<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 or any
amendments to this Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE:
PART III: Portions of the registrant's definitive proxy statement to be issued
in conjunction with the registrant's annual stockholders' meeting to be held on
June 10, 1997.
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TABLE OF CONTENTS
FORM 10-K
<TABLE>
<CAPTION>
PART I
<S> <C> <C>
Item 1 Business......................................................................................
Item 2 Properties....................................................................................
Item 3 Legal Proceedings.............................................................................
Item 4 Submission of Matters to a Vote of Security Holders...........................................
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters..........................
Item 6 Selected Financial Data.......................................................................
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.........
Item 8 Financial Statements and Supplementary Data...................................................
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........
PART III
Item 10 Directors and Executive Officers of the Registrant............................................
Item 11 Executive Compensation........................................................................
Item 12 Security Ownership of Certain Beneficial Owners and Management................................
Item 13 Certain Relationships and Related Transactions................................................
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................
</TABLE>
<PAGE> 3
PART I
This Annual Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Operating Partnership's actual
results could differ materially from those set forth in the forward-looking
statements as a result of various factors, including general real estate
investment risks, competition, risks associated with acquisition and development
activities and debt financing, environmental matters, general uninsured losses
and seismic activity.
ITEM 1. BUSINESS
Description of Business
Spieker Properties, L.P. (the "Operating Partnership") acquires, develops and
operates commercial properties in California and Washington, Oregon and Idaho
(the "Pacific Northwest"). As of December 31, 1996, the Operating Partnership
owned income-producing properties (the "Properties") aggregating approximately
21.4 million rentable square feet. The portfolio consists of industrial
properties aggregating approximately 13.7 million rentable square feet, office
properties aggregating approximately 6.3 million rentable square feet and retail
properties aggregating approximately 1.4 million rentable square feet. The
Operating Partnership has acquired 3.3 million net rentable square feet of
office and industrial properties since December 31, 1996, and has completed the
disposal of one additional retail property. As of December 31, 1996, the average
occupancy rate of the properties was approximately 96.6%
Spieker Properties, Inc. (the "Company") was incorporated in the state of
Maryland on August 20, 1993, and commenced operations effective with the
completion of its initial public offering ("IPO") on November 18, 1993. In the
IPO, the Company issued 20,400,000 shares of Common Stock at $20.50 per share,
or $418.2 million and used net proceeds of $386.8 million to purchase an
approximate 77.6% general partnership interest in the Operating Partnership.
Since there are no material differences between the Company's and the Operating
Partnership's business and properties, the Company and the Operating Partnership
are collectively referred to as the "Company", unless the context requires
otherwise. As of December 31, 1996, the Company owned an approximate 84.9%
general partnership interest in the Operating Partnership. Following the equity
offering in January 1997 described herein, the percentage ownership was
increased to 86.9% as of March 18, 1997.
Business Strategy and Operational Philosophy
The Company's principal objective is to achieve sustainable long-term growth in
Funds from Operations per share. The Company has pursued this goal since its
inception through a focused, strategic approach to acquisition, development and
property management.
BUSINESS STRATEGY
Focus on Quality Commercial Property. The Company invests in quality office and
industrial properties that possess attributes that enable the properties to be
competitive in both the short and the long run. The Company seeks to own
properties in locations which provide easy access to major transportation
arteries and are close to important services. With more than 25 years of
experience in owning and operating income-producing properties, the Company's
management possesses a high degree of knowledge of the physical and locational
characteristics that give a property long-term viability.
The Company takes significant steps to differentiate its properties from those
of nearby competitors, so as to maximize their attractiveness to potential
users. The Company focuses on office properties that have ample glass line per
square foot of office space, and user-friendly common areas, stairs, elevators
and restrooms, convenient parking and efficient suite layouts. Additionally, the
Company seeks to provide amenities and services such as conference rooms and
health clubs. The Company's warehouse properties typically have high clear
heights, numerous dock facilities, appropriate truck staging and high-capacity
sprinkler systems. The Company also seeks to differentiate its industrial
properties through the use of landscaping as well as exterior glass walls.
<PAGE> 4
The Company pays careful attention to the long-term quality of the buildings
that it develops by emphasizing first-class materials, systems and workmanship
during their construction. The exterior appearances of the Properties are
designed to be attractive, enduring and appropriately simple. The Company avoids
projects which are lavish or unnecessarily intricate, as these features tend to
prematurely date buildings and often fail to deliver value from the tenants'
perspective.
Serve Wide Range of Tenants. The Company focuses on leasing space to tenants of
various sizes and on owning properties that are easily divisible and therefore
appeal to a wide range of potential tenants. Such property flexibility also
allows the Company to better serve existing tenants by accommodating their
inevitable expansion and contraction needs. In addition, the Company's
experience is that such project flexibility helps it maintain high occupancy
rates particularly when market conditions are less favorable.
By focusing on divisible projects and a wide range of tenants, the Company has
been able to control the capital expenditures associated with re-leasing space.
Consequently, the Company's capital expenditure requirements are relatively
lower than those associated with downtown office buildings or large single
tenant suburban projects. The Company also attempts to limit tenant improvement
expenditures to those which are in demand by, and adaptable to, a high number of
users.
Own Suburban Properties. The Company focuses its efforts on properties in
suburban markets surrounding major metropolitan areas. The Company believes that
a number of significant demographic and technological factors have caused, and
will continue to cause, properties in suburban areas to perform better than
properties in central business districts. The desire of employees to work near
their residence as well as transportation difficulties and safety concerns
associated with central business districts have generally caused employers to
seek facilities in the suburbs in the recent past. These factors are reinforced
by technological changes which have enabled companies to operate efficiently
from disparate locations.
In each specific local submarket of a suburban area in which it operates, the
Company generally seeks to own a number of properties and to be one of the most
significant commercial landlords in that market. The Company believes that this
strategy gives it a measure of control over the rental rates it charges for its
properties. Through this approach, the Company can also offer prospective
tenants a variety of property options and can provide existing tenants, who are
expanding, additional space in properties owned by the Company in the same area.
The Company believes that it has achieved significant market penetration within
a number of the submarkets in which it operates.
Invest in Growing Regions. The Company focuses its activities in California and
the Pacific Northwest, where it believes economic growth will exceed national
averages. The Company believes these regions possess diverse and vibrant
economies with strong prospects for future growth due to their Pacific Rim
location, quality of life, well-developed transportation infrastructures, high
technology industries, well-educated employee base and excellent universities.
Within California and the Pacific Northwest, the Company focuses its activities
on the major metropolitan areas of Seattle, Portland, San Francisco, San Jose,
Sacramento, Los Angeles, Orange County and San Diego, which have shown to be
desired locations of a large number of businesses.
Provide Superior Level of Service. The Company's goal is to provide a superior
level of service to its tenants in order to achieve high occupancy and rental
rates, as well as low turnover. The Company's office property managers are
located on-site, providing tenants with convenient access to management and
allowing tenants to focus on their business rather than on property issues.
On-site staff enable the Company's properties to be well-maintained and to
convey a sense of quality, order and security that complements the suburban
environments in which the properties are located. The Company has significant
experience in acquiring properties managed by others and thereafter improving
tenant satisfaction, occupancy levels, renewal rates and rental income by
implementing the Company's tenant service programs.
OPERATING PHILOSOPHY
Fully-Integrated Management Capabilities. The Company has had, and will continue
to have, a philosophy of maintaining in-house resources to add value to
properties through the entire cycle of acquisition, development, and ownership,
including design, construction, leasing and management. The Company utilizes
in-house resources to
<PAGE> 5
market, lease and manage its properties and does not typically list its
properties with outside businesses or use third-party management contractors.
All of the Company's officers with real estate responsibility have had extensive
experience marketing various properties and have, at least one time in their
careers, been directly responsible for leasing specific properties. The Company
believes this approach gives it a significant advantage as such depth of
experience provides it with a detailed knowledge of markets and tenant
preferences.
Accountability. The Company has a philosophy of holding one senior officer or a
small group of senior officers accountable, under the supervision and direction
of the Company's executive officers, for all phases of a property's development,
from purchase, design and budgeting through construction, leasing and ongoing
management. The Company believes that this approach increases the likelihood of
a project's success because of the senior officer's accountability, continuity
of involvement in the project and resulting detailed knowledge of the property
and its tenants, particularly as compared to a compartmentalized approach to the
real estate business where individuals are responsible only for certain limited
areas of a project.
Training and Retention. The Company's hiring, training and retention of a
talented management group has been an important factor in its success. The
Company expends significant efforts in the training of new employees in
fundamental real estate skills as well as in the continuing education of
existing employees. All of the Company's officers, including the executive
officers, are involved in the education program, which reinforces the program's
importance to the Company and its personnel. The Company's officer compensation
program includes cash bonuses and restricted stock payments tied largely to
growth in net operating income from existing properties under their management,
as well as contribution to Funds from Operations from new acquisitions and
developments in their regions. Non-officer compensation includes subjective
bonuses based upon, among other factors, tenant satisfaction and leasing and
re-leasing success. The Company also believes that stock options are an
effective means of linking employees' actions to stockholder value and has
granted options to 70 of the Company's 212 employees.
Employees
As of December 31, 1996, the Company had 212 employees.
Competition
Other properties within the Company's markets compete with the Properties in
attracting tenants, primarily on the bases of location, rental rates, services
provided, and the design and condition of the improvements. In each of the
Company's markets, the competition for tenants has been, and continues to be,
intense. Some of these competing properties are newer, better located or better
capitalized than the Company's properties. The number of competitive commercial
properties in a particular area could have a material effect on the Company's
ability to lease space in its properties or at newly developed or acquired
properties and on the rents charged.
The Company also faces competition in its efforts to acquire equity interests in
desirable real estate; such competitors include domestic and foreign financial
institutions, other REITs, life insurance companies, pension funds, trust funds,
partnerships and individual investors.
Working Capital
The Company believes that the cash provided by operations and its unsecured line
of credit provide sufficient sources of liquidity to fund the Company's working
capital requirements.
Environmental Matters
Compliance with laws and regulations relating to the protection of the
environment, including those regarding the discharge of materials into the
environment, has not had any material effects upon the capital expenditures,
earnings or competitive position of the Company.
The 97 Properties owned by the Company at December 31, 1993, were each subject
to a Phase I environmental audit or update during the twelve-month period ended
December 31, 1993, certain of the Properties were subject to
<PAGE> 6
Phase II environmental investigations, and all buildings on properties
constructed prior to 1985 have been subject to asbestos detection
investigations. In addition, for each of the properties acquired subsequent to
December 31, 1993, and for each parcel of land purchased for development, a
Phase I environmental audit or update was completed as part of the acquisition
due diligence process. These investigations have not revealed any environmental
condition that the Company believes would have a material effect on its
business, assets or results of operations. Independent parties have reported
that no asbestos-containing materials were used in buildings constructed on the
Properties during or after 1985.
Site assessments have revealed soil and ground water contamination at the
Stender Way II property in Santa Clara, California. A third party is primarily
bearing the costs relating to this environmental condition and the Company
believes that its exposure, if any, is not material. Additionally, three
properties located in Stanford Research Park in Palo Alto, California, are
subject to varying degrees of known environmental contamination. The remediation
costs associated with this contamination have also been, and are expected to
continue to be, borne by other parties. Furthermore, the Company has entered
into indemnification agreements whereby the Company has been, and is to be,
indemnified for liabilities arising from clean-up costs relating to these three
properties. Environmental contamination has been found to have originated on the
industrial development project site in Santa Clara, which is known as Walsh at
Lafayette, and which was acquired by the Company in 1995. The relevant
government agency has identified a third party as responsible for remediation,
and the remediation process is continuing. The Company is being indemnified for
environmental contamination on the Walsh at Lafayette property by a third party
that was the former owner of the property.
Site assessments have revealed that soil and groundwater at the Company's
Montgomery Ward property in Pleasant Hill, California, have been contaminated
with volatile organic compounds. The likely sources of this contamination are
on-site underground storage tanks and a potential off-site contamination source.
To date, no government agency has issued any directives requiring that a
remediation plan be filed or the contamination be cleaned up. The Spieker
partnership (the "Spieker Predecessor") that transferred this property to the
Company previously filed a lawsuit against the seller to enforce an indemnity
agreement and against certain other potentially responsible parties to have
those parties bear any clean-up costs. Settlement has been reached with certain
of the defendants in the lawsuit, resulting in cash payments to the Company. A
trial involving the remaining defendants ended without any additional cash
awards being made. Due to the nature of this environmental condition and the
Company's expectation that other parties will be primarily responsible for the
clean-up costs, the Company believes that its exposure, if any, for clean-up
costs would not have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
Site assessments have revealed soil and groundwater contamination at the Arden
Square property in Sacramento, California. This property is one of the retail
properties which are under contract to be sold to Pacific Retail Trust ("PRT").
The Company has agreed to indemnify PRT for the contamination. However, the
Company believes that the liabilities and clean-up costs associated with this
contamination are covered under the Company's pollution insurance policy (except
to the extent of the deductible under such policy). A possible similar situation
was recently discovered in Woodside, California, which retail property is also
under contract to be sold to PRT. The extent of this possible contamination, if
any, is still being tested. The Company also has pollution insurance coverage
for this property and believes that such contamination will be covered by such
insurance (except to the extent of the deductible under such policy).
Although the environmental investigations conducted to date have not revealed
any environmental liability that the Company believes would have a material
adverse effect on the Company's business, assets or results of operations, and
the Company is not aware of any such liability, it is possible that these
investigations did not reveal all environmental liabilities or that there are
material environmental liabilities of which the Company is unaware. No
assurances can be given that (i) future laws, ordinances, or regulations will
not impose any material environmental liability, or (ii) the current
environmental condition of the Properties has not been, or will not be, affected
by tenants and occupants of the Properties, by the condition of properties in
the vicinity of the Properties, or by third parties unrelated to the Company.
<PAGE> 7
ITEM 2. PROPERTIES
General
As of December 31, 1996, the Company's portfolio of properties consisted of
industrial, suburban office and retail income-producing properties located in
California and the Pacific Northwest. The total rentable square footage of the
Properties at December 31, 1996, was approximately 21.4 million rentable square
feet, consisting of approximately 13.7 million square feet of industrial
property, approximately 6.3 million square feet of office property and
approximately 1.4 million square feet of retail property. As of December 31,
1996, the average occupancy rate of the Properties was approximately 96.6%.
After an extensive review of the Company's investment opportunities and
strategic position, the Company has decided to focus exclusively on office and
industrial properties. The Company has therefore decided to divest itself of its
retail properties and reinvest the proceeds from these properties in office and
industrial properties, which the Company believes offer better growth prospects.
During 1996, the Company completed the disposal of three of its retail
properties at an aggregate consideration of $45.4 million, and signed definitive
agreements to dispose of six other retail properties for aggregate consideration
of approximately $61.1 million. Of the six properties under contract, five will
be disposed of before May 1, 1997, on dates to be determined by the Company,
with the final property to be disposed of by December 31, 1997. In connection
with these dispositions, the Company's retail employees have become employees of
PRT, and PRT has agreed to manage the Company's remaining retail properties
pending disposition. The Company is in the process of marketing and divesting
its other retail properties and it anticipates that the divestiture will be
completed in 1998.
For the year ended December 31, 1996, none of the Properties had net book values
equal to 10% or more of the Company's total assets or aggregate gross revenues.
The Company's largest property represents 3.2% of net book value and 2.6% of
base rental revenues.
The Location and Type of the Company's Properties
The Properties are located in six geographic areas within California and the
Pacific Northwest, which are comprised of numerous local markets. The following
table sets forth, as of December 31, 1996, the location and type of the
Properties by rentable square feet.
RENTABLE SQUARE FOOTAGE OF PROPERTIES BY LOCATION AND TYPE OF PROPERTY
<TABLE>
<CAPTION>
Geographic Area Industrial Office Retail Total Percent of Total
- --------------- ---------- ------ ------ ----- ----------------
<S> <C> <C> <C> <C> <C>
Greater Seattle Area, WA/Boise, ID 3,093,023 667,265 214,195 3,974,483 18.6%
Greater Portland Area, OR 1,758,627 423,989 89,624 2,272,240 10.6
Sacramento/Central Valley, CA 1,124,293 1,225,681 360,531 2,710,505 12.6
East Bay-- San Francisco, CA 3,685,995 274,394 624,155 4,584,544 21.4
South Bay-- San Francisco, CA 3,014,860 2,089,060 168,734 5,272,654 24.6
Orange County/San Diego, CA 1,041,726 1,573,580 - 2,615,306 12.2
----------- ----------- ----------- ---------- -----
Total 13,718,524 6,253,969 1,457,239 21,429,732 100.0%
=========== =========== =========== ========== =====
Percent of total 64.0% 29.2% 6.8% 100.0%
==== ==== === =====
</TABLE>
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Property Operating Income
The following table sets forth for the quarter ended December 31, 1996, the
Company's property operating income, which is rental revenue less rental
expenses and real estate taxes and excluding interest, depreciation and
amortization and general and administrative expenses, on a percentage basis by
the location and type of the Properties.
PERCENTAGE OF NET OPERATING INCOME BY LOCATION AND TYPE OF PROPERTY
FOR THE QUARTER ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Geographic Area Industrial Office Retail Percent of Total
- --------------- ---------- ------ ------ ----------------
<S> <C> <C> <C> <C>
Greater Seattle Area, WA/Boise, ID 8.5% 4.5% 2.8% 15.8%
Greater Portland Area, OR 4.5 3.1 0.7 8.3
Sacramento/Central Valley, CA 2.6 8.8 2.5 13.9
East Bay-- San Francisco, CA 12.8 1.7 4.3 18.8
South Bay-- San Francisco, CA 12.6 18.9 1.3 32.8
Orange County/San Diego, CA 3.6 6.8 - 10.4
------ ------ ------ ------
Percent of Total 44.6% 43.8% 11.6% 100.0%
====== ====== ====== ======
</TABLE>
Average Occupancy Rates
The following table sets forth the aggregate average occupancy rates of the
Properties during the years specified.
AVERAGE OCCUPANCY
<TABLE>
<CAPTION>
Year Total Rentable Average Occupancy
(As of December 31) Square Footage at Year End
------------------- -------------- -----------
<S> <C> <C> <C>
1996 21,429,732 96.6%
1995 16,282,278 96.9
1994 13,933,113 97.6
1993 11,072,796 92.1
1992 9,724,363 92.1
</TABLE>
The following table sets forth the aggregate average occupancy rates as of
December 31, 1996, of the Properties, in terms of location and type of the
Properties.
AVERAGE OCCUPANCY BY LOCATION AND TYPE OF PROPERTY
<TABLE>
<CAPTION>
Geographic Area Industrial Office Retail Total
- --------------- ---------- ------ ------ -----
<S> <C> <C> <C> <C>
Greater Seattle Area, WA/Boise, ID 96.0% 97.8% 95.4% 96.3%
Greater Portland Area, OR 96.5 99.8 96.6 97.1
Sacramento/Central Valley, CA 96.7 90.4 98.2 94.0
East Bay-- San Francisco, CA 98.1 99.0 92.6 97.4
South Bay-- San Francisco, CA 99.8 98.7 93.5 99.1
Orange County/San Diego, CA 94.2 91.2 - 92.4
------- ------- ------- -------
Weighted Average 97.4% 95.2% 94.7% 96.6%
======= ======= ======= =======
</TABLE>
<PAGE> 9
Tenant Improvements and Leasing Commissions
While maintaining high occupancy levels in each of its property types and
markets, the Company also focuses on controlling the expenditures associated
with renewing or re-leasing space. For the year ended December 31, 1996, the
Company renewed or re-leased 3.7 million square feet of space, and the average
committed capitalized tenant improvement and leasing commission expenditures per
square foot of renewed or re-leased space was $2.20.
Lease Expirations
The following tables set forth the lease expirations in summary and by type for
leases in place in the Properties as of January 1, 1997, assuming none of the
tenants exercises renewal options or termination rights. The tables do not
include month-to-month leases.
LEASE EXPIRATIONS OF THE COMPANY'S PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES (1)
- ---------- -------------------------- --------------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997 4,516,401 $ 34,167 17.0%
1998 3,930,160 36,148 18.0
1999 2,601,714 26,879 13.4
2000 2,845,376 29,476 14.7
2001 3,556,258 38,156 19.0
2002 878,034 10,816 5.4
2003 370,764 4,404 2.2
2004 802,470 7,576 3.8
2005 327,932 2,431 1.2
2006 194,634 2,376 1.2
2007 and Thereafter 666,044 8,347 4.1
------------ ---------- -------
Total 20,689,787 $ 200,776 100.0%
============ ========== =======
</TABLE>
(1) Calculated by dividing annual base rent (amounts contractually due, which
may include taxes, insurance, and common area maintenance ("Annual Base
Rent")) as adjusted for contractual increases expiring during each period
by the total Annual Base Rent inclusive of contractual increases.
<PAGE> 10
LEASE EXPIRATIONS OF THE INDUSTRIAL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES (1)
- ---------- -------------------------- --------------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997 3,286,003 $ 15,881 21.0%
1998 2,727,560 14,637 19.4
1999 1,653,116 9,774 12.9
2000 2,022,303 12,115 16.0
2001 2,195,648 13,017 17.2
2002 331,316 1,685 2.2
2003 204,419 2,103 2.8
2004 578,840 4,182 5.5
2005 280,654 1,451 1.9
2006 77,284 804 1.1
2007 and Thereafter 0 0 0.0
------------ ---------- -------
Total 13,357,143 $ 75,649 100.0%
============ ========== =======
</TABLE>
- ----------------------------------
(1) Calculated by dividing Annual Base Rent as adjusted for contractual
increases expiring during each period by the Total Base Rent inclusive of
contractual increases.
LEASE EXPIRATIONS OF THE OFFICE PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES (1)
- ---------- -------------------------- --------------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997 1,021,708 $ 17,079 15.8%
1998 1,125,547 20,091 18.6
1999 899,343 16,140 14.9
2000 761,724 16,223 15.0
2001 1,333,776 24,612 22.8
2002 534,859 8,855 8.2
2003 93,688 1,688 1.6
2004 140,242 2,523 2.3
2005 14,752 375 0.4
2006 10,114 212 0.2
2007 and Thereafter 16,234 226 0.2
------------ ---------- -------
Total 5,951,987 $ 108,024 100.0%
============ ========== =======
</TABLE>
- --------------------------------
(1) Calculated by dividing Annual Base Rent as adjusted for contractual
increases expiring during each period by the Total Base Rent inclusive of
contractual increases.
<PAGE> 11
LEASE EXPIRATIONS OF THE RETAIL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES (1)
- ---------- -------------------------- --------------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997 208,690 $ 1,207 7.1%
1998 77,053 1,420 8.3
1999 49,255 965 5.6
2000 61,349 1,138 6.6
2001 26,834 527 3.1
2002 11,859 276 1.6
2003 72,657 613 3.6
2004 83,388 871 5.1
2005 32,526 605 3.5
2006 107,236 1,360 8.0
2007 and Thereafter 649,810 8,121 47.5
------------ ---------- -------
Total 1,380,657 $ 17,103 100.0%
============ ========== =======
</TABLE>
- -----------------------------------
(1) Calculated by dividing Annual Base Rent as adjusted for contractual
increases expiring during each period by the Total Base Rent inclusive of
contractual increases.
<PAGE> 12
1996 Acquisitions
The following table sets forth certain information regarding properties
acquired by the Company during the year ended December 31, 1996.
<TABLE>
<CAPTION>
PROPERTIES ACQUIRED IN 1996
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OCCUPANCY
MONTH RENTABLE RATE AT TOTAL
PROPERTY NAME LOCATION ACQUIRED SQUARE FEET 12/31/96 INVESTMENT (1)
- ------------------------------------ ---------------------- --------------- --------------- -------------- ---------------
(IN THOUSANDS)
INDUSTRIAL PROPERTIES
<S> <C> <C> <C> <C> <C>
Benicia Industrial I (2) Benicia, CA January 904,473 95.2% $ 26,485
Everett Industrial Center Everett, WA March 150,154 100.0 7,484
Everett 526 Everett, WA May 97,523 100.0 4,388
Port of Oakland Center Oakland, CA May 199,733 96.9 7,160
Doolittle Business Center San Leandro, CA May 113,195 91.9 3,767
MacArthur Park Santa Ana, CA August 94,014 71.1 6,370
Stadium Plaza Anaheim, CA August 806,678 95.9 40,278
Charcot Business Park San Jose, CA October 163,370 95.7 12,235
Kifer Road Industrial Center Sunnyvale, CA November 287,300 100.0 14,449
Airport Service Center Burlingame, CA November 36,310 97.3 2,816
Ravendale Mountain View, CA December 80,450 100.0 8,150
---------- ------ --------
SUBTOTAL OR WEIGHTED AVERAGE 2,933,200 95.0% $133,582
========== ====== ========
OFFICE PROPERTIES
Bayside Corporate Center Foster City, CA January 84,925 100.0% $ 10,074
Airport Office Center (3) San Jose, CA January N/A N/A 14,400
Carmel Valley Centre I and II Del Mar, CA April 106,920 99.8 14,328
2290 North First Street San Jose, CA May 75,680 95.8 6,669
10700 Building Bellevue, WA May 55,854 100.0 4,675
Dove Street Newport Beach, CA June 78,052 93.5 8,330
Fidelity Plaza Sacramento, CA July 77,452 76.2 5,779
The City (4) Orange, CA July 429,756 87.2 30,483
Fairchild Corporate Center Irvine, CA August 104,823 92.3 10,670
One Pacific Plaza Huntington Beach, CA November 111,718 83.4 10,986
Central Park Plaza Santa Clara, CA December 305,918 99.9 35,584
Corona Corporate Center Corona, CA December 46,227 100.0 4,239
One Lakeshore Plaza Ontario, CA December 175,840 86.8 19,245
Wood Island Office Complex Larkspur, CA December 73,731 96.4 14,544
Pacific View Plaza Carlsbad, CA December 48,680 81.5 5,666
---------- ------ --------
SUBTOTAL OR WEIGHTED AVERAGE 1,775,576 91.9% $195,672
========== ====== ========
TOTAL OR WEIGHTED AVERAGE 4,708,776 93.9% $329,254
========== ====== ========
</TABLE>
-------------------------------
(1) Represents capitalized cost as of December 31, 1996, plus estimated
repositioning costs.
(2) In addition to the square footage and total investment shown in this table,
the purchase included eight buildings totaling 895,530 square feet that are
currently under development. See the development project titled "Benicia
Industrial II" in the table titled "Developments in Process."
(3) Represents an investment in two mortgages with an aggregate face value of
$21.0 million secured by this property.
(4) In addition to the square footage and total investment shown in this table,
the purchase included one building totaling 146,300 square feet that is
currently under redevelopment. See the development project titled "The
City - 3800 Chapman" in the table titled "Developments in Process."
<PAGE> 13
1996 Developments
The following table sets forth certain information regarding property
developments completed by the Company during the year ended December 31, 1996.
<TABLE>
<CAPTION>
DEVELOPMENTS COMPLETED IN 1996
- -------------------------------------------------------------------------------------------------
RENTABLE TOTAL
PROPERTY NAME LOCATION SQUARE FEET INVESTMENT (1)
- ---------------------------------------- --------------------- --------------- ----------------
(IN THOUSANDS)
INDUSTRIAL
<S> <C> <C> <C>
Walsh @ Lafayette Santa Clara, CA 320,505 $ 13,070
Cadillac Court II Milpitas, CA 36,120 2,554
Marine Drive Dist Ctr Phase I Portland, OR 226,478 7,185
--------- --------
SUBTOTAL 583,103 $ 22,809
--------- --------
OFFICE
Ryan Ranch Office Phase II Monterey, CA 25,864 $ 2,947
4004 S.W. Kruse Way Place Portland, OR 56,245 7,049
--------- --------
SUBTOTAL 82,109 $ 9,996
--------- --------
RETAIL
Broadway Faire (2) Fresno, CA 60,383 $ 8,174
Metro 580 (2) Pleasanton, CA 172,878 18,286
--------- --------
SUBTOTAL 233,261 $ 26,460
--------- --------
TOTAL COMPLETED DEVELOPMENTS 898,473 $ 59,265
========= ========
</TABLE>
- --------------------------
(1) Represents capitalized cost as of December 31, 1996.
(2) Properties to be disposed of pursuant to retail divestiture.
<PAGE> 14
Developments In Process
The following table sets forth certain information regarding the Company's
property developments in process as of December 31, 1996.
<TABLE>
<CAPTION>
DEVELOPMENTS IN PROCESS
- ----------------------------------------------------------------------------------------------------------------------
ACTUAL OR
ESTIMATED
SHELL COMPLETION RENTABLE TOTAL
PROPERTY NAME LOCATION DATE (1) SQUARE FEET INVESTMENT (2)
- ---------------------------------------- --------------------- ------------------- --------------- ----------------
(IN THOUSANDS)
INDUSTRIAL
<S> <C> <C> <C> <C>
Benicia Industrial II Benicia, CA February 1996 895,530 $ 18,471
Ryan Ranch Industrial (14B) Monterey, CA April 1996 31,560 1,806
Woodinville III Seattle, WA May 1996 239,570 11,812
Marine Drive II Portland, OR November 1996 106,000 3,309
Concord North Commerce Ctr. Concord, CA November 1996 191,150 9,074
Airport Way Commerce Park Portland, OR February 1997 205,000 7,590
Riverside Business Center Sacramento, CA April 1997 174,624 7,430
Sorrento Vista San Diego, CA June 1997 226,478 9,945
Dixon Landing North II Milpitas, CA July 1997 83,890 7,408
Marine Drive III Portland, OR July 1997 258,500 8,545
Bay Center III Business Park Hayward, CA August 1997 118,056 6,563
Dixon Landing North I Milpitas, CA September 1997 116,890 10,956
---------- ----------
SUBTOTAL 2,647,248 $ 102,909
---------- ----------
OFFICE
Gateway Oaks III Sacramento, CA March 1996 45,321 $ 5,533
Bellefield Maplewood Bldg Seattle, WA January 1997 34,763 5,015
Ridder Park San Jose, CA February 1997 83,841 8,515
Ryan Ranch Office Center III Monterey, CA February 1997 24,343 3,001
The City - 3800 Chapman Orange Co., CA July 1997 146,300 9,638
4949 Meadows Building Lake Oswego, OR November 1997 119,000 16,409
Bellefield Building "N" Bellevue, WA December 1997 45,000 6,137
---------- ----------
SUBTOTAL 498,568 $ 54,248
---------- ----------
TOTAL DEVELOPMENTS IN PROCESS 3,145,816 $ 157,157
========== ==========
</TABLE>
(1) Shell completion date refers to the date when the property is first
available for occupancy.
(2) Represents total estimated cost of development.
<PAGE> 15
Acquisitions Completed Subsequent to Year-End
The following table sets forth certain information regarding the properties
acquired by the Company between January 1, 1997, and March 15, 1997.
<TABLE>
<CAPTION>
PROPERTIES ACQUIRED IN 1997 (THROUGH MARCH 15, 1997)
- ------------------------------------------------------------------------------------------------------------------
TOTAL
MONTH RENTABLE TOTAL
PROPERTY NAME LOCATION ACQUIRED SQUARE FEET INVESTMENT(1)
- ------------------------------------ ---------------------- --------------- --------------- --------------
(IN
THOUSANDS)
INDUSTRIAL PROPERTIES
<S> <C> <C> <C> <C>
Andover Park West Tukwila, WA January 286,921 $ 6,545
---------- ----------
OFFICE PROPERTIES
Mission West San Diego, CA January 818,836 $ 53,982
Emeryville Portfolio Emeryville, CA January 946,385 134,033
Brea Park Centre Brea, CA January 141,837 11,856
555 Twin Dolphin Drive Redwood Shores, CA February 198,941 43,400
Quadrant Corporate Center Bothell, WA February 204,871 23,000
Riverside Centre Portland, OR February 99,233 9,500
Metro Plaza San Jose, CA March 414,737 75,500
Kodak San Jose, CA March 196,444 39,716
---------- ----------
SUBTOTAL 3,021,284 $ 390,987
========== ==========
TOTAL 3,308,205 $ 397,532
========== ==========
</TABLE>
- -----------------------------
(1) Represents initial purchase price plus estimated repositioning costs.
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which either the Company or
the Properties is a party, or to which any of the assets of the Company or the
Properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders in the
fourth quarter of the fiscal year ended December 31, 1996.
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for:
- Spieker Properties, L.P. consolidated operating data presented for the
years ended December 31, 1996, December 31, 1995, and December 31,
1994, and for the period from November 19, 1993, to December 31, 1993.
The consolidated balance sheet data presented as of December 31, 1996,
1995, 1994, and 1993.
- Spieker Partner Properties combined operating data presented for the
period from January 1, 1993, to November 18, 1993, and for the year
ended December 31, 1992. The combined balance sheet data presented as
of December 31, 1992.
This selected financial data should be read in conjunction with financial
statements (including the notes thereto) of the Company included in Item 14.
SUMMARY FINANCIAL INFORMATION
(In thousands, except per share amounts and number of Properties)
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP PREDECESSOR
-------------------------------------------------------------- -------------------------------
YEAR YEAR YEAR NOV. 19, 1993 JAN. 1, 1993 YEAR
ENDED ENDED ENDED TO TO ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 NOV. 18, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- ------------- -------------
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 200,699 $ 153,391 $ 121,037 $ 12,696 $ 78,157 $ 83,804
Income (loss) from operations
before disposal of
properties, minority
interests and extraordinary 65,764 30,335 13,363 1,699 (15,574) (12,428)
items
Income (loss) before
extraordinary items 74,091 30,444 13,393 1,699 (13,363) (7,819)
Net income (loss) 74,091 (10,361) 13,393 (1,261) (13,363) (7,819)
Net income (loss) available
to General Partners 64,190 (8,837) 10,541 (980) N/A N/A
Net income (loss) available
to Limited Partners 9,901 (1,524) 2,852 (281) N/A N/A
Net income (loss) per OP unit
before extraordinary items 1.74 .90 .49 .06 N/A N/A
(1)
Net income (loss)
per OP unit (1) 1.74 (.31) .49 (.05) N/A N/A
Distributions per unit:
General Partners (1) 2.04 1.76 1.60 .19 N/A N/A
Limited Partners (1) 1.72 1.68 1.60 .19 N/A N/A
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP PREDECESSOR
----------------------------------------------------------------------- -------------
AS OF AS OF AS OF AS OF AS OF
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate (before
accumulated depreciation) $1,447,173 $1,098,871 $ 870,613 $ 722,928 $ 533,282
Net investment in real estate 1,319,472 974,259 770,827 638,533 463,959
Total assets 1,390,314 1,011,497 809,938 691,909 489,916
Mortgage loans, net (2) 45,997 112,702 514,098 403,676 589,737
Unsecured debt 674,000 377,700 - 900 10,765
Total debt 719,997 490,402 514,098 404,576 600,502
Partners' capital (deficit) 610,928 468,576 258,760 264,409 (144,002)
</TABLE>
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP PREDECESSOR
------------------------------------------------------------ -----------------------------
YEAR YEAR YEAR NOV. 19, 1993 JAN. 1, 1993 YEAR
ENDED ENDED ENDED TO TO ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 NOV. 18, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- ------------- -------------
OTHER DATA:
<S> <C> <C> <C> <C> <C> <C>
Funds from Operations (3) $ 93,293 $ 61,428 $ 41,935 $ 5,622 $ 7,426 $ 8,186
Cash flow provided by (used in):
Operating activities 103,607 75,567 47,750 5,935 3,806 8,362
Investing activities (378,593) (199,611) (161,332) (169,050) (16,972) (20,203)
Financing activities 296,749 121,954 97,378 175,611 24,637 11,840
Total rentable square footage of
properties at end of period 21,430 16,282 13,933 11,073 10,317 9,724
Number of properties at end of period 156 128 111 97 93 89
Occupancy rate at end of period 96.6% 96.9% 97.6% 92.1% N/A 92.1%
</TABLE>
- --------------------
(1) 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, 1996, 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
--------------------- ---------------------
Year ended:
<S> <C> <C>
December 31, 1996 35,910,652 6,549,819
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>
(2) Net of discount of approximately $31.6 million and $38.3 million
as of December 31, 1994 and 1993, respectively.
(3) Funds from Operations means income (loss) from operations before disposal
of real estate properties, minority interests and extraordinary items plus
depreciation and amortization and an adjustment for straight-lined rents
less cash distributable to minority interests in certain properties owned
by the Company. In February 1995, the National Association of Real Estate
Investment Trusts ("NAREIT") established new guidelines clarifying its
definition of Funds from Operations and requested that REITs adopt this new
definition beginning in 1996. The new definition provides that the
amortization of debt discount and deferred financing costs is no longer to
be added back to net income to calculate Funds from Operations. In 1996,
the Company substantially implemented the new NAREIT definition for
calculating Funds from Operations. The amounts presented above for the
years ended December 31, 1995 and 1994, have been restated to reflect the
new NAREIT definition. Funds from Operations previously reported by the
Company based on the old NAREIT definition for the years ended December 31,
1995 and 1994, were $70,790 and $52,142, respectively. Management generally
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 does not necessarily indicate that cash flows will
be sufficient to fund cash needs. It should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of 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 stockholders. Funds from Operations also
does not represent cash flows generated 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.
<PAGE> 19
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 Company should be read in conjunction with the selected
financial data and the Company's financial statements included elsewhere in this
Form 10-K.
RESULTS OF OPERATIONS
OVERVIEW
In 1996, the Company continued to identify and complete attractive acquisition
and development transactions and to focus on increasing the cash flow from its
existing core portfolio of properties by maintaining high occupancy levels and
increasing effective rents. The Company also continued to strengthen its balance
sheet and to establish a capital structure that allows the Company to take
advantage of growth opportunities.
During 1996, the Company added 4.7 million square feet to its portfolio by
completing acquisitions representing a total investment of approximately $329.3
million (the "1996 Acquisitions"). As used herein, the term "total investment"
represents the initial purchase price of acquisitions, plus the estimated cost
of certain repositioning capital expenditures anticipated at the time of
purchase. Significantly, the Company increased its presence in Southern
California by completing nine transactions representing a total investment of
$150.6 million and over 2.0 million square feet.
While the Company was able to complete a number of acquisition transactions
during 1996, the overall market for property acquisitions is getting more
challenging. In all of the markets in which the Company operates, the Company is
experiencing an increased level of competition for acquisitions, including
competition from a number of REITs. The Company believes that as the
fundamentals of these markets continue to strengthen and the number of qualified
buyers increases, the average initial return achievable on new acquisitions may
decrease and the acquisition cost of new properties may begin to approach
replacement cost.
The Company also increased its level of development activity. In 1996, seven
projects totaling 0.9 million square feet were completed at a total investment
of $59.3 million. In addition, as of December 31, 1996, the Company had
developments in process in each of its operating regions representing an
estimated total investment of $157.2 million and a total of 3.1 million square
feet of suburban office and industrial space. The developments completed during
1996 and the developments in process at December 31, 1996, are collectively
referred to as the "Developments." Certain of the developments in process,
though not yet completed, were partially leased and occupied during 1996 and,
accordingly, certain revenue and expense amounts for such developments are
included in the Company's operating results for the year ended December 31,
1996.
The Company was also able to increase rents in its core portfolio. On the 3.7
million square feet of second-generation space renewed or re-leased during the
year, new effective rents were, on average, 10.7% higher than the expiring
coupon rent. At year end, the Company's portfolio of properties was 96.6%
leased.
The Company continued to strengthen its balance sheet by accessing both the
public and private equity markets and the public debt market. The Company raised
more than $151.3 million in equity capital in 1996 by completing a concurrent
public and private offering of Common Stock and Class C Common Stock. In
addition, over the course of the year, the Company issued $375.0 million of
investment grade rated unsecured notes with maturities ranging from five to
twenty years.
Finally, in 1996 the Company announced a strategic decision to dispose of its
existing portfolio of retail properties and replace such properties with office
and industrial properties, which the Company believes provide superior long-term
growth prospects. In December 1996, the Company disposed of three retail
properties and signed definitive contracts to dispose of six additional retail
properties to Pacific Retail Trust ("PRT"). The aggregate consideration for the
dispositions to PRT will amount to approximately $106.5 million. Of this total
amount, transactions valued at $45.4 million closed in December 1996. On the
three properties disposed of in December 1996, the Company recognized a book
gain of approximately $9.7 million. Of the six properties under contract, five
<PAGE> 20
will be disposed of before May 1, 1997, on dates to be determined by the
Company, with the final property to be disposed of by December 31, 1997. In
connection with these dispositions, the Company's retail employees have become
employees of PRT, and PRT has agreed to manage the Company's remaining retail
properties pending disposition. The Company is in the process of divesting its
other retail properties and it anticipates that such divestiture will be
completed by the end of 1998.
COMPARISON OF 1996 TO 1995
The following compares the Company's results for the year ended December 31,
1996, with its results for the year ended December 31, 1995.
For the year ended December 31, 1996, rental revenues increased by $45.1
million, or 29.8%, to $196.5 million, as compared to $151.4 million for the
corresponding period ended December 31, 1995. The increase was attributable to
revenues in the amount of $18.9 million from the 1996 Acquisitions, $16.1
million from properties acquired during 1995 (the "1995 Acquisitions"), $7.9
million from the Developments, and $2.2 million from the Core Portfolio. As used
herein, the term "Core Portfolio" refers to those stabilized properties owned by
the Company as of January 1, 1995.
Interest and other income increased by $2.2 million, or 110.0%, to $4.2 million
for the year ended December 31, 1996, as compared to the year ended December 31,
1995. The net increase in interest and other income was primarily due to $1.8
million in interest income earned on the Company's investment in two mortgages,
which were acquired in January 1996.
Rental expenses increased by $10.1 million, or 41.1%, to $34.7 million for the
year ended December 31, 1996, as compared to $24.6 million for 1995. Real estate
taxes increased by $3.6 million, or 30.3%, to $15.5 million in 1996, as compared
to $11.9 million in 1995. The total increase in property operating expenses
(rental expenses and real estate taxes) is due to a $5.9 million increase
attributable to the 1996 Acquisitions, a $5.3 million increase attributable to
the 1995 Acquisitions, a $2.0 million increase attributable to the Developments,
and a $0.5 million increase attributable to the Core Portfolio. On a percentage
basis, property operating expenses were 25.5% and 24.1% of rental revenues for
the years ended December 31, 1996 and 1995, respectively. The higher percentage
of property operating expenses is attributable to an increasing percentage of
office properties in the Company's portfolio, and to the Company's acquisition
of properties with occupancy levels less than the expected stabilized occupancy,
resulting in the Company recognizing the full expense burden of a property
before recognizing the full revenue potential of the property, which doesn't
occur until the acquired vacant space is leased.
The net property operating income (rental revenues less rental expenses and real
estate taxes) in the Core Portfolio increased by $1.7 million or approximately
1.6% from the year ended December 31, 1995, to the year ended December 31, 1996.
The increase is principally the result of increasing effective rents on leases
signed for the renewal or re-leasing of second-generation space and contractual
rent increases included in leases signed in prior years. For both the year ended
December 31, 1995, and the year ended December 31, 1996, the occupancy in the
Core Portfolio was stable at approximately 97%.
Interest expense decreased by $9.2 million, or 19.8%, to $37.2 million in 1996,
from $46.4 million in 1995. The decrease in interest expense is due to the
elimination of the amortization of debt discount as a result of the December
1995 refinancing of $347.0 million of secured mortgage debt (the "Prudential
Debt"). The prepayment of the Prudential Debt resulted in the write-off of
approximately $28.1 million in debt discount which was previously being
amortized over the remaining term of the loans and recorded as interest expense.
The Prudential Debt was prepaid with the net proceeds from the concurrent
underwritten public offering of $260.0 million of investment grade rated
unsecured notes and 4.25 million shares of Series B Preferred Stock.
Depreciation and amortization expenses increased by $5.8 million, or 18.4%, to
$37.4 million for the year ended December 31, 1996, as compared with the same
period in 1995, due to the 1995 and 1996 Acquisitions and the Developments.
<PAGE> 21
General and administrative expenses and other expenses increased by $1.6
million, or 18.8%, to $10.1 million for the year ended December 31, 1996, as
compared with 1995, primarily as a result of the increased number of employees,
which rose from 175 at December 31, 1995, to 212 at December 31, 1996. On a
percentage basis, general and administrative expenses were 5.1% of rental
revenues for the year ended December 31, 1996, as compared with 5.6% for 1995.
In 1996, net income before minority interests and disposal of real estate
properties increased by $35.5 million, or 117.2%, to $65.8 million as compared
to $30.3 million in 1995. The increase in net income is principally due to (i)
the increase in income from the 1995 and 1996 Acquisitions, the Developments and
the increased property operating income generated by the Core Portfolio as a
result of increased rental rates realized on the renewal and re-leasing of
second-generation space and (ii) the decrease in interest expense.
COMPARISON OF 1995 TO 1994
The following compares the Company's results for the year ended December 31,
1995, with its results for the year ended December 31, 1994.
Rental revenues increased by $31.0 million, or 25.7%, to $151.4 million in 1995,
as compared with $120.4 million in 1994. Of this increase, $13.5 million was
generated by the 1995 Acquisitions. During 1995 the Company 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 Company'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
re-leasing of previously leased space. During 1995, the Company signed 552
leases for the renewal or re-leasing 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.
Interest and other income increased by $1.3 million, or 185.7%, to $2.0 million
in 1995, as compared with $0.7 million in 1994. This increase is predominantly
due to $0.8 million in management fee income earned by the Company 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 Company, was transferred to the Company. Accordingly, certain
revenue and expense items previously recorded by SPNW are now recorded by the
Company.
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 17.8%, 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. The remainder
is attributable to the Core Portfolios. In 1995, the Company's rental expenses
and real estate taxes in total were 24.1% of rental revenues, as compared to
23.3% 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 Company's 1995 Developments
consist of nine 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 9.0%, 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
37.1%, 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
<PAGE> 22
management fee income earned by the Company as discussed above. The remaining
increase is due to the increase in personnel and investments in upgrading the
Company's management information systems to support the Company's growth.
Net income before minority interests and extraordinary items increased by $16.9
million, or 126.1%, 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 Company 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 $347.0 million cross
collateralized mortgage obligation with the net proceeds from the issuance of
$260.0 million of unsecured investment grade debt and $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 Company 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.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1996, cash provided by operating activities
increased by $28.0 million, or 37.0%, to $103.6 million, as compared to $75.6
million for 1995. The increase is primarily due to the increase in net income
resulting from the 1995 and 1996 Acquisitions, the Developments, increased
property operating income generated by the Core Portfolio and a decrease in
interest expense. Cash used for investing activities increased by $179.0
million, or 89.7%, to $378.6 million for 1996, as compared to $199.6 million for
1995. The increase is attributable to the Company's ongoing acquisition and
development of suburban office and industrial properties. Cash provided by
financing activities increased by $174.7 million, or 143.2%, to $296.7 million
for 1996, as compared to $122.0 million for 1995. During 1996, cash provided by
financing activities consisted, primarily, of $152.4 million in net proceeds
from the sale of Common Stock and Class C Common Stock, and $371.5 million in
net proceeds from the issuance of unsecured notes, which was offset by net
payments of $78.7 million on the Facility (as defined below) and net payments of
$66.7 million on mortgage loans. Additionally, payments of distributions
increased by $27.2 million to $81.6 million for 1996, as compared with $54.4
million for 1995. The distribution payment increase is due to the greater number
of shares outstanding and a 2.4% increase in the distribution rate.
The principal sources of funding for acquisitions, development, expansion and
renovation of the properties are an unsecured line of credit, permanent secured
debt financings, 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. In addition, during 1996 the Company made
the strategic decision to sell its retail assets and use the proceeds from the
sale of the retail properties for the acquisition and development of office and
industrial properties. The Company believes that its liquidity and its ability
to access capital are adequate to continue to meet liquidity requirements for
the foreseeable future.
At December 31, 1996, the Company had no material commitments for capital
expenditures related to the renewal or re-leasing of space. The Company believes
that the cash provided by operations and its line of credit provide sufficient
sources of liquidity to fund capital expenditure costs associated with the
renewal or re-leasing of space.
The Company has a $150.0 million unsecured line of credit facility (the
"Facility") with interest at London Interbank Offered Rates ("LIBOR") plus
1.25%. The Facility matures in November 1997 and the Company 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, 1996, the Company had $39.0 million outstanding under the Facility.
<PAGE> 23
In December 1995, the Company issued in a public offering $260.0 million of
unsecured investment grade rated notes (the "Unsecured Notes") and the Company
issued $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 1995 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 dividend
yield of 9.45%.
The proceeds from the December 1995 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
unencumbrance of 55 of the Company's properties.
On January 19, 1996, the Company issued $100.0 million of investment grade rated
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 $98.8 million were used
to repay borrowings on the unsecured line of credit. In June 1996, the Company
commenced a $200.0 million medium-term note program. In July 1996, the Company
issued $100.0 million of 8.00% medium-term notes due July 19, 2005, and $50.0
million of 7.58% medium-term notes due December 17, 2001, (the "July 1996
Notes"). The net proceeds of $148.8 million from the issuance of the July 1996
Notes were used to repay borrowings on the line of credit and to fund the
ongoing acquisition and development of properties. In December 1996, the Company
issued $100.0 million of 7.125% investment grade rated unsecured notes, priced
to yield 7.14% and maturing on December 1, 2006, and $25.0 million of 7.875%
investment grade rated unsecured notes, priced to yield 7.91% and maturing on
December 1, 2016. The net proceeds of $123.9 million were used to pay down
borrowings on the line of credit and to fund the ongoing acquisition and
development of properties.
As of December 31, 1996, the Company had $635.0 million of investment grade
rated unsecured notes outstanding. The notes have interest rates which vary from
6.65% to 8.00%, and various maturity dates which range from 2000 to 2016.
In addition to the Unsecured Notes and the Facility, the Company has $46.0
million of secured indebtedness (the "Mortgages") at December 31, 1996. The
Mortgages have interest rates varying from 7.5% to 9.75% and maturity dates from
1997 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 Company also has $4.8 million of assessment bonds outstanding as
of December 31, 1996.
On February 28, 1996, the Company concurrently sold 4,887,500 shares of Common
Stock (including 637,500 shares sold pursuant to the underwriters' exercise of
their over-allotment option) 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 of $151.3 million were used primarily to repay floating
rate debt.
In January 1996, the Company filed a shelf registration statement (the "January
1996 Shelf Registration Statement") with the SEC 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 January 1996 Shelf Registration
Statement was declared effective by the SEC on February 28, 1996. The Company
will receive no proceeds from the sale of Common Stock under the January 1996
Shelf Registration Statement.
In May 1996, the Company and the Operating Partnership filed a shelf
registration statement (the "May 1996 Shelf Registration Statement") with the
SEC which registered $250.0 million of equity securities of the Company and
$250.0 million of debt securities of the Operating Partnership. The May 1996
Shelf Registration Statement was declared effective by the SEC on June 20, 1996.
<PAGE> 24
In August 1996, the Company filed a shelf registration statement (the "August
1996 Shelf Registration Statement") with the SEC to register 50,000 shares of
Common Stock issuable by the Company upon exchange of partnership units in the
Operating Partnership by certain holders thereof. In October 1996, the Company
filed a registration statement (the "October 1996 Shelf Registration Statement")
with the SEC to register 245,738 shares of Common Stock issuable by the Company
upon exchange 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 August 1996 Shelf Registration Statement or the October 1996
Shelf Registration Statement.
Subsequent to year-end, in January 1997, the Company sold 11,500,000 shares of
Common Stock (including 1,500,000 shares sold to the underwriters in the
exercise of their over-allotment option) through an underwritten public offering
at $34.50 per share. The net proceeds of $374.8 million were used to purchase
properties during the first quarter of 1997, many of which were under contract
or letter of intent at the time of the offering, and to repay indebtedness.
Also, in January 1997, the Company and the Operating Partnership filed a shelf
registration statement (the "January 1997 Shelf Registration Statement") with
the SEC which registered $500.0 million of equity securities of the Company and
$500.0 million of debt securities of the Operating Partnership and became
effective in January 1997.
After completion of the January 1997 equity offering, the Company has the
capacity pursuant to the January 1997 Shelf Registration Statement to issue up
to approximately $500.0 million in equity securities and the Operating
Partnership has the capacity pursuant to the May 1996 Shelf Registration
Statement and the January 1997 Shelf Registration Statement to issue up to
$615.0 million in debt securities (including the $50.0 million of medium-term
notes available under the Company's existing medium-term note program).
FUNDS FROM OPERATIONS
The Company considers Funds from Operations to be a useful financial 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, developments, and other capital expenditures. Funds from
Operations does not represent net income or cash flows from operations as
defined by generally accepted accounting principles ("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 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 stockholders.
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.
Pursuant to the National Association of Real Estate Investment Trusts ("NAREIT")
revised definition of Funds from Operations, beginning with the quarter ended
March 31, 1996, the Company calculated 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 Company does not add back the depreciation of
corporate items, such as computers or furniture and fixtures, or the
amortization of deferred financing costs or debt discount. However, the Company
includes 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.
Funds from Operations per unit is calculated based on weighted average units
outstanding.
<PAGE> 25
The tables below sets forth the Company's calculation of Funds from Operations
for 1996 and 1995, based on the new NAREIT definition.
<TABLE>
<CAPTION>
STATEMENT OF FUNDS FROM OPERATIONS
(based on the new NAREIT definition)
(amounts in thousands)
YEAR ENDED
MARCH 31, 1996 JUNE 30, 1996 SEPTEMBER 30, 1996 DECEMBER 31, 1996 DECEMBER 31,1996
-------------- ------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Income from operations before disposal
of real estate and minority interests: $ 14,829 $ 17,131 $ 16,096 $ 17,557 $ 65,764
Adjustments:
Depreciation and amortization 8,475 8,723 9,938 9,904 37,040
Dividends on Series B Preferred Stock (2,510) (2,510) (2,510) (2,510) (10,041)
Other, net 115 120 116 103 303
Straight-lined rent (70) 125 252 (80) 227
----------- ----------- ----------- ----------- -----------
Funds from Operations $ 20,839 $ 23,589 $ 23,892 $ 24,974 $ 93,293
=========== =========== =========== =========== ===========
Weighted average units outstanding (1) 39,105 43,438 43,498 43,777 42,460
=========== =========== =========== =========== ===========
</TABLE>
- -------------------------------------
(1) Assumes conversion of the shares of Class B and Class C Common Stock,
shares of Series A Preferred Stock and partnership units in the Operating
Partnership into shares of Common Stock.
<TABLE>
<CAPTION>
STATEMENT OF FUNDS FROM OPERATIONS
(based on the new NAREIT definition)
(amounts in thousands)
YEAR ENDED
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 DECEMBER 31,1995
-------------- ------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Net income before minority interest: $ 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 $ 11,669 $ 14,833 $ 16,987 $ 17,939 $ 61,428
=========== =========== =========== ========== ==========
Weighted average units outstanding (1) 27,660 33,085 37,028 37,109 33,770
=========== =========== =========== ========== ==========
</TABLE>
-------------------------------------
(1) Assumes conversion of the shares of Class B and Class C Common Stock,
shares of Series A Preferred Stock and partnership units in the
Operating Partnership into shares of Common Stock.
Because of the impact of the December 1995 Offerings on the Company's
balance sheet and results of operations, the Company believes that an
adjusted calculation of 1995 Funds from Operations, based on the new NAREIT
definition and reflecting the effect of the December 1995 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 Company's calculation of Funds from Operations for 1995 based
upon the new NAREIT definition and adjusted to reflect the December 1995
Offerings and conversion of the secured line of credit into an unsecured
facility as if they occurred on January 1, 1995.
<PAGE> 26
<TABLE>
<CAPTION>
PRO-FORMA STATEMENT OF FUNDS FROM OPERATIONS
(based on the new NAREIT definition)
(amounts in thousands)
YEAR ENDED
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 DECEMBER 31,1995
-------------- ------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Funds from Operations - New Definition $ 11,669 $ 14,833 $ 16,987 $ 17,939 $ 61,428
Add:
Amortization of discount and deferred
financing fees 2,519 2,455 2,443 1,945 9,362
----------- ----------- ----------- ----------- -----------
Funds from Operations - Old Definition 14,188 17,288 19,430 19,884 70,790
Less:
Restructuring of secured debt (1) (958) (958) (958) (730) (3,604)
Amortization of discount and deferred
financing fees (2) (375) (311) (299) (360) (1,345)
----------- ----------- ----------- ----------- -----------
Funds from Operations - Pro Forma New
Definition $ 12,855 $ 16,019 $ 18,173 $ 18,794 $ 65,841
=========== =========== =========== =========== ===========
Weighted average units
outstanding (3) 27,660 33,085 37,028 37,109 33,770
=========== =========== =========== =========== ===========
</TABLE>
------------------------------
(1) Adjustment reflects interest cost of unsecured notes and dividend cost
of Series B Preferred Stock less previously recorded cash interest
cost on $347 million of prepaid debt.
(2) Adjustment reflects amortization of discount and deferred financing
fees added back in calculating FFO based on the old NAREIT definition
less amortization on the $347 million of prepaid debt and the previous
secured line of credit and adding in amortization on the new unsecured
line of credit.
(3) Assumes conversion of the shares of Class B and Class C Common Stock,
shares of Series A Preferred Stock and partnership units in the
Operating Partnership into shares of Common Stock.
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this Form 10-K.
See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(A) 1. FINANCIAL STATEMENTS AND REPORTS OF ARTHUR ANDERSEN LLP, INDEPENDENT AUDITORS
Reports of Independent Public Accountants
Financial Statements:
Balance Sheets:
Spieker Properties, L.P. Consolidated as of December 31, 1996 and 1995
Statements of Operations:
Spieker Properties, L.P. Consolidated for the Years Ended December
31, 1996, December 31, 1995, and December 31, 1994.
Statements of Partners' Capital:
Spieker Properties, L.P. Consolidated for the Years Ended December
31, 1996, December 31, 1995, and December 31, 1994.
Statements of Cash Flows:
Spieker Properties, L.P. Consolidated for the Years Ended December 31, 1996,
December 31, 1995, and December 31, 1994
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES:
Schedule III -- Real Estate and Accumulated Depreciation as of December 31, 1996
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
During the quarter ended December 31, 1996, the Operating Partnership
filed the following report on Form 8-K:
(i) a Form 8-K dated December 4, 1996, which includes combined
statements of revenues and certain expenses of the Three Property
Transactions (as defined therein)
(C) EXHIBITS
The exhibits cited in the following Index to Exhibits are filed
herewith or are incorporated by reference to exhibits previously filed.
</TABLE>
<PAGE> 30
(C) EXHIBITS (ENCLOSED ATTACHMENTS ARE SEQUENTIALLY NUMBERED)
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS PAGE
NUMBER EXHIBIT TITLE NUMBER
===================================================================================================================
<S> <C>
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. (1)
4.2 Intentionally omitted
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)
4.14 Fifth Supplemental Indenture relating to the Medium Term Note Program and Forms of Medium
Term Notes (incorporated by reference to Exhibit 4.1 to Spieker Properties, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996)
4.15 Sixth Supplemental Indenture relating to the 7 1/8 Notes Due 2006 and Form of 2006 Note
(incorporated by reference to Exhibit 4.1 of Spieker Properties, Inc.'s Current Report on
Form 8-K filed with the Commission on December 19, 1996)
4.16 Seventh Supplemental Indenture relating to the 7 7/8 Notes Due 2016 and Form of 2016 Note
(incorporated by reference to Exhibit 4.2 of Spieker Properties, Inc.'s Current Report on
Form 8-K filed with the Commission on December 19, 1996)
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* Amended and Restated Spieker Properties, Inc. 1993 Stock Incentive Plan (incorporated by
reference to Exhibit 4.3 to Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996)
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>
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS PAGE
NUMBER EXHIBIT TITLE NUMBER
===================================================================================================================
<S> <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 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)
10.10 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)
10.11 Credit Agreement among Spieker Properties, L.P. as borrower, and Wells Fargo Bank, The First
National Bank of Boston, First Bank National Association, 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))
10.12 Seventh Amendment to First Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P. (incorporated by reference to Exhibit 10.16 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996)
10.13 Amendment No. 1 to the Credit Agreement among Spieker Properties, L.P., as borrower and
Wells Fargo Bank, The First National Bank of Boston, First Bank National Association,
Seattle-First National Bank and Union Bank as lenders, dated as of July 24, 1996
(incorporated by reference to Spieker Properties, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996)
10.14 Eighth Amendment to First Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P.
12.1 Schedule of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends
21.1 List of Subsidiaries of Spieker Properties, L.P.
23.1 Consent of Independent Public Accountants
</TABLE>
- -----------------------------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-11 (Registration No. 33-67906),
which became effective on November 10, 1993.
<PAGE> 32
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, 1996 and
1995, and the related consolidated statements of operations, partners' capital
and cash flows for the years ended December 31, 1996, 1995 and 1994. 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, 1996 and 1995, and the results of its operations and its
cash flows for the years ended December 31, 1996, 1995 and 1994, 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 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 24, 1997
<PAGE> 33
SPIEKER PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------ ------------
INVESTMENTS IN REAL ESTATE:
<S> <C> <C>
Land, land improvements and leasehold interests $ 338,445 $ 303,157
Buildings and improvements 944,646 756,734
Construction in progress 31,969 38,980
------------ ------------
1,315,060 1,098,871
Less - accumulated depreciation (127,701) (124,612)
------------ ------------
1,187,359 974,259
Investment in mortgages 14,381 -
Property held for disposition 117,732 -
------------ ------------
Net investments in real estate 1,319,472 974,259
CASH AND CASH EQUIVALENTS 29,336 7,573
ACCOUNTS RECEIVABLE 3,799 3,351
DEFERRED RENT RECEIVABLE 3,242 4,698
RECEIVABLE FROM AFFILIATES 117 386
DEFERRED FINANCING AND LEASING COSTS, net of
accumulated amortization of $7,682 and $9,586 as
of December 31, 1996 and 1995, respectively 15,860 13,485
FURNITURE, FIXTURES & EQUIPMENT, net 2,386 1,678
PREPAID EXPENSES AND OTHER ASSETS 16,102 6,067
------------ ------------
$ 1,390,314 $ 1,011,497
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 34
SPIEKER PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(dollars in thousands)
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
DEBT:
Unsecured notes $ 635,000 $ 260,000
Unsecured line of credit 39,000 117,700
Mortgage loans 45,997 112,702
------------ ------------
719,997 490,402
------------ ------------
ASSESSMENT BONDS PAYABLE 4,758 12,140
ACCOUNTS PAYABLE 3,258 3,804
ACCRUED REAL ESTATE TAXES 731 506
ACCRUED INTEREST 10,471 2,510
UNEARNED RENTAL INCOME 6,345 6,972
DIVIDENDS AND DISTRIBUTIONS PAYABLE 18,660 15,588
OTHER ACCRUED EXPENSES AND LIABILITIES 16,406 12,202
------------ ------------
Total liabilities 780,626 544,124
------------ ------------
MINORITY INTERESTS (1,240) (1,203)
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
PARTNERS' CAPITAL:
General Partners, including a liquidation preference of $131,250 and
$25,000 as of December 31, 1996 and 1995, respectively 563,928 419,847
Limited Partners 47,000 48,729
------------ ------------
Total Partners' Capital 610,928 468,576
------------ ------------
$ 1,390,314 $ 1,011,497
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 35
SPIEKER PROPERTIES, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
REVENUES:
<S> <C> <C> <C>
Rental income $ 196,471 $ 151,412 $ 120,355
Interest and other income 4,228 1,979 682
--------- --------- ---------
200,699 153,391 121,037
--------- --------- ---------
OPERATING EXPENSES:
Rental expenses 34,690 24,601 17,998
Real estate taxes 15,510 11,934 10,111
Interest expense, including amortization of discount and
financing costs 37,235 46,386 44,395
Depreciation and amortization 37,385 31,602 28,953
General and administrative and other expenses 10,115 8,533 6,217
--------- --------- ---------
134,935 123,056 107,674
--------- --------- ---------
Income (loss) from operations before disposal of real
estate properties, minority interests and
extraordinary items 65,764 30,335 13,363
--------- --------- ---------
DISPOSAL OF REAL ESTATE PROPERTIES:
Gain on disposition of property 8,350 - -
--------- --------- ---------
Income from operations before minority interests and
extraordinary items 74,114 30,335 13,363
MINORITY INTERESTS' SHARE IN NET (INCOME) LOSS (23) 109 30
--------- --------- ---------
Net income before extraordinary items 74,091 30,444 13,393
EXTRAORDINARY ITEMS - (40,805) -
--------- --------- ---------
Net income (loss) $ 74,091 $ (10,361) $ 13,393
========= ========= =========
General Partner $ 64,190 $ (8,837) $ 10,541
Limited Partner 9,901 (1,524) 2,852
--------- --------- ---------
Totals $ 74,091 $ (10,361) $ 13,393
========= ========= =========
Net income (loss) per Operating Partnership unit:
Income before extraordinary items $ 1.74 $ .90 $ .49
Extraordinary items - (1.21) -
--------- --------- ---------
Net income (loss) $ 1.74 $ (.31) $ .49
========= ========= =========
Distributions per Operating Partnership Unit:
General Partners:
From net income $ 1.74 $ - $ .49
Representing a return of capital .30 1.76 1.11
--------- --------- ---------
Total distributions $ 2.04 $ 1.76 $ 1.60
========= ========= =========
Limited Partners:
From net income $ 1.51 $ - $ .49
Representing a return of capital .21 1.68 1.11
--------- --------- ---------
Total distributions $ 1.72 $ 1.68 $ 1.60
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 36
SPIEKER PROPERTIES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996, 1995 AND 1994
(dollars in thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partner General Limited
Units Units Partner Partner Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 20,400,000 5,894,100 $ 205,061 $ 59,348 $ 264,409
Contribution-Proceeds from sale of 1,219,512 - 23,949 - 23,949
Series A Preferred Stock
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 income - - 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' 16,731 (16,731) 343 (343) -
interests
Contribution of property - 705,501 - 8,907 8,907
Contributions-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
Contribution-Proceeds from sale of
Class C Common Stock 1,176,470 - 29,963 - 29,963
Contribution-Proceeds from sale of
Common Stock 5,022,500 - 121,368 - 121,368
Conversion of limited partners' 15,537 (15,537) 386 (386) -
interests
Restricted Stock grant 8,000 - - - -
Non-cash compensation merit fund - - 100 20 120
Contributions-Exercise of stock options 51,750 - 1,061 - 1,061
Amortization of deferred compensation - - 388 - 388
Partner distributions - - (73,375) (11,264) (84,639)
Net income - - 64,190 9,901 74,091
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1996 36,749,489 6,549,819 $ 563,928 $ 47,000 $ 610,928
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 37
SPIEKER PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 74,091 $ (10,361) $ 13,393
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation and amortization 37,385 31,602 28,953
Amortization of discount and deferred financing costs 1,224 9,362 9,727
Non-cash compensation 508 368 330
Minority interests' share of net income (loss) 23 (109) (30)
Extraordinary items - 40,805 -
Gain on disposition of property (8,350) - -
Increase in accounts receivable and other assets (11,865) (2,858) (2,046)
Decrease (increase) in receivables from related parties 269 453 (839)
Decrease in assessment bonds payable (849) (726) (843)
Increase in accounts payable and accrued expenses and 2,985 8,959 418
liabilities
Increase (decrease) in accrued real estate taxes 225 328 (154)
Increase (decrease) in accrued interest 7,961 (1,070) 803
Decrease in payable to related party - (1,186) (1,962)
--------- --------- ---------
Net cash provided by operating activities 103,607 75,567 47,750
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties (406,552) (195,528) (159,154)
Additions to investment in mortgages (14,381) - -
Additions to leasing costs (5,627) (4,083) (3,235)
Decrease in restricted cash - - 1,057
Proceeds from disposition of properties 47,967 - -
--------- --------- ---------
Net cash used for investing activities (378,593) (199,611) (161,332)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 684,800 325,177 167,744
Payments on debt (455,205) (403,263) (55,067)
Payments of financing fees (3,612) (2,747) (1,929)
Payment of distributions (81,626) (54,377) (37,319)
Capital contributions-- stock offerings 151,331 269,183 23,949
Capital contributions-- stock options exercised 1,061 686 -
Prepayment of interest, restructuring fees, and penalties - (12,705) -
--------- --------- ---------
Net cash provided by financing activities 296,749 121,954 97,378
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 21,763 (2,090) (16,204)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,573 9,663 25,867
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,336 $ 7,573 $ 9,663
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 38
SPIEKER PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
Spieker Properties, L.P. (the "Company") was formed on November 10,
1993, and commenced operations on November 19, 1993, when Spieker
Properties, Inc., the general partner in the Company ("General
Partner"), completed its initial public offering ("IPO") on November
18, 1993. The General Partner qualifies as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986 (the "Code"), as
amended. As of December 31, 1996, the General Partner owned an
approximate 84.9 percent general partnership interest in the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the consolidated
financial position of the Company and its subsidiary partnerships as of
December 31, 1996 and 1995, and its consolidated results of operations
and cash flows for the years ended December 31, 1996, 1995 and 1994.
The Company's investment in Spieker Northwest, Inc. is accounted for
under the equity method. The carrying value of Spieker Northwest, Inc.
of $53 at December 31, 1996 and 1995, is included in prepaid expenses
and other assets. 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> <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>
The cost of buildings and improvements includes the purchase price of
the property or interests in property, legal fees, acquisition costs
and interest, property taxes and other costs incurred during the period
of construction.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments which extend the
economic useful life of assets are capitalized.
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 Company 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 property's current value or the amount that will be
realized upon the ultimate disposition of the property.
<PAGE> 39
As of December 31, 1996 and 1995, none of the carrying values of the
properties exceeded their estimated fair values. As of December 31,
1996 and 1995, 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 Company owns two mortgage loans that are secured by real estate.
The Company assesses possible impairment of these loans by reviewing
the fair value of the underlying real estate. As of December 31, 1996,
the fair value of the underlying real estate was in excess of the
Company's book value of the mortgage loans.
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 and other 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 Company'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 Company 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 1 to 23 years. Unamortized
leasing costs are charged to expense upon the early termination of the
lease or upon the early payment of financing.
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 Company, the carrying amount of debt
approximates fair value. Cash and cash equivalents consist of demand
deposits, certificates of 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.
<PAGE> 40
Interest and Other Income
Interest and other income includes interest income on cash, cash
equivalents, and investment in mortgages and management fee income.
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 (prepaid interest and arrangement
fee paid to Prudential at the time of the IPO and until December 1995
was amortized to interest expense) related to the Prudential Debt
paydown as a result of the stock offering in December 1995, and (ii) a
fee of $938 paid in connection with the conversion of the secured line
of credit into an unsecured facility.
Income Allocation
Income is allocated to the Partners based upon the terms set forth in
the partnership agreement. The income allocated to the General Partner
includes a preferential allocation arising from Series B Preferred
Stock dividends of $10,041 and $586 for the years ended December 31,
1996 and 1995, respectively.
Net Income (Loss) per Unit
Per unit amounts for the Company 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, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
General Partner Units Limited Partner Units
--------------------- ---------------------
<S> <C> <C> <C>
Year ended:
December 31, 1996 35,910,652 6,549,819
December 31, 1995 27,360,000 6,409,742
December 31, 1994 21,192,655 5,876,586
</TABLE>
Reclassifications
Certain items in the 1995 and 1994 financial statements have been
reclassified to conform to the 1996 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires 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. TRANSACTIONS WITH AFFILIATES
Revenues and Expenses
The Company received $802, $1,427 and $0 during 1996, 1995 and 1994,
respectively, for management services provided to certain properties
that are controlled and operated by Spieker Partners, a California
general partnership, and its affiliates (collectively, "Spieker
Partners"). Certain officers of Spieker Properties, Inc., are partners
in Spieker Partners.
<PAGE> 41
Acquisition of Properties
During the years ended December 31, 1996 and 1995, the Company
purchased certain properties and land parcels from Spieker Partners
totaling $1,783 and $22,216, respectively, pursuant to the provisions
of certain landholding and excluded property agreements entered into
during the Company's IPO. Under the landholding agreements, the Company
has an option to purchase specific land parcels from Spieker Partners
at the lower of an established fixed price or independently appraised
value. Under the excluded property agreements, the Company has an
option to acquire certain properties or partnership interests after a
purchase agreement can be reached with certain unaffiliated partners in
the partnerships. Acquisitions from Spieker Partners are subject to
approval by the Board of Directors.
Receivable From Affiliates
The $117 and $386 receivable from affiliates at December 31, 1996 and
1995, respectively, primarily represents management fees and
reimbursements due from Spieker Partners affiliates.
4. PROPERTY HELD FOR DISPOSITION
The Company has determined to focus exclusively on office and
industrial properties. The Company has therefore decided to divest
itself of its thirteen retail properties and to reinvest the proceeds
from these properties in office and industrial properties.
In December 1996, the Company entered into agreements to dispose of
nine retail properties located in California, Oregon, and Washington to
a third party for $106,500. Three of the nine properties closed on
December 20, 1996. Five of the remaining properties are scheduled to be
disposed of by May 1, 1997, and the final property by December 31,
1997.
The following summarizes the condensed results of operations of the
properties disposed of in 1996 for the years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income $ 5,332 $ 5,168 $ 3,289
Expenses 1,797 1,987 1,130
---------- ---------- ----------
Net Income $ 3,535 $ 3,181 $ 2,159
========== ========== ==========
</TABLE>
In addition, the Company is in the process of divesting itself of four
other retail properties. The divestiture of the remaining four retail
properties is subject to negotiation of acceptable terms and other
customary conditions.
The following summarizes the condensed results of operations of the ten
retail properties held for disposition for the years ended December 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income $ 18,815 $ 15,013 $ 13,152
Expenses 7,330 5,989 5,700
---------- ---------- ----------
Net Income $ 11,485 $ 9,024 $ 7,452
========== ========== ==========
</TABLE>
The net carrying amount of the ten retail properties held for
disposition as of December 31, 1996, is $117,732.
<PAGE> 42
5. DEBT
As of December 31, 1996 and 1995, debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C> <C> <C>
Unsecured investment grade notes, varying fixed interest rates from 6.65% to
8.00% payable semi-annually, due 2000 to 2016 $ 635,000 $ 260,000
Unsecured line of credit, LIBOR + 1.25%, 6.63% at December 31, 1996, due
November 1997 39,000 117,700
Mortgage loans, varying interest rates from 7.5% to 9.75%, due 1997 to 2012 45,997 112,702
---------- ----------
$ 719,997 $ 490,402
========== ==========
</TABLE>
On November 6, 1995, the Company converted its secured line of credit to
a $150 million unsecured line of credit (the "line"). The line matures in
November 1997 and the Company has an option to extend the line for one
year upon payment of a fee equal to 0.12% 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.
Mortgage loans generally require monthly principal and interest payments.
The mortgage loans are secured by deeds of trust on fourteen properties.
The undepreciated book value of real estate assets pledged as collateral
under deeds of trust for mortgage loans at December 31, 1996, and
December 31, 1995, is $79,440 and $162,885, respectively.
Interest capitalized for the years ended December 31, 1996, 1995 and
1994, was $3,116, $1,301 and $468, respectively.
Maturity Schedule
The scheduled maturities of all debt outstanding as of December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
Year Amount
- ---- ------
<S> <C>
1997 (includes line of credit, see paragraph above) $ 51,429
1998 821
1999 895
2000 100,975
2001 109,016
Thereafter 456,861
----------
$ 719,997
==========
</TABLE>
6. LEASING ACTIVITY
Future minimum rentals due under noncancelable operating leases in effect
at December 31, 1996, with tenants are as follows:
<TABLE>
<CAPTION>
Year Amount
- ---- ------
<S> <C>
1997 $ 184,418
1998 151,943
1999 121,929
2000 93,118
2001 63,813
Thereafter 127,819
----------
$ 743,040
==========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to
$44,155, $32,125 and $16,463 for the years ended December 31, 1996,
<PAGE> 43
1995 and 1994, 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,
1996, 1995 and 1994, were $362, $310 and $298 respectively. Certain
leases contain options to renew.
7. PARTNER DISTRIBUTIONS PAYABLE
The partner distributions payable at December 31, 1996 and 1995,
represent amounts payable to partners for the quarters then ended.
8. INCOME TAXES
Spieker Properties, L.P. and its subsidiary partnerships file federal
and state returns of income. They pay no income taxes other than the
$800 minimum tax per limited 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, 1996, 1995 and 1994, was $76,323, $5,098 and
$26,563, respectively.
The differences between book income and taxable income primarily result
from timing differences consisting of depreciation expense for tenant
improvements and unearned rental income.
9. EMPLOYEE RETIREMENT AND STOCK PLANS
Retirement Savings Plan
Effective January 1, 1994, the Company 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 Company which amounted to $292 and $266
for the years ended December 31, 1996 and 1995. In addition, the
Company may make additional contributions at the discretion of
management. Management authorized additional contributions of $230 and
$126 for the years ended December 31, 1996 and 1995.
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 Operating
Partnership Units for awards to personnel employed by the Company at
the time of the IPO. The units are converted into Common Stock at the
time of grant. The aggregate number of units reserved for the Employee
Stock Incentive Pool 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, January 1, 1995, and January 1, 1996,
resulting in a total of 75% of potential stock awards having been
granted. The remainder of the employees' allocations will be granted on
January 1, 1997, provided that the employee has not previously
terminated employment.
The initial deferred compensation of $1,320 pertaining to the 69,990
units was recorded on the books of the Company, and is being amortized
annually based on the vesting period. The initial value was calculated
by converting the 69,990 partnership units into shares of Common Stock
and multiplying by the Company's Common Stock price on the date of the
grant.
For the years ended December 31, 1996, 1995 and 1994, non-cash
compensation expense recognized for such awards was $388, $339 and $0,
respectively.
<PAGE> 44
Merit Plan
The Senior Officers of the Company reserved a portion of their limited
partnership interests in the Operating Partnership, equivalent to
153,659 Operating Partnership units, to reward Senior Officers and
other key employees of the Company for significant individual
contributions to the enhancement of the Company's value and to
encourage further equity interests in the Company.
On an annual basis, the Executive Officers will review the performance
of the Senior Officers and other 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 the Senior Officers' ownership of limited partnership
interests and does not have a dilutive effect on the stockholders of
the Company. As of December 31, 1996, 49,730 units have been awarded
under the Merit Plan.
To the extent that awards are made under the Merit Plan, they will be
compensatory. Accordingly, non-cash compensation expense is recorded in
the Company's financial statements. For the years ended December 31,
1996, 1995 and 1994, non-cash compensation expense recognized under the
Merit Plan was $120, $29 and $0.
Stock Options
The Company applies APB 25 and related interpretations in accounting
for its stock option plan. Accordingly, no compensation cost has been
recognized. Had compensation cost for the plan been determined based on
the fair value at the grant dates for awards under the plan consistent
with the method prescribed by Statement of Financial Accounting
Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
the Company's net income and earnings per unit would have been reduced
to the pro forma amounts indicated as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
------------- --------------
<S> <C> <C> <C>
Net income (loss)
As reported $ 74,091 $ (10,361)
Pro forma 73,349 (10,764)
Earnings per unit
As reported $ 1.74 $ (.31)
Pro forma 1.73 (.32)
</TABLE>
For these disclosure purposes, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants
in 1996 and 1995, respectively; dividend yield of 6.15% for both years;
expected volatility of 13.28% for both years; expected lives of seven
years for both years; and risk-free interest rates of 6.21% for both
years.
During the initial phase-in period, the effects of applying SFAS No.
123 may not be representative of the effects on disclosed pro forma net
income for future years because options vest over several years and
additional awards can be made each year.
10. COMMITMENTS AND CONTINGENCIES
Environmental Matters
The Company follows the policy of monitoring its properties for the
presence of hazardous or toxic substances. The Company is not aware of
any environmental liability with respect to the properties that would
have a material adverse effect on the Company'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
Company's results of operations and cash flow.
<PAGE> 45
Lease Commitments
The Company 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.
General Uninsured Losses
The Company 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. Should an uninsured loss
occur, the Company could lose its investment in, and anticipated
profits and cash flows from, a property.
Certain of the properties are located in areas that are subject to
earthquake activity; the Company has therefore obtained limited
earthquake insurance. In the event of an earthquake, properties are
self-insured for the first $25,000 of loss. The Company is insured for
the next $50,000 of loss, any losses in excess of $75,000 will be borne
by the Company.
11. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $ 31,167 $ 39,876 $ 34,116
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Extraordinary loss write-off of deferred financing - 28,100 -
costs
Debt assumed in relation to property acquisitions - 22,827 -
Minority interest capital recorded in relation to
property acquisitions - 8,877 -
Increase to land and assessment bond payable 1,283 4,687 92
Write-off of fully depreciated property 15,469 3,662 10,672
Write-off of fully amortized deferred financing and
leasing costs 4,696 1,847 2,618
</TABLE>
12. QUARTERLY FINANCIAL DATA (unaudited)
<TABLE>
<CAPTION>
Quarter
---------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 45,318 (1) $ 47,696 $ 52,143 $ 55,542 $ 200,699
Income from operations before
disposal of real estate
properties, minority interests
and extraordinary items 14,980 (1) 17,131 16,096 17,557 65,764
Net income 14,982 17,127 14,609 27,373 74,091
Income per Operating
Partnership unit $ .38 $ .39 $ .34 $ .63 $ 1.74
</TABLE>
(1) Includes reclassification of extraordinary gain on early
extinguishment of debt of $150.
<PAGE> 46
13. SUBSEQUENT EVENTS
On January 21, 1997, the General Partner sold 10,000,000 shares of
Common Stock at $34.50 per share through an underwritten public
offering. In addition, shortly thereafter, the underwriters exercised
their over-allotment option resulting in the General Partner selling an
additional 1,500,000 shares of Common Stock. The aggregate net proceeds
of $374,835 were used primarily to acquire an additional 2% interest in
the Company. The Company used the proceeds to purchase properties under
contract at the time of the offering.
On various dates subsequent to December 31, 1996 the Company acquired
nine properties totaling 3.3 million rentable square feet at a total
initial acquisition cost of $369,751.
<PAGE> 47
SPIEKER PROPERTIES L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31,1996
<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> <C>
10011 Stender Way II Santa Clara, CA $118,274 $840,169 $1,250,787
10041 Scott Blvd. Santa Clara, CA 128,623 583,455 1,811,630
10061 Fresno Warehouse II Fresno, CA 31,311 310,908 1,616,875 1,731,587
10071 Bakersfield Warehouse Bakersfield, CA 519,900 1,623,282 2,004,571
10091 Terminal St. Warehouse Sacramento, CA 198,113 1,181,083 219,706
10101 Stender Way I Santa Clara, CA 98,915 536,920 230,416
10111 Applied Materials I Santa Clara, CA 381,686 1,625,507 3,690
10121 Sunnyvale Business Center Santa Clara, CA 67,145 257,035 811,284 555,713
10161 Cupertino Business Center Cupertino, CA 3,876,840 3,970,597 882,898
10171 Fresno Warehouse III Fresno, CA 405,166 1,407,087 423,844
10191 North American Van Lines San Jose, CA 2,191,699 4,999,710 786,893
10241 Applied Materials II Santa Clara, CA 1,535,741 651,943 3,392,605 3,040,850
10261 Front Street Warehouse Sacramento, CA 294,674 908,485 207,700
10271 Aspect Building San Jose, CA 164,751 2,223,805 2,265,103 281,512
10301 Cadillac Court Milpitas, CA 127,601 959,042 1,493,087 972,430
10331 Ryan Ranch Industrial Monterey, CA 422,500 969,386 798,752
10371 Fremont Bayside Fremont, CA 6,659,809 1,245,617 2,704,137 534,183
10381 Livermore Commerce Ctr. Livermore, CA 39,127 1,312,199 3,563,238 865,239
10401 Fairfield Business Center Fairfield, CA 7,130 439,350 2,662,769 1,086,488
10421 Patrick Henry Drive San Jose, CA 13,748 933,058 2,702,038 2,277,020
10431 COG Warehouse Milpitas, CA 503,104 2,549,224 1,907,937 1,086,032
10451 Okidata Distribution Center Milpitas, CA 347,394 1,808,159 1,750,086 1,132,809
10461 Pro Log Monterey, CA 780,000 1,148,054 1,058,360
10481 Huntwood Business Center Hayward, CA 13,467 198,026 686,076 1,271,015
10491 Independent Rd Warehouse Oakland, CA 237,380 706,174 313,217
10501 Grandview Drive So. San Fran, CA 562,050 259,751 561,224 520,092
10511 Baycenter Business Park II Hayward, CA 248,456 1,228,225 3,116,626 2,179,728
10521 Keebler Warehouse Hayward, CA 97,563 569,642 1,568,210 188,521
10531 Fremont Commerce Center Fremont, CA 614,357 1,588,166 570,393
10571 Montague Industr. Center Palo Alto, CA 1,482,000 5,131,899 5,869,335
10591 Dubuque Business Center So. San Fran, CA 2,912,158 3,128,405 2,952,407
10601 Cabot Blvd. Warehouse Hayward, CA 1,550,174 4,531,092 1,197,467
10611 Benicia Commerce Center Benicia, CA 434,027 3,810,746 1,327,501
10621 Montgomery Ward Pleasant Hill, CA 717,750 3,485,901 95,406
10631 Eden Landing Bus. Center Hayward, CA 1,152,163 1,940,740 308,962
10641 Good Guys Dist. Center Hayward, CA 21,320 4,923,246 9,254,184 142,304
10651 Fleetside Comrce Center Benicia, CA 382,613 1,080,303 2,952,609 540,501
10661 Industrial Dr. Warehouse Fremont, CA 2,292,211 1,822,496 3,793,609 457,451
10711 Redwood Shores Redwood City, CA 3,437,897 3,702,938 1,489,219
10741 Baycenter Business Park I Hayward, CA 1,500,000 4,105,976 69,318
10761 2905-2909 Stender Way Santa Clara, CA 385,992 1,174,719 444,000
10781 Meier - Central South Santa Clara, CA 0 2,571,112 7,177,524 163,565
10791 Meier - Mountain View Santa Clara, CA 6,092,762 5,265,351 14,236,164 55,704
10801 Meier - Central North Santa Clara, CA 1,753,361 4,740,570 0
10811 Meier - Sunnyvale Santa Clara, CA 352,776 953,800 0
10821 732-834 Striker Ave Sacramento, CA 1,009,601 2,767,658 215,283
10831 Fresno Warehouse I Fresno, CA 2,140,209 841,100 2,304,645 0
10871 Walsh & Lafayette Ind Park Santa Clara, CA 3,359,291 7,808,387 1,382,535
10881 Ridder Park San Jose, CA 169,298 1,794,057 0
10901 Ryan Ranch - Lot 14B Monterey, CA 311,835 0
10911 Cadillac Court II Milpitas, CA 174,005 817,334 1,162,712 663,659
10931 Northgate Commerce Ctr Sacramento, CA 1,854,090 5,594,480 326,316
10941 Doolittle Business Center San Leandro, CA. 866,075 2,598,689 228,279
10951 Benicia Ind I (Stone) Benicia, CA. 5,238,267 15,735,277 0
10961 Benicia Ind I (Getty Ct) Benicia, CA. 1,134,212 3,402,635 0
11001 Carlsbad Airport Plaza Carlsbad, CA 1,532,406 4,597,219 20,427
11041 Concord North Comm Ctr Concord, CA 2,340,139 0
</TABLE>
<TABLE>
<CAPTION>
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> <C>
10011 Stender Way II $491,822 $1,717,408 $2,209,230 $579,358 1978 4-40
10041 Scott Blvd. 554,191 1,969,517 2,523,708 493,591 1976 4-40
10061 Fresno Warehouse II 784,254 2,875,116 3,659,370 922,278 1981 3-40
10071 Bakersfield Warehouse 1,090,739 3,057,014 4,147,753 941,807 1982 20-40
10091 Terminal St. Warehouse 202,000 1,396,902 1,598,902 640,763 1975 3-40
10101 Stender Way I 170,073 696,177 866,250 283,932 1978 20-40
10111 Applied Materials I 381,686 1,629,197 2,010,883 887,796 1975 20-40
10121 Sunnyvale Business Center 241,207 1,382,825 1,624,032 423,364 1987 4-40
10161 Cupertino Business Center 4,082,078 4,648,256 8,730,335 1,168,711 1985 32-40
10171 Fresno Warehouse III 482,421 1,753,676 2,236,097 422,819 1987 5-40
10191 North American Van Lines 2,199,552 5,778,750 7,978,302 1,723,431 1988 10-40
10241 Applied Materials II 1,270,250 5,815,147 7,085,397 2,450,625 1979 16-40
10261 Front Street Warehouse 294,674 1,116,185 1,410,859 250,525 1988 5-40
10271 Aspect Building 2,229,772 2,540,648 4,770,420 477,028 1989 6-40
10301 Cadillac Court 1,131,026 2,293,533 3,424,559 726,136 1991 5-40
10331 Ryan Ranch Industrial 557,763 1,632,875 2,190,638 530,755 1991 5-40
10371 Fremont Bayside 1,247,069 3,236,868 4,483,937 820,266 1990 3-40
10381 Livermore Commerce Ctr. 1,499,807 4,240,869 5,740,676 837,993 1988 3-40
10401 Fairfield Business Center 1,079,336 3,109,271 4,188,607 817,521 1991 3-40
10421 Patrick Henry Drive 993,156 4,918,960 5,912,116 1,173,140 1991 12-40
10431 COG Warehouse 3,026,377 2,516,816 5,543,193 633,459 1992 11-40
10451 Okidata Distribution Center 2,163,397 2,527,657 4,691,054 765,427 1993 4-40
10461 Pro Log 1,121,135 1,865,279 2,986,414 309,133 1993 12-40
10481 Huntwood Business Center 434,534 1,720,583 2,155,117 568,640 1979 7-40
10491 Independent Rd Warehouse 332,303 924,468 1,256,771 470,538 1972 5-40
10501 Grandview Drive 468,097 872,970 1,341,067 385,256 1979 20-40
10511 Baycenter Business Park II 1,781,453 4,743,126 6,524,579 1,333,825 1984 3-40
10521 Keebler Warehouse 605,637 1,720,736 2,326,373 456,122 1985 10-40
10531 Fremont Commerce Center 708,494 2,064,422 2,772,916 391,973 1989 5-40
10571 Montague Industr. Center 2,820,461 9,662,773 12,483,234 3,748,559 1993 5-40
10591 Dubuque Business Center 3,491,267 5,501,702 8,992,969 1,212,560 1986 3-40
10601 Cabot Blvd. Warehouse 1,559,831 5,718,902 7,278,733 1,401,374 1988 3-40
10611 Benicia Commerce Center 683,781 4,888,494 5,572,275 1,104,272 1989 3-40
10621 Montgomery Ward 717,750 3,581,308 4,299,058 702,897 1989 35-40
10631 Eden Landing Bus. Center 1,158,197 2,243,668 3,401,865 472,894 1990 3-40
10641 Good Guys Dist. Center 4,936,467 9,383,267 14,319,734 1,098,118 1990 5-40
10651 Fleetside Comrce Center 1,080,303 3,493,110 4,573,413 691,202 1990 6-40
10661 Industrial Dr. Warehouse 1,822,496 4,251,060 6,073,557 748,633 1993 3-40
10711 Redwood Shores 3,796,415 4,833,639 8,630,054 907,892 1987 7-40
10741 Baycenter Business Park I 1,500,000 4,175,294 5,675,294 301,522 1994 3-40
10761 2905-2909 Stender Way 385,992 1,618,719 2,004,711 172,671 1995 6-40
10781 Meier - Central South 2,571,112 7,341,089 9,912,201 339,961 1995 5-40
10791 Meier - Mountain View 5,265,351 14,291,868 19,557,218 659,433 1995 5-40
10801 Meier - Central North 1,753,361 4,740,570 6,493,931 217,277 1995 40
10811 Meier - Sunnyvale 352,776 953,800 1,306,576 43,716 1995 40
10821 732-834 Striker Ave 1,024,488 2,968,054 3,992,543 150,531 1995 5-40
10831 Fresno Warehouse I 841,100 2,304,645 3,145,745 104,889 1995 5-40
10871 Walsh & Lafayette Ind Park 3,359,291 9,190,922 12,550,213 218,694 1995 5-40
10881 Ridder Park 1,794,057 0 1,794,057 0 1995 40
10901 Ryan Ranch - Lot 14B 311,835 0 311,835 0 1995 40
10911 Cadillac Court II 817,334 1,826,371 2,643,706 88,666 1995 7-40
10931 Northgate Commerce Ctr 1,854,090 5,925,353 7,779,442 221,735 1995 10-40
10941 Doolittle Business Center 977,416 2,715,627 3,693,043 44,946 1996 12-40
10951 Benicia Ind I (Stone) 5,238,267 15,735,277 20,973,544 360,601 1996 40
10961 Benicia Ind I (Getty Ct) 1,134,212 3,402,635 4,536,847 77,977 1996 40
11001 Carlsbad Airport Plaza 1,532,406 4,624,246 6,156,652 137,480 1995 5-40
11041 Concord North Comm Ctr 2,340,139 0 2,340,139 0 1995 40
</TABLE>
<PAGE> 48
SPIEKER PROPERTIES L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31,1996
<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> <C>
11071 Benicia Ind II Benicia, CA. 3,891,910 11,673,229 0
11161 Port of Oakland Oakland, CA 1,693,760 5,080,325 0
11181 MacArthur Park Santa Ana, CA 1,556,617 4,693,089 0
11191 Stadium Plaza Anaheim, CA 9,134,965 29,269,756 0
11211 Sorrento Vista San Diego, CA 2,754,158 0
11231 Charcot Business Center San Jose, CA 2,983,255 8,949,598 0
11241 Airport Service Center San Jose, CA 668,240 2,004,907 0
11251 Dixon Landing North Milpitas, CA 6,355,274 0
11261 Kifer Road Industrial Park Sunnyvale, CA 3,528,693 10,587,055 0
11281 Baycenter Business Park III Hayward, CA 200,885 1,248,216 0
11291 Riverside Business Center Sacramento, CA 1,259,389 0
11361 Ravendale at Central Mountain View, CA 2,017,212 6,051,636 0
20001 West Valley Business Ctr Kent, WA 56,284 681,200 2,124,967 2,242,955
20011 Cascade Comrce. Park Kent, WA 43,069 2,430,989 5,005,502 1,726,844
20031 Valley Freeway Bus. Center Kent, WA 1,061,293 2,243,650 469,519
20071 Woodinville Corp. Center I Woodinville, WA 1,321,071 3,712,131 696,817
20081 Woodinville Corp. Center II Woodinville, WA 1,851,708 6,391,154 3,563,648
20111 Georgetown Center Seattle, WA 4,274,197 4,165,405 412,689
20121 City Commerce Park Seattle, WA 1,855,377 2,548,461 1,315,036
20141 Vancouver Comrce. Park Vancouver, WA 337,930 1,359,073 218,838
20151 Millcreek Distribution Ctr Kent, WA 36,609 2,541,162 7,738,028 29,305
20161 Sea-Tac Industrial Park SeaTac, WA 1,953,528 5,538,926 30,089
20171 Valley Industrial Park Kent, WA 30,807 6,765,505 17,221,447 286,803
20221 Woodinville Corp Ctr Bellevue, WA 2,588,694 5,757,519 2,820,903
20231 Everett Industrial Center Everett, WA 9,479 1,863,532 5,566,581 0
20251 Everett 526 Everett, WA 1,087,615 3,262,856 15,046
30001 Park 217 I Portland, OR 1,359,958 2,346,881 3,219,851
30011 Park 217 Phase II Portland, OR 0 490,845 1,762,678 1,472,708
30021 Park 217 Phase III Portland, OR 101,555 601,310 201,653
30031 Sunset Science Park Portland, OR 403,359 147,569 581,642 781,585
30041 Swan Island Portland, OR 916,417 290,504 758,714 436,534
30071 Nelson Business Center I&II Tigard, OR 37,293 3,454,590 5,905,233 4,574,656
30081 SW Commerce Ctr. Portland, OR 499,146 1,390,426 745,582
30101 Columbia IV Portland, OR 833,668 4,430,444 37,876
30051 Columbia Commerce Park Portland, OR 1,939,782 6,606,003 2,387,418
30141 Marine Dr Distribution Ctr Portland, OR 1,166,743 3,482,832 1,519,766
30151 Marine Drive Dist. Ctr II Portland, OR 622,307 1,867,657 622,956
30161 Airport Way Commerce Park Portland, OR 80,549 1,581,544 0
30171 4949 Meadows Building Lake Oswego, OR 2,003,180 0
30181 Marine Drive Dist. Ctr III Portland, OR 1,760,241 0
40011 Cole Rd. Warehouse Boise, ID 313,392 103,617 416,506 166,205
--------------------------------------------------------------------------
TOTAL INDUSTRIAL $23,818,958 $161,714,060 $354,077,572 $76,230,995
--------------------------------------------------------------------------
10001 Santa Clara Office Center I Santa Clara, CA $1,275,227 $187,326 $1,392,344 2,736,970
10021 Santa Clara Office Center II Santa Clara, CA 173,317 2,581,836 2,820,672
10031 Gateway Ofc. Phase I San Jose, CA 721,215 9,010,137 4,158,074
10051 Santa Clara Office Center III Santa Clara, CA 36,746 2,193,334 2,011,652
10081 Gateway Ofc. Phase II San Jose, CA 1,562,154 20,337,863 14,718,756
10131 The Alameda San Jose, CA 774,316 4,278,623 929,502
10141 Creekside Phase I San Jose, CA 436,655 10,385,797 8,518,712 4,046,490
10151 North First Ofc. Ctr. San Jose, CA 6,698,611 5,900,388 2,455,237
10181 455 University Sacramento, CA 925,000 1,305,000 571,310
10201 650 & 701 Howe Sacramento, CA 1,665,000 4,996,755 3,716,304
10211 8880 Cal Center Sacramento, CA 3,252,741 8,493,503 2,293,382
10231 740 University Sacramento, CA 261,250 793,750 165,414
10251 Denny's Restaurant Santa Clara, CA 181,634 551,427 1,225
10281 Gateway Oaks II Sacramento, CA 1,510,137 4,258,061 1,577,894
</TABLE>
<TABLE>
<CAPTION>
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> <C>
11071 Benicia Ind II 3,891,910 11,673,229 15,565,139 267,512 1996 40
11161 Port of Oakland 1,693,760 5,080,325 6,774,085 74,088 1996 40
11181 MacArthur Park 1,556,617 4,693,089 6,249,707 39,100 1996 40
11191 Stadium Plaza 9,134,965 29,269,756 38,404,722 243,899 1996 40
11211 Sorrento Vista 2,754,158 0 2,754,158 0 1996 40
11231 Charcot Business Center 2,983,255 8,949,598 11,932,853 37,290 1996 40
11241 Airport Service Center 668,240 2,004,907 2,673,147 8,354 1996 40
11251 Dixon Landing North 6,355,274 0 6,355,274 0 1996 40
11261 Kifer Road Industrial Park 3,528,693 10,587,055 14,115,748 44,113 1996 40
11281 Baycenter Business Park III 1,248,216 0 1,248,216 0 1996 40
11291 Riverside Business Center 1,259,389 0 1,259,389 0 1996 40
11361 Ravendale at Central 2,017,212 6,051,636 8,068,848 0 1996 40
20001 West Valley Business Ctr 1,286,458 3,762,664 5,049,121 1,218,028 1980 20-40
20011 Cascade Comrce. Park 3,129,620 6,039,010 9,168,630 1,101,496 1989 5-40
20031 Valley Freeway Bus. Center 1,262,572 2,511,890 3,774,462 585,986 1990 7-40
20071 Woodinville Corp. Center I 1,740,944 3,994,424 5,735,368 1,121,611 1988 3-40
20081 Woodinville Corp. Center II 4,258,674 7,547,836 11,806,510 2,176,236 1991 4-40
20111 Georgetown Center 4,517,411 4,334,881 8,852,291 1,117,826 1984 5-40
20121 City Commerce Park 2,218,399 3,500,474 5,718,873 786,022 1988 5-40
20141 Vancouver Comrce. Park 451,891 1,467,189 1,919,081 329,494 1990 3-40
20151 Millcreek Distribution Ctr 2,541,162 7,767,332 10,308,495 430,089 1994 5-40
20161 Sea-Tac Industrial Park 1,953,528 5,569,015 7,522,543 308,941 1994 4-40
20171 Valley Industrial Park 6,862,205 17,411,550 24,273,755 980,711 1994 3-40
20221 Woodinville Corp Ctr 4,160,957 7,006,159 11,167,116 237,751 1995 5-40
20231 Everett Industrial Center 1,863,532 5,566,581 7,430,113 104,374 1996 40
20251 Everett 526 1,087,615 3,277,901 4,365,516 47,895 1996 12-40
30001 Park 217 I 2,472,845 4,453,844 6,926,689 1,644,200 1980 5-40
30011 Park 217 Phase II 780,261 2,945,970 3,726,231 872,679 1981 10-40
30021 Park 217 Phase III 132,615 771,904 904,519 324,980 1981 5-40
30031 Sunset Science Park 322,532 1,188,264 1,510,796 420,885 1975 5-40
30041 Swan Island 369,011 1,116,741 1,485,752 392,039 1978 5-40
30071 Nelson Business Center I&II 4,944,462 9,011,623 13,956,085 1,686,769 1990 3-40
30081 SW Commerce Ctr. 707,816 1,930,703 2,638,519 429,520 1989 5-40
30101 Columbia IV 833,668 4,468,319 5,301,988 301,157 1994 40
30051 Columbia Commerce Park 2,527,306 8,408,812 10,936,117 1,761,429 1988 3-40
30141 Marine Dr Distribution Ctr 1,870,511 4,298,829 6,169,341 118,941 1995 5-40
30151 Marine Drive Dist. Ctr II 1,110,852 2,002,068 3,112,920 8,167 1996 5-40
30161 Airport Way Commerce Park 1,581,544 0 1,581,544 0 1996 40
30171 4949 Meadows Building 2,003,180 0 2,003,180 0 1996 40
30181 Marine Drive Dist. Ctr III 1,760,241 0 1,760,241 0 1996 40
40011 Cole Rd. Warehouse 114,465 571,863 686,328 230,356 1976 16-40
---------------------------------------------------------------------
TOTAL INDUSTRIAL $182,702,463 $409,373,087 $592,075,550 $56,566,649
---------------------------------------------------------------------
10001 Santa Clara Office Center I $883,440 $3,465,805 $4,349,245 $1,012,557 1977 3-40
10021 Santa Clara Office Center II 931,364 4,664,639 5,596,003 1,585,650 1980 2-40
10031 Gateway Ofc. Phase I 1,552,568 12,364,657 13,917,226 4,322,857 1981 3-40
10051 Santa Clara Office Center III 596,050 3,652,942 4,248,992 1,171,185 1981 3-40
10081 Gateway Ofc. Phase II 4,116,198 32,528,584 36,644,781 9,176,742 1983 3-40
10131 The Alameda 966,236 5,016,206 5,982,441 1,430,095 1984 3-40
10141 Creekside Phase I 10,965,419 11,989,446 22,954,866 2,847,119 1985 5-40
10151 North First Ofc. Ctr. 6,973,869 8,080,367 15,054,236 2,117,385 1985 3-40
10181 455 University 993,704 1,865,536 2,859,240 407,048 1987 3-40
10201 650 & 701 Howe 2,120,259 8,260,688 10,380,947 1,661,757 1987 2-40
10211 8880 Cal Center 3,804,401 10,296,155 14,100,556 1,936,914 1989 3-40
10231 740 University 261,250 971,994 1,233,244 239,368 1987 3-40
10251 Denny's Restaurant 181,634 552,652 734,286 121,885 1988 34-40
10281 Gateway Oaks II 1,996,441 5,365,890 7,362,331 1,259,986 1992 3-40
</TABLE>
<PAGE> 49
SPIEKER PROPERTIES L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31,1996
<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> <C>
10291 Gateway Oaks I Sacramento, CA 2,926,887 9,856,301 1,404,531
10311 701 University Sacramento, CA 1,051,108 3,239,007 506,139
10321 Ryan Ranch Ofc. Ctr. Monterey, CA 1,048,740 3,951,223 2,361,010
10341 The Orchard Sacramento, CA 1,505,937 4,517,810 344,211
10351 555 University Sacramento, CA 2,432,533 1,467,023 4,401,069 221,218
10361 575 and 601 University Sacramento, CA 1,677,507 5,720,244 484,557
10391 655 University Sacramento, CA 1,147,733 3,443,200 228,357
10411 Arden Office Sacramento, CA 576,552 1,729,656 2,168,824
10541 Lockheed Bldg. Palo Alto, CA 1,735,789 6,264,357 1,126,913
10551 Xerox Campus Palo Alto, CA 9,145,484 29,360,411 5,281,728
10561 Foothill Research Ctr. Palo Alto, CA 7,474,154 30,819,577 5,592,931
10671 2180 Sand Hill Road Menlo Park, CA 466,525 1,281,023 123,918
10681 Point West Executive Ctr. Sacramento, CA 2,538,020 5,952,306 746,330
10701 McCarthy Milpitas, CA 5,777 845,039 4,219,348 274,879
10751 Point West Commercenter Sacramento, CA 3,443,730 9,025,615 371,430
10851 Ryan Ranch Off - Ph II Monterey, CA 402,750 2,004,132 497,760
10891 Gateway Oaks III Sacramento, CA 1,151,181 0
10981 La Jolla Centre II San Diego, CA 3,252,653 13,057,444 61,398
10991 One Pacific Heights San Diego, CA 3,089,433 8,352,911 0
11011 Pacific Point San Diego, CA 3,111,202 9,333,605 248,664
11021 Bayside Corporate Center Foster City, CA 519,706 2,455,163 7,597,914 291,091
11031 Ryan Ranch Office II Bldg D Monterey, CA 420,000 0
11051 3600 American River Dr Sacramento, CA 1,059,222 4,266,132 5,748
11052 3610 American River Dr Sacramento, CA 490,859 1,963,435 19,892
11053 3620 American River Dr Sacramento, CA 1,033,387 4,133,548 5,102
11061 Inwood Business Park Irvine, CA 2,232,769 8,934,175 0
11141 Carmel Valley Centre San Diego, CA 2,792,159 11,207,702 84,296
11151 2290 North First Street San Jose, CA 1,222,335 4,891,759 0
11171 Dove Street Newport Beach, CA 1,568,509 6,278,089 0
11221 Fairchild Corporate Center Irvine, CA 2,011,443 8,054,128 0
11271 One Pacific Plaza Huntington Beach, CA 2,020,486 8,085,263 0
11301 Fidelity Plaza Sacramento, CA 1,354,983 3,695,222 0
11311 Central Park Plaza Santa Clara, CA 246,039 9,446,335 24,866,654 0
11321 Corona Corporate Center Southern Cal 741,710 2,966,841 0
11331 Wood Island Office Complex Larkspur, CA 72,109 3,789,482 10,050,094 0
11341 One Lakeshore Centre Southern Cal 73,114 3,892,211 15,275,917 0
11351 Pacific View Plaza San Diego, CA 1,404,336 3,796,910 0
11401 The City Orange County, CA 5,585,542 22,355,536 0
11501 The City Orange County, CA 1,309,617 5,243,681 0
19881 San Mateo Baycenter San Mateo, CA 9,175,644 2,464,154 10,331,261 554,478
20021 Federal Way Office Fed Way, WA 297,202 765,990 112,005
20041 Bellevue Gtwy I Bellevue, WA 2,681,773 6,064,829 7,222,290
20051 Bellevue Gateway II Bellevue, WA 1,201,588 4,859,552 2,499,448
20061 Main Street Office Bellevue, WA 13,738 1,917,015 1,385,821 396,056
20211 Bellefield Office Park Bellevue, WA 12,659,811 5,530,275 12,623,527 2,936,910
20241 10700 Building Bellevue, WA 24,384 24,384 4,651,580 0
30091 5550 Macadam Office Portland, OR 764,081 3,646,922 241,485
30111 River Forum Portland, OR 2,462,767 16,637,177 627,018
30121 Kruse Way Portland, OR 0 2,785,451 7,911,320 728,674
30131 4004 S.W. Kruse Way Place Lake Oswego, OR 0 981,486 3,986,194
40001 Key Financial Tower Boise, ID 236,501 2,864,931 5,245,557
--------------------------------------------------------------------------
TOTAL OFFICE $26,934,737 $142,569,916 $460,533,074 $85,217,730
--------------------------------------------------------------------------
GRAND TOTALS $50,753,695 $304,283,976 $814,610,647 $161,448,725
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
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> <C>
10291 Gateway Oaks I 2,938,968 11,313,704 14,252,672 2,678,248 1990 2-40
10311 701 University 1,247,111 3,549,142 4,796,253 794,888 1991 3-40
10321 Ryan Ranch Ofc. Ctr. 2,093,355 5,299,989 7,393,344 1,302,940 1992 3-40
10341 The Orchard 1,539,497 4,828,460 6,367,957 865,529 1990 3-40
10351 555 University 1,484,661 4,610,173 6,094,834 801,671 1990 3-40
10361 575 and 601 University 1,915,967 6,022,912 7,938,880 1,171,784 1990 3-40
10391 655 University 1,159,673 3,703,199 4,862,872 765,278 1990 2-40
10411 Arden Office 751,483 3,725,565 4,477,048 1,307,860 1990 7-40
10541 Lockheed Bldg. 1,735,789 7,391,270 9,127,059 1,255,646 1993 8-40
10551 Xerox Campus 9,145,484 34,642,139 43,787,623 5,577,232 1993 8-40
10561 Foothill Research Ctr. 7,474,154 36,412,508 43,886,662 6,463,234 1993 6-40
10671 2180 Sand Hill Road 466,525 1,412,286 1,878,811 790,804 1973 3-40
10681 Point West Executive Ctr. 2,573,522 6,664,520 9,238,042 457,907 1994 10-40
10701 McCarthy 845,039 4,494,227 5,339,266 305,077 1994 1-40
10751 Point West Commercenter 3,443,730 9,397,045 12,840,775 572,285 1994 4-40
10851 Ryan Ranch Off - Ph II 402,750 2,501,892 2,904,642 112,133 1995 3-40
10891 Gateway Oaks III 1,151,181 0 1,151,181 0 1995 40
10981 La Jolla Centre II 3,252,653 13,301,773 16,554,426 401,220 1995 4-40
10991 One Pacific Heights 3,089,433 8,352,911 11,442,345 243,627 1995 40
11011 Pacific Point 3,111,202 9,582,269 12,693,471 308,494 1995 4-40
11021 Bayside Corporate Center 2,465,778 7,878,390 10,344,168 221,371 1996 7-40
11031 Ryan Ranch Office II Bldg D 420,000 0 420,000 0 1996 40
11051 3600 American River Dr 1,059,222 4,271,879 5,331,101 115,679 1995 12-40
11052 3610 American River Dr 490,859 1,983,327 2,474,186 54,834 1995 5-40
11053 3620 American River Dr 1,033,387 4,138,650 5,172,037 112,126 1995 12-40
11061 Inwood Business Park 2,232,769 9,266,014 11,498,783 261,069 1995 3-40
11141 Carmel Valley Centre 2,792,159 11,291,998 14,084,158 230,392 1996 40
11151 2290 North First Street 1,222,335 4,891,759 6,114,094 81,529 1996 40
11171 Dove Street 1,568,509 6,278,089 7,846,598 78,476 1996 40
11221 Fairchild Corporate Center 2,011,443 8,054,128 10,065,572 67,088 1996 40
11271 One Pacific Plaza 2,020,486 8,085,263 10,105,749 33,687 1996 40
11301 Fidelity Plaza 1,354,983 3,695,222 5,050,205 46,190 1996 40
11311 Central Park Plaza 9,446,335 24,866,654 34,312,989 51,806 1996 40
11321 Corona Corporate Center 741,710 2,966,841 3,708,552 0 1996 40
11331 Wood Island Office Complex 3,789,482 10,050,094 13,839,576 0 1996 40
11341 One Lakeshore Centre 3,892,211 15,275,917 19,168,128 0 1996 40
11351 Pacific View Plaza 1,404,336 3,796,910 5,201,246 0 1996 40
11401 The City 5,585,542 22,355,536 27,941,078 279,345 1996 40
11501 The City 1,309,617 5,243,681 6,553,297 65,507 1996 40
19881 San Mateo Baycenter 2,688,531 10,674,459 13,362,990 3,162,173 1995 3-40
20021 Federal Way Office 297,202 877,995 1,175,197 142,087 1989 20-40
20041 Bellevue Gtwy I 4,526,668 11,442,223 15,968,891 2,660,123 1985 2-40
20051 Bellevue Gateway II 1,867,498 6,803,580 8,671,078 1,357,604 1988 3-40
20061 Main Street Office 1,927,586 1,790,773 3,718,359 279,933 1990 2-40
20211 Bellefield Office Park 5,623,429 15,467,283 21,090,711 839,258 1995 3-40
20241 10700 Building 24,384 4,651,580 4,675,964 67,836 1996 40
30091 5550 Macadam Office 765,082 3,903,271 4,668,353 723,767 1990 3-40
30111 River Forum 2,462,767 17,264,196 19,726,963 1,241,942 1994 5-40
30121 Kruse Way 2,825,101 8,600,343 11,425,444 493,367 1994 5-40
30131 4004 S.W. Kruse Way Place 1,422,662 5,055,020 6,477,682 203,357 1995 3-40
40001 Key Financial Tower 305,943 8,070,045 8,375,988 2,797,297 1977 5-40
--------------------------------------------------------------------
TOTAL OFFICE $155,743,029 $535,272,666 $691,015,694 $71,134,245
--------------------------------------------------------------------
GRAND TOTALS $338,445,492 $944,645,753 $1,283,091,245 $127,700,893
====================================================================
</TABLE>
<PAGE> 50
Schedule III (cont'd)
SPIEKER PROPERTIES, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
A summary of activity for real estate and accumulated depreciation is as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REAL ESTATE:
Balance at beginning of year $ 1,098,871 $ 870,613 $ 722,928
Acquisition of properties and limited
partners' interests 340,298 185,862 144,757
Improvements 67,537 46,058 13,600
Cost of real estate disposed of (42,206) - -
Property held for disposition (133,971) - -
Disposition of and write-off of fully
depreciated property (15,469) (3,662) (10,672)
------------ ------------ ------------
Balance at end of year $ 1,315,060 $ 1,098,871 $ 870,613
============ ============ ============
ACCUMULATED DEPRECIATION:
Balance at beginning of year $ 124,612 $ 99,786 $ 84,395
Depreciation expense 33,487 28,488 26,063
Disposal of property (3,102) - -
Property held for disposition (11,827) - -
Disposition of and write-off of fully
depreciated property (15,469) (3,662) (10,672)
------------ ------------ ------------
Balance at end of year $ 127,701 $ 124,612 $ 99,786
============ ============ ============
</TABLE>
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPIEKER PROPERTIES, L.P.
Registrant)
Dated: March 28, 1997 /s/ Warren E. Spieker, Jr.
---------------------- ----------------------------------------------
Warren E. Spieker, Jr.
Chairman of the Board, Director and
Chief Executive Officer of Spieker
Properties, Inc., the General Partner
Dated: March 28, 1997 /s/ Craig G. Vought
---------------------- ----------------------------------------------
Craig G. Vought
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer) of Spieker
Properites, Inc., the General Partner
Dated: March 28, 1997 /s/ John K. French
---------------------- ----------------------------------------------
John K. French
Director, Executive Vice President
and Chief Operating Officer of Spieker
Properties, Inc., the General Partner
Dated: March 28, 1997 /s/ Elke Strunka
---------------------- ----------------------------------------------
Elke Strunka
Vice President and
Principal Accounting Officer of Spieker
Properties, Inc., the General Partner
Dated: March 28, 1997 /s/ David M. Petrone
---------------------- ----------------------------------------------
David M. Petrone
Director of Spieker Properties, Inc., the
General Partner
<PAGE> 52
(C) EXHIBITS (ENCLOSED ATTACHMENTS ARE SEQUENTIALLY NUMBERED)
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS PAGE
NUMBER EXHIBIT TITLE NUMBER
===================================================================================================================
<S> <C>
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. (1)
4.2 Intentionally omitted
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)
4.14 Fifth Supplemental Indenture relating to the Medium Term Note Program and Forms of Medium
Term Notes (incorporated by reference to Exhibit 4.1 to Spieker Properties, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996)
4.15 Sixth Supplemental Indenture relating to the 7 1/8 Notes Due 2006 and Form of 2006 Note
(incorporated by reference to Exhibit 4.1 of Spieker Properties, Inc.'s Current Report on
Form 8-K filed with the Commission on December 19, 1996)
4.16 Seventh Supplemental Indenture relating to the 7 7/8 Notes Due 2016 and Form of 2016 Note
(incorporated by reference to Exhibit 4.2 of Spieker Properties, Inc.'s Current Report on
Form 8-K filed with the Commission on December 19, 1996)
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* Amended and Restated Spieker Properties, Inc. 1993 Stock Incentive Plan (incorporated by
reference to Exhibit 4.3 to Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996)
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>
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS PAGE
NUMBER EXHIBIT TITLE NUMBER
===================================================================================================================
<S> <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 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)
10.10 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)
10.11 Credit Agreement among Spieker Properties, L.P. as borrower, and Wells Fargo Bank, The First
National Bank of Boston, First Bank National Association 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))
10.12 Seventh Amendment to First Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P. (incorporated by reference to Exhibit 10.16 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996)
10.13 Amendment No. 1 to the Credit Agreement among Spieker Properties, L.P., as borrower and
Wells Fargo Bank, The First National Bank of Boston, First Bank National Association
Seattle-First National Bank and Union Bank as lenders, dated as of July 24, 1996
(incorporated by reference to Spieker Properties, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996)
10.14 Eighth Amendment to First Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P.
12.1 Schedule of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends
21.1 List of Subsidiaries of Spieker Properties, L.P.
23.1 Consent of Independent Public Accountants
27.1 Financial Data Schedule
</TABLE>
- -----------------------------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-11 (Registration No. 33-67906),
which became effective on November 10, 1993.
<PAGE> 1
EIGHTH AMENDMENT TO FIRST AMENDED AND RESTATED
EXHIBIT 10.14
AGREEMENT OF LIMITED PARTNERSHIP
OF
SPIEKER PROPERTIES, L.P.
This Eighth Amendment ("Eighth Amendment") to the First Amended and
Restated Agreement of Limited Partnership of Spieker Properties, L.P., a
California limited partnership, dated as of February 2, 1995, as amended (the
"Partnership Agreement"), is executed and made effective for all purposes as of
this 24th day of January, 1997 (the "Effective Date"), by and among Spieker
Properties, Inc., a Maryland corporation, the General Partner of the
Partnership, those Persons identified on Schedule 1 attached hereto (the "New
Limited Partners") and the undersigned existing Limited Partners of the
Partnership, who constitute a Majority-in-Interest of the Limited Partners as
of the date hereof. The term "New Limited Partners" shall include those
partners and interest holders of a Partnership Transferor identified on
Schedule 1A hereto to the extent that, and upon and after the date that, any
Partnership Units are distributed to such partner or interest holder by a
Partnership Transferor (as defined in the Contribution Agreement), at which
time (i) each such partner and interest holder shall be, and such Partnership
Units shall continue to be, bound by, and entitled to the benefits of, those
provisions of this Eighth Amendment applicable to a New Limited Partner and a
New Limited Partner's Partnership Units, (ii) each such partner and interest
holder shall execute a Subscription Agreement in a form reasonably requested by
the Partnership and shall execute a counterpart copy of the Partnership
Agreement, and (iii) to the extent that any Partnership Units distributed to
any such partner or interest holder are subject to a lien and security interest
in favor of the Partnership, such partner or interest holder shall execute a
Security Agreement and UCC-1 Financing Statement in form reasonably requested by
the Partnership.
WHEREAS, Section 4.3 of the Partnership Agreement provides that the
General Partner may, without the consent of any Limited Partner, from time to
time, upon its determination that the issuance of Additional Units is in the
best interests of the partnership, cause the Partnership to issue Additional
Units to a Person and, if necessary, admit such Person as an Additional Limited
Partner, in exchange for the Capital Contribution by such Person of cash and/or
property;
WHEREAS, pursuant to the terms of that certain Contribution Agreement
dated as of September 30, 1996, by and among the Partnership, the General
Partner, Watergate Tower Associates, Tower II, Watergate Tower III Associates,
Baybridge Office Plaza Associates, F.P. Lathrop, Marcia Fay Lathrop and Sandra
L. Hyde, as Trustees of The Lathrop Trust, and F.P. Lathrop (the "Contribution
Agreement"), the Transferors (as defined in the Contribution Agreement) are
concurrently herewith making the Capital Contribution to the Partnership of
certain real, personal and intangible property described in the Contribution
Agreement (the "Emeryville Capital Contribution");
WHEREAS, the General Partner has determined that the issuance of
Additional Units in the respective amounts set forth on Schedule 2 of the New
Limited Partners in exchange
1
<PAGE> 2
for the Transferors' making of the Emeryville Capital Contribution is in the
best interests of the Partnership;
WHEREAS, the General Partner, the New Limited Partners and the
undersigned existing Limited Partners of the Partnership, who constitute a
Majority-in-Interest of the Limited Partners as of the date hereof, desire to
enter into this Eighth Amendment to set forth the terms and conditions on
which the Transferors shall make the Emeryville Capital Contribution and to
amend certain other provisions of the partnership Agreement as set forth herein,
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1. Capitalized terms used herein, unless otherwise defined herein,
shall have the same meanings as set forth in the Partnership Agreement.
2. Pursuant to Section 4.7 of the Partnership Agreement, each of
the New Limited Partners is hereby admitted to the Partnership as a Limited
Partner, and the names of the New Limited Partners are hereby recorded in the
books and records of the Partnership, effective as of the date first written
above. By executing this Eighth Amendment, the General Partner hereby consents
to the admission of the New Limited Partners as Limited Partners in the
Partnership.
3. Each of the New Limited Partners hereby agrees to be subject
and bound at all times to all of the terms and conditions of the Partnership
Agreement, as now in effect or hereafter amended. Without limitation, each of
the New Limited Partners acknowledges and agrees that it is bound by Article
XIV of the Partnership Agreement which provides for the arbitration of disputes
arising under the Partnership Agreement. Notwithstanding the foregoing, the
Partnership, the General Partner and each of the New Limited Partners
acknowledges and agrees that the provisions of Article XIV of the Partnership
Agreement shall not be applicable to disputes arising out of or relating to the
provisions of Paragraph 12 of the Contribution Agreement. BY INITIALING IN THE
SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS
INCLUDED IN ARTICLE XIV "ARBITRATION OF DISPUTES" DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL EXCEPT AS
SPECIFICALLY INCLUDED IN THIS "ARBITRATION OF DISPUTES" PROVISION. BY
INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING
AND AGREE TO SUBMIT DISPUTES
2
<PAGE> 3
ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
(INITIALED) (INITIALED) (INITIALED)
----------- ----------- -----------
WT III WTA Tower II
(INITIALED) (INITIALED) (INITIALED) (INITIALED)
----------- ----------- ----------- -----------
Baybridge FPL, Trustee MFL, Trustee SLH, Trustee
4. The Partnership hereby issues to the New Limited Partners the
respective number of Partnership Partners the respective number of Partnership
Units set forth adjacent to the name of each of the New Limited Partners on
Schedule 2 attached hereto (the "Emeryville Additional Units").
5. The parties hereto hereby acknowledge that the Transferors have
made the Emeryville Capital Contribution to the Partnership and the Gross Asset
Value of the Emeryville Capital Contribution with respect to each New Limited
Partner is as set forth adjacent to the name of each of the New Limited
Partners on Schedule 3 attached hereto.
6. The General Partner hereby approves the acquisition of Rights by
each of the New Limited Partners with respect to the Emeryville Additional
Units and hereby grants to each of the New Limited Partners the Rights with
respect to the Emeryville Additional Units on the terms and subject to the
conditions and restrictions contained in Exhibit G to the Partnership
Agreement, provided that, notwithstanding anything to the contrary provided in
the Partnership Agreement or this Eighth Amendment, none of the New Limited
Partners shall have the right to exercise the Rights with respect to all or any
portion of the Emeryville Additional Units prior to the first anniversary of
the Closing (as defined in the Contribution Agreement). For purposes of Section
11.1 of the Partnership Agreement, the General Partner's approval and grant set
forth in this Paragraph 6 shall be deemed to have occurred prior to the New
Limited Partners' admission to the Partnership as Additional Limited Partners.
7. Each of the New Limited Partners hereby acknowledges and agrees
that it has relied fully upon the advice of its own legal counsel and/or
accountant in determining the tax consequences of the transactions contemplated
hereby and not upon any representations or advice by the General Partner or by
any other Partner, except to the extent expressly set forth in Paragraph 11 of
the Contribution Agreement. Each of the New Limited Partners hereby represents
and warrants to the Partnership and the General Partner that it (i) is
acquiring its respective portion of the Emeryville Additional Units for itself
for investment purposes only, and not with a view to any resale or distribution
of such Partnership Units, (ii) has been advised and understands that the
Emeryville Additional Units are registered under the Securities Act and all
applicable state securities laws, or unless exemptions from registration are
available, and (iii) has, either alone or with its "purchaser representative"
as that term is defined in Rule 501(h) under the Securities Act, such knowledge
and experience in financial and business matters that is capable of evaluating
<PAGE> 4
the merits and risks of its investment in the Partnership. Each of the New
Limited Partners hereby acknowledges that the partnership and the General
Partner have made available to such New Limited Partner, at a reasonable time
prior to its acquisition of the Emeryville Additional Units, the opportunity to
ask questions and receive answers concerning the terms and conditions of such
acquisition and to obtain any additional information which the Partnership
and/or the General Partner possessed or could acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished by the Partnership and the General Partner in connection with such
acquisition.
8. The following new Section 4.11 is hereby added to the
Partnership Agreement as follows:
4.11 PARTNER ASSUMPTION OF INDEBTEDNESS. Each Limited Partner
listed on Exhibit Y hereto unconditionally and severally guarantees to
the Debtor the full payment and performance of all of the Partnership's
present and future indebtedness and obligations under the Note or Notes
listed next to such Limited Partner's name on Exhibit Y and any other
Loan Documents relating to such Note or Notes, provided that,
notwithstanding anything to the contrary contained in this Section 4.11,
each Limited Partner's obligation shall be limited to the amount(s) set
for on Exhibit Y next to such Limited Partner's name (with respect to
each Limited Partner, an "Emeryville Limited Partner's Share") and shall
be limited to guaranteeing the payment and performance of only the Note
or Notes set forth on Exhibit Y next to such Limited Partner's name.
Exhibit Y may be amended from time to time to increase (but not
decrease) one or more Limited Partner's obligations, such amendment
needing the approval only of the Partnership and by only that Limited
Partner whose obligation is to be increased by such amendment. All such
indebtedness and obligations under such Loan Documents are referred to
in this Section 4.11 as the "Section 4.11 Indebtedness." Without
limiting the provisions of this Section 4.11, it is the Limited
Partners' and the Debtor's intent that each Limited Partner shall have
liability for such Emeryville Limited Partner's Share of the Section
4.11 Indebtedness to the same extent that the General Partner, as a
general partner of the Partnership, is liable for the Section 4.11
Indebtedness under the laws of the State of California. Each Emeryville
Limited Partner's Share of the Section 4.11 Indebtedness will be payable
by such Limited Partner to the Partnership as a Capital Contribution
immediately on written demand of Debtor in the event of any default of
Debtor (beyond the expiration of any applicable grace period) with
respect to the Section 4.11 Indebtedness or any part thereof.
Notwithstanding anything to the contrary contained in the Partnership
Agreement or the Bylaws or Articles of Incorporation of the General
Partner, as each may be amended from time to time, any decision by
Debtor hereunder, including a decision to make a demand on the Limited
Partners under this Section 4.11, shall require the majority vote of the
independent directors of the General Partner. Each Limited Partner
authorizes Debtor at any time in its
4
<PAGE> 5
discretion to alter any of the terms of the Section 4.11 Indebtedness
and to make such modifications to the Section 4.11 Indebtedness that
have the effect of releasing the Debtor from liability for all or any
part of the Section 4.11 Indebtedness. Debtor and the Note Holders may
take any of the foregoing actions upon any terms and conditions as the
Debtor and the Note Holders may elect, without giving notice to any
Limited Partner or obtaining the consent of any Limited Partner and
without affecting the liability of any Limited Partner under this
Section 4.11. It is understood and agreed by each Limited Partner that
until the Section 4.11 Indebtedness is fully paid and until each and
every term, covenant and condition of this Section 4.11 is fully
performed, no Limited Partner shall be released by any act or event
which might, but for this provision of this Section 4.11, be deemed a
legal or equitable discharge of a surety, or by reason of any waiver,
extension, modification, forbearance or delay or other act or omission
of the Note Holders' or the Partnership's failure to proceed promptly or
otherwise as against the General Partner or Debtor's failure to proceed
promptly or otherwise as against any Limited Partner or Note Holder's
failure to proceed promptly or otherwise against the Debtor, or by
reason of any action taken or omitted or circumstance which may or might
vary the risk or affect the rights or remedies of any Limited Partner as
against Debtor or the Note Holders, or by reason of any Limited Partner
as against Debtor or the Note Holders, or by reason of any further
dealings between the Debtor and the Note Holders, whether relating to
the Section 4.11 Indebtedness, the Debt Offering or otherwise, and each
Limited Partner hereby expressly waives and surrenders any defense to
its liability hereunder based upon any of the foregoing acts, omissions,
things, agreements, waivers or any of them; it being the purpose and
intent of this Section 4.11 that the obligations of each Limited Partner
hereunder are absolute and unconditional under any and all
circumstances. Each Limited Partner's obligations under this Section
4.11 are independent of those of Debtor. The Debtor's rights under this
Section 4.11 will not be exhausted by any action by it until all of the
Section 4.11 Indebtedness and all other obligations of the Partnership
under the Notes have been fully paid and performed and the period of
time has expired during which any payment made to the Note Holders by
the Debtor under the Notes or to the Debtor by each Limited Partner
under this Section 4.11 may be determined to be a Preferential Payment
(as defined below) without such determination, in fact being made. Each
Limited Partner further agrees that to the extent all or any part of any
payment made to the Note Holders under the Notes or by a Limited Partner
under this Section 4.11 is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid by the
recipient thereof or paid over to a trustee, receiver or any other
entity, whether under any bankruptcy act or otherwise (any such payment
is hereinafter referred to as a "Section 4.11 Preferential Payment"),
then this Section 4.11 shall continue to be effective or shall be
reinstated, as the case may be, and, to the extent of such payment or
repayment, the Limited
5
<PAGE> 6
Partners' obligations under this Section 4.11 intended to be satisfied by such
Section 4.11 Preferential Payment shall be revived and continued in full force
and effect as if said Section 4.11 Preferential Payment had not been made. Each
Limited Partner waives: (a) all statutes of limitations as a defense to any
action brought against any Limited Partner pursuant to this Section 4.11, to
the fullest extent permitted by law; (b) any defense based upon any legal
disability of Debtor or any discharge or limitation of the liability of Debtor
to the Note Holders, whether consensual or arising by operation of law or any
bankruptcy, reorganization, receivership, insolvency, or debtor-relief
proceeding, or from any other cause; (c) presentment, demand, protest and
notice of any kind, provided that the foregoing waiver shall not be construed
to waive any demand or notice to the Limited Partners expressly provided for in
this Section 4.11; and (d) any defense based upon or arising out of any defense
which Debtor may have to the payment or performance of any part of the Section
4.11 Indebtedness. Notwithstanding any other provision of this Section 4.11 to
the contrary, each Limited Partner may now have or hereafter acquire against
Debtor, or each of them, or any other Limited Partner, or any other person, of
all or any of the Section 4.11 Indebtedness that arise from the existence or
performance of such Limited Partner's obligations under this Section 4.11, the
Notes or any of the Loan Documents (all such claims and rights are referred to
as the "Emeryville Limited Partner's Conditional Rights"), including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
or indemnification, any right to participate in any claim or remedy of the
Partnership against the General Partner or the Note Holders against the Debtor,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made hereunder or otherwise, including
without limitation, the right to take or receive from Debtor, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights. If,
notwithstanding the foregoing provisions, any amount shall be paid to any
Limited Partner on account of any such Emeryville Limited Partner's Conditional
Rights and either (i) such amount is paid to such Limited Partner at any time
when the Section 4.11 Indebtedness shall not have been paid or performed in
full, or (ii) regardless of when such amount is paid to such Limited Partner,
any payment made by Debtor to the Note Holders or by a Limited Partner under
this Section 4.11 is at any time determined to be a Section 4.11 Preferential
Payment, then such amount paid to such Limited Partner shall be held in trust
for the benefit of Debtor and the Note Holders, as their interests may appear,
and shall forthwith be paid to the Partnership as a Capital contribution to be
credited and applied upon the Section 4.11 Indebtedness, whether matured or
unmatured, in such order as the Debtor, in its sole and absolute discretion,
shall determine. To the extent that any of the provisions of this Section 4.11
shall not be
<PAGE> 7
enforceable, each Limited Partner agrees that until such time as the
Section 4.11 Indebtedness has been paid and performed in full and the
period of time has expired during which any payment made by Debtor to
the Note Holders or by a Limited Partner under this Section 4.11 may be
determined to be a Section 4.11 Preferential Payment, the Emeryville
Limited Partner's Conditional Rights to the extent not validly waived
shall be subordinate to the Note Holders' right to full payment and
performance of the Section 4.11 Indebtedness, and such Limited Partner
shall not enforce such Emeryville Limited Partner's Conditional Rights
during such period. Each Limited Partner assumes full responsibility
for keeping fully informed of the financial condition of Debtor and each
other Limited Partner and all other circumstances affecting Debtor's
ability to perform its obligations under the Loan Documents and each
other Limited Partner's ability to perform its obligations hereunder and
agrees that neither Debtor nor the Note Holders will have any duty to
report to any Limited Partner any information which Debtor or the Note
Holders receive about Debtor's or any Limited Partner's financial
condition or any circumstances being on Debtor's or any Limited
Partner's ability to perform. Upon a default of the Partnership under
the Loan Documents, the Note Holders may elect to compromise, or adjust
any part of the Section 4.11 Indebtedness, or make any other
accommodation with the Debtor, or exercise any other remedy against the
Debtor. No such action by the Note Holders will release or limit the
liability of any Limited Partner. In addition to all rights of setoff
or lien against any moneys, securities or other property of any Limited
Partner given to the Partnership by law, the Partnership shall have a
right of setoff against all distributions to which a Limited Partner may
be entitled from the Partnership, and every such right of setoff may be
exercised without demand upon or notice to any Limited Partner (except
the notice expressly provided for above). No right of setoff shall be
deemed to have been waived by any act or conduct on the part of the
Partnership or by any neglect to exercise such right of setoff, or by
any delay in doing so; and every right of setoff shall continue in full
force and effect until specifically waived or released by an instrument
in writing executed by the Partnership or until a Limited Partner has
satisfied in full all of such Limited Partner's obligations under this
Section 4.11. In the event that any Limited Partner shall advance or
become obligated to pay any sums toward the Section 4.11 Indebtedness,
or in the event that for any reason whatsoever Debtor is now, or shall
hereafter become, indebted to any Limited Partner, each Limited Partner
agrees that the amount of such sums and of such indebtedness and all
interest thereon shall at all times be subordinate as to lien, time of
payment and in all other respects to the full and prior repayment to
Note Holders of the Section 4.11 Indebtedness, and no Limited Partner
shall be entitled to enforce or receive payment thereof until all such
sums owing to the Note Holders have been paid in full and the period of
time has expired during which any payment made by Debtor to the Note
Holders or the
7
<PAGE> 8
Limited Partners pursuant to this Section 4.11 may be determined to be a
Section 4.11 Preferential Payment. Each Limited Partner agrees to pay
its pro rata share (based on the ratio that each such Emeryville Limited
Partner's Share bears to the total of all of the Emeryville Limited
Partners' Shares) of Debtor's reasonable out-of-pocket costs and
expenses, including but not limited to legal fees and disbursements,
incurred in any effort to collect or enforce any of the Section 4.11
Indebtedness or this Section 4.11, whether or not any lawsuit is filed.
Any payment made by any Limited Partner under this Section 4.11 shall be
deemed to be a Capital Contribution by said Limited Partner to the
Partnership. This Section 4.11 shall be governed by California law, and
may be amended only by a written instrument executed by the Limited
Partners listed on Exhibit Y hereto and Debtor; provided, however, that
a Emeryville Limited Partner's Share may be increased (but not
decreased) pursuant to a written instrument executed by the Debtor and
such Limited Partner so long as such action does not increase or
decrease any other Emeryville Limited Partner's Share. The provisions
of this Section 4.11 shall bind and benefit the heirs' executors,
administrators, legal representatives, successors and assigns of each
Limited Partner and Debtor. Whenever the context requires, all terms
used in the singular will be construed in the plural and vice versa, and
each gender will include each other gender. Notwithstanding anything to
the contrary provided herein, in no event shall any Limited Partner be
entitled to the issuance of any Additional Units as a result of any
contribution made by such Limited Partner pursuant to this Section 4.11,
nor shall the Percentage Interests of the Partners be adjusted as a
result thereof. Subject to the foregoing sentence, if any Limited
Partner makes a payment under that certain Reimbursement Agreement
between the Limited Partners listed on Exhibit Y hereto and the General
Partner, dated January __, 1997, such payment shall for all other
purposes be deemed to constitute a Capital Contribution to the
Partnership pursuant to this Section 4.11.
9. The following new Section 4.12 is hereby added to the
Partnership Agreement as follows:
4.12 NON-DISCRIMINATION. The Partnership and the
General Partner agree to exercise all of their rights under said
Sections 4.10 and 4.11 in a non-discriminatory manner with respect to
the Limited Partners and in a manner that is not disproportionate to any
of the Limited Partner's Shares of the Indebtedness (including, for the
purposes of this Section 4.12, any of the Emeryville Limited Partner's
Shares of the Section 4.11 Indebtedness), provided that the foregoing
shall not impair or limit either the Partnership's or the General
Partner's right to exercise all of their rights under said Sections 4.10
and 4.11 to the fullest extent permitted under this Agreement.
8
<PAGE> 9
10. The following new Section 4.13 is hereby added to the
Partnership Agreement as follows:
4.13 RIGHT TO ASSUME OTHER INDEBTEDNESS. In the event
that any of the Guarantees defined in the Reimbursement Agreements that
are referenced in the last sentences of Sections 4.10 and 4.11 of this
Agreement, respectively, are released or any of the Notes are repaid or
otherwise extinguished, the Limited Partners that have agreed to
reimburse the General Partner for an amount paid by the General Partner
with respect to such Guarantee and those Limited Partners that have
guaranteed the Partnership's obligations under such Note (all such
Limited Partners being referred to herein as "Section 4.13 Limited
Partners) shall have the right to agree to reimburse the General Partner
for amounts paid by the General Partner with respect to any other
Guarantee or any replacement Guarantee and to guaranty the Partnership's
obligations under any other Note or any replacement Note pro rata based
on (i) that portion of the Guarantees with respect to which no Person
has agreed to reimburse the General Partner and that portion of the
indebtedness under the Notes with respect to which no Person has agreed
to guaranty the Partnership's obligations and (ii) the relative amounts
that the Section 4.13 Limited Partners had agreed to reimburse the
General Partner with respect to such released Guarantee(s) and had
agreed to guaranty the Partnership's obligations with respect to such
repaid or otherwise extinguished Note(s). Nothing contained in this
Section 4.13 shall be construed in any manner as requiring the
Partnership to incur any indebtedness (including, without limitation, by
executing any replacement Note) or the Company to guarantee any
indebtedness (including, without limitation, by executing any
replacement Guarantee).
11. Exhibit M to the Partnership Agreement is hereby
amended to add the addresses for the New Limited Partners that are set forth on
Schedule 4 attached hereto.
12. Each of the New Limited Partners hereby acknowledges
that, in connection with any proposed merger, tender offer or acquisition of
the Company or the Partnership or similar event, the General Partner's
obligations to its shareholders may conflict with the interests of the Limited
Partners. Each of the New Limited Partners hereby further acknowledges that
such New Limited Partner has consulted with its advisors, including legal
counsel, regarding such conflicts and understands such conflicts. Each of the
New Limited Partners hereby waives, and agrees that it shall not pursue, any
claims against the General Partner to the extent that the General Partner is
fulfilling its obligations to its shareholders in connection with any such
proposed merger, tender offer, acquisition or similar event and agrees, to the
extent that the General Partner is fulfilling its obligations to its
shareholders in connection with any such proposed merger, tender offer,
acquisition or similar event and agrees, to the extent that the General Partner
is fulfilling its obligations to its shareholders, not to enjoin or to attempt
to enjoin any such proposed merger, tender offer, acquisition or similar event.
13. This Eighth Amendment may be executed in two or more
counterparts, each of which shall be deemed originals, and all of which taken
together shall constitute one
9
<PAGE> 10
instrument. By executing this Eighth Amendment below, each signatory hereby
agrees that a facsimile signature shall be deemed to have the same effect as an
original signature.
14. This Eighth Amendment shall be governed by and construed in
conformity with the laws of the State of California.
15. Except as specifically provided herein, the Partnership
Agreement shall remain in full force and effect.
16. The provisions of the Contribution Agreement and the parties
obligations thereunder shall not be merged into the provisions of this Eighth
Amendment and shall survive the execution and delivery of this Eighth Amendment
to the extent that the Contribution Agreement provides that the parties
obligations thereunder shall survive the Closing.
IN WITNESS WHEREOF, this Eighth Amendment is hereby entered into among
the undersigned parties as of the Effective Date.
GENERAL PARTNER; SPIEKER PROPERTIES, INC.
a Maryland corporation
By: /s/ [SIG]
-------------------------------
Its: Vice President
------------------------------
EXISTING LIMITED PARTNERS:
/s/ Warren E. Spieker, Jr.
----------------------------------
Warren E. Spieker, Jr.
/s/ Dennis E. Singleton
----------------------------------
Dennis E. Singleton
/s/ John K. French
----------------------------------
John K. French
----------------------------------
Bruce H. Hosford
10
<PAGE> 11
instrument. By executing this Eighth Amendment below, each signatory hereby
agrees that a facsimile signature shall be deemed to have the same effect as an
original signature.
14. This Eighth Amendment shall be governed by and construed in
conformity with the laws of the State of California.
15. Except as specifically provided herein, the Partnership
Agreement shall remain in full force and effect.
16. The provisions of the Contribution Agreement and the parties
obligations thereunder shall not be merged into the provisions of this Eighth
Amendment and shall survive the execution and delivery of this Eighth Amendment
to the extent that the Contribution Agreement provides that the parties
obligations thereunder shall survive the Closing.
IN WITNESS WHEREOF, this Eighth Amendment is hereby entered into among
the undersigned parties as of the Effective Date.
GENERAL PARTNER: SPIEKER PROPERTIES, INC.
a Maryland corporation
By: ______________________________
Its: ______________________________
EXISTING LIMITED PARTNERS:
-----------------------------------
Warren E. Spieker, Jr.
-----------------------------------
Dennis E. Singleton
-----------------------------------
John K. French
/s/ BRUCE H. HOSFORD
-----------------------------------
Bruce H. Hosford
10
<PAGE> 12
/s/ PETER H. SCHNUGG
-----------------------------------
Peter H. Schnugg
/s/ CRAIG G. VOUGHT
-----------------------------------
Craig G. Vought
/s/ JOHN A. FOSTER
-----------------------------------
John A. Foster
NEW LIMITED PARTNERS: WATERGATE TOWER ASSOCIATES,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
TOWER II,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
WATERGATE TOWER III ASSOCIATES,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
11
<PAGE> 13
BAYBRIDGE OFFICE PLAZA ASSOCIATES,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
/s/ F P LATHROP
-------------------------------
F.P. LATHROP
as Trustee of The Lathrop Trust
/s/ MARCIA FAY LATHROP
-------------------------------
MARCIA FAY LATHROP
as Trustee of The Lathrop Trust
/s/ SANDRA L. HYDE
-------------------------------
SANDRA L. HYDE
as Trustee of The Lathrop Trust
12
<PAGE> 14
SCHEDULE 1 TO EIGHTH AMENDMENT
LIST OF NEW LIMITED PARTNERS
Watergate Tower Associates, a California limited partnership
Tower II, a California limited partnership
Watergate Tower III Associates, a California limited partnership
Baybridge Office Plaza Associates, a California limited partnership
F.P. Lathrop, Marcia Fay Lathrop and Sandra L. Hyde, as Trustees of The Lathrop
Trust (u/t/d November 19, 1993)
<PAGE> 15
Schedule 1A to Eighth Amendment
List of Partners and Interest Holders
F.P. Lathrop, Marcia Fay Lathrop and Sandra L. Hyde, as Trustees of The Lathrop
Trust (u/t/d November 19, 1993)
F. Pierce Lathrop
Marcia Fay Lathrop
Steven P. Lathrop
Thomas N. Lathrop
Shand L. Green
Robert H. Goldsmith
Betty G. Austin
<PAGE> 16
SCHEDULE 2 TO EIGHTH AMENDMENT
ALLOCATION OF EMERYVILLE PARTNERSHIP UNITS
New Limited Partners Emeryville Partnership Units**
- ----------------------------------------- ------------------------------
Watergate Tower Associates, 252,537
a California limited partnership
Tower II, a California limited partnership 302,026
Watergate Tower III Associates, 27,603
a California limited partnership
Baybridge Office Plaza Associates, 84,823
a California limited partnership
F.P. Lathrop, Marcia Fay Lathrop and 98,141
Sandra L. Hyde, as Trustees of
The Lathrop Trust
(u/t/d November 19, 1993)
** Subject to post-closing adjustments
<PAGE> 17
Schedule 3 to Eighth Amendment
Gross Asset Values
New Limited Partner Gross Asset Values
- ------------------- ------------------
Watergate Tower Associates, a California $21,200,000
limited partnership
Tower II, a California limited partnership $25,800,000
Watergate Tower III Associates, $67,500,000
a California limited partnership
Baybridge Office Plaza Associates $7,300,000
a California limited partnership
F.P. Lathrop, Marcia Fay Lathrop and $3,400,000
Sandra L. Hyde, as Trustees of
The Lathrop Trust (u/t/d/ November 19, 1993)
<PAGE> 18
Schedule 4 to Eighth Amendment
Addresses of New Limited Partners
New Limited Partners Addresses
- -------------------- ---------
Watergate Tower Associates, a California c/o F.P. Lathrop
limited partnership 2000 Powell Street, Suite 1600
Emeryville, California 94608
Tower II, a California limited partnership c/o F.P. Lathrop
2000 Powell Street, Suite 1600
Emeryville, California 94608
Watergate Tower III Associates, a California c/o F.P. Lathrop
limited partnership 2000 Powell Street, Suite 1600
Emeryville, California 94608
Baybridge Office Plaza Associates, a c/o F.P. Lathrop
California limited partnership 2000 Powell Street, Suite 1600
Emeryville, California 94608
F.P. Lathrop, Marcia Fay Lathrop and Sandra c/o F.P. Lathrop
L. Hyde, as Trustees of The Lathrop Trust 2000 Powell Street, Suite 1600
(u/t/d November 19, 1993) Emeryville, California 94608
<PAGE> 19
Exhibit Y to Eighth Amendment
Emeryville Limited Partner's Shares
New Limited Partners Emeryville Limited Partner's Shares
- -------------------- -----------------------------------
Watergate Tower Associates, a California $2,510,000
limited partnership
Tower II, a California limited partnership $4,477,000
Watergate Tower III Associates, a California $50,689,000
limited partnership
Baybridge Office Plaza Associates, a $1,500,000
California limited partnership
<PAGE> 1
EXHIBIT 12.1
Spieker Properties, L.P. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(in thousands, except ratios)
<TABLE>
<CAPTION>
Spieker Partners
Spieker Properties, L.P. Consolidated Properties Combined
--------------------------------------------------------- ---------------------------
Period of Period of
November 19, January 1,
1993 to 1993 to
December 31, December 31, December 31, December 31, November 18, December 31,
1996 1995 1994 1993 1993 1992
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from operations
before disposal of real
estate properties and
minority interest $ 65,764 $30,335 $13,363 $1,699 $(15,144) $(8,497)
Interest expense(1) 37,235 46,386 44,395 4,522 47,176 50,640
Amortization of capitalized
interest 266 195 183 21 154 169
-------- ------- ------- ------ -------- -------
Total earnings $103,265 $76,916 $57,941 $6,242 $ 32,186 $42,312
======== ======= ======= ====== ======== =======
Fixed charges:
Interest expense(1) $ 37,235 $46,386 $44,395 $4,522 $ 47,176 $50,640
Capitalized interest 3,116 1,301 468 - 265 1,107
-------- ------- ------- ------ -------- -------
Total fixed charges $ 40,351 $47,687 $44,863 $4,522 $ 47,441 $51,747
======== ======= ======= ====== ======== =======
Ratio of earnings to
fixed charges 2.56 1.61 1.29 1.38(2) 0.68(2) 0.82
======== ======= ======= ====== ======== =======
Fixed charges in excess
of earnings $ - $ - $ - $ - $ 15,255 $ 9,435
======== ======= ======= ====== ======== =======
</TABLE>
Notes:
(1) Includes amortization of debt discount and deferred financing fees.
(2) The ratio for the year ended December 31, 1993 (which combines the results
of operations of Spieker Properties, L.P. and Spieker Partners Properties)
is 0.74 and fixed charges in excess of earnings is $13,535.
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries of Spieker Properties, L.P.
1. Spieker Washington Interest Partners, a California general partnership
2. Fremont Bayside Associates, L.P., a California limited partnership
3. Spieker Partners-Livermore Ltd., a California limited partnership
4. Spieker Properties #172, Limited Partnership, a California limited
partnership
5. Spieker Properties #221 Partners, Limited Partnership, a California
general partnership
6. Spieker Properties #178, Limited Partnership, a California limited
partnership
7. Spieker Properties #166, Limited Partnership, a California limited
partnership
8. Spieker Properties #177, Limited Partnership, a California limited
partnership
9. Spieker Properties #237, Partners, a California general partnership
10. Spieker Properties #122, Limited Partnership, a California limited
partnership
11. Spieker Properties #219, Partners, a California general partnership
12. Spieker Properties #185, Limited Partnership, a California limited
partnership
13. Spieker Properties #183, Limited Partnership, a California limited
partnership
14. Spieker Properties #144, Limited Partnership, a Texas limited
partnership
15. Spieker Properties #179, Limited Partnership, a California limited
partnership
16. Spieker Properties #238, Partners, a California general partnership
17. Spieker Singleton #154, a California limited partnership
18. Sand Hill Northwest Properties, L.L.C.
19. San Mateo Office Limited, a California limited partnership
20. S.S. Livermore L.P., a California limited partnership
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 24, 1997, included in this Form 10-K of
Spieker Properties, L.P. (the "Operating Partnership") for the year ended
December 31, 1996, filed with the Operating Partnership's previously filed
Registration Statements on Form S-3 (File Nos. 333-04299 and 333-18483).
San Francisco, California ARTHUR ANDERSEN LLP
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 29,336
<SECURITIES> 0
<RECEIVABLES> 3,799
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,315,060
<DEPRECIATION> 127,701
<TOTAL-ASSETS> 1,390,314
<CURRENT-LIABILITIES> 0
<BONDS> 719,997
0
0
<COMMON> 0
<OTHER-SE> 610,928
<TOTAL-LIABILITY-AND-EQUITY> 1,390,314
<SALES> 0
<TOTAL-REVENUES> 200,699
<CGS> 0
<TOTAL-COSTS> 50,200
<OTHER-EXPENSES> 47,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,235
<INCOME-PRETAX> 65,764
<INCOME-TAX> 0
<INCOME-CONTINUING> 74,091
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,091
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 0.00
</TABLE>
