<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 33-98372-01
SPIEKER PROPERTIES, L.P.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3188774
- ---------------------------------------------------- -----------------------
(State or other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
2180 SAND HILL ROAD, MENLO PARK, CA 94025
- ---------------------------------------------------- -------------------
(Address of principal executive offices) (Zip code)
(415) 854-5600
-------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendments to this Form 10-K. / /
<PAGE> 2
EXPLANATORY NOTE
The undersigned Registrant hereby amends Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations of Part II, Item 13 -
Certain Relationships and Related Transactions of Part III and Item 14 -
Exhibits, Financial Statements, Schedules and Reports on Form 8-K of Part IV, of
its Annual Report on Form 10-K for the fiscal year ended December 31, 1995 filed
on March 29, 1996 pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
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PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the results of operations and
financial condition of the Operating Partnership should be read in conjunction
with the selected financial data and the Operating Partnership's financial
statements included elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
OVERVIEW
During 1995, the Operating Partnership continued to generate growth through
its abilities in both managing and leasing commercial property space and in
finding attractive acquisition and development opportunities. Throughout 1995,
the Operating Partnership's portfolio of Properties was in excess of 95% leased.
The Operating Partnership's commitment to superior tenant service and to
maintaining a strong local presence in each of its markets enabled the Operating
Partnership to lease over 3.6 million rentable square feet of space in 1995.
Significantly, effective rents on the 3.1 million square feet of second
generation space leased increased by 7.6% as compared to the ending rental rates
of expiring leases. Also in 1995, the Operating Partnership acquired 17
Properties aggregating over 2.3 million rentable square feet for a total
capitalized cost of $164.8 million as of December 31, 1995 and committed $74.0
million to the development of another 1.0 million square feet. In 1994, the
Operating Partnership added $149.7 million of new Properties, representing 2.4
million rentable square feet, to its portfolio. The average annualized
unleveraged return on the 27 Properties acquired by the Operating Partnership
from January 1, 1994 through November 30, 1995 was approximately 11.2%. The
Operating Partnership calculated this unleveraged return by dividing actual
property operating income (rental revenues less rental expenses and real estate
taxes excluding interest, depreciation and amortization and general and
administrative expenses) for 1995, which was annualized from the date of
acquisition in the case of Properties acquired in 1995, by capitalized costs,
including acquisition costs and costs incurred to renovate or reposition the
asset or release space before stabilization, as of December 31, 1995. Finally,
in 1995 the Operating Partnership strengthened its balance sheet by using the
net proceeds from the issuance of $260.0 million of unsecured investment grade
rated debt and $106.3 million of Series B Preferred Stock to prepay a $347
million cross-collateralized mortgage obligation and by converting its secured
line of credit into an unsecured facility. By prepaying the mortgage debt and
converting its line of credit facility, the Operating Partnership increased its
balance sheet flexibility by unencumbering a large pool of assets, and at the
same time the Operating Partnership was able to extend the average maturity of
its debt at attractive interest rates. Management believes that the Operating
Partnership's ability to access capital in the public and private debt and
equity markets and to lower its overall cost of capital will enable the
Operating Partnership to continue to capitalize on attractive acquisition and
development opportunities.
COMPARISON OF 1995 TO 1994
The following compares the Operating Partnership's results for the year
ended December 31, 1995 with its results for the year ended December 31, 1994.
Rental revenues increased by $30.2 million, or 25.4%, to $149.3 million in
1995, as compared with $119.1 million in 1994. Of this increase, $13.5 million
was generated by the Properties acquired during 1995 (the "1995 Acquisitions").
During 1995 the Operating Partnership invested $164.8 million for the
acquisition of Properties with over 2.3 million rentable square feet of space.
By property type, 53.6% of the Operating Partnership's 1995 Acquisitions were
office Properties, 41.7% were industrial Properties and 4.7% were retail
Properties. Of the increase in rental revenues $11.1 million was generated by
the Properties acquired during 1994 (the "1994 Acquisitions") and $1.8 million
was generated by the two Properties developed during 1994 (the "1994
Developments"). The remaining increase is attributable to contractual rent
increases and increased effective rents on leases signed for the renewal or
releasing of previously leased space. During 1995, the Operating Partnership
signed 552 leases for the renewal or releasing of over 3.1 million square feet
of space. On average, the new effective rents were 7.6% higher than ending
rental rates on the expiring lease.
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Interest and other income increased by $2.2 million, or 109.6%, to $4.1
million in 1995, as compared with $1.9 million in 1994. This increase is
predominantly due to $0.8 million in management fee income earned by the
Operating Partnership from the third-party management of certain properties
during 1995. Beginning in the first quarter of 1995, a portion of the
third-party management and other services previously performed by Spieker
Northwest, Inc. ("SPNW"), an unconsolidated subsidiary of the Operating
Partnership, was transferred to the Operating Partnership. Accordingly, certain
revenue and expense items previously recorded by SPNW are now recorded by the
Operating Partnership.
Rental expenses increased by $6.6 million, or 36.7%, to $24.6 million in
1995, as compared to $18.0 million in 1994. Real estate taxes increased by $1.8
million, or 18.0%, to $11.9 million in 1995, as compared to $10.1 million in
1994. Of the combined $8.4 million increase in rental expenses and real estate
taxes, $3.8 million is attributable to the 1995 Acquisitions and $3.4 million is
attributable to the 1994 Acquisitions and the 1994 Developments. In 1995, the
Operating Partnership's rental expenses and real estate taxes in total were
24.5% of rental revenues, as compared to 23.6% for 1994.
Interest expense increased by $2.0 million, or 4.5%, to $46.4 million in
1995, as compared to $44.4 million in 1994. The increase in interest expense
resulted primarily from higher average outstanding debt balances during 1995 as
compared with 1994. Such higher balances were due to the debt incurred to
complete the 1995 and 1994 Acquisitions, the 1994 Developments, and the Property
developments commenced in 1995 (the "1995 Developments"). The Operating
Partnership's 1995 Developments consist of 9 properties totaling over 1.0
million square feet with an estimated total capitalized cost of $74.0 million.
Depreciation and amortization increased by $2.6 million, or 9.1%, to $31.6
million in 1995, as compared to $29.0 million in 1994. The increase is primarily
due to the 1995 and 1994 Acquisitions, the 1994 Developments and basis
adjustments relating to the purchases of limited partners' interests in
predecessor entities.
General and administrative and other expenses increased by $2.3 million, or
37.3%, to $8.5 million in 1995, as compared to $6.2 million in 1994. Of the
increase, $1.0 million is due to expenses incurred related to the increased
management fee income earned by the Operating Partnership as discussed above.
The remaining increase is due to the increase in personnel and investments in
upgrading the Operating Partnership's management information systems to support
the Operating Partnership's growth.
Net income before minority interests and extraordinary items increased by
$17.0 million, or 127.0%, to $30.3 million in 1995, as compared to $13.4 million
in 1994. This increase is primarily due to the net income from the 1995 and 1994
Acquisitions and the 1994 Developments and the increased effective rents on
leases signed for previously occupied space.
For the year ended December 31, 1995, the Operating Partnership recorded a
net loss of $8.8 million as compared to net income of $10.5 million in 1994. The
net loss in 1995 is attributable to a one time extraordinary loss of $40.8
million, before minority interests share of the loss of $7.3 million, recorded
during the fourth quarter of 1995 in connection with the prepayment of a $347
million cross collateralized mortgage obligation with the net proceeds from the
issuance of $260 million of unsecured investment grade debt and the Company
issued and distributed to the Operating Partnership $106.3 million of Series B
Preferred Stock. The loss included a $28.1 million, non-cash charge related to
the write-off of unamortized debt discount and deferred financing fees and a
$12.7 million charge related to prepayment penalties and fees. By prepaying the
debt, the Operating Partnership was able to increase its financial flexibility
by unencumbering a large pool of assets and to extend the weighted average
maturity of its debt at attractive interest rates.
COMPARISON OF 1994 TO 1993
The following compares the Operating Partnership's results for the year
ended December 31, 1994 with its results for the year ended December 31, 1993.
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Rental revenue increased by $30.5 million or 34.4% to $119.1 million as
compared with $88.6 million in 1993. Of this increase, $13.4 million was
generated by four Properties (the "Stanford Properties" and the "Montague
Property") acquired simultaneously with the closing of the Company's initial
public offering. $10.1 million was generated by the twelve properties acquired
during 1994 (the "1994 Acquisitions"). The remaining increase is attributable to
the lease-up of properties developed by Spieker Partners Properties during 1993
and to higher occupancy levels in the Operating Partnership's previously
developed and acquired properties.
Interest, other income and management fee income decreased by $0.4
million or 17.4% to $1.9 million as compared to $2.3 million in 1993. The
decrease was attributable to the inclusion of management fee income in 1993.
Actual interest and other income increased during 1994 due to higher average
cash balances and higher interest rates on the Company's investments.
Total operating expenses, including interest, depreciation, and amortization
increased by $3.0 million or 2.9% to $107.7 million as compared with $104.7
million in 1993. Rental expenses and real estate taxes increased $5.6 million of
which $2.7 million was attributable to the 1994 Acquisitions and $1.6 million
was attributable to the Stanford Properties and the Montague Property.
Depreciation and amortization increased $3.3 million principally due to the
acquisition of the Stanford Properties, the Montague Property, and the 1994
Acquisitions. General and administrative expenses increased $1.3 million due to
expenses incurred as a result of operating as a public company and the Operating
Partnership's ongoing acquisition and development activities. Interest expense
decreased by $7.3 million due to the repayment of $213.8 million of debt in
connection with the Operating Partnership's initial public offering, which was
offset somewhat by debt incurred to complete the 1994 Acquisitions and the 1994
developments, as well as the amortization of indebtedness discount incurred as a
result of debt structuring at the Operating Partnership's initial public
offering.
The Operating Partnership recorded net income from operations before
disposal of real estate properties, minority interests, and extraordinary items
of $13.4 million for the year ended December 31, 1994, as compared with a $13.9
million net loss in 1993. The increase in net income is the result of increased
rental revenue attributable to the Operating Partnership's acquisitions in 1993
and 1994 and to higher occupancy levels in the Operating Partnership's
portfolio, and to the decrease in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1995, cash provided by operating activities
increased by $26.8 million, or 59.2%, to $72.2 million, as compared to $45.4
million for the same period in 1994. The increase is primarily due to the
increase in net income before extraordinary item resulting from the 1995 and
1994 Acquisitions, the 1994 Developments and increasing rents on leases signed
for the renewal and releasing of space. Cash used for investing activities
increased by $38.1 million, or 24.1%, to $196.3 million during 1995, as compared
with $158.2 million during 1994. The increase is attributable to the Operating
Partnership's ongoing acquisition and development of suburban office, industrial
and retail properties. Cash provided by financing activities increased by $25.4
million or 26.3% to $122.0 million during 1995, as compared to $96.6 million
during 1994. During 1995, cash provided by financing activities consisted,
primarily, of net proceeds from the issuance of preferred stock, common stock
and unsecured investment grade rated debt, line of credit borrowings and other
property indebtedness. During 1995, cash used for financing activities
consisted, primarily, of the repayment of mortgages, line of credit borrowings
and other property indebtedness, and payment of partner's distributions. During
1994, cash provided by financing costs consisted primarily of net proceeds from
the issuance of preferred stock, line of credit borrowings and other property
indebtedness net of partners' distributions. Partners' distributions paid
increased by $17.1 million to $54.4 million during 1995, as compared with $37.3
million during 1994. The increase was the result of the higher number of
partnership units outstanding resulting from the additional partners' capital
contributions in 1994 and 1995 and a 5% increase in the distribution rate
beginning with the first quarter 1995 distribution.
The Operating Partnership's principal sources of funding for the
acquisition, development, expansion and renovation of Properties are an
unsecured line of credit, construction and permanent secured debt financing,
public and privately placed equity financing, public unsecured debt financing,
the issuance of partnership units in the Operating Partnership and cash flow
provided by operations. The Operating Partnership believes that its liquidity
and capital resources are adequate to continue to meet liquidity requirements
for the foreseeable future.
5
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At December 31, 1995, the Operating Partnership had no material commitments
for capital expenditures related to the renewal or releasing of space. The
Operating Partnership believes that the cash provided by operations and its line
of credit provide sufficient sources of liquidity to fund the capital
expenditure costs associated with the renewal or releasing of space.
In December 1995, the Operating Partnership issued in a public offering
$260.0 million of unsecured investment grade rated debt ((the "Unsecured Notes")
and $106.3 million of Series B Preferred Stock (the offering of the Unsecured
Notes and the offering of the Series B Preferred Stock are collectively referred
to as the "December Offerings"). The Unsecured Notes were issued in three
tranches as follows: $100.0 million of 6.65% notes due December 15, 2000 priced
to yield 6.683%, $50.0 million of 6.80% notes due December 15, 2001 priced to
yield 6.823%, and $110.0 million of 6.95% notes due December 15, 2002 priced at
par. The Series B Preferred Stock was issued at $25.00 per share and a yield of
9.45%.
The proceeds from the December Offerings of $358.9 million were used to
prepay a cross-collateralized mortgage obligation outstanding to Prudential
Insurance Company. The amount paid to Prudential Insurance Company included the
repayment of principal, interest due through December 10, 1995 and a negotiated
prepayment penalty of $11.8 million. The prepayment resulted in the
unencumberance of 55 of the Operating Partnership's properties.
On November 6, 1995, the Operating Partnership converted its secured line of
credit to a $150 million unsecured line of credit facility (the "Facility") with
interest at London Interbank Offered Rates ("LIBOR") plus 1.5%. The Facility
matures in November 1997 and the Operating Partnership has an option to extend
the Facility for one year upon payment of a fee equal to 0.12% of the total
Facility. The Facility also includes a fee on average unused funds, which varies
between 0.125% and 0.20% based on the average outstanding balance. At December
31, 1995 the Operating Partnership had $117.7 million outstanding under the
Facility.
In addition to the Unsecured Notes and the Facility, the Operating
Partnership has $112.7 million of secured indebtedness (the "Mortgages") at
December 31, 1995. The Mortgages have interest rates varying from 7.00% to
13.75% and maturity dates from 1996 to 2012. The Mortgages are secured by a
first or second deed of trust on the related Properties and generally require
monthly principal and interest payments. The Operating Partnership also has
$12.1 million of assessment bonds outstanding at December 31, 1995.
The scheduled maturities for the Operating Partnership's Unsecured Notes,
and Mortgages are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<S> <C>
1996........................................... $ 26,689
1997........................................... 20,415
1998........................................... 37,907
1999........................................... 892
2000........................................... 100,973
Thereafter..................................... 185,826
</TABLE>
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In addition to the Facility, $38.2 million of the Mortgages carry a floating
rate interest based on varying LIBOR spreads. The following table summarizes the
Operating Partnership's debt, excluding the assessment bonds:
<TABLE>
<CAPTION>
PERCENT OF WEIGHTED WEIGHTED
TOTAL DEBT AVERAGE RATE AVERAGE MATURITY
---------- ------------ ----------------
(YEARS)
<S> <C> <C> <C>
Floating Rate Debt....... 31.8% 7.2% 2.0
Fixed Rate Debt.......... 68.2 7.2 5.4
----- --- ---
Total 100.0% 7.2% 4.3
===== === ===
</TABLE>
On May 11, 1995, the Company completed an underwritten public offering of
5,750,000 shares of its Common Stock (including 750,000 shares sold pursuant to
the underwriters' exercise of their over-allotment option) at an offering price
per share of $19.75. Simultaneously, the Company completed the private placement
of 506,329 shares of Common Stock at a per share price of $19.75 and 2,000,000
shares of Class B Common Stock at a per share price of $25.00. The net proceeds
from the offerings of approximately $167.0 million were contributed to the
Operating Partnership and were used to repay indebtedness incurred to fund the
Operating Partnership's acquisition and development activities.
On May 13, 1994, the Company issued $25.0 million of Series A Cumulative
Convertible Preferred Stock to an individual investor. The Company contributed
the proceeds from the sale of such preferred stock to the Operating Partnership
to fund its ongoing acquisition and development activities.
During 1995 the Company filed two shelf registration statements with the
Securities and Exchange Commission (the "Commission"). On March 14, 1995 the
Company filed a shelf registration statement for up to $200 million of Common
Stock, Preferred Stock and Warrants to purchase Common and Preferred Stock (the
"March Shelf Registration Statement"). On October 19, 1995 the Company and the
Operating Partnership filed a shelf registration statement for up to $876.4
million (including $76.4 million remaining on the March Shelf Registration
Statement) of unsecured Debt Securities, Common Stock, Preferred Stock,
Depositary Shares and Warrants to purchase Common and Preferred Stock and
Guarantees. In January 1996, the Company and the Operating Partnership filed a
shelf registration statement (the "January 1996 Shelf Registration Statement")
with the Commission to register 1,407,005 shares of Common Stock issuable by the
Company upon conversion of shares of Series A Preferred Stock and upon
conversion of partnership units in the Operating Partnership by certain holders
thereof. The Company will receive no proceeds from the sale of Common Stock
under the 1996 Shelf Registration Statement.
Subsequent to year end, on January 16, 1996 the Operating Partnership issued
$100.0 million of investment grade rated 8 year unsecured notes. The notes carry
an interest rate of 6.90%, were priced to yield 6.97%, and mature on January 15,
2004. Net proceeds of $98.973 million were used to repay borrowing on the
unsecured line of credit. In addition, on February 28, 1996, the Company
concurrently sold 4,887,500 shares of Common Stock (including underwriters
option to cover over-allotments of 637,500 shares), through an underwritten
public offering and directly placed 1,176,470 shares of Class C Common Stock and
135,000 shares of Common Stock with a limited number of institutional investors
at $25.50 per share. The net proceeds were contributed to the Operating
Partnership and were used primarily to repay debt.
FUNDS FROM OPERATIONS
The Operating Partnership considers Funds from Operations to be a useful
financial performance measure of the operating performance of an equity REIT
because, together with net income and cash flows, Funds from Operations provides
investors with an additional basis to evaluate the ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures. Funds
from Operations does not represent net income or cash flows from operations as
defined by GAAP and Funds from Operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of
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liquidity. Funds from Operations does not measure whether cash flow is
sufficient to fund all of the Company's cash needs including principal
amortization, capital improvements and distributions to shareholders. Funds from
Operations does not represent cash flows from operating, investing or financing
activities as defined by GAAP. Further, Funds from Operations as disclosed by
other REITs may not be comparable to the Company's calculation of Funds from
Operations, as described below.
The Operating Partnership calculates Funds from Operations by adjusting net
income before minority interest, calculated in accordance with GAAP, for certain
non-cash items, principally the amortization and depreciation of real property
and for dividends on shares and other equity interests that are not convertible
into shares of Common Stock. The Operating Partnership does not add back the
depreciation of corporate items, such as computers and furniture and fixtures.
The Operating Partnership's Funds from Operations calculation includes an
adjustment for the straight-lining of rent under GAAP in order to present a more
meaningful picture of rental income over the period. The Operating Partnership
has not purchased interest rate caps or hedges on its floating rate debt.
Accordingly, no amortization of these items is added back to net income in
calculating Funds from Operations.
In calculating Funds from Operations, the Operating Partnership has,
historically, added back to net income an amount expensed each period relating
to the amortization of the indebtedness discount recorded at the Company's
initial public offering (the "IPO"). At the IPO, the Operating Partnership
incurred a onetime cost of $38.7 million as a result of the prepayment of
interest on, and the restructuring of, a majority of its indebtedness. Pursuant
to GAAP, this amount was recorded as a discount to the remaining indebtedness.
Had the Operating Partnership chosen to repay and replace the debt existing at
the IPO with similar debt from a third party, the $38.7 million cost would have
been expensed as an extraordinary charge at the IPO rather than amortized over
the remaining term of the loans. Accordingly, the Operating Partnership adds
such amortization to net income in calculating Funds from Operations for the
years 1993-1995. With the completion of the December Offerings, the remaining
indebtedness discount was written-off as part of the prepayment of a $347
million cross-collateralized mortgage obligation. The Operating Partnership will
therefore no longer be adding back to Funds from Operations the amortization of
debt discount.
<TABLE>
<CAPTION>
OLD NAREIT DEFINITION
QUARTER PERIOD
--------------
(dollars in thousands)
YEAR ENDED
DECEMBER 31,
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 1995
-------------- ------------- ------------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
Income from operations before
minority interests and
extraordinary items ............ $ 4,440 $ 6,991 $ 8,811 $ 10,093 $ 30,335
Adjustments:
Depreciation and Amortization .. 7,339 7,855 8,081 8,136 31,411
Amortization of debt discount
and deferred financing costs.. 2,519 2,455 2,443 1,945 9,362
Dividends on Series B Preferred
Stock......................... -- -- -- (586) (586)
Other, net ..................... 75 65 107 88 335
Straight-lined rent ............ (185) (78) (12) 208 (67)
------------ ------------ ------------ ------------ ------------
Funds from Operations - Old
Definition...................... $ 14,188 $ 17,288 $ 19,430 $ 19,884 $ 70,790
============ ============ ============ ============ ============
Weighted Average Operating
Partnership Units Outstanding... 27,660,271 33,085,328 37,027,543 37,109,138 33,769,742
============ ============ ============ ============ ============
</TABLE>
Beginning with the first quarter of 1996, the Operating Partnership will
calculate its Funds from Operations in accordance with the new NAREIT definition
of Funds from Operations. Accordingly, the Operating Partnership will no longer
add back amounts related to the amortization of debt discount and deferred
financing costs. However, the Operating Partnership will continue to include an
adjustment for the straight-lining of rent under GAAP, as management believes
this presents a more meaningful picture of rental income over the reporting
period.
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<PAGE> 9
The table below sets forth the Operating Partnership's calculation of Funds
from Operations for 1995 based on the new NAREIT definition.
<TABLE>
<CAPTION>
NEW NAREIT DEFINITION
QUARTER ENDED
(dollars in thousands)
YEAR ENDED
DECEMBER 31,
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 1995
-------------- ------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Income from operations before
minority interests and
extraordinary items: .......... $ 4,440 $ 6,991 $ 8,811 $ 10,093 $ 30,335
Adjustments:
Depreciation and Amortization.. 7,339 7,855 8,081 8,136 31,411
Dividends on Series B Preferred
Stock ....................... -- -- -- (586) (586)
Other, net .................... 75 65 107 88 335
Straight-lined rent ........... (185) (78) (12) 208 (67)
------------ ------------ ------------ ------------ ------------
Funds from Operations - New
Definition..................... $ 11,669 $ 14,833 $ 16,987 $ 17,939 $ 61,428
============ ============ ============ ============ ============
Weighted Average Operating
Partnership Units Outstanding.. 27,660,271 33,085,328 37,027,543 37,109,138 33,769,742
============ ============ ============ ============ ============
</TABLE>
Because of the impact of the December Offerings on the Operating
Partnership's balance sheet and results of operations, the Operating Partnership
believes that an adjusted calculation of 1995 Funds from Operations, based on
the new NAREIT definition and reflecting the effect of the December Offerings
and the conversion of the secured line of credit into an unsecured facility as
if such transactions had occurred on January 1, 1995, provides a helpful basis
for analyzing the impact of the new NAREIT definition.
The table below sets forth the Operating Partnership's calculation of Funds
from Operations for 1995 based upon the new NAREIT definition and adjusted to
reflect the December Offerings and conversion of the secured line of credit into
an unsecured facility.
<TABLE>
<CAPTION>
ADJUSTED NEW NAREIT DEFINITION
QUARTER ENDED
(dollars in thousands)
YEAR ENDED
DECEMBER 31,
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 1995
-------------- ------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Income from operations before
minority interests and
extraordinary items: ........... $ 8,136 $ 10,687 $ 12,507 $ 12,873 $ 44,203(1)
Adjustments:
Depreciation and Amortization .. 7,339 7,855 8,081 8,136 31,411
Dividends on Series B Preferred
Stock ........................ (2,510) (2,510) (2,510) (2,511) (10,041)
Other, net ..................... 75 65 107 88 335
Straight-lined rent ............ (185) (78) (12) 208 (67)
------------ ------------ ------------ ------------ ------------
Funds from Operations - Adjusted New
Definition ..................... $ 12,855 $ 16,019 $ 18,173 $ 18,794 $ 65,841
============ ============ ============ ============ ============
Weighted Average Operating
Partnership Units Outstanding .. 27,660,271 33,085,328 37,027,543 37,109,138 33,769,742
============ ============ ============ ============ ============
</TABLE>
- --------------------
(1) REFLECTS ADJUSTMENTS FOR THE INCREMENTAL EFFECT ON THE INTEREST EXPENSE OF
THE DECEMBER 1995 ISSUANCES OF $260,000 OF UNSECURED INVESTMENT GRADE DEBT AND
$106,250 OF SERIES B PREFERRED STOCK, CONSISTING OF (i) THE REPAYMENT OF SECURED
DEBT, RESULTING IN A REDUCTION OF INTEREST EXPENSE OF APPROXIMATELY $29,761,
INCLUDING AMORTIZATION OF DEBT DISCOUNT AND DEFERRED FINANCING COSTS OF
APPROXIMATELY $6,841, (ii) THE CONVERSION OF THE SECURED LINE OF CREDIT INTO AN
UNSECURED FACILITY RESULTING IN A REDUCTION OF AMORTIZATION OF DEFERRED
FINANCING COSTS OF APPROXIMATELY $1,176 AND (iii) INTEREST ON THE $260,000
UNSECURED INVESTMENT GRADE DEBT OF APPROXIMATELY $17,069.
9
<PAGE> 10
PART III
ITEM 13. CERTAIN TRANSACTIONS
The Company owns 95% of the non-voting preferred stock of Spieker Northwest,
Inc. ("Spieker Northwest"), which provides fee management and other services for
properties not owned by the Company, including certain properties in which
Messrs. Spieker, French, Hosford and Singleton have ownership interests. The
fees charged by Spieker Northwest for managing properties are comparable to the
fees it charges for managing other properties. Messrs. Spieker, French, Hosford
and Singleton own 100% of the voting stock of Spieker Northwest and the
remaining 5% of the non-voting preferred stock. For the year ended December 31,
1995, Spieker Northwest had revenues of $1.4 million, which were mainly offset
by operating expenses, and it did not pay any dividends on its common or
preferred stock.
On July 14, 1995, the Company acquired a 50% ownership interest and a 50%
beneficial ownership interest in a 116,096 square-foot office building located
in San Mateo, California (the "San Mateo Property") valued at approximately
$13.5 million, through the purchase of partnership interests in an entity in
which Messrs. Spieker and Singleton held a general partnership interest. The San
Mateo Property had not been contributed to the Operating Partnership at the time
of the IPO because a satisfactory arrangement could not be made with the
unaffiliated partners in the partnership. The partners were subsequently able to
reach an agreement with the unaffiliated partners, and the Company exercised its
option to acquire the interests of the unaffiliated partners. The Company paid
approximately $3.4 million to the unaffiliated partners and issued partnership
units with an aggregate value of $776,000 to Messrs. Spieker and Singleton in
exchange for the beneficial ownership. A mortgage of $9.3 million was assumed in
connection with the purchase. The monetary value of the Operating Partnership
units issued to Messrs. Spieker and Singleton of the Company was based upon the
negotiated value paid to the unaffiliated partners. The number of Operating
Partnership units issued was calculated by dividing such monetary value by the
stock price of the Company's Common Stock (into which such units are
convertible) at the close of the day prior to acquisition.
On March 31, 1995, the Company acquired a 175,900 square foot industrial
project valued at $5.9 million, located in Fresno, California through the
purchase of partnership interests in an entity in which Messrs. Spieker and
French held a general partnership interest, under similar circumstances as
described with regard to the San Mateo Property as discussed above. The Company
paid $2.3 million to the unaffiliated partners, assumed $2.2 million of debt and
issued partnership units in the Operating Partnership with a value of
approximately $1.4 million to Messrs. Spieker and French. The monetary value of
the Operating Partnership units issued to Messrs. Spieker and French was based
upon the negotiated value paid to the unaffiliated partners. The number of
Operating Partnership units issued was calculated by dividing such monetary
value by the stock price of the Company's Common Stock (into which such units
are convertible) at the close of the day prior to acquisition.
At the time of the Company's 1993 initial public offering, the Company
entered into land holding agreements ("Land Holding Agreements") with certain of
its executive officers with respect to vacant land parcels in which such
executive officers hold ownership interest. The Land Holding Agreements
generally provide the Company with the option to purchase the land subject to
the agreement for the lesser of a fixed price set forth in the Agreement or the
fair market value as determined by appraisal.
During the second quarter of 1995, the Company acquired four land parcels
pursuant to Land Holding Agreements. A 4.36 acre parcel of land located in
Sacramento, California in which Messrs, Spieker, Singleton and French held
ownership interests was acquired for a negotiated price of approximately $1.1
million, which was less than the fixed price set forth in the Land Holding
Agreement. The Company acquired the land for the purpose of developing a 45,000
square foot office building at an estimated total cost of approximately $5.4
million. As part of the land purchase price, the Company issued partnership
units in the Operating Partnership valued at approximately $324,000 to Messrs,
Spieker, Singleton and French. A 2.91 acre parcel of land located in Milpitas,
California in which Messrs. Spieker and French held ownership interests was
acquired for a negotiated price of $617,000, which was less than the fixed price
set forth in the Land Holding Agreement. The land was acquired for the purpose
of developing a 36,030 square foot industrial building at a total estimated cost
of approximately $2.4 million. A 3.78 acre parcel of land located in Monterey,
California in which Messrs. Spieker and French held ownership interests was
acquired for a negotiated price of $659,000, which was less than the fixed price
set forth in the Land Holding Agreement. The land was acquired for the purpose
of developing a 31,560 square foot industrial complex at a total estimated cost
of approximately $2.6 million. Construction of these developments commenced
during the third quarter of 1995. A 3.40 acre parcel of land located in
Monterey, California in which Messrs. Spieker and French
10
<PAGE> 11
held ownership interests was acquired for a negotiated price of approximately
$400,000, which was less than the fixed price set forth in the Land Holding
Agreement. The purchase agreement provides for certain further earn-out
payments, which in aggregate with the initial payment will not exceed the fixed
price set forth in the Land Holding Agreement. The land was acquired for the
purpose of developing a 23,000 square foot office complex at a total estimated
cost of approximately $3.0 million. Construction of this development began
during the second quarter of 1995. These four land acquisitions were each
approved by the independent directors of the Company.
11
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
Page
(a) 1. FINANCIAL STATEMENTS AND REPORTS OF ARTHUR ANDERSEN LLP, INDEPENDENT
AUDITORS
Reports of Independent Public Accountants 17
Financial Statements:
Balance Sheets:
Spieker Properties, L.P. Consolidated as of December 31, 1995
and 1994 18
Statements of Operations:
Spieker Properties, L.P. Consolidated for the Years Ended
December 31, 1995, December 31, 1994 and for the Period from
November 19, 1993 to December 31, 1993. 20
Spieker Partners Properties Combined for the Period from
January 1, 1993 to November 18, 1993. 21
Statements of Partners' Capital:
Spieker Properties, L.P. Consolidated for the Years Ended
December 31, 1995, December 31, 1994 and for the Period from
November 19, 1993 to December 31, 1993. 21
Spieker Partners Properties Combined for the Period from
January 1, 1993 to November 18, 1993 21
Statements of Cash Flows:
Spieker Properties, L.P. Consolidated for the Years Ended
December 31, 1995, December 31, 1994 and for the Period
from November 19, 1993 to December 31, 1993 22
Spieker Partners Properties Combined for the Period from
January 1, 1993 to November 18, 1993 22
Notes to Financial Statements 23
2. FINANCIAL STATEMENT SCHEDULES:
Schedule III -- Real Estate and Accumulated Depreciation as of
December 31, 1995 34
All other schedules are omitted because they are not required or
the required information is shown in the financial statements or
notes thereto.
3. EXHIBITS
The following exhibits in the accompanying index to exhibits are
filed herewith or are incorporated by reference to exhibits
previously filed.
(b) REPORTS ON FORM 8-K
None
12
<PAGE> 13
(C) EXHIBITS (ENCLOSED ATTACHMENTS ARE SEQUENTIALLY NUMBERED)
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS SEQUENTIALLY
NUMBER EXHIBIT TITLE NUMBERED
=================================================================================================
<S> <C> <C>
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
(1)
4.2 Form of Loan Agreement between Prudential and the Operating
Partnership (incorporated by reference to Exhibit 10.23 to
Spieker Properties, Inc.'s Registration Statement on Form S-11
(Registration No. 33-67906))
4.3 Indenture dated as of December 6, 1995, among Spieker Properties,
L.P., Spieker Properties, Inc. and State Street Bank and Trust,
as Trustee (incorporated by reference to Exhibit 4.5 to Spieker
Properties, Inc.'s Form 10-K Report for the year ended December
31, 1995)
4.4 First Supplemental Indenture relating to the 2000 Notes, the 2000
Note and Guarantee (incorporated by reference to Exhibit 4.6 to
Spieker Properties, Inc.'s Form 10-K Report for the year ended
December 31, 1995)
4.5 Second Supplemental Indenture relating to the 2001 Notes, the
2001 Note and Guarantee (incorporated by reference to Exhibit 4.7
to Spieker Properties, Inc.'s Form 10-K Report for the year ended
December 31, 1995)
4.6 Third Supplemental Indenture relating to the 2002 Notes, the 2002
Note and Guarantee (incorporated by reference to Exhibit 4.8 to
Spieker Properties, Inc.'s Form 10-K Report for the year ended
December 31, 1995)
4.7 Fourth Supplemental Indenture relating to the 2004 Notes and the
2004 Note (incorporated by reference to Exhibit 4.9 to Spieker
Properties, Inc.'s Form 10-K Report for the year ended December
31, 1995)
10.1 First Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P. and First and Second Amendment thereto
(incorporated by reference to exhibits 10.1, 10.2, and 10.3 of
Spieker Properties, Inc.'s Form 8-K dated April 10, 1995)
10.2* Form of Employment Agreement between the Company and each of
Warren E. Spieker, Jr., John K. French, Bruce E. Hosford, and
Dennis E. Singleton. (1)
10.3* Form of Spieker Merit Plan. (1)
10.4* Form of Spieker Properties, Inc. 1993 Stock Incentive Plan. (1)
10.5 Form of Indemnification Agreement between the Company and its
directors and officers (incorporated by reference to Exhibit
10.21 to Spieker Properties, Inc.'s Registration Statement on
Form S-11 (File No. 33-67906))
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS SEQUENTIALLY
NUMBER EXHIBIT TITLE NUMBERED
=================================================================================================
<S> <C> <C>
10.6 Form of Land Holding Agreement among the Company, Spieker
Northwest, Inc., the Operating Partnership and owner of the
applicable Land Holding (incorporated by reference to Exhibit
10.22 to Spieker Properties, Inc.'s Registration Statement on
Form S-11 (File No. 33-67906)
10.7* Form of Employee Stock Incentive Pool (incorporated by reference
to Exhibit 10.35 to Spieker Properties, Inc.'s Registration
Statement on Form S-11 (File No. 33-67906))
10.8 Form of Excluded Property Agreement between the Operating
Partnership and certain of the Senior Officers (incorporated by
reference to Exhibit 10.36 to Spieker Properties, Inc.'s
Registration Statement on Form S-11 (File No. 33-67906))
10.9 Credit Agreement among Spieker Properties, L.P., a California
Limited Partnership, as Borrower and Wells Fargo Bank, National
Association, Seattle-First National Bank and Union Bank together
with those Assignees becoming parties hereto pursuant to Section
11.13, as lenders, and Wells Fargo Bank, National Association,
as agent, dated as of April 15, 1994 (incorporated by reference
to Exhibit 10.1 to Spieker Properties, Inc.'s Report for the
quarter ended March 31, 1994)
10.10 Amendments to the Credit Agreement dated as of April 15, 1994
(Exhibit 10.38) numbered Amendment No. 1 dated as of May 31,
1994, Amendment No. 2 dated as of September 12, 1994 and
Amendment No. 3 dated as of November 28, 1994 (Incorporated by
reference to Exhibit 10.40 to Spieker Properties Inc.'s
Form 10-K Report for the year ended December 31, 1994)
10.11 Amendments to the Credit Agreement dated as of April 15, 1994
number Amendment No. 4 dated as of March 31, 1995 and Amendment
No. 5 dated as of June 15, 1995 (incorporated by reference to
Exhibit 10.2 to Spieker Properties, Inc.'s Form 10-Q Report for
the quarter ended September 30, 1995).
10.12 Third Amendment to First Amended and Restated Agreement of
Limited Partnership of Spieker Properties, L.P. (incorporated by
reference to Exhibit 10.1 to Spieker Properties, Inc.'s Report on
Form 10-Q for the quarter ended September 30, 1995)
10.13 Fourth Amendment, Fifth Amendment and Sixth Amendment to First
Amended and Restated Agreement of Limited Partnership of Spieker
Properties, L.P. (incorporated by reference to Exhibit 10.14 to
Spieker Properties, Inc.'s Form 10-K Report for the year ended
December 31, 1995).
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS SEQUENTIALLY
NUMBER EXHIBIT TITLE NUMBERED
=================================================================================================
<S> <C> <C>
10.14 Credit Agreement among Spieker Properties, L.P. as borrower, and
Wells Fargo Bank, The First National Bank of Boston,
Seattle-First National Bank of Boston, Seattle-First National
Bank and Union Bank, as lenders, dated as of November 6, 1995,
and Loan Notes pursuant to the credit agreement (incorporated by
reference to Exhibit 4.8 to Spieker Properties, Inc.'s
Registration Statement on Form S-3 (File No. 33-98372))
12.1 Schedule of Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends (incorporated by reference to
Exhibit 12.1 to the Spieker Properties, L.P.'s Annual Report on
Form 10-K for the year ended December 31, 1995)
21.1 List of Subsidiaries of Spieker Properties, L.P. (incorporated by
reference to Exhibit 21.1 to the Spieker Properties, L.P.'s
Annual Report on Form 10-K for the year ended December 31, 1995)
</TABLE>
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement of Form S-11 (Registration No.
33-67906), which became effective on November 10, 1993.
15
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Spieker Properties, L.P.:
We have audited the accompanying consolidated balance sheets of Spieker
Properties, L.P. (a California Limited Partnership) as of December 31, 1995 and
1994, and the related consolidated statements of operations, partners' capital
and cash flows for the years ended December 31, 1995 and 1994 and the period
from November 19, 1993 to December 31, 1993. These consolidated financial
statements and the schedule referred to below are the responsibility of the
management of Spieker Properties, L.P. Our responsibility is to express an
opinion on these consolidated financial statements and the 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall 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 Spieker Properties,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years ended December 31, 1995 and 1994 and the period from
November 19, 1993 to December 31, 1993, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule listed in the
index to the financial statements is presented for the purposes of complying
with the Securities and Exchange Commission rules and is not a required part of
the basic financial statements. This information has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Arthur Andersen LLP
San Francisco, California
January 25, 1996
17
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Spieker Partners Properties:
We have audited the accompanying combined statements of operations, partners'
deficit and cash flows of Spieker Partners Properties for the period from
January 1, 1993 to November 18, 1993. These combined financial statements are
the responsibility of the management of Spieker Partners Properties. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Spieker Partners Properties for the period from January 1, 1993 to November 18,
1993, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
San Francisco, California
January 25, 1996
18
<PAGE> 18
SPIEKER PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE:
Land, land improvements and leasehold interests $ 303,157 $ 238,771
Buildings and improvements 756,734 624,330
Construction in progress 38,980 7,512
----------- ---------
1,098,871 870,613
Less - Accumulated depreciation (124,612) (99,786)
----------- ---------
Net investments in real estate 974,259 770,827
CASH AND CASH EQUIVALENTS 7,573 9,663
ACCOUNTS RECEIVABLE 3,351 2,896
DEFERRED RENT RECEIVABLE 4,698 4,631
RECEIVABLE FROM RELATED PARTY 386 839
DEFERRED FINANCING AND LEASING COSTS, net of
accumulated amortization of $9,586 and $11,601 as
of December 31, 1995 and 1994, respectively 13,485 14,406
FURNITURE, FIXTURES & EQUIPMENT, net 1,678 1,222
PREPAID EXPENSES AND OTHER ASSETS 6,067 5,454
----------- ---------
$ 1,011,497 $ 809,938
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 19
SPIEKER PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(dollars in thousands)
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
DEBT:
Unsecured notes $ 260,000 $ --
Unsecured line of credit 117,700 --
Secured line of credit -- 103,700
Mortgage loans, net of discount of $31,617 as of December 31, 1994 112,702 400,589
Construction loans -- 9,809
----------- ---------
490,402 514,098
----------- ---------
ASSESSMENT BONDS PAYABLE 12,140 8,179
ACCOUNTS PAYABLE 3,804 164
ACCRUED REAL ESTATE TAXES 506 178
ACCRUED INTEREST 2,510 3,580
UNEARNED RENTAL INCOME 6,972 4,132
PARTNER DISTRIBUTIONS PAYABLE 15,588 11,005
PAYABLE TO RELATED PARTY -- 1,186
OTHER ACCRUED EXPENSES AND LIABILITIES 12,202 9,728
----------- ---------
Total liabilities 544,124 552,250
----------- ---------
MINORITY INTERESTS (1,203) (1,072)
----------- ---------
COMMITMENTS AND CONTINGENCIES -- --
PARTNERS' CAPITAL:
General Partners, including a liquidation preference of $131,250
and $25,000 as of December 31, 1995 and 1994, respectively 419,847 206,304
Limited Partners 48,729 52,456
----------- ---------
Total Partners' Capital 468,576 258,760
----------- ---------
$ 1,011,497 $ 809,938
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 20
SPIEKER PROPERTIES, L.P. AND SPIEKER PARTNERS PROPERTIES
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, AND 1994 AND
FOR THE PERIODS FROM NOVEMBER 19, 1993, TO DECEMBER 31, 1993,
AND FROM JANUARY 1, 1993, TO NOVEMBER 18, 1993
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Spieker
Partners
Spieker Properties, L.P. Properties
Consolidated Combined
------------------------------------------- ------------
November 19, January 1,
1993 to 1993 to
Years Ended December 31, December 31, November 18,
1995 1994 1993 1993
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental income-
From outside parties $ 149,308 $119,089 $ 12,530 $ 75,448
From related parties -- -- -- 576
Interest and other income 4,083 1,948 166 1,237
Management fee income -- -- -- 896
--------- -------- -------- --------
153,391 121,037 12,696 78,157
--------- -------- -------- --------
OPERATING EXPENSES:
Rental expenses-
To outside parties 24,601 17,998 1,589 10,892
To related parties -- -- -- 1,402
Real estate taxes 11,934 10,111 1,214 7,412
Interest expense-
To outside parties, including amortization of discount 46,386 44,395 4,522 47,077
To a related party -- -- -- 99
Depreciation and amortization 31,602 28,953 3,174 22,438
General and administrative and other expenses-
To outside parties 8,533 6,217 498 571
To a related party -- -- -- 3,840
--------- -------- -------- --------
123,056 107,674 10,997 93,731
--------- -------- -------- --------
Income (loss) from operations before disposal of real estate
properties, minority interests and extraordinary items 30,335 13,363 1,699 (15,574)
--------- -------- -------- --------
DISPOSAL OF REAL ESTATE PROPERTIES:
Gain on sale -- -- -- 430
Income from operations -- -- -- --
--------- -------- -------- --------
Income (loss) from operations before minority interests and
extraordinary items 30,335 13,363 1,699 (15,144)
MINORITY INTERESTS' SHARE IN NET LOSS 109 30 -- 1,781
--------- -------- -------- --------
Net income (loss) before extraordinary items 30,444 13,393 1,699 (13,363)
EXTRAORDINARY ITEMS (40,805) -- (2,960) --
--------- -------- -------- --------
Net income (loss) $ (10,361) $ 13,393 $ (1,261) $(13,363)
========= ======== ======== ========
General Partner (8,837) 10,541 $ (980)
Limited Partner (1,524) 2,852 (281)
--------- -------- --------
Totals $ (10,361) $ 13,393 $ (1,261)
========= ======== ========
Net income (loss) per Operating Partnership unit:
Income before extraordinary items $ .90 $ .49 $ .06
Extraordinary items (1.21) -- (.11)
--------- --------- ---------
Net income (loss) $ (.31) $ .49 $ (.05)
========= ======== =========
Distributions per Operating Partnership Unit:
General Partners:
From net income $ -- $ .49 $ --
Representing a return of capital 1.76 1.11 .19
--------- --------- ---------
Total distributions $ 1.76 $ 1.60 $ .19
========= ========= =========
Limited Partners:
From net income $ -- $ .49 $ --
Representing a return of capital 1.68 1.11 .19
--------- --------- ---------
Total distributions $ 1.68 $ 1.60 $ .19
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 21
SPIEKER PROPERTIES, L.P. AND SPIEKER PARTNERS PROPERTIES
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995 AND 1994 AND
FOR THE PERIODS FROM NOVEMBER 19, 1993, TO DECEMBER 31, 1993,
AND FROM JANUARY 1, 1993, TO NOVEMBER 18, 1993
(dollars in thousands)
<TABLE>
<CAPTION>
Spieker Partners
Properties Combined Spieker Properties, L.P. Consolidated
---------------------- ----------------------------------------------------------------
Interests General Limited
to be Continuing Partner Partner General Limited
Acquired Interests Units Units Partner Partner Total
-------- --------- ---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1992 $(23,178) $(120,824) -- -- $ -- $ -- $(144,002)
Contributions 201 24,125 -- -- -- -- 24,326
Distributions (1,380) (7,293) -- -- -- -- (8,673)
Net loss (1,615) (11,748) -- -- -- -- (13,363)
-------- --------- ---------- ----------- ----------- --------- ---------
BALANCE AT NOVEMBER 18,
1993 (25,972) (115,740) -- -- -- -- (141,712)
Basis adjustments and
acquisitions of limited partners'
interests 25,972 115,740 -- -- (176,874) 60,749 25,587
Initial public offering -- -- 20,400,000 5,894,100 418,200 -- 418,200
Underwriting commissions and
offering costs -- -- -- -- (31,409) -- (31,409)
Partner Distributions -- -- -- -- (3,876) (1,120) (4,996)
Net loss -- -- -- -- (980) (281) (1,261)
-------- --------- ---------- ----------- ----------- --------- ---------
BALANCE AT DECEMBER 31,
1993 -- -- 20,400,000 5,894,100 205,061 59,348 264,409
Contribution-Proceeds from
sale of Series A Preferred Stock -- -- 1,219,512 -- 23,949 -- 23,949
Conversion of limited partners'
interest -- -- 17,514 (17,514) 330 (330) --
Amortization of deferred
compensation -- -- -- -- 330 -- 330
Partner Distributions -- -- -- -- (33,907) (9,414) (43,321)
Net loss -- -- -- -- 10,541 2,852 13,393
-------- --------- ---------- ----------- ----------- --------- ---------
BALANCE AT DECEMBER 31,
1994 21,637,026 5,876,586 206,304 52,456 258,760
Contribution-Proceeds from
sale of Series B Preferred Stock -- -- -- -- 102,064 -- 102,064
Contribution-Proceeds from
sale of Class B Common Stock -- -- 2,531,646 -- 49,961 -- 49,961
Contribution-Proceeds from
sale of Common Stock -- -- 6,256,329 -- 117,158 -- 117,158
Conversion of limited partners'
interests -- -- 16,731 (16,731) 343 (343) --
Contribution of property -- -- -- 705,501 -- 8,907 8,907
Exercise of stock options -- -- 33,500 -- 686 -- 686
Amortization of deferred
compensation -- -- -- -- 339 -- 339
Partner Distributions -- -- -- -- (48,171) (10,767) (58,938)
Net loss -- -- -- -- (8,837) (1,524) (10,361)
-------- --------- ---------- ----------- ----------- --------- ---------
BALANCE AT DECEMBER 31,
1995 $ -- $ -- 30,475,232 6,565,356 $ 419,847 $ 48,729 $ 468,576
======== ========= ========== =========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 22
SPIEKER PROPERTIES, L.P. AND SPIEKER PARTNERS PROPERTIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND
FOR THE PERIODS FROM NOVEMBER 19, 1993, TO DECEMBER 31, 1993,
AND FROM JANUARY 1, 1993, TO NOVEMBER 18, 1993
(dollars in thousands)
<TABLE>
<CAPTION>
Spieker
Partners
Spieker Properties, L.P. Properties
Consolidated Combined
------------------------------------------ -------------
November 19, January 1,
1993 to 1993 to
Years Ended December 31, December 31, November 18,
1995 1994 1993 1993
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (10,361) $ 13,393 $ (1,261) $(13,363)
Adjustments to reconcile net income (loss) to net cash
provided by (used) for operating activities-
Depreciation and amortization 31,602 28,953 3,174 22,438
Amortization of discount and deferred financing costs 9,362 9,727 798 649
Amortization of deferred compensation 368 330 -- --
Minority interests' share of net loss (109) (30) -- (1,781)
Extraordinary items 40,805 -- 722 --
Interest costs funded by capital contribution -- -- -- 442
Gain on sale of property -- -- -- (430)
Decrease (increase) in accounts receivable and other assets (2,858) (2,046) 1,357 (3,714)
Increase in receivables from related parties 453 (839) -- --
Additions to leasing costs (4,083) (3,235) (1,393) (3,110)
Increase in accounts payable and accrued expenses and liabilities 8,959 418 2,811 1,646
Increase (decrease) in accrued real estate taxes 328 (154) (2,256) (229)
Increase (decrease) in accrued interest (1,070) 803 21 1,021
Increase (decrease) in payable to related party (1,186) (1,962) 1,962 237
--------- --------- --------- --------
Net cash provided by operating activities 72,210 45,358 5,935 3,806
--------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties (196,254) (159,246) (102,029) (19,979)
Decrease (increase) in restricted cash -- 1,057 (637) 1,966
Acquisition of limited partners' interests -- -- (66,384) --
Proceeds from sale of properties -- -- -- 1,041
--------- --------- --------- --------
Net cash used for investing activities (196,254) (158,189) (169,050) (16,972)
--------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 325,177 167,836 365 49,229
Payments on debt (403,263) (55,910) (168,911) (36,338)
Payments of deferred financing fees (2,747) (1,929) -- (339)
Payment of distributions (54,377) (37,319) -- --
Capital contributions -- stock offerings 269,183 23,949 -- --
Capital contributions -- stock options exercised 686 -- -- --
Prepayment of interest, restructuring fees, and penalties (12,705) -- (42,634) --
Initial public offering proceeds, net -- -- 386,791 --
Contributions by continuing interests -- -- -- 20,333
Distributions to continuing interests -- -- -- (7,293)
Contributions by minority interests -- -- -- 2,000
Distributions to minority interests -- -- -- (1,776)
Contributions by limited partnerships interests to be acquired -- -- -- 201
Distributions to limited partnership interests to be acquired -- -- -- (1,380)
--------- --------- --------- --------
Net cash provided by financing activities 121,954 96,627 175,611 24,637
--------- --------- --------- --------
Net increase (decrease) in cash and cash equivalents (2,090) (16,204) 12,496 11,471
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,663 25,867 13,371 1,900
--------- --------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,573 $ 9,663 $ 25,867 $ 13,371
========= ========= ========= ========
</TABLE>
22
<PAGE> 23
1. ORGANIZATION AND BASIS OF PRESENTATION:
[*]
Spieker Properties, L.P. (the "Operating Partnership") was formed on
November 10, 1993 and commenced operations on November 19, 1993 when
Spieker Properties, Inc. ("the Company") completed an initial public
offering ("IPO") and issued 20,400,000 Shares of Common Stock at $20.50
per share, or $418,200. Net proceeds of $386,800 were used to purchase an
approximate 77.6 percent general partnership interest in the Operating
Partnership. The Operating Partnership used the funds it received from the
Company as follows: (i) $213,800 to repay certain indebtedness and modify
the terms of certain other indebtedness (ii) $101,900, including related
transfer costs, to acquire three office buildings located in Palo Alto,
California, and the unaffiliated interest in an industrial property
located in San Jose, California, and (iii) $66,400, including related
transfer costs, to acquire the interest of unaffiliated limited partners
in certain properties. In addition, the individual partners in Spieker
Partners exchanged their interests in these properties for an
approximate 22.4 percent limited partnership interest in the Operating
Partnership.
The transaction was accounted for as a business combination using the
purchase method for the acquisition of the separate properties and the
interest of the unaffiliated limited partners. The predecessor cost basis
was maintained to the extent of the 22.4 percent interest in those
properties received from the former partners of Spieker Partners.
On May 13, 1994, the Company sold 1,000,000 shares of Series A Preferred
Stock (convertible into 1,219,512 shares of Common Stock) for $25.00 per
share to an individual investor. Proceeds from the sale were contributed
to the Operating Partnership and were used to fund the acquisition and
development of commercial properties.
On May 11, 1995, the Company sold 5,750,000 shares of Common Stock for
$19.75 per share through an underwritten public offering. Concurrently,
the Company sold 506,329 shares of Common Stock at $19.75 per share and
2,000,000 shares of Class B Common Stock at $25.00 per share to a
limited number of institutional investors (collectively referred to as
the "Concurrent Offerings"). Net proceeds from the underwritten public
offering and the Concurrent Offerings totaling $167,119 were contributed
to the Operating Partnership and were used to repay indebtedness incurred
by the Operating Partnership to fund acquisition and development
activities.
In December 1995, the Company sold 4,250,000 shares of Series B Preferred
Stock at $25.00 per share and concurrently sold $260,000 of unsecured
investment grade rated notes through underwritten public offerings
(collectively referred to as the "December 1995 Offerings"). Net proceeds
of $360,242 were contributed to the Operating Partnership and were used to
prepay cross-collateralized mortgage obligations outstanding and certain
fees to Prudential Insurance Company (the "Prudential Debt").
As a result of the aforementioned stock offerings and contribution of
capital to the Operating Partnership by the Company, the Company owns
approximately 82.3 percent general partner interest of the Operating
Partnership as of December 31, 1995.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
23
<PAGE> 24
The Operating Partnership is primarily engaged in the ownership,
operation, management, leasing, acquisition, expansion and development of
industrial, suburban office, and retail income-producing properties. As of
December 31, 1995, the Operating Partnership owned (i) 100 percent of 113
properties, (ii) a 100 percent general partner interest in Spieker
Washington Interest Partners ("SWIP"), a California general partnership,
which owns 100 percent of 13 properties, (iii) a 90 percent interest in
one property, (iv) a 93 percent interest with SWIP in one property, and
(v) 95 percent of the Series A Preferred Stock of Spieker Northwest, Inc.,
which provides fee management and other services for properties not owned
by the Operating Partnership. The Operating Partnership's 128 properties,
aggregating approximately 16.3 million leasable square feet, are comprised
of 71 industrial properties, 43 office properties, and 14 retail
properties. All of the properties are located in California and the
Pacific Northwest.
Spieker Partners Properties
Spieker Partners Properties is not a legal entity, but rather a
combination of the assets, liabilities and operations of 92 limited
partnerships controlled and operated by Spieker Partners, a California
general partnership ("Spieker Partners"). Prior to November 19, 1993,
these partnerships were wholly owned by individual partners of Spieker
Partners and individual limited partners. Additionally, the financial
statements of Spieker Partners Properties include a 93rd property, the
2180 Sand Hill Road property in Menlo Park, California. The accounts of
Spieker Partners are not included as a component of these financial
statements.
All significant intercompany balances and transactions have been
eliminated in the combined financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The consolidated financial statements include the consolidated financial
position of the Operating Partnership and SWIP as of December 31, 1995 and
1994, and their consolidated results of operations and cash flows for the
years ended December 31, 1995 and 1994 and the period from November 19,
1993 to December 31, 1993. The Operating Partnership's investment in
Spieker Northwest, Inc. is accounted for under the equity method. The
carrying value of Spieker Northwest, Inc. of $53 and $47 at December 31,
1995 and 1994, respectively, is included in prepaid expenses and other
assets. Prior to November 19, 1993, the Operating Partnership had no
operations. All significant intercompany balances and transactions have
been eliminated in the consolidated financial statements.
Properties
Properties are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the properties.
The estimated lives are as follows:
<TABLE>
<S> <C>
Land improvements and leasehold interests 18 to 40 years
Buildings and improvements 10 to 40 years
Tenant improvements Term of the related lease
</TABLE>
In accordance with the Statement of Financial Accounting Standard ("SFAS")
No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", investments in real estate are
stated at the lower of depreciated cost or estimated fair value. Fair
value for financial reporting purposes is evaluated periodically by the
Operating Partnership on a property by property basis using undiscounted
cash flow. If a potential impairment is identified, it is measured by the
property's fair value based on either sales comparables or the net cash
expected to be generated by the property, less estimated carrying costs
(including interest) throughout the anticipated holding period, plus the
estimated cash proceeds from the ultimate disposition of the property. To
the extent that the carrying value exceeds the estimated fair value, a
provision for decrease in net realizable value is recorded. Estimated fair
value is not necessarily an indication of a
24
<PAGE> 25
property's current value or the amount that will be realized upon the
ultimate disposition of the property. As of December 31, 1995 and 1994,
none of the carrying values of the properties exceeded their estimated
fair values. As of December 31, 1995 and 1994, the properties are located
primarily in California, Oregon and Washington. As a result of this
geographic concentration, the operations of these properties could be
adversely affected by a recession or general economic downturn in the
areas where these properties are located. The carrying value of all
properties is below their estimated fair values.
Construction in Progress
Project costs clearly associated with the development and construction of
a real estate project are capitalized as construction in progress. In
addition, interest, real estate taxes, insurance, and other holding costs
are capitalized during the period in which activities necessary to get the
property ready for its intended use are in progress.
Cash and Cash Equivalents
Highly liquid investments with an original maturity of three months or
less when purchased are classified as cash equivalents.
Ground Leases
The land on which three of the Operating Partnership's properties are
located is owned by Stanford University and is subject to ground leases.
The ground leases expire in 2039 or 2040, and unless the leases are
extended, the use of the land, together with all improvements, will revert
back to Stanford University. The former owners of the three properties
prepaid the ground leases through 2011, 2012 and 2017; thereafter, the
Operating Partnership will be responsible for the ground lease payments,
as defined under the terms of the leases. These ground lease payments have
been segregated from the total purchase price of the properties,
capitalized as leasehold interests in the accompanying consolidated
balance sheet, and are being amortized ratably over the terms of the
related prepayment periods (18 to 24 years).
Deferred Financing and Leasing Costs
Costs incurred in connection with financing or leasing are capitalized and
amortized on a straight-line basis over the term of the related loan or
lease for periods ranging from 2 to 25 years. Unamortized leasing costs
are charged to expense upon the early termination of the lease.
Debt Discount and Prepaid Interest
Debt discount consists of prepaid interest and an arrangement fee paid to
Prudential Life Insurance for modifying the Prudential Debt at the time of
the IPO. The arrangement fee of $2,142 is treated as an adjustment of
interest expense. This fee, along with the interest prepaid to the lender,
is amortized to expense using the effective interest method over the term
of the related debt. On December 11, 1995, the Prudential Debt was prepaid
with the proceeds from the December 1995 offerings. The unamortized debt
discount was written off and an extraordinary item was recognized.
Prepaid interest deposited with an independent financial intermediary in
connection with the IPO is classified as prepaid expenses and other assets
and is amortized over the term of the related loans.
Fair Value of Financial Investments
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments. Based on the borrowing
rates currently available to the Operating Partnership, the carrying
amount of debt approximates fair value. Cash and cash equivalents consist
of demand deposits, certificates of
25
<PAGE> 26
deposit and overnight repurchase agreements with financial institutions.
The carrying amount of cash and cash equivalents approximates fair value.
Minority Interest
Minority interest in the Operating Partnership represents a 10 percent
interest in one property and a 7.5 percent interest in a second property
held by outside interests.
Revenues
All leases are classified as operating leases. Rental income is recognized
on the straight-line basis over the terms of the leases. Deferred rent
receivable represents the excess of rental revenue recognized on a
straight-line basis over cash received under the applicable lease
provisions.
Extraordinary Items
Extraordinary items for the year ended December 31, 1995, consist of (i)
$11,767 in prepayment penalties, and a write-off of $28,100 in previously
capitalized debt discount related to the Prudential Debt paydown as a
result of the December 1995 offerings, and (ii) a fee of $938 paid in
connection with the conversion of the secured line of credit into an
unsecured facility.
Extraordinary items incurred during the period from November 19, 1993 to
December 31, 1993, consist of (i) $2,238 of prepayment penalties for debt
paid off and paid down as part of the IPO, and (ii) the write-off of
previously capitalized deferred financing fees of $722 related to the debt
paid off and paid down as part of the IPO.
Income Allocation
Income is allocated to the Partners based upon the terms set forth in the
partnership agreement of the Operating Partnership.
Net Income (Loss) Per Unit
Per unit amounts for the Operating Partnership are computed using the
weighted average units outstanding during the period. The weighted average
general partner units and limited partner units outstanding for the years
ended December 31, 1995 and 1994 and for the period from November 19, 1993
to December 31, 1993 are as follows:
<TABLE>
<CAPTION>
General Partner Units Limited Partner Units
--------------------- ---------------------
<S> <C> <C>
Year ended:
December 31, 1995 27,360,000 6,409,742
December 31, 1994 21,192,655 5,876,586
Period from:
November 19, 1993 to
December 31, 1993 20,400,000 5,894,100
</TABLE>
Reclassifications
Certain items in the 1993 and 1994 financial statements have been
reclassified to conform to the 1995 presentation.
26
<PAGE> 27
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. RELATED-PARTY TRANSACTIONS:
Revenues and Expenses
Management fee income for the year ended December 31, 1995 of $1,427
included in interest and other income is from Spieker Partners and
affiliates.
Prior to November 18, 1993, Spieker Partners provided services to the
properties included in Spieker Partners Properties. Amounts charged to the
properties for these services for the period from January 1, 1993 to
November 18, 1993 consist of (i) management fees of $2,115, (ii) general
and administrative expenses of $1,725 and (iii) salaries and benefits of
$1,402.
Spieker Partners leased office space from certain entities included in
Spieker Partners Properties under seven operating leases with initial
lease terms ranging from one to five years. These leases were canceled
upon consummation of the IPO because these business activities are now
conducted by the Company. Rental income, including operating expense
reimbursements, recognized by Spieker Partners Properties relative to the
aforementioned leases was $576 in the period from January 1, 1993 to
November 18, 1993.
Acquisition of Properties
On July 14, 1995, the Operating Partnership acquired a 50 percent
ownership interest and a 50 percent beneficial ownership interest in a
116,096 square foot office building located in San Mateo, California (the
"San Mateo Property") valued at approximately $13,500, through the
purchase of a partnership interest in a related entity in which two
partners held a general partnership interest. As outlined in the Company's
S-11 Registration Statement (registration no. 33-67906), this project was
not contributed to the Operating Partnership at the IPO because a
satisfactory arrangement could not be reached with the unaffiliated
partners in the Partnership at that time. The partners were subsequently
able to reach an agreement with the unaffiliated partners, and the
Operating Partnership exercised its option to acquire the interests of the
unaffiliated partners. The Operating Partnership paid $3,425 to the
unaffiliated partners and issued partnership units with a value of $776 to
the two partners in exchange for the beneficial ownership. A mortgage of
$9,345 was assumed in connection with the purchase. The basis of the
property was recorded as the sum of the cash paid to acquire outside
investor interests and the carryover basis of the two partners of the
Operating Partnership who held general partnership interests in the San
Mateo property. The monetary value of the Operating Partnership units
issued to the two partners of the Operating Partnership was based upon the
negotiated value paid to the unaffiliated partners. The number of
Operating Partnership units issued was calculated by such monetary basis
by the stock price of the Company's common stock (into which such units
are convertible) at the close of the day prior to acquisition.
During the second quarter of 1995, the Operating Partnership acquired four
land parcels under landholding agreements with certain partners of the
Operating Partnership. The landholding agreements provide that the
Operating Partnership has the option to purchase a landholding for the
lower of a predetermined fixed price or an appraised fair market value. A
4.36 acre parcel of land located in Sacramento, California was acquired
for $1,140, which was a negotiated price that was lower than the fixed
price specified in the landholding agreement. The Operating Partnership
acquired the land for the purpose of developing a 45,000 square foot
office building at an estimated total cost of $5,400. As part of the land
purchase price, the Operating Partnership issued partnership units valued
at $324 to certain partners. A 2.91 acre parcel of land located in
Milpitas, California was acquired for $617, which was a negotiated price
that was lower than the fixed price
27
<PAGE> 28
specified in the landholding agreement. The land was acquired for the
purpose of developing a 36,030 square foot industrial building at a total
estimated cost of $2,400. A 3.78 acre parcel of land located in Monterey,
California was acquired for $659, which was a negotiated price that was
lower than the fixed price specified in the landholding agreement. The
land was acquired for the purpose of developing a 31,560 square foot
industrial complex at a total estimated cost of $2,600. Construction of
these developments commenced during the third quarter of 1995. A 3.40 acre
parcel of land located in Monterey, California was acquired for $400,
which was a negotiated price that was lower than the fixed price specified
in the landholding agreement. The land was acquired for the purpose of
developing a 23,000 square foot office complex at a total estimated cost
of $3,000. Construction of this development began during the second
quarter of 1995. The land was recorded at the historical cost basis of the
partners.
On March 31, 1995, the Operating Partnership acquired a 175,900 square
foot industrial project valued at $5,900, located in Fresno, California
through the purchase of a partnership interest in a related entity in
which two partners of the Operating Partnership held a general partnership
interest, under similar circumstances as described with regard to the San
Mateo Property above. The Operating Partnership paid $2,300 to the
unaffiliated partners, assumed $2,200 of debt and issued partnership units
in the Operating Partnership with a value of $1,400 to the two partners.
The basis of the property was recorded as the sum of the cash paid to
acquire outside investor interests and the carryover basis of the two
partners of the Operating Partnership who held general partnership
interests in the property. The monetary value of the Operating Partnership
units issued to the two partners was based upon the negotiated value paid
to the unaffiliated partners. The number of Operating Partnership units
issued was calculated by dividing the negotiated market value by the stock
price of the Company's common stock into which such units are convertible
at close of the day prior to acquisition.
Upon approval by the Company's independent directors on April 6, 1994, the
Operating Partnership purchased a 7.6 acre parcel of land located in
Hayward, California for $1,800, under a landholding agreement with certain
partners of the Operating Partnership. The Operating Partnership exercised
its option to purchase the landholding in connection with a build-to-suit
of a 176,000 square foot warehouse. The fixed price of $1,800 was below
market value.
Receivable From Related Party
The $386 receivable at December 31, 1995, primarily represents amounts due
from Spieker Partners and affiliates for reimbursement of property
insurance.
The $839 receivable at December 31, 1994, represents certain legal fees
and construction costs which, at the time of the IPO, were deemed to be
the obligation of Spieker Partners and its affiliates. The amounts were
not incurred until the fourth quarter of 1994.
Payable to Related Party
As of December 31, 1994, the Operating Partnership recorded amounts
payable to Spieker Partners and other affiliates of $1,186. The amount
payable at December 31, 1994, represents construction financing provided
by Spieker Partners to one of the entities included in Spieker Partners
Properties and now owned by the Operating Partnership. These amounts were
repaid in 1995.
28
<PAGE> 29
4. DEBT:
As of December 31, 1995 and 1994, debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Unsecured investment grade notes, varying fixed interest rates from 6.65%
to 6.95% payable semi-annually, due 2000 to 2002 $260,000 $ --
Unsecured line of credit, LIBOR + 1.5%, 7.22% at December 31, 1995, due
1997 117,700 --
Secured line of credit -- 103,700
Mortgage loans, varying interest rates from 7.5% to 13.75%, due
1996 to 2012 112,702 432,206
Construction loans, rates from prime + 1% to prime + 1.5%, 9.5% to 10% at
December 31, 1994 -- 9,809
-------- ---------
490,402 545,715
Less debt discount -- (31,617)
-------- ---------
$490,402 $ 514,098
======== =========
</TABLE>
Mortgage loans generally require monthly principal and interest payments.
The mortgage loans are secured by a first or second deed of trust on the
related properties. Under the terms of the loan agreements 23 properties
are collateralized, of which 6 are cross-collateralized. Undepreciated
book value of real estate assets pledged as collateral under first deeds
of trust for mortgage loans at December 31, 1995 and December 31, 1994 is
$162,885 and $545,715, respectively.
On November 6, 1995, the Operating Partnership converted its secured line
of credit to a $150 million unsecured line of credit (the "line"). The
line matures in November 1997 and the Operating Partnership has an option
to extend the line for one year upon payment of a fee equal to .12% of the
total line. The line also includes a fee on average unused funds, which
varies between 0.125% and 0.20% based on the average outstanding balance.
The Company is a guarantor of the line.
Construction loans represent amounts drawn under commitments to develop
property. These loans, including accumulated interest, are generally
replaced by other types of financing upon completion of the related
project. The loans are secured by a deed of trust and assignment of rents
on the related property. There were no construction loans outstanding as
of December 31, 1995.
Interest capitalized for the years ended December 31, 1995 and 1994 was
$1,301 and $468, respectively.
Maturity Schedule
The scheduled maturities of all debt outstanding as of December 31, 1995
are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $ 26,689
1997 (includes line of credit, see paragraph above) 138,115
1998 37,907
1999 892
2000 100,973
Thereafter 185,826
--------
$490,402
========
</TABLE>
29
<PAGE> 30
5. LEASING ACTIVITY:
Future minimum rentals due under noncancelable operating leases in effect
at December 31, 1995, with tenants are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $141,104
1997 121,926
1998 96,976
1999 77,705
2000 59,528
Thereafter 155,346
-------
$652,585
========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to
$32,125 and $16,463 for the years ended December 31, 1995 and 1994,
respectively, and $1,607 and $10,059 for the periods from November 19,
1993 to December 31, 1993 and from January 1, 1993 to November 18, 1993,
respectively. These amounts are included as rental revenue and rental
expense in the accompanying statements of operations. Certain of the
leases also provide for the payment of additional rent based on a
percentage of the tenant's revenues. Additional rents under these leases
for the years ended December 31, 1995 and 1994, and for the periods from
November 19, 1993 to December 31, 1993 and from January 1, 1993 to
November 18, 1993 were $310, $298, $30, and $260, respectively. Certain
leases contain options to renew.
6. PARTNER DISTRIBUTIONS PAYABLE
The partner distributions payable at December 31, 1995 and 1994 represent
amounts payable to partners for the quarters then ended.
7. INCOME TAXES
Spieker Properties, L.P. and its subsidiary partnerships file federal and
state income tax returns. They pay no income taxes other than the $800
minimum tax per partnership to the State of California. Taxable income or
loss is reportable by the individual partners.
The Operating Partnership's consolidated taxable income for the years
ended December 31, 1995 and 1994 and for the period from November 19, 1993
to December 31, 1993 was $5,098, $26,563 and $4,651, respectively.
The differences between book income and taxable income primarily result
from timing differences consisting of depreciation expense for tenant
improvements and prepaid rental income.
Income taxes are not provided for in Spieker Partners Properties' combined
financial statements because the entities that own the properties and the
operating businesses are partnerships and the taxable income or loss is
included in the income tax returns of the individual partners.
8. EMPLOYEE RETIREMENT AND STOCK PLANS:
Retirement Savings Plan
Effective January 1, 1994, the Operating Partnership adopted a retirement
savings plan pursuant to Section 401(k) of the Internal Revenue Code,
whereby participants may contribute a percentage of compensation, but not
in excess of the maximum allowed under the Code. The plan provides for a
matching contribution by the Operating Partnership which amounted to $266
and $239 for the years ended December 31, 1995 and 1994. In
30
<PAGE> 31
addition, the Operating Partnership may make additional contributions at
the discretion of management. Management authorized additional
contributions of $126 and $117 for the years ended December 31, 1995 and
1994.
Employee Stock Incentive Pool
At the time of the Company's initial public offering, the Senior Officers
of the Company reserved a portion of their limited partnership interests
in the Operating Partnership for awards and conversion into common stock
to existing employees at that time. The aggregate amount of interests
reserved for the Employee Stock Incentive Pool is equivalent to 69,990
Partnership Units in the Operating Partnership is equivalent to 69,990
shares of common stock. The participants in the Pool were granted 25% of
their respective allocations on January 1, 1994 and January 1, 1995
resulting in a total of 50% of stock awards having been granted. The
remainder of the employees' allocations will be granted in two equal
awards on each of the subsequent two anniversaries of the first award,
provided that the employee has not previously terminated employment.
The initial deferred compensation of $1,320 pertaining to the 69,990 units
was recorded in the equity accounts of the Company with a corresponding
entry in the capital account of the Operating Partnership, and is being
amortized annually based on the vesting period. The initial value was
calculated by multiplying the number of shares of Common Stock into which
the 69,990 Partnership Units are convertible by the Company's Common Stock
price on the date of grant.
For the year ended December 31, 1995, non-cash compensation expense
arising from the conversion of 16,731 shares of common stock equivalents
was $339, and the deferred compensation was $652.
Merit Plan
Certain limited partners of the Operating Partnership reserved a portion
of their partnership units in the Operating Partnership, equivalent to
$4,200, to reward key employees of the Operating Partnership for
significant individual contributions to the enhancement of the Operating
Partnership's value and to encourage further equity interests in the
Operating Partnership.
On an annual basis, certain partners will review the performance of the
key employees and will award, at their discretion, options to acquire
limited partnership interests from the Merit Plan to qualifying
individuals. The Merit Plan represents a reallocation of certain partners'
ownership of limited partnership interests. As of December 31, 1995,
25,610 options to acquire limited partnership interests have been awarded
under the Merit Plan.
To the extent that awards are made under the Merit Plan, they are
compensatory. Accordingly, non-cash compensation expense is recorded in
the Operating Partnership's financial statements.
9. COMMITMENTS AND CONTINGENCIES:
Environmental Matters
The Operating Partnership follows the policy of monitoring its properties
for the presence of hazardous or toxic substances. The Operating
Partnership is not aware of any environmental liability with respect to
the properties that would have a material adverse effect on the Operating
Partnership's business, assets or results of operations. There can be no
assurance that such a material environmental liability does not exist. The
existence of any such material environmental liability would have an
adverse effect on the Operating Partnership's results of operations and
cash flow.
31
<PAGE> 32
Lease Commitments
The Operating Partnership will be responsible for minimum ground lease
payments of $213, $900 and $1,108 beginning in 2011, 2012 and 2017,
respectively, through 2040, 2039 and 2040, respectively (see Note 2).
General Uninsured Losses
The Operating Partnership carries comprehensive liability, fire, flood,
extended coverage and rental loss insurance with policy specifications,
limits and deductibles customarily carried for similar properties. There
are, however, certain types of extraordinary losses which may be either
uninsurable, or not economically insurable. Further, certain of the
properties are located in areas that are subject to earthquake activity.
Although the Operating Partnership has obtained certain limited earthquake
insurance policies, should a property sustain damage as a result of an
earthquake, the Operating Partnership may incur losses due to insurance
deductibles, co-payments on insured losses or uninsured losses. Should an
uninsured loss occur, the Operating Partnership could lose its investment
in, and anticipated profits and cash flows from, a property.
10. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Spieker Partners
Spieker Properties, L.P. Properties
Consolidated Combined
--------------------------------- ----------
November 19, January 1,
1993 to 1993 to
Years Ended December 31, December 31, November 18,
1995 1994 1993 1993
------- ------- ------------ ------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $39,876 $34,116 $ 3,703 $45,771
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Extraordinary loss write-off of deferred financing costs 28,100 -- -- --
Debt assumed in relation to property acquisitions 22,827 -- -- --
Capital recorded in relation to property acquisitions 8,877 -- -- --
Increase in minority interest for non-cash compensation 29 -- -- --
Conversion of debt to limited partnership interests
to be acquired -- -- -- 3,100
Write-off of fully depreciated property 3,662 10,672 715 8,333
Write-off of fully amortized deferred financing and
leasing costs 1,847 2,618 955 3,871
Payments on property indebtedness funded by capital
contributions -- -- -- 250
Loan assumption with related increase in property -- -- 4,884 --
Step-up in property basis -- -- 11,359 --
Carve-out of land parcels- --
Property indebtedness -- -- 3,513 --
Land and land improvements -- -- 5,317 --
</TABLE>
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter
-------------------------------------------------
First Second Third Fourth Total
------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $35,281 $37,744 $ 39,025 $ 41,341 $ 153,391
Income from operations 4,440 6,991 8,811 10,093 30,335
Net income (loss) 4,445 6,997 8,818 (30,621) (10,361)
Income (loss) per share of
Operating Partnership Unit
0.16 0.21 0.24 (0.92) (0.31)
</TABLE>
32
<PAGE> 33
12. SUBSEQUENT EVENTS:
On January 19, 1996 the Operating Partnership sold $100,000 of unsecured
investment grade notes bearing interest at 6.9% and due January 15, 2004.
Net proceeds of $98,973 were used to repay borrowings on the unsecured
line of credit.
On February 28, 1996, the Company concurrently sold 4,887,500 shares of
Common Stock (including underwriters option to cover over-allotments of
637,500 shares) through an underwritten public offering and directly
placed 1,176,470 shares of Class C Common Stock and 135,000 shares of
Common Stock with a limited number of institutional investors at $25.50
per share. The Company contributed the net proceeds to Operating
Partnership and were primarily used to repay floating rate debt.
33
<PAGE> 34
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31,1995
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
-------------------------------- ADDITIONS
ENCUMBRANCES LAND AND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS IMPROVEMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stender Way II Santa Clara, CA $ 118,274 $ 840,169 $1,250,787
Scott Blvd. Santa Clara, CA 128,623 648,750 1,753,225
Fresno Warehouse II Fresno, CA 33,534 310,908 1,616,875 1,731,588
Bakersfield Warehouse Bakersfield, CA 519,900 1,623,282 2,004,571
Terminal St. Warehouse Sacramento, CA 198,113 1,181,083 245,559
Stender Way I Santa Clara, CA 98,915 536,920 230,416
Applied Materials I Santa Clara, CA 3,866,825 381,686 1,625,507 3,690
Sunnyvale Business Center Santa Clara, CA 133,295 257,035 811,284 555,713
Cupertino Business Center Cupertino, CA 3,876,840 3,970,597 772,106
Fresno Warehouse III Fresno, CA 405,166 1,407,087 423,844
North American Van Lines San Jose, CA 2,191,699 4,999,710 786,893
Applied Materials II Santa Clara, CA 8,631,039 651,943 3,392,605 3,040,850
Front Street Warehouse Sacramento, CA 294,674 908,485 207,700
Aspect Building San Jose, CA 181,015 2,223,805 2,265,103 2,058,080
Cadillac Court Milpitas, CA 141,278 959,042 1,493,087 972,431
Ryan Ranch Industrial Monterey, CA 422,500 969,386 798,752
Fremont Bayside Fremont, CA 499,520 1,245,617 2,704,137 932,456
Livermore Commerce Ctr. Livermore, CA 41,924 1,312,199 3,563,238 983,645
Fairfield Business Center Fairfield, CA 21,692 439,350 2,662,769 1,238,978
Patrick Henry Drive San Jose, CA 17,185 933,058 2,702,038 2,277,020
COG Warehouse Milpitas, CA 551,374 2,549,224 1,907,937 1,086,032
North 10th Warehouse Sacramento, CA 641,285 1,948,032 1,100,021
Okidata Distribution Center Milpitas, CA 380,745 1,808,159 1,750,086 1,132,809
Pro Log Monterey, CA 780,000 1,148,054 1,058,360
Huntwood Business Center Hayward, CA 18,276 198,026 686,076 1,271,015
Independent Rd Warehouse Oakland CA 237,380 706,174 313,217
Grandview Drive So. San Fran, CA 588,444 259,751 561,224 520,092
Baycenter Business Park II Hayward, CA 7,597,115 1,228,225 3,116,626 2,184,763
Keebler Warehouse Hayward, CA 2,547,793 569,642 1,568,210 345,708
Fremont Commerce Center Fremont, CA 614,357 1,588,166 570,393
Montague Industr. Center Palo Alto, CA 9,294,629 1,482,000 5,131,899 5,667,235
Dubuque Business Center So. San Fran, CA 2,912,158 3,128,405 3,508,660
Cabot Blvd. Warehouse Hayward, CA 1,550,174 4,531,092 867,368
Benicia Commmerce Center Benicia, CA 434,027 3,810,746 1,327,501
Eden Landing Bus. Center Hayward, CA 1,152,163 1,940,740 355,564
Good Guys Dist. Center Hayward, CA 27,640 4,923,246 9,254,184 817,656
Fleetside Comrce Center Benicia, CA 395,300 1,080,303 2,952,609 544,636
Industrial Dr. Warehouse Fremont, CA 4,631,122 1,822,496 3,793,609 625,410
Redwood Shores Redwood City, CA 3,437,897 3,702,938 2,010,245
Baycenter Business Park I Hayward, CA 1,500,000 4,105,976 51,231
2905-2909 Stender Way Santa Clara, CA 385,992 1,157,977 444,000
Meier - Central South Santa Clara, CA 2,430,536 2,571,112 6,953,513 0
Meier - Mountain View Santa Clara, CA 8,611,695 5,265,351 14,236,164 0
Meier - Central North Santa Clara, CA 1,753,361 4,740,570 0
Meier - Sunnyvale Santa Clara, CA 352,776 953,800 0
732-834 Striker Ave Sacramento, CA 1,009,601 2,734,914 166,700
Fresno Warehouse I Fresno, CA 2,172,039 841,100 2,274,907 0
Walsh & Lafayette Ind Park Santa Clara, CA 3,359,291 0
Ridder Park San Jose, CA 184,590 1,794,057 0
Ryan Ranch - Lot 14B Monterey, CA 663,479 0
Cadillac Court II Milpitas. CA 191,731 816,766 0
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
-------------------------------------------- DATE OF
LAND BUILDINGS AND CONSTRUCTION DEPRECIABLE
LAND IMP. AND BUILDING ACCUMULATED AND/OR LIVES
Project LEASEHOLD INT. IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stender Way II $ 491,822 $1,717,408 $ 2,209,230 $ 518,491 1978 4-40
Scott Blvd. 573,696 1,956,902 2,530,598 499,296 1976 4-40
Fresno Warehouse II 784,254 2,875,117 3,659,371 829,484 1981 3-40
Bakersfield Warehouse 1,090,739 3,057,014 4,147,753 843,750 1982 20-40
Terminal St. Warehouse 307,112 1,317,643 1,624,755 706,613 1975 3-40
Stender Way I 170,073 696,177 866,250 263,149 1978 20-40
Applied Materials I 381,686 1,629,197 2,010,883 846,985 1975 20-40
Sunnyvale Business Center 241,207 1,382,825 1,624,032 327,951 1987 4-40
Cupertino Business Center 4,069,866 4,549,676 8,619,543 1,047,578 1985 32-40
Fresno Warehouse III 482,421 1,753,676 2,236,097 354,655 1987 5-40
North American Van Lines 2,199,552 5,778,750 7,978,302 1,522,209 1988 10-40
Applied Materials II 1,270,250 5,815,148 7,085,398 2,245,693 1979 16-40
Front Street Warehouse 294,674 1,116,185 1,410,859 216,847 1988 5-40
Aspect Building 2,229,772 4,317,216 6,546,988 2,280,335 1989 6-40
Cadillac Court 1,131,026 2,293,534 3,424,560 554,664 1991 5-40
Ryan Ranch Industrial 557,763 1,632,875 2,190,638 410,531 1991 5-40
Fremont Bayside 1,247,069 3,635,141 4,882,210 1,073,682 1990 3-40
Livermore Commerce Ctr. 1,499,806 4,359,276 5,859,082 852,817 1988 3-40
Fairfield Business Center 1,079,336 3,261,761 4,341,097 777,122 1991 3-40
Patrick Henry Drive 993,156 4,918,960 5,912,116 946,426 1991 12-40
COG Warehouse 3,026,377 2,516,816 5,543,193 504,589 1992 11-40
North 10th Warehouse 789,363 2,899,975 3,689,338 401,331 1990 4-40
Okidata Distribution Center 2,163,397 2,527,657 4,691,054 555,579 1993 4-40
Pro Log 1,121,135 1,865,279 2,986,414 206,090 1993 12-40
Huntwood Business Center 434,534 1,720,583 2,155,117 483,000 1979 7-40
Independent Rd Warehouse 332,303 924,468 1,256,771 436,055 1972 5-40
Grandview Drive 468,097 872,970 1,341,067 353,575 1979 20-40
Baycenter Business Park II 1,781,453 4,748,161 6,529,614 1,166,507 1984 3-40
Keebler Warehouse 605,637 1,877,923 2,483,560 565,814 1985 10-40
Fremont Commerce Center 708,494 2,064,422 2,772,916 316,250 1989 5-40
Montague Industr. Center 2,820,461 9,460,673 12,281,134 3,397,139 1993 5-40
Dubuque Business Center 3,491,267 6,057,956 9,549,223 1,606,330 1986 3-40
Cabot Blvd. Warehouse 1,559,831 5,388,804 6,948,635 1,200,207 1988 3-40
Benicia Commmerce Center 683,781 4,888,494 5,572,275 932,346 1989 3-40
Eden Landing Bus. Center 1,158,197 2,290,270 3,448,467 550,026 1990 3-40
Good Guys Dist. Center 4,936,467 10,058,619 14,995,086 1,527,944 1990 5-40
Fleetside Comrce Center 1,080,303 3,497,245 4,577,548 674,568 1990 6-40
Industrial Dr. Warehouse 1,822,496 4,419,019 6,241,515 591,383 1993 3-40
Redwood Shores 3,796,415 5,354,665 9,151,080 1,233,643 1987 7-40
Baycenter Business Park I 1,500,000 4,157,207 5,657,207 170,577 1994 3-40
2905-2909 Stender Way 385,992 1,601,977 1,987,970 77,954 1995 6-40
Meier - Central South 2,571,112 6,953,513 9,524,625 144,865 1995 40
Meier - Mountain View 5,265,351 14,236,164 19,501,514 296,587 1995 40
Meier - Central North 1,753,361 4,740,570 6,493,931 98,762 1995 40
Meier - Sunnyvale 352,776 953,800 1,306,576 19,871 1995 40
732-834 Striker Ave 1,009,601 2,901,613 3,911,215 59,547 1995 5-40
Fresno Warehouse I 841,100 2,274,907 3,116,006 47,384 1995 5-40
Walsh & Lafayette Ind Park 3,359,291 0 3,359,291 0 1995 -
Ridder Park 1,794,057 0 1,794,057 0 1995 -
Ryan Ranch - Lot 14B 663,479 0 663,479 0 1995 -
Cadillac Court II 816,766 0 816,766 0 1995 -
</TABLE>
34
<PAGE> 35
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31,1995
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
-------------------------------- ADDITIONS
ENCUMBRANCES LAND AND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS IMPROVEMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Northgate Commerce Ctr Sacramento, CA 1,854,090 5,562,290 0
Carlsbad Airport Plaza Carlsbad, CA 1,532,406 4,597,219 0
Concord North Comm Ctr Concord, CA 2,340,720 0
West Valley Business Ctr Kent, WA 3,687,786 681,200 2,124,967 2,191,054
Cascade Comrce. Park Kent, WA 46,382 2,430,989 5,005,502 2,491,240
Valley Freeway Bus. Center Kent, WA 1,061,293 2,243,650 544,677
Woodinville Corp. Center I Woodinville, WA 1,321,071 3,712,131 696,817
Woodinville Corp. Center II Woodinville, WA 1,851,708 6,391,154 4,467,156
City Commerce Park Seattle, WA 1,855,377 2,548,461 1,315,036
Vancouver Comrce. Park Vancouver, WA 337,930 1,359,073 248,085
Millcreek Distribution Ctr Kent, WA 54,914 2,541,162 7,738,028 0
Sea-Tac Industrial Park SeaTac, WA 1,953,528 5,538,926 0
Valley Industrial Park Kent, WA 34,230 6,765,505 17,221,447 12,377
Woodinville Corp Ctr Bellevue, WA 2,588,694 0
Park 217 I Portland, OR 1,359,958 2,346,881 3,219,851
Park 217 Phase II Portland, OR 5,058,665 490,845 1,762,678 1,457,443
Park 217 Phase III Portland, OR 101,555 601,310 221,542
Sunset Science Park Portland, OR 472,914 147,569 581,642 815,159
Swan Island Portland, OR 957,038 290,504 758,714 492,830
Nelson Business Center Tigard, OR 44,074 3,454,590 5,905,233 4,777,539
I&II
SW Commerce Ctr. Portland, OR 499,146 1,390,426 954,543
Columbia IV Portland, OR 833,668 4,430,444 37,876
Columbia Commerce Park Portland, OR 1,939,782 6,606,003 2,394,575
Marine Dr Distribution Ctr Portland, OR 1,147,900 0
Cole Rd. Warehouse Boise, ID 323,371 103,617 416,506 158,209
----------------------------------------------------------------
TOTAL INDUSTRIAL $63,869,709 $104,447,551 $219,149,426 $74,732,925
----------------------------------------------------------------
Santa Clara Office Center I Santa Clara, CA $ 1,333,354 $ 187,326 $ 1,392,344 2,609,423
Santa Clara Office Center II Santa Clara, CA 173,317 2,581,836 2,757,866
Gateway Ofc. Phase I San Jose, CA 9,085,818 721,215 9,010,137 4,437,804
Santa Clara Office Center III Santa Clara, CA 36,746 2,193,334 2,040,345
Gateway Ofc. Phase II San Jose, CA 5,345 1,562,152 20,202,863 13,259,787
The Alameda San Jose, CA 774,316 4,278,623 903,623
Creekside Phase I San Jose, CA 479,752 10,385,797 8,518,712 3,615,270
North First Ofc. Ctr. San Jose, CA 6,698,611 5,900,388 3,001,263
455 University Sacramento, CA 925,000 1,305,000 528,708
650 & 701 Howe Sacramento, CA 1,665,000 4,996,755 3,540,185
8880 Cal Center Sacramento, CA 3,252,741 8,493,503 3,737,083
740 University Sacramento, CA 261,250 793,750 165,414
Gateway Oaks II Sacramento, CA 710 1,510,137 4,258,061 1,745,778
Gateway Oaks I Sacramento, CA 1,374 2,926,887 9,856,301 1,620,651
701 University Sacramento, CA 1,051,108 3,239,007 1,177,738
Ryan Ranch Ofc. Ctr. Monterey, CA 1,048,740 3,951,223 2,370,293
The Orchard Sacramento, CA 1,505,937 4,517,810 381,268
555 University Sacramento, CA 2,501,867 1,467,023 4,401,069 282,759
575 and 601 University Sacramento, CA 1,677,507 5,720,244 542,469
655 University Sacramento, CA 1,147,733 3,443,200 228,357
Arden Office Sacramento, CA 576,552 1,729,656 2,168,824
Lockheed Bldg. Palo Alto, CA 1,735,789 6,264,357 1,126,913
Xerox Campus Palo Alto, CA 9,145,484 29,360,411 5,281,728
Foothill Research Ctr. Palo Alto, CA 7,474,154 30,819,577 5,544,055
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
-------------------------------------------- DATE OF
LAND BUILDINGS AND CONSTRUCTION DEPRECIABLE
LAND IMP. AND BUILDING ACCUMULATED AND/OR LIVES
PROJECT LEASEHOLD INT. IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Northgate Commerce Ctr 1,854,090 5,566,847 7,420,936 46,466 1995 10-40
Carlsbad Airport Plaza 1,532,406 4,597,219 6,129,625 19,155 1995 40
Concord North Comm Ctr 2,340,720 0 2,340,720 0 1995 -
West Valley Business Ctr 1,286,458 3,710,762 4,997,220 1,085,011 1980 20-40
Cascade Comrce. Park 3,129,620 6,803,405 9,933,025 1,593,259 1989 5-40
Valley Freeway Bus. Center 1,262,572 2,587,048 3,849,620 542,222 1990 7-40
Woodinville Corp. Center I 1,740,944 3,994,424 5,735,368 967,240 1988 3-40
Woodinville Corp. Center II 4,258,674 8,451,343 12,710,018 2,335,112 1991 4-40
City Commerce Park 2,218,399 3,500,474 5,718,873 672,302 1988 5-40
Vancouver Comrce. Park 451,891 1,496,437 1,948,328 302,140 1990 3-40
Millcreek Distribution Ctr 2,541,162 7,738,028 10,279,190 233,320 1994 5-40
Sea-Tac Industrial Park 1,953,528 5,538,926 7,492,454 167,206 1994 40
Valley Industrial Park 6,765,505 17,233,824 23,999,329 519,701 1994 40
Woodinville Corp Ctr 2,588,694 0 2,588,694 0 1995 -
Park 217 I 2,472,845 4,453,844 6,926,689 1,454,995 1980 5-40
Park 217 Phase II 780,261 2,930,705 3,710,966 758,460 1981 10-40
Park 217 Phase III 152,504 771,904 924,408 308,468 1981 5-40
Sunset Science Park 369,132 1,175,238 1,544,370 418,620 1975 5-40
Swan Island 369,011 1,173,037 1,542,048 447,746 1978 5-40
Nelson Business Center I&II 4,944,462 9,214,506 14,158,968 1,506,459 1990 3-40
SW Commerce Ctr. 707,816 2,139,663 2,847,479 554,978 1989 5-40
Columbia IV 833,668 4,468,320 5,301,988 189,549 1994 40
Columbia Commerce Park 2,527,306 8,415,968 10,943,274 1,544,173 1988 3-40
Marine Dr Distribution Ctr 1,147,900 0 1,147,900 0 1995 -
Cole Rd. Warehouse 184,287 494,045 678,332 279,050 1976 16-40
TOTAL INDUSTRIAL -----------------------------------------------------------
$122,602,030 $275,774,196 $398,376,226 $50,681,835
-----------------------------------------------------------
Santa Clara Office Center I $ 883,440 $ 3,332,286 $ 4,215,726 $ 911,030 1977 3-40
Santa Clara Office Center II 931,364 4,581,656 5,513,019 1,445,501 1980 2-40
Gateway Ofc. Phase I 1,552,569 12,633,096 14,185,665 4,326,813 1981 3-40
Santa Clara Office Center III 596,050 3,674,376 4,270,426 1,061,868 1981 3-40
Gateway Ofc. Phase II 4,116,196 30,940,618 35,056,813 8,010,984 1983 3-40
The Alameda 966,236 4,990,326 5,956,562 1,310,720 1984 3-40
Creekside Phase I 10,965,419 11,558,227 22,523,646 2,565,072 1985 5-40
North First Ofc. Ctr. 6,973,869 8,626,392 15,600,261 2,498,524 1985 3-40
455 University 993,704 1,816,930 2,810,635 387,772 1987 3-40
650 & 701 Howe 2,120,259 8,084,569 10,204,828 1,838,946 1987 2-40
8880 Cal Center 3,804,401 11,739,856 15,544,257 3,108,847 1989 3-40
740 University 261,250 971,994 1,233,244 205,444 1987 3-40
Gateway Oaks II 1,996,441 5,533,774 7,530,215 1,015,372 1992 3-40
Gateway Oaks I 2,938,968 11,529,823 14,468,792 2,436,168 1990 2-40
701 University 1,247,111 4,220,741 5,467,852 1,330,919 1991 3-40
Ryan Ranch Ofc. Ctr. 2,093,355 5,309,272 7,402,627 973,274 1992 3-40
The Orchard 1,539,497 4,865,517 6,405,014 758,081 1990 3-40
555 University 1,484,661 4,671,714 6,156,375 777,973 1990 3-40
575 and 601 University 1,915,967 6,080,825 7,996,792 1,076,997 1990 3-40
655 University 1,159,673 3,703,199 4,862,872 648,170 1990 2-40
Arden Office 751,483 3,725,565 4,477,048 1,069,689 1990 7-40
Lockheed Bldg. 1,735,789 7,391,270 9,127,059 852,642 1993 8-40
Xerox Campus 9,145,484 34,642,139 43,787,623 3,786,568 1993 8-40
Foothill Research Ctr. 7,474,154 36,363,632 43,837,786 4,377,611 1993 6-40
</TABLE>
35
<PAGE> 36
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31,1995
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
-------------------------------- ADDITIONS
ENCUMBRANCES LAND AND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS IMPROVEMENTS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2180 Sand Hill Road Menlo Park, CA 466,525 1,281,023 175,649
Point West Executive Ctr. Sacramento, CA 2,538,020 5,952,306 235,761
McCarthy Milpitas, CA 7,744 845,039 4,219,348 215,489
Point West Commercenter Sacramento, CA 3,443,730 9,025,615 80,415
Ryan Ranch Off - Ph II Monterey, CA 521,973 0
Gateway Oaks III Sacramento, CA 764 1,185,470 0
La Jolla Centre II San Diego, CA 3,252,110 13,008,442 0
One Pacific Heights San Diego, CA 3,089,433 8,352,911 0
Pacific Point San Diego, CA 3,111,202 9,333,605 0
3600 American River Dr Sacramento, CA 1,059,086 4,236,345 0
3610 American River Dr Sacramento, CA 490,796 1,963,184 0
3620 American River Dr Sacramento, CA 1,033,255 4,133,020 0
Inwood Business Park Irvine, CA 2,224,523 8,898,093 0
San Mateo Baycenter San Mateo, CA 9,305,074 2,464,154 10,235,585 544,443
Federal Way Office Fed Way, WA 297,202 765,990 137,543
Bellevue Gtwy I Bellevue, WA 2,681,773 6,064,829 7,157,067
Bellevue Gateway II Bellevue, WA 1,201,588 4,859,552 2,641,655
Main Street Office Bellevue, WA 14,348 1,917,015 1,385,821 361,756
Bellefield Office Park Bellevue, WA 12,784,442 4,672,318 12,623,527 206,995
5550 Macadam Office Portland, OR 764,081 3,646,922 181,416
River Forum Portland, OR 2,462,767 16,637,177 326,664
Kruse Way Portland, OR 7,455,000 2,785,451 7,911,320 469,948
4004 S.W. Kruse Way Lake Oswego, OR 126,520 985,736
Place
Key Financial Tower Boise, ID 236,501 2,864,931 5,251,492
-----------------------------------------------------------------
TOTAL OFFICE $ 43,102,111 $101,640,271 $314,627,705 $ 81,053,895
-----------------------------------------------------------------
Arden Square Sacramento, CA $ 1,099,715 $ 4,815,974 $ 602,484
Denny's Restaurant Santa Clara, CA 181,634 551,427 1,225
Arbor Faire Fresno, CA $ 259,660 5,427,656 6,661,531 4,004,934
Rose Pavilion Pleasanton, CA 3,166,412 8,816,733 18,751,776 10,463,082
Montgomery Ward Pleasant Hill, CA 717,750 3,485,901 95,406
Country Club Village San Ramon, CA 9,715,640 3,456,871 8,383,612 351,037
Woodside Plaza Redwood City, CA 4,976,294 6,439,166 122,590
Broadway Faire Fresno, CA 66,076 2,537,182 0
Metro 580 Pleasanton, CA 3,938,301 8,175,028 0
West Park Plaza San Jose, CA 2,036,967 4,749,734 0
Georgetown Center Seattle, WA 4,274,197 4,165,405 441,321
Southcenter Plaza Seattle, WA 1,282,422 2,667,763 2,429,984
South Point Plaza Seattle, WA 503,825 4,358,747 7,896,791 247,050
Totem Hill Plaza Kirkland, WA 976,406 1,333,205 585,915
Lake Meridian Kent, WA 5,081,047 13,300,957 14,761
Walker Center Portland, OR 220,317 3,261,651 2,477,750 1,822,009
-----------------------------------------------------------------
TOTAL RETAIL $ 17,870,232 $ 56,660,298 $ 85,680,992 $ 21,181,798
-----------------------------------------------------------------
GRAND TOTALS $124,842,052 $262,748,120 $619,458,124 $176,968,618
=================================================================
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
------------------------------------------------ DATE OF
LAND BUILDINGS AND CONSTRUCTION DEPRECIABLE
LAND IMP. AND BUILDING ACCUMULATED AND/OR LIVES
PROJECT LEASEHOLD INT. IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2180 Sand Hill Road 466,525 1,464,017 1,930,542 777,273 1973 3-40
Point West Executive Ctr. 2,573,522 6,153,951 8,727,473 259,200 1994 10-40
McCarthy 845,039 4,434,837 5,279,875 187,919 1994 40
Point West Commercenter 3,443,730 9,106,030 12,549,760 292,991 1994 40
Ryan Ranch Off - Ph II 521,973 0 521,973 0 1995 -
Gateway Oaks III 1,185,470 0 1,185,470 0 1995 -
La Jolla Centre II 3,252,110 13,008,442 16,260,552 54,202 1995 40
One Pacific Heights 3,089,433 8,352,911 11,442,345 34,804 1995 40
Pacific Point 3,111,202 9,333,605 12,444,807 38,890 1995 40
3600 American River Dr 1,059,086 4,236,345 5,295,432 8,826 1995 40
3610 American River Dr 490,796 1,963,184 2,453,981 4,090 1995 40
3620 American River Dr 1,033,255 4,133,020 5,166,275 8,610 1995 40
Inwood Business Park 2,224,523 8,898,093 11,122,616 18,538 1995 40
San Mateo Baycenter 2,688,531 10,565,541 13,254,072 2,817,901 1995 3-40
Federal Way Office 297,202 903,533 1,200,735 239,737 1989 20-40
Bellevue Gtwy I 4,526,668 11,377,000 15,903,669 2,414,416 1985 40
Bellevue Gateway II 1,867,498 6,945,788 8,813,286 1,498,287 1988 3-40
Main Street Office 1,927,586 1,756,473 3,684,059 452,254 1990 2-40
Bellefield Office Park 4,672,318 12,830,521 17,502,839 285,697 1995 3-40
5550 Macadam Office 765,082 3,843,202 4,608,283 611,628 1990 3-40
River Forum 2,462,767 16,963,841 19,426,608 747,811 1994 5-40
Kruse Way 2,813,354 8,353,364 11,166,718 263,676 1994 40
4004 S.W. Kruse Way 985,736 0 985,736 0 1995 -
Place
Key Financial Tower 305,943 8,073,880 8,379,823 2,505,905 1977 5-40
-----------------------------------------------------------------
TOTAL OFFICE $114,256,691 $383,685,376 $ 497,942,067 $ 60,297,639
-----------------------------------------------------------------
Arden Square $ 1,106,176 $ 5,417,353 $ 6,523,530 $ 1,078,819 1987 5-40
Denny's Restaurant 181,634 552,652 734,286 108,063 1988 34-40
Arbor Faire 7,283,192 8,810,929 16,094,121 821,833 1993 5-40
Rose Pavilion 13,303,204 24,728,386 38,031,591 4,680,642 1987 3-40
Montgomery Ward 717,750 3,581,308 4,299,058 613,352 1989 35-40
Country Club Village 3,456,871 8,734,649 12,191,520 216,077 1994 40
Woodside Plaza 4,976,294 6,561,756 11,538,050 280,214 1994 40
Broadway Faire 2,537,182 0 2,537,182 0 1995 -
Metro 580 8,175,028 0 8,175,028 0 1995 -
West Park Plaza 2,036,967 4,749,734 6,786,701 69,267 1995 40
Georgetown Center 4,517,411 4,363,513 8,880,924 996,754 1984 5-40
Southcenter Plaza 3,322,221 3,068,453 6,390,673 1,223,336 1990 5-40
South Point Plaza 4,524,291 7,978,297 12,502,588 1,486,753 1988 3-40
Totem Hill Plaza 1,410,957 1,484,569 2,895,526 408,685 1990 5-40
Lake Meridian 5,081,047 13,315,718 18,396,765 566,042 1994 40
Walker Center 3,667,955 3,926,871 7,594,826 1,082,986 1988 4-40
-----------------------------------------------------------------
TOTAL RETAIL $ 66,298,180 $ 97,274,187 $ 163,572,366 $ 13,632,824
-----------------------------------------------------------------
GRAND TOTALS $303,156,901 $756,733,759 $1,059,890,659 $124,612,297
=================================================================
</TABLE>
(1) Includes assessment bonds payable
36
<PAGE> 37
Schedule III
(cont'd)
SPIEKER PROPERTIES, L.P. AND SPIEKER PARTNERS PROPERTIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND
FOR THE PERIODS FROM NOVEMBER 19, 1993 TO DECEMBER 31, 1993,
AND FROM JANUARY 1, 1993 TO NOVEMBER 18, 1993
A summary of activity for real estate and accumulated depreciation is as follows
(in thousands):
<TABLE>
<CAPTION>
Spieker Partners
----------------
Spieker Properties, L.P. Consolidated Properties
------------------------------------- ----------
Combined
--------
November 19, January 1,
1993 to 1993 to
December 31, December 31, December 31, November 18,
1995 1994 1993 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REAL ESTATE:
Balance at beginning of year 870,613 $ 722,928 $ 544,316 $ 533,282
Acquisition of properties and
limited partners' interests 185,862 144,757 168,248 --
Basis adjustments -- -- 16,243 --
Improvements 46,058 13,600 153 19,979
Carve-out of land parcels -- -- (5,317) --
Disposition of and write-off of fully
depreciated property
(3,662) (10,672) (715) (8,945)
----------- --------- --------- ---------
Balance at end of year $ 1,098,871 $ 870,613 $ 722,928 $ 544,316
=========== ========= ========= =========
ACCUMULATED DEPRECIATION:
Balance at beginning of year $ 99,786 $ 84,395 $ 79,458 $ 69,323
Depreciation expense 28,488 26,063 2,970 18,468
Acquisition of property -- -- 2,682 --
Disposition of and write-off of fully
depreciated property (3,662) (10,672) (715) (8,333)
----------- --------- --------- ---------
Balance at end of year $ 124,612 $ 99,786 $ 84,395 $ 79,458
=========== ========= ========= =========
</TABLE>
37
<PAGE> 38
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Annual Report on Form 10-K filed on Form 10-K/A to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: June 19, 1996 SPIEKER PROPERTIES, L.P.
By: /s/ Elke Strunka
----------------------------
Elke Strunka
Vice President and
Principal Accounting Officer
