For information on your Renaissance Fund account, call:
1-800-962-8300 toll free
For information on your mutual fund account, call:
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price Real Estate Group
100 East Pratt Street
Baltimore, Maryland 21202
T. Rowe Price Renaissance Fund, Ltd.
A Sales-Commission-Free Real Estate Investment
Quarterly Report
For The Period Ended June 30, 1996
FELLOW STOCKHOLDER:
During our recent annual review of the strategic plan for the Fund, we
concluded that the alignment between (1) the fundamental operating environment
and (2) capital flows into real estate is the best it has been for a number of
years. New construction was rather stagnant, occupancy and rental rates
appeared to be stabilizing or improving, and returns on real estate
investments started to improve. Property values also began showing signs of
recovery in a number of areas. And, for reasons we will discuss later, it
appears market conditions will continue to improve over the next several
years.
The Renaissance Fund seeks investments in properties in depressed
markets which, in the opinion of LaSalle Advisors, the Fund's investment
advisor, are undervalued and have the potential for principal growth. Based on
our current market outlook, finding properties which meet the Fund's
investment criteria may be increasingly difficult to do. As a result, it is
likely that the portfolio will be liquidated over the next two to three years.
As was true when we put Buckley Square on the market last year, the timing of
individual sales will be governed by our assessment of the benefits to you of
holding versus selling immediately. Future reports will bring you up to date
on disposition developments.
Results of Operations
The improvement in net income for the three and six months ended June 30,
1996, is attributable primarily to a slight increase in rental income and
lower expenses at Buckley Square. Because the property is being sold, it is no
longer being depreciated, saving $91,000 relative to the first half of 1995.
The acquisition of Buschwood III in June of last year had the most
significant effect on revenues and expenses. The property contributed $576,000
in revenues in the first half of this year, and its expenses before interest
on the borrowing made to acquire the property were $325,000. Its contribution
to income, shown in the table on page 2, was a modest $30,000 after interest
expense. If Buckley is sold, the majority of the proceeds will be used to pay
down the loan, so we would expect Buschwood to contribute more to net income
in the future. This property is 100% leased, no leases expire during the
remainder of 1996, and its submarket remains healthy.
Of the other three properties, Gatehall's revenue stream continued to
suffer from a lower average leased status in both periods under review, while
property operating costs related to snow removal during the blizzard of '96
hurt the six-month expense comparison. The leased status declined further in
July, as a tenant representing 11% of the space did not renew. We are
encouraged, however, by leasing activity registered in the quarter just ended
and by the recovery in the Parsippany office market which is driving vacancy
rates down and rental rates up. In addition, activity at the property remains
good, with several financially strong potential tenants looking at space.
Valley Business Center is a bright spot in the portfolio. It is now 100%
leased, and we anticipate that occupancy will remain strong at this
Denver-area industrial property. Our outlook is based on a favorable market
environment as well as one tenant's desire to expand its space as leases
representing 24% of the center expire over the remainder of the year. The
importance of the Center to the portfolio is evidenced by its being the
largest holding in terms of square footage and, as shown in the table on page
2, by being second only to Buckley in its contribution to net income.
Further downsizing in the oil and gas industry and high vacancy rates in
Houston's West Loop/Galleria office submarket continue to inhibit leasing
activity at Post Oak Place. Our efforts remain focused on retaining existing
tenants and attracting new ones.
The Fund's cash position declined in the first half of the year,
primarily because of repayments on debt used to purchase Buschwood and
Gatehall.
Distributions From Operations
The dividend for the second quarter remained at the $0.15 per-share rate paid
for the first quarter. We will continue to monitor operating conditions and
the effect of any property sales to see if a change is warranted in subsequent
quarters.
Disposition Update
As we advised you in the March report, we had received an offer to buy Buckley
Square. We entered into a contract with the buyer, but were unable to resolve
contingencies to our satisfaction. We subsequently entered into negotiations
with another buyer. Once again, there is no assurance that negotiations with
this potential purchaser will be successful. If the property is eventually
sold at the price currently under discussion, it will result in a taxable gain
that must be distributed to you in order for the Fund to avoid paying taxes on
the gain. The remainder, as mentioned earlier, will be used to reduce the
Fund's debt.
Outlook
The prospects for maintaining or improving occupancy levels at all properties
except Post Oak Place are favorable. In addition, rental rates are stable or
rising in most of the markets where your properties are located. As a result,
barring any major downturn in local real estate conditions, we hope results
will reflect the more positive environment. In addition, if we are able to
reduce the Fund's debt and interest expense, it should help offset the impact
on continuing operations of the sale of Buckley Square.
Sincerely,
James S. Riepe
Chairman
August 9, 1996
<TABLE>
Real Estate Investments (Dollars in thousands)
__________________________________________________________________________________________________
Leased Average Contribution to
Status Leased Status Net Income
____________ _________________________ __________________________
Gross
Property Leasable June 30, Six Months Ended June 30, Six Months Ended June 30,
Name Area (Sq. Ft.) 1996 1995 1996 1995 1996
_____________ __________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Valley Business
Center 202,540 100% 99% 97% $ 97 $113
Post Oak Place 56,449 74 76 75 35 23
Gatehall I 113,604 82 84 73 97 (8)
Buschwood III 76,930 100 100 100 4 30
_________________________________________________________________________________
449,523 92 92 89 233 158
Held for Sale
Buckley
Square 121,602 93 93 93 158 282
________________________________________________________________________________
571,125 92 93 90 391 440
Fund Expenses
Less Interest
Income - - - - (87) (61)
_______________________________________________________________________________
Total 571,125 92% 93% 90% $304 $379
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands except share data)
June 30, December 31,
1996 1995
__________ __________
Assets
Real Estate Property Investments
Land . . . . . . . . . . . . . . . . . . . . . $ 6,037 $ 6,037
Buildings and Improvements . . . . . . . . . . 16,472 15,971
________ ________
22,509 22,008
Less: Accumulated Depreciation and
Amortization. . . . . . . . . . . . . . . . (1,735) (1,387)
________ ________
20,774 20,621
Held for Sale. . . . . . . . . . . . . . . . . 5,332 5,332
________ ________
26,106 25,953
Cash and Cash Equivalents. . . . . . . . . . . . 1,192 1,608
Accounts Receivable (less allowances of
$36 and $11). . . . . . . . . . . . . . . . 238 281
Other Assets . . . . . . . . . . . . . . . . . . 233 194
________ ________
$ 27,769 $ 28,036
________ ________
________ ________
Liabilities and Stockholders' Equity
Liabilities
Mortgage Loans Payable . . . . . . . . . . . . $ 8,730 $ 8,976
Security Deposits and Prepaid Rents. . . . . . 273 326
Accrued Real Estate Taxes. . . . . . . . . . . 192 284
Accounts Payable and Other Accrued Expenses. . 332 285
Dividends Declared . . . . . . . . . . . . . . 229 76
Minority Interest. . . . . . . . . . . . . . . 545 541
________ ________
Total Liabilities. . . . . . . . . . . . . . . . 10,301 10,488
________ ________
Stockholders' Equity
Common Stock, $.001 Par Value, Authorized
5,500,000 Shares; Issued and Outstanding
1,525,268 and 1,527,191 Shares. . . . . . . 1 1
Additional Paid-In Capital . . . . . . . . . . 18,446 18,447
Dividends in Excess of Net Income. . . . . . . (979) (900)
________ ________
Total Stockholders' Equity . . . . . . . . . . . 17,468 17,548
________ ________
$ 27,769 $ 28,036
________ ________
________ ________
See the accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands except per-share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
________ ________ ________ ________
Revenues
Rental Income. . . . . . . . . . $ 1,307 $ 1,019 $ 2,611 $ 2,092
Interest Income. . . . . . . . . 18 19 44 28
________ ________ ________ ________
1,325 1,038 2,655 2,120
________ ________ ________ ________
Expenses
Property Operating Expenses. . . 498 368 1,017 732
Real Estate Taxes. . . . . . . . 49 130 241 250
Depreciation and Amortization. . 184 232 348 393
Investment Advisory Fees . . . . 70 70 140 130
Fund Management Expenses . . . . 66 39 103 88
Interest Expense . . . . . . . . 190 90 389 177
Amortization of
Organization Costs . . . . . . - 12 - 23
Minority Interest. . . . . . . . 18 11 38 23
________ ________ ________ ________
1,075 952 2,276 1,816
________ ________ ________ ________
Net Income . . . . . . . . . . . $ 250 $ 86 $ 379 $ 304
________ ________ ________ ________
________ ________ ________ ________
Activity per Share
Net Income . . . . . . . . . . . $ 0.16 $ 0.06 $ 0.25 $ 0.20
________ ________ ________ ________
________ ________ ________ ________
Dividends Declared . . . . . . . $ 0.15 $ 0.18 $ 0.30 $ 0.36
________ ________ ________ ________
________ ________ ________ ________
Weighted Average Number of
Shares Outstanding . . . . . . 1,525,114 1,504,311 1,525,087 1,500,337
________ ________ ________ ________
________ ________ ________ ________
See the accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Unaudited
(In thousands except share data)
Additional Dividends
Common Stock Paid-In In Excess Of
Shares Amount Capital Net Income Total
______ ______ _______ __________ ________
Balance,
December 31, 1995 . . . 1,527,191 $ 1 $ 18,447 $(900) $17,548
Net Income . . . . . . . - - - 379 379
Dividend Reinvestments . 15,882 0 211 - 211
Share Repurchases. . . . (17,805) 0 (212) - (212)
Dividends Declared . . . - - - (458) (458)
________ ____ _______ _______ _______
Balance,
June 30, 1996 . . . . . 1,525,268 $ 1 $ 18,446 $ (979) $17,468
________ ____ _______ _______ _______
________ ____ _______ _______ _______
See the accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
Six Months Ended
June 30,
1996 1995
___________ ___________
Cash Flows from Operating Activities
Net Income . . . . . . . . . . . . . . . . . . . $ 379 $ 304
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and Amortization. . . . . . . . . 348 393
Amortization of Organization Costs . . . . . . - 23
Minority Interest's Share of Net Income. . . . 38 23
Other Changes in Assets and Liabilities. . . . (94) 81
________ ________
Net Cash Provided by Operating Activities. . . . 671 824
________ ________
Cash Flows Used in Investing Activities
Investments in Real Estate . . . . . . . . . . . (501) (5,721)
________ ________
Cash Flows from Financing Activities
Dividends Paid . . . . . . . . . . . . . . . . . (305) (597)
Reinvestments in Shares. . . . . . . . . . . . . 211 409
Repurchases of Shares. . . . . . . . . . . . . . (212) (115)
Minority Interest Distribution . . . . . . . . . (34) (27)
Proceeds of Mortgage Loan. . . . . . . . . . . . - 5,500
Repayment of Mortgage Loan Principal . . . . . . (246) -
________ ________
Net Cash Provided by (Used in)
Financing Activities. . . . . . . . . . . . . . (586) 5,170
________ ________
Cash and Cash Equivalents
Net Increase (Decrease) during Period. . . . . . (416) 273
At Beginning of Year . . . . . . . . . . . . . . 1,608 1,460
________ ________
At End of Period . . . . . . . . . . . . . . . . $ 1,192 $ 1,733
________ ________
________ ________
See the 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 financial statements contained in the 1995 Annual Report
to Stockholders.
NOTE 1 - TRANSACTIONS WITH RELATED PARTIES AND OTHER
Pursuant to contracts executed in 1991, the Fund pays advisory fees to T. Rowe
Price Real Estate Group, Inc. (the "Investment Manager"), an affiliate of the
Fund's Sponsor, and LaSalle Advisors Limited Partnership (the "Investment
Advisor"). The Investment Manager provides communications, cash management,
administrative, and other related services to the Fund for an advisory fee of
.45% per year of the fair market value, as defined, of the Fund's assets and
earned $66,000 for the first six months of 1996. The Investment Advisor
provides the Fund with real estate advisory, accounting, and other related
services for an advisory fee of .50% per year of the fair market value, as
defined, of the Fund's assets and earned $74,000 for the first six months of
1996. Recognition of these investment advisory fees is subject to limitations
adopted by the Fund pursuant to guidelines promulgated by the North American
Securities Administrators Association.
An affiliate of the General Partner earned a normal and customary fee of
$2,000 from the money market mutual funds in which the Partnership made its
interim cash investments during the first six months of 1996.
The Fund also reimburses the Investment Manager and Investment Advisor
for certain defined expenses incurred in operating and administering the
affairs of the Fund. Expense reimbursements for the Investment Manager and
Investment Advisor totaled $12,000 and $15,000, respectively, for the first
six months of 1996.
NOTE 2 - PROPERTY HELD FOR SALE
The Fund's previously disclosed negotiations for the sale of Buckley Square
were terminated; however, the Fund is continuing negotiations with another
potential buyer. If an agreement is reached, the sale could settle by the end
of the third quarter. Proceeds from this property sale are anticipated to be
distributed to Fund shareholders in the amount of any tax-basis gain from the
disposition. The residual proceeds are anticipated to be used to repay a
significant portion of the Fund's outstanding debt. Results of operations at
the property were $282,000 and $158,000 for the six months ended June 30, 1996
and 1995, respectively.
NOTE 3 - DIVIDEND DECLARATION
The Fund declared a quarterly cash dividend of $.15 per share payable to
stockholders of record at June 30, 1996. The total dividend payable is
$229,000 and will be paid in August 1996.
