<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, 1998
[ ] 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 (IRS Employer
incorporation or organization) Identification No.)
2180 SAND HILL ROAD, MENLO PARK, CA 94025
- ---------------------------------------------------------- ----------------
(Address of principal executive offices) (Zip code)
(650) 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. [ ]
<PAGE> 2
TABLE OF CONTENTS
FORM 10-K
<TABLE>
<CAPTION>
PART I Page No.
<S> <C>
Item 1 Business ..................................................................... 15
Item 2 Properties ................................................................... 15
Item 3 Legal Proceedings ............................................................ 15
Item 4 Submission of Matters to a Vote of Security Holders .......................... 15
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters ........ 15
Item 6 Selected Financial Data ...................................................... 15
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................... 17
Item 7A Quantitative and Qualitative Disclosures About Market Risk ................... 24
Item 8 Financial Statements and Supplementary Data .................................. 24
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ................................................................... 24
PART III
Item 10 Directors and Executive Officers of the Registrant ........................... 24
Item 11 Executive Compensation ....................................................... 24
Item 12 Security Ownership of Certain Beneficial Owners and Management ............... 24
Item 13 Certain Relationships and Related Transactions ............................... 24
PART IV
Item 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K ............ 25
</TABLE>
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 9, 1999.
LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part IV herein
on page number 25.
This document consists of 72 pages, plus exhibits attached hereto.
2
<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.
OVERVIEW
Spieker Properties, L.P. (the "Operating Partnership") specializes in the
acquisition, development, management and leasing of office and industrial
properties in California and Washington, Oregon and Idaho (the "Pacific
Northwest"). Substantially all of the business activities of Spieker Properties,
Inc. (the "Company") are conducted through the Operating Partnership, in which
the Company owned an approximate 87.8% general and limited partnership interest
at December 31, 1998.
The Company was formed to continue and expand the real estate activities of its
predecessor firm, launched in 1970, commenced operations with the completion of
its initial public offering ("IPO") in November 1993.
BUSINESS STRATEGY
The Operating Partnership's principal objective is to achieve sustainable,
long-term growth in funds from operations per unit. Consistent with this
objective the Operating Partnership seeks to maximize the return on each dollar
of capital invested through the following focused and consistent business
strategies.
Quality Office and Industrial Properties
The Operating Partnership invests in quality office and industrial properties
that possess attributes that enable the properties to be competitive in the
marketplace in both the short and long-term. With approximately 30 years of
experience in owning and operating commercial properties, the Operating
Partnership's management team possesses the knowledge necessary to assess the
physical and locational attributes that determine a property's long-term
viability.
The Operating Partnership focuses on differentiating its properties from those
of nearby competitors, so as to maximize their attractiveness to potential
users. Important characteristics in office buildings include efficient suite
layouts, ample glass line per square foot of office space, user friendly common
areas, stairs, elevators and restrooms and convenient parking. Further
differentiation is achieved through amenities and services provided, such as
on-site management, conference rooms and health clubs.
Distribution properties are designed with high clear heights, multiple dock
facilities, appropriate truck staging and high-capacity sprinkler systems. With
light industrial or R&D properties, the Operating Partnership also uses
landscaping and exterior glass walls to increase the attractiveness of and
demand for such space.
Invest in Growing Regions
The Operating Partnership seeks to invest in regions with diverse and vibrant
economies that possess strong prospects for continued economic growth. The
Operating Partnership believes that California and the Pacific Northwest possess
attributes - high concentration of technology industries, growing populations
with a well-educated employee base, ability to attract new capital, excellent
universities, quality of life and well-developed infrastructures - that will
contribute to continued economic growth. Within these growing regions the
Operating Partnership focuses its activities in the major metropolitan areas of
Seattle, Portland, San Francisco, San Jose, Sacramento, Los Angeles County,
Orange County and San Diego, which have proven to be desired locations for a
large number of businesses.
3
<PAGE> 4
Submarket Concentrations
In the specific local submarkets in which it operates, the Operating Partnership
generally seeks to own a number of properties and to be one of the most
significant commercial landlords in that submarket. The Operating Partnership
believes that it has achieved significant market penetration within a number of
submarkets in which it operates. By achieving concentrated market positions, the
Operating Partnership can offer prospective tenants a variety of property
options and can accommodate the growth of existing tenants. Such submarket
concentration also enables the Operating Partnership to maximize synergistic
opportunities and economies of scale and allows key operating personnel to
concentrate their expertise on specific markets and local conditions. Finally,
the Operating Partnership believes that this strategy gives it a measure of
control over the rental rates achieved and capital expenditures incurred in
leasing space.
Focus on Flexible, Multi-Tenant Properties
The Operating Partnership seeks to own properties which will appeal to a broad
range of potential tenants. As such, the Operating Partnership focuses on
properties which are easily divisible and can accommodate tenants of various
sizes. This flexibility also enables the Operating Partnership to meet the needs
of existing tenants by being able to accommodate their inevitable expansion and
contraction needs. In addition, the Operating Partnership's experience is that
such property flexibility helps it maintain high occupancy rates, particularly
when market conditions are less favorable, and control the cost of re-tenanting
space.
Provide a Superior Level of Service
The Operating Partnership'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. To achieve this level of service, the Operating Partnership's office
property managers are located on-site, providing tenants with convenient direct
access to a management team which can respond quickly and allow tenants to focus
on their business rather than property issues. These on-site property managers
enable the properties to be well-maintained and convey a sense of quality, order
and security.
EMPLOYEES AND OPERATING PHILOSOPHY
As of December 31, 1998, the Operating Partnership had 548 employees. These
employee's focus on enhancing the Operating Partnership's business strategies
through the following operating philosophies.
Fully-Integrated Real Estate Management Capabilities
The Operating Partnership 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 Operating Partnership utilizes in-house resources to
market, lease and manage its properties and does not typically list its
properties with outside businesses or use third-party managers. All of the
Operating Partnership'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
Operating Partnership believes this approach gives it a significant advantage as
such depth of experience provides it with a detailed knowledge of markets and
tenant preferences.
Training and Retention
The Operating Partnership's hiring, training and retention of a talented
management group has been an important factor in its success. The Operating
Partnership 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 Operating Partnership's officers, including the
executive officers, are involved in the education program, which reinforces the
program's importance to the Operating Partnership and its personnel.
The Operating Partnership'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
4
<PAGE> 5
compensation includes subjective bonuses based upon, among other factors, tenant
satisfaction and leasing and re-leasing success. The Operating Partnership also
believes that stock options are an effective means of linking employees' actions
to stockholder value and generally grants options to all full-time employees
upon the completion of one year of service with the Operating Partnership.
Accountability
The Operating Partnership has a philosophy of holding one senior officer or a
small group of senior officers accountable, under the supervision and direction
of the Operating Partnership's executive officers, for all phases of a
property's development, from purchase, design and budgeting through
construction, leasing and ongoing management. The Operating Partnership 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 for only certain limited areas of a project.
PROPERTY OVERVIEW
As of December 31, 1998, the Operating Partnership's portfolio of properties,
consisted of 40.8 million square feet, made up of 20.5 million square feet of
office and 20.3 million of industrial income producing properties located in
California and the Pacific Northwest. With the exception of three assets
totaling 808,000 square feet, the Operating Partnership owns 100% of the
properties. The properties are segmented and managed in four operating regions.
These four operating regions have been broken down into nine identifiable
markets. Segment information related to the Operating Partnership's operating
regions can also be found in footnote 13 of the Operating Partnership's
Financial Statements.
The following table sets forth the rentable square feet of the Operating
Partnership's properties by region, market and type, as of December 31, 1998.
RENTABLE SQUARE FOOTAGE OF PROPERTIES
<TABLE>
<CAPTION>
OFFICE INDUSTRIAL TOTAL % OF TOTAL
------ ---------- ----- ----------
<S> <C> <C> <C> <C>
Pacific Northwest
Seattle, WA/Boise, ID 2,005,890 3,709,047 5,714,937 14.0%
Portland, OR 2,472,344 3,400,578 5,872,922 14.4
---------- ---------- ---------- --------
4,478,234 7,109,625 11,587,859 28.4
---------- ---------- ---------- --------
North - East Bay/Sacramento
Sacramento, CA 1,481,599 1,572,238 3,053,837 7.5
East Bay - San Francisco, CA 1,169,702 5,381,562 6,551,264 16.0
Peninsula - San Francisco, CA 2,116,337 184,094 2,300,431 5.6
---------- ---------- ---------- --------
4,767,638 7,137,894 11,905,532 29.1
---------- ---------- ---------- --------
Silicon Valley
South Bay - San Francisco, CA 3,712,160 4,094,380 7,806,540 19.1
---------- ---------- ---------- --------
3,712,160 4,094,380 7,806,540 19.1
---------- ---------- ---------- --------
Southern California
Los Angeles County, CA 2,480,721 -- 2,480,721 6.1
Orange County, CA 3,643,523 1,081,105 4,724,628 11.6
San Diego, CA 1,463,265 874,928 2,338,193 5.7
---------- ---------- ---------- --------
7,587,509 1,956,033 9,543,542 23.4
---------- ---------- ---------- --------
Total 20,545,541 20,297,932 40,843,473 100.0%
========== ========== ========== ========
50.3% 49.7% 100.0%
</TABLE>
Occupancy Rates
The Operating Partnership continues to operate at consistently high occupancy
levels and ended 1998 at a 96.4% average occupancy. This occupancy level is
indicative of the strength of the Operating Partnership's local real estate
markets, the continuing demand for space and the abilities of the Operating
Partnership's local management teams to keep their projects leased.
5
<PAGE> 6
The following tables set forth average occupancy rates at December 31, 1998, of
the Operating Partnership's properties region, market and type and five year
historical year-end occupancies.
AVERAGE OCCUPANCY RATES
<TABLE>
<CAPTION>
OFFICE INDUSTRIAL TOTAL
------ ---------- -----
<S> <C> <C> <C>
Pacific Northwest
Seattle, WA/Boise, ID 98.7% 97.4% 97.8%
Portland, OR 96.2 98.7 97.6
------- ------- -------
97.3 98.0 97.7
------- ------- -------
North - East Bay/Sacramento
Sacramento, CA 91.7 95.5 93.7
East Bay - San Francisco, CA 87.1 98.5 96.4
Peninsula - San Francisco, CA 98.2 98.3 98.2
------- ------- -------
93.5 97.8 96.1
------- ------- -------
Silicon Valley
South Bay - San Francisco, CA 96.5 96.5 96.5
------- ------- -------
96.5 96.5 96.5
------- ------- -------
Southern California
Los Angeles County, CA 91.3 -- 91.3
Orange County, CA 95.6 99.4 96.5
San Diego, CA 95.3 99.7 97.0
------- ------- -------
94.2 99.5 95.3
------- ------- -------
Total 95.1% 97.8% 96.4%
======= ======= =======
</TABLE>
5 YEAR HISTORICAL YEAR-END OCCUPANCY
<TABLE>
<CAPTION>
TOTAL RENTABLE YEAR-END
YEAR SQUARE FOOTAGE (1) OCCUPANCY
---- ------------------ ---------
<S> <C> <C>
1998 40,843,473 96.4%
1997 34,543,280 94.5
1996 21,429,732 96.6
1995 16,282,278 96.9
1994 13,933,113 97.6
</TABLE>
(1) Historical rental square footage may include occupancies for properties
that have been sold.
Rent Growth/Lease Expirations
During 1998, the Operating Partnership continued to benefit from strong real
estate markets with healthy demand, low vacancy levels and rising rents. As
rents in many of the Operating Partnership's targeted markets have risen
dramatically over the last few years, the Operating Partnership has achieved
accelerated roll-over rent growth. Rent growth, measured as the difference
between net effective (average) rents on new and renewed leases as compared to
the expiring coupon rent on those same spaces, was at 37.4% for 1998. The
following table shows recent historical roll-over rent growth:
ROLL-OVER RENT GROWTH
<TABLE>
<CAPTION>
TYPE 1998 1997 1996
- ---- ---- ---- ----
<S> <C> <C> <C>
Office 43.2% 27.9% 15.4%
Industrial 26.8 18.8 5.8
------ ------ ------
TOTAL 37.4% 23.0% 11.3%
====== ====== ======
</TABLE>
6
<PAGE> 7
Lease Expirations
For the year ending December 31, 1999 approximately 15.3% of the Operating
Partnership's rentable square footage representing leases in-place, is scheduled
to expire. During the five year period from 1999-2003, over 86.0% of the leases
in-place are scheduled to expire. Given the difference between in-place rents
and current market rents, the lease expirations should provide opportunities for
the Operating Partnership to increase rents on the re-leasing or renewal of
second generation space.
The following tables set forth the lease expirations in summary and by product
type for leases in-place as of January 1, 1999, assuming tenant renewal or
termination options are not exercised.
LEASE EXPIRATIONS - ALL PROPERTIES
<TABLE>
<CAPTION>
RENTABLE SQUARE ANNUAL BASE PERCENTAGE OF BASE
YEAR FOOTAGE EXPIRING (1) RENTS EXPIRING(2) RENTS EXPIRING
---- -------------------- ----------------- --------------
<S> <C> <C> <C>
1999 6,028,500 $ 80,057 15.1%
2000 7,634,086 94,988 17.9
2001 7,985,659 99,203 18.7
2002 6,549,855 85,013 16.0
2003 5,538,059 81,835 15.4
2004 2,046,278 28,115 5.3
2005 1,052,666 14,249 2.7
2006 697,943 12,705 2.4
2007 638,465 13,638 2.6
Thereafter 1,214,548 20,551 3.9
---------- -------- -----
Total 39,386,059 $530,354 100.0%
========== ======== =====
</TABLE>
LEASE EXPIRATIONS - OFFICE PROPERTIES
<TABLE>
<CAPTION>
RENTABLE SQUARE ANNUAL BASE PERCENTAGE OF BASE
YEAR FOOTAGE EXPIRING (1) RENTS EXPIRING (2) RENTS EXPIRING
---- -------------------- ------------------ --------------
<S> <C> <C> <C>
1999 3,383,442 $ 64,295 15.8%
2000 3,786,851 72,673 17.9
2001 3,548,947 73,542 18.2
2002 3,394,589 68,404 16.8
2003 2,489,065 58,727 14.4
2004 812,865 18,802 4.6
2005 388,532 10,585 2.6
2006 558,264 11,488 2.8
2007 513,906 12,156 3.0
Thereafter 663,555 15,752 3.9
---------- -------- -----
Total 19,540,016 $406,424 100.0%
========== ======== =====
</TABLE>
LEASE EXPIRATIONS - INDUSTRIAL PROPERTIES
<TABLE>
<CAPTION>
RENTABLE SQUARE ANNUAL BASE PERCENTAGE OF BASE
YEAR FOOTAGE EXPIRING (1) RENTS EXPIRING (2) RENTS EXPIRING
---- -------------------- ------------------ --------------
<S> <C> <C> <C>
1999 2,645,058 $ 15,762 12.7%
2000 3,847,235 22,315 18.0
2001 4,436,712 25,661 20.7
2002 3,155,266 16,609 13.4
2003 3,048,994 23,108 18.6
2004 1,233,413 9,313 7.5
2005 664,134 3,664 3.0
2006 139,679 1,217 1.0
2007 124,559 1,482 1.2
Thereafter 550,993 4,799 3.9
---------- -------- -----
Total 19,846,043 $123,930 100.0%
========== ======== =====
</TABLE>
(1) Does not include month-to-month leases.
(2) Base rent represents amounts contractually due, adjusted for contractual
increases, which may include taxes, insurance and common area
maintenance.
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<PAGE> 8
Leasing Activity/Re-leasing Costs
The Operating Partnership continues to aggressively manage the cost of leasing
commissions and tenant improvements ("capital expenditures") associated with the
renewal and re-leasing of space. The amount of capital expenditures spent on
leasing second generation space is impacted by the relative strength of the
local real estate market, the type of property being leased, the length of the
leases signed and the total value of the leases signed. The average capital
expenditure per square foot of space leased has shown moderate growth over time.
This increase is directly correlated to a shift in the Operating Partnership's
portfolio towards office properties, rapidly increasing market rents, which
result in higher leasing commissions, and longer average lease terms. The
following tables highlight historical leasing activity and re-leasing costs by
property type.
SUMMARY OF 1998 LEASING ACTIVITY
<TABLE>
<CAPTION>
WEIGHTED
1ST GENERATION SPACE (1) 2ND GENERATION SPACE (2) AVERAGE 2ND GEN.
TOTAL ------------------------ ------------------------ LEASE TI/COMM
TYPE # LEASES SQ.FEET #LEASES SQ. FEET # LEASES SQ. FEET TERM (MO) PSF (3)
- ---- -------- ------- ------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office 1,084 4,481,345 174 1,025,483 910 3,455,862 54 $5.26
Industrial 382 6,042,888 52 1,182,264 330 4,860,624 51 1.20
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
Total 1,466 10,524,233 226 2,207,747 1,240 8,316,486 53 $2.73
========== ========== ========== ========== ========== ========== ========== =====
</TABLE>
SUMMARY OF 1997 LEASING ACTIVITY
<TABLE>
<CAPTION>
WEIGHTED
1ST GENERATION SPACE (1) 2ND GENERATION SPACE (2) AVERAGE 2ND GEN.
TOTAL ------------------------ ------------------------ LEASE TI/COMM
TYPE # LEASES SQ. FEET #LEASES SQ. FEET #LEASES SQ. FEET TERM (MO) PSF (3)
- ---- -------- -------- ------- -------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office 673 2,121,754 122 570,977 551 1,550,777 41 $3.65
Industrial 325 5,774,904 58 1,168,891 267 4,606,013 45 0.88
--------- --------- --------- --------- --------- --------- --------- -----
Total 998 7,896,658 180 1,739,868 818 6,156,790 42 $1.57
========= ========= ========= ========= ========= ========= ========= =====
</TABLE>
SUMMARY OF 1996 LEASING ACTIVITY
<TABLE>
<CAPTION>
WEIGHTED
1ST GENERATION SPACE (1) 2ND GENERATION SPACE (2) AVERAGE 2ND GEN.
TOTAL ------------------------ ------------------------ LEASE TI/COMM
TYPE # LEASES SQ. FEET # LEASES SQ. FEET # LEASES SQ. FEET TERM (MO) PSF (3)
- ---- -------- -------- -------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office 458 1,363,183 51 145,308 407 1,217,875 40 $4.38
Industrial 187 2,993,029 27 744,791 160 2,248,238 40 0.97
--------- --------- --------- --------- --------- --------- --------- -----
Total 645 4,356,212 78 890,099 567 3,466,113 40 $2.22
========= ========= ========= ========= ========= ========= ========= =====
</TABLE>
(1) 1st generation is defined as previously unleased shell space.
(2) Excluding month-to-month leases.
(3) Tenant Improvement and leasing commission costs per square foot
calculated based on 2nd generation space, excluding month-to-month and
repositioning leases, of 1,936,943 square feet for 1998, 2,798,822
square feet for 1997 and 877,587 square feet for 1996.
8
<PAGE> 9
Tenant Profiles
The Operating Partnership has over 4,500 tenants, with the average tenant
occupying approximately 8,500 square feet and paying an annual net rent of
approximately $98,250. The tenant base is extremely diversified, as demonstrated
below, based on the business sectors in which they operate. The Operating
Partnership's largest tenant, Xerox, represents approximately 1.4% of the
Operating Partnership's 1998 net rental income. The top fifty tenants represent
less than 23% of the Operating Partnership's 1998 net rental income.
TENANT PROFILE BASED ON 1998 NET RENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
BUSINESS SECTOR NET RENTAL INCOME
--------------- -----------------
<S> <C>
Software 11%
Hardware 9
Insurance 6
Professional Services 6
Banking 6
Telecom 5
Securities 4
Research & Development 4
Transportation & Logistics 3
Aircraft & Auto Manufacturing 3
</TABLE>
Investment Activity
The Operating Partnership strategically invests in real estate either through
the acquisition of existing properties or through the development of new
properties. The Operating Partnership invests in markets with vigorous economies
that have the potential for sustainable long-term economic growth. Within these
markets the Operating Partnership focuses on high quality, flexible,
multi-tenant office and industrial buildings. When evaluating potential
acquisitions, some of the factors the Operating Partnership considers are short
and long-term returns on capital, total cost compared to replacement cost, the
level of in-place rents compared to current market rents and tenant mix. In
assessing the viability of a potential development the Operating Partnership
also considers market demand and competitive supply.
Acquisitions
During 1998, the Operating Partnership acquired office and industrial properties
totaling 6.3 million square feet representing a total investment of $884.8
million. Office acquisitions added 5.1 million square feet for a total
investment of $825.4 million while industrial acquisitions added 1.2 million
square feet for a $59.4 million total investment. Average initial occupancies on
these acquisitions were 90.8%. The Operating Partnership uses the terms "total
investment" and "invested" to represent the initial cost of an acquisition, plus
projected costs of repositioning capital expenditures anticipated at the time of
purchase.
The following table sets forth 1998 acquisitions by region, market and type
based on total investment:
1998 ACQUISITIONS
<TABLE>
<CAPTION>
OFFICE INDUSTRIAL TOTAL
-------- ---------- --------
<S> <C> <C> <C>
Pacific Northwest
Seattle, WA/Boise, ID $ 15.1 $ -- $ 15.1
Portland, OR 52.3 -- 52.3
-------- -------- --------
67.4 -- 67.4
-------- -------- --------
North - East Bay/ Sacramento
Sacramento, CA -- 25.0 25.0
East Bay - San Francisco, CA -- 34.4 34.4
Peninsula - San Francisco, 153.3 -- 153.3
-------- -------- --------
CA
153.3 59.4 212.7
-------- -------- --------
Silicon Valley
South Bay - San Francisco, 189.9 -- 189.9
-------- -------- --------
CA
Southern California
Los Angeles County, CA 218.8 -- 218.8
Orange County, CA 159.4 -- 159.4
San Diego, CA 36.6 -- 36.6
-------- -------- --------
414.8 -- 414.8
-------- -------- --------
Total $ 825.4 $ 59.4 $ 884.8
======== ======== ========
</TABLE>
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<PAGE> 10
Developments
During 1998, the Operating Partnership completed six property developments
adding 889,651 square feet to the Operating Partnership's stabilized portfolio
for a total investment of $56.6 million. The Operating Partnership considers a
development completed and stabilized at the earlier of eighteen months after
shell completion or a 95% occupancy rate having been reached. Each of the
completed development properties listed below by type, market, and region were
100% occupied at December 31, 1998 and are included in the Operating
Partnership's stabilized portfolio.
COMPLETED DEVELOPMENTS
<TABLE>
<CAPTION>
RENTABLE TOTAL INVESTMENT
PROPERTY LOCATION SQUARE FEET ($000'S)
-------- -------- ----------- --------
<S> <C> <C> <C>
Office
PACIFIC NORTHWEST
Portland, OR
4949 Meadows Lake Oswego, OR 125,190 $ 17,648
-------- --------
TOTAL OFFICE 125,190 $ 17,648
======== ========
Industrial
PACIFIC NORTHWEST
Seattle, WA
Kirkland 118 Kirkland, WA 77,000 $ 5,964
Portland, OR
Marine Drive Distribution Portland, OR 258,500 8,308
Center III
NORTH - EAST BAY/SACRAMENTO
East Bay - San Francisco, CA
Bay Center Business Park-Phase III Hayward, CA 116,941 6,880
SILICON VALLEY
South Bay - San Francisco, CA
Dixon Landing-North Phase II Milpitas, CA 83,890 7,934
SOUTHERN CALIFORNIA
San Diego, CA
Sorrento Vista San Diego, CA 228,130 9,903
-------- --------
TOTAL INDUSTRIAL 764,461 $ 38,989
======= ========
TOTAL COMPLETED DEVELOPMENTS 889,651 $ 56,637
======= ========
</TABLE>
At the end of 1998 the Operating Partnership had seven industrial properties and
fourteen office properties under development that will add approximately 3.3
million square feet to the Operating Partnership's stabilized portfolio over the
next several years. The tables on the following page detail development
properties by type, region and market for a total estimated investment of $377.2
million. These development properties were on average 47.6% pre-leased at
December 31, 1998.
(See following page for table)
10
<PAGE> 11
Developments in Process
<TABLE>
<CAPTION>
ACTUAL OR TOTAL
ESTIMATED SHELL RENTABLE INVESTMENT
PROPERTY COMPLETION DATE SQUARE FEET ($000'S)
- -------- --------------- ----------- --------
<S> <C> <C> <C>
OFFICE
PACIFIC NORTHWEST
Portland, OR
4800 Meadows January 1999 74,211 $ 13,019
NORTH - EAST BAY / SACRAMENTO
Sacramento, CA
Gateway Oaks IV June 1998 81,482 11,854
Parkshore Plaza Phase I November 1998 114,356 14,371
Johnson Ranch Corp. Center II December 1998 41,000 5,413
East Roseville Parkway May 1999 105,000 15,008
Parkshore Plaza Phase II August 1999 153,430 20,331
---------- ----------
495,268 66,977
---------- ----------
East Bay - San Francisco, CA
Treat Towers February 1999 362,146 63,569
SILICON VALLEY
South Bay - San Francisco, CA
Gateway Office III June 1998 123,400 21,628
Ryan Ranch Oaks Phase I September 1998 34,895 4,937
Concourse V July 1999 135,238 35,210
---------- ----------
293,533 61,775
---------- ----------
SOUTHERN CALIFORNIA
Los Angeles County, CA
Arboretum Courtyard April 1999 133,528 33,938
Orange County, CA
City Plaza November 1998 318,622 35,655
San Diego, CA
Bridge Pointe I August 1998 215,800 22,820
Pacific Ridge Corporate Center March 1999 120,980 17,468
---------- ----------
336,780 40,288
---------- ----------
TOTAL OFFICE 2,014,088 $ 315,221
========== ==========
INDUSTRIAL
PACIFIC NORTHWEST
Portland, OR
158th Commerce Park June 1998 381,750 $ 16,589
NORTH - EAST BAY / SACRAMENTO
Sacramento, CA
Riverside Business Center June 1997 174,624 7,430
Seaport Distribution Center December 1997 199,553 6,510
---------- ----------
374,177 13,940
---------- ----------
East Bay - San Francisco, CA
Concord N. Commerce Center II November 1998 64,125 4,163
Benicia Commerce Center II December 1998 220,549 9,580
Vasco Business Center December 1998 95,574 6,493
---------- ----------
380,248 20,236
---------- ----------
SILICON VALLEY
South Bay - San Francisco, CA
Dixon Landing North Phase I January 1998 118,290 11,179
---------- ----------
TOTAL INDUSTRIAL 1,254,465 $ 61,944
========== ==========
TOTAL DEVELOPMENTS IN PROCESS 3,268,553 $ 377,165
========== ==========
</TABLE>
11
<PAGE> 12
Competition
Other properties within the Operating Partnership's markets compete with the
Properties in attracting tenants, primarily on the basis of location, rental
rates, services provided, and the design and condition of the improvements. In
each of the Operating Partnership'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 Operating Partnership's
properties. The number of competitive commercial properties in a particular area
could have a material effect on the Operating Partnership's ability to lease
space in its properties or at newly developed or acquired properties and on the
rents charged.
The Operating Partnership also faces competition in its efforts to acquire or
develop desirable real estate. Such competitors include domestic and foreign
financial institutions, other REITs, life insurance companies, pension funds,
trust funds, partnerships and individual investors.
CAPITAL STRUCTURE AND WORKING CAPITAL
The Operating Partnership's principal sources of funding for its ongoing
operations, which include the leasing and build-out of existing space as well as
the acquisition, development, expansion and renovation of additional properties
and debt maturities, are cash flows provided by operations, unsecured short-term
borrowings, public and privately placed equity financing, public unsecured debt
financing, the issuance of partnership units in the Operating Partnership,
proceeds from the disposition of non-strategic assets and the assumption of
secured debt on properties acquired.
The Operating Partnership believes that its ability to access a variety of
capital sources enables it to reduce its overall cost of capital and maintain a
prudent capital structure. Including its IPO, the Company has raised over $1.7
billion in public equity capital. These proceeds were contributed by the Company
to the Operating Partnership in exchange for Operating Partnership Units. The
Operating Partnership has also issued approximately $1.4 billion of investment
grade rated unsecured notes with interest rates between 6.65% and 8.0% and
maturity dates ranging from 2000 to 2027 and approximately $500 million of
Preferred Stock and Preferred Operating Partnership Units at dividend yields
between 7.6875% and 9.45%.
CAPITAL STRUCTURE AT DECEMBER 31, 1998
DEBT
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------
<S> <C>
Unsecured Notes $1,436,500
Unsecured Short-Term Borrowings 300,000
Mortgage Loans 110,698
----------
Total Debt $1,847,198
----------
</TABLE>
EQUITY
<TABLE>
<CAPTION>
SHARES CONVERSION COMMON STOCK $ VALUE
OUTSTANDING RATIO EQUIVALENTS EQUIVALENT(1)
----------- ----- ----------- -------------
<S> <C> <C> <C> <C>
Series A Convertible Preferred Stock 1,000 1.22:1 1,220 $ 42,243
Series B Cumulative Redeemable Preferred Stock 4,250 N/A N/A 106,250(2)
Series C Cumulative Redeemable Preferred Stock 6,000 N/A N/A 150,000(2)
Series E Cumulative Redeemable Preferred Stock 4,000 N/A N/A 100,000(2)
Common Stock 61,916 N/A 61,916 2,143,841
Class B Common Stock (3) N/A N/A N/A --
Class C Common Stock (4) 1,176 1:1 1,176 40,719
Operating Partnership Units 8,903 1:1 8,903 308,266
Convertible Preferred OP Units 1,722 N/A N/A 64,334(5)
Series D Cumulative Redeemable Preferred OP Units 1,500 N/A N/A 75,000(6)
----- ----------
Total Equity 73,215 3,030,653
===== ----------
Total Market Capitalization (total debt plus total equity) $4,877,851
==========
</TABLE>
(1) Value based on December 31, 1998 closing stock price of $34.625, unless
otherwise noted.
(2) Value based on $25.00 per share liquidation preference.
(3) Shares were convertible at May 1998. As of December 31, 1998, all shares
have been converted into Common Stock.
(4) Shares are convertible beginning in March 1999.
(5) Value based on $37.36 per share liquidation preference into Series D
Preferred Stock; units have been convertible since May 1998 at a
conversion rate of 0.90909 per unit.
(6) Value based on $50.00 per share, units have been convertible into Series
D Preferred Stock since April 1998.
12
<PAGE> 13
The Operating Partnership believes that the cash provided by operations, its
unsecured line of credit and proceeds from the disposition of non-strategic
assets provide sufficient sources of liquidity to fund the Operating
Partnership's working capital requirements.
OTHER DISCLOSURES
Year 2000 Compliance
The Operating Partnership utilizes information technology (IT) systems such as
computer hardware, software, and operating systems which are used for its
financial and accounting business systems, as well as for property management
and administrative functions. The Operating Partnership also utilizes non-IT
systems, such as electrical and mechanical systems, within its real estate
facilities.
To evaluate the impact of Year 2000 compliance on its operations, the Operating
Partnership established a Year 2000 task force. The task force consulted with
the Operating Partnership's IT department, the Operating Partnership's regional
facilities managers, and an outside consulting group to determine the impact to
the IT and non-IT systems within its facilities. Based upon their findings, a
course of action was developed, and the results are outlined below.
The Operating Partnership's IT department inventoried all IT hardware and
software to assess the business risk of each item. Manufacturers and/or
suppliers were contacted to determine Year 2000 compliance. Hardware and
software with high business risk, based on the manufacturer's and/or supplier's
assurances, do not appear to present Year 2000 issues. Since the filing of the
Operating Partnership's Form 10-Q for the period ended September 30, 1998, the
Operating Partnership's payroll system has been upgraded and tested and is now
Year 2000 compliant. Items with medium or low risk factors will be phased out or
upgraded. None of the above upgrades constitutes a material capital expense for
the Operating Partnership.
The Operating Partnership's primary business is owning and managing real estate,
therefore non-IT Year 2000 issues could reside in the Operating Partnership's
properties. The Task Force, together with the regional facilities managers have
examined each building for electrical and mechanical systems that may contain
date sensitive software and/or date sensitive imbedded microprocessors.
Manufacturers and/or suppliers have been contacted to determine which systems
are Year 2000 compliant. Where non-compliance was detected, recommendations for
solutions to potential problems were requested. Tests have been run, where
possible, to determine which of the systems are Year 2000 compliant. Based on
these evaluations, the Operating Partnership estimates that minimal modification
is required, and as a whole these modifications should not constitute a material
capital expense. The modification that is required should be completed within
the first six months of 1999.
In the event of unforeseen failure of any facility-related mechanical system,
due to a Year 2000 issue, contingency plans are in place and include the
deployment of teams consisting of regional facility managers, building engineers
and customer service personnel which would manually override any such building
systems in a timely manner.
In addition to the "due diligence" being performed at the property level, other
steps have been taken to attempt to minimize the Operating Partnership's Year
2000 exposure: (1) the Operating Partnership's third party "critical" vendors
(utility providers, banks, etc.) have been contacted to determine their state of
Year 2000 preparedness; and the Operating Partnership is currently in the
process of receiving their responses; (2) the task force has attended Year 2000
seminars and has consulted with external legal counsel and consultants regarding
potential issues facing the Operating Partnership; and (3) an in-house database
has been established to track building and vendor compliance, as well as tenant
requests and the Operating Partnership's corresponding responses.
Based on the Operating Partnership's assessments to date and the proposed
modifications, the Operating Partnership believes that there should not be a
material impact on the Operating Partnership's IT and non-IT systems. No
assurances, however, can be given that any or all of the Operating Partnership's
systems will be Year 2000 compliant, or that compliance will not have a material
adverse effect on results of operations.
13
<PAGE> 14
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 effect upon the financial condition or
results of operations of the Operating Partnership.
The 97 properties owned by the Operating Partnership 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 Phase
II environmental investigations, and all buildings 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 Operating Partnership
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 its 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 Operating
Partnership 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 Operating Partnership
has entered into indemnification agreements whereby the Operating Partnership
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 at Walsh at Lafayette, an industrial development project site
in Santa Clara that was acquired by the Operating Partnership in 1995. The
relevant government agency has identified a third party as responsible for
remediation, and the remediation process is continuing. The Operating
Partnership 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 Operating
Partnership'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 that transferred this property to the Operating
Partnership 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
Operating Partnership. A trial involving the remaining defendants ended without
any additional cash awards being made. Due to the nature of this environmental
condition and the Operating Partnership's expectation that other parties will be
primarily responsible for the clean-up costs, the Operating Partnership believes
that its exposure, if any, for clean-up costs would not have a material adverse
effect on the Operating Partnership's financial condition, results of operations
or liquidity.
Site assessments have revealed soil and groundwater contamination at the Arden
Square property in Sacramento, California, and the Woodside Central property in
Woodside, California, which have since been sold to Pacific Retail Trust. The
Operating Partnership agreed to indemnify the buyer for the contamination.
However, the Operating Partnership believes that the liabilities and clean-up
costs associated with this contamination are covered under the Operating
Partnership's pollution insurance policy, except to the extent of the deductible
under such policy.
Property owned by GAF Corporation and/or Mattel, Inc. in the vicinity of the
Nimbus Corporate Center property in Beaverton, Oregon was discovered to have
very high levels of soil and groundwater contamination. Site assessments are
currently being conducted to determine the extent, if any, that such
contamination may have affected the Nimbus Corporate Center property. The
Operating Partnership believes that GAF, Mattel and/or other third parties will
bear the liabilities and remediation costs associated with this contamination,
and that, in any event, any exposure the Operating Partnership might have, would
be covered by the Operating Partnership's pollution insurance policy, except to
the extent of the deductible under such policy.
14
<PAGE> 15
Although the environmental investigations conducted to date have not revealed
any environmental liability that the Operating Partnership believes would have a
material adverse effect on the Operating Partnership's business, assets or
results of operations, and the Operating Partnership 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 Operating Partnership is unaware. No assurances can be given that
(1) future laws, ordinances, or regulations will not impose any material
environmental liability, or (2) 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 Operating Partnership.
ITEM 1. BUSINESS
Information related to this Item is located on pages 3-5 and on pages 12-15.
ITEM 2. PROPERTIES
Information related to this Item is located on pages 5-11.
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, 1998.
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:
o Consolidated operating data presented for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994.
o Consolidated balance sheet data presented as of December 31,
1998, 1997, 1996, 1995, and 1994.
15
<PAGE> 16
This selected financial data should be read in conjunction with financial
statements (including the notes thereto) of the Operating Partnership included
in Item 8.
SUMMARY FINANCIAL INFORMATION
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 561,097 $ 331,313 $ 200,699 $ 153,391 $ 121,037
Income from operations before
disposition of property, minority
interests and extraordinary items 163,924 110,134 65,764 30,335 13,363
Income before extraordinary items 185,939 130,365 74,091 30,444 13,393
Net income (loss) 185,939 130,365 74,091 (10,361) 13,393
Net income (loss) available to 133,211 102,305 54,149 (8,837) 10,541
General Partners
Net income (loss) available to 17,731 14,959 9,901 (1,524) 2,852
Limited Partners
Net income (loss) per Common
Operating Unit before 2.56 2.27 1.74 .90 .49
extraordinary items (1)
Net income (loss) per Common 2.56 2.27 1.74 (.31) .49
Operating Unit (1)
Distribution per Common Unit:
General Partners (1) 2.29 2.08 1.78 1.76 1.60
Limited Partners (1) 2.28 1.98 1.72 1.68 1.60
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate (before
accumulated depreciation) $4,182,806 $3,252,572 $1,447,173 $1,098,871 $ 870,613
Net investment in real estate 3,942,028 3,083,521 1,319,472 974,259 770,827
Total assets 4,056,870 3,242,934 1,390,314 1,011,497 809,938
Mortgage loans, net (2) 110,698 96,502 45,997 112,702 514,098
Unsecured debt 1,736,500 1,335,000 674,000 377,700 --
Total debt 1,847,198 1,431,502 719,997 490,402 514,098
Partners' capital 2,021,814 1,679,841 610,928 468,576 258,760
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from Operations (3) $ 215,064 $ 147,912 $ 93,293 $ 61,428 $ 41,935
Cash flow provided (used) by:
Operating activities 293,989 191,450 112,581 76,471 47,750
Investing activities (786,502) (1,697,885) (387,567) (200,515) (161,332)
Financing activities 474,801 1,499,727 296,749 121,954 97,378
Total rentable square footage of
properties at end of period 40,843 34,543 21,430 16,282 13,933
Occupancy rate at end of period 96.4% 94.5% 96.6% 96.9% 97.6%
</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 ending December 31, 1998, 1997, 1996, 1995 and 1994, are as
follows:
<TABLE>
<CAPTION>
Diluted Weighted Diluted Weighted
Average Average
Year Ended General Partner Units Limited Partner Units
---------- --------------------- ---------------------
<S> <C> <C>
1998 64,098,182 8,429,646
1997 50,186,572 7,209,418
1996 35,910,652 6,549,819
1995 27,360,000 6,409,742
1994 21,192,655 5,876,586
</TABLE>
(2) Net of discount of approximately $31.6 million as of December 31, 1994.
(3) Refer to "Funds from Operations" in Item-7 Management's Discussion and
Analysis of Financial Condition and Results of Operations for discussion
and definition of the Operating Partnership's Funds from Operations. 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 Operating
Partnership 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 Operating Partnership based on the old NAREIT definition for the
years ended December 31, 1995 and 1994, were $70,790 and $52,142,
respectively.
16
<PAGE> 17
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements contained in this Item 7, "Management's Discussion and Analysis of
Financial Conditions and Results of Operations," and elsewhere in this Form
10-K, which are not historical facts, may be forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected, including, but not
limited to, those risks and special considerations set forth in the Operating
Partnership's other SEC filings. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as of the date
hereof. The Operating Partnership undertakes no obligation to publicly release
any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Overview
In 1998, the Operating Partnership focused on maximizing the value of its real
estate portfolio by increasing the cash flow from its properties, by maintaining
high occupancy levels and increasing effective rents, as well as completing
strategic acquisition and development transactions. The Operating Partnership
also continued to focus on maintaining a capital structure that allows the
Operating Partnership to execute its business strategy.
The Operating Partnership continued to experience accelerating rent growth in
its portfolio of properties. For the year ended December 31, 1998, net effective
rents on average were 37.4% higher than the expiring coupon rent on the 8.3
million square feet of second generation space renewed or re-leased. For the
year ended December 31, 1997, roll-over rents grew by 23.0% on approximately 6.2
million square feet of second generation space.
The Operating Partnership continued to increase its presence in its target
markets during 1998. Of the 6.3 million square feet added to its portfolio
during 1998 (the "1998 Acquisitions"), 5.9 million square feet were added in
California. A significant contributor to this increase was the closing of the
Transpacific Development Company (TDC) portfolio. The TDC portfolio consists of
3.1 million square feet of office space for a total investment of $459.3
million. The portfolio added the following: 1.7 million square feet in the Los
Angeles County market for a total investment of $218.9 million; 0.7 million
square feet in the Peninsula market for $136.9 million; 0.4 million square feet
in the Orange County market for $67.0 million and 0.3 million square feet in the
San Diego market for $36.5 million. Two significant acquisitions in the Silicon
Valley region added 0.9 million square feet for a total investment of $189.9
million. The remainder of the acquisitions added 1.3 million square feet in
North-East Bay/Sacramento, CA, 0.6 million square feet in Southern California
and 0.4 million square feet in the Pacific Northwest for a total investment of
$235.6 million. Further breakdown of the 1998 Acquisitions can be found in Part
1 of this Form 10-K.
While the Operating Partnership was able to complete a number of acquisitions
during early 1998, the market for property acquisitions tightened. In all of the
markets that the Operating Partnership operates competition increased and, with
it, the cost of assets. Concurrent with this increase in costs was a decrease in
the initial returns reducing the Operating Partnership's incentive to purchase
new properties. Accordingly, the Operating Partnership purchased fewer assets in
the latter half of the year.
During 1998, the Operating Partnership increased its level of development
activity. The Operating Partnership added eight projects totaling 929,000 square
feet to its development pipeline for a total investment of approximately $110.6
million while it completed six properties during the year adding 889,651 square
feet to its stabilized portfolio for a total investment of $56.6 million. At
December 31, 1998 the Operating Partnership had developments and redevelopments
in process for approximately 3.3 million square feet of office and industrial
properties for a total investment of $377.2 million up from 2.9 million square
feet for a total investment of $284.7 million at the end of 1997. Further
breakdown of the Operating Partnership's developments and redevelopments in
process can be found in Part 1 of this Form 10-K. The developments completed
during 1998 and the developments in process at December 31, 1998, are
collectively referred to as the "Developments." A few of the developments in
process, though not yet completed, were partially leased and occupied during
1998 and, accordingly, revenue and expense amounts for such developments are
included in the Operating Partnership's operating results for the year ended
December 31, 1998.
17
<PAGE> 18
The Operating Partnership continued to strengthen its balance sheet by accessing
both the public and private equity markets and the public debt market. In 1998,
the Company raised approximately $266.2 million in equity capital and issued
$301.5 million of investment grade rated unsecured notes with maturities ranging
from seven to ten years.
During 1998 the Operating Partnership disposed of its final retail property for
a total sales price of $40.9 million and recognized a book gain of approximately
$9.0 million. The Operating Partnership also disposed of six other properties
and two land parcels, for a total sales price of $34.5 million recognizing a
book gain of approximately $11.1 million. Additionally, Spieker Northwest, Inc.
(SNI), an affiliate of Spieker Properties, Inc., recognized net proceeds of
$284.4 million on property disposed of during 1998. These properties were not
consistent with the Operating Partnership's long-term growth strategy due to
location, asset quality, tenant mix or certain other characteristics.
Comparison of 1998 to 1997
The following comparison is of the Operating Partnership's consolidated
operations for the year ended December 31, 1998 to the year ended December 31,
1997.
Rental revenues for 1998 increased by $220.8 million for 68.7% to $542.4
million, as compared with $321.6 million for 1997. Of this increase, $117.6
million was generated by properties acquired during 1997 (the "1997
Acquisitions"), for which the Operating Partnership recognized a full year's
results in 1998 as compared to a partial year's results in the year acquisition.
$86.5 million was generated by the 1998 Acquisitions which were acquired on
various dates throughout 1998. $17.6 million is attributable to the Developments
and $13.7 million is attributable to the 1998 Core Portfolio. The "1998 Core
Portfolio" is defined as properties owned at January 1, 1997 and still owned at
December 31, 1998. Increases in the 1998 Core Portfolio can be attributed to
higher rents on roll-overs, contractual rent increases and increased
occupancies. The increases in rental revenue are partially offset by a decrease
of $14.6 million attributable to the disposition of properties, which were owned
by the Operating Partnership during the year ended December 31, 1997 (the "1998
Property Dispositions").
Interest and other income increased by $9.0 million or 92.4% for the year ended
December 31, 1998, as compared to the year ended December 31, 1997. The net
increase in interest and other income is due to interest income from mortgage
loans made to SNI in relation to SNI's acquisition of non-core assets. These
assets have subsequently been sold. This increase is slightly offset by a
decrease in interest earned on cash balances. Average cash balances for the year
ended December 31, 1998 were $33.9 million as compared to $56.4 million in 1997.
Rental expenses increased by $58.2 million or 87.3% for 1998, as compared with
1997. Real estate taxes increased by $17.6 million or 71.2% in 1998, as compared
to $24.6 million in 1997. The overall increase in rental expenses and real
estate taxes (collectively referred to as "property operating expenses") is
primarily a result of the growth in the total square footage of the Operating
Partnership's portfolio of properties. Of the total $75.7 million increase in
property operating expenses, $36.2 million is attributable to the 1998
Acquisitions, $35.9 million is attributable to the 1997 Acquisitions, $5.6
million is attributable to the Developments, and $2.0 million is attributable to
the 1998 Core Portfolio offset by a $4.0 million decrease attributable to the
1998 Property Dispositions. On a percentage basis, property operating expenses
were 30.8% and 28.4% of rental revenues for 1998 and 1997, respectively. The
increase in property operating expenses as a percentage of rental revenues is
attributable to the increased percentage of office properties in the Operating
Partnership's portfolio. For the year ended December 31, 1998, 69.1% of the
Operating Partnership's net operating income (rental revenues less property
operating expenses) was generated by office properties as compared with 60.1%
for 1997.
Removing the effects of the retail properties which, as of December 31, 1998,
had been completely disposed of, the following analysis of the office and
industrial properties is presented. Rental revenues net of property operating
expenses (referred to as "net operating income") increased by $155.7 million or
71.5% to $373.5 million for 1998, as compared to $217.8 million for 1997. Of
this increase, $81.7 million is attributable to the 1997 Acquisitions, $50.3
million relates to the 1998 Acquisitions, $12.0 is attributable to the
Developments and $11.7 million to the 1998 Core Portfolio.
18
<PAGE> 19
Interest expense increased by $54.1 million or 86.8% to $116.3 million for 1998,
from $62.3 million for 1997. The increase in interest expense is due to
increases in the total average outstanding debt balances. The average
outstanding debt for 1998 was $1.8 billion and $936.0 million in 1997 and is
consistent with the increase in the size of the Operating Partnership's
portfolio of properties.
Depreciation and amortization expenses increased by $41.7 million or 79.1% for
1998, as compared with 1997, due to the 1998 and 1997 Acquisitions and the
completed Developments.
General and administrative expenses and other expenses increased by $4.5 million
for 1998 as compared with 1997, primarily as a result of the increased number of
employees. On a percentage basis, general and administrative expenses were 3.6%
of rental revenues for 1998, as compared with 4.6% for 1997 reflecting economies
of scale associated with the growth of the Operating Partnership.
During 1998, the Operating Partnership disposed of one retail property, two
office properties, four industrial properties and two land parcels resulting in
a gain of $20.1 million.
Net income before minority interests and disposition of property increased by
$53.8 million or 48.8% to $163.9 million for 1998, from $110.1 million for 1997.
The increase in net income is principally due to the 1998 and 1997 Acquisitions.
Comparison of 1997 to 1996
The following comparison is of the Operating Partnership's results for the year
ended December 31, 1997, to the year ended December 31, 1996.
Rental revenues for 1997 increased by $125.1 million or 63.7% to $321.6 million,
as compared with $196.5 million for 1996. Of this increase, $91.9 million was
generated by the 1997 Acquisitions. The 1997 Acquisitions were acquired on
various dates throughout 1997 and, as such, a full year's revenue and expense
were not recognized during the year. $29.5 million of the rental revenue
increase was generated by properties acquired during 1996 (the "1996
Acquisitions"), for which the Operating Partnership recognized a full year's
results in 1997 as compared to a partial year's results in the year of
acquisition. $8.7 million is attributable to the 1997 Core Portfolio and $8.3
million of the rental revenue increase in 1997 was generated by the
Developments. The "1997 Core Portfolio" is defined as properties owned at
January 1, 1996 and still owned at December 31,1997. The increases in rental
revenue are partially offset by a decrease of $13.3 million attributable to the
disposition of properties which were owned by the Operating Partnership during
the year ended December 31, 1996 (the "1997 Property Dispositions").
Interest and other income increased by $5.5 million or 131.0% for 1997, as
compared to 1996. The net increase in interest and other income is due to
interest income from mortgage loans made to SNI, in relation to SNI's
acquisition of non-core assets in the WCB Portfolio and higher average cash
balances of $56.4 million for 1997 as compared to $13.4 million for 1996.
Rental expenses increased by $32.0 million or 92.2% for 1997, as compared with
1996. Real estate taxes increased by $9.1 million or 58.7% in 1997, as compared
to $15.5 million in 1996. The overall increase in rental expenses and real
estate taxes (collectively referred to as "property operating expenses") is
primarily a result of the growth in the total square footage of the Operating
Partnership's portfolio of properties. Of the total $41.1 million increase in
property operating expenses, $30.3 million is attributable to the 1997
Acquisitions, $9.8 million is attributable to the 1996 Acquisitions, $1.9
million is attributable to the Developments, and $1.4 million is attributable to
the 1997 Core Portfolio offset by a $2.3 million decrease attributable to the
1997 Property Dispositions. On a percentage basis, property operating expenses
were 28.4% of rental revenues for 1997 and 25.5% for 1996. The increase in
property operating expenses as a percentage of rental revenues is attributable
to the increased percentage of office properties in the Operating Partnership's
portfolio. For 1997, 60.1% of the Operating Partnership's net operating income
was generated by office properties as compared with 44.9% during 1996.
19
<PAGE> 20
Removing the effects of the retail properties, most of which, at December 31,
1997, had been disposed of, the following analysis of the office and industrial
properties is presented. Rental revenues net of property operating expenses
increased by $95.0 million or 75.9% to $220.2 million for 1997, as compared to
$125.2 million for 1996. Of this increase, $61.6 million and $19.7 million
relates to the 1997 and 1996 Acquisitions, $7.3 million is attributable to the
1997 Core Portfolio, and $6.4 million is attributable to the Developments.
Interest expense increased by $25.1 million or 67.5% to $62.3 million for 1997,
from $37.2 million for 1996. The increase in interest expense is due to
increases in the total average outstanding debt balances. The average
outstanding debt was $936.0 million for 1997 and $554.0 million for 1996. The
increase in the average outstanding debt balance is consistent with the increase
in the size of the Operating Partnership's portfolio of properties.
Depreciation and amortization expenses increased by $15.4 million or 41.2% for
the year ended December 31, 1997, as compared with 1996, due to the 1997 and
1996 Acquisitions and the completed Developments.
General and administrative expenses and other expenses increased by $4.7 million
for the year ended December 31, 1997 as compared with 1996, primarily as a
result of the increased number of employees. On a percentage basis, general and
administrative expenses were 4.6% of rental revenues for 1997, as compared with
5.1% for 1996.
During 1997, the Operating Partnership disposed of nine retail properties
resulting in a gain on disposition of $18.5 million. In addition, the Operating
Partnership disposed of two office properties, one industrial property and one
parking lot resulting in a gain of $1.8 million. This brings the total gain on
disposition of property for 1997 to $20.3 million.
Net income before minority interests and disposition of property increased by
$44.3 million or 67.3% to $110.1 million for the year ended December 31, 1997,
from $65.8 million for 1996. The increase in net income is principally due to
the 1997 and 1996 Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1998, cash provided by operating activities
increased by $102.5 million, or 53.5%, to $294.0 million, as compared to $191.5
million for 1997. The increase is primarily due to the increase in net income
resulting from the 1997 and 1998 Acquisitions, the Developments and the 1998
Core Portfolio. Cash used for investing activities decreased by $911.4 million,
or 53.7%, to $786.5 million for 1998, as compared to $1,697.9 million for 1997.
The decrease is attributable to the Operating Partnership's decrease in the
number of acquisitions completed. Cash provided by financing activities
decreased by $1,024.9 million, or 68.3%, to $474.8 million for 1998, as compared
to $1,499.7 million for 1997. During 1998, cash provided by financing activities
consisted primarily of $271.9 million in net proceeds from the sale of Common
and Preferred Stock and Preferred Operating Partnership Units, $301.5 million in
gross proceeds from the issuance of unsecured notes, net borrowings of $100.0
million under a short-term bank facility and net payments of $2.7 million on
mortgage loans. Additionally, payments of distributions increased by $88.0
million to $195.9 million for 1998, as compared with $107.9 million for 1997.
The distribution payment increase is due to the greater number of shares and
units outstanding and a 21% increase in the distribution rate of $.57 per share
for each quarter of 1998 from $.47 per share for the first three quarters of
1997 and $.57 for the fourth quarter of 1997.
The principal sources of funding for acquisitions, development, expansion and
renovation of properties and debt maturities are unsecured short-term
borrowings, public and privately placed equity financing, public unsecured debt
financing, the issuance of partnership units in the Operating Partnership, the
assumption of secured debt on properties acquired and cash flow provided by
operations. The Operating Partnership believes that its liquidity, its ability
to access capital and proceeds from disposition of non-strategic assets are
adequate to continue to meet liquidity requirements for the foreseeable future.
At December 31, 1998, the Operating Partnership had no material commitments for
capital expenditures related to the renewal or re-leasing of space. The
Operating Partnership 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.
20
<PAGE> 21
In 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 contributed to the Operating Partnership and
were used primarily to repay floating rate debt.
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 in February 1997) through an underwritten public offering
at $34.50 per share. The net proceeds of $374.8 million were contributed to the
Operating Partnership and 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.
In October 1997, the Company sold 6,000,000 shares of Series C Cumulative
Redeemable Preferred Stock for $25.00 per share. Dividends are payable at an
annual rate of 7.875% of the liquidation preference of $150.0 million. Net
proceeds of $146.0 million were contributed to the Operating Partnership and
were used principally to repay borrowings on the unsecured line of credit and to
fund the ongoing acquisition and development of property.
In November 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 $38.875 per
share. The net proceeds of $425.0 million were contributed to the Operating
Partnership and were used to repay indebtedness and to purchase properties which
were under contract at the time of the offering.
In December 1997, the Company placed 573,134 shares of Common Stock in a
Registered Unit Investment Trust at $41.875 per share together with other
publicly traded REIT's. The net proceeds of $22.8 million were contributed to
the Operating Partnership and were used to repay borrowings on the unsecured
line of credit and to fund the ongoing acquisition and development of
properties.
In February, March and April 1998, the Company placed 710,832 shares, 608,828
shares and 1,166,144 shares, respectively, of Common Stock at prices of $42.25,
$41.06 and $39.88 in Unit Investment Trusts along with other publicly traded
REITs. The net proceeds of $96.3 million were contributed to the Operating
Partnership and were used to paydown borrowings on the line of credit and to
fund the ongoing acquisition and development of properties.
In April 1998, the Company sold 1,500,000 Series D Cumulative Redeemable
Preferred Units (the "Series D Preferred Units") to an institutional investor
for $50.00 per unit. Dividends are payable at an annual rate of 7.6875%. The
Series D Preferred Units may be called by the Company at par on or after April
20, 2003, and have no stated maturity or mandatory redemption. The Series D
Preferred Units are exchangeable for the Series D Cumulative Redeemable
Preferred Stock of the Company on or after April 20, 2008. The net proceeds of
$73.1 million for the Series D Preferred Units were contributed to the Operating
Partnership and were used to paydown the line of credit and fund future growth
of the Company.
In June 1998, the Company sold 4,000,000 shares of Series E Cumulative
Redeemable Preferred Stock for $25.00 per share. These shares are redeemable at
the option of the Company. Dividends are payable at an annual rate of 8.00% of
the redeemable liquidation preference of $100.0 million. Net proceeds of $96.8
million were contributed to the Operating Partnership and were used principally
to repay borrowings on the unsecured line of credit and to fund the ongoing
acquisition and development of property.
In 1996, the Operating Partnership issued $375.0 million of investment grade
rated unsecured notes in five tranches as follows: $100.0 million of 6.9% notes
due January 15, 2004, priced to yield 6.97%; $100.0 million of 8.0% medium-term
notes due July 19, 2005; $50.0 million of 7.58% medium-term notes due December
17, 2001; $100.0 million of 7.125% notes due December 1, 2006 priced to yield
7.14%; and $25.0 million of 7.875% notes due December 1, 2016, priced to yield
7.91%. The net proceeds of $372.0 million from these issuances were used to pay
down borrowings on the line of credit and to fund ongoing acquisition and
development of properties.
21
<PAGE> 22
In 1997, the Operating Partnership issued $500.0 million of investment grade
rated debt in three tranches as follows: $150.0 million of 7.125% notes due July
1, 2009; $150.0 million of 7.5% notes due October 1, 2027; $200.0 million of
7.35% notes due December 1, 2017. Net proceeds from the July 1997, September
1997 and December 1997 unsecured debt securities of $489.0 million were used to
repay borrowings on the unsecured line of credit and to fund the ongoing
acquisition and development of properties.
During 1998, the Operating Partnership issued $301.5 million of investment grade
rated unsecured notes in four tranches as follows: $150.0 million of 6.75% notes
due January 15, 2008; $125.0 million of 6.875% notes due February 1, 2005; $1.5
million of 7.0% notes due February 2, 2007 and $25.0 million of 6.880% notes due
April 30, 2007. Net proceeds of $299.1 million were used to repay borrowings on
the unsecured line of credit and to fund the acquisition and development of
properties.
As of December 31, 1998, the Operating Partnership had $1.4 billion of
investment grade rated unsecured debt securities outstanding. The debt
securities have interest rates which vary from 6.65% to 8.0%, and maturity dates
which range from 2000 to 2027.
The Operating Partnership has a $250.0 million unsecured line of credit facility
with interest at London Interbank Offered Rates ("LIBOR") plus .80%. This
facility matures in August 2001. This facility has a competitive bid option that
allows the Operating Partnership to request bids from the lenders for advances
up to $150.0 million. At December 31, 1998, the Operating Partnership had $100.0
million outstanding under the facility. In addition, the Operating Partnership
had $200.0 million outstanding under a separate short-term bank facility at
December 31, 1998. This short-term facility carries interest at LIBOR plus 0.65%
and matures in November 1999.
In addition to the unsecured debt securities and the Facility, the Operating
Partnership has $110.7 million of secured indebtedness (the "Mortgages") at
December 31, 1998. The Mortgages have interest rates varying from 7.37% to 9.88%
and maturity dates from 1999 to 2013. The Mortgages are secured by a first or
second deed of trust on the related properties and generally require monthly
principal and interest payments. The Operating Partnership also has $11.3
million of assessment bonds outstanding as of December 31, 1998.
The Company has the capacity pursuant to shelf registration statements to issue
up to approximately $770.5 million in equity securities and the Operating
Partnership has the capacity to issue up to $813.5 million in debt securities.
FUNDS FROM OPERATIONS
The Operating Partnership 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 Operating
Partnership'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 Operating Partnership'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, the Operating Partnership
calculates Funds from Operations by adjusting net income before minority
interest, calculated in accordance with GAAP, for certain non-cash items,
principally the amortization and depreciation of real property and for dividends
on shares and other equity interests that are not convertible into shares of
Common Stock. The Operating Partnership does not add back the depreciation of
corporate items, such as computers or furniture and fixtures, or the
amortization of deferred financing costs or debt discount. However, the
Operating Partnership eliminates the effect of straight-lined rents, as defined
under GAAP, in its
22
<PAGE> 23
FFO calculation, as management believes this presents a more meaningful picture
of rental income over the reporting period.
The tables below set forth the Operating Partnership's calculation of Funds from
Operations for 1998 and 1997.
<TABLE>
<CAPTION>
STATEMENT OF FUNDS FROM OPERATIONS
(amounts in thousands)
QUARTER ENDED
-------------------------------------------------------- YEAR ENDED
1998 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Income from operations before
disposition of property and
minority interests: $ 37,943 $ 40,630 $ 43,262 $ 42,088 $ 163,924
Adjustments:
Depreciation and
amortization 19,366 22,404 23,924 27,813 93,512
Dividends on Series B
Preferred Stock (2,510) (2,510) (2,510) (2,510) (10,041)
Dividends on Series C
Preferred Stock (2,953) (2,953) (2,953) (2,953) (11,813)
Dividends on Series E
Preferred Stock -- (600) (2,000) (2,000) (4,600)
Distributions on Preferred
Operating Partnership Units (1,266) (2,223) (2,527) (2,527) (8,542)
Other, net (14) (14) 105 36 112
Straight-lined rent (1,640) (1,508) (2,408) (1,932) (7,488)
--------- --------- --------- --------- ---------
Funds from Operations $ 48,926 $ 53,226 $ 54,893 $ 58,015 $ 215,064
========= ========= ========= ========= =========
Weighted average diluted
share equivalents
outstanding 69,795 72,883 73,639 73,733 72,528
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF FUNDS FROM OPERATIONS
(amounts in thousands)
QUARTER ENDED
-------------------------------------------------------- YEAR ENDED
1997 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Income from operations before
disposition of property and
minority interests: $ 23,812 $ 26,111 $ 27,051 $ 33,160 $ 110,134
Adjustments:
Depreciation and amortization 10,478 12,276 13,282 16,136 52,172
Dividends on Series B
Preferred Stock (2,510) (2,510) (2,510) (2,510) (10,041)
Dividends on Series C
Preferred Stock -- -- -- (2,658) (2,658)
Distributions on Preferred
Operating Partnership Units -- -- -- (402) (402)
Other, net 187 187 186 186 747
Straight-lined rent 3 (579) (624) (840) (2,040)
--------- --------- --------- --------- ---------
Funds from Operations $ 31,970 $ 35,485 $ 37,385 $ 43,072 $ 147,912
========= ========= ========= ========= =========
Weighted average diluted share
equivalents outstanding 52,558 56,353 56,459 64,099 57,396
========= ========= ========= ========= =========
</TABLE>
The sum of quarterly funds from operations data in 1998 and 1997 varies from the
annual data due to rounding.
23
<PAGE> 24
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses fixed and variable rate debt to finance its operations. The
information below summarizes the Company's market risks associated with debt
outstanding as of December 31, 1998. The following table presents principal cash
flows and related weighted average interest rates by year of maturity.
EXPECTED MATURITY DATE
(in millions)
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 THEREAFTER TOTAL
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt $ 15.5 $ 100.0 $ 133.0 $ 122.4 $ -- $ 1,176.3 $ 1,547.2
Average Interest Rate 8.99% 6.65% 7.25% 7.21% -- 7.28% 7.25%
Variable Rate Debt $ 200.0 -- $ 100.0 -- -- -- $ 300.0
Average Interest Rate 5.75% -- 5.90% -- -- -- 5.80%
</TABLE>
The carrying amount of the Company's debt approximates fair value. The Company's
fixed and variable rate debt is described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." At December 31,
1998, the Company had no interest rate caps or swaps. All of the Company's debt
is denominated in United States dollars. The Company's risk management policies
do not provide for the utilization of financial instruments for trading purposes
and only minimal use for hedging purposes.
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.
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 9, 1999.
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 9, 1999.
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 9, 1999.
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 9, 1999.
24
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) 1. FINANCIAL STATEMENTS AND REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT
AUDITORS
Report of Independent Public Accountants 28
Financial Statements:
Balance Sheets:
Spieker Properties, L.P. Consolidated as of December 31, 1998 and
1997 29
Statements of Operations:
Spieker Properties, L.P. Consolidated for the Years Ended December
31, 1998, December 31, 1997, and December 31, 1996 31
Statements of Partners' Capital:
Spieker Properties, L.P. Consolidated for the Years Ended December
31, 1998, December 31, 1997, and December 31, 1996 32
Statements of Cash Flows:
Spieker Properties, L.P. Consolidated for the Years Ended December
31, 1998, December 31, 1997, and December 31, 1996 33
Notes to Financial Statements 34
2. FINANCIAL STATEMENT SCHEDULES
Schedule III -- Real Estate and Accumulated Depreciation as of
December 31, 1998 45
</TABLE>
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes
thereto.
(b) REPORTS ON FORM 8-K
None.
(c) EXHIBITS
The exhibits cited in the following Index to Exhibits are filed herewith
or are incorporated by reference to exhibits previously filed.
25
<PAGE> 26
Exhibits (enclosed attachments are sequentially numbered)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.1A Articles of Amendment of Spieker Properties, Inc. (incorporated
by reference to Exhibit 3.1A to Spieker Properties, Inc.'s Report
on Form 10-K for the year ended December 31, 1996)
3.2 Bylaws of Spieker Properties, Inc. (1)
3.3 Articles Supplementary of Spieker Properties, Inc. for Series A
Preferred Stock (incorporated by reference to Exhibit 4.2 to
Spieker Properties, Inc.'s Report on Form 10-Q for the quarter
ended March 31, 1994)
3.4 Articles Supplementary of Spieker Properties, Inc. for Class B
Common Stock (incorporated by reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Report on Form 10-Q for the quarter ended
March 31, 1995)
3.5 Articles Supplementary of Spieker Properties, Inc. for the Series
B Preferred Stock (2)
3.6 Articles Supplementary of Spieker Properties, Inc. for the Class
C Common Stock (2)
3.7 Articles Supplementary of Spieker Properties, Inc. for the Series
C Preferred Stock (incorporated by reference to Exhibit 3.1 to
Spieker Properties, Inc.'s Report on Form 10-Q for the quarter
ended September 30, 1997)
3.8 Articles Supplementary of Spieker Properties, Inc. for the Series
D Preferred Stock
3.9 Articles Supplementary of Spieker Properties, Inc. for the Series
E Preferred Stock (incorporated by reference to Exhibit 3.1 to
Spieker Properties, Inc.'s Report on Form 8-K dated June 4, 1998)
3.10 Rights Agreement, which includes as Exhibit A the Form of Rights
Certificate and Election to Exercise and as Exhibit B the Form of
Articles Supplementary (incorporated by reference to Exhibit 4 to
Spieker Properties, Inc.'s Report on Form 8-K dated September 22,
1998)
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K
(1)
4.2 Intentionally omitted
4.3 Series A Preferred Stock Purchase Agreement, (incorporated by
reference to Exhibit 4.1 to Spieker Properties, Inc.'s Form 10-Q
Report for the quarter ended March 31, 1994)
4.4 Investor Rights Agreement relating to A Series Preferred Stock
(incorporated by reference to Exhibit 4.3 to Spieker Properties,
Inc.'s Form 10-Q Report for the quarter ended March 31, 1994)
4.5 Indenture dated as December 6, 1995, among Spieker Properties,
L.P., Spieker Properties, Inc. and State Bank and Trust, as
Trustee (2)
4.6 First Supplemental Indenture relating to the 2000 Notes, the 2000
Note and Guarantee (2)
4.7 Second Supplemental Indenture relating to the 2001 Notes, 2001
Note and Guarantee (2)
4.8 Third Supplemental Indenture relating to the 2002 Notes, the 2002
Note and Guarantee (2)
4.9 Fourth Supplemental Indenture relating to the 2004 Notes and the
2004 Note (2)
4.10 Class B Common Stock Purchase Agreement (incorporated by
reference to Exhibit 4.1 to Spieker Properties, Inc.'s Form 10-Q
Report for the quarter ended March 31, 1994)
4.11 Investor's Rights Agreement relating to Class B Common Stocks
(incorporated by reference to Exhibit 4.3 to Spieker Properties,
Inc.'s Form 10-Q Report for the quarter ended March 31, 1994)
4.12 Class C Common Stock Purchase Agreement (2)
4.13 Investor's Rights Agreement relating to Class C Common Stock (2)
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 (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 (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)
4.17 Eighth Supplemental Indenture relating to the 7.125% Notes Due
2009 (incorporated by reference to Exhibit 4.9 of Spieker
Properties, Inc.'s Registration statement on Form S-3 (File No.
333-35997))
</TABLE>
26
<PAGE> 27
Exhibits (enclosed attachments are sequentially numbered)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.18 Ninth Supplemental Indenture relating to the 7.50% Debentures Due
2027 (incorporated by reference to Exhibit 4.1 Spieker
Properties, Inc.'s Report on Form 10-Q for the quarter ended
September 30, 1997)
4.19 Tenth Supplemental Indenture relating to the 7.35% Debentures Due
2017 (incorporated by reference to Exhibit 4.1 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
4.20 Eleventh Supplemental Indenture relating to the 6.75% Notes Due
2008 (incorporated by reference to Exhibit 4.2 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
4.21 Twelfth Supplemental Indenture relating to the 6.875% Notes Due
2006 (incorporated by reference to Exhibit 4.3 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
4.22 Thirteenth Supplemental Indenture relating to the 7% Notes Due
2007 (incorporated by reference to Exhibit 4.1 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
10.1 Second Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P.
10.2 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of Spieker Properties, L.P.
10.3 Credit Agreement among Spieker Properties, L.P., as borrower,
Wells Fargo Bank, as Agent, Morgan Guaranty Trust Company of New
York, as Documentation Agent, and the lenders named therein,
dated as of August 8, 1997, and Loan Notes pursuant to such
Credit Agreement (incorporated by reference to Exhibit 10.16 to
Spieker Properties, Inc.'s Current Report on Form 8-K dated
September 22, 1997)
10.4* 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)
10.5* Form of Spieker Merit Plan (1)
10.6* 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)
10.7 Form of Indemnification Agreement between Spieker Properties,
Inc. 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))
10.8 Form of Land Holding Agreement among Spieker Properties, Inc.,
Spieker Northwest, Inc., Spieker Properties, L.P. 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))
10.9* 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))
10.10 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))
10.11* Amended and Restated Spieker Properties, Inc. 1993 Directors'
Stock Option Plan (incorporated by reference to Exhibit 4.2 to
Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996)
10.12 Second Amendment to Second Amended and Restated Agreement of
United Partnership of Spieker Properties, L.P. (incorporated by
reference to Exhibit 3.1 to Spieker Properties, L.P.'s Report on
Form-Q/A for the quarterly period ended June 30, 1998)
10.13 Third Amendment to Second Amended and Restated Agreement to
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, Inc.
23.1 Consent of Independent Public Accountants
27.1 Article 5 Financial Data Schedule (Edgar Filing Only)
</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.
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995.
27
<PAGE> 28
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, 1998 and
1997, and the related consolidated statements of operations, partners' capital
and cash flows for the years ended December 31, 1998, 1997 and 1996. 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, 1998 and 1997, and the results of its operations and its
cash flows for the years ended December 31, 1998, 1997 and 1996, 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.
San Francisco, California ARTHUR ANDERSEN LLP
February 2, 1999
28
<PAGE> 29
SPIEKER PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE:
Land, land improvements and leasehold interests $ 770,670 $ 673,686
Buildings and improvements 2,924,290 2,159,581
Construction in progress 255,710 89,509
----------- -----------
3,950,670 2,922,776
Less - accumulated depreciation (240,778) (169,051)
----------- -----------
3,709,892 2,753,725
Land held for investment 131,530 20,935
Investment in mortgages 28,069 271,675
Property held for disposition, net 72,537 37,186
----------- -----------
Net investments in real estate 3,942,028 3,083,521
CASH AND CASH EQUIVALENTS 4,916 22,628
ACCOUNTS RECEIVABLE, net of allowance for doubtful accounts of
$894 and $260 as of December 31, 1998 and 1997 9,416 8,661
DEFERRED RENT RECEIVABLE 12,746 5,276
RECEIVABLE FROM AFFILIATES 183 294
DEFERRED FINANCING AND LEASING COSTS, net of accumulated
amortization of $14,539 and $10,036 as of December 31, 1998
and 1997 44,607 30,983
FURNITURE, FIXTURES and EQUIPMENT, net 4,495 3,375
PREPAID EXPENSES, DEPOSITS ON PROPERTIES AND OTHER ASSETS
17,616 50,892
INVESTMENT IN AFFILIATE 20,863 37,304
----------- -----------
$ 4,056,870 $ 3,242,934
=========== ===========
</TABLE>
29
<PAGE> 30
SPIEKER PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(dollars in thousands, except unit data)
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
DEBT:
Unsecured notes $1,436,500 $1,135,000
Unsecured short-term borrowings 300,000 200,000
Mortgage loans 110,698 96,502
---------- ----------
Total debt 1,847,198 1,431,502
---------- ----------
ASSESSMENT BONDS PAYABLE 11,339 12,672
ACCOUNTS PAYABLE 24,938 9,519
ACCRUED REAL ESTATE TAXES 2,251 1,003
ACCRUED INTEREST 25,263 21,541
UNEARNED RENTAL INCOME 22,635 13,712
DIVIDENDS AND DISTRIBUTIONS PAYABLE 44,728 41,110
OTHER ACCRUED EXPENSES AND LIABILITIES 56,704 32,034
---------- ----------
Total liabilities 2,035,056 1,563,093
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 12) -- --
PARTNERS' CAPITAL:
General Partners, including a liquidation preference of
$381,250 as of December 31, 1998 and $281,250 for 1997 1,723,462 1,493,828
Limited Partners 298,352 186,013
---------- ----------
Total Partners' Capital 2,021,814 1,679,841
---------- ----------
$4,056,870 $3,242,934
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE> 31
SPIEKER PROPERTIES, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(dollars in thousands, except per unit amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Rental income $ 542,430 $ 321,609 $ 196,471
Interest and other income 18,667 9,704 4,228
--------- --------- ---------
561,097 331,313 200,699
--------- --------- ---------
OPERATING EXPENSES:
Rental expenses 124,847 66,654 34,690
Real estate taxes 42,196 24,644 15,510
Interest expense, including amortization of
financing costs 116,335 62,266 37,235
Depreciation and amortization 94,512 52,779 37,385
General and administrative and other expenses 19,283 14,836 10,115
--------- --------- ---------
397,173 221,179 134,935
--------- --------- ---------
Income from operations before disposition of
property 163,924 110,134 65,764
--------- --------- ---------
GAIN ON DISPOSITION OF PROPERTY 22,015 20,252 8,350
--------- --------- ---------
Income from operations before minority
interests 185,939 130,386 74,114
Minority interests' share in net income -- (21) (23)
--------- --------- ---------
Net income $ 185,939 $ 130,365 $ 74,091
--------- --------- ---------
Preferred Operating Partnership Unit (8,543) (402) --
Distributions
Preferred Dividends:
Series B Preferred Stock (10,041) (10,041) (10,041)
Series C Preferred Stock (11,813) (2,658) --
Series E Preferred Stock (4,600) -- --
--------- --------- ---------
Net income available to general and limited
partners $ 150,942 $ 117,264 $ 64,050
========= ========= =========
General Partner $ 133,211 $ 102,305 $ 54,149
--------- --------- ---------
Limited Partner 17,731 14,959 9,901
--------- --------- ---------
Total $ 150,942 $ 117,264 $ 64,050
========= ========= =========
NET INCOME PER COMMON OPERATING PARTNERSHIP UNIT
Basic earnings per unit $ 2.59 $ 2.30 $ 1.76
========= ========= =========
Diluted earnings per unit $ 2.56 $ 2.27 $ 1.74
========= ========= =========
DISTRIBUTIONS PER COMMON OPERATING PARTNERSHIP UNITS:
General Partner $ 2.29 $ 2.08 $ 1.78
========= ========= =========
Limited Partners $ 2.28 $ 1.98 $ 1.72
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE> 32
SPIEKER PROPERTIES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands, except for unit data)
<TABLE>
<CAPTION>
General Limited
Partner Partner General Limited
Units Units Partner Partner Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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' interests 15,537 (15,537) 386 (386) --
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
=========== =========== =========== =========== ===========
Contribution-Proceeds from sale of Series C
Preferred Stock -- -- 145,959 -- 145,959
Contribution-Proceeds from sale of Common
Stock 23,573,134 -- 822,636 -- 822,636
Sale of Operating Partnership Units -- 775 -- 25 25
Conversion of Operating Partnership Units to
Common Stock 155,380 (155,380) -- -- --
Conversion of Operating Partnership
Units-Employee Stock Incentive Pool 14,984 (14,984) 524 (524) --
Contribution of property -- 941,896 -- 97,164 97,164
Restricted Stock grant 41,073 -- -- -- --
Non-cash compensation merit fund -- -- 236 36 272
Contributions-Exercise of stock options 166,200 -- 3,425 -- 3,425
Amortization of deferred compensation -- -- 593 -- 593
Allocation of Operating Partnership interest -- -- (42,855) 42,855 --
Partner distributions -- -- (115,622) (14,647) (130,269)
Consolidation Minority interest to Limited
Partner -- -- -- (1,257) (1,257)
Net income -- -- 115,004 15,361 130,365
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 60,700,260 7,322,126 $ 1,493,828 $ 186,013 $ 1,679,841
=========== =========== =========== =========== ===========
Contribution-Proceeds from sale of Series E
Preferred Stock -- -- 96,401 -- 96,401
Contribution-Proceeds from sale of Common
Stock 2,659,467 -- 102,391 -- 102,391
Contribution-Common Stock issued for property 165,984 -- 6,900 -- 6,900
Contribution-Proceeds from sale of Preferred
Operating Units -- -- -- 73,124 73,124
Conversion of Preferred Operating Units to
Common Stock 259,694 -- -- -- --
Conversion of Operating Partnership Units to 109,032 (109,032) -- -- --
Common Stock
Conversion of Operating Partnership
Units-Employee Stock Incentive Pool -- -- 10,840 (10,840) --
Contribution of property for Operating
Partnership Units -- 1,689,821 -- 69,404 69,404
Restricted Stock grant 103,256 -- -- -- --
Non-cash compensation merit fund -- -- -- -- --
Exercise of stock options 314,748 -- 6,578 -- 6,578
Amortization of deferred compensation -- -- 730 -- 730
Allocation of Operating Partnership interest -- -- 17,885 (17,885) --
Partner distributions -- -- (171,756) (27,738) (199,494)
Net income -- -- 159,665 26,274 185,939
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998 64,312,441 8,902,915 $ 1,723,462 $ 298,352 $ 2,021,814
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE> 33
SPIEKER PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 185,939 $ 130,365 $ 74,091
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 94,512 52,779 37,385
Amortization of discount and deferred financing costs 2,283 1,426 1,224
Non-cash compensation 84 865 508
Minority interests' share in net income -- 21 23
Gain on disposition of property (22,015) (20,252) (8,350)
Increase in accounts receivable and other assets (15,077) (11,935) (2,891)
Decrease (increase) in receivables from related
parties 111 (177) 269
Decrease in assessment bonds payable (1,012) (1,070) (849)
Increase in accounts payable and accrued expenses and
other liabilities 44,194 28,086 2,985
Increase in accrued real estate taxes 1,248 272 225
Increase in accrued interest 3,722 11,070 7,961
----------- ----------- -----------
Net cash provided by operating activities 293,989 191,450 112,581
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties (1,141,633) (1,483,866) (406,552)
Reductions (additions) to deposits on properties, net 37,920 (31,473) (8,974)
Additions to investment in mortgages (11,610) (257,294) (14,381)
Additions to investment in affiliates (13,574) (37,256) --
Additions to leasing costs (18,300) (8,231) (5,627)
Proceeds from disposition of property 73,538 120,235 47,967
Proceeds from investment in mortgages 257,142 -- --
Proceeds from investment in affiliate 30,015 -- --
----------- ----------- -----------
Net cash used for investing activities (786,502) (1,697,885) (387,567)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 1,096,500 1,368,000 684,800
Payments on debt (700,922) (720,435) (455,205)
Payments of financing fees (3,395) (12,026) (3,612)
Payments of distributions (195,877) (107,857) (81,626)
Capital contributions - Stock offerings 198,792 968,595 151,331
Capital contributions - Stock options exercised 6,578 3,425 1,061
Proceeds from sale of operating partnership units 73,125 25 --
----------- ----------- -----------
Net cash provided by financing activities 474,801 1,499,727 296,749
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (17,712) (6,708) 21,763
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,628 29,336 7,573
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,916 $ 22,628 $ 29,336
=========== =========== ===========
</TABLE>
33
<PAGE> 34
SPIEKER PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and unit data)
DECEMBER 31, 1998 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Spieker Properties, L.P. (the "Operating Partnership"), a California limited
partnership, was formed on November 10, 1993 and commenced operations on
November 19, 1993, when Spieker Properties, Inc. (the "Company"), the general
partner in the Operating Partnership, completed its initial public offering
("IPO") on November 18, 1993. As of December 31, 1998, the Company owned an
approximate 87.8 % general and limited partnership interest in the Operating
Partnership. The Operating Partnership specializes in the acquisition,
development, management and leasing of office and industrial properties in
California and Washington, Oregon and Idaho (the "Pacific Northwest").
Substantially all of the business activities of the Company are conducted
through the Operating Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The Operating Partnership's consolidated financial statements include the
consolidated financial position of the Operating Partnership and its
subsidiaries as of December 31, 1998 and 1997, and its consolidated results of
operations and cash flows for the years ended December 31, 1998, 1997 and 1996.
The Operating Partnership's investment in Spieker Northwest, Inc. (an
unconsolidated Preferred Stock subsidiary) and its investment in Spieker
Griffin/W9 Associates, LLC are accounted for under the equity method. All
significant intercompany balances and transactions have been eliminated in the
consolidated financial statements.
Properties
Properties are recorded at cost and are depreciated using the straight-line
method over the estimated useful lives of the properties. The estimated lives
are as follows:
<TABLE>
<S> <C>
Land improvements and leasehold interests 18 to 40 years
Buildings and improvements 10 to 40 years
Tenant improvements Term of the related lease
</TABLE>
The cost of buildings and improvements includes the purchase price of the
property or interests in the property, legal fees, acquisition costs,
capitalized interest, property taxes and other costs incurred during the period
of construction. All acquisitions are recorded using the purchase method of
accounting.
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 Operating Partnership on a property by property basis using
undiscounted cash flow. If a potential impairment is identified, it is measured
by the property's fair value based on either sales comparables or the net cash
expected to be generated by the property, less estimated carrying costs
(including interest) throughout the anticipated holding period, plus the
estimated cash proceeds from the ultimate disposition of the property. To the
extent that the carrying value exceeds the estimated fair value, a provision for
decrease in net realizable value is recorded. Estimated fair value is not
necessarily an indication of a property's current value or the amount that will
be realized upon the ultimate disposition of the property. As of December 31,
1998 and 1997, none of the carrying values of the properties exceeded their
estimated fair values. As of December 31, 1998 and 1997, the properties are
located primarily in California and the Pacific Northwest. As a result of this
geographic concentration, the operations of these properties could be adversely
affected by a recession or general economic downturn where these properties are
located.
The Operating Partnership owns mortgage loans that are secured by real estate.
Certain loans are with an affiliate of the Company (see note 4). The Company
assesses possible impairment of these loans by reviewing the fair value of the
34
<PAGE> 35
underlying real estate. As of December 31, 1998 and 1997, the estimated fair
value of the underlying real estate was in excess of the Operating Partnership'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 the property is under construction and until all costs related to the
property's development are complete.
Land Held for Investment
The Operating Partnership has costs related to land parcels that are either held
for investment or are in a design and approval process. There were no material
Construction in process costs associated with these land parcels.
Cash and Cash Equivalents
Highly liquid investments with an original maturity of three months or less when
purchased are classified as cash equivalents.
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.
Unamortized financing and leasing costs are charged to expense upon the early
termination of the lease or upon the early payment of financing.
Fair Value of Financial Instruments
Based on the borrowing rates currently available to the Operating Partnership,
the carrying amount of debt approximates fair value. Cash and cash equivalents
consist of demand deposits, certificates of deposit and overnight repurchase
agreements with financial institutions. The carrying amount of cash and cash
equivalents approximates fair value.
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.
Interest and Other Income
Interest and other income includes interest income on cash, cash equivalents,
and investment in mortgages and management fee income.
Net Income Per Unit
Per unit amounts for the Operating Partnership are computed using the weighted
average units outstanding during the period. Additionally, earnings used in the
calculation are reduced by dividends owed to Series B, C, D and E preferred unit
holders. The diluted weighted average units outstanding include the dilutive
effect of stock options. The basic and diluted weighted average general partner
units and limited partners units outstanding for the year ended December 31,
1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
BASIC WEIGHTED AVERAGE BASIC WEIGHTED AVERAGE
GENERAL PARTNER UNITS LIMITED PARTNER UNITS
---------------------- ----------------------
<S> <C> <C>
Year ended:
December 31, 1998 63,333,898 8,429,646
December 31, 1997 49,424,808 7,209,418
December 31, 1996 35,657,829 6,549,819
</TABLE>
<TABLE>
<CAPTION>
DILUTED WEIGHTED AVERAGE DILUTED WEIGHTED AVERAGE
GENERAL PARTNER UNITS LIMITED PARTNER UNITS
------------------------ ------------------------
<S> <C> <C>
Year ended:
December 31, 1998 64,098,182 8,429,646
December 31, 1997 50,186,572 7,209,418
December 31, 1996 35,910,652 6,549,819
</TABLE>
35
<PAGE> 36
Reclassifications
Certain items in the 1997 and 1996 financial statements have been reclassified
to conform to the 1998 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. ACQUISITIONS AND DISPOSITIONS
The Operating Partnership acquired the following properties (the "1998
Acquisitions") during the year ended December 31, 1998:
<TABLE>
<CAPTION>
PROPERTY TOTAL RENTABLE INITIAL
PROJECT NAME LOCATION TYPE (1) SQUARE FEET COST (2)(3)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Concourse (4) San Jose, CA O 540,224 $150,300
Koll Bellefield Center Bellevue, WA O 65,946 10,300
Santa Monica Business Park (5) Santa Monica, CA O 960,081 111,500
Marina Business Center (5) Marina Del Rey, CA O 261,966 28,600
City Tower (6) Orange, CA O 409,492 66,180
Skyport Plaza (7) San Jose, CA O 359,600 33,800
Brea Park Center - Building C Brea, CA O 26,856 2,300
Allegiance Center Ontario, CA O 73,778 5,200
Ontario Corporate Center Ontario, CA O 97,703 10,500
2600 Michelson (5) Irvine, CA O 391,166 64,600
Cerritos Towne Center I, II, III (5) Cerritos, CA O 332,608 42,700
Metro Center (5) San Mateo, CA O 711,584 134,900
Biltmore Commerce Center (5) Phoenix, AZ O 262,875 36,600
Benjamin Franklin Plaza Portland, OR O 273,239 50,100
San Mateo Bay Center III San Mateo, CA O 62,869 16,100
Kline Center II Ontario, CA O 51,431 4,900
Gateway 405 Bellevue, WA O 34,505 4,900
Cerritos Towne Center IV (5) Cerritos, CA O 80,821 11,500
Cerritos Towne Center V (5) Cerritos, CA O 50,000 5,100
Hayward Business Park Hayward, CA I 630,944 33,500
Enterprise Business Park II (8) Sacramento, CA I 579,545 24,100
</TABLE>
(1) "O" indicates office property; "I" indicates industrial property.
(2) Represents the initial acquisition costs of the properties excluding any
additional repositioning costs.
(3) Does not include the Company's 50% common and preferred interests in
Spieker Griffin/W9 Associates, L.L.C., which owns Griffin Towers in
Orange County, California, acquired for approximately $18.0 million in
April 1998.
(4) Does not include $22.1 million allocated to 6.6 acres of land held for
future development.
(5) Previously identified as a part of the Transpacific Development Company
(TDC) portfolio.
(6) Does not include $3.5 million allocated to 10.5 acres of land held for
future development and $27.6 million allocated to a redevelopment
property, City Plaza, which is detailed on page 12 "Developments in
Process."
(7) Does not include $23.1 million allocated to 20.0 acres of land held for
future development.
(8) Does not include $1.9 million allocated to 11.7 acres of land held for
future development.
During the year ended December 31, 1997, the Operating Partnership acquired
12,512,893 square feet of office and industrial property at an initial cost of
$1,535,411 (the "1997 Acquisitions"). The 1998 and 1997 Acquisitions were
recorded using the purchase method of accounting.
36
<PAGE> 37
The Operating Partnership disposed of the following properties (the "1998
Dispositions") during the year ended December 31, 1998:
<TABLE>
<CAPTION>
PROPERTY TOTAL RENTABLE
PROJECT NAME LOCATION TYPE (1) SQUARE FEET SALES PRICE (2)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rose Pavilion Pleasanton, CA R 292,902 $40,928
Camino West Business Park Carlsbad, CA O 44,574 2,750
Fresno Associates I Fresno, CA I 175,900 6,463
Fresno Warehouse II Fresno, CA I 122,000 3,934
Fresno Warehouse III Fresno, CA I 100,200 3,653
McArthur Park Santa Ana, CA O 94,023 7,800
Vancouver Commerce Park Portland, OR I 82,460 3,700
Commerce Point Land Ontario, CA L - 929
Sea Tac Corporate Center Seattle, WA L - 5,200
</TABLE>
(1) "O" indicates office property; "I" indicates industrial property; "R"
indicates retail property: "L" indicates land.
(2) Excludes the net proceeds from the sale of $284.4 million of properties
held by Spieker Northwest, Inc., an affiliate of Spieker Properties,
L.P.
During the year ended December 31, 1997, the Operating Partnership disposed of
nine retail properties, two office properties, one industrial property, and one
parking garage for $125,800 (the "1997 Dispositions").
4. TRANSACTIONS WITH AFFILIATES
Revenues and Expenses
The Operating Partnership received $2,848 in 1998, $919 in 1997, and $802 in
1996, for management services provided to certain properties that are controlled
and operated by either Spieker Northwest, Inc. or Spieker Partners related
entities (collectively, "Spieker Partners"). Certain officers of the Spieker
Properties, Inc., are partners in Spieker Partners.
Acquisition of Properties
During the year ended December 31, 1997 the Operating Partnership acquired one
office building and one land parcel from certain senior officers of the Company.
The Operating Partnership paid $5,818 to unaffiliated limited partners, issued
Operating Partnership Units with a value of $7,625 and assumed a mortgage of
$10,991 in relation to the office building. The land parcel was acquired for
$1,486. These acquisitions were subject to approval by the Board of Directors.
Receivable From Affiliates
The $183 receivable from affiliates at December 31, 1998 and the $294 at
December 31, 1997, represents management fees and reimbursements due from
Spieker Northwest, Inc., Spieker Griffin/W9 Associates, LLC and Spieker
Partners.
Investments in Mortgages
Included in Investment in Mortgages are $18,725 at December 31, 1998 and
$257,294 at December 31, 1997 of loans to Spieker Northwest, Inc. (SNI). The
loans are secured by deeds of trust on real property, bear interest at 8.5%, and
mature in 2012. Interest income of $10,748 is included in interest and other
income for the year ended December 31, 1998 and $3,108 for the year ended
December 31, 1997 in relation to these loans.
Investments in Affiliate
The investment in affiliate represents an investment in SNI. The Operating
Partnership owns 95% of the Preferred Stock of SNI. Certain senior officers of
the Company own 100% of the voting stock of SNI. At December 31, 1998 SNI owned
225,815 thousand square feet and at December 31, 1997 owned 2.8 million square
feet of office and industrial property located in various states. In addition,
SNI owns 6 parcels of land totaling 24.6 acres. Certain of these properties are
held for sale at December 31, 1998. In addition to property ownership, SNI
provides property management services to certain properties owned by Spieker
Partners.
37
<PAGE> 38
Summarized condensed financial information of SNI is presented as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Balance Sheet:
Investments in real estate, net $ 18,147 $296,094
Other assets 33,705 2,915
-------- --------
$ 51,852 $299,009
======== ========
Mortgages and other $ 19,219 $260,520
Shareholders' equity 32,633 38,489
-------- --------
$ 51,852 $299,009
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Results of Operations:
Revenues $ 20,682 $ 6,750 $ 1,304
Interest expense (10,748) (3,108) --
Other expenses (8,877) (3,461) (1,224)
-------- -------- --------
Net Income Before Depreciation $ 1,057 $ 181 $ 80
======== ======== ========
</TABLE>
Additionally, investment in affiliates represents the 12.5% common interest and
37.5% preferred interest in Spieker Griffin/W9 Associates, LLC. Spieker
Griffin/W9 Associates, LLC purchased in April 1998 a 535,000 square foot office
complex, which is managed by the Company, located in Orange County, California
for an initial cost of $100,000.
5. PROPERTY HELD FOR DISPOSITION
The Operating Partnership continues to review its portfolio and its long-term
strategy for properties. The Operating Partnership will dispose, over time,
assets that do not have a strategic fit in the portfolio. Included in property
held for disposition of $72,537 at December 31, 1998, are thirteen properties.
One of the properties is an office property located in Arizona, four industrial
properties are located in Northern California, six industrial properties and two
land parcels are located in Southern California. The divestiture of the property
is subject to identification of a purchaser, negotiation of acceptable terms and
other customary conditions. Property held for disposition at December 31, 1997,
of $37,186 consisted of two properties, one property was a retail center located
in Northern California and the other was an office property located in Southern
California.
The following summarizes the condensed results of operations of the properties
held for disposition at December 31, 1998 for the years ended December 31, 1998,
1997 and 1996. Some properties held for disposition were acquired during the
periods presented, therefore the Net Operating Income for these periods
presented may not be comparable.
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Income $ 8,013 $ 3,021 $ 1,179
Property Operating Expenses (2,451) (604) (200)
------- ------- -------
Net Operating Income $ 5,562 $ 2,417 $ 979
======= ======= =======
</TABLE>
6. DEBT
As of December 31, 1998 and 1997, debt consists of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Unsecured investment grade notes, varying fixed interest rates
from 6.65% to 8.00% payable semi-annually, due from 2000 to 2027 $1,436,500 $1,135,000
Unsecured short-term borrowings 300,000 200,000
Mortgage loans, varying interest rates from 7.37% to 9.88%, due 1999 to 2013 110,698 96,502
---------- ----------
$1,847,198 $1,431,502
========== ==========
</TABLE>
The Operating Partnership has an Unsecured Line of Credit Facility (the
"Facility"). The maximum amount available under the Facility is $250,000. The
Facility carries interest at LIBOR (London Interbank Offered Rates) plus 0.80%
38
<PAGE> 39
matures in August 2001, includes an annual administrative fee of $50 and an
annual Facility fee of .20%. The one-month LIBOR at December 31, 1998 was 5.1%.
As of December 31, 1998, the amount drawn on the Facility was $100,000. In
addition, the Company has $200,000 short-term bank facility (the "Bank
Facility") outstanding at December 31, 1998. This short-term Bank Facility
carries interst at LIBOR plus .65% and matures November 1999. The line of credit
Facility and the Bank Facility are subject to financial covenants concerning
leverage, interest coverage and certain other ratios. The Operating Partnership
is currently in compliance with all of the covenants in the line of credit
Facility and the Bank Facility concerning its indebtedness.
Mortgage loans generally require monthly principal and interest payments. The
mortgage loans are secured by deeds of trust on related properties. The gross
book value of real estate assets pledged as collateral under deeds of trust for
mortgage loans at December 31, 1998 was $286,995 and $228,618 at December 31,
1997.
The unsecured notes are subject to financial covenants concerning leverage,
interest coverage and certain other ratios. The Operating Partnership is
currently in compliance with all of the covenants in the unsecured note
agreements governing its indebtedness.
Interest capitalized for the year ended December 31, 1998 was $16,482, $6,338 in
1997 and $3,116 in 1996.
Future Minimum Debt Schedule
The scheduled future minimum debt payments of all debt outstanding including
short-term borrowings as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------- ----------
<S> <C>
1999 $ 217,572
2000 102,272
2001 233,801
2002 112,158
2003 2,569
Thereafter 1,178,826
----------
$1,847,198
==========
</TABLE>
7. LEASING ACTIVITY
Future minimum rentals due under noncancelable operating leases in effect at
December 31, 1998, with tenants are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------- ----------
<S> <C>
1999 $ 491,575
2000 416,531
2001 335,850
2002 238,935
2003 159,284
Thereafter 298,365
----------
$1,940,540
==========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for their pro
rata share of specified operating expenses, which amounted to $147,850 for the
year ended December 31, 1998, $83,170 in 1997 and $44,155 in 1996. 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 year ended December 31, 1998 was $528, $254 for 1997 and
$362 for 1996. Certain leases contain options to renew.
39
<PAGE> 40
8. PARTNERS' DISTRIBUTIONS PAYABLE
The partner distributions payable at December 31, 1998 and 1997, represents
amounts payable to partners for the quarters then ended.
The unit holders of record as of December 31, 1998, and December 31, 1997, are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
Shares of:
General Partners 61,916,459 55,772,632
Limited Partners 8,902,915 7,322,126
Series A Preferred Units 1,000,000 1,000,000
Series B Preferred Units 4,250,000 4,250,000
Series C Preferred Units 6,000,000 6,000,000
Series D Preferred Units 1,721,831 2,007,495
Series E Preferred Units 4,000,000 --
</TABLE>
9. INCOME TAXES
Spieker Properties, L.P. and its subsidiary partnerships file federal and state
returns of income. The partnerships pay no income taxes other than an $.8
limited partnership tax, where applicable, to the State of California. Taxable
income or loss is allocable to the partners of the respective partnerships.
The Operating Partnership's consolidated taxable income was $175,247 for the
year ended 1998, $115,525 for 1997 and $76,323 for 1996.
The differences between book income and taxable income primarily result from
timing differences consisting of depreciation expense for tenant improvements
and unearned rental income.
10. PARTNERS' EQUITY
Preferred Units
The 1,000,000 shares of Series A Cumulative Convertible Preferred Stock rank
senior to the Common Units as to dividends and liquidation rights. The preferred
units are convertible into 1,219,512 units of the Operating Partnership. The
distribution per unit, calculated on the converted numbers of units, is equal to
the Common Unit dividend, provided that the dividend yield on the preferred
units may not be less than the initial distribution rate thereof. Distributions
are paid quarterly in arrears. With respect to the payment of distributions and
amounts upon liquidation, the Series A Preferred Unit ranks on parity with the
Series B, Series C and Series E Preferred Units and ranks senior to the Common
Units.
The Series B Preferred Unit distributions are paid quarterly in arrears at 9.45%
of the initial liquidation preference per annum. The Series B Preferred Units
are redeemable on or after December 11, 2000 at the option of the Company in
whole or in part at a redemption price of $25.00 per unit, plus accrued and
unpaid distributions. With respect to the payments of distributions and amounts
upon liquidation, the Series B Preferred Units ranks on parity with the Series
A, Series C and Series E Preferred Units and ranks senior to the Common Units
The Series C Preferred Unit distributions are payable quarterly in arrears at an
annual rate of 7.88% of the initial liquidation preference of $150,000. The
Series C Preferred Units are redeemable after October 10, 2002 at the option of
the Company, in whole or in part, at a redemption price of $25.00 per unit, plus
accrued and unpaid distributions. With respect to the payments of distributions
and amounts upon liquidation, the Series C Preferred Units rank on parity to the
Company's Series A, Series B and Series E Preferred Units and ranks senior to
the Common Units.
In June 1998, the Company sold 4,000,000 shares of Series E Cumulative
Redeemable Preferred Stock for $25.00 per share. These shares are redeemable at
the option of the Company. Dividends are payable at an annual rate of 8.00% of
the redeemable liquidation preference of $100.0 million. The net proceeds of
$96.8 million were contributed by the Company to the Operating Partnership in
exchange for 4,000,000 Series E Cumulative Redeemable Preferred Units with
terms
40
<PAGE> 41
substantially identical to the Series E Cumulative Redeemable Preferred Stock.
Net proceeds were used principally to repay borrowings on the unsecured line of
credit and to fund the ongoing acquisition and development of property.
During 1998 the Company issued 1,471,260 Operating Partnership Units in
connection with the acquisition of the TDC portfolio and 308,300 Operating
Partnership Units in relation to other acquisitions. The Company also issued in
April 1998, 1,500,000 Series D Cumulative Redeemable Preferred Units to an
institutional investor for $50.00 per unit. Distributions are payable at an
annual rate of 7.6875%. The Series D Preferred Units may be called by the
Operating Partnerships at par on or after April 20, 2003, and have no stated
maturity or mandatory redemption. The Series D Preferred Units are exchangeable
for the Series D Cumulative Redeemable Preferred Stock of the Company on or
after April 20, 2008.
Stockholders Rights Agreement
On September 30, 1998, the Operating Partnership paid a distribution of one
right for each outstanding partnership unit of the Operating Partnership held of
record at the close of business on September 30, 1998 or issued thereafter prior
to the Separation Time, as defined in the Rights Agreement referred to below.
The rights were issued pursuant to the Stockholder's Protection Rights
Agreement, dated as of September 10, 1998 (the "Rights Agreement"), between the
Operating Partnership and the Bank of New York, as Rights Agent.
11. EMPLOYEE RETIREMENT AND STOCK PLANS
Retirement Savings Plan
Effective January 1, 1994, the Operating Partnership adopted a retirement
savings plan pursuant to Section 401(k) of the Internal Revenue Code, whereby
participants may contribute a percentage of compensation, but not in excess of
the maximum allowed under the Code. The plan provides for a matching
contribution by the Operating Partnership which amounted to $597 for the year
ended December 31, 1998, $393 for 1997 and $292 for 1996. In addition, the
Operating Partnership may make additional contributions at the discretion of
management. Management authorized additional contributions of $582 for the year
ended December 31, 1998, $337 for 1997 and $230 for 1996.
Stock Incentive Plan
The Company has adopted the Spieker Properties, Inc. 1993 Stock Incentive Plan
(the "Stock Incentive Plan") to provide incentives to attract and retain
officers and key employees. Under the Plan as amended on May 22, 1996, the
number of shares available for option grant is 9.9% of the number of shares of
Common Stock, on a fully-converted basis, outstanding as of the last day of the
immediately preceding quarter, reduced by the number of shares of Common Stock
reserved for issuance under other stock compensation plans of the Company. The
strike price on the shares granted is equal to the market price of the Company's
stock at the grant date. Shares granted under this plan vest over four or five
years.
Information relating to the employee Stock Incentive Plan from January 1, 1996
through December 31, 1998, is as follows:
<TABLE>
<CAPTION>
OPTION PRICE
OPTIONS PER SHARE
---------- -------------
<S> <C> <C>
Shares under option at January 1, 1996 1,483,000 $ 25.92
Granted 1,628,000 25.00-31.63
Exercised (51,750) 20.50
Forfeited (5,750) 20.50
---------- -------------
Shares under option at December 31, 1996 3,053,500 20.50-31.63
Granted 1,237,500 35.19
Exercised (163,950) 20.50-29.25
Forfeited (24,000) 20.50-29.25
---------- -------------
Shares under option at December 31, 1997 4,103,050 20.50-35.19
Granted 1,405,000 34.63-38.75
Exercised (300,750) 20.50-29.25
Forfeited (119,800) 20.50-38.75
---------- -------------
Shares under option at December 31, 1998 5,087,500 $20.50-38.75
========== =============
Options exercisable at December 31, 1998 1,715,700 $ 25.92(1)
========== =============
Shares available for grant at December 31, 1998 1,792,852
==========
</TABLE>
(1) Represents the average price.
41
<PAGE> 42
Directors Stock Option Plan
On May 22, 1996, the Directors' Stock Option Plan was amended to increase the
number of shares of Common Stock subject to automatic annual option grants to
the Company's independent directors from 500 shares to 4,000 shares, to increase
the number of shares of Common Stock available for option grant from 30,000 to
150,000, and to provide that, in the event of a Change in Control, outstanding
options will become fully vested. To date, 62,000 shares have been granted under
the plan and 7,250 shares have been exercised.
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 share would
not have been materially reduced.
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 1998 and 1997,
respectively; dividend yield of 6.6% and 5.8%; expected volatility of 18.1% and
18.6%; expected lives of six and seven years; and risk-free interest rates of
4.6% and 6.4%.
12. COMMITMENTS AND CONTINGENCIES
Environmental Matters
The Operating Partnership follows the policy of monitoring its properties for
the presence of hazardous or toxic substances. The Operating Partnership is not
aware of any environmental liability with respect to the properties that would
have a material adverse effect on the Operating Partnership's business, assets
or results of operations. There can be no assurance that such a material
environmental liability does not exist. The existence of any such material
environmental liability would have an adverse effect on the Operating
Partnership's results of operations and cash flow.
Lease Commitments
The Operating Partnership has entered into operating ground leases on certain
land parcels with periods ranging from 16 to 89 years. Future minimum rental
payments required under noncancelable operating ground leases in effect at
December 31, 1998, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------- --------
<S> <C>
1999 $ 7,858
2000 7,908
2001 7,914
2002 7,937
2003 9,874
Thereafter 366,904
--------
$408,395
========
</TABLE>
The land on which three of the Operating Partnership's properties are located is
owned by Stanford University and is subject to ground leases. The ground leases
expire in 2039 or 2040, and unless the leases are extended, the use of the land,
together with all improvements, will revert back to Stanford University. The
former owners of the three properties prepaid the ground leases through 2011,
2012 and 2017; thereafter, the Operating Partnership will be responsible for the
ground lease payments, as defined under the terms of the leases. These ground
lease payments have been segregated from the total purchase price of the
properties, capitalized as leasehold interests in the accompanying consolidated
balance sheet, and are being amortized ratably over the terms of the related
prepayment periods (18 to 24 years).
General Uninsured Losses
The Operating Partnership carries commercial general 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 Operating
Partnership could lose its investment in, and anticipated profits and cash flows
from, a property.
42
<PAGE> 43
Certain of the properties are located in areas that are subject to earthquake
activity; the Operating Partnership has therefore obtained excess earthquake
insurance for those properties in higher risk earthquake areas. In the event of
an earthquake, the Operating Partnership is insured for $200,000 of loss (less a
deductible of 5% of total insured value per occurrence), any losses in excess of
$200,000 will be borne by the Operating Partnership.
13. SEGMENT INFORMATION
The Operating Partnership has four operating regions that would comprise
definable segments: Pacific Northwest; North-East Bay, San Francisco/Sacramento,
CA; Silicon Valley; and Southern California. Each region has a Regional Senior
Vice President who is directly responsible for managing all phases of the
region's operations including acquisition, development, leasing and property
management. The Operating Partnership believes that the most relevant
information about the way that its business is managed is through disclosure of
certain data at the operating region level. The accounting policies of the four
regions are the same as those described in the summary of significant accounting
policies. Each of the four operating regions consists of differing mixes of
property types. The following table may not be comparable by the regions listed
below given the differing mixes of properties within the regions. Significant
information used by the Operating Partnership for the reportable segments is as
follows:
<TABLE>
<CAPTION>
Pacific North - East Bay/ Silicon Southern
Northwest Sacramento, CA Valley California Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 Revenue $ 117,920 $ 139,126 $ 127,756 $ 157,628 $ 542,430
1997 Revenue 66,029 103,703 86,792 65,085 321,609
1996 Revenue 51,578 66,079 59,978 18,836 196,471
1998 Net Operating Income(1) 84,843 95,163 97,326 98,055 375,387
1997 Net Operating Income 48,249 72,552 66,898 42,612 230,311
1996 Net Operating Income 37,603 48,210 48,160 12,298 146,271
1998 Deployable Assets 886,981 1,035,833 826,918 1,076,758 3,826,490
1997 Deployable Assets 761,199 914,453 484,374 694,176 2,854,202
1996 Deployable Assets 285,767 334,310 390,478 272,536 1,283,091
</TABLE>
(1) Net operating income (NOI) for the properties is calculated by
subtracting rental expenses and real estate taxes from rental income.
14. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $126,812 $ 56,108 $ 31,167
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS:
Debt assumed in relation to property acquisitions 19,394 63,940 --
Units issued in connection with property acquisitions 69,405 97,164 --
Increase to land and assessment bond payable 4,344 8,984 1,283
Write-off of fully depreciated property 11,347 3,196 15,469
Write-off of fully amortized deferred
financing and leasing costs 2,342 2,359 4,696
Conversion of operating partnership units
to Common Stock with resulting reduction
in Limited Partners' interest and
increase in General Partners' interest 10,840 524 386
Property acquired through the issuance of Common Stock 6,900 -- --
</TABLE>
43
<PAGE> 44
15. QUARTERLY FINANCIAL DATA (unaudited)
Summarized quarterly 1998 and 1997 data is as follows:
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------------------
1998 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
- ---- --------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues $125,307 $138,616 $145,790 $151,383 $561,097
Income from operations
before disposition of
property and minority interests 37,943 40,630 43,262 42,088 163,924
Net income 35,069 33,789 29,786 31,788 130,431
Income per diluted Common
Operating Partnership units $ .58 $ .53 $ .47 $ .50 $ 2.07
</TABLE>
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------------------
1997 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
- ---- --------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 66,417 $ 75,878 $ 83,896 $105,122 $331,313
Income from operations
before disposition of
property, minority
interests and extraordinary items 23,812 26,111 27,051 33,160 110,134
Net income 19,121 30,997 24,220 25,554 99,890
Income per Operating
Partnership units $ .43 $ .65 $ .50 $ .47 $ 2.04
</TABLE>
The sum of quarterly financial data in 1998 and 1997 varies from the annual data
due to rounding.
44
<PAGE> 45
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------------
ENCUMBRANCES LAND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS
- ------------------------------------------------------------------------------------------------------------------
NORTH-EAST BAY/SACRAMENTO
<S> <C> <C> <C> <C>
10181 455 University Sacramento, CA $925,000 $1,305,000
10211 8880 SoCal Center Sacramento, CA 3,252,741 8,493,503
10231 740 University Sacramento, CA 261,250 793,750
10281 Gateway Oaks II Sacramento, CA 1,510,137 4,258,061
10291 Gateway Oaks I Sacramento, CA 2,926,887 9,856,301
10311 701 University Sacramento, CA 1,051,108 3,239,007
10341 The Orchard Sacramento, CA 1,505,937 4,517,810
10351 555 University Sacramento, CA 1,467,023 4,401,069
10361 575 and 601 University Sacramento, CA 1,677,507 5,720,244
10391 655 University Sacramento, CA 1,147,733 3,443,200
10681 Point West Executive Ctr. Sacramento, CA 2,538,020 5,952,306
10691 Point West Commercenter Sacramento, CA 3,443,730 9,025,615
10891 Gateway Oaks III Sacramento, CA 1,151,181 3,344,582
11021 Bayside Corporate Center Foster City, CA 457,099 2,455,163 7,623,408
11051 3600 American River Dr Sacramento, CA 1,059,222 4,274,450
11052 3610 American River Dr Sacramento, CA 490,859 1,963,435
11053 3620 American River Dr Sacramento, CA 1,033,387 4,133,548
11301 Fidelity Plaza Sacramento, CA 1,354,983 3,695,222
11331 Wood Island Office Complex Larkspur, CA 53,185 3,796,146 10,090,937
11471 Emeryville Towers Emeryville, CA 29,695,815 101,059,827
11511 555 Twin Dolphin Plaza Redwood City, CA 8,181,629 35,100,408
11541 Fountaingrove Santa Rosa, CA 0 4,391,945 11,841,364
11561 Sierra Point Brisbane, CA 363,250 2,429,943 8,198,137
11621 Point West Corp Center I Sacramento, CA 4,388,722 11,865,803
11651 Point West Corp Center II Sacramento, CA 1,000,000 3,983
11681 Lafayette Terrace Lafayette, CA 2,037,282 5,508,225
11801 Gateway Oaks IV Sacramento, CA 1,180,174 7,453,716
11831 San Mateo Baycenter San Mateo, CA 2,464,154 10,422,627
11841 Treat Towers Walnut Creek, CA 1,325,000 4,089,868 36,427,480
11851 Johnson Ranch Corp Centre Roseville, CA 0 5,707,610 17,049,589
12031 East Roseville Parkway Roseville, CA 1,563,207 6,251,699
12081 Vintage Park Office Foster City, CA 507,323 7,138,571 14,680,327
12111 Douglas Corporate Center Roseville, CA 804,807 3,468,131 10,959,465
12121 San Mateo Baycenter II San Mateo, CA 10,816,420 1,263,543 7,120,618
12161 Port Plaza Land W Sacramento, CA 503,734 1,853,178 0
12171 Concord N Commerce Ctr II Concord, CA 912,711 2,139,551
12401 Metro Center Foster City, CA 0 134,942,965
12471 Enterprise Business Park I & II W. Sacramento, CA 10,447,348 4,967,619 14,753,963
12481 Commerce Park West I, II, III W. Sacramento, CA 98,949 3,135,239 3,358,313
12531 San Mateo BayCenter III San Mateo, CA 3,214,450 12,858,586
10091 Terminal St. Warehouse Sacramento, CA $198,113 $1,181,083
10261 Front Street Warehouse Sacramento, CA 294,674 908,485
10381 Livermore Commerce Ctr. Livermore, CA 32,839 1,312,199 3,563,238
10481 Huntwood Business Center Hayward, CA 3,371 198,026 686,076
10491 Independent Rd Warehouse Oakland, CA 237,380 706,174
10511 Baycenter Business Park II Hayward, CA 221,126 1,228,225 3,116,626
10521 Keebler Warehouse Hayward, CA 86,831 569,642 1,568,210
10531 Fremont Commerce Center Fremont, CA 614,357 1,588,166
10591 Dubuque Business Center So. San Fran, CA 2,912,158 3,128,405
10601 Cabot Blvd. Warehouse Hayward, CA 1,550,174 4,531,092
10611 Benicia Commmerce Center Benicia, CA 434,027 3,810,746
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
----------------------------------------------------------------
ADDITIONS LAND BUILDINGS AND
AND LAND IMP. AND BUILDING
PROJECT LOCATION IMPROVEMENTS LEASEHOLD INT. IMPROVEMENTS TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
NORTH-EAST BAY/SACRAMENTO
<S> <C> <C> <C> <C> <C>
10181 455 University Sacramento, CA $786,252 $993,704 $2,074,475 $3,068,179
10211 8880 SoCal Center Sacramento, CA 2,811,335 3,804,401 10,546,560 14,350,961
10231 740 University Sacramento, CA 173,513 261,250 959,617 1,220,867
10281 Gateway Oaks II Sacramento, CA 743,749 1,996,441 4,511,077 6,507,518
10291 Gateway Oaks I Sacramento, CA 211,967 2,938,968 10,121,140 13,060,108
10311 701 University Sacramento, CA 354,591 1,247,111 3,319,746 4,566,857
10341 The Orchard Sacramento, CA 1,124,148 1,539,497 4,977,806 6,517,303
10351 555 University Sacramento, CA 708,357 1,484,661 4,799,428 6,284,089
10361 575 and 601 University Sacramento, CA 723,872 1,915,967 6,174,166 8,090,134
10391 655 University Sacramento, CA 281,936 1,159,673 3,645,041 4,804,714
10681 Point West Executive Ctr. Sacramento, CA 1,260,351 2,573,522 7,139,142 9,712,664
10691 Point West Commercenter Sacramento, CA 1,084,491 3,443,730 9,877,980 13,321,710
10891 Gateway Oaks III Sacramento, CA 1,043,948 1,161,264 4,364,270 5,525,534
11021 Bayside Corporate Center Foster City, CA 361,860 2,465,778 7,973,761 10,439,539
11051 3600 American River Dr Sacramento, CA 458,332 1,059,222 4,644,440 5,703,662
11052 3610 American River Dr Sacramento, CA 248,203 490,859 2,110,797 2,601,656
11053 3620 American River Dr Sacramento, CA 392,341 1,033,387 4,496,582 5,529,969
11301 Fidelity Plaza Sacramento, CA 760,368 1,368,143 3,912,820 5,280,963
11331 Wood Island Office Complex Larkspur, CA 736,650 3,796,146 10,781,499 14,577,645
11471 Emeryville Towers Emeryville, CA 11,766,845 29,695,815 101,271,722 130,967,537
11511 555 Twin Dolphin Plaza Redwood City, CA 174,722 8,181,629 32,738,206 40,919,835
11541 Fountaingrove Santa Rosa, CA 863,062 4,432,734 12,399,983 16,832,717
11561 Sierra Point Brisbane, CA 509,568 2,455,517 8,367,988 10,823,505
11621 Point West Corp Center I Sacramento, CA 952,804 4,388,722 11,888,041 16,276,763
11651 Point West Corp Center II Sacramento, CA 0 1,000,000 0 1,000,000
11681 Lafayette Terrace Lafayette, CA 56,857 2,037,282 5,565,082 7,602,365
11801 Gateway Oaks IV Sacramento, CA 938,428 1,180,174 0 1,180,174
11831 San Mateo Baycenter San Mateo, CA 322,524 2,464,154 10,630,564 13,094,719
11841 Treat Towers Walnut Creek, CA (199) 4,089,868 0 4,089,868
11851 Johnson Ranch Corp Centre Roseville, CA 381,692 5,728,033 13,246,387 18,974,420
12031 East Roseville Parkway Roseville, CA 0 1,563,207 0 1,563,207
12081 Vintage Park Office Foster City, CA 3,390,089 7,138,571 17,842,517 24,981,088
12111 Douglas Corporate Center Roseville, CA 633,650 3,468,131 10,959,465 14,427,596
12121 San Mateo Baycenter II San Mateo, CA 10,905,395 3,439,087 15,764,044 19,203,131
12161 Port Plaza Land W Sacramento, CA 1,800 1,853,178 0 1,853,178
12171 Concord N Commerce Ctr II Concord, CA 125,002 912,711 0 912,711
12401 Metro Center Foster City, CA 170,570 0 134,975,118 134,975,118
12471 Enterprise Business Park I & II W. Sacramento, CA 35,462 4,967,619 14,753,338 19,720,958
12481 Commerce Park West I, II, III W. Sacramento, CA 96,336 3,135,239 3,358,313 6,493,552
12531 San Mateo BayCenter III San Mateo, CA 42,444 3,214,450 12,858,586 16,073,036
10091 Terminal St. Warehouse Sacramento, CA $205,205 $202,000 $1,382,401 $1,584,401
10261 Front Street Warehouse Sacramento, CA 174,711 294,674 1,074,551 1,369,225
10381 Livermore Commerce Ctr. Livermore, CA 877,879 1,499,807 4,253,509 5,753,316
10481 Huntwood Business Center Hayward, CA 1,324,409 434,534 1,603,115 2,037,649
10491 Independent Rd Warehouse Oakland, CA 421,106 332,303 1,032,357 1,364,660
10511 Baycenter Business Park II Hayward, CA 2,233,490 1,781,453 4,765,801 6,547,254
10521 Keebler Warehouse Hayward, CA 229,779 605,637 1,761,994 2,367,631
10531 Fremont Commerce Center Fremont, CA 593,031 708,494 2,087,060 2,795,554
10591 Dubuque Business Center So. San Fran, CA 2,935,507 3,491,267 5,465,429 8,956,696
10601 Cabot Blvd. Warehouse Hayward, CA 1,257,050 1,559,831 5,778,486 7,338,317
10611 Benicia Commmerce Center Benicia, CA 1,185,984 683,781 4,649,614 5,333,395
</TABLE>
<TABLE>
<CAPTION>
CONSTRUCTION DEPRECIABLE
ACCUMULATED AND/OR LIVES
PROJECT LOCATION DEPRECIATION ACQUISITION (YEARS)
- -----------------------------------------------------------------------------------------------------------------
NORTH-EAST BAY/SACRAMENTO
<S> <C> <C> <C> <C>
10181 455 University Sacramento, CA $563,070 1987 3-40
10211 8880 SoCal Center Sacramento, CA 2,520,977 1989 3-40
10231 740 University Sacramento, CA 272,616 1987 3-40
10281 Gateway Oaks II Sacramento, CA 976,528 1992 3-40
10291 Gateway Oaks I Sacramento, CA 2,147,167 1990 2-40
10311 701 University Sacramento, CA 737,417 1991 3-40
10341 The Orchard Sacramento, CA 1,109,939 1990 3-40
10351 555 University Sacramento, CA 1,089,479 1990 3-40
10361 575 and 601 University Sacramento, CA 1,468,287 1990 3-40
10391 655 University Sacramento, CA 810,223 1990 2-40
10681 Point West Executive Ctr. Sacramento, CA 927,971 1994 10-40
10691 Point West Commercenter Sacramento, CA 1,248,749 1994 4-40
10891 Gateway Oaks III Sacramento, CA 529,253 1995 2-40
11021 Bayside Corporate Center Foster City, CA 682,989 1996 7-40
11051 3600 American River Dr Sacramento, CA 386,762 1995 12-40
11052 3610 American River Dr Sacramento, CA 180,045 1995 5-40
11053 3620 American River Dr Sacramento, CA 367,707 1995 12-40
11301 Fidelity Plaza Sacramento, CA 290,684 1996 2-40
11331 Wood Island Office Complex Larkspur, CA 541,731 1996 4-40
11471 Emeryville Towers Emeryville, CA 4,946,971 1997 3-40
11511 555 Twin Dolphin Plaza Redwood City, CA 1,569,494 1997 5-40
11541 Fountaingrove Santa Rosa, CA 559,060 1997 3-40
11561 Sierra Point Brisbane, CA 366,630 1997 3-40
11621 Point West Corp Center I Sacramento, CA 499,791 1997 3-40
11651 Point West Corp Center II Sacramento, CA 0 1997 40
11681 Lafayette Terrace Lafayette, CA 209,281 1997 10-40
11801 Gateway Oaks IV Sacramento, CA 0 1997 5-40
11831 San Mateo Baycenter San Mateo, CA 3,496,795 1995 3-40
11841 Treat Towers Walnut Creek, CA 0 1997 6-40
11851 Johnson Ranch Corp Centre Roseville, CA 414,375 1997 3-40
12031 East Roseville Parkway Roseville, CA 0 1997 40
12081 Vintage Park Office Foster City, CA 483,547 1997 7-40
12111 Douglas Corporate Center Roseville, CA 296,819 1997 3-40
12121 San Mateo Baycenter II San Mateo, CA 3,379,134 1997 3-40
12161 Port Plaza Land W Sacramento, CA 0 1997 40
12171 Concord N Commerce Ctr II Concord, CA 0 1997 5-40
12401 Metro Center Foster City, CA 2,187,058 1998 10-40
12471 Enterprise Business Park I & II W. Sacramento, CA 307,374 1998 5-40
12481 Commerce Park West I, II, III W. Sacramento, CA 69,965 1998 2-40
12531 San Mateo BayCenter III San Mateo, CA 160,732 1998 4-40
10091 Terminal St. Warehouse Sacramento, CA $710,151 1975 3-40
10261 Front Street Warehouse Sacramento, CA 272,799.20 1988 5-40
10381 Livermore Commerce Ctr. Livermore, CA 1,062,914.62 1988 3-40
10481 Huntwood Business Center Hayward, CA 666,052.98 1979 7-40
10491 Independent Rd Warehouse Oakland, CA 524,081.31 1972 5-40
10511 Baycenter Business Park II Hayward, CA 1,634,027.96 1984 3-40
10521 Keebler Warehouse Hayward, CA 560,881.30 1985 10-40
10531 Fremont Commerce Center Fremont, CA 552,951.28 1989 5-40
10591 Dubuque Business Center So. San Fran, CA 1,541,803.65 1986 3-40
10601 Cabot Blvd. Warehouse Hayward, CA 1,862,215.48 1988 3-40
10611 Benicia Commmerce Center Benicia, CA 1,072,245.28 1989 3-40
</TABLE>
45
<PAGE> 46
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST
---------------------------------
ENCUMBRANCES LAND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10621 Montgomery Ward Pleasant Hill, CA 717,750 3,485,901
10631 Eden Landing Bus. Center Hayward, CA 1,152,163 1,940,740
10641 Good Guys Dist. Center Hayward, CA 7,685 4,923,246 9,254,184
10651 Fleetside Comrce Center Benicia, CA 355,424 1,080,303 2,952,609
10661 Industrial Dr. Warehouse Fremont, CA 2,224,289 1,822,496 3,793,609
10711 Redwood Shores Redwood City, CA 3,437,897 3,702,938
10741 Baycenter Business Park I Hayward, CA 1,500,000 4,105,976
10821 732-834 Striker Ave Sacramento, CA 1,009,601 2,767,658
10931 Northgate Commerce Ctr Sacramento, CA 1,854,097 5,611,557
10941 Doolittle Business Center San Leandro, CA 866,075 2,735,652
10951 Benicia Ind I (Stone) Benicia, CA 4,777,806 14,394,164
10961 Benicia Ind I (Getty Ct) Benicia, CA 1,134,212 3,402,635
11041 Concord North Comm Ctr Concord, CA 2,340,139 4,945,766
11071 Benicia Ind II Benicia, CA 3,891,910 12,137,918
11161 Port of Oakland Oakland, CA 1,693,760 5,091,125
11281 Baycenter Business Park III Hayward, CA 178,788 1,248,216 3,775,498
11291 Riverside Business Center Sacramento, CA 194,221 1,471,099 4,395,800
11551 Seaport Distribution Center W Sacramento, CA 1,180,994 4,273,837
11761 Huntwood Business Center Hayward, CA 2,929,335 8,788,004
11771 Fremont Commerce Center Fremont, CA 4,315,601 12,946,802
11881 Milimont R&D Fremont, CA 1,806,606 5,419,919
11891 Kato R&D Fremont, CA 2,002,504 6,007,610
12041 W. North Market Sacramento, CA 1,150,545 3,451,632
12051 Overland Court W Sacramento, CA 616,816 3,294,800 7,250,436
12091 Vintage Park Industrial Foster City, CA 1,699,775 25,531,280 70,993,759
12381 Hayward Business Park Hayward, CA 32,058 8,453,559 25,160,239
12421 Benicia Commerce Center II Benicia, CA 1,722,991 5,298,888
12491 Vasco Business Center Livermore, CA 1,313,645 3,301,550
12571 Airway Business Park Livermore, CA 3,875,096 15,522
12541 Skyway Landing -Land San Carlos, CA $18,379,610 $962,941
---------------------------------------------------
TOTAL $31,030,338 $246,558,115 $815,281,267
===================================================
SILICON VALLEY
10001 Santa Clara Office Center I Santa Clara, CA $1,140,584 $187,326 $1,392,344
10021 Santa Clara Office Center II Santa Clara, CA 173,317 2,581,836
10031 Gateway Ofc. Phase I San Jose, CA 721,215 9,010,137
10051 Santa Clara Office Center III Santa Clara, CA 36,746 2,193,334
10081 Gateway Ofc. Phase II San Jose, CA 1,275,102 40,341,270
10131 The Alameda San Jose, CA 774,316 4,278,623
10141 Creekside Phase I San Jose, CA 344,127 10,385,797 8,518,712
10151 North First Ofc. Ctr. San Jose, CA 6,698,611 5,900,388
10251 Denny's Restaurant Santa Clara, CA 181,634 551,427
10321 Ryan Ranch Ofc. Ctr. Monterey, CA 1,048,740 3,951,223
10541 Lockheed Bldg. Palo Alto, CA 1,735,789 6,264,357
10551 Xerox Campus Palo Alto, CA 9,145,484 29,360,411
10561 Foothill Research Ctr. Palo Alto, CA 7,474,154 30,819,577
10671 2180 Sand Hill Road Menlo Park, CA 685,933 1,939,250
10701 McCarthy Milpitas, CA 1,311 845,039 4,219,348
10851 Ryan Ranch Off - Ph II Monterey, CA 565,580 2,012,002
11031 Ryan Ranch Office II Bldg D Monterey, CA 420,000 2,160,535
11151 2290 North First Street San Jose, CA 1,222,335 4,891,759
11311 Central Park Plaza Santa Clara, CA 119,695 9,492,940 25,036,338
11521 Metro Plaza San Jose, CA 24,507,919 14,789,132 59,287,827
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
------------------------------------------------------------
ADDITIONS LAND BUILDINGS AND
AND LAND IMP. AND BUILDING
PROJECT LOCATION IMPROVEMENTS LEASEHOLD INT. IMPROVEMENTS TOTAL
- ------- -------- ------------ -------------- ------------- -----
<S> <C> <C> <C> <C> <C>
10621 Montgomery Ward Pleasant Hill, CA 95,406 717,750 3,581,308 4,299,058
10631 Eden Landing Bus. Center Hayward, CA 181,182 1,158,197 2,115,888 3,274,085
10641 Good Guys Dist. Center Hayward, CA 150,352 4,936,467 9,391,315 14,327,782
10651 Fleetside Comrce Center Benicia, CA 483,625 1,080,303 3,425,992 4,506,295
10661 Industrial Dr. Warehouse Fremont, CA 171,712 1,822,496 3,965,321 5,787,817
10711 Redwood Shores Redwood City, CA 1,614,156 3,796,415 4,833,639 8,630,054
10741 Baycenter Business Park I Hayward, CA 183,798 1,500,000 4,207,820 5,707,820
10821 732-834 Striker Ave Sacramento, CA 276,734 1,024,488 2,968,054 3,992,543
10931 Northgate Commerce Ctr Sacramento, CA 547,873 1,869,659 6,114,203 7,983,862
10941 Doolittle Business Center San Leandro, CA 118,458 984,533 2,735,652 3,720,185
10951 Benicia Ind I (Stone) Benicia, CA 641,141 4,777,806 15,000,875 19,778,681
10961 Benicia Ind I (Getty Ct) Benicia, CA 33,250 1,134,212 3,435,885 4,570,096
11041 Concord North Comm Ctr Concord, CA 1,556,278 2,344,326 6,497,858 8,842,184
11071 Benicia Ind II Benicia, CA 3,129,710 4,107,912 14,980,402 19,088,313
11161 Port of Oakland Oakland, CA 83,585 1,708,799 5,159,671 6,868,470
11281 Baycenter Business Park III Hayward, CA 1,560,997 1,248,216 5,336,495 6,584,711
11291 Riverside Business Center Sacramento, CA 1,424,884 1,471,099 1,197,507 2,668,606
11551 Seaport Distribution Center W Sacramento, CA 556,626 1,180,994 - 1,180,994
11761 Huntwood Business Center Hayward, CA 34,254 2,929,335 8,822,259 11,751,593
11771 Fremont Commerce Center Fremont, CA 158,006 4,315,601 12,994,086 17,309,687
11881 Milimont R&D Fremont, CA - 1,806,606 5,419,919 7,226,524
11891 Kato R&D Fremont, CA - 2,002,504 6,007,610 8,010,115
12041 W. North Market Sacramento, CA 35,266 1,150,545 3,451,632 4,602,177
12051 Overland Court W Sacramento, CA 23,496 3,294,800 7,250,436 10,545,236
12091 Vintage Park Industrial Foster City, CA 218,062 25,531,280 70,993,759 96,525,040
12381 Hayward Business Park Hayward, CA 1,002,166 8,453,559 25,735,966 34,189,525
12421 Benicia Commerce Center II Benicia, CA - 1,722,991 - 1,722,991
12491 Vasco Business Center Livermore, CA 855,669 1,313,645 (6,607) 1,307,038
12571 Airway Business Park Livermore, CA - 3,875,096 - 3,875,096
12541 Skyway Landing -Land San Carlos, CA $0 $18,379,610 $0 $18,379,610
---------------------------------------------------------------
TOTAL $72,208,152 $253,312,871 $782,520,961 $1,035,833,832
===============================================================
SILICON VALLEY
10001 Santa Clara Office Center I Santa Clara, CA $2,999,512 $806,700 $3,729,002 $4,535,702
10021 Santa Clara Office Center II Santa Clara, CA 3,020,359 931,364 4,838,333 5,769,697
10031 Gateway Ofc. Phase I San Jose, CA 4,604,797 1,574,966 12,732,599 14,307,566
10051 Santa Clara Office Center III Santa Clara, CA 1,995,348 623,340 3,575,404 4,198,744
10081 Gateway Ofc. Phase II San Jose, CA 15,698,128 3,829,146 31,844,532 35,673,678
10131 The Alameda San Jose, CA 972,225 966,236 5,001,398 5,967,633
10141 Creekside Phase I San Jose, CA 4,046,490 10,965,419 11,985,579 22,950,999
10151 North First Ofc. Ctr. San Jose, CA 2,836,871 6,973,869 8,446,206 15,420,075
10251 Denny's Restaurant Santa Clara, CA 1,315 181,634 552,652 734,286
10321 Ryan Ranch Ofc. Ctr. Monterey, CA 1,796,965 2,093,355 4,735,944 6,829,298
10541 Lockheed Bldg. Palo Alto, CA 1,126,913 1,735,789 7,391,270 9,127,059
10551 Xerox Campus Palo Alto, CA 5,281,728 9,145,484 34,642,139 43,787,623
10561 Foothill Research Ctr. Palo Alto, CA 5,584,896 7,474,154 36,404,473 43,878,627
10671 2180 Sand Hill Road Menlo Park, CA 1,074,015 753,570 2,702,713 3,456,283
10701 McCarthy Milpitas, CA 660,931 845,039 4,613,400 5,458,439
10851 Ryan Ranch Off - Ph II Monterey, CA 457,048 565,580 2,469,051 3,034,631
11031 Ryan Ranch Office II Bldg D Monterey, CA 571,155 420,000 2,731,690 3,151,690
11151 2290 North First Street San Jose, CA 585,608 1,222,335 5,477,366 6,699,701
11311 Central Park Plaza Santa Clara, CA 1,340,177 9,622,273 26,163,153 35,785,427
11521 Metro Plaza San Jose, CA 575,266 14,789,132 59,727,455 74,516,587
</TABLE>
<TABLE>
<CAPTION>
CONSTRUCTION DEPRECIABLE
ACCUMULATED AND/OR LIVES
PROJECT LOCATION DEPRECIATION ACQUISITION (YEARS)
- ------- -------- ------------ ----------- -------
<S> <C> <C> <C> <C>
10621 Montgomery Ward Pleasant Hill, CA 881,986.53 1989 35-40
10631 Eden Landing Bus. Center Hayward, CA 516,668.86 1990 3-40
10641 Good Guys Dist. Center Hayward, CA 1,592,498.40 1990 5-40
10651 Fleetside Comrce Center Benicia, CA 935,257.87 1990 6-40
10661 Industrial Dr. Warehouse Fremont, CA 600,009.36 1993 3-40
10711 Redwood Shores Redwood City, CA 1,159,504.16 1987 7-40
10741 Baycenter Business Park I Hayward, CA 498,238.92 1994 3-40
10821 732-834 Striker Ave Sacramento, CA 342,970.38 1995 5-40
10931 Northgate Commerce Ctr Sacramento, CA 620,983.78 1995 10-40
10941 Doolittle Business Center San Leandro, CA 206,957.16 1996 12-40
10951 Benicia Ind I (Stone) Benicia, CA 1,080,062.25 1996 40
10961 Benicia Ind I (Getty Ct) Benicia, CA 257,129.45 1996 2-40
11041 Concord North Comm Ctr Concord, CA 691,485.49 1995 3-40
11071 Benicia Ind II Benicia, CA 1,126,744.26 1996 4-40
11161 Port of Oakland Oakland, CA 347,654.37 1996 3-40
11281 Baycenter Business Park III Hayward, CA 187,201.89 1996 5-40
11291 Riverside Business Center Sacramento, CA 184,973.68 1996 5-40
11551 Seaport Distribution Center W Sacramento, CA 0.00 1997 5-40
11761 Huntwood Business Center Hayward, CA 299,360.28 1997 3-40
11771 Fremont Commerce Center Fremont, CA 436,561.98 1997 1-40
11881 Milimont R&D Fremont, CA 146,789.50 1997 40
11891 Kato R&D Fremont, CA 162,706.18 1997 40
12041 W. North Market Sacramento, CA 93,481.70 1997 40
12051 Overland Court W Sacramento, CA 196,366.04 1997 40
12091 Vintage Park Industrial Foster City, CA 1,919,895.46 1997 5-40
12381 Hayward Business Park Hayward, CA 627,950.72 1998 3-40
12421 Benicia Commerce Center II Benicia, CA 0.00 1998 5-40
12491 Vasco Business Center Livermore, CA 0.00 1998 7-40
12571 Airway Business Park Livermore, CA 0.00 1998 40
12541 Skyway Landing -Land San Carlos, CA $0 1998 40
------------
TOTAL $61,372,180
============
SILICON VALLEY
10001 Santa Clara Office Center I Santa Clara, CA $1,192,080 1977 3-40
10021 Santa Clara Office Center II Santa Clara, CA 1,778,260 1980 2-40
10031 Gateway Ofc. Phase I San Jose, CA 4,849,826 1981 3-40
10051 Santa Clara Office Center III Santa Clara, CA 1,330,720 1981 3-40
10081 Gateway Ofc. Phase II San Jose, CA 11,446,399 1983 3-40
10131 The Alameda San Jose, CA 1,649,615 1984 3-40
10141 Creekside Phase I San Jose, CA 3,644,208 1985 5-40
10151 North First Ofc. Ctr. San Jose, CA 2,638,279 1985 3-40
10251 Denny's Restaurant Santa Clara, CA 149,528 1988 34-40
10321 Ryan Ranch Ofc. Ctr. Monterey, CA 1,422,453 1992 3-40
10541 Lockheed Bldg. Palo Alto, CA 2,061,654 1993 8-40
10551 Xerox Campus Palo Alto, CA 9,158,558 1993 8-40
10561 Foothill Research Ctr. Palo Alto, CA 10,619,284 1993 6-40
10671 2180 Sand Hill Road Menlo Park, CA 947,074 1973 3-40
10701 McCarthy Milpitas, CA 564,718 1994 1-40
10851 Ryan Ranch Off - Ph II Monterey, CA 413,685 1995 3-40
11031 Ryan Ranch Office II Bldg D Monterey, CA 283,181 1996 5-40
11151 2290 North First Street San Jose, CA 390,270 1996 3-40
11311 Central Park Plaza Santa Clara, CA 1,400,905 1996 2-40
11521 Metro Plaza San Jose, CA 2,749,512 1997 3-40
</TABLE>
46
<PAGE> 47
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST
--------------------------------
ENCUMBRANCES LAND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11531 1740 Technology San Jose, CA 20,670,230 7,918,598 31,710,229
11861 100 Moffett Mountain View, CA 1,140,758 3,119,916
12101 Ryan Ranch Office Lot 2 Monterey, CA 1,486,666 2,970,709
12191 Concourse San Jose, CA 51,969,773 120,464,859
12391 Skyprt Plaza San Jose, CA 31,519,209 25,368,821
10011 Stender Way II Santa Clara, CA 118,274 840,169
10041 Scott Blvd. Santa Clara, CA 128,623 583,455
10101 Stender Way I Santa Clara, CA 98,915 536,920
10111 Applied Materials I Santa Clara, CA 381,686 1,625,507
10121 Sunnyvale Business Center Santa Clara, CA 257,035 811,284
10161 Cupertino Business Center Cupertino, CA 3,876,840 3,970,597
10191 North American Van Lines San Jose, CA 2,191,699 4,999,710
10241 Applied Materials II Santa Clara, CA 1,402,048 651,943 3,392,605
10271 Aspect Building San Jose, CA 129,840 2,223,805 2,265,103
10301 Cadillac Court Milpitas, CA 98,592 959,042 1,493,087
10331 Ryan Ranch Industrial Monterey, CA 422,500 969,386
10371 Fremont Bayside Fremont, CA 6,435,831 1,245,617 2,704,137
10421 Patrick Henry Drive San Jose, CA 6,329 933,058 2,702,038
10431 COG Warehouse Milpitas, CA 471,379 2,616,039 1,907,937
10451 Okidata Distribution Center Milpitas, CA 331,613 1,854,892 1,750,086
10461 Pro Log Monterey, CA 780,000 1,148,054
10571 Montague Industr. Center Palo Alto, CA 1,482,000 5,131,899
10761 2905-2909 Stender Way Santa Clara, CA 385,992 1,174,719
10781 Meier - Central South Santa Clara, CA 2,571,112 7,177,524
10791 Meier - Mountain View Santa Clara, CA 3,222,019 5,265,351 14,236,164
10801 Meier - Central North Santa Clara, CA 1,753,361 4,740,570
10811 Meier - Sunnyvale Santa Clara, CA 352,776 953,800
10871 Walsh & Lafayette Ind Park Santa Clara, CA 3,359,291 7,803,602
10881 Ridder Park San Jose, CA 136,215 1,794,057 4,443,925
10901 Ryan Ranch - Lot 14B Monterey, CA 311,835 746,295
10911 Cadillac Court II Milpitas, CA 167,227 845,833 1,166,712
11231 Charcot Business Center San Jose, CA 2,988,923 9,091,293
11241 Airport Service Center San Jose, CA 668,283 2,013,558
11251 Dixon Landing North Milpitas, CA 6,254,151 8,068,464
11261 Kifer Road Industrial Park Sunnyvale, CA 3,530,775 10,731,346
11361 Ravendale at Central Mountain View, CA 2,018,673 6,064,095
11871 Oak Creek Milpitas, CA 5,702 2,040,639 6,095,607
11911 SoCalifornia Circle II Milpitas, CA 2,555,551 7,685,101
12011 Borregas Avenue Sunnyvale, CA 780,376 2,341,128
------------------------------------------------------
TOTAL $59,190,661 $219,593,139 $559,711,108
======================================================
SOUTHERN CALIFORNIA
10981 La Jolla Centre II San Diego, CA $3,252,653 $13,070,059
10991 One Pacific Heights San Diego, CA 3,089,433 8,365,526
11011 Pacific Point San Diego, CA 3,111,202 9,333,605
11061 Inwood Business Park Irvine, CA 2,232,769 8,956,722
11141 Carmel Valley Centre San Diego, CA 2,792,159 11,243,482
11171 Dove Street Newport Beach, CA 1,569,792 6,283,219
11221 Fairchild Corporate Center Irvine, CA 2,011,443 8,054,128
11271 One Pacific Plaza Huntington Beach, CA 2,020,971 8,088,154
11321 Corona Corporate Center Corona, CA 743,147 2,986,626
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
-------------------------------------------------
ADDITIONS LAND BUILDINGS AND
AND LAND IMP. AND BUILDING
PROJECT LOCATION IMPROVEMENTS LEASEHOLD INT. IMPROVEMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11531 1740 Technology San Jose, CA 1,833,408 7,918,598 31,807,104
11861 100 Moffett Mountain View, CA 393,630 1,140,758 3,084,373
12101 Ryan Ranch Office Lot 2 Monterey, CA 165,921 1,486,666 -
12191 Concourse San Jose, CA 26,345,244 51,969,773 120,456,272
12391 Skyprt Plaza San Jose, CA 2,344,235 31,519,209 25,368,821
10011 Stender Way II Santa Clara, CA 1,169,652 410,687 1,717,408
10041 Scott Blvd. Santa Clara, CA 1,831,378 554,191 1,989,265
10101 Stender Way I Santa Clara, CA 212,343 152,000 696,177
10111 Applied Materials I Santa Clara, CA 3,690 381,686 1,629,197
10121 Sunnyvale Business Center Santa Clara, CA 401,585 241,207 1,221,295
10161 Cupertino Business Center Cupertino, CA 997,898 4,082,078 4,648,256
10191 North American Van Lines San Jose, CA 49,412 2,199,552 5,041,269
10241 Applied Materials II Santa Clara, CA 3,040,850 1,270,250 5,815,148
10271 Aspect Building San Jose, CA 281,512 2,229,772 2,540,648
10301 Cadillac Court Milpitas, CA 784,661 1,131,026 2,093,778
10331 Ryan Ranch Industrial Monterey, CA 552,521 557,763 1,386,644
10371 Fremont Bayside Fremont, CA 289,429 1,247,069 2,992,114
10421 Patrick Henry Drive San Jose, CA 2,277,020 993,156 4,918,960
10431 COG Warehouse Milpitas, CA 1,086,032 3,093,192 2,516,816
10451 Okidata Distribution Center Milpitas, CA 358,753 2,210,130 1,753,601
10461 Pro Log Monterey, CA 342,838 1,121,135 1,149,758
10571 Montague Industr. Center Palo Alto, CA 6,239,020 2,820,461 9,809,032
10761 2905-2909 Stender Way Santa Clara, CA 252,357 385,992 1,391,253
10781 Meier - Central South Santa Clara, CA 367,599 2,571,112 7,478,323
10791 Meier - Mountain View Santa Clara, CA 113,396 5,265,351 14,349,560
10801 Meier - Central North Santa Clara, CA 50,426 1,753,361 4,790,996
10811 Meier - Sunnyvale Santa Clara, CA - 352,776 953,800
10871 Walsh & Lafayette Ind Park Santa Clara, CA 1,382,535 3,359,291 9,186,137
10881 Ridder Park San Jose, CA 2,012,184 1,794,057 6,456,109
10901 Ryan Ranch - Lot 14B Monterey, CA 260,181 311,835 1,006,476
10911 Cadillac Court II Milpitas, CA 667,138 845,833 1,833,850
11231 Charcot Business Center San Jose, CA 246,444 3,069,126 9,257,533
11241 Airport Service Center San Jose, CA 63,995 692,476 2,033,558
11251 Dixon Landing North Milpitas, CA 2,362,984 6,314,112 817,602
11261 Kifer Road Industrial Park Sunnyvale, CA 106,852 3,552,325 10,816,647
11361 Ravendale at Central Mountain View, CA 43,877 2,031,387 6,095,258
11871 Oak Creek Milpitas, CA - 2,040,639 6,095,607
11911 SoCalifornia Circle II Milpitas, CA 14,796 2,555,551 7,670,997
12011 Borregas Avenue Sunnyvale, CA 115,946 780,376 2,359,531
------------------------------------------------
TOTAL 114,291,488 $231,925,346 $594,993,534
================================================
SOUTHERN CALIFORNIA
10981 La Jolla Centre II San Diego, CA $634,473 $3,268,743 $13,442,448
10991 One Pacific Heights San Diego, CA 129,655 3,101,153 8,469,310
11011 Pacific Point San Diego, CA 337,503 3,111,202 9,659,051
11061 Inwood Business Park Irvine, CA 1,013,676 2,251,304 9,195,371
11141 Carmel Valley Centre San Diego, CA 603,518 2,796,624 11,487,130
11171 Dove Street Newport Beach, CA 347,914 1,569,792 6,327,675
11221 Fairchild Corporate Center Irvine, CA 787,535 2,028,596 8,408,586
11271 One Pacific Plaza Huntington Beach, CA 901,540 2,020,971 8,174,026
11321 Corona Corporate Center Corona, CA 14,054 743,147 2,998,607
</TABLE>
<TABLE>
<CAPTION>
CONSTRUCTION DEPRECIABLE
ACCUMULATED AND/OR LIVES
PROJECT LOCATION TOTAL DEPRECIATION ACQUISITION (YEARS)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11531 1740 Technology San Jose, CA 39,725,703 1,474,409 1997 3-40
11861 100 Moffett Mountain View, CA 4,225,131 83,535 1997 40
12101 Ryan Ranch Office Lot 2 Monterey, CA 1,486,666 - 1997 40
12191 Concourse San Jose, CA 172,426,046 3,049,905 1998 2-40
12391 Skyprt Plaza San Jose, CA 56,888,030 581,369 1998 40
10011 Stender Way II Santa Clara, CA 2,128,095 617,253 1978 4-40
10041 Scott Blvd. Santa Clara, CA 2,543,456 664,248 1976 4-40
10101 Stender Way I Santa Clara, CA 848,177 306,973 1978 20-40
10111 Applied Materials I Santa Clara, CA 2,010,883 969,418 1975 20-40
10121 Sunnyvale Business Center Santa Clara, CA 1,462,502 383,981 1987 4-40
10161 Cupertino Business Center Cupertino, CA 8,730,335 1,421,275 1985 32-40
10191 North American Van Lines San Jose, CA 7,240,821 1,328,424 1988 10-40
10241 Applied Materials II Santa Clara, CA 7,085,398 2,860,489 1979 16-40
10271 Aspect Building San Jose, CA 4,770,420 686,420 1989 6-40
10301 Cadillac Court Milpitas, CA 3,224,804 869,323 1991 5-40
10331 Ryan Ranch Industrial Monterey, CA 1,944,407 485,256 1991 5-40
10371 Fremont Bayside Fremont, CA 4,239,183 753,751 1990 3-40
10421 Patrick Henry Drive San Jose, CA 5,912,116 1,626,568 1991 12-40
10431 COG Warehouse Milpitas, CA 5,610,008 891,199 1992 11-40
10451 Okidata Distribution Center Milpitas, CA 3,963,731 343,490 1993 4-40
10461 Pro Log Monterey, CA 2,270,893 229,010 1993 12-40
10571 Montague Industr. Center Palo Alto, CA 12,629,493 4,436,980 1993 5-40
10761 2905-2909 Stender Way Santa Clara, CA 1,777,245 230,640 1995 6-40
10781 Meier - Central South Santa Clara, CA 10,049,435 777,310 1995 5-40
10791 Meier - Mountain View Santa Clara, CA 19,614,910 1,389,235 1995 5-40
10801 Meier - Central North Santa Clara, CA 6,544,357 460,725 1995 40
10811 Meier - Sunnyvale Santa Clara, CA 1,306,576 91,406 1995 40
10871 Walsh & Lafayette Ind Park Santa Clara, CA 12,545,428 1,055,825 1995 5-40
10881 Ridder Park San Jose, CA 8,250,165 554,547 1995 10-40
10901 Ryan Ranch - Lot 14B Monterey, CA 1,318,311 136,479 1995 4-40
10911 Cadillac Court II Milpitas, CA 2,679,683 333,288 1995 7-40
11231 Charcot Business Center San Jose, CA 12,326,659 525,153 1996 5-40
11241 Airport Service Center San Jose, CA 2,726,034 115,655 1996 5-40
11251 Dixon Landing North Milpitas, CA 7,131,714 121,206 1996 5-40
11261 Kifer Road Industrial Park Sunnyvale, CA 14,368,973 586,119 1996 4-40
11361 Ravendale at Central Mountain View, CA 8,126,645 304,620 1996 5-40
11871 Oak Creek Milpitas, CA 8,136,245 165,851 1997 40
11911 SoCalifornia Circle II Milpitas, CA 10,226,548 223,738 1997 40
12011 Borregas Avenue Sunnyvale, CA 3,139,907 73,913 1997 12-40
------------------------------
TOTAL $826,918,880 $89,899,194
==============================
SOUTHERN CALIFORNIA
10981 La Jolla Centre II San Diego, CA $16,711,190 $1,148,281 1995 4-40
10991 One Pacific Heights San Diego, CA 11,570,463 668,502 1995 4-40
11011 Pacific Point San Diego, CA 12,770,253 918,702 1995 4-40
11061 Inwood Business Park Irvine, CA 11,446,676 767,509 1995 3-40
11141 Carmel Valley Centre San Diego, CA 14,283,754 842,152 1996 1-40
11171 Dove Street Newport Beach, CA 7,897,466 414,138 1996 2-40
11221 Fairchild Corporate Center Irvine, CA 10,437,183 624,687 1996 3-40
11271 One Pacific Plaza Huntington Beach, CA 10,194,997 452,782 1996 3-40
11321 Corona Corporate Center Corona, CA 3,741,754 156,653 1996 3-40
</TABLE>
47
<PAGE> 48
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST
--------------------------------
ENCUMBRANCES LAND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11341 One Lakeshore Centre Ontario, CA 65,395 3,899,948 15,321,532
11351 Pacific View Plaza San Diego, CA 1,404,336 3,808,865
11381 La Place Court Carlsbad, CA 1,467,057 5,878,445
11391 Carmel View Office Plaza San Diego, CA 1,426,649 5,706,594
11401 The City Orange, CA 5,586,737 22,370,476
11431 Centerpark Plaza Two San Diego, CA 882,852 3,536,241
11451 Camino West Carlsbad, CA 980,334 3,921,333
11481 Brea Park Centre Brea, CA 3,525,337 9,558,103
11501 The City Orange County, CA 1,309,617 5,300,831
11571 Pasadena Financial Pasadena, CA 5,353,401 21,417,296
11581 Century Square Pasadena, CA 8,318,792 33,284,001
11591 Brea Corporate Plaza Brea, CA 2,958,418 8,000,717
11641 McKesson Building Pasadena, CA 5,159,033 13,949,317
11671 Arboretum Courtyard Santa Monica, CA 5,718,678 12,764,799
11691 Brea Place Brea, CA 5,254,525 14,206,679
11711 Sepulveda Center Los Angeles, CA 5,046,469 20,186,465
11721 Brea Corporate Place Brea, CA 2,388,158 41,631,215
11781 790 E Colorado Ave Pasadena, CA 3,868,533 15,474,257
11791 Tower Seventeen Irvine, CA 2,488,732 4,006,406 36,058,314
11811 Noble Corporate Plaza San Diego, CA 4,511,165 12,211,077
11821 Carlsbad Ranch Carlsbad, CA 3,873,656 6,463,269
11921 East Hills Office Park Anaheim, CA 2,166,615 5,935,400
11931 Stadium Towers Plaza Anaheim, CA 3,910,743 35,358,792
11971 Centerpoint Irvine I Irvine, CA 1,292,562 3,494,706
12061 Park Plaza San Diego, CA 2,550,500 6,873,088
12071 La Jolla Centre I La Jolla, CA 2,958,803 26,629,223
12131 Stadium Towers Land Anaheim, CA 3,652,063 362,611
12141 East Hills Land Anaheim, CA 1,720,330 -
12181 11999 San Vicente Los Angeles, CA 3,391,136 9,168,666
12251 City Tower Orange, CA 6,617,782 59,562,582
12261 City Plaza Orange, CA 5,526,355 22,105,420
12271 Marina Business Center Bldg 1 Marina Del Rey, CA 7,731,927 20,904,840
12281 Marina Business Center Bldg 2-4 Marina Del Rey, CA - -
12291 Cerritos Towne Center I-V Cerritos, CA - 54,197,825
12331 2600 Michelson Irvine, CA 5,800,810 52,282,800
12341 18581 Teller Irvine, CA 1,764,831 4,771,580
12351 Santa Monica Business Park A-L Santa Monica, CA - 94,067,662
12361 Santa Monica Business Park M-U Santa Monica, CA - -
12371 Santa Monica Business Pard SMA Santa Monica, CA 8,711,647 4,710,231 12,735,067
12461 Allegiance Center Ontario, CA 1,402,128 3,790,939
12501 Ontario Corporate Center Ontario, CA 2,097,546 8,390,436
12521 Parkshore Plaza Folsom, CA 1,578,273 8,932,396
12551 Kline Center II Ontario, CA 1,328,829 3,579,153
12561 Parkshore Plaza Phase II Folsom, CA 1,634,925 601,081
10071 Bakersfield Warehouse Bakersfield, CA 519,900 1,623,282
11001 Carlsbad Airport Plaza Carlsbad, CA 1,532,406 4,609,834
11191 Stadium Plaza Anaheim, CA 9,134,965 29,269,756
11211 Sorrento Vista San Diego, CA 2,745,889 6,100,721
11371 Centerpark Plaza One San Diego, CA 1,367,014 5,474,682
11421 Centerpark Plaza Two San Diego, CA 1,340,092 4,119,510
11491 Eastgate Technology Park La Jolla, CA 5,870,873 16,771,052
11941 Pacific Corporate Park San Diego, CA 2,757,590 8,601,592
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
-------------------------------------------------
ADDITIONS LAND BUILDINGS AND
AND LAND IMP. AND BUILDING
PROJECT LOCATION IMPROVEMENTS LEASEHOLD INT. IMPROVEMENTS
- -------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
11341 One Lakeshore Centre Ontario, CA 521,032 3,899,948 15,758,209
11351 Pacific View Plaza San Diego, CA 335,135 1,425,500 4,110,344
11381 La Place Court Carlsbad, CA 470,820 1,506,454 6,127,515
11391 Carmel View Office Plaza San Diego, CA 169,475 1,426,649 5,860,361
11401 The City Orange, CA 3,971,304 5,586,737 24,681,037
11431 Centerpark Plaza Two San Diego, CA 77,852 882,852 3,584,887
11451 Camino West Carlsbad, CA 65,115 980,334 3,967,178
11481 Brea Park Centre Brea, CA 1,036,995 3,525,337 9,932,885
11501 The City Orange County, CA 5,614,838 1,345,692 10,862,100
11571 Pasadena Financial Pasadena, CA 32,403 5,353,401 21,450,670
11581 Century Square Pasadena, CA 49,114 8,318,792 33,286,002
11591 Brea Corporate Plaza Brea, CA 909,111 3,011,503 8,164,213
11641 McKesson Building Pasadena, CA 121,852 5,159,033 13,949,317
11671 Arboretum Courtyard Santa Monica, CA - 5,718,678 -
11691 Brea Place Brea, CA 428,302 5,254,525 14,326,082
11711 Sepulveda Center Los Angeles, CA 755,807 5,046,469 20,216,152
11721 Brea Corporate Place Brea, CA 298,388 2,388,158 41,108,760
11781 790 E Colorado Ave Pasadena, CA 131,637 3,868,533 15,474,257
11791 Tower Seventeen Irvine, CA 502,934 4,006,406 36,197,281
11811 Noble Corporate Plaza San Diego, CA 104,550 4,511,165 12,281,957
11821 Carlsbad Ranch Carlsbad, CA 54,567 3,873,656 -
11921 East Hills Office Park Anaheim, CA 12,237 2,166,615 5,870,121
11931 Stadium Towers Plaza Anaheim, CA 840,813 3,910,743 35,196,106
11971 Centerpoint Irvine I Irvine, CA 109,364 1,292,562 3,494,706
12061 Park Plaza San Diego, CA 324,805 2,550,500 6,960,289
12071 La Jolla Centre I La Jolla, CA 459,849 2,958,803 26,995,550
12131 Stadium Towers Land Anaheim, CA - 3,652,063 1,025
12141 East Hills Land Anaheim, CA - 1,720,330 -
12181 11999 San Vicente Los Angeles, CA 346,825 3,391,136 9,168,666
12251 City Tower Orange, CA 827,520 6,617,782 59,765,360
12261 City Plaza Orange, CA 4,482,747 5,526,355 22,421,413
12271 Marina Business Center Bldg 1 Marina Del Rey, CA 91,889 7,731,927 20,904,840
12281 Marina Business Center Bldg 2-4 Marina Del Rey, CA 619,001 - -
12291 Cerritos Towne Center I-V Cerritos, CA 5,360,482 - 54,201,521
12331 2600 Michelson Irvine, CA 445,032 5,800,810 52,282,800
12341 18581 Teller Irvine, CA 255,949 1,764,831 4,771,580
12351 Santa Monica Business Park A-L Santa Monica, CA 378,593 - 94,067,662
12361 Santa Monica Business Park M-U Santa Monica, CA 293,751 - -
12371 Santa Monica Business Pard SMA Santa Monica, CA 495,727 4,710,231 12,738,317
12461 Allegiance Center Ontario, CA 329,650 1,402,128 3,790,939
12501 Ontario Corporate Center Ontario, CA 38,181 2,097,546 8,390,436
12521 Parkshore Plaza Folsom, CA 1,373,418 1,578,273 21
12551 Kline Center II Ontario, CA 6,165 1,328,829 3,579,153
12561 Parkshore Plaza Phase II Folsom, CA - 1,634,925 -
10071 Bakersfield Warehouse Bakersfield, CA 2,004,571 1,090,739 3,057,014
11001 Carlsbad Airport Plaza Carlsbad, CA 128,728 1,532,406 4,732,138
11191 Stadium Plaza Anaheim, CA 2,104,186 9,134,965 31,134,952
11211 Sorrento Vista San Diego, CA 823,665 2,745,889 6,924,386
11371 Centerpark Plaza One San Diego, CA 338,326 1,367,014 5,801,393
11421 Centerpark Plaza Two San Diego, CA 144,528 1,340,092 4,264,038
11491 Eastgate Technology Park La Jolla, CA 1,454,492 5,870,873 -
11941 Pacific Corporate Park San Diego, CA 169,692 2,818,139 8,707,050
</TABLE>
<TABLE>
<CAPTION>
CONSTRUCTION DEPRECIABLE
ACCUMULATED AND/OR LIVES
PROJECT LOCATION TOTAL DEPRECIATION ACQUISITION (YEARS)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11341 One Lakeshore Centre Ontario, CA 19,658,157 875,163 1996 3-40
11351 Pacific View Plaza San Diego, CA 5,535,843 258,668 1996 2-40
11381 La Place Court Carlsbad, CA 7,633,969 353,160 1997 4-30
11391 Carmel View Office Plaza San Diego, CA 7,287,009 291,085 1997 3-40
11401 The City Orange, CA 30,267,774 1,750,085 1996 5-40
11431 Centerpark Plaza Two San Diego, CA 4,467,739 180,147 1997 3-40
11451 Camino West Carlsbad, CA 4,947,511 199,527 1997 3-40
11481 Brea Park Centre Brea, CA 13,458,222 571,266 1997 3-40
11501 The City Orange County, CA 12,207,791 556,356 1996 10-40
11571 Pasadena Financial Pasadena, CA 26,804,071 937,922 1997 5-40
11581 Century Square Pasadena, CA 41,604,795 1,456,376 1997 10-40
11591 Brea Corporate Plaza Brea, CA 11,175,716 358,683 1997 3-40
11641 McKesson Building Pasadena, CA 19,108,350 552,161 1997 1-40
11671 Arboretum Courtyard Santa Monica, CA 5,718,678 - 1997 40
11691 Brea Place Brea, CA 19,580,607 516,098 1997 5-40
11711 Sepulveda Center Los Angeles, CA 25,262,621 680,828 1997 3-40
11721 Brea Corporate Place Brea, CA 43,496,918 1,464,560 1997 12-40
11781 790 E Colorado Ave Pasadena, CA 19,342,790 515,760 1997 40
11791 Tower Seventeen Irvine, CA 40,203,687 1,136,224 1997 3-40
11811 Noble Corporate Plaza San Diego, CA 16,793,122 418,285 1997 3-40
11821 Carlsbad Ranch Carlsbad, CA 3,873,656 - 1997 40
11921 East Hills Office Park Anaheim, CA 8,036,735 161,607 1997 5-10
11931 Stadium Towers Plaza Anaheim, CA 39,106,849 955,035 1997 3-40
11971 Centerpoint Irvine I Irvine, CA 4,787,268 95,390 1997 5-40
12061 Park Plaza San Diego, CA 9,510,788 210,069 1997 3-40
12071 La Jolla Centre I La Jolla, CA 29,954,352 892,925 1997 40
12131 Stadium Towers Land Anaheim, CA 3,653,088 - 1997 40
12141 East Hills Land Anaheim, CA 1,720,330 - 1997 40
12181 11999 San Vicente Los Angeles, CA 12,559,802 248,294 1997 2-40
12251 City Tower Orange, CA 66,383,142 1,391,787 1998 2-40
12261 City Plaza Orange, CA 27,947,769 532,282 1998 3-40
12271 Marina Business Center Bldg 1 Marina Del Rey, CA 28,636,767 498,037 1998 1-40
12281 Marina Business Center Bldg 2-4 Marina Del Rey, CA - - 1998 5-40
12291 Cerritos Towne Center I-V Cerritos, CA 54,201,521 716,247 1998 5-40
12331 2600 Michelson Irvine, CA 58,083,610 977,162 1998 3-40
12341 18581 Teller Irvine, CA 6,536,411 89,467 1998 40
12351 Santa Monica Business Park A-L Santa Monica, CA 94,067,662 2,136,331 1998 4-40
12361 Santa Monica Business Park M-U Santa Monica, CA - - 1998 5-9
12371 Santa Monica Business Pard SMA Santa Monica, CA 17,448,547 286,123 1998 3-40
12461 Allegiance Center Ontario, CA 5,193,067 71,080 1998 2-40
12501 Ontario Corporate Center Ontario, CA 10,487,982 174,801 1998 4-40
12521 Parkshore Plaza Folsom, CA 1,578,295 - 1998 4-40
12551 Kline Center II Ontario, CA 4,907,982 22,370 1998 40
12561 Parkshore Plaza Phase II Folsom, CA 1,634,925 - 1998 40
10071 Bakersfield Warehouse Bakersfield, CA 4,147,753 1,137,920 1982 20-40
11001 Carlsbad Airport Plaza Carlsbad, CA 6,264,544 420,273 1995 5-40
11191 Stadium Plaza Anaheim, CA 40,269,918 1,912,092 1996 3-40
11211 Sorrento Vista San Diego, CA 9,670,275 309,703 1996 3-40
11371 Centerpark Plaza One San Diego, CA 7,168,407 321,352 1997 3-40
11421 Centerpark Plaza Two San Diego, CA 5,604,131 256,714 1997 3-40
11491 Eastgate Technology Park La Jolla, CA 5,870,873 - 1997 7-40
11941 Pacific Corporate Park San Diego, CA 11,525,189 291,354 1997 2-40
</TABLE>
48
<PAGE> 49
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST
--------------------------------
ENCUMBRANCES LAND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11951 Sorrento Tech I, II & III San Diego, CA 2,686,323 7,270,872
11961 Westridge I San Diego, CA 1,712,464 4,630,094
12431 SoCalifornia Federal Land Orange, CA 130,102 -
12451 City South Land Orange, CA 1,117,832 1,750
12511 Carlsbad Centerpointe-Land Carlsbad, CA 4,776,886 672,211
------------------------------------------------------
TOTAL $11,265,774 $195,292,393 $910,320,972
======================================================
PACIFIC NORTHWEST
20021 Federal Way Office Fed Way, WA $297,202 $765,990
20041 Bellevue Gtwy I Bellevue, WA 2,681,773 6,059,838
20051 Bellevue Gateway II Bellevue, WA 1,201,588 4,859,552
20061 Main Street Office Bellevue, WA 12,375 1,917,015 1,385,821
20181 North Creek Parkway Centre Bothell, WA 6,104,971 16,506,048
20211 Bellefield Office Park Bellevue, WA 12,410,003 6,573,539 29,775,354
20241 10700 Building Bellevue, WA 8,128 24,384 4,668,923
20281 ABAM Building Federal Way, WA 1,332,001 3,601,961
20311 Washington Park I & II Federal Way, WA 2,116,789 4,033,560
20341 Southgate Office
Plaza I, II & III Renton, WA 9,382 4,972,280 26,037,740
20351 Plaza Center Bellevue, WA 54,504 8,118,890 72,519,863
20371 Gateway 405 Bellevue, WA 1,328,676 3,590,766
40001 Key Financial Tower Boise, ID 236,500 2,864,931
30091 5550 Macadam Office Portland, OR 764,081 3,646,922
30111 River Forum Portland, OR 2,462,767 16,637,177
30121 Kruse Way Portland, OR - 2,785,451 7,911,320
30131 4004 S.W. Kruse Way Place Lake Oswego, OR - 981,486 4,012,624
30171 4949 Meadows Building Lake Oswego, OR 208,998 2,661,561 11,027,806
30191 Riverside Centre Portland, OR - 9,291,612
30241 One Pacific Square Portland, OR 26,721 3,612,427 32,258,089
30261 Kruseway Plaza I & II Lake Oswego, OR - 4,140,680 11,195,672
30271 Kruse Woods Lake Oswego, OR 15,286 29,282,892 64,599,227
30281 4800 Meadows Lake Oswego, OR 104,785 1,766,115 7,953,618
30301 Benjamin Franklin Plaza Portland, OR 5,009,308 45,084,342
20001 West Valley Business Ctr Kent, WA 47,625 681,200 2,124,967
20011 Cascade Comrce. Park Kent, WA 36,443 2,430,989 5,005,502
20031 Valley Freeway Bus. Center Kent, WA 1,061,293 2,243,650
20071 Woodinville Corp. Center I Woodinville, WA 1,321,071 3,712,131
20081 Woodinville Corp. Center II Woodinville, WA 1,851,708 6,391,154
20111 Georgetown Center Seattle, WA 4,274,197 4,165,405
20121 City Commerce Park Seattle, WA 1,855,377 2,548,461
20151 Millcreek Distribution Ctr Kent, WA - 2,541,162 7,738,028
20161 Sea-Tac Industrial Park SeaTac, WA 1,953,528 5,538,926
20171 Valley Industrial Park Kent, WA 23,961 6,765,505 17,221,447
20221 Woodinville Corp Ctr Woodinville, WA 2,588,694 5,996,128
20231 Everett Industrial Center Everett, WA - 1,863,532 5,585,864
20251 Everett 526 Everett, WA 1,087,615 3,284,524
20261 Southcenter West Business Park Tukwila, WA 6,451,183
20271 Kirkland 118 Commerce Ctr Kirkland, WA 1,195,205 2,827,215
20321 Redmond Heights Tech Center Redmond, WA 32,760 3,136,545 9,256,994
40011 Cole Rd. Warehouse Boise, ID 290,220 103,617 416,506
30001 Park 217 I Portland, OR 1,359,958 2,346,881
30011 Park 217 Phase II Portland, OR 490,845 1,762,678
30021 Park 217 Phase III Portland, OR 101,555 601,310
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
-------------------------------------------------
ADDITIONS LAND BUILDINGS AND
AND LAND IMP. AND BUILDING
PROJECT LOCATION IMPROVEMENTS LEASEHOLD INT. IMPROVEMENTS
- ------------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
11951 Sorrento Tech I, II & III San Diego, CA 15,860 2,686,323 7,263,117
11961 Westridge I San Diego, CA $0 $1,712,464 $4,630,094
12431 SoCalifornia Federal Land Orange, CA - 130,102 -
12451 City South Land Orange, CA - 1,117,832 -
12511 Carlsbad Centerpointe-Land Carlsbad, CA - 4,776,886 226
--------------------------------------------------
TOTAL $44,697,146 $196,141,464 $880,616,324
==================================================
PACIFIC NORTHWEST
20021 Federal Way Office Fed Way, WA $182,405 $297,202 $948,395
20041 Bellevue Gtwy I Bellevue, WA 7,264,000 4,526,668 11,478,942
20051 Bellevue Gateway II Bellevue, WA 2,665,096 1,867,498 6,848,534
20061 Main Street Office Bellevue, WA 572,012 1,927,586 1,936,123
20181 North Creek Parkway Centre Bothell, WA 386,831 6,129,225 16,900,024
20211 Bellefield Office Park Bellevue, WA 8,730,799 7,697,616 37,067,981
20241 10700 Building Bellevue, WA 221,763 24,384 4,715,797
20281 ABAM Building Federal Way, WA 245,170 1,332,001 3,837,297
20311 Washington Park I & II Federal Way, WA 255,372 2,116,789 4,087,120
20341 Southgate Office
Plaza I, II & III Renton, WA 340,167 4,972,280 26,103,668
20351 Plaza Center Bellevue, WA 1,619,342 8,118,890 72,721,584
20371 Gateway 405 Bellevue, WA - 1,328,676 3,590,766
40001 Key Financial Tower Boise, ID 5,142,190 302,677 7,946,269
30091 5550 Macadam Office Portland, OR 277,825 765,083 3,933,350
30111 River Forum Portland, OR 1,029,149 2,462,767 17,665,196
30121 Kruse Way Portland, OR 1,131,991 2,825,101 8,953,060
30131 4004 S.W. Kruse Way Place Lake Oswego, OR 1,481,426 1,422,662 5,052,875
30171 4949 Meadows Building Lake Oswego, OR 2,696,850 3,646,668 12,869,848
30191 Riverside Centre Portland, OR 88,514 - 9,380,127
30241 One Pacific Square Portland, OR 317,443 3,612,427 32,551,144
30261 Kruseway Plaza I & II Lake Oswego, OR 355,033 4,140,680 11,478,546
30271 Kruse Woods Lake Oswego, OR 4,279,483 29,849,197 67,186,721
30281 4800 Meadows Lake Oswego, OR 278,021 1,766,115 -
30301 Benjamin Franklin Plaza Portland, OR 1,188,152 5,009,308 46,258,431
20001 West Valley Business Ctr Kent, WA 2,326,083 1,286,458 3,762,664
20011 Cascade Comrce. Park Kent, WA 1,733,661 3,129,620 6,045,827
20031 Valley Freeway Bus. Center Kent, WA 243,262 1,262,572 2,285,633
20071 Woodinville Corp. Center I Woodinville, WA 505,971 1,740,944 3,803,578
20081 Woodinville Corp. Center II Woodinville, WA 2,882,949 4,258,675 6,867,137
20111 Georgetown Center Seattle, WA 555,602 4,517,411 4,474,248
20121 City Commerce Park Seattle, WA 1,390,407 2,218,399 3,575,846
20151 Millcreek Distribution Ctr Kent, WA 167,040 2,541,162 7,902,498
20161 Sea-Tac Industrial Park SeaTac, WA 70,634 1,953,528 5,609,560
20171 Valley Industrial Park Kent, WA 929,941 6,981,280 17,755,964
20221 Woodinville Corp Ctr Woodinville, WA 3,625,747 4,160,957 8,049,613
20231 Everett Industrial Center Everett, WA 666,675 1,863,532 6,252,530
20251 Everett 526 Everett, WA 15,046 1,087,615 3,299,569
20261 Southcenter West Business Park Tukwila, WA 163,221 - 6,589,725
20271 Kirkland 118 Commerce Ctr Kirkland, WA 2,138,077 2,299,292 3,861,180
20321 Redmond Heights Tech Center Redmond, WA 113,857 3,174,399 9,332,997
40011 Cole Rd. Warehouse Boise, ID 330,616 114,465 736,274
30001 Park 217 I Portland, OR 3,672,759 2,483,105 4,885,166
30011 Park 217 Phase II Portland, OR 1,500,008 780,261 2,973,270
30021 Park 217 Phase III Portland, OR 216,628 132,615 771,904
</TABLE>
<TABLE>
<CAPTION>
CONSTRUCTION DEPRECIABLE
ACCUMULATED AND/OR LIVES
PROJECT LOCATION TOTAL DEPRECIATION ACQUISITION (YEARS)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11951 Sorrento Tech I, II & III San Diego, CA 9,949,440 197,451 1997 40
11961 Westridge I San Diego, CA $6,342,558 $126,140 1997 40
12431 SoCalifornia Federal Land Orange, CA 130,102 - 1998 40
12451 City South Land Orange, CA 1,117,832 - 1998 40
12511 Carlsbad Centerpointe-Land Carlsbad, CA 4,777,112 - 1998 40
------------------------------
TOTAL $1,076,757,788 $33,497,765
==============================
PACIFIC NORTHWEST
20021 Federal Way Office Fed Way, WA $1,245,597 $234,331 1989 20-40
20041 Bellevue Gtwy I Bellevue, WA 16,005,611 3,380,704 1985 2-40
20051 Bellevue Gateway II Bellevue, WA 8,716,033 1,784,725 1988 3-40
20061 Main Street Office Bellevue, WA 3,863,709 499,193 1990 2-40
20181 North Creek Parkway Centre Bothell, WA 23,029,249 848,818 1997 5-40
20211 Bellefield Office Park Bellevue, WA 44,765,597 2,916,132 1995 3-40
20241 10700 Building Bellevue, WA 4,740,181 401,068 1996 5-40
20281 ABAM Building Federal Way, WA 5,169,298 99,874 1997 7-40
20311 Washington Park I & II Federal Way, WA 6,203,910 136,785 1997 6-40
20341 Southgate Office
Plaza I, II & III Renton, WA 31,075,948 813,891 1997 40
20351 Plaza Center Bellevue, WA 80,840,475 2,130,448 1997 3-40
20371 Gateway 405 Bellevue, WA 4,919,442 7,481 1997 40
40001 Key Financial Tower Boise, ID 8,248,946 2,943,233 1977 5-40
30091 5550 Macadam Office Portland, OR 4,698,433 979,604 1990 3-40
30111 River Forum Portland, OR 20,127,963 2,255,217 1994 5-40
30121 Kruse Way Portland, OR 11,778,161 1,029,134 1994 5-40
30131 4004 S.W. Kruse Way Place Lake Oswego, OR 6,475,536 866,876 1995 3-40
30171 4949 Meadows Building Lake Oswego, OR 16,516,515 604,067 1996 5-40
30191 Riverside Centre Portland, OR 9,380,127 432,270 1997 5-40
30241 One Pacific Square Portland, OR 36,163,570 893,827 1997 1-40
30261 Kruseway Plaza I & II Lake Oswego, OR 15,619,226 335,490 1997 4-40
30271 Kruse Woods Lake Oswego, OR 97,035,918 1,689,652 1997 1-40
30281 4800 Meadows Lake Oswego, OR 1,766,115 - 1997 5-40
30301 Benjamin Franklin Plaza Portland, OR 51,267,739 761,692 1998 3-40
20001 West Valley Business Ctr Kent, WA 5,049,122 1,495,232 1980 20-40
20011 Cascade Comrce. Park Kent, WA 9,175,447 1,448,041 1989 5-40
20031 Valley Freeway Bus. Center Kent, WA 3,548,205 576,680 1990 7-40
20071 Woodinville Corp. Center I Woodinville, WA 5,544,522 1,192,763 1988 3-40
20081 Woodinville Corp. Center II Woodinville, WA 11,125,812 1,970,737 1991 4-40
20111 Georgetown Center Seattle, WA 8,991,659 1,404,857 1984 5-40
20121 City Commerce Park Seattle, WA 5,794,244 1,018,487 1988 5-40
20151 Millcreek Distribution Ctr Kent, WA 10,443,661 883,085 1994 5-40
20161 Sea-Tac Industrial Park SeaTac, WA 7,563,088 598,906 1994 4-40
20171 Valley Industrial Park Kent, WA 24,737,244 1,967,727 1994 3-40
20221 Woodinville Corp Ctr Woodinville, WA 12,210,570 1,261,609 1995 5-40
20231 Everett Industrial Center Everett, WA 8,116,062 450,510 1996 12-40
20251 Everett 526 Everett, WA 4,387,184 214,366 1996 12-40
20261 Southcenter West Business Park Tukwila, WA 6,589,725 330,811 1997 2-40
20271 Kirkland 118 Commerce Ctr Kirkland, WA 6,160,472 135,739 1997 4-40
20321 Redmond Heights Tech Center Redmond, WA 12,507,396 310,072 1997 1-40
40011 Cole Rd. Warehouse Boise, ID 850,739 265,587 1976 6-40
30001 Park 217 I Portland, OR 7,368,272 1,918,460 1980 5-40
30011 Park 217 Phase II Portland, OR 3,753,531 1,119,871 1981 10-40
30021 Park 217 Phase III Portland, OR 904,519 390,157 1981 5-40
</TABLE>
49
<PAGE> 50
SPIEKER PROPERTIES, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INITIAL COST
--------------------------------
ENCUMBRANCES LAND AND
PROJECT LOCATION AND LIENS (1) LEASEHOLD INTEREST BUILDINGS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
30041 Swan Island Portland, OR 823,039 290,504 758,714
30051 Columbia Commerce Park Portland, OR 1,939,782 6,606,003
30071 Nelson Business Center I&II Tigard, OR 23,732 3,454,590 5,905,233
30081 SW Commerce Ctr. Portland, OR 499,146 1,390,426
30101 Columbia IV Portland, OR 55,468 889,345 4,430,444
30141 Marine Dr Distribution Ctr Portland, OR 1,166,743 3,509,787
30151 Marine Drive Dist. Ctr II Portland, OR 622,307 1,958,595
30161 Airport Way Commerce Park Portland, OR 423,037 2,134,252 3,791,017
30181 Marine Drive Dist. Ctr III Portland, OR 1,760,241 4,444,965
30201 158th Commerce Park Portland, OR 191,190 2,871,441 7,384,928
30211 Nimbus Corp. Ctr Beaverton, OR 91,103 17,726,282 52,792,538
30221 Parkway Industrial Wilsonville, OR 1,878,731 5,619,196
30231 Kelley Point Distribution Ctr Portland, OR 4,108,593 12,325,778
30251 Wilsonville Wilsonville, OR 66,677 10,384,072 19,747,622
30311 181st Commerce Park Gresham, Or 7,582,642 183,357
30291 Kruse Oaks-Land Lake Oswego, OR 13,218,483 1,014,203
------------------------------------------------------
TOTAL $14,955,437 $197,563,123 $617,370,518
======================================================
GRAND TOTAL $116,442,210 $859,006,771 $2,902,683,865
======================================================
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT CLOSE OF PERIOD
-------------------------------------------------
ADDITIONS LAND BUILDINGS AND
AND LAND IMP. AND BUILDING
PROJECT LOCATION IMPROVEMENTS LEASEHOLD INT. IMPROVEMENTS
- ---------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
30041 Swan Island Portland, OR 452,115 369,011 1,132,321
30051 Columbia Commerce Park Portland, OR 2,415,648 2,527,306 8,379,959
30071 Nelson Business Center I&II Tigard, OR 4,204,250 4,944,462 8,641,217
30081 SW Commerce Ctr. Portland, OR 804,796 707,816 1,989,916
30101 Columbia IV Portland, OR 37,876 889,345 4,468,320
30141 Marine Dr Distribution Ctr Portland, OR 1,519,766 1,870,511 4,325,785
30151 Marine Drive Dist. Ctr II Portland, OR 508,085 1,117,248 1,971,739
30161 Airport Way Commerce Park Portland, OR 2,321,247 3,187,202 5,054,362
30181 Marine Drive Dist. Ctr III Portland, OR 1,926,941 2,862,229 5,269,918
30201 158th Commerce Park Portland, OR 4,360,752 5,298,199 9,318,001
30211 Nimbus Corp. Ctr Beaverton, OR 1,783,551 17,732,570 54,506,985
30221 Parkway Industrial Wilsonville, OR 46,336 1,878,731 5,665,532
30231 Kelley Point Distribution Ctr Portland, OR 614,223 4,108,593 12,940,000
30251 Wilsonville Wilsonville, OR 418,437 10,398,044 20,148,193
30311 181st Commerce Park Gresham, Or - 7,582,642 -
30291 Kruse Oaks-Land Lake Oswego, OR - 13,218,483 318
---------------------------------------------------
TOTAL $85,411,238 $220,820,179 $666,159,546
===================================================
GRAND TOTAL $316,608,024 $902,199,860 $2,924,290,366
===================================================
</TABLE>
<TABLE>
<CAPTION>
CONSTRUCTION DEPRECIABLE
ACCUMULATED AND/OR LIVES
PROJECT LOCATION TOTAL DEPRECIATION ACQUISITION (YEARS)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
30041 Swan Island Portland, OR 1,501,333 452,896 1978 5-40
30051 Columbia Commerce Park Portland, OR 10,907,265 2,066,942 1988 3-40
30071 Nelson Business Center I&II Tigard, OR 13,585,678 1,882,075 1990 3-40
30081 SW Commerce Ctr. Portland, OR 2,697,732 592,543 1989 5-40
30101 Columbia IV Portland, OR 5,357,664 524,374 1994 40
30141 Marine Dr Distribution Ctr Portland, OR 6,196,296 691,222 1995 5-40
30151 Marine Drive Dist. Ctr II Portland, OR 3,088,987 154,017 1996 5-40
30161 Airport Way Commerce Park Portland, OR 8,241,563 667,153 1996 3-40
30181 Marine Drive Dist. Ctr III Portland, OR 8,132,147 342,105 1996 4-40
30201 158th Commerce Park Portland, OR 14,616,199 307,669 1997 2-40
30211 Nimbus Corp. Ctr Beaverton, OR 72,239,555 2,056,285 1997 4-40
30221 Parkway Industrial Wilsonville, OR 7,544,263 201,343 1997 12-40
30231 Kelley Point Distribution Ctr Portland, OR 17,048,593 465,953 1997 3-40
30251 Wilsonville Wilsonville, OR 30,546,237 606,773 1997 5-40
30311 181st Commerce Park Gresham, Or 7,582,642 - 1998 40
30291 Kruse Oaks-Land Lake Oswego, OR 13,218,801 - 1998 40
------------------------------
TOTAL $886,979,725 $56,009,558
==============================
GRAND TOTAL $3,826,490,225 $240,778,697
==============================
</TABLE>
50
<PAGE> 51
16. REAL ESTATE AND ACCUMULATED DEPRECIATION
A summary of activity for real estate and accumulated depreciation is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REAL ESTATE:
Balance at beginning of year $ 2,943,711 $ 1,315,060 $ 1,098,871
Acquisition of properties and
limited partners' interests 1,141,633 1,526,012 340,298
Improvements 102,308 127,889 67,537
Cost of real estate disposed of (18,549) (15,804) (42,206)
Property held for disposition (75,556) (6,250) (133,971)
Disposition of and write-off of
fully depreciated property (11,347) (3,196) (15,469)
----------- ----------- -----------
Balance at end of year $ 4,082,200 $ 2,943,711 $ 1,315,060
=========== =========== ===========
ACCUMULATED DEPRECIATION:
Balance at beginning of year $ 169,051 $ 127,701 $ 124,612
Depreciation expense 87,638 48,536 33,487
Disposal of property (2,152) (3,834) (3,102)
Property held for disposition (2,412) (156) (11,827)
Disposition of and write-off of
fully depreciated property (11,347) (3,196) (15,469)
----------- ----------- -----------
Balance at end of year $ 240,778 $ 169,051 $ 127,701
=========== =========== ===========
</TABLE>
The aggregate cost for federal income tax purposes of real estate as of December
31, 1998, was $3,759,241.
51
<PAGE> 52
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 30, 1999 /s/ Warren E. Spieker, Jr
------------------- -------------------------------------------
Warren E. Spieker, Jr.
Chairman of the Board, Director and Chief
Executive Officer
Dated: March 30, 1999 /s/ Dennis E. Singleton
------------------- ------------------------------------------
Dennis E. Singleton
Vice Chairman of the Board
Dated: March 30, 1999 /s/ John K. French
------------------- -------------------------------------------
John K. French
Director, Executive Vice President and Chief
Operating Officer
Dated: March 30, 1999 /s/ John A. Foster
------------------- -------------------------------------------
John A. Foster
Executive Vice President and Chief Investment
Officer
Dated: March 30, 1999 /s/ Craig G. Vought
------------------- -------------------------------------------
Craig G. Vought
Executive Vice President and Chief Financial
Officer
Dated: March 30, 1999 /s/ Harold M. Messmer
------------------- -------------------------------------------
Harold M. Messmer
Director
Dated: March 30, 1999 /s/ Elke Strunka
------------------- -------------------------------------------
Elke Strunka
Vice President and Principal Accounting
Officer
52
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Menlo Park,
California on the 25th day of March, 1999.
SPIEKER PROPERTIES, L.P.
By: /s/ Elke Strunka
-------------------------------------
Elke Strunka
Vice President and Principal
Accounting Officer
53
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
3.1A Articles of Amendment of Spieker Properties, Inc. (incorporated
by reference to Exhibit 3.1A to Spieker Properties, Inc.'s Report
on Form 10-K for the year ended December 31, 1996)
3.2 Bylaws of Spieker Properties, Inc. (1)
3.3 Articles Supplementary of Spieker Properties, Inc. for Series A
Preferred Stock (incorporated by reference to Exhibit 4.2 to
Spieker Properties, Inc.'s Report on Form 10-Q for the quarter
ended March 31, 1994)
3.4 Articles Supplementary of Spieker Properties, Inc. for Class B
Common Stock (incorporated by reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Report on Form 10-Q for the quarter ended
March 31, 1995)
3.5 Articles Supplementary of Spieker Properties, Inc. for the Series
B Preferred Stock (2)
3.6 Articles Supplementary of Spieker Properties, Inc. for the Class
C Common Stock (2)
3.7 Articles Supplementary of Spieker Properties, Inc. for the Series
C Preferred Stock (incorporated by reference to Exhibit 3.1 to
Spieker Properties, Inc.'s Report on Form 10-Q for the quarter
ended September 30, 1997)
3.8 Articles Supplementary of Spieker Properties, Inc. for the Series
D Preferred Stock
3.9 Articles Supplementary of Spieker Properties, Inc. for the Series
E Preferred Stock (incorporated by reference to Exhibit 3.1 to
Spieker Properties, Inc.'s Report on Form 8-K dated June 4, 1998)
3.10 Rights Agreement, which includes as Exhibit A the Form of Rights
Certificate and Election to Exercise and as Exhibit B the Form of
Articles Supplementary (incorporated by reference to Exhibit 4 to
Spieker Properties, Inc.'s Report on Form 8-K dated September 22,
1998)
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K
(1)
4.2 Intentionally omitted
4.3 Series A Preferred Stock Purchase Agreement, (incorporated by
reference to Exhibit 4.1 to Spieker Properties, Inc.'s Form 10-Q
Report for the quarter ended March 31, 1994)
4.4 Investor Rights Agreement relating to A Series Preferred Stock
(incorporated by reference to Exhibit 4.3 to Spieker Properties,
Inc.'s Form 10-Q Report for the quarter ended March 31, 1994)
4.5 Indenture dated as December 6, 1995, among Spieker Properties,
L.P., Spieker Properties, Inc. and State Bank and Trust, as
Trustee (2)
4.6 First Supplemental Indenture relating to the 2000 Notes, the 2000
Note and Guarantee (2)
4.7 Second Supplemental Indenture relating to the 2001 Notes, 2001
Note and Guarantee (2)
4.8 Third Supplemental Indenture relating to the 2002 Notes, the 2002
Note and Guarantee (2)
4.9 Fourth Supplemental Indenture relating to the 2004 Notes and the
2004 Note (2)
4.10 Class B Common Stock Purchase Agreement (incorporated by
reference to Exhibit 4.1 to Spieker Properties, Inc.'s Form 10-Q
Report for the quarter ended March 31, 1994)
4.11 Investor's Rights Agreement relating to Class B Common Stocks
(incorporated by reference to Exhibit 4.3 to Spieker Properties,
Inc.'s Form 10-Q Report for the quarter ended March 31, 1994)
4.12 Class C Common Stock Purchase Agreement (2)
4.13 Investor's Rights Agreement relating to Class C Common Stock (2)
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 (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 (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)
4.17 Eighth Supplemental Indenture relating to the 7.125% Notes Due
2009 (incorporated by reference to Exhibit 4.9 of Spieker
Properties, Inc.'s Registration statement on Form S-3 (File No.
333-35997))
</TABLE>
26
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
4.18 Ninth Supplemental Indenture relating to the 7.50% Debentures Due
2027 (incorporated by reference to Exhibit 4.1 Spieker
Properties, Inc.'s Report on Form 10-Q for the quarter ended
September 30, 1997)
4.19 Tenth Supplemental Indenture relating to the 7.35% Debentures Due
2017 (incorporated by reference to Exhibit 4.1 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
4.20 Eleventh Supplemental Indenture relating to the 6.75% Notes Due
2008 (incorporated by reference to Exhibit 4.2 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
4.21 Twelfth Supplemental Indenture relating to the 6.875% Notes Due
2006 (incorporated by reference to Exhibit 4.3 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
4.22 Thirteenth Supplemental Indenture relating to the 7% Notes Due
2007 (incorporated by reference to Exhibit 4.1 Spieker
Properties, Inc.'s Current Report on Form 8-K dated January 30,
1998)
10.1 Second Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P.
10.2 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of Spieker Properties, L.P.
10.3 Credit Agreement among Spieker Properties, L.P., as borrower,
Wells Fargo Bank, as Agent, Morgan Guaranty Trust Company of New
York, as Documentation Agent, and the lenders named therein,
dated as of August 8, 1997, and Loan Notes pursuant to such
Credit Agreement (incorporated by reference to Exhibit 10.16 to
Spieker Properties, Inc.'s Current Report on Form 8-K dated
September 22, 1997)
10.4* 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)
10.5* Form of Spieker Merit Plan (1)
10.6* 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)
10.7 Form of Indemnification Agreement between Spieker Properties,
Inc. 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))
10.8 Form of Land Holding Agreement among Spieker Properties, Inc.,
Spieker Northwest, Inc., Spieker Properties, L.P. 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))
10.9* 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))
10.10 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))
10.11* Amended and Restated Spieker Properties, Inc. 1993 Directors'
Stock Option Plan (incorporated by reference to Exhibit 4.2 to
Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996)
10.12 Second Amendment to Second Amended and Restated Agreement of
United Partnership of Spieker Properties, L.P. (incorporated by
reference to Exhibit 3.1 to Spieker Properties, L.P.'s Report on
Form-Q/A for the quarterly period ended June 30, 1998)
10.13 Third Amendment to Second Amended and Restated Agreement to
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, Inc.
23.1 Consent of Independent Public Accountants
27.1 Article 5 Financial Data Schedule (Edgar Filing Only)
</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.
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995.
<PAGE> 1
EXHIBIT 3.8
SPIEKER PROPERTIES, INC.
ARTICLES SUPPLEMENTARY
SPIEKER PROPERTIES, INC., a Maryland corporation, having its principal
office in the City of Baltimore, Maryland (the "Corporation"), hereby certifies
to the Maryland State Department of Assessments and Taxation that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by the Charter of the Corporation, the Board of Directors has
duly reclassified 1,500,000 shares of the Common Stock (par value $.0001 per
share) of the Corporation into 1,500,000 shares of a class designated as Series
D Cumulative Redeemable Preferred Stock (par value $.0001 per share) of the
Corporation ("Series D Preferred Stock") and has provided for the issuance of
such shares.
SECOND: The reclassification increases the number of shares classified
as Series D Preferred Stock from no shares immediately prior to the
reclassification to 1,500,000 shares immediately after the reclassification. The
reclassification decreases the number of shares classified as Common Stock (par
value $.0001 per share) from 654,500,000 shares immediately prior to the
reclassification to 653,000,000 shares immediately after the reclassification.
THIRD: Subject in all cases to the provisions of Article NINTH of the
Charter of the Corporation with respect to Excess Stock, the following is a
description of the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of Series D Preferred Stock of the Corporation:
1. DESIGNATION AND AMOUNT.
The designation of Series D Preferred Stock described in
Article FIRST hereof shall be "Series D Cumulative Redeemable Preferred
Stock (par value $.0001 per share)." The number of shares of Series D
Preferred Stock to be authorized shall be 1,500,000. The Series A
Preferred Stock, par value $.0001 per share ("Series A Preferred
Stock"), the Series B Cumulative Redeemable Preferred Stock, par value
$.0001 per share ("Series B Preferred Stock") and the Series C
Cumulative Redeemable Preferred Stock, par value $.0001 per share
("Series C Preferred Stock"), and the Series D Preferred Stock of the
Corporation rank on a parity as to dividends and amounts upon
liquidation, dissolution or winding up of the affairs of the
Corporation.
Series D Preferred Stock will, with respect to dividends
and amounts upon liquidation, dissolution or winding up of the affairs
of the Corporation, rank senior to all classes or series of Common Stock
(as defined in the Charter, including but not limited to Class A Common
Stock, Class B Common Stock and Class C Common Stock) and to all classes
or series of equity securities issued or outstanding, other than any
class or series of equity securities expressly designated as ranking on
a parity with or senior to the Series D Preferred Stock as to dividends
and amounts upon liquidation, dissolution or winding up of the affairs
of the Corporation.
<PAGE> 2
2. DIVIDENDS AND DIVIDEND PROVISIONS.
(a) Subject to the rights of series of Preferred Stock
ranking on a parity with or senior to the Series D Preferred Stock as to
dividends which may from time to time come into existence, holders of
Series D Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of funds legally available for
the payment of dividends, cumulative preferential cash dividends of
$3.84375 per annum per share. Such dividends shall be cumulative from
the date of original issue and shall be payable quarterly in arrears on
the last day of March, June, September and December, or, if not a
business day, the next succeeding business day (each, a "Dividend
Payment Date"). Any dividend payable on Series D Preferred Stock for any
partial dividend period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends will be payable to holders
of record as they appear in the records of the Corporation at the close
of business on the applicable record date, which shall be on such date
designated by the Board of Directors of the Corporation for the payment
of dividends that is not more than 50 nor less than 10 days prior to
such Dividend Payment Date (each, a "Dividend Record Date").
Notwithstanding anything to the contrary set forth herein, each share of
Series D Preferred Stock shall also accumulate all accrued and unpaid
distributions, whether or not declared, up to the exchange date on any
Series D Preference Unit (as defined in the Second Amended and Restated
Limited Partnership Agreement of Spieker Properties, L.P., as amended
(the "Partnership Agreement")) validly exchanged into such share of
Series D Preferred Stock in accordance with the provisions of such
Partnership Agreement and for purposes of these Articles Supplementary
such accrued and unpaid distributions on such Series D Preference Units
shall deem to constitute accrued and unpaid dividends with respect to
past dividends periods on Series D Preferred Stock.
(b) Dividends on Series D Preferred Stock will accrue
whether or not the Corporation has earnings, whether or not there are
funds legally available for the payment of such dividends and whether or
not such dividends are declared. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or
payments on Series D Preferred Stock which may be in arrears. Holders of
the Series D Preferred Stock will not be entitled to dividends in excess
of the full cumulative dividends as described above.
(c) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the
Internal Revenue Code of 1986, as amended, or any successor revenue code
or section (the "Code")) any portion (the "Capital Gains Amount") of the
total distributions (as determined for federal income tax purposes) paid
or made available for the year to holders of all classes of capital
stock (the "Total Distributions"), then the portion of the Capital Gains
Amount that shall be allocable to holders of Series D Preferred Stock
shall be in the same portion that the Total Distributions paid or made
available to the holders of Series D Preferred Stock for the year bears
to the Total Distributions.
(d) If any shares of Series D Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment on any shares of series of capital stock of the Corporation
ranking, as to dividends, on a parity with or junior to Series D
Preferred Stock for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the full payment thereof deposited irrevocably in trust
for the benefit of holders of Series D Preferred Stock on shares of
Series D Preferred Stock for all past dividend periods and the then
current dividend period. When dividends are not paid in full (or a sum
sufficient for such full payment
<PAGE> 3
is not deposited irrevocably in trust for the benefit of holders of
Series D Preferred Stock) upon the shares of Series D Preferred Stock
and the shares of any other series of capital stock ranking on parity as
to dividends with shares of Series D Preferred Stock, all dividends
declared upon shares of Series D Preferred Stock and any other series of
capital stock ranking on a parity as to dividends with Series D
Preferred Stock shall be declared pro rata so that the amount of
dividends declared per share on Series D Preferred Stock and such other
series of capital stock shall in all cases bear to each other the same
ratio that accrued dividends per share on Series D Preferred Stock and
such other series of capital stock bear to each other.
(e) Except as provided in Section 2(d), unless full
cumulative dividends on shares of Series D Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the full payment thereof has been deposited irrevocably in trust for
the benefit of holders of Series D Preferred Stock for all past dividend
periods and the then current dividend period, no dividends (other than
in shares of Common Stock or other capital stock ranking junior to
Series D Preferred Stock as to dividends and amounts upon liquidation,
dissolution or winding up of the affairs of the Corporation) shall be
declared or paid or set aside for payment or other dividend shall be
declared or made upon the shares of Common Stock, Class B Common Stock,
Class C Common Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or any other capital stock of the
Corporation ranking junior to or on a parity with Series D Preferred
Stock as to dividends or amounts upon liquidation, nor shall any shares
of Common Stock, Class B Common Stock, Class C Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
any other capital stock of the Corporation ranking junior to or on a
parity with Series D Preferred Stock as to dividends or amounts upon
liquidation, dissolution or winding up of the affairs of the Corporation
be redeemed, purchased or otherwise acquired for any consideration (or
any moneys be paid to or made available for a sinking fund for the
redemption of any such capital stock) by the Corporation (except by
conversion into or exchange for other capital stock of the Corporation
ranking junior to Series D Preferred Stock as to dividends and amounts
upon liquidation, dissolution or winding up of the affairs of the
Corporation).
(f) Any dividend payment made on shares of Series D
Preferred Stock shall first be credited against the earliest accrued but
unpaid dividend due with respect to shares of Series D Preferred Stock
which remains payable.
3. LIQUIDATION RIGHTS.
(a) Subject to the rights of series of Preferred Stock
ranking on a parity with or senior to the Series D Preferred Stock as to
amounts upon liquidation, dissolution or winding up of the affairs of
the Corporation which may from time to time come into existence, upon
any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, then, before any distribution or payment
shall be made to the holders of any shares of Common Stock or any other
class or series of capital stock of the Corporation ranking junior to
Series D Preferred Stock in the distribution of assets upon any
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Series D Preferred Stock shall be
entitled to receive out of assets of the Corporation legally available
for distribution to stockholders, liquidation distributions in the
amount of the liquidation preference of $50.00 per share, plus an amount
equal to all dividends accrued and unpaid thereon. After payment of the
full amount of the liquidating distributions to which they are entitled,
the holders of shares of Series D Preferred Stock will have no right or
claim to any of the remaining assets of the Corporation. In the event
that, upon any such voluntary or
<PAGE> 4
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the available assets of the Corporation are insufficient to
pay the amount of the liquidation distributions on all outstanding
shares of Series D Preferred Stock and the corresponding amounts payable
on all shares of other classes or series of capital stock of the
Corporation ranking on a parity with Series D Preferred Stock as to
dividends and amounts upon liquidation, dissolution or winding up of the
affairs of the Corporation, including the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock ("Parity
Stock"), then the holders of shares of Series D Preferred Stock and
Parity Stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
(b) A consolidation or merger of the Corporation with or
into any other entity or entities, or a sale, lease, conveyance or
disposition of all or substantially all of the assets of the Corporation
or the effectuation by the Corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of, shall not be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation within the
meaning of this Section 3.
4. REDEMPTION.
(a) Shares of Series D Preferred Stock are not redeemable
prior to April 20, 2003. On and after April 20, 2003, the Corporation at
its option upon not less than 30 nor more than 60 days' written notice
may redeem outstanding shares of Series D Preferred Stock, in whole or
in part, at any time or from time to time, for cash at a redemption
price of $50.00 per share, plus an amount equal to all dividends accrued
and unpaid thereon, whether or not declared, to the date fixed for
redemption, without interest. The redemption price of shares of Series D
Preferred Stock (other than the portion thereof consisting of accrued
and unpaid dividends) is payable solely out of proceeds (with giving
effect to any temporary use of such proceeds) from the sale of other
capital stock of the Corporation, which may include Common Stock,
Preferred Stock, depository shares, interests, participations or other
ownership interests in the Corporation however designated (other than
debt securities converted into or exchangeable for capital stock), and
any rights, warrants or options to purchase any thereof. Holders of
shares of Series D Preferred Stock to be redeemed shall surrender such
shares of Series D Preferred Stock at the place designated in such
notice and shall be entitled to the redemption price and any accrued and
unpaid dividends payable upon such redemption following such surrender.
If fewer than all of the outstanding shares of Series D Preferred Stock
are to be redeemed, the number of shares to be redeemed will be
determined by the Corporation and such shares may be redeemed pro rata
from the holders of record of such shares in proportion to the number of
such shares held by such holders (with adjustments to avoid redemption
of fractional shares) or by lot in a manner determined by the
Corporation.
(b) Unless full cumulative dividends on all shares of
Series D Preferred Stock and Parity Stock shall have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the full payment thereof deposited irrevocably in trust for the
benefit of holders of Series D Preferred Stock for all past dividend
periods and the then current dividend period, no shares of Series D
Preferred Stock or Parity Stock shall be redeemed unless all outstanding
shares of Series D Preferred Stock and Parity Stock are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of Series D Preferred Stock or Parity
Stock pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Series D Preferred Stock or Parity
Stock, as the case may be. Furthermore, unless full
<PAGE> 5
cumulative dividends on all outstanding shares of Series D Preferred
Stock and Parity Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof deposited
irrevocably in trust for the benefit of holders of Series D Preferred
Stock for all past dividend periods and the then current dividend
period, the Corporation shall not purchase or otherwise acquire directly
or indirectly any shares of Series D Preferred Stock or Parity Stock
(except by conversion into or exchange for shares of capital stock of
the Corporation ranking junior to Series D Preferred Stock and Parity
Stock as to dividends and amounts upon liquidation, dissolution or
winding up of the affairs of the Corporation).
(c) Notice of redemption will be mailed and telecopied (if
possible) at least 30 days but not more than 60 days before the
redemption date to each holder of record of shares of Series D Preferred
Stock at the address or telecopier number shown on the stock transfer
books of the Corporation. Each notice shall state: (i) the redemption
date; (ii) the number of shares of Series D Preferred Stock to be
redeemed; (iii) the redemption price per share; (iv) the place or places
where certificates for shares of Series D Preferred Stock are to be
surrendered for payment of the redemption price; and (v) that dividends
on shares of Series D Preferred Stock will cease to accrue on such
redemption date. If fewer than all shares of Series D Preferred Stock
are to be redeemed, the notice mailed and telecopied (if possible) to
each such holder thereof shall also specify the number of shares of
Series D Preferred Stock to be redeemed from each such holder. If notice
of redemption of any shares of Series D Preferred Stock has been given
and if the funds necessary for such redemption have been set aside by
the Corporation in trust for the benefit of the holders of shares of
Series D Preferred Stock so called redemption, then from and after the
redemption date, dividends will cease to accrue on such shares of Series
D Preferred Stock, such shares of Series D Preferred Stock shall no
longer be deemed outstanding and all rights of the holders of such
shares will terminate, except the right to receive the redemption price.
(d) The holders of shares of Series D Preferred Stock at
the close of business on a Dividend Record Date will be entitled to
receive the dividend payable with respect to such shares of Series D
Preferred Stock on the corresponding Dividend Payment Date
notwithstanding the redemption thereof between such Dividend Record Date
and the corresponding Dividend Payment Date or the Corporation's default
in the payment of the dividend due.
(e) Series D Preferred Stock will not be subject to any
sinking fund or mandatory redemption, except as provided in Article
NINTH of the Charter of the Corporation.
(f) The redemption price shall be payable on to the
holders of the Series D Preferred Stock upon surrender of the
certificate evidencing the Series D Preferred Stock by such holders at
the place designated in the notice of redemption. If fewer than all
Series D Preferred Stock evidenced by any certificate is being redeemed,
a new certificate shall be issued upon surrender of the certificate
evidencing all Series D Preferred Stock, evidencing the unredeemed
Series D Preferred Stock without cost to the holder thereof. If any
redemption date is not a business day, then payment of the redemption
price payable on such redemption date will be made on the next
succeeding business day (and without any interest or other payment in
respect of any such delay) except that, if such business day falls in
the next calendar year, such payment will be made on the immediately
preceding business day, in each case with the same force and effect as
if made on such redemption date. If payment of the redemption price or
any accumulated or unpaid distributions in respect of the Series D
Preferred Stick is improperly withheld or refused and not paid by the
Corporation, distributions on such Series D Preferred Stock will
continue to accumulate from the original
<PAGE> 6
redemption date to the date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the applicable redemption price and any accumulated and
unpaid distributions.
5. VOTING RIGHTS.
(a) Except as indicated in this Section 5, or except as
otherwise from time to time required by applicable law, the holders of
shares of Series D Preferred Stock will have no voting rights.
(b) (i) If six quarterly dividends (including quarterly
distributions on the Series D Preferred Units prior to the exchange into
Series D Preferred Stock) (whether or not consecutive) payable on shares
of Series D Preferred Stock or any Parity Stock are in arrears, whether
or not earned or declared, the number of directors then constituting the
Board of Directors of the Corporation will be automatically increased by
two, and the holders of shares of Series D Preferred Stock, voting
together as a class with the holders of shares of any other series of
Parity Stock entitled to such voting rights which are then exercisable
(any such other series, the "Voting Preferred Stock"), will have the
right to elect two additional directors (the "Preferred Stock
Directors") to serve on the Corporation's Board of Directors at any
annual meeting of stockholders or a properly called special meeting of
the holders of Series D Preferred Stock and such other Voting Preferred
Stock until all such dividends have been declared and paid in full or
deposited irrevocably in trust for the benefit of holders of Series D
Preferred Stock. At any such meeting, the Preferred Stock Directors
shall be elected by plurality vote on the basis of one vote per $25.00
of liquidation preference to which such Series D Preferred Stock and
Voting Preferred Stock is entitled (excluding amounts in respect of
accumulated and unpaid dividends). The term of office of all Preferred
Stock Directors so elected will terminate with the termination of such
voting rights. (ii) Any Preferred Stock Director may be removed at any
time with or without cause by the vote of, and shall not be removed
otherwise than by the vote of, the holders of record of a majority of
the outstanding Series D Preferred Stock. Any vacancy in the office of a
Preferred Stock Director may be filled by written consent of the
Preferred Stock Director remaining in office, or if none remains in
office, by a vote of the holders of record of shares of Series D
Preferred Stock, voting together as a class with the holders of Voting
Preferred Stock. The Preferred Stock Director shall each be entitled to
one vote per director on any matter.
(c) The approval of two-thirds of the outstanding Series D
Preferred Stock is required in order to (i) enter into a share exchange
that affects shares of Series D Preferred Stock, or consolidate with or
merge the Corporation with or into any other corporation or convey,
lease or transfer all of its assets as an entirety, unless in each such
case each share of Series D Preferred Stock remains outstanding without
a material adverse change to its terms, preferences, privileges, voting
powers and rights or is converted into or exchanged for preferred stock
of the surviving entity having preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications
and terms or conditions of redemption thereof identical to that of a
share of Series D Preferred Stock, or (ii) authorize, reclassify,
create, or increase the authorized amount of any class of stock having
rights senior to Series D Preferred Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up of the
affairs of the Corporation. However, the Corporation may create
additional classes of Parity Stock and capital stock ranking junior to
Series D Preferred Stock as to dividends or amounts upon liquidation,
dissolution or winding up of the affairs of the Corporation ("Junior
Stock"), increase the authorized number of shares of Parity Stock and
Junior Stock and issue additional series of Parity Stock and Junior
Stock without the consent of any holder of Series D Preferred Stock,
<PAGE> 7
unless, in the case of Parity Stock, such Parity Stock is created or
increased solely for the purpose of issuance to an affiliate (as defined
in Rule 144 under the Securities Act of 1933) of the Company, which
requires the approval of two-thirds of the outstanding Series D
Preferred Stock.
(d) The approval of two-thirds of the outstanding Series D
Preferred Stock, voting as a single class, is required in order to amend
the Corporation's Articles Supplementary or Charter to affect materially
and adversely the rights, preferences or voting power of the holders of
shares of Series D Preferred Stock.
(e) Except as provided above and as required by law, the
holders of Series D Preferred Stock are not entitled to vote on any
merger or consolidation involving the Corporation, on any share exchange
or on a sale of all or substantially all of the assets of the
Corporation.
6. CONVERSION.
The shares of Series D Preferred Stock are not convertible
into or exchangeable for any other property or securities of the
Corporation, except that each share of Series D Preferred Stock is
exchangeable into Excess Stock as provided in Article NINTH of the
Charter of the Corporation.
7. STATUS OF REDEEMED OF REACQUIRED STOCK.
In the event any shares of Series D Preferred Stock shall
be redeemed pursuant to Section 4 hereof or reacquired, the shares so
redeemed or reacquired shall revert to the status of authorized but
unissued shares of Series D Preferred Stock available for future
issuance and reclassification by the Corporation.
<PAGE> 8
IN WITNESS WHEREOF, SPIEKER PROPERTIES, INC. has caused these presents
to be signed in its name and on its behalf by its Chief Financial Officer and
Executive Vice President and witnessed by its Secretary on April 20, 1998.
WITNESS: SPIEKER PROPERTIES, INC.
/s/ Sara H. Reynolds By: /s/ Craig G. Vought
- ---------------------------------- --------------------------------
Sara H. Reynolds Craig G. Vought
Secretary Chief Financial Officer and
Executive Vice President
THE UNDERSIGNED, Chief Financial Officer and Executive Vice President of
SPIEKER PROPERTIES, INC., who executed on behalf of the Corporation the Articles
Supplementary of which this certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles Supplementary
to be the corporate act of said Corporation and hereby certifies that the
matters and facts set forth herein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
/s/ Craig G. Vought
-----------------------------------
Craig G. Vought
<PAGE> 1
EXHIBIT 10.13
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SPIEKER PROPERTIES, L.P.
This Third Amendment ("Third Amendment") to the Second Amended
and Restated Agreement of Limited Partnership of Spieker Properties, L.P., a
California limited partnership, dated as of October 13, 1997 (the "Partnership
Agreement"), as amended by the First Amendment, dated as of December 3, 1997,
and Second Amendment, dated as of April 20, 1998, is executed and made effective
for all purposes as of this 4th day of June, 1998 (the "Effective Date"), by
Spieker Properties, Inc., a Maryland corporation, the General Partner of the
Partnership, pursuant to the provisions of Sections 4.3 and 13.7(b) of the
Partnership Agreement.
WHEREAS, Section 4.3(a) 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 Partnership
Interests is in the best interests of the partnership, cause the Partnership to
issue additional Partnership Interests to any Partner (including the General
Partner) of one or more classes, or one or more series of classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including, without limitation, rights, powers and
duties senior to the Limited Partners' Partnership Interests, in exchange for
the Capital Contribution by such Partner of cash and/or property.
WHEREAS, substantially concurrent herewith, the General Partner
is contributing to the Partnership the proceeds from the issuance of the Series
E Cumulative Redeemable Preferred Stock.
WHEREAS, Section 4.3(b) of the Partnership Agreement provides
that the General Partner may not cause the Partnership to issue additional
Partnership Interests to itself unless the additional Partnership Interests are
issued in connection with an issuance of shares of the General Partner, which
shares have designations, preferences and other rights, all such that the
economic interests are substantially similar to the designations, preferences
and other rights of the additional Partnership Interests issued to the General
Partner in accordance with Section 4.3(a) of the Partnership Agreement;
WHEREAS, the economic interests of the Series E Cumulative
Redeemable Preferred Stock are substantially similar to that of the Series E
Cumulative Redeemable Preferred Interest;
<PAGE> 2
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions.
(a) Capitalized terms used herein, unless otherwise
defined herein, shall have the meanings set forth in the Partnership
Agreement.
(b) Section 1.1 of the Partnership Agreement is hereby
amended to add the following defined terms and phrases.
"Series E Cumulative Redeemable Preferred Articles
Supplementary" shall mean those certain Articles Supplementary executed
by the General Partner and filed with the Department on June 3, 1998,
and pursuant to which the Series E Cumulative Redeemable Preferred Stock
was issued.
"Series E Cumulative Redeemable Preferred Interest" shall
mean the interest in the Partnership received by the General Partner in
exchange for the additional Capital Contribution made by the General
Partner in connection with the issuance of the Series E Cumulative
Redeemable Preferred Stock, which Series E Cumulative Redeemable
Preferred Interest includes the right to receive certain preferential
distributions and additional rights as set forth in this Agreement.
"Series E Cumulative Redeemable Preferred Interest
Redemption Distribution" shall have the meaning set forth in Section
6.2(e) hereof.
"Series E Cumulative Redeemable Preferred Stock" shall
mean the Series E Cumulative Redeemable Preferred Stock (par value
$.0001 per share) of the General Partner, as described in the Series E
Cumulative Redeemable Preferred Articles Supplementary.
"Series E Cumulative Redeemable Preferred Stock Share
Issue Price" shall mean $25.00, which is the per share liquidation
preference of the Series E Cumulative Redeemable Preferred Stock sold in
the General Partner's June 4, 1998 sale of such stock.
2. Agreement to Contribute Proceeds from Issuance of Series E
Cumulative Redeemable Preferred Stock. Immediately upon receipt by the General
Partner of the proceeds from the issuance and sale of the Series E Cumulative
Redeemable Preferred Stock, the General Partner shall contribute to the
Partnership, as an
<PAGE> 3
additional Capital Contribution, the entire amount of such proceeds, net of the
expenses (including, without limitation, any applicable placement fees or
underwriting or other discounts) incurred by the General Partner in connection
with the issuance of the Series E Cumulative Redeemable Preferred Stock. Upon
the making of such additional Capital Contribution, the General Partner's
Capital Account shall be increased by an amount equal to the number of shares of
Series E Cumulative Redeemable Preferred Stock issued and sold in the June 4,
1998 sale multiplied by the Series E Cumulative Redeemable Preferred Stock Share
Issue Price.
3. No Adjustment of Percentage Interests or Standard Percentage.
Notwithstanding the General Partner's making of the additional Capital
Contribution described in Paragraph 2 above, the General Partner shall not be
issued any Additional Units in the Partnership, nor shall the then current
Percentage Interests or Standard Percentage of the Partners be adjusted.
4. Distributions. Section 6.2(a)(i) of the Partnership Agreement
is hereby deleted in its entirety, and the following is hereby substituted in
the place thereof:
(i) First, pro rata (in the proportion that amounts due
and unpaid pursuant to each of clause (x), clause (y) and clause (z)
bear to the total amounts due and unpaid pursuant to clause (x), clause
(y) and clause (z) in the aggregate) (x) to the General Partner, on
account of the Series A Preferred Interest, the Series B Cumulative
Redeemable Preferred Interest, the Series C Cumulative Redeemable
Preferred Interest, the Series D Preferred Interest and the Series E
Cumulative Redeemable Preferred Interest on a pro rata basis, until the
total amount of distributions made to the General Partner pursuant to
this subparagraph (i) equals the total amount of accrued but unpaid
dividends (if any) on the Series A Preferred Stock, the Series B
Cumulative Redeemable Preferred Stock, the Series C Cumulative
Redeemable Preferred Stock, the Series D Preferred Stock and the Series
E Cumulative Redeemable Preferred Stock as of the date of such
distribution, (y) to the WCB Limited Partners, on account of the WCB
Partnership Units, an amount equal to the sum of [1] the WCB Preferred
Return as to such period plus [2] the accrued but unpaid WCB Preferred
Return in respect of any prior period and (z) to the Series D Limited
Partners, on account of the Series D Preferred Units held by such Series
D Limited Partners, an amount equal to the sum of [1] the Series D
Preferred Return as to such period plus [2] the accrued but unpaid
Series D Preferred Return in respect of any prior period;
<PAGE> 4
5. Redemption Distribution. A new Subsection 6.2(i) is hereby
added to the Partnership Agreement to read as follows:
(i) Notwithstanding the foregoing, the General Partner may, in
its sole discretion, at any time on or after June 4, 2003, when any
Series E Cumulative Redeemable Preferred Stock is outstanding, make one
or more special distributions to itself, alone, on account of the Series
E Cumulative Redeemable Preferred Interest, for the sole purpose of, and
in an amount no greater than such amount as will be used by the General
Partner for, redemption of all or any portion of the outstanding Series
E Cumulative Redeemable Preferred Stock (any such distribution shall be
referred to as a "Series E Cumulative Redeemable Preferred Interest
Redemption Distribution"). There shall be no adjustment of the then
current Percentage Interests of the Partners on account of any Series E
Cumulative Redeemable Preferred Interest Redemption Distribution.
6. Allocations. Exhibit B to the Partnership Agreement is hereby
deleted in its entirety, and the attached Exhibit B is hereby inserted in the
place thereof.
7. Conditions to Effectiveness of Amendment. This Third Amendment
shall become effective only upon the execution of this Third Amendment by the
General Partner and the filing of the Series E Cumulative Redeemable Preferred
Articles Supplementary with the Department.
8. Governing Law. This Third Amendment shall be governed by and
construed in conformity with the laws of the State of California.
9. Continuing Effect of Partnership Agreement. Except as
specifically provided herein, the Partnership Agreement shall remain in full
force and effect.
<PAGE> 5
IN WITNESS WHEREOF, the General Partner has executed this Third
Amendment as of the Effective Date.
GENERAL PARTNER: SPIEKER PROPERTIES, INC.,
a Maryland corporation
By:________________________________
Stuart A. Rothstein
Senior Vice President, Finance
<PAGE> 6
EXHIBIT B
ALLOCATIONS
1. Allocation of Net Income and Net Loss.
(a) Net Income. Except as otherwise provided herein, Net Income for any
fiscal year or other applicable period shall be allocated in the following order
and priority:
(1) First, to the Partners, until the cumulative Net Income
allocated pursuant to this Subparagraph 1(a)(1) for the current and all prior
periods equals the cumulative Net Loss allocated pursuant to Subparagraphs
1(b)(3) and (4) hereof for all prior periods, among the Partners in the reverse
order that such Net Loss was allocated (and, in the event of a shift of a
Partner's interest in the Partnership, to the Partners in a manner that most
equitably reflects the successors in interest of such Partners);
(2) Second, to the General Partner, the WCB Limited Partners and
the Series D Limited Partners, until the cumulative Net Income allocated
pursuant to this Subparagraph 1(a)(2) for the current and all prior periods
equals the cumulative Net Loss allocated pursuant to Subparagraph 1(b)(2) hereof
for all prior periods;
(3) Third, in equal priority, (x) to the General Partner until
the cumulative amount of Net Income allocated pursuant to this Subparagraph
1(a)(3), Subparagraph 1(a)(3) of Exhibit E to the First Restated Agreement as in
effect immediately prior to the Fourth Amendment thereto and Subparagraph
1(c)(1)(iii) of Exhibit E to the First Restated Agreement as in effect
immediately prior to the Third Amendment thereto equals the total amount of
dividends paid on the Series A Preferred Stock as of or prior to the date of
such allocation plus the total amount of accrued but unpaid dividends on any
Series A Preferred Stock issued and outstanding as of such date, plus the total
amount of dividends paid on the Series B Cumulative Redeemable Preferred Stock
as of or prior to the date of such allocation plus the total amount of accrued
but unpaid dividends on any Series B Cumulative Redeemable Preferred Stock
issued and outstanding as of such date, plus the total amount of dividends paid
on the Series C Cumulative Redeemable Preferred Stock as of or prior to the date
of such allocation plus the total amount of accrued but unpaid dividends on any
Series C Cumulative Redeemable Preferred Stock issued and outstanding as of such
date, plus the total amount of dividends paid on the Series D Preferred Stock as
of or prior to the date of such allocation plus the total amount of accrued but
unpaid dividends on any Series D Preferred Stock issued and outstanding as of
such date, plus the total amount of dividends paid on the Series E Cumulative
Redeemable Preferred Stock as of or prior to the date of such allocation plus
the total amount of accrued but unpaid dividends on any Series E Cumulative
Redeemable Preferred Stock issued and outstanding as of such date, (y) to the
WCB Limited Partners until the cumulative amount of Net Income allocated
pursuant to this Subparagraph 1(a)(3) equals the total amount of distributions
made to the WCB
<PAGE> 7
Limited Partners pursuant to Section 6.2(a)(i) of this Agreement and (z) to the
Series D Limited Partners until the cumulative amount of Net Income allocated
pursuant to this Subparagraph 1(a)(3) equals the total amount of distributions
made to the Series D Limited Partners pursuant to Section 6.2(a)(i) of this
Agreement;
(4) Fourth, to the General Partner on account of the Common B
Interest and the Common C Interest, an amount equal to the sum of (x) $0.0625
per annum multiplied by the number of shares issued and outstanding of Class B
Common Stock, plus (y) $0.05 per annum multiplied by the number of shares issued
and outstanding of Class C Common Stock, prorated on a daily basis over each
calendar year, and adjusted, as appropriate, to reflect any variance in the
number of such shares issued and outstanding from time to time; and
(5) Thereafter, the balance of the Net Income, if any, shall be
allocated to the Partners holding Standard Partnership Units in accordance with
their respective Standard Percentages.
(b) Net Loss. Net Loss of the Partnership for each fiscal year or other
applicable period shall be allocated as follows:
(1) First, to the Partners (other than the WCB Limited Partners
with respect to their WCB Partnership Units and the Series D Limited Partners
with respect to their Series D Preferred Units) in accordance with their
respective Standard Percentages until the Capital Account balances of the
Limited Partners (other than the WCB Limited Partners with respect to their WCB
Partnership Units and the Series D Limited Partners with respect to their Series
D Preferred Units) are reduced to zero (for purpose of this calculation, such
Partners' share of Partnership Minimum Gain shall be added back to their Capital
Accounts);
(2) Second, to the General Partner, the WCB Limited Partners (to
the extent of their WCB Partnership Units) and the Series D Limited Partners (to
the extent of their Series D Preferred Units), in proportion to their positive
Capital Account balances, until their Capital Account balances have been reduced
to zero (for purpose of this calculation, such Partners' share of Partnership
Minimum Gain shall be added back to their Capital Accounts);
(3) Thereafter, to the Partners holding Standard Partnership
Units in accordance with their then Standard Percentages; and
(4) Notwithstanding the preceding provisions of this Subparagraph
1(b), to the extent that any Net Loss allocated to a Partner under Subparagraph
1(b) would cause such Partner (hereinafter, a "Restricted Partner") to have an
Adjusted Capital Account Deficit as of the end of the fiscal year to which such
Net Loss relates, such Net Loss shall not be allocated to such Restricted
Partner and instead shall be allocated to the other Partner(s) (hereinafter, the
"Permitted Partners") pro rata in accordance with their relative Percentage
Interests.
<PAGE> 8
(c) Book-Up and Capital Account Adjustments. On any day on which Series
A Preferred Stock is redeemed or converted into Common Stock or the Series B
Cumulative Redeemable Preferred Stock is redeemed, the Series C Cumulative
Redeemable Preferred Stock is redeemed, the Series D Preferred Stock is redeemed
or the Series E Cumulative Redeemable Preferred Stock is redeemed, or any WCB
Partnership Units are converted into Standard Partnership Units, the Partnership
may, in the discretion of the General Partner, adjust the Gross Asset Values of
all Partnership assets to equal their respective gross fair market values and
shall allocate the amount of such adjustment as Net Income or Net Loss pursuant
to Paragraph 1(a) hereof.
2. Special Allocations.
Notwithstanding any provisions of Paragraph 1 of this Exhibit B, the
following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year (except as
a result of conversion or refinancing of Partnership indebtedness, certain
capital contributions or revaluation of the Partnership property as further
outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3)), each Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in Partnership Minimum Gain. The items to be so allocated
shall be determined in accordance with Regulation Section 1.704-2(f). This
Paragraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this Paragraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a
net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any
fiscal year (other than due to the conversion, refinancing or other change in
the debt instrument causing it to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of Partnership property
as further outlined in Regulation Section 1.704-2(i)(4)), each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that Partner's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The
items to be so allocated shall be determined in accordance with Regulation
Section 1.704-2(i)(4) and (j)(2). This Paragraph 2(b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this Paragraph 2(b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Limited Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), and such Limited Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain shall be
specially allocated
<PAGE> 9
to such Partner in an amount and manner sufficient to eliminate the Adjusted
Capital Account Deficit as quickly as possible. This Paragraph 2(c) is intended
to constitute a "qualified income offset" under Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
or other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any fiscal year or other applicable period shall be specially allocated to the
Partner that bears the economic risk of loss for the debt (i.e., the Partner
Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are
attributable (as determined under Regulation Section 1.704-2(b)(4) and (i)(1)).
(f) Curative Allocations. It is the intent of the Partnership that, to
the extent possible, the Capital Account balances of the Partners be in the
following relationship: (1) first, the Capital Account of the General Partner
should be at least equal to $25.00 multiplied by the number of issued and
outstanding shares of Series A Preferred Stock, Series B Cumulative Redeemable
Preferred Stock, Series C Cumulative Redeemable Preferred Stock and Series E
Cumulative Redeemable Preferred Stock and $50.00 multiplied by the number of
issued and outstanding shares of Series D Preferred Stock, the Capital Accounts
of the WCB Limited Partners should be at least equal to the WCB Partnership Unit
Issue Price multiplied by the number of issued and outstanding WCB Partnership
Units and the Capital Accounts of the Series D Limited Partners should be at
least equal to the Series D Preferred Unit Issue Price multiplied by the number
of issued and outstanding Series D Preferred Units; and (2) second, the Limited
Partners' (other than the WCB Limited Partners with respect to their WCB
Partnership Units and the Series D Limited Partners with respect to their Series
D Preferred Units) Capital Account balances and the General Partner's Capital
Account balance in excess of the product described in clause (1) above should be
in proportion to their Standard Percentages. Thus, items of "book" income, gain,
loss, and deduction shall be allocated among the Partners so that, to the extent
possible, the resulting Partners' Capital Account balances bear this
relationship. This Paragraph 2(f) is intended to minimize to the extent possible
and to the extent necessary any economic distortions which may result from
application of the Regulatory Allocations and shall be interpreted in a manner
consistent therewith. For purposes hereof, "Regulatory Allocations" shall mean
the allocations provided under Subparagraph 1(b)(2) and this Paragraph 2 (save
Subparagraphs 2(d) and (f) hereof).
(g) Merit Plan. To the extent that the Partnership recognizes income or
gain or is entitled to deduction, expense or loss with respect to transfers of
interests pursuant to the Merit Plan, all such items shall be allocated among
the Limited Partners in accordance with the Merit Plan.
<PAGE> 10
3. Tax Allocations.
(a) Generally. Subject to Paragraphs 3(b) and (c) below, items of
income, gain, loss, deduction and credit to be allocated for income tax purposes
(collectively, "Tax Items") shall be allocated among the Partners on the same
basis as their respective book items.
(b) Sections 1245/1250 Recapture. If any portion of gain from the sale
of property is treated as gain which is ordinary income by virtue of the
application of Code Section 1245 or 1250 ("Affected Gain"), then (A) such
Affected Gain shall be allocated among the Partners in the same proportion that
the depreciation and amortization deductions giving rise to the Affected Gain
were allocated and (B) other Tax Items of gain of the same character that would
have been recognized, but for the application of Code Sections 1245 and/or 1250,
shall be allocated away from those Partners who are allocated Affected Gain
pursuant to Clause (A) so that, to the extent possible, the other Partners are
allocated the same amount, and type, of capital gain that would have been
allocated to them had Code Sections 1245 and/or 1250 not applied; provided,
however, that the net amount of Tax Items allocated to each Partner shall be the
same as if this Paragraph 3(a) did not exist. For purposes hereof, in order to
determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income and Net Loss for such
respective period.
(c) Allocations Respecting Section 704(c) and Revaluations. If any
Partnership property is subject to Code Section 704(c) or is reflected in the
Capital Accounts of the Partners and on the books of the Partnership at a book
value that differs from the adjusted tax basis of such property, then the tax
items with respect to such property shall, in accordance with the requirements
of Regulations Section 1.704-1(b)(4)(i), be shared among the Partners in a
manner that takes account of the variation between the adjusted tax basis of the
applicable property and its book value in the same manner as variations between
the adjusted tax basis and fair market value of property contributed to the
Partnership are taken into account in determining the Partners' share of tax
items under Code Section 704(c). The General Partner is authorized to choose any
reasonable method permitted by the Regulations pursuant to Code Section 704(c),
including the "remedial" method, the "curative" method and the "traditional"
method; provided that the General Partner agrees to use reasonable efforts to
minimize the amount of taxable income in excess of book income allocated to the
holders of the Series D Preferred Units.
(d) Code Section 752 Specification. Pursuant to Regulations Section
1.752-3, the interest of the Partners holding Standard Partnership Units in
Partnership profits for purposes of determining the Partners' shares of excess
nonrecourse liabilities shall be their Standard Percentages.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 2, 1999 included in this Form 10-K, into the Operating
Partnership's previously filed Registration Statements No.'s 333-51269, and
333-35997.
San Francisco, California ARTHUR ANDERSEN LLP
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,916
<SECURITIES> 0
<RECEIVABLES> 9,416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,154,737
<DEPRECIATION> 240,778
<TOTAL-ASSETS> 4,056,870
<CURRENT-LIABILITIES> 0
<BONDS> 1,847,198
0
0
<COMMON> 0
<OTHER-SE> 2,023,073
<TOTAL-LIABILITY-AND-EQUITY> 4,056,870
<SALES> 0
<TOTAL-REVENUES> 561,097
<CGS> 0
<TOTAL-COSTS> 167,043
<OTHER-EXPENSES> 113,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,335
<INCOME-PRETAX> 163,924
<INCOME-TAX> 0
<INCOME-CONTINUING> 185,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,942
<EPS-PRIMARY> 2.59<F1>
<EPS-DILUTED> 2.46
<FN>
<F1>For purposes of this exhibit, primary means basic.
</FN>
</TABLE>
