T. Rowe Price
Renaissance
Fund, Ltd.
A
Sales-Commission-Free
Real Estate Investment
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
410-625-6500 Baltimore area
T. Rowe Price Real Estate Group
100 East Pratt Street
Baltimore, Maryland 21202
Final Report
1997
FELLOW STOCKHOLDER:
Renaissance Fund was organized in 1989 for the primary purpose of
acquiring a diversified portfolio of what we considered to be
undervalued properties, then operating and holding them for
investment purposes. The Fund was structured to have a life of
about five to eight years after making its investments. After its
intended life span, the Fund would begin an orderly liquidation of
its properties, pay final fund expenses and liabilities, distribute
net proceeds from the liquidations to stockholders, and dissolve.
In 1996, we indicated to you our intention to dispose of all
properties over the next two to three years. We made this decision
since the properties were reaching the end of their anticipated
holding periods, and also because of our belief that real estate
conditions had improved significantly. Improvements in the real
estate capital markets, and in the operating performance of various
properties, enabled rents to rise and tenant concessions to
decrease. Because of higher occupancy, increasing cash flow, and
general market conditions, the prospects for a favorable
disposition of fund properties improved, and we decided to
investigate opportunities for property sales. As a result, Buckley
Square was the first property sold in November 1996.
In January 1997, the Fund was contacted by a buyer interested
in purchasing the remaining properties, as well as those of the
other four realty funds sponsored by T. Rowe Price. On April 11,
1997, after considering a less favorable offer from another party
and negotiating with the final buyer, the Fund's board of directors
unanimously approved the sale of all Fund properties to Glenborough
Realty Trust for $27,150,000. A proposal to approve the sale was
submitted to a vote of the stockholders at their annual meeting.
The transaction was approved by almost 77% of the stockholders on
September 11, 1997, and the sale was closed the following day. We
are happy to report that, based on final distributions, original
investors who did not participate in the dividend reinvestment
program realized a total return of approximately 65% over the life
of the fund. Those investors who did reinvest realized a slightly
higher return.
Distributions
The Fund paid $13 per share on September 19, 1997, which was a
substantial portion of the total liquidating distributions.
Depending on the election you made, either the distribution was
invested in the T. Rowe Price mutual fund you designated, or a
check for the amount was sent to you. Enclosed with this report is
a check for the final liquidating distribution or a notice that the
amount was invested in the fund you selected. Information about the
final distribution is contained in the enclosed statement. The 1997
federal income tax treatment of liquidating distributions will be
reported to you in January 1998.
Results of Operations
The Fund's net income for its final nine months was $7,149,000,
which included a gain of $6,219,000 on the sale of the properties
to Glenborough and income of $930,000 from operations. Net income
amounted to $4.48 per share. Net income for 1996 included a loss of
$223,000 from operations and a gain of $1,368,000 from the sale of
Buckley Square. The remaining four properties, Buschwood III,
Gatehall I, Post Oak Place, and Valley Business Center, were sold
on September 12, 1997, for net proceeds of $26,815,000 and a gain
of $6,219,000.
Conclusion
As the real estate market improved in recent years, we seized the
opportunity to capture higher prices for portfolio properties in
the belief that it was in the best interests of investors to
liquidate the Fund as it neared the end of its planned lifespan.
Normally, as real estate cycles run their course, rising property
prices often lead to an increased supply of new properties, which
could result in softer prices sometime later.
Accordingly, your management and directors believed that this
was an opportune time to sell and liquidate the Fund at prices
beneficial to stockholders. We would like to thank our investors
for their confidence, support, and cooperation during the past
eight years.
Sincerely,
James S. Riepe
Chairman
November 3, 1997
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
September 30, December 31,
1997 1996
____________ ____________
Assets
Real Estate Property Investments
Land. . . . . . . . . . . . . $ 5,438
Buildings and
Improvements . . . . . . . 16,245
________
21,683
Less: Accumulated
Depreciation
and Amortization . . . . . (1,866)
________
19,817
Cash and Cash Equivalents. . . . $ 3,872 2,738
Accounts Receivable (less
allowance of
$10 in 1996). . . . . . . . . 11 277
Other Assets . . . . . . . . . . - 148
____________
$ 3,883 $ 22,980
____________ __________
____________ __________
Liabilities and Stockholders' Equity
Liabilities
Mortgage Loans Payable. . . . $ 4,106
Security Deposits and Prepaid
Rents. . . . . . . . . . . 268
Accrued Real Estate
Taxes. . . . . . . . . . . 175
Accounts Payable and
Other Accrued
Expenses . . . . . . . . . $ 69 346
Dividends Declared. . . . . . - 1,514
__________ __________
Total Liabilities. . . . . . . . 69 6,409
__________ __________
Stockholders' Equity
Common Stock, $.001 Par Value,
Authorized 5,500,000 Shares;
Issued and Outstanding
1,600,062 and 1,529,446
Shares . . . . . . . . . . 1 1
Additional Paid-In
Capital. . . . . . . . . . 3,813 18,526
Dividends in Excess of Net
Income . . . . . . . . . . - (1,956)
__________ _________
Total Stockholders' Equity . . . 3,814 16,571
__________ _________
$ 3,883 $ 22,980
__________ _________
__________ _________
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per-share amounts)
January 1 Years Ended
through December 31,
September 30,
_____________________
1997 1996 1995
__________ _________ __________
Revenues
Rental Income. . . . . $ 3,131 $ 5,231 $ 4,822
Interest Income. . . . 84 89 56
_________ _________ _________
3,215 5,320 4,878
_________ _________ _________
Expenses
Property Operating
Expenses. . . . . . 1,205 2,055 1,749
Real Estate
Taxes . . . . . . . 352 512 566
Depreciation and
Amortization. . . . 198 816 807
Decline of Property
Value . . . . . . . - 907 -
Fund Management
Expenses. . . . . . 314 483 420
Interest Expense . . . 216 705 588
Minority Interest in
Operations and Other
Expenses. . . . . . - 65 70
_________ _________ _________
2,285 5,543 4,200
_________ _________ _________
Income (Loss) from Operations
before Gain on Real
Estate Sold . . . . 930 (223) 678
Gain on Real Estate Sold
(Net of minority
interest in
1996) . . . . . . . 6,219 1,368 -
_________ _________ _________
Net Income . . . . . . $ 7,149 $ 1,145 $ 678
_________ _________ _________
_________ _________ _________
Activity per Share
Net Income . . . . . . $ 4.48 $ 0.75 $ 0.45
_________ _________ _________
_________ _________ _________
Dividends
Declared. . . . . . $ 13.00 $ 1.44 $ 0.59
_________ _________ _________
_________ _________ _________
Weighted Average Number
of Shares
Outstanding . . . . 1,597,426 1,529,663 1,509,428
_________ _________ _________
_________ _________ _________
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except share data)
Dividends
Additional in Excess
Common Stock Paid-In of Net
Shares Amount Capital Income Total
______ _____ ______ _______ _____
Balance,
December 31,
1994 . . . . . 1,486,743 $ 1 $ 17,888 $ (687)$ 17,202
Net Income . . . - - - 678 678
Dividend
Reinvest-
ments. . . . . 59,602 0 787 - 787
Share
Repur-
chases . . . . (19,154) 0 (228) - (228)
Dividends
Declared . . . - - - (891) (891)
________ ____ _______ _______ _______
Balance,
December 31,
1995 . . . . . 1,527,191 $ 1 $ 18,447 $ (900)$ 17,548
Net Income . . . - - - 1,145 1,145
Dividend Reinvest-
ments. . . . . 39,491 0 523 - 523
Share Repur-
chases . . . . (37,236) 0 (444) - (444)
Dividends
Declared . . . - - - (2,201) (2,201)
________ ____ _______ _______ _______
December 31,
1996 . . . . . 1,529,446 $ 1 $ 18,526 $ (1,956)$ 16,571
Net Income . . . - - - 7,149 7,149
Dividend Reinvest-
ments. . . . . 83,489 0 1,039 - 1,039
Share Repur-
chases . . . . (12,873) 0 (144) - (144)
Dividends
Declared . . . - - (15,608) (5,193) (20,801)
________ ____ _______ _______ _______
Balance,
September 30,
1997 . . . . . 1,600,062 $ 1 $ 3,813 $ - $ 3,814
________ ____ _______ _______ _______
________ ____ _______ _______ _______
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
January 1 Years Ended
through December 31,
September 30,
____________________
1997 1996 1995
_____________ ___________________
Cash Flows from
Operating Activities
Net Income . . . . . . $ 7,149 $ 1,145 $ 678
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating
Activities
Depreciation and
Amortization . . 198 816 807
Decline of Property
Values . . . . . - 907 -
Minority Interest in
Operations
and Other
Expenses . . . . - 65 70
Gain on Real Estate
Sold . . . . . . (6,219) (1,368) -
Change in
Receivables. . . 266 4 (99)
Change in Other
Assets . . . . . 68 46 (37)
Change in Security
Deposits and Prepaid
Rents. . . . . . (268) (58) 32
Change in Accrued Real
Estate Taxes . . (175) (109) 2
Change in Accounts
Payable and Other
Accrued
Expenses . . . . (277) 61 (12)
_________ _________ _________
Net Cash Provided by
Operating
Activities. . . . . 742 1,509 1,441
_________ _________ _________
Cash Flows from Investing
Activities
Proceeds from Property
Disposition . . . . 26,815 7,036 -
Investments in Real
Estate. . . . . . . (897) (946) (6,070)
_________ _________ _________
Net Cash Provided by
(Used in)
Investing
Activities. . . . . 25,918 6,090 (6,070)
_________ _________ _________
Cash Flows from Financing
Activities
Dividends Paid . . . . (22,315) (763) (1,141)
Dividend Reinvest-
ments . . . . . . . 1,039 523 787
Share Repurchases. . . (144) (444) (228)
Minority Interest
Distributions . . . - (915) (54)
Proceeds of Mortgage Loan,
Net of Debt Issuance
Costs . . . . . . . - - 5,459
Repayment of Mortgage
Loans . . . . . . . (4,106) (4,870) (46)
_________ _________ _________
Net Cash Provided by
(Used in) Financing
Activities. . . . . (25,526) (6,469) 4,777
_________ _________ _________
Cash and Cash Equivalents
Net Increase during
Year. . . . . . . . 1,134 1,130 148
At Beginning of Year . 2,738 1,608 1,460
_________ _________ _________
At End of Year . . . . $ 3,872 $ 2,738 $ 1,608
_________ _________ _________
_________ _________ _________
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE FUND AND ITS LIQUIDATION
T. Rowe Price Renaissance Fund, Ltd., A Sales-Commission-Free Real Estate
Investment (the Fund), was incorporated in 1989 in the state of Maryland. The
Fund is qualified and has elected to be treated as a real estate investment
trust (REIT) under the Internal Revenue Code. The Fund has not incurred
federal income taxes because it met the regulatory requirements to maintain
its REIT status and distributed all taxable income to its stockholders.
The Fund had a reinvestment plan whereby stockholders could elect to have
cash dividends automatically reinvested in additional shares of the Fund. The
price of shares sold through the plan was established at least annually by the
Fund's board of directors based upon the estimated value of a share. The plan
was terminated in 1997.
The Fund also had a redemption plan whereby stockholders could request
that the Fund repurchase their shares. The Fund used reinvestment proceeds to
repurchase shares at 90% of the estimated value per share. The plan was
terminated in 1997.
After the sale of its remaining four properties on September 12, 1997,
the Fund entered into its final liquidating phase. On September 19, 1997, the
Fund paid a partial liquidating dividend aggregating $20,801,000 to its
stockholders. The Fund will pay a final liquidating cash dividend equivalent
to its remaining net assets in November 1997 and, thereafter, will be
dissolved.
The accompanying financial statements for 1997 include estimates of the
costs of liquidating the Fund. Results of operations from October 1, 1997
until the date of the final liquidating dividend are not expected to be
significant and will consist primarily of interest income and the settlement
of receivables and payables.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which requires the use of estimates and
assumptions by the Fund's management.
The consolidated financial statements include the accounts of the Fund
and the partnership accounts of Buckley Square Associates in which the Fund
had a 90% interest until the property's disposition in 1996.
The Fund reviewed its real estate property investments for impairment
whenever events or changes in circumstances indicated that the property
carrying amounts might not have been recoverable. Such a review resulted in
the Fund recording a provision for impairment of the carrying value of its
real estate property investments if the estimated future cash flows from a
property's operations and projected sale were less than the property's net
carrying value. When a provision for impairment was recorded, the estimated
fair value of the property became its new cost basis.
Depreciation was calculated primarily on the straight-line method over
the estimated useful lives of buildings and improvements, which range from 5
to 40 years. Lease commissions and tenant improvements were capitalized and
amortized over the lives of the respective leases using the straight-line
method.
Through December 31, 1995, properties held for sale were depreciated. On
January 1, 1996, the Fund adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The impact of adoption was that depreciation
expense ceased to be recognized on properties held for sale.
Cash equivalents consist of all short-term, highly liquid investments
including money market mutual funds and marketable U.S. Treasury debt
securities with maturities at the time of acquisition of three months or less.
The cost of such investments approximates fair value.
The Fund used the allowance method of accounting for doubtful accounts.
Provisions for uncollectible tenant receivables in the amounts of $35,000,
$78,000 and $6,000 were recorded in 1997, 1996 and 1995, respectively. Bad
debt expense is included in Property Operating Expenses.
Rental income was recognized on a straight-line basis over the term of
each lease. Rental income accrued, but not yet billed, was included in Other
Assets and aggregated $86,000 at December 31, 1996.
Debt issuance costs were amortized on a straight-line basis over the
expected life of the related mortgage loan.
Organization costs were amortized over a five-year period.
NOTE 3 - PROPERTY VALUATIONS
Based upon a review of market conditions, estimated holding period and future
performance expectations, the Fund's management determined that the net
carrying value of Post Oak Place was not fully recoverable from estimated
future operations and projected sale and recognized a decline in property
value of $907,000 in 1996.
NOTE 4 - PROPERTY DISPOSITIONS
In November 1996, Buckley Square was sold and the Fund received net proceeds
of $6,189,000. The net book value of the Fund's interest in the property was
$4,821,000 after deduction of accumulated depreciation and minority interest.
Accordingly, the Fund recognized a $1,368,000 gain on the sale of this
property in the fourth quarter of 1996.
On September 12, 1997, the Fund sold its four remaining
properties-Buschwood III, Gatehall I, Post Oak Place and Valley Business
Center- to a single, third-party buyer for net proceeds of $26,815,000. The
sale was approved by more than two-thirds of the Fund's stockholders on
September 11, 1997. The net book value of the four properties was $20,596,000
after accumulated depreciation expense and a previously recorded decline in
property value. Accordingly, the Fund recognized a $6,219,000 gain on the sale
of the four properties in the third quarter of 1997.
NOTE 5 - MORTGAGE LOANS PAYABLE
The Fund acquired three of its properties in part with mortgage loans payable
of $2,100,000 for Valley Business Center in 1990, $1,400,000 for Gatehall I in
1994, and $5,500,000 for Buschwood III in 1995. The mortgage loans were repaid
in 1996 and 1997 from sales proceeds of real estate property dispositions.
NOTE 6 - TRANSACTIONS WITH RELATED PARTIES
The Fund paid contracted advisory fees to T. Rowe Price Real Estate Group,
Inc. (the Investment Manager) and LaSalle Advisors Limited Partnership (the
Investment Advisor). The Investment Manager provided 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 $13,000, $133,000, and $119,000 in 1997, 1996, and
1995, respectively. The Investment Advisor provided 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
$15,000, $147,000, and $132,000 in 1997, 1996 and 1995, respectively.
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 Investment Manager earned a normal and customary fee
of approximately $4,000, $3,000, and $4,000 from the money market mutual funds
in which the Fund made its cash investments during 1997, 1996, and 1995,
respectively.
The Fund also reimbursed the Investment Manager and Investment Advisor
for certain defined expenses incurred in operating and administering the Fund.
Expense reimbursements for the Investment Manager totaled $46,000, $40,000 and
$32,000, for 1997, 1996 and 1995, respectively. Reimbursements for the
Investment Advisor totaled $18,000, $30,000 and $30,000 for 1997, 1996 and
1995, respectively.
In addition, the Fund was obligated to pay acquisition and disposition
fees for services rendered in connection with the purchase and sale of
properties. In 1995, the Investment Manager and Investment Advisor each
received $52,500 in connection with the Buschwood III acquisition. In
September 1997, the Fund paid disposition fees of $126,000 to the Investment
Manager and $42,000 to the Investment Advisor. The Investment Manager owns
16,000, or 1%, of the Fund's common shares.
NOTE 7 - RECONCILIATION OF FINANCIAL STATEMENT TO TAXABLE INCOME
As described in Note 1, the Fund has not incurred any income tax liability;
however, certain timing differences exist between amounts in net income
reported for financial statement and federal income tax purposes. These
differences (in thousands) are summarized below:
1997 1996 1995
_________ __________ _________
Net income reported
in financial
statements . . . . $ 7,149 $ 1,145 $ 678
Decline of property
value . . . . . . . (907) 907 -
Depreciation . . . . . (247) 140 192
Other items. . . . . . (354) 8 21
_________ _________ ________
Taxable income
before REIT dividend
deduction . . . . . $ 5,641 $ 2,200 $ 891
_________ _________ ________
_________ ____________________
INDEPENDENT AUDITORS' REPORT
To the Stockholders
T. Rowe Price Renaissance Fund, Ltd.,
A Sales-Commission-Free Real Estate Investment:
We have audited the consolidated balance sheets of T. Rowe Price Renaissance
Fund, Ltd., A Sales-Commission-Free Real Estate Investment, and its
consolidated partnership, as of September 30, 1997, and December 31, 1996, and
the related consolidated statements of operations, stockholders' equity and
cash flows for the period January 1, 1997, through September 30, 1997, and for
the years ended December 31, 1996, and 1995. These consolidated financial
statements are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting 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 Renaissance Fund, Ltd., A Sales-Commission-Free Real Estate Investment,
and its consolidated partnership as of September 30, 1997, and December 31,
1996, and the results of their operations and their cash flows for the period
January 1, 1997, through September 30, 1997, and for the years ended December
31, 1996, and 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
October 10, 1997
