foot with tenant improvements ranging anywhere from $7.00
to $20.00 per square foot. There continue to be several 15,000
to 25,000 square foot buildings available for lease in the
Kearney Mesa submarket which compete directly with the
Tierrasanta vacancy.
<PAGE>7
During 1996, the Partnership recorded a provision for value
impairment of $1,099,000 in connection with Tierrasanta. 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 project through
future operations over a shorter anticipated holding period and
the ultimate sale of the property.
Westbrook Commons
The Partnership owns a 50% interest in Penasquitos 34, a joint
venture with RIF III. Penasquitos 34 owns a 100% interest in
Westbrook Commons Shopping Center ("Westbrook Commons"), a
neighborhood shopping center in the Village of Westchester,
Illinois, a Chicago suburb. The property contains 122,000
rentable square feet of space.
Three new, five renewal, and one expansion lease totaling 19,952
square feet, were signed during the year. Despite three tenants
that did not renew their leases, including one tenant that was
lost due to credit reasons, the property's occupancy increased
slightly from 96% to 98% by year end 1996. Leases representing
only 7% of the property's total leasable area expire in 1997.
Activity from prospective tenants has been good.
The Westchester market in which the project is located continues
to remain a stable and relatively healthy environment for
retailers. Grocery anchored centers such as Westbrook Commons
have proven to be the most successful for service/convenience
based retailers. Little fluctuation has occurred in the overall
vacancy and rental rates throughout the submarket. Industry
figures place the vacancy rate for the competitive centers within
a three-mile radius of Westbrook Commons at approximately 2%.
The average rental rates in the submarket increased $0.00- $2.00
per square foot per year for Class A space.
Goshen Plaza Shopping Center
The Partnership owns a 90% interest in Goshen Road Limited
Partnership, which owns Goshen Plaza Shopping Center ("Goshen
Plaza"), a neighborhood shopping center in Montgomery County,
Maryland, a suburb of the District of Columbia. The Partnership
is the sole general partner of the Goshen Road Limited
Partnership; the remaining 10% interest is owned by the limited
partners of Goshen Road Limited Partnership who sold the
Partnership its 90% interest. None of these limited partners are
affiliates of the Partnership.
Goshen Plaza consists of four buildings: two multi-tenant
buildings on either side of a single-tenant building occupied by
a People's Drug Store and a free-standing, single-tenant
<PAGE>8
restaurant building on a pad. The total gross leasable area of
the Center is 46,000 square feet.
Goshen Plaza ended the year at 88% leased which was up thirteen
percentage points from the previous year. Two leases covering
2,844 square feet expired in 1996, and three new and one renewal
leases totaling 9,004 square feet were signed during the year.
Strong leasing efforts produced the lease signings, including a
new 4,200 square foot restaurant. Leases representing 6% of the
property's total leasable area expire in 1997.
Goshen Plaza competes primarily with nine other neighborhood
shopping centers located within a five mile radius, ranging in
size from 11,000 square feet to 165,000 square feet and totaling
approximately 782,000 square feet. Vacancy in these projects is
currently 9% versus 4% for the previous year. The increase in
vacancy can be attributed to one large tenant who vacated a
center within the subject's sub-market. Retail activity in the
Montgomery County submarket continues to improve slightly from
the prior year, as market rates have moved upward $2.00 to $6.00
per square foot net of taxes, insurance and utilities ("NNN")
from $13.00 to $18.00 per square foot NNN in the prior year.
Tenants signing new leases within this market are typically
negotiating one to two months of free rent on a five-year term.
Burnham Building
The Partnership owns a 100% interest in a warehouse facility in
the South Congress Industrial Park in the northern section of
Boca Raton, which is in south Palm Beach County. It is leased to
a single tenant, Burnham Services Corporation, under a long-term
lease which expires February 28, 2000. Burnham subleases a
portion of the property to other tenants. This one-story
industrial facility contains 71,000 rentable square feet and is
situated on 4.4 acres of land.
Burnham is a nationwide moving and storage company specializing
in transportation, storage, warehouse management, and
installation of high-tech electronic equipment. The Burnham
Building is their Southeast Florida regional headquarters.
The downsizing of IBM's 1.0 million square-foot personal computer
manufacturing headquarters in Boca Raton in the late 1980's
created a glut of space that prompted the deterioration of this
flex office/industrial market. In 1996, IBM continued to reduce
their commitment to space in the area. However, the market is
almost fully absorbed and industrial space is still somewhat
scarce. Overall market rents have remained stable. Rental rates
for low-finish industrial buildings are at an average of between
$3.50 to $9.50 per square foot per year NNN. No new significant
speculative projects are expected in the near future, due to high
land costs and restrictive zoning regulations.
<PAGE>9
Kent Sea Park
The Partnership owns a 100% interest in Kent Sea Park which is
located in the southern end of the Kent Valley industrial market,
four miles southeast of the Seattle-Tacoma International Airport
and about 15 miles south of downtown Seattle. The property
consists of two one-story warehouse buildings containing 138,000
square feet located on 3.7 acres.
The property's year-end occupancy decreased to 95% from 97% in
1995. Although two new and two expansion leases totaling 26,382
square feet were signed in 1996, the Partnership was unable to
release 2,400 square feet vacated by two tenants who did not
renew their leases. Leases representing 15% of the project
expire in 1997.
The property continues to compare favorably to the Kent Valley
industrial market, which remains relatively strong overall. In
1996 there was a slight decline in the average occupancy level to
95% versus 96% the previous year due to increased construction.
Total square footage in the submarket is approximately 70 million
square feet. Although additional construction is expected to
occur in 1997, occupancy and rental rates at Kent Sea Park should
remain relatively stable near term as much of the new
construction is expected to be designed for larger tenants than
those which exist at the property.
Employees
The Partnership has no employees and, accordingly, the General
Partner, the Partnership's investment adviser, LaSalle, and their
affiliates and independent contractors perform services on behalf
of the Partnership in connection with administering the affairs
of the Partnership and operating properties for the Partnership.
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 interests in the properties referred to
under Item 1. above, to which reference is made for the name,
location and description of each property. All properties were
acquired on an all-cash basis.
<PAGE>10
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal
proceedings.
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
There were 4,657 Limited Partners as of March 17, 1997. There is
no active public market for the Units. However, in the fourth
quarter of 1996, one bidder, who is not affiliated with the
General Partner or LaSalle, made a tender offer for the Units, at
a price of $22 per Unit, less the amount per Unit of
distributions declared or paid during a specified period. As of
February 28, 1997, sales of 11,323 Units to the bidder pursuant
to the tender offer have been presented for processing.
The Partnership had a reinvestment plan, which was terminated in
August of 1996. As of the termination of the plan, 167,874
additional Units had been sold at prices ranging from $31 to $50
per Unit, for a total of $6,947,000. Pursuant to the
Partnership's Redemption Plan, 95,050 Units have been redeemed as
of March 17, 1997 for a total of $3,287,000. As of March 17,
1997 there were 765,422 Units outstanding.
The Partnership has a redemption plan, whereby Limited Partners
have the opportunity to present some or all of their Units to the
Partnership for redemption, and to have those Units redeemed
provided the Partnership then has sufficient proceeds from the
reinvestment plan available for this purpose. Under the
redemption plan, the redemption price per Unit is 90% of the
estimated fair market value of a Unit as determined from time to
time. Completed redemption requests must be received in good
order by the Partnership at least 60 days prior to the end of a
quarter for the Units to qualify for redemption at the end of
that quarter. In addition, redemptions will only be permitted if
at least one of the following conditions is satisfied: (i) total
redemptions and transfers (other than Excluded Transfers, as
defined below) during the Partnership's fiscal year do not exceed
5% of the Units outstanding; (ii) total redemptions and transfers
(other than Excluded Transfers) during the Partnership's fiscal
year do not exceed 10% of the Units outstanding and total
transfers (other than redemptions and Excluded Transfers) do not
exceed 2% of Units outstanding; or (iii) the General Partner has
<PAGE>11
received an opinion of counsel satisfactory to the General
Partner or a favorable Internal Revenue Service ("IRS") ruling
that such transfer will not result in the Partnership being
classified as a "publicly traded partnership" for such year. As
of March 17, 1997, 2,329 Units had been redeemed in 1997 for a
total of $63,504. The plan may be terminated by the General
Partner at any time.
In 1987, the IRS 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 IRS 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. However, in the
event the transfer of Units presented for transfer within a tax
year of the Partnership could cause the partnership to be treated
as a "publicly traded partnership" for federal tax purposes, the
General Partner will accept such transfers only after receiving
from the transferor or the transferee an opinion of reputable
counsel satisfactory to the General Partner that the recognition
of such transfers will not cause the Partnership to be treated as
a "publicly traded partnership" under the Internal Revenue Code
of 1986, as amended. The General Partner is closely monitoring
this situation in light of the recent tender offer.
Cash distributions declared to the Limited Partners during the
two most recent fiscal years are as follows:
Distribution Amount of
for the Distributions
Quarter Ended per Unit
March 31, 1995 0.47
June 30, 1995 0.47
September 30, 1995 0.47
December 31, 1995 0.47
March 31, 1996 0.40
June 30, 1996 0.40
September 30, 1996 2.93
December 31, 1996 0.75
<PAGE>12
All of the foregoing distributions were paid from cash flows from
operating activities, with the exception of the distribution for
the quarter ended September 30, 1996 which included $2.53 per
Unit from the proceeds of the sale of Fairchild Corporate Center.
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.
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations, below, for a
discussion of the Partnership's ability to continue to make
future distributions.
At the end of 1996, the Partnership conducted its annual formal
unit valuation. The valuation of the Partnership's properties was
performed by the General Partner, and then reviewed by an
independent professional appraiser to assess the analysis and
assumptions utilized. The estimated investment value of limited
partnership Units resulting from this process was $31.05 per
Unit. After adjusting for the February 1997 distribution, the
estimated value is $30.30. In general, Units cannot currently 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 sets forth a summary of the selected financial data
for the Fund:
(Dollars in thousands except per-unit amounts)
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Total assets $22,717 $25,585 $26,206 $32,652 $33,129
at year-end
Total revenues $3,465 $3,706 $4,112 $4,230 $3,959
Net income $415 $1,044 $1,095 $1,358 $725
Net income
per Unit $.53 $1.35 $1.45 $1.80 $0.97
Cash distributions
declared per Unit 4.48 $1.88 $11.25 $2.57 $2.79
Notes:
<PAGE>13
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 for Net income include permanent value
impairments of $1,099,000 in 1996 and $733 in 1994 and valuation
allowances (recoveries) of $(3) in 1994, $75 in 1993 and $510 in
1992, and gain from the sale of the Partnership's interest in
Fairchild Corporate Center of $582 in 1996, and from the sale of
the Metropolitan Industrial property of $577 in 1994.
3. The figures above for Net income (loss) per Limited Partner
Unit include permanent value impairments of $1.42 per Unit in
1996 and $0.97 per Unit in 1994, and valuation allowances
(recoveries) of $(.01) per Unit in 1994, $0.10 per Unit in 1993
and $0.68 per Unit in 1992. Also includes gain from the sale of
Fairchild Corporate Center of $.75 per Unit in 1996, and gain
from sale of the Metropolitan Industrial Building of $0.77 per
Unit in 1994.
Item 7. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Liquidity and Capital Resources
The Partnership originally sold 692,598 Units in connection with
the public offering of Units, for a total of $34,630,000,
including the contribution of $25,000 from the Initial Limited
Partner. After deduction of organizational and offering costs of
$2,078,000, the Partnership had $32,552,000 available for
investment and cash reserves.
The public offering of Units was terminated on September 30,
1988, and additional Units will be sold only in connection with
the Partnership's reinvestment plan. As of August, 1996, when
the plan was terminated, additional capital in the amount of
$6,947,000 had been raised from cash distributions reinvested and
167,874 Units issued in connection therewith. Of this amount
$2,861,000 has been used to redeem Units. The remaining funds
from the reinvestment plan will be used, to the extent necessary,
to repurchase Units in connection with the Partnership's
redemption plan; the balance will be available for investment in
real estate or for cash reserves.
The Partnership originally purchased six properties or interests
therein on an all-cash basis, and made an investment in an
interest in a participating mortgage loan, completing the initial
acquisition phase of its business plan. Through December 31,
1996 the Partnership had sold two property investments: the
Metropolitan Industrial property and Fairchild Corporate Center,
in which the Partnership had a 20% interest.
<PAGE>14
As of December 31, 1996 the cost of the Partnership's remaining
real estate investments, including subsequent improvements, was
$26,356,000. The Partnership has also recorded provisions for
value impairments in connection with these properties totaling
$1,832,000. In recording the new carrying basis for these
properties, in accordance with Statement of Financial Accounting
Standards No. 121, which was adopted in 1996, the Partnership
offset the properties' accumulated depreciation balances,
totaling $1,293,000 against their historical cost. Accumulated
depreciation and amortization after this reclassification equals
$3,050,000. Therefore, investment in real estate for financial
reporting purposes including properties held for sale, after
accumulated depreciation, amortization and valuation allowances,
was $20,181,000 as of December 31, 1996.
The Partnership expects to incur capital expenditures during 1997
totaling approximately $400,000 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, including a substantial
portion for the renovation of the large vacant space at
Tierrasanta. While the percentage of leases expiring is lower
than in 1996, the Partnership's business plan now calls for the
disposition of all of its real estate investments by the end of
1998. In order to strategically position the properties for
sale, the Partnership will place greater emphasis on entering
into longer-term leases with creditworthy tenants. This strategy
is likely to result in higher leasing commission and tenant
improvement costs, but should result in higher sales prices for
the properties than would otherwise be the case.
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 1997 will be adequate to fund the
Partnership's current investing and operating needs. Based on
current expectations, cash distributions to partners from
operating income are expected to be lower than those in 1996,
because the Partnership no longer owns the Fairchild Corporate
Center property, which contributed $597,000 to 1996 net income,
and because the Partnership may dispose of additional properties
during 1997. In 1997, management will determine cash
distributions from operations each quarter based on net cash
flows for the quarter, money needed to operate the properties and
pay Partnership expenses, and anticipated capital needed to
repair and maintain the properties and make occupancy related
tenant improvements.
<PAGE>15
As of December 31, 1996, the Partnership maintained cash and cash
equivalents aggregating $1,769,000, substantially unchanged from
the prior year end. Net cash provided by investing activities
increased by $2,146,000 due primarily to the Fairchild Corporate
Center sale in 1996. Net cash used in financing activities
increased by $1,724,000 due primarily to distribution of the
proceeds of the Fairchild Corporate Center sale, the termination
of the reinvestment plan, and an increase in the number of Units
redeemed.
Operations
1996 v. 1995
The Partnership had a loss of $167,000 from operations in 1996,
before the gain on the Fairchild Corporate Center sale, compared
with net income of $1,044,000 in 1995. This difference is
primarily due to a downward property valuation adjustment at
Tierrasanta of $1,099,000 accompanied by an decreased
contribution to income of $105,000 from Westbrook Commons. While
conditions in the market where Tierrasanta is located are
generally improving, the shortened anticipated holding period due
to the Partnership's disposition plans caused it to adjust the
carrying value downward.
Revenues from rental income and interest totaled $3,465,000 for
the year compared with $3,706,000 a year earlier. This
comparison was negatively affected by the absence of a full
year's rental income from the Fairchild Corporate Center.
Results were helped by a decline of $129,000 in operating
expenses before valuation adjustments during the year, largely
due to a decrease in bad debt expenses at Goshen Plaza.
Leases representing 9% of the portfolio's leasable square footage
are scheduled to expire in 1997. These leases represent
approximately 11% of the portfolio's rental income for 1996.
This amount of potential lease turnover is below 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 1996. Management anticipates
that occupancy levels will generally remain level or increase in
1997. In most markets, new leases are generally expected to
reflect level to higher market rental rates in comparison to the
rates of expiring leases. To the extent that the Partnership
sells one or more properties during the year, cash flow from
operations would be expected to decline while cash flows from
sales would increase substantially.
The Burnham property is the only single-tenant property in the
Partnership's portfolio, and no single tenant accounted for more
than 10% of the Partnership's revenue in 1996. The Partnership
therefore does not expect any material adverse effect on revenue
on account of the failure of any single tenant in 1997.
<PAGE>16
1995 v. 1994
Net income from operations in 1995 was $1,044,000, an increase of
$526,000 from 1994 (before gain on real estate sold). Properties
held throughout both years contributed $675,000 over 1994
operations. Metropolitan contributed $149,000 to net income
before its sale in 1994 but nothing in 1995. The effect of
increased bad debt expense in 1995 at Goshen Plaza, Kent Sea
Park, and Tierrasanta was more than offset by not having any
valuation adjustments that year compared with $730,000 in 1994.
The absence of operations at Metropolitan accounted for a decline
of $379,000 in revenues and $230,000 in expenses in 1995 relative
to 1994. Proceeds from the sale of Metropolitan in June 1994
contributed a gain of $577,000 to net income in 1994.
The leased status of the portfolio at the end of 1995 was the
same as it was in 1994, but the average for the year was lower,
primarily driven by Goshen Plaza and Fairchild Corporate Center.
Even so, revenue gains at other properties offset the effect of
the declines at these two properties.
Within the expense categories, management fees experienced a
sharp drop from 1994 primarily because there was less cash
available for distribution in 1995.
The cash position declined from the beginning of year level. Cash
from operating activities declined by $325,000 during the year,
and capital improvements increased $343,000. Proceeds from
dividend reinvestments net of redemptions increased $540,000.
The Partnership's net income of $1,044,000 for 1995 equates to
$1.35 per share compared with $1,095,000, or $1.45 per share, in
1994.
Reconciliation of Financial and Tax Results
For 1996, the Partnership's book net income was $415,000 and its
taxable loss was $2,084,000. The loss for tax purposes on the
Fairchild Corporate Center sale was the primary reason for the
difference. For 1995, the Partnership's book net income was
$1,044,000 and its taxable income was $1,414,000. Interest on
the loan secured by Fairchild Corporate Center, which was
recognized only for tax purposes, and bad debt expense, which was
recognized only for book purposes, were the primary differences
between the two. For 1994, the Partnership's book net income was
$1,095,000 and its taxable income was $2,167,000. The gain for
tax purposes on the sale of the Metropolitan Industrial property
was the primary reason for the difference. For a complete
reconciliation see Note 7 to the Partnership's financial
statements, which note is hereby incorporated by reference
herein.
<PAGE>17
Item 8. Financial Statements and Supplementary Data
The financial statements appearing on pages 5 through 12 of the
Partnership's 1996 Annual Report to Limited Partners are
incorporated by reference in this Form 10-K Annual Report. The
report on such financial statements of KPMG Peat Marwick LLP
dated January 27, 1997, is filed as Exhibit 99(c) to this form
10-K Annual Report and is hereby incorporated by reference
herein. Financial Statement Schedule III, Consolidated Real
Estate and Accumulated Depreciation, is filed as Exhibit 99(b) to
this Form 10-K Annual Report, and is 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 Partnership
The General Partner of the Partnership is T. Rowe Price Realty
Income Fund IV Management, Inc. ("RIF IV 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. RIF IV 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 I Management, Inc., T.
Rowe Price Realty Income Fund II Management, Inc., and T. Rowe
Price Realty Income Fund III Management, Inc. are the General
Partners of other real estate limited partnerships sponsored by
Associates. Real Estate Group is investment manager to T. Rowe
Price Renaissance Fund, Ltd., a Sales-Commission-Free Real Estate
Investment ("Renaissance Fund"), a real investment trust
sponsored by Associates. Associates was founded in 1937 and as
of December 31, 1996 managed over $99 billion in assets.
The directors and executive officers of Fund IV Management are as
follows:
<PAGE>18
Position with T. Rowe Price Realty
Name Income Fund IV Management, Inc.
James S. Riepe Chairman of the Board, President,
also Principal Executive Officer
for the Partnership
Henry H. Hopkins Vice President and Director
Lucy B. Robins Vice President and Secretary
Mark B. Ruhe Vice President
Alvin M. Younger, Jr. Treasurer and Director
Kenneth J. Rutherford Vice President
Joseph P. Croteau Controller and Director, also
Principal Financial Officer for
the Partnership
Mark S. Finn Chief Accounting Officer for the
Partnership
Mr. Riepe was elected President in 1991. Mr. Ruhe was first
elected Vice President in 1988. Mr. Croteau was first elected as
Controller in 1988 and as a director in 1996, and was designated
as Principal Financial Officer for the Partnership in 1992. Mr.
Rutherford was first elected Vice President in 1994. Mr. Finn
was designated as Chief Accounting Officer in 1996. In all other
cases these individuals have served in these capacities since the
inception of Fund IV Management in November, 1987. 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 Managing Director and
Director, T. Rowe Price Associates, Inc. ("Associates") and
Director of its Investment Services Division; President and
Chairman of Real Estate Group and each of the general partners of
T. Rowe Price Realty Income Fund I, A No-Load Limited Partnership
("RIF I"), RIF II, and RIF III,(the "Realty Income Funds");
Chairman of six of the 42 mutual funds sponsored by Associates on
which he serves as a director or trustee; Chairman of New Age
Media Fund; Director, Rhone-Poulenc Rorer, Inc., a
pharmaceuticals company.
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 each of the general
partners of the Realty Income Funds. He is also a Vice President
certain of the mutual funds managed by Associates. Mr. Hopkins
joined Associates in 1972.
Lucy B. Robins (Born 1952) is Vice President and
Associate Legal Counsel of Associates and Vice President of Real
Estate Group and each of the general partners of the Realty
Income Funds. Ms. Robins joined Associates in 1986.
<PAGE>19
Mark B. Ruhe (Born 1954) is an Asset Manager for Real
Estate Group, and Vice President of the Investment Manager and
each of the general partners of the Realty Income Funds. Mr.
Ruhe joined Associates in 1987.
Alvin M. Younger, Jr. (Born 1949) is Treasurer and
Director of each of the general partners of the Realty Income
Funds and a Managing Director, Secretary and Treasurer of
Associates, and Secretary and Treasurer of Real Estate Group.
Mr. Younger joined Associates in 1973.
Kenneth J. Rutherford (Born 1963) is Marketing Manager
for Associates since 1996 and Vice President of each of the
general partners of the Realty Income Funds. Mr. Rutherford
joined Associates in 1992. From 1992 to 1996 he was Assistant to
the Director of Associates' Investment Services Division. From
1990 to 1992 he was a student at the Stanford Graduate School of
Business.
Joseph P. Croteau (Born 1954) is a Vice President and
Controller of Associates, and Director and Controller of each of
the general partners of the Realty Income Funds. Mr. Croteau
joined Associates in 1987.
Mark S. Finn (Born 1963) is an Assistant Vice President
of Associates, and Chief Accounting Officer of the Realty Income
Funds and the Renaissance Fund. Mr. Finn joined Associates in
1990.
No Forms 3, or Forms 4, or amendments to either of them, were
furnished to the Partnership for its most recent fiscal year.
Based on a review of Forms 5 furnished the Partnership for its
most recent fiscal year and 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, if
any, 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 executive officers of the General Partner
receive no current or proposed remuneration from the Partnership.
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 "Income and Losses and
Cash Distributions" of the Prospectus, on pages 6-7 and 31-34
respectively, which pages are incorporated herein by reference.
For a discussion of compensation and fees to which the General
Partner is entitled, see Item 13., which is incorporated herein
by reference.
<PAGE>20
As discussed in Item 1, above, LaSalle receives reimbursement
from the Partnership for certain expenses incurred in performance
of its responsibilities under the advisory contract. 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.
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 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 issues 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 February 1, 1997,
the directors and officers of the General Partner, as a group,
beneficially owned 4.77% of the common stock of Associates,
including options to purchase 336,000 shares exercisable within
60 days of February 1, 1997, and shares as to which voting power
is shared with others. Of this amount, Mr. Riepe owned 2.34% of
such stock (1,380,978 shares, including 106,400 shares which may
be acquired by Mr. Riepe upon the exercise of stock options,
140,000 shares held in trusts for members of Mr. Riepe's family
and 40,000 shares held by a member of Riepe's family, as to which
Mr. Riepe disclaims beneficial ownership, and 82,000 shares held
in a charitable foundation of which Mr. Riepe is a trustee and as
to which Mr. Riepe has shared voting and disposition power). Mr.
Hopkins owned 1.11% (643,768 shares, including 120,800 shares
which may be acquired by Mr. Hopkins upon the exercise of stock
options). Mr. Younger owned 1% (580,000 shares, including 16,500
shares which may be acquired by Mr. Younger upon the exercise of
stock options, and 25,000 shares owned by a member of Mr.
Younger's family as to which Mr. Younger disclaims beneficial
ownership). 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.
<PAGE>21
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 6-11, which pages are hereby incorporated by
reference herein.
In 1996, 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 in the amount of
$74,000. The General Partner's management fee in 1996 was
$191,000 and its share of cash distributions totaled $15,000. An
affiliate of the General Partner received a fee of $3,000 from
the money market mutual funds in which the Partnership made its
interim cash investments in 1996.
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:
(1) Financial Statements:
Incorporated by reference from the indicated pages of the
Partnership's 1996 Annual Report to Limited Partners:
Page
Consolidated Balance Sheets at 5
December 31, 1996 and 1995
Consolidated Statements of Operations 6
for each of the three years in
the period ended December 31, 1996
Consolidated Statements of Partners' Capital 7
for each of the three years in the
period ended December 31, 1996
Consolidated Statements of Cash Flows for 8
each of the three years in the period
ended December 31, 1996
Notes to Consolidated Financial Statements 9-12
Independent Auditors' Report - Incorporated by reference from
Exhibit 99(c) hereof.
(2) Financial Statement Schedules:
III - Consolidated Real Estate and Accumulated
Depreciation, incorporated by reference to Exhibit
99(b) hereof.
<PAGE>22
All other schedules are omitted because they are not
applicable or the required information is presented in
the financial statements and notes hereto.
(3) Exhibits
3, 4. (a) Agreement of Limited Partnership of the
Partnership dated November 17, 1987, as
amended and restated as of February 23, 1988,
included as Exhibit A to the Prospectus of the
Partnership, dated February 26, 1988, File
Number 33-18965, as filed with the Commission
pursuant to Rule 424(b) ("the Prospectus"),
incorporated by reference herein.
(b) Certificate of Limited Partnership,
incorporated by reference to Exhibit 3,4(b) to
the Partnership's Registration Statement, File
No. 33-19865, as filed on December 9, 1987.
(c) Amendment No. 5 to Amended and Restated
Limited Partnership Agreement, incorporated by
reference to Exhibit 3,4(g) to Post-Effective
Amendment No. 1 to the Partnership's
Registration Statement, File No. 33-18965,
filed on February 25, 1988 ("Post-Effective
Amendment No. 1").
10. (a) 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(c) of the registrant's report on
Form 10-K for the year ended December 31,
1991.
13. Annual Report for the year ended December 31, 1996,
distributed to limited partners on or about March 10,
1997.
24. Accountants' Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule
99. (a) Pages 6-11, 17-24 and 31-34 of the Prospectus
of the Partnership dated July 15, 1991,
incorporated by reference to Exhibit 99(a) of
the registrant's report on Form 10-K for the
year ended December 31, 1994, File Number
0-17636
(b) Financial Statement Schedule III -
Consolidated Real Estate and Accumulated
Depreciation.
<PAGE>23
(c) Report of KPMG Peat Marwick LLP dated
January 27, 1997 regarding the financial
statements of the Partnership.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed for the
last quarter of the period covered by this report.
(1) Report on Form 8-K dated January 17, 1997
regarding the valuation of the Partnership's
Units.
<PAGE>24
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: March 27, 1997 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
By: /s/James S. Riepe
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: March 27, 1997
James S. Riepe,
Director and Chairman of
the Board, President
T. Rowe Price Realty Income
Fund IV Management, Inc.,
Principal Executive Officer
for the Partnership
/s/Henry H. Hopkins Date: March 27, 1997
Henry H. Hopkins,
Director and Vice President,
T. Rowe Price Realty Income
Fund IV Management, Inc.
/s/Alvin M. Younger, Jr. Date: March 27, 1997
Alvin M. Younger, Jr.,
Director and Treasurer,
T Rowe Price Realty Income
Fund IV Management, Inc.
<PAGE>25
/s/Joseph P. Croteau Date: March 27, 1997
Joseph P. Croteau, Controller,
Director and Principal
Financial for the Partnership
/s/Mark S. Finn Date: March 27, 1997
Mark S. Finn
Chief Accounting Officer for
the Partnership
T. Rowe Price Realty Income
Fund IV Management, Inc.<PAGE>
The Annual Report to Limited Partners for
the Year ended December
31, 1996 should be inserted here.
ANNUAL REPORT
FOR THE PERIOD ENDED
DECEMBER 31, 1996
FELLOW PARTNERS:
Now that we have initiated the disposition phase of your Fund,
the amount of your distributions and the estimated value of a
Fund unit will be influenced more by sales than by operations. As
a result, we thought it appropriate to begin this report by
providing you with the estimated unit value of the Fund and then
with a report on your fourth quarter distribution.
At this stage of your Fund's life cycle, our primary focus
is shifting from the production of income to the strategic
positioning of Fund properties to maximize potential sales
proceeds.
Unit Valuation
As you know, at the end of each year we employ a third-party
appraiser to review and assess the analysis and assumptions used
to prepare an estimated current value of the properties held in
your Fund. We then use these valuations to prepare an estimated
unit value, which may not be representative of the value of your
units when the Fund ultimately liquidates. Nor is there any
assurance that you could sell your units today at a price equal
to the current estimated value.
At December 31, 1996, the estimated unit value of the Fund
was $31.05. After adjusting for our February distribution of
$0.75, the value per unit is $30.30. Total appreciation for the
year, including net appreciation on the property sold, is 5.9%.
As you may recall, we mailed this information to you in a
letter dated January 22, 1997, in response to the offerings made
to you by other investors. While we cannot assure that you will
ultimately receive the exact amount of the estimated unit value,
we believe our valuation process has been sound, and we want you
to be as well-informed as possible about the value of your
investment. Our objective is to supply you with the information
you need to make the best decisions based on your particular
circumstances.
Real Estate Investments (Dollars in thousands)
_________________________________________________________________
Average Contribution
Leased Status Leased Status to Net Income
___________ _____________ ____________
Gross Twelve Twelve
Leasable Months Ended Months Ended
Property Area December 31, December 31, December 31,
Name (Sq. Ft.) 1996 1995 1996 1995 1996
_________ __________ __________ _____ _____ _____ _____
Tierrasanta 104,200 62% 75% 87% $ 113 $(976)
Goshen Plaza 45,500 88 84 81 80 143
Westbrook
Commons 121,600 98 98 96 472 367
Burnham
Building 71,200 100 100 100 199 181
Kent Sea Park 138,200 95 97 99 341 355
________ ____ ____ ____ _____ ______
480,700 89 92 94 1,205 70
Properties Sold - - - - 31 597
Fund Expenses
Less Interest
Income - - - - (192) (252)
________ ____ ____ ____ _____ ______
Total 480,700 89% 92% 94% $1,044 $ 415
Cash Distributions
The Fund declared a fourth quarter distribution from
operations of $0.75 per unit, bringing the total distributions
from operations for the year to $1.95. Additionally, $2.53 per
unit was paid out to you during the year from sales proceeds for
the Fund's 20% share of Fairchild, resulting in total
distributions of $4.48 per unit for 1996. Future distributions
will be determined each quarter based on cash flow, anticipated
capital requirements, and the status of property dispositions.
Results of Operations
The Fund had a loss of $167,000 from operations in 1996, before
the gain on property sold during the year, compared with net
income of $1,044,000 in 1995. This difference is primarily due to
a valuation impairment of $1,099,000 at Tierrasanta, accompanied
by a $105,000 decline in contribution to income from Westbrook
Commons caused by normal tenant turnover. This decline in income
from operations was partly offset by the $582,000 gain on the
sale of Fairchild. While conditions in Tierrasanta's submarket
are generally improving, the shortened anticipated holding period
due to our disposition plans caused us to adjust the carrying
value downward. Property carrying amounts for financial statement
purposes should not be confused with the estimated fair market
values used to determine your estimated unit value.
Revenues from rental income and interest income resulted in
total gross revenues of $3,465,000 for the year compared with
$3,706,000 a year earlier. This comparison was negatively
affected by the absence of a full year's rental income from
Fairchild. Results were helped by a decline of $129,000 in
operating expenses before the valuation adjustment during the
year, largely due to a decrease in bad debt expenses at Goshen
Plaza.
At the property level, the average leased status of Fund
properties increased by two percentage points to 94% in 1996. At
Westbrook Commons, three new leases, five renewals, and one
expansion lease were signed during the year. Previously, three
tenants had not renewed, including one lost due to credit
reasons. The lower average leased status at this property was
temporary and the property remains healthy.
As we reported previously, a tenant that occupied 38% of
Tierrasanta did not renew its lease, which expired at the end of
August. There is interest in the property and the market is
tightening, but several competitive properties have comparable
space available, and we cannot be sure when this space will be
re-leased.
Goshen enjoyed an increase in leased status over the year.
Three new leases and one renewal accounted for much of the boost.
New tenants in this suburban Maryland retail center include a
large restaurant, which has brought the property to near market
occupancy levels.
Outlook
Currently, the Fund has no properties held for sale, but we will
begin to market them soon. Some of you have asked why we are
beginning to sell now, just as the market has been exhibiting
signs of strengthening.
Our primary goal is to take advantage of rising property values
as the Fund nears the end of its planned lifespan. As real estate
markets have been improving during the past few years, we have
used the opportunity to capture higher prices for investors.
As usually happens in improving markets, the turnaround in
real estate is broadly encouraging an increasing supply of new
properties, which could eventually lead to an oversupply and
softer prices down the road. This is normal as the real estate
cycle runs its course. While we do not expect a recession in
either real estate or the general economy to emerge in the near
future, the country's economic expansion is almost six years old
and is approaching an advanced stage, by historical measures.
It is possible that by selling Fund properties during the
next few years, we might miss some further advances in real
estate values. However, with prices currently rising due to
strong tenant and investor demand, supply growing in many
markets, and the Fund nearing the end of its planned lifespan, we
believe it is prudent to sell into that strength while prices are
on the upswing.
Sincerely,
James S. Riepe
Chairman
February 7, 1997
REAL ESTATE HOLDINGS
December 31, 1996
(In thousands)
Date Carrying
Property Name Type and Location Acquired Amount
_______________ ________________ _________ ________
Tierrasanta Business Park 5/88 $ 2,303
San Diego,
California
Goshen Plaza Retail 11/90 6,146
Gaithersburg,
Maryland
Westbrook Retail 12/90 4,897
Commons Westchester,
Illinois
Burnham Building Warehouse 01/91 2,225
Boca Raton,
Florida
Kent Sea Park Industrial 08/91 4,610
Kent, Washington
_______
$ 20,181
_______
_______
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
1996 1995
___________ ____________
Assets
Real Estate Property Investments
Land . . . . . . . . . . . . . . . $ 7,413 $ 8,502
Buildings and Improvements. . . . . 15,818 18,295
________ ________
23,231 26,797
Less: Accumulated Depreciation and
Amortization . . . . . . . . . . (3,050) (3,848)
________ ________
20,181 22,949
Cash and Cash Equivalents. . . . . . 1,769 1,733
Accounts Receivable (less
allowances of $28
and $367) . . . . . . . . . . . . . 525 623
Other Assets . . . . . . . . . . . . 242 280
________ ________
$ 22,717 $ 25,585
________ ________
________ ________
Liabilities and Partners' Capital
Security Deposits and
Prepaid Rents . . . . . . . . . . . $ 209 $ 200
Accrued Real Estate Taxes. . . . . . 358 353
Accounts Payable and
Other Accrued
Expenses. . . . . . . . . . . . . . 270 234
Minority Interest. . . . . . . . . . 688 688
________ ________
Total Liabilities. . . . . . . . . . 1,525 1,475
Partners' Capital. . . . . . . . . . 21,192 24,110
________ ________
$ 22,717 $ 25,585
________ ________
________ ________
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per-unit amounts)
Years Ended December 31,
1996 1995 1994
_________ __________________
Revenues
Rental Income. . . . . . . . $ 3,366 $ 3,616 $ 3,950
Interest Income. . . . . . . 99 90 162
_______ _______ _______
3,465 3,706 4,112
_______ _______ _______
Expenses
Property Operating
Expenses . . . . . . . . . 709 940 823
Real Estate Taxes. . . . . . 568 589 635
Depreciation and
Amortization . . . . . . . 745 786 873
Decline of Property
Values . . . . . . . . . . 1,099 - 730
Management Fee to General
Partner. . . . . . . . . . 191 85 267
Partnership Management
Expenses . . . . . . . . . 320 262 266
_______ _______ _______
3,632 2,662 3,594
_______ _______ _______
Income (Loss)
from Operations before
Real Estate Sold . . . . . (167) 1,044 518
Gain on Real Estate Sold . . 582 - 577
_______ _______ _______
Net Income . . . . . . . . . $ 415 $ 1,044 $ 1,095
_______ _______ _______
_______ _______ _______
Activity per Limited
Partnership Unit
Net Income . . . . . . . . . $ 0.53 $ 1.35 $ 1.45
_______ _______ _______
_______ _______ _______
Cash Distributions Declared
from Operations. . . . . . $ 1.95 $ 1.88 $ 2.62
as Return of
Capital. . . . . . . . . . - - 0.78
from Sale Proceeds . . . . 2.53 - 7.85
_______ _______ _______
Total Distributions
Declared . . . . . . . . . $ 4.48 $ 1.88 $ 11.25
_______ _______ _______
_______ _______ _______
Weighted Average Number of
Units Outstanding. . . . . 773,703 766,443 747,028
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In thousands)
General Limited
Partner Partners Total
________ ________ ________
Balance,
December 31, 1993. . . . . $ (47) $31,186 $31,139
Net Income . . . . . . . . . 8 1,087 1,095
Reinvestments in
Units. . . . . . . . . . . - 792 792
Redemptions of
Units. . . . . . . . . . . - (632) (632)
Cash Distributions . . . . . (19) (7,700) (7,719)
_______ _______ _______
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
. . . . . . . . . . . . . _______ _______ _______
. . . . . . . . . . . . . _______ _______ _______
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
1996 1995 1994
_______ _______ _______
Cash Flows from Operating Activities
Net Income . . . . . . . . . . $ 415 $ 1,044 $ 1,095
Adjustments to Reconcile
Net Income to
Net Cash
Provided by Operating
Activities
Depreciation and
Amortization . . . . . . . 745 786 873
Decline of Property
Values . . . . . . . . . . 1,099 - 730
Gain on Real Estate
Sold . . . . . . . . . . . (582) - (577)
Change in Accounts
Receivable, Net
of Allowances. . . . . . . 94 (1) (139)
Change in Other
Assets . . . . . . . . . . 35 (125) (27)
Change in Accounts
Payable and
Other Accrued
Expenses . . . . . . . . . 36 (86) 24
Other Changes in
Assets and
Liabilities. . . . . . . . 14 30 (6)
_______ _______ _______
Net Cash Provided by
Operating
Activities . . . . . . . . . 1,856 1,648 1,973
_______ _______ _______
Cash Flows from Investing
Activities
Proceeds from
Property
Disposition. . . . . . . . . 1,956 - 5,870
Investments in Real
Estate . . . . . . . . . . . (443) (633) (290)
_______ _______ _______
Net Cash Provided by
(Used in)
Investing
Activities . . . . . . . . . 1,513 (633) 5,580
_______ _______ _______
Cash Flows Used in
Financing Activities
Cash Distributions . . . . . . (3,252) (2,309) (7,719)
Reinvestments in
Units. . . . . . . . . . . . 421 999 792
Redemptions of
Units. . . . . . . . . . . . (502) (299) (632)
_______ _______ _______
Net Cash Used in Financing
Activities . . . . . . . . . (3,333) (1,609) (7,559)
_______ _______ _______
Cash and Cash Equivalents
Net Increase
(Decrease)
during Year. . . . . . . . . 36 (594) (6)
At Beginning
of Year. . . . . . . . . . . 1,733 2,327 2,333
_______ _______ _______
At End of
Year . . . . . . . . . . . . $ 1,769 $ 1,733 $ 2,327
_______ _______ _______
_______ _______ _______
The accompanying notes are an integral part of the consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
T. Rowe Price Realty Income Fund IV, America's
Sales-Commission-Free Real Estate Limited Partnership (the
"Partnership"), was formed on November 17, 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 sole General
Partner. The initial offering resulted in the sale of 692,598
limited partnership units at $50 per unit.
The Partnership had a reinvestment plan whereby the Limited
Partners could elect to have their cash distributions automatically
reinvested in additional units of the Partnership, or fractions
thereof, instead of receiving cash payments. The reinvestment price
per unit was the estimated fair market value of the unit as
determined by the General Partner in accordance with the
partnership agreement. During 1996, the reinvestment program was
terminated. A total of 167,874 units were purchased under this
plan from reinvestments of $6,947,000.
The Partnership has a redemption plan whereby Limited Partners
may request that the Partnership redeem their units. Since
September 30, 1992, the redemption price of a unit has been equal
to 90% of the estimated fair market value of a unit as determined
by the General Partner in accordance with the partnership
agreement. As of December 31, 1996, 92,722 units had been redeemed
under this plan for a total of $3,227,000.
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 1% and 99%, respectively. Sale or refinancing proceeds are
generally allocated first to the Limited Partners in an amount
equal to their capital contributions, next to the Limited Partners
to provide specified returns on their adjusted capital
contributions, next 3% to the General Partner, with any remaining
proceeds allocated 85% to the Limited Partners and 15% to the
General Partner. Gain on property sold is generally allocated first
between the General Partner and Limited Partners in an amount equal
to the depreciation previously allocated from the property and then
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.
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 accompanying consolidated financial statements include the
accounts of the Partnership and its pro-rata share of the accounts
of Tierrasanta 234 and Penasquitos 34 (Westbrook Commons), both of
which are California general partnerships, in which the Partnership
has 40% and 50% interests, respectively. They also include the
Partnership's pro-rata share of the accounts of Fairchild 234, a
California general partnership in which the Partnership had a 20%
interest prior to disposition of the property on August 28, 1996.
The other partners in these ventures are affiliates of the
Partnership. Additionally, the accounts of Goshen Road Limited
Partnership, a Maryland limited partnership in which the
Partnership has a 90% controlling general partnership interest have
been consolidated. All intercompany accounts and transactions have
been eliminated in consolidation.
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 $34,000, $269,000, and $102,000 were recorded in
1996, 1995, and 1994, respectively. Bad debt expense is included in
Property Operating Expenses.
The Partnership will review its real estate property
investments for impairment whenever events or changes in
circumstances indicate that the property carrying amounts may not
be recoverable. Such a review results 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 are less than the
property's net carrying value. The General Partner believes that
the estimates and assumptions used in evaluating the carrying value
of the Partnership's properties are appropriate; however, changes
in market conditions and circumstances could occur in the near term
which would cause these estimates to change.
Rental income is recognized 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 $188,000 and $192,000 at
December 31, 1996 and 1995, 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 consolidated financial statements.
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES
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 partnership management fees of $191,000, $85,000, and
$267,000 in 1996, 1995, and 1994, respectively. In addition, the
General Partner's share of cash available for distribution from
operations, as discussed in Note 1, totaled $15,000, $15,000, and
$20,000 in 1996, 1995, and 1994, 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 $74,000,
$58,000, and $55,000 for communications and administrative services
performed on behalf of the Partnership during 1996, 1995, and 1994,
respectively.
An affiliate of the General Partner earned a normal and
customary fee of $3,000, $6,000, and $17,000 from the money market
mutual funds in which the Partnership made its interim cash
investments during 1996, 1995, and 1994, respectively.
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 $80,000.
An affiliate of LaSalle earned $84,000, $78,000, and $73,000
in 1996, 1995, and 1994, respectively, for property management fees
and leasing commissions on tenant renewals and extensions at
several of the Partnership's properties.
NOTE 4 - PROPERTY DISPOSITIONS
In June 1994, the Partnership sold Metropolitan Industrial and
received net proceeds of $5,870,000. The net book value of this
property at the time of disposition was $5,293,000, after
accumulated depreciation expense. Accordingly, the Partnership
recognized a gain of $577,000. Results of operations at the
property were $149,000 in 1994.
On August 28, 1996, Fairchild Corporate Center, an office
property in which the Partnership had a 20% interest, was sold.
The Partnership received net proceeds of $1,956,000. The net book
value of the Partnership's interest at the date of sale was
$1,374,000, after deduction of accumulated depreciation, and
previously recorded impairments. Accordingly, the Partnership
recognized a $582,000 gain on the sale of this property. Income
from operations for this property, before the gain on real estate
sold, was $15,000, $31,000, and $82,000 in 1996, 1995, and 1994,
respectively.
NOTE 5 - PROPERTY VALUATIONS
On January 1, 1996, 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 changed the Partnership's 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 is now based on the
estimated fair value of the property, which becomes the property's
new cost basis, rather than the sum of expected future cash flows.
Properties held for sale continue to be reflected at the lower of
historical cost or estimated fair value less anticipated selling
costs. In addition, properties held for sale are no longer
depreciated.
Based upon a review of current market conditions, estimated
holding period, and future performance expectations of each
Partnership property, the General Partner has determined that the
net carrying value of Tierrasanta may not be fully recoverable from
future operations and disposition, and recognized impairment
charges of $1,099,000 in 1996 and $730,000 in 1994.
NOTE 6 - LEASES
Future minimum rentals (in thousands) to be received by the
Partnership under noncancelable operating leases in effect at
December 31, 1996, are:
1997 $ 2,227
1998 1,840
1999 1,242
2000 891
2001 677
Thereafter 3,841
_______
Total $10,718
_______
_______
NOTE 7 - 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 reporting and federal income
tax purposes. These differences are summarized below for the last
three years:
1996 1995 1994
___________________ ________
(In thousands)
Book net income
(loss) . . . . . . . . . . $ 415 $ 1,044 $ 1,095
Allowance for
doubtful accounts. . . . . (320) 246 74
Property valuation
and losses on
disposition. . . . . . . . (2,218) - 730
Normalized and
prepaid rents . . . . . . 44 (93) (65)
Interest income. . . . . . . - 252 254
Other items. . . . . . . . . (5) (35) 79
________ ________ ________
Taxable income
(loss) . . . . . . . . . . $(2,084) $ 1,414 $ 2,167
________ ________ ________
________ ________ ________
NOTE 8 - SUBSEQUENT EVENT
The Partnership declared a quarterly cash distribution of $.75 per
unit to Limited Partners of the Partnership as of the close of
business on December 31, 1996. The Limited Partners will receive
$576,000, and the General Partner will receive $6,000.
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 accompanying 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
December 31, 1996 and 1995, and the related consolidated statements
of operations, partners' capital and cash flows for each of the
years in the three-year period ended December 31, 1996. 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 from 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 principles 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 December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
January 27, 1997
ACCOUNTANTS' CONSENT
To the Partners
T. Rowe Price Realty Income Fund IV,
America's Sales-Commission-Free Real Estate Limited
Partnership:
We consent to incorporation by reference in the registration
statement (No. 33-45405) on Form S-3 of T. Rowe Price Realty
Income Fund IV, America's Sales-Commission-Free Real Estate
Limited Partnership of our report dated January 27, 1997,
relating to 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 December 31, 1996 and 1995, and the related consolidated
statements of operations, partners' capital, and cash flows
and related schedule for each of the years in the three-year
period ended December 31, 1996, which report appears in the
December 31, 1996 Annual Report on Form 10-K of T. Rowe Price
Realty Income Fund IV, America's Sales-Commission-Free Real
Estate Limited Partnership and to the reference to our firm
under the heading "Experts" in the prospectus, which is a
part of the registration statement.
Chicago, Illinois
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the unaudited condensed 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-K for the year ended
December 31, 1996 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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,769,000
<SECURITIES> 0
<RECEIVABLES> 553,000
<ALLOWANCES> 28,000
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 23,231,000
<DEPRECIATION> 3,050,000
<TOTAL-ASSETS> 22,717,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,192,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 22,717,000
<SALES> 0
<TOTAL-REVENUES> 3,465,000
<CGS> 0
<TOTAL-COSTS> 3,632,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 415,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 415,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 415,000
<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 $0.53.
</FN>
<PAGE>1
T. Rowe Price Realty Income Fund IV
America's Sales-Commission-Free Real Estate Limited
Partnership Consolidated Real Estate and Accumulated
DepreciationDecember 31, 1996
Dollars in Thousands (000's)
Description Type Encumbrances
Properties Held for Real
Estate Investment
Tierrasanta Business Park $0
San Diego, California
Goshen Plaza Retail 0
Montgomery City, MD
Westbrook Commons Retail 0
Westchester, Illinois
Burnham Building Warehouse 0
Boca Raton, Florida
Kent Sea Park Business Park 0
Kent, Washington
_________
Portfolio Totals $ 0
<PAGE>
Initial Cost
Costs
Capitalized
Buildings and Subsequent to
Description Land Improvements Acquisition(1,4)
Properties Held for Real
Estate Investment
Tierrasanta (1) $ 1,800 $ 3,201 $ (2,698)
San Diego, California
Goshen Plaza 2,540 4,495 140
Montgomery City, MD
Westbrook Commons 1,700 3,415 631
Westchester, Illinois
Burnham Building 665 1,924 0
Boca Raton, Florida
Kent Sea Park 1,470 3,415 533
Kent, Washtington
_______ _______ ________
Portfolio Totals $ 8,175 $16,450 $(1,394)
<PAGE>
Gross Amounts at which Carried at Close
of Period
Buildings and
Description Land Improvements Total (2)
Properties Held for Real
Estate Investment
Tierrasanta (1) $ 1,038 $ 1,265 $ 2,303
Denver, Colorado
Goshen Plaza 2,540 4,635 7,175
Montgomery City, MD
Westbrook Commons 1,700 4,046 5,746
Westchester, Illinois
Burnham Building 665 1,924 2,589
Boca Raton, Florida
Kent Sea Park 1,470 3,948 5,418
Kent, Washington
_______ _______ ________
Portfolio Totals $ 7,413 $15,818 $23,231
<PAGE>
Accumulated Date of Date
Description Depreciation (3,4) Construction Acquired
Properties Held for Real
Estate Investment
Tierrasanta (1) $ 0 1984 05/88
San Diego, California
Goshen Plaza 1,029 1989 11/90
Montgomery City, MD
Westbrook Commons 849 1982 12/90
Westchester, Illinois
Burnham Building 364 1980 01/91
Boca Raton, Florida
Kent Sea Park 808 1972 08/91
Kent, Washington
_______
Portfolio Totals $ 3,050
<PAGE>
Life on which
Depreciation
in Latest
Statement of
Operations is
Description Computed
Properties Held for Real Estate Investment
Tierrsanta (1) 5 - 40 years
San Diego, California
Goshen Plaza 5 - 40 years
Montgomery City, MD
Westbrook Commons 5 - 40 years
Westchester, Illinois
Burnham Building 5 - 40 years
Boca Raton, Florida
Kent Sea Park 5 - 40 years
Kent, Washington<PAGE>
Notes:
(1) The Partnership recorded a provision for value impairment in
connection with Tierrasanta for $730 in 1994, and an additional value
impairment in 1996 of $1,099.
(2) Reconciliation of real estate owned for Real Estate Property
Investments:
1996 1995 1994
Balance at beginning of period $26,797 $26,273 $32,830
Additions during period 443 633 290
Property dispositions during
period (5) (1,617) -- (5,532)
Decline of Property Values (1,099) -- (1,315)
Reductions during period (4) (1,293) (109) --
_______ _______ _______
Balance at end of period $23,231 $26,797 $26,273
(3) Reconciliation of accumulated depreciation for Real Estate Property
Investments:
1996 1995 1994
Balance at beginning of period $ 3,848 $ 3,171 $ 2,537
Depreciation and amortization
expense 745 786 873
Property dispositions during
period (5) (250) -- (239)
Reductions during period (4) (1,293) (109) --
________ _______ _______
Balance at end of period $ 3,050 $ 3,848 $ 3,171
(4) Reductions during 1996 reflect the offset of accumulated
depreciation in establishing the new cost basis of Tierrasanta.
(5) The Partnership sold Metropolitan Industrial in 1994 and its
interest in Fairchild Corporate Center in 1996.
(6) Aggregate cost of real estate owned at December 31, 1996 for
Federal income tax purposes was approximately $25,156.
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 December 31, 1996 and
1995, and the related consolidated statements of operations, partners'
capital and cash flows for each of the years in the three-year period
ended December 31, 1996. In connection with our audits of the
consolidated financial statements, we also have audited the related
financial statement schedule. These consolidated financial statements
and financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion
on these consolidated financial statements and financial statement
schedule 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 principles 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
December 31, 1996 and 1995, and the results of their operations and
their cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Chicago, Illinois
January 27, 1997
