<PAGE>
Filed Pursuant to Rule 424(b)(2)
Commission File No. 333-26845-01
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 27, 1997)
[LOGO]
DUKE REALTY LIMITED PARTNERSHIP
$100,000,000 6 3/4% NOTES DUE MAY 30, 2008
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The 6 3/4% Notes due May 30, 2008 (the "Notes") offered hereby (the
"Offering") are being issued by Duke Realty Limited Partnership, an Indiana
limited partnership (the "Operating Partnership"), in aggregate principal amount
of $100,000,000. The Notes will mature on May 30, 2008 and are redeemable at any
time at the option of the Operating Partnership, in whole or in part, at a
redemption price equal to the sum of (i) the principal amount of the Notes being
redeemed plus accrued interest to the redemption date and (ii) the Make-Whole
Amount (as defined in "Description of the Notes--Optional Redemption"), if any.
The Notes are not subject to any mandatory sinking fund. Interest on the Notes
is payable semi-annually in arrears on each May 30 and November 30, commencing
November 30, 1998. See "Description of the Notes."
The Notes will be represented by a single fully-registered global note in
book-entry form, without coupons (a "Global Note"), registered in the name of
the nominee of The Depository Trust Company ("DTC"). Beneficial interests in the
Global Note will be shown on, and transfers thereof will be effected only
through, records maintained by DTC (with respect to beneficial interests of
participants) or by participants or persons that hold interests through
participants (with respect to beneficial interests of beneficial owners). Owners
of beneficial interests in the Global Note will be entitled to physical delivery
of Notes in definitive form equal in principal amount to their respective
beneficial interest only under the limited circumstances described under
"Description of the Notes--Book-Entry System." Settlement for the Notes will be
made in immediately available funds. The Notes will trade in DTC's Same-Day
Funds Settlement System until maturity or until the Notes are issued in
definitive form, and secondary market trading activity in the Notes will
therefore settle in immediately available funds. All payments of principal and
interest in respect of the Notes will be made by the Operating Partnership in
immediately available funds. See "Description of the Notes--Same-Day Settlement
and Payment."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING OPERATING
PUBLIC (1) DISCOUNT (2) PARTNERSHIP (3)
<S> <C> <C> <C>
Per Note........................................ 99.907% .65% 99.257%
Total........................................... $99,907,000 $650,000 $99,257,000
</TABLE>
(1) Plus accrued interest, if any, from June 2, 1998.
(2) The Operating Partnership has agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$75,000.
------------------------
The Notes are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, subject to approval of
certain legal matters by counsel for the Underwriter and to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York on or about June 2,
1998.
------------------------
MERRILL LYNCH & CO.
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The date of this Prospectus Supplement is May 27, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
ENTERING STABILIZING BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
S-2
<PAGE>
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING IN THE
ACCOMPANYING PROSPECTUS OR DOCUMENTS INCORPORATED HEREIN AND THEREIN BY
REFERENCE. UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT IS PRESENTED AS OF MARCH 31, 1998. UNIT AND PER UNIT
AMOUNTS IN THIS PROSPECTUS SUPPLEMENT REFLECT THE OPERATING PARTNERSHIP'S
TWO-FOR-ONE UNIT SPLIT WHICH OCCURRED ON AUGUST 25, 1997. SEE "RECENT
DEVELOPMENTS." ALL REFERENCES TO THE "OPERATING PARTNERSHIP" IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCLUDE THE OPERATING PARTNERSHIP AND
THOSE ENTITIES OWNED OR CONTROLLED BY THE OPERATING PARTNERSHIP, UNLESS THE
CONTEXT INDICATES OTHERWISE.
WHEN USED IN THIS PROSPECTUS SUPPLEMENT, THE WORDS "BELIEVES," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY 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. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY. 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 THE RESULTS
OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
THE OPERATING PARTNERSHIP
The Operating Partnership is managed by its general partner, Duke Realty
Investments, Inc. (the "Company"), a self-administered and self-managed real
estate investment trust (a "REIT") that began operations through a related
entity in 1972. At March 31, 1998, the Operating Partnership owned a diversified
portfolio of 381 in-service industrial, office and retail properties (the
"Properties"), encompassing approximately 43.8 million square feet located in
eight states, and 23 buildings and four building expansions encompassing
approximately 4.3 million square feet under development. The Operating
Partnership also owned approximately 1,700 acres of unencumbered land (the
"Land") for future development, of which approximately 71% is zoned for
industrial use and which is typically located adjacent to the Properties. The
Operating Partnership provides leasing, management, construction, development
and other tenant-related services for the Properties and certain properties
owned by third parties. The Operating Partnership believes that the Midwest
offers a relatively strong and stable economy compared to other regions of the
United States and provides significant growth potential due to its central
location, established manufacturing base, skilled work force and moderate labor
costs.
The Operating Partnership has developed approximately 55 million square feet
of commercial property since its founding including an average of approximately
4.9 million square feet per year during the last five years. In addition, the
Operating Partnership acquired approximately 14.1 million square feet during the
three years ended December 31, 1997. Through the three months ended March 31,
1998, the Operating Partnership placed in service 2.1 million square feet of new
development and acquired 1.1 million square feet of property.
The Operating Partnership manages approximately 56 million square feet of
property, including over 7.7 million square feet owned by third parties. The
Operating Partnership manages approximately 37% and 27% of all competitive
suburban office, warehousing and light manufacturing space in Indianapolis and
Cincinnati, respectively. In addition to providing services to more than 2,400
tenants in the Properties, the Operating Partnership provides such services to
nearly 900 tenants in 92 properties owned by third parties. Based on market data
maintained by the Operating Partnership, the Operating Partnership believes that
it was responsible in 1997 for approximately 72% and 57% of the net absorption
(gross space leased minus lease terminations and expirations) of competitive
suburban office, warehousing and light manufacturing space in Indianapolis and
Cincinnati, respectively. The Operating Partnership believes that its dominant
position in the primary markets in which it operates gives it a competitive
advantage in its real estate activities.
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<PAGE>
All of the Company's interests in the Properties and Land are held directly
or indirectly by, and substantially all of its operations relating to the
Properties are conducted through the Operating Partnership. Partnership
interests ("Units") in the Operating Partnership may be exchanged by the holders
thereof, other than the Company, for common stock of the Company ("Common
Stock") on a one-for-one basis. Upon an exchange of Units for Common Stock, the
Company's percentage interest in the Operating Partnership will increase. The
Company controls the Operating Partnership as the sole general partner and
owner, as of March 31, 1998 of approximately 88% of the Units. In addition, the
senior management team of the Company owns approximately 11% of the Company
through Common Stock and Unit ownership.
The following tables provide an overview of the Properties.
SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF ANNUAL NET TOTAL NET
SQUARE TOTAL SQUARE EFFECTIVE EFFECTIVE OCCUPANCY AT
TYPE OF PROPERTY FEET FEET RENT(1) ANNUAL RENT MARCH 31, 1998
- ---------------------------------------------- --------- --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Industrial.................................... 30,638 70% $ 110,272 42% 92.7%
Office........................................ 11,118 25 134,307 51 96.3%
Retail........................................ 2,041 5 17,982 7 95.3%
--------- --- ------------ ---
Total....................................... 43,797 100% $ 262,561 100% 93.8%
--------- --- ------------ ---
--------- --- ------------ ---
</TABLE>
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(1) Represents annual net effective rent due from tenants in occupancy as of
March 31, 1998. Net effective rent ("Net Effective Rent") equals the average
annual rental property revenue over the terms of the respective leases,
excluding additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.
SQUARE FOOTAGE AND ANNUAL NET EFFECTIVE RENT OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
SQUARE FEET
----------------------------------------------------------- ANNUAL NET PERCENT OF
PERCENT OF EFFECTIVE ANNUAL NET
PRIMARY MARKET INDUSTRIAL OFFICE RETAIL TOTAL TOTAL RENT(1) EFFECTIVE RENT
- ---------------------------------- ----------- --------- --------- --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Indianapolis...................... 14,603 1,704 194 16,501 38% $ 66,826 26%
Cincinnati........................ 5,189 3,402 1,130 9,721 22 67,881 26
Columbus.......................... 2,275 1,695 219 4,188 9 29,850 11
Minneapolis....................... 3,388 106 -- 3,494 7 14,830 5
St. Louis......................... 1,480 1,902 -- 3,383 8 32,129 12
Cleveland......................... 1,573 1,314 -- 2,886 7 21,778 8
Chicago........................... 803 995 -- 1,798 4 17,813 7
Nashville......................... 633 -- -- 633 2 4,719 2
Other (2)......................... 694 -- 498 1,192 3 6,735 3
----------- --------- --------- --------- --- ------------ ---
Total........................... 30,638 11,118 2,041 43,797 100% $ 262,561 100%
----------- --------- --------- --------- --- ------------ ---
----------- --------- --------- --------- --- ------------ ---
</TABLE>
- ------------
(1) Represents annual Net Effective Rent due from tenants in occupancy as of
March 31, 1998, excluding additional rent due as a result of operating
expense reimbursements, landlord allowances for operating expenses and
percentage rents.
(2) Represents properties not located in the Operating Partnership's primary
markets. These properties are located in other similar Midwestern markets.
S-4
<PAGE>
RECENT DEVELOPMENTS
DISTRIBUTION AND STOCK SPLIT
On April 23, 1998, the Company, as general partner of the Operating
Partnership, declared a regular quarterly distribution to record holders of
Units other than preferred Units, payable on May 29, 1998 to Unit holders of
record on May 13, 1998. The Operating Partnership effected a two-for-one split
of Units in conjunction with a two-for-one split of the Company's Common Stock
(the "Unit Split") which was paid on August 25, 1997 to Unit holders of record
on August 18, 1997. Unit and per Unit amounts in this Prospectus Supplement have
been restated to reflect the effect of the Unit Split.
FINANCING
In April 1998, the Company issued 2,351,873 shares of its Common Stock to
two unit trusts, raising combined net proceeds of approximately $53.7 million.
The proceeds of these financings were contributed by the Company to the
Operating Partnership in exchange for additional Units and were used to fund the
development and acquisition of additional rental properties.
DEVELOPMENT AND ACQUISITIONS
During the first quarter of 1998, the Operating Partnership completed
development of and placed in service 10 properties comprising 2.0 million square
feet at a total cost of $78.1 million. The Operating Partnership had 23
properties and four property expansions under development at March 31, 1998
comprising 4.3 million square feet which is expected to have a total cost of
$330.9 million upon completion. Also during the first quarter of 1998, the
Operating Partnership acquired 15 properties with 1.1 million square feet at a
total cost of $40.9 million.
These property additions (the "New Properties"), totaling 7.4 million square
feet, consist of 65% industrial, 32% office and 3% retail projects. The total
cost of the New Properties is expected to be $449.9 million. At March 31, 1998,
the New Properties which have been placed in service are 83% leased, and the New
Properties under construction are 59% pre-leased for a combined total of 69%
leased. The New Properties are expected to provide a weighted average
unleveraged stabilized return on cost (computed as property annual contractual
net operating income ("NOI") divided by total project costs) of 11.0% with
anticipated leasing activity. The annual contractual NOI to be generated from
the New Properties, once placed in service, will be $49.5 million with
anticipated additional leasing.
The Operating Partnership's expectations of total cost and weighted average
unleveraged stabilized return on cost constitute forward-looking information
that is subject to risks inherent in the completion of construction of the
properties under development and the leasing of any unleased portion of the
properties. Such risks could cause actual results to differ materially from the
Operating Partnership's expectations.
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby are expected to be approximately $99.2 million. The Operating
Partnership presently intends to use the net proceeds to retire a portion of the
outstanding balance on its unsecured line of credit (the "Line of Credit") used
to fund development and acquisition of additional rental properties. The Line of
Credit is expected to have an outstanding balance of approximately $123 million
on June 2, 1998, bearing interest at the 30-day London Interbank Offered Rate
("LIBOR") plus .80%.
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership and its subsidiaries as of March 31, 1998 and as adjusted to give
effect to issuance of the Notes in the amount of $100 million and
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<PAGE>
the application of the net proceeds thereof. The table should be read in
conjunction with the Operating Partnership's consolidated financial statements
incorporated herein by reference.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
HISTORICAL AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Secured Debt (1).................................................................... $ 363,898 $ 363,898
Unsecured Debt...................................................................... 440,000 540,000
Line of Credit (1).................................................................. -- --
------------ ------------
Total Debt.......................................................................... 803,898 903,898
------------ ------------
Minority Interest..................................................................... 29 29
------------ ------------
Partners' Equity:
Preferred Equity.................................................................... 218,906 218,906
Common Equity (2)................................................................... 1,166,960 1,166,960
------------ ------------
Total Partners' Equity.............................................................. 1,385,866 1,385,866
------------ ------------
Total Capitalization.................................................................. $ 2,189,793 $ 2,289,793
------------ ------------
------------ ------------
</TABLE>
- ------------
(1) The Operating Partnership has drawn $123 million on its unsecured line of
credit since March 31, 1998 to fund its current development and
acquisitions. It is the Company's policy that the Company will not incur
indebtedness other than short-term trade, employee compensation, dividends
payable or similar indebtedness that will be paid in the ordinary course of
business, and that indebtedness will instead be incurred by the Operating
Partnership to the extent necessary to fund the business activities
conducted by the Operating Partnership and its subsidiaries.
(2) Subsequent to March 31, 1998, the Company issued 2.4 million shares of
Common Stock, raising net proceeds of $53.7 million which were contributed
by the Company to the Operating Partnership in exchange for an additional
2.4 million Units of common equity.
RATIOS OF EARNINGS TO FIXED CHARGES
The Operating Partnership's ratio of earnings to fixed charges for the year
ended December 31, 1997 was 2.11 and for the three months ended March 31, 1998
was 2.22. For purposes of computing these ratios, earnings have been calculated
by adding fixed charges, excluding capitalized interest, to income (loss) before
gains or losses on property sales. Fixed charges consist (if applicable) of
interest costs, whether expensed or capitalized, the interest component of
rental expense and amortization of debt issuance costs.
For a statement of the Operating Partnership's ratios of earnings to fixed
charges for prior periods, see "Ratios of Earnings to Fixed Charges" in the
accompanying Prospectus.
S-6
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes constitute a separate series of securities (which is more fully
described in the accompanying Prospectus), to be issued pursuant to an indenture
dated as of September 19, 1995, as amended or supplemented (the "Indenture"),
between the Operating Partnership and The First National Bank of Chicago, as
trustee (the "Trustee"), and will be limited to an aggregate principal amount of
$100,000,000. The terms of the Notes include those provisions contained in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes are
subject to all such terms, and holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to and qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below.
The Notes will be direct, unsecured obligations of the Operating Partnership
and will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. The Notes will be effectively subordinated to the prior claims of
each secured mortgage lender to any specific Property which secures such
lender's mortgage. As of March 31, 1998, such mortgages aggregated approximately
$364 million. See "Capitalization." Subject to certain limitations set forth in
the Indenture, and as described under "--Certain Covenants--Limitations on
Incurrence of Debt" below, the Indenture will permit the Operating Partnership
to incur additional secured and unsecured indebtedness.
The Notes will mature on May 30, 2008 (the "Maturity Date"). The Notes are
not subject to any sinking fund provisions. The Notes will be issued only in
fully registered, book-entry form without coupons, in denominations of $1,000
and integral multiples thereof, except under the limited circumstances described
below under "Description of the Notes--Book-Entry System."
Except as described under "--Certain Covenants--Limitations on Incurrence of
Debt" below and under "Description of Debt Securities--Merger, Consolidation or
Sale" in the accompanying Prospectus, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the Notes protection in the event
of (i) a highly leveraged or similar transaction involving the Operating
Partnership, the Company as general partner of the Operating Partnership, or any
Affiliate of either such party, (ii) a change of control, or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Notes. In
addition, subject to the limitations set forth under "Description of Debt
Securities--Merger, Consolidation or Sale" in the accompanying Prospectus, the
Operating Partnership may, in the future, enter into certain transactions such
as the sale of all or substantially all of its assets or the merger or
consolidation of the Operating Partnership that would increase the amount of the
Operating Partnership's indebtedness or substantially reduce or eliminate the
Operating Partnership's assets, which may have an adverse effect on the
Operating Partnership's ability to service its indebtedness, including the
Notes. The Operating Partnership and its management have no present intention of
engaging in a highly leveraged or similar transaction involving the Operating
Partnership.
PRINCIPAL AND INTEREST
The Notes will bear interest at 6 3/4% per annum from June 2, 1998 or from
the immediately preceding Interest Payment Date (as defined below) to which
interest has been paid, payable semi-annually in arrears on each May 30 and
November 30, commencing November 30, 1998 (each, an "Interest Payment Date"),
and on the Maturity Date, to the persons (the "Holders") in whose names the
applicable Notes are registered in the security register applicable to the Notes
at the close of business 15 calendar days prior to such payment date regardless
of whether such day is a Business Day, as defined below (each,
S-7
<PAGE>
a "Regular Record Date"). Interest on the Notes will be computed on the basis of
a 360-day year of twelve 30-day months.
The principal of each Note payable on the Maturity Date will be paid against
presentation and surrender of such Note at the corporate trust office of the
Trustee, located initially at 14 Wall Street, Eighth Floor, New York, New York,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
If any Interest Payment Date or a Maturity Date falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or such Maturity Date, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, on which banking institutions in The City of New York
are open for business.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit any Subsidiary to, incur any Debt (as defined below), other than
intercompany debt (representing Debt to which the only parties are the Company,
the Operating Partnership and any of their Subsidiaries (but only so long as
such Debt is held solely by any of the Company, the Operating Partnership and
any Subsidiary) that is subordinate in right of payment to the Notes) if,
immediately after giving effect to the incurrence of such additional Debt, the
aggregate principal amount of all outstanding Debt of the Operating Partnership
and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 55% of the sum of (i)
the Operating Partnership's Total Assets (as defined below) as of the end of the
calendar quarter covered in the Operating Partnership's Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed
with the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Debt and (ii) the
increase in Total Assets from the end of such quarter including, without
limitation, any increase in Total Assets resulting from the incurrence of such
additional Debt (such increase together with the Operating Partnership's Total
Assets shall be referred to as the "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge (in each case as defined below) for the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 2.0 to 1, on a pro forma basis
after giving effect to the incurrence of such Debt and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by the Operating Partnership or its Subsidiaries since the
first day of such four-quarter period and the application of the proceeds
therefrom, including to refinance other Debt, had occurred at the beginning of
such period, (ii) the repayment or retirement of any other Debt by the Operating
Partnership or its Subsidiaries since the first day of such four-quarter period
had been incurred, repaid or retired at the beginning of such period (except
that, in making such computation, the amount of Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Debt
during such period), (iii) the income earned on any increase in Adjusted Total
Assets since the end of such four-quarter period had been earned, on an
annualized basis, during such period, and (iv) in the case of any acquisition or
disposition by the Operating Partnership or any Subsidiary of any asset or group
of assets since the first day of such four-quarter period, including, without
limitation, by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Debt had occurred as of
the first day of such period with the appropriate adjustments with respect to
such acquisition or disposition being included in such pro forma calculation.
S-8
<PAGE>
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any Subsidiary ("Secured Debt"), whether owned at the date of the Indenture or
thereafter acquired, if, immediately after giving effect to the incurrence of
such additional Secured Debt, the aggregate principal amount of all outstanding
Secured Debt of the Operating Partnership and its Subsidiaries on a consolidated
basis is greater than 40% of the Operating Partnership's Adjusted Total Assets.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the Operating
Partnership and its Subsidiaries on a consolidated basis shall create, assume,
guarantee or otherwise become liable in respect thereof.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating Partnership is
required to maintain Total Unencumbered Assets of not less than 185% of the
aggregate outstanding principal amount of the Unsecured Debt of the Operating
Partnership.
As used herein:
"ANNUAL SERVICE CHARGE" as of any date means the amount which is expensed in
any 12-month period for interest on Debt.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of the Operating Partnership and its
Subsidiaries (i) plus amounts which have been deducted for (a) interest on Debt
of the Operating Partnership and its Subsidiaries, (b) provision for taxes of
the Operating Partnership and its Subsidiaries based on income, (c) amortization
of debt discount, (d) depreciation and amortization, (e) the effect of any
noncash charge resulting from a change in accounting principles in determining
Consolidated Net Income for such period, (f) amortization of deferred charges
and (g) provisions for or realized losses on properties and (ii) less amounts
which have been included for gains on properties.
"CONSOLIDATED NET INCOME" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
"DEBT" of the Operating Partnership or any Subsidiary means any indebtedness
of the Operating Partnership and its Subsidiaries, whether or not contingent, in
respect of (i) borrowed money evidenced by bonds, notes, debentures or similar
instruments, (ii) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by the Operating
Partnership and its Subsidiaries, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance deferred and unpaid of the purchase
price of any property except any such balance that constitutes an accrued
expense or trade payable or (iv) any lease of property by the Operating
Partnership and its Subsidiaries as lessee which is reflected in the Operating
Partnership's consolidated balance sheet as a capitalized lease in accordance
with generally accepted accounting principles, in the case of items of
indebtedness under (i) through (iii) above to the extent that any such items
(other than letters of credit) would appear as a liability on the Operating
Partnership's consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise included,
any obligation by the Operating Partnership or any Subsidiary to be liable for,
or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another person
(other than the Operating Partnership or any Subsidiary) (it being understood
that Debt shall be deemed to be incurred by the Operating Partnership and its
Subsidiaries on a consolidated basis whenever the Operating Partnership and its
Subsidiaries on a consolidated basis shall create, assume, guarantee or
otherwise become liable in respect thereof).
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<PAGE>
"FUNDS FROM OPERATIONS" for any period means the Consolidated Net Income of
the Operating Partnership and its Subsidiaries for such period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for such
period, plus the allocable portion, based on the Operating Partnership's
ownership interest, of funds from operations of unconsolidated joint ventures,
all determined on a consistent basis in accordance with generally accepted
accounting principles.
"SUBSIDIARY" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Operating Partnership or by one or more other Subsidiaries of
the Operating Partnership. For the purposes of this definition, "voting stock"
means stock having voting power for the election of directors, or trustees, as
the case may be, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"TOTAL ASSETS" as of any date means the sum of (i) the Operating
Partnership's and its Subsidiaries' Undepreciated Real Estate Assets and (ii)
all other assets of the Operating Partnership and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable).
"TOTAL UNENCUMBERED ASSETS" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an encumbrance and (ii) all other assets of the
Operating Partnership and its Subsidiaries not subject to an encumbrance
determined in accordance with generally accepted accounting principles (but
excluding accounts receivable and intangibles).
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"UNSECURED DEBT" means Debt of the Operating Partnership or any Subsidiary
which is not secured by any mortgage, lien, charge, pledge or security interest
of any kind upon any of the Properties.
Reference is made to the section entitled "Description of Debt
Securities--Certain Covenants" in the accompanying Prospectus for a description
of additional covenants applicable to the Notes. Compliance with the covenants
described herein and such additional covenants with respect to the Notes
generally may not be waived by the Board of Directors of the Company, as general
partner of the Operating Partnership, or by the Trustee unless the Holders of at
least a majority in principal amount of all outstanding Notes consent to such
waiver; PROVIDED, HOWEVER, that the defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt
Securities--Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus will apply to the Notes, including with respect to the covenants
described in this Prospectus Supplement.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or from time to time in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon to the redemption date and (ii) the Make-Whole Amount (as
defined below), if any, with respect to such Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Notes will be to receive payment of the
Redemption Price.
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Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of the Operating
Partnership, the Operating Partnership will notify the Trustee at least 45 days
prior to giving notice of redemption (or such shorter period as is satisfactory
to the Trustee) of the aggregate principal amount of Notes to be redeemed and
their redemption date. The Trustee shall select, in such manner as it shall deem
fair and appropriate, the Notes to be redeemed in whole or in part.
As used herein:
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of each such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semi-annual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid.
"REINVESTMENT RATE" means .25% plus the arithmetic mean of the yields under
the respective heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to maturity,
as of the payment date of the principal being redeemed or paid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Operating
Partnership.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of DTC
that affect the payment of principal and interest and transfers of interests in
the Global Note. Upon issuance, the Notes will only be issued in the form of a
Global Note which will be deposited with, or on behalf of, DTC and registered in
the name of Cede & Co., as nominee of DTC. Unless and until it is exchanged in
whole or in part for Notes in definitive form under the limited circumstances
described below, the Global Note may not be transferred except as a whole (i) by
DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or another nominee of
DTC or (iii) by DTC or any such nominee to a successor of DTC or a nominee of
such successor.
Ownership of beneficial interests in the Global Note will be limited to
persons that have accounts with DTC for the Global Note ("participants") or
persons that may hold interests through participants. Upon
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the issuance of the Global Note, DTC will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Notes represented by the Global Note beneficially owned by such
participants. Ownership of beneficial interests in the Global Note will be shown
on, and the transfer of such ownership interests will be effected only through,
records maintained by DTC (with respect to interests of participants) and on the
records of participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may limit or impair the ability to own, transfer or pledge beneficial
interests in the Global Note.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or its nominee, as the case may be, will be considered the sole owner or
Holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in the
Global Note will not be entitled to have Notes represented by the Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in the Global Note must rely on the
procedures of DTC and, if such person in not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a Holder under the Indenture. The Operating Partnership understands
that under existing industry practices, if the Operating Partnership requests
any action of Holders or if an owner of a beneficial interest in the Global Note
desires to give or take any action that a Holder is entitled to give or take
under the Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal and interest payments on interests represented by the Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of the Global Note. None of the Operating Partnership, the Trustee or any other
agent of the Operating Partnership or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership of interests in the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment of
principal or interest in respect of the Global Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Note held through such participants
will be governed by standing customer instructions and customary practice, as is
now the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Exchange Act within 90 days, the
Operating Partnership will issue the Notes in definitive form in exchange for
the Global Note. Any Notes issued in definitive form in exchange for the Global
Note will be registered in such name or names, and will be issued in
denominations of $1,000 and such integral multiples thereof, as DTC shall
instruct the Trustee. It is expected that such instructions will be based upon
directions received by DTC from participants with respect to ownership of
beneficial interests in the Global Note.
DTC has advised the Operating Partnership of the following information
regarding DTC. DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities of its participants
and to facilitate the clearance and
S-12
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settlement of transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations, some of which (and/or
their representatives) own DTC. Access to the DTC book-entry system is also
available to others, such as banks, brokers and dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter (as defined herein)
in immediately available funds. All payments of principal and interest in
respect of the Notes will be made by the Operating Partnership in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
S-13
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and
related underwriting agreement (collectively, the "Underwriting Agreement"), the
Operating Partnership has agreed to sell to Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Underwriter"), and the Underwriter has agreed to
purchase from the Operating Partnership, $100,000,000 in aggregate principal
amount of the Notes. The Underwriting Agreement provides that the obligations of
the Underwriter are subject to certain conditions precedent, and that the
Underwriter will be obligated to purchase all of the Notes if any are purchased.
The Underwriter has advised the Operating Partnership that it proposes
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of .4% of the principal amount
thereof. The Underwriter may allow, and such dealers may reallow, a discount not
in excess of .25% of the principal amount to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Notes constitute a new issue of securities with no established trading
market. The Operating Partnership does not intend to apply for listing of the
Notes on a national securities exchange. The Operating Partnership has been
advised by the Underwriter that the Underwriter intends to make a market in the
Notes as permitted by applicable laws and regulations, but the Underwriter is
not obligated to do so and may discontinue market-making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriter may be required to make in respect
thereof.
The Underwriter from time to time provides investment banking and financial
advisory services to the Company and the Operating Partnership. The Underwriter
also acted as underwriter or representative of various underwriters in
connection with public offerings of the Company's Common Stock and the Operating
Partnership's debt securities from 1993 through 1998.
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NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS
OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
The Operating Partnership................................................. S-3
Recent Developments....................................................... S-5
Use of Proceeds........................................................... S-5
Capitalization............................................................ S-5
Ratios of Earnings to Fixed Charges....................................... S-6
Description of the Notes.................................................. S-7
Underwriting.............................................................. S-14
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company and the Operating Partnership................................. 3
Use of Proceeds........................................................... 3
Ratios of Earnings to Fixed Charges....................................... 4
Description of Debt Securities............................................ 4
Description of Preferred Stock............................................ 15
Description of Depositary Shares.......................................... 22
Description of Common Stock............................................... 25
Federal Income Tax Considerations......................................... 27
Plan of Distribution...................................................... 34
Legal Opinions............................................................ 36
Experts................................................................... 36
</TABLE>
[LOGO]
DUKE REALTY
LIMITED PARTNERSHIP
$100,000,000
6 3/4% NOTES
DUE MAY 30, 2008
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
MAY 27, 1998
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