UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
---------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
------ ------
---------------------------------------------------------------------
Commission File Number: 1-9044
------
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
State of Incorporation: IRS Employer ID Number:
Indiana 35-1740409
----------------------- ----------------------
Address of principal executive offices:
600 East 96th Street, Suite 100
------------------------------
Indianapolis, Indiana 46260
-----------------------------
Telephone: (317) 808-6000
--------------------------
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
--- ---
The number of Common Units outstanding as of July 31, 2000 was 19,081,990
($.01 par value).
<PAGE>
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
INDEX
PART I - FINANCIAL INFORMATION PAGE
------------------------------ ----
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
as of June 30, 2000 (Unaudited) and
December 31, 1999 2
Condensed Consolidated Statements of
Operations (Unaudited) for the three
and six months ended June 30, 2000 and 1999 3
Condensed Consolidated Statements of
Cash Flows (Unaudited) for the six
months ended June 30, 2000 and 1999 4
Condensed Consolidated Statement of
Partners' Equity (Unaudited) for the
six months ended June 30, 2000 5
Notes to Condensed Consolidated
Financial Statements (Unaudited) 6-11
Independent Accountants' Review Report 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 13-21
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote
of Security Holders 21-22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
----- -------- ----------
(Unaudited)
<S> <C> <C>
Real estate investments:
Land and improvements $ 634,454 $ 602,789
Buildings and tenant improvements 4,318,580 4,124,117
Construction in progress 264,302 327,944
Investments in unconsolidated companies 157,976 145,587
Land held for development 235,695 246,533
--------- ---------
5,611,007 5,446,970
Accumulated depreciation (308,841) (254,574)
--------- ---------
Net real estate investments 5,302,166 5,192,396
Cash and cash equivalents 41,403 18,514
Accounts receivable, net of allowance
of $1,412 and $1,775 17,662 26,844
Straight-line rent receivable, net
of allowance of $841 34,657 29,770
Receivables on construction contracts 40,307 29,537
Deferred financing costs, net of
accumulated amortization of $10,761
and $9,082 15,530 16,571
Deferred leasing and other costs, net
of accumulated amortization of $27,315
and $21,287 99,183 83,153
Escrow deposits and other assets 180,396 90,499
--------- ---------
$5,731,304 $5,487,284
========= =========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Indebtedness:
Secured debt $ 559,985 $ 528,665
Unsecured notes 1,326,711 1,326,811
Unsecured lines of credit 463,000 258,000
--------- ---------
2,349,696 2,113,476
Construction payables and amounts
due subcontractors 63,868 89,985
Accounts payable 5,005 3,179
Accrued expenses:
Real estate taxes 56,698 47,604
Interest 22,025 20,658
Other 42,271 41,836
Other liabilities 36,562 30,541
Tenant security deposits and
prepaid rents 36,261 36,156
--------- ---------
Total liabilities 2,612,386 2,383,435
--------- ---------
Minority interest 1,856 1,860
--------- ---------
Partners' equity:
General Partner
Common equity 2,096,259 2,082,720
Preferred equity (liquidation
preference of $609,721) 587,108 587,385
--------- ---------
2,683,367 2,670,105
Limited partners' common equity 330,740 328,929
Limited partners' preferred equity 102,955 102,955
--------- ---------
3,117,062 3,101,989
--------- ---------
$5,731,304 $5,487,284
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
- 2 -
<PAGE>
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
RENTAL OPERATIONS:
Revenues:
Rental income $174,182 $104,369 $346,092 $203,848
Equity in earnings of
unconsolidated companies 4,226 2,779 7,050 5,287
------- ------- ------- -------
178,408 107,148 353,142 209,135
------- ------- ------- -------
Operating expenses:
Rental expenses 28,264 17,501 57,106 36,127
Real estate taxes 19,064 11,674 37,584 22,491
Interest expense 36,253 17,129 68,934 33,120
Depreciation and amortization 39,766 20,935 79,545 41,389
------- ------- ------- -------
123,347 67,239 243,169 133,127
------- ------- ------- -------
Earnings from rental
operations 55,061 39,909 109,973 76,008
------- ------- ------- -------
SERVICE OPERATIONS:
Revenues:
Property management,
maintenance
and leasing fees 6,582 3,795 12,265 7,421
Construction and development
activity income 18,399 4,812 25,947 13,159
Other income 60 286 894 580
------- ------- ------- -------
25,041 8,893 39,106 21,160
Operating expenses 14,088 5,311 22,777 12,542
------- ------- ------- -------
Earnings from service
operations 10,953 3,582 16,329 8,618
------- ------- ------- -------
General and administrative
expense (4,510) (3,496) (9,674) (7,111)
------- ------- ------- -------
Operating income 61,504 39,995 116,628 77,515
OTHER INCOME (EXPENSE):
Interest income 2,283 546 3,903 1,145
Earnings from land and
depreciated property sales 3,405 1,971 18,091 4,285
Other expense (128) (106) (250) (338)
Other minority interest in
earnings of subsidiaries (311) (450) (972) (880)
------- ------ ------- -------
Net income $ 66,753 $ 41,956 $137,400 $ 81,727
Dividends on preferred units (14,351) (9,254) (28,705) (18,096)
------- ------- ------- -------
Net income available for
common unitholders $ 52,402 $ 32,702 $108,695 $ 63,631
======= ======= ======= =======
Net income per common unit:
Basic $ 0.36 $ 0.33 $ 0.75 $ 0.65
======= ======= ======= =======
Diluted $ 0.36 $ 0.33 $ 0.74 $ 0.65
======= ======= ======= =======
Weighted average number of
common units outstanding 145,719 97,894 145,422 97,548
======= ======= ======= =======
Weighted average number of
common and dilutive
potential common units 147,181 98,855 146,754 98,477
======= ======= ======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
- 3 -
<PAGE>
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $137,400 $ 81,727
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of buildings and tenant improvements 71,378 37,049
Amortization of deferred financing costs 1,553 725
Amortization of deferred leasing and other costs 8,167 4,340
Minority interest in earnings 972 880
Straight-line rent adjustment (8,145) (3,748)
Earnings from land and depreciated property sales (18,091) (4,286)
Construction contracts, net (36,887) (40,417)
Other accrued revenues and expenses, net 19,839 6,799
Equity in earnings in excess of
operating distributions received
from unconsolidated companies (1,621) (499)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 174,565 82,570
------- -------
Cash flows from investing activities:
Development of real estate investments (268,388) (161,843)
Acquisition of real estate investments (5,932) (87,827)
Acquisition of land held for development
and infrastructure costs (32,140) (60,973)
Recurring costs:
Tenant improvements (16,204) (7,845)
Leasing commissions (10,830) (4,993)
Building improvements (3,275) (666)
Other deferred leasing costs (21,735) (8,439)
Other deferred costs and other assets (9,671) (10,298)
Proceeds from land and depreciated
property sales, net 214,299 24,695
Escrow for property exchanges, net (87,940) (8,572)
Capital distributions from unconsolidated companies - 16,802
Net investment in and advances to
unconsolidated companies (16,652) (13,017)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (258,468) (322,976)
------- -------
Cash flows from financing activities:
Contributions from General Partner 13,589 134,420
Proceeds from indebtedness - 300,000
Borrowings on lines of credit, net 245,227 61,000
Repayments on indebtedness including
principal amortization (8,230) (3,947)
Distributions to partners (113,378) (66,229)
Distributions to preferred unitholders (28,705) (18,096)
Distributions to minority interest (813) (930)
Deferred financing costs (898) (4,342)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 106,792 401,876
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 22,889 161,470
Cash and cash equivalents at beginning of period 18,514 6,626
------- -------
Cash and cash equivalents at end of period $ 41,403 $168,096
======= =======
Other non-cash items:
Assumption of debt for real estate
acquisitions $ - $ 26,186
======= =======
Conversion of Limited Partner Units
to General Partner common shares $ 953 $ 45,498
======= =======
Issuance of Limited Partner Units
for real estate acquisitions $ 3,937 $ 2,017
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
- 4 -
<PAGE>
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
General Partner Limited Limited
------------------------ Partners' Partners'
Common Preferred Common Preferred
Equity Equity Equity Equity Total
------- --------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1999 $2,082,720 $ 587,385 $328,929 $102,955 $3,101,989
Net income 94,383 24,501 14,312 4,204 137,400
Capital contribution
from (repayments to)
General Partner 15,143 (277) - - 14,866
Acquisition of
partnership
interest for
common stock of
General Partner 2,480 - (1,527) - 953
Acquisition of
property in
exchange for
Limited Partner
Units - - 3,937 - 3,937
Distributions to
preferred
unitholders - (24,501) - (4,204) (28,705)
Distributions to
partners ($.78 per
Common Unit) (98,467) - (14,911) - (113,378)
--------- ------- ------- ------- ---------
BALANCE AT
JUNE 30, 2000 $2,096,259 $587,108 $330,740 $102,955 $3,117,062
========= ======= ======= ======= =========
COMMON UNITS
OUTSTANDING
AT JUNE 30, 2000 126,760 19,080 145,840
========= ======= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
- 5 -
<PAGE>
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The interim condensed consolidated financial statements included
herein have been prepared by Duke-Weeks Realty Limited Partnership
(the "Partnership") without audit. The statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions
for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. These financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the
Partnership's Annual Financial Statements.
THE PARTNERSHIP
The Partnership was formed on October 4, 1993, when the General
Partner contributed all of its properties and related assets and
liabilities along with the net proceeds from the issuance of an
additional 14,000,833 units through a common stock offering to the
Partnership. Simultaneously, the Partnership completed the
acquisition of Duke Associates, a full-service commercial real
estate firm operating in the Midwest. The General Partner was
formed in 1985 and qualifies as a real estate investment trust
under provisions of the Internal Revenue Code. The General Partner
is the sole general partner of the Partnership and owns 86.9% of
the Partnership at June 30, 2000. The remaining limited partnership
interest ("Limited Partner Units") (together with the units of
general partner interests, the ("Common Units")) are mainly owned
by the previous partners of Duke Associates. The Limited Partner
Units are exchangeable for units of the General Partner's common
stock on a one-for-one basis subject generally to a one-year
holding period. The General Partner periodically acquires a portion
of the minority interest in the Partnership through the issuance of
units of common stock for a like number of Common Units. The
acquisition of the minority interest is accounted for under the
purchase method with assets acquired recorded at the fair market
value of the General Partner's common stock on the date of
acquisition.
The service operations are conducted through Duke Realty Services
Limited Partnership and Duke Construction Limited Partnership, in
which the Partnership has an 89% profits interest (after certain
preferred returns on partners' capital accounts) and effective
control of their operations. The consolidated financial statements
include the accounts of the Partnership and its majority-owned or
controlled subsidiaries. The equity interests in these majority-
owned or controlled subsidiaries not owned by the Partnership are
reflected as minority interests in the consolidated financial
statements.
- 6 -
2. LINES OF CREDIT
The Partnership has the following lines of credit available:
Borrowing Outstanding
Capacity Maturity Interest at June 30, 2000
Description (in 000's) Date Rate (in 000's)
------------------------ ---------- ---------- ----------- ----------------
Unsecured Line of Credit $450,000 April 2001 LIBOR + .70% $428,000
Unsecured Line of Credit $300,000 June 2001 LIBOR + .90% $ 35,000
Secured Line of Credit $150,000 January 2003 LIBOR + 1.05% $ 40,228
The lines of credit are used to fund development and acquisition of
additional rental properties and to provide working capital.
The $450 million line of credit allows the Partnership an option to
obtain borrowings from the financial institutions that participate
in the line of credit at rates lower than the stated interest rate,
subject to certain restrictions. Amounts outstanding on the line of
credit at June 30, 2000, are at LIBOR + .57 to .70%.
3. RELATED PARTY TRANSACTIONS
The Partnership provides management, maintenance, leasing,
construction, and other tenant related services to properties in
which certain executive officers have continuing ownership
interests. The Partnership was paid fees totaling $993,000 and $1.4
million for such services for the six months ended June 30, 2000
and 1999, respectively. Management believes the terms for such
services are equivalent to those available in the market. The
Partnership has an option to purchase the executive officers'
interest in each of these properties which expires October 2003.
The option price of each property was established at the date the
option was granted.
At June 30, 2000, other assets included outstanding loan advances
totaling $2.4 million due from a related party, under a $5.7
million demand loan agreement. The loan bears interest at LIBOR
plus 2.10% and is secured by real estate assets held by the related
entity, for which the Partnership has arrangements to acquire in
future periods. Interest earned under the agreement and included in
the accompanying condensed consolidated statements of operations
totaled $121,764 in the six months ended June 30, 2000.
4. NET INCOME PER COMMON UNIT
Basic net income per common unit is computed by dividing net income
available for common unitholders by the weighted average number of
common units outstanding for the period. Diluted net income per unit
is computed by dividing net income available for common unitholders
by the sum of the weighted average number of common units and
dilutive potential common units outstanding for the period.
The following table reconciles the components of basic and diluted
net income per common unit for the three and six months ended June
30:
- 7 -
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income
available for
common unitholders $ 52,402 $32,702 $108,695 $63,631
======= ====== ======= ======
Weighted average number of
common units outstanding 145,719 97,894 145,422 97,548
Dilutive units for long-term
compensation plans 1,462 961 1,332 929
======= ====== ======= ======
Weighted average number of
common units and dilutive
potential common units 147,181 98,855 146,754 98,477
======= ====== ======= ======
</TABLE>
The Preferred D Series Convertible equity and the Series G preferred
limited partner units were anti-dilutive at June 30, 2000; therefore,
no conversion to common units is included in weighted dilutive potential
common units outstanding.
5. SEGMENT REPORTING
The Partnership is engaged in four operating segments; the
ownership and rental of office, industrial and retail real estate
investments and the providing of various real estate services such
as property management, maintenance, leasing, development and construction
management to third-party property owners ("Service Operations").
The Partnership's reportable segments offer different products or
services and are managed separately because each requires different
operating strategies and management expertise. There are no
material intersegment sales or transfers.
Non-segment revenue to reconcile to total revenue consists mainly
of equity in earnings of unconsolidated companies. Non-segment
assets to reconcile to total assets consist of corporate assets
including cash, deferred financing costs and investments in
unconsolidated companies.
The Partnership assesses and measures segment operating results
based on industry performance measures referred to as Funds From
Operations ("FFO"). The National Association of Real Estate
Investment Trusts defines FFO as net income or loss, excluding
gains or losses from debt restructuring and sales of depreciated
operating property, plus operating property depreciation and
amortization and adjustments for minority interest and
unconsolidated companies on the same basis. FFO is not a measure of
operating results or cash flows from operating activities as
measured by generally accepted accounting principles, is not
necessarily indicative of cash available to fund cash needs and
should not be considered an alternative to cash flows as a measure
of liquidity. Interest expense and other non-property specific
revenues and expenses are not allocated to individual segments in
determining the Partnership's performance measure.
The revenues and FFO for each of the reportable segments for the
three and six months ended June 30, 2000 and 1999, and the assets
for each of the reportable segments as of June 30, 2000 and
December 31, 1999, are summarized as follows:
- 8 -
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
--------
Rental Operations:
Office $ 82,964 $ 62,907 $163,974 $122,397
Industrial 84,582 35,354 168,519 68,390
Retail 7,658 6,146 14,891 12,078
Service Operations 25,041 8,893 39,106 21,160
------- ------- ------- -------
Total Segment Revenues 200,245 113,300 386,490 224,025
Non-Segment Revenue 3,204 2,741 5,758 6,270
------- ------- ------- --------
Consolidated Revenue $203,449 $116,041 $392,248 $230,295
======= ======= ======= =======
Funds From Operations
---------------------
Rental Operations:
Office $ 57,610 $ 43,298 $112,726 $ 83,783
Industrial 66,089 27,431 131,646 52,282
Retail 6,396 5,123 12,032 9,785
Services Operations 10,953 3,582 16,329 8,618
------- ------- ------- -------
Total Segment FFO 141,048 79,434 272,733 154,468
Non-Segment FFO:
Interest expense (36,253) (17,129) (68,934) (33,120)
Interest income 2,283 546 3,903 1,145
General and
administrative
expense (4,510) (3,496) (9,674) (7,111)
Gain on land sales 297 887 3,913 887
Other revenues and
expenses, net (3,675) (801) (5,605) (994)
Minority interest in
earnings of
subsidiaries (311) (450) (972) (880)
Joint venture FFO 6,165 4,057 10,453 8,079
Dividends on preferred
units (14,351) (9,254) (28,705) (18,096)
------- ------- ------- -------
Consolidated FFO 90,693 53,794 177,112 104,378
Depreciation and
amortization (39,766) (20,935) (79,545) (41,389)
Share of joint venture
adjustments (1,633) (1,241) (3,050) (2,756)
Earnings from depreciated
property sales 3,108 1,084 14,178 3,398
------- ------- ------- -------
Net Income Available
for Common
Unitholders $ 52,402 $ 32,702 $108,695 $ 63,631
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Assets
Rental Operations:
Office $2,337,090 $2,252,795
Industrial 2,818,390 2,707,028
Retail 197,933 205,993
Service Operations 99,777 62,335
--------- ---------
Total Segment Assets 5,454,190 5,228,151
Non-Segment Assets 277,114 259,133
--------- ---------
Consolidated Assets $5,731,304 $5,487,284
========= =========
6. REAL ESTATE ASSETS HELD FOR SALE
In order to redeploy capital, the Partnership has an active sales
program through which it is continually pursuing favorable opportunities
to dispose of real estate assets that no longer meet long-term investment
objectives of the Partnership. At June 30, 2000, the Partnership had 36
industrial, 10 office and one retail property comprising approximately 6.6
million square feet held for sale. Of these properties, five build-to-suit
office and three build-to-suit industrial properties were under development
at June 30, 2000. Net operating income (defined as total property revenues,
less property expenses, which include real estate taxes, repairs
and maintenance, property management, utilities, insurance and
other expenses) of the properties held for sale for the six months
ended June 30, 2000, was approximately $15.1 million. Net book value
of the properties held for sale at June 30, 2000, is approximately
$318.7 million. There can be no assurances that such properties
will be sold.
- 9 -
<PAGE>
7. PARTNERS' EQUITY
The following series of preferred equity are outstanding as of June
30, 2000 (in thousands, except percentages):
</TABLE>
<TABLE>
<CAPTION>
Shares Dividend Redemption Liquidation
Description Outstdg Rate Date Preference Convertible
------------------ -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Preferred A Series 300 9.100% 08/31/2001 $ 75,000 No
Preferred B Series 300 7.990% 09/30/2007 150,000 No
Preferred D Series 539 7.375% 12/31/2003 134,721 Yes
Preferred E Series 400 8.250% 01/20/2004 100,000 No
Preferred F Series 600 8.000% 10/10/2002 150,000 No
</TABLE>
All series of preferred equity require cumulative distributions,
have no stated maturity date, and the redemption price of each
series may only be paid from the proceeds of other capital
contributions from the General Partner, which may include other
classes or series of preferred equity.
The Preferred Series D equity is convertible at a conversion rate
of 9.3677 common units for each preferred equity outstanding.
The dividend rate on the Preferred B Series equity increases to 9.99%
after September 12, 2012.
8. MERGER WITH WEEKS CORPORATION
In July 1999, the General Partner and Weeks Corporation ("Weeks"),
approved a merger transaction whereby Weeks, a self-administered,
self-managed geographically focused Real Estate Investment Trust
("REIT") which operated primarily in the southeastern United States
and its consolidated subsidiary, Weeks Realty L.P. ("Weeks
Operating Partnership"), were merged with and into the General
Partner and its consolidated subsidiary, Duke Realty Limited
Partnership ("Duke Operating Partnership"). The total purchase
price of Weeks and Weeks Operating Partnership aggregated
approximately $1.9 billion, which included the assumption of the
outstanding debt and liabilities of Weeks Operating Partnership of
approximately $775 million.
The following summarized pro forma unaudited information represents
the combined historical operating results of Weeks Operating
Partnership and Duke Operating Partnership with the appropriate
purchase accounting adjustments, assuming the merger had occurred
on January 1, 1999. The pro forma financial information presented
is not necessarily indicative of what the Partnership's actual
operating results would have been had Weeks Operating Partnership
and Duke Operating Partnership constituted a single entity during
such periods (in thousands, except per unit amounts):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
2000 1999 2000 1999
----- ---- ---- ----
(Actual) (Pro Forma) (Actual) (Pro Forma)
Rental income $174,182 $150,657 $346,092 $294,931
======= ======= ======= =======
Net income available
for common
unitholders $ 52,402 $ 44,023 $108,695 $ 88,618
======= ======= ======= =======
Weighted average
common units
outstanding:
Basic 145,719 135,423 145,422 134,979
======= ======= ======= =======
Diluted 147,181 136,704 146,754 136,157
======= ======= ======= =======
Net income per
common unit:
Basic $ 0.36 $ 0.33 $ 0.75 $ 0.66
======= ====== ======= =======
Diluted $ 0.36 $ 0.32 $ 0.74 $ 0.65
======= ====== ======= =======
- 10 -
<PAGE>
9. OTHER MATTERS
ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and for
Hedging Activities," effective for fiscal years beginning after
June 15, 2000. The statement will require the Partnership to
recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, then depending on the
nature of the hedge, changes in the fair value will either be
offset through earnings, against the change in fair value of hedged
assets, liabilities or firm commitments or recognized in other
comprehensive income until the hedged item is recognized in
income. The ineffective portion of a hedge's change in fair value
will be immediately recognized in income. Based on the
information available at this time, the adoption of this statement
is not expected to have a material impact on the Partnership's
financial statements.
RECLASSIFICATIONS
Certain 1999 balances have been reclassified to conform to 2000
presentation.
10. SUBSEQUENT EVENTS
The Board of Directors of the General Partner declared the
following distributions on July 26, 2000:
Quarterly
Class Amount/Share Record Date Payment Date
----------- ------------ ------------ ------------
Common $0.43 August 16, 2000 August 31, 2000
Preferred
(per depositary
share):
Series A $0.56875 August 17, 2000 August 31, 2000
Series B $0.99875 September 15, 2000 September 29, 2000
Series D $0.46094 September 15, 2000 September 29, 2000
Series E $0.51563 September 15, 2000 September 29, 2000
Series F $0.50000 October 17, 2000 October 31, 2000
- 11 -
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
The Board of Directors
Duke-Weeks Realty Limited Partnership:
We have reviewed the condensed consolidated balance sheet of Duke-
Weeks Realty Limited Partnership and subsidiaries as of June 30,
2000, the related condensed consolidated statements of operations
for the three months and the six months ended June 30, 2000 and
1999, the related condensed consolidated statements of cash flows
for the six months ended June 30, 2000 and 1999, and the related
condensed consolidated statement of partners' equity for the six
months ended June 30, 2000. These condensed consolidated financial
statements are the responsibility of the Partnership's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Duke-Weeks
Realty Limited Partnership and subsidiaries as of December 31,
1999, and the related consolidated statements of operations,
partners' equity and cash flows for the year then ended (not
presented herein); and in our report dated January 25, 2000, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December
31, 1999 is fairly presented, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
KPMG LLP
Indianapolis, Indiana
July 26, 2000
- 12 -
<PAGE>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
--------
The Partnership's operating results depend primarily upon income
from the rental operations of its industrial, office and retail
properties located in its primary markets. This income from rental
operations is substantially influenced by the supply and demand for
the Partnership's rental space in its primary markets. In addition,
the Partnership's continued growth is dependent upon its ability to
maintain occupancy rates and increase rental rates of its in-
service portfolio and to continue development and acquisition of
additional rental properties.
The Partnership's primary markets have continued to offer strong
and stable local economies and have provided attractive new
development opportunities because of their central location,
established manufacturing base, skilled work force and moderate
labor costs. The Partnership expects to continue to maintain or increase
its overall occupancy levels and also expects to be able to maintain
rental rates as leases are renewed or new leases are executed. This
combination should improve the Partnership's results of operations
from its in-service properties. The Partnership's strategy for
continued growth also includes developing and acquiring additional
rental properties in its primary markets.
The Partnership tracks Same Property performance which compares
those properties that were in-service for all of a calendar two year
period. The net operating income from the same property portfolio
increased 6.13% for the six months ended June 30, 2000, compared to
the six months ended June 30, 1999.
The following table sets forth information regarding the
Partnership's in-service portfolio of rental properties as of June
30, 2000 and 1999 (in thousands, except percentages):
<TABLE>
<CAPTION>
Total Percent of
Square Feet Total Square Feet Percent Occupied
---------------- ----------------- ----------------
Type 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL
Service Centers 12,962 6,672 13.52% 11.55% 93.04% 92.71%
Bulk 60,433 34,121 63.06 59.05 92.41% 93.87%
OFFICE
Suburban 18,867 13,575 19.69 23.50 92.62% 94.84%
CBD 861 861 .90 1.49 95.35% 93.76%
RETAIL 2,708 2,548 2.83 4.41 96.52% 92.36%
------ ------ ------ ------
Total 95,831 57,777 100.00% 100.00% 92.68% 93.90%
====== ====== ====== ======
</TABLE>
The following table reflects the Partnership's in-service portfolio
lease expiration schedule as of June 30, 2000, by product type
indicating square footage and annualized net effective rents under
expiring leases (in thousands, except per square foot amounts):
<TABLE>
<CAPTION>
Total Industrial Office Retail
----- ---------- ------ ------
Yr of Sq Sq Sq Sq
Exp Feet Dollars Feet Dollars Feet Dollars Feet Dollars
----- ---- ------- ---- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 3,865 $ 22,766 3,174 $ 14,569 608 $ 7,450 83 $ 747
2001 9,305 60,429 7,224 34,584 1,984 24,617 97 1,228
2002 10,451 66,825 8,420 41,487 1,934 23,961 97 1,377
2003 10,053 69,556 7,879 40,811 2,012 26,696 162 2,049
2004 9,928 71,858 7,568 39,431 2,225 30,938 135 1,489
2005 11,458 79,358 8,710 41,486 2,430 34,729 318 3,143
2006 6,500 39,906 5,321 23,141 1,166 16,583 13 182
2007 4,851 32,566 3,998 20,654 781 11,200 72 712
2008 5,349 32,710 4,388 19,548 898 12,448 63 714
2009 6,657 43,240 5,275 23,498 1,251 18,095 131 1,647
2010
and
There-
after 10,398 86,730 5,951 28,658 3,004 44,773 1,443 13,299
------ ------- ------ ------- ------ ------- ------ ------
Total
Leased 88,815 $605,944 67,908 $327,867 18,293 $251,490 2,614 $26,587
====== ======= ====== ======= ====== ======= ===== ======
Total
Portfolio
Sq Ft 95,831 73,395 19,728 2,708
====== ====== ====== =====
Annualized
net
effective
rent
per square
foot $6.82 $4.83 $13.75 $10.17
==== ==== ===== =====
</TABLE>
The Partnership also expects to realize growth in earnings from
rental operations through the development and acquisition of
additional rental properties in its primary markets and the completion
of the 7.5 million square feet of properties under development by
the Partnership at June 30, 2000, over the next three quarters and
thereafter. These properties under development should provide future
earnings through service operations income upon sale or from rental
operations growth as they are placed in service as follows (in thousands,
except percent leased and stabilized returns):
Anticipated
In-Service Square Percent Project Stabilized
Date Feet Leased Costs Return
------------ ------ ------- ------- ----------
Held For Rental:
3rd Quarter 2000 2,884 41% $225,741 11.7%
4th Quarter 2000 2,046 33% 148,098 11.6%
1st Quarter 2001 870 10% 56,666 11.2%
Thereafter 212 0% 24,463 11.6%
----- -------
6,012 32% $454,968 11.6%
===== =======
Build-to-Suit for Sale:
3rd Quarter 2000 499 100% $ 15,072
4th Quarter 2000 - -% -
1st Quarter 2001 - -% -
Thereafter 945 91% 81,438
----- -------
1,444 94% $ 96,510
----- -------
Total 7,456 44% $551,478
===== =======
MERGER WITH WEEKS CORPORATION
In July 1999, the General Partner and Weeks Corporation ("Weeks"),
approved a merger transaction whereby Weeks, a self-administered,
self-managed geographically focused Real Estate Investment Trust
("REIT") which operated primarily in the southeastern United States
and its consolidated subsidiary, Weeks Realty L.P. ("Weeks
Operating Partnership"), were merged with and into the General
Partner and its consolidated subsidiary, Duke Realty Limited
Partnership ("Duke Operating Partnership"). The total purchase
price of Weeks and Weeks Operating Partnership aggregated
approximately $1.9 billion, which included the assumption of the
outstanding debt and liabilities of Weeks Operating Partnership of
approximately $775 million.
- 14 -
<PAGE>
The following summarized pro forma unaudited information represents
the combined historical operating results of Weeks Operating
Partnership and Duke Operating Partnership with the appropriate
purchase accounting adjustments, assuming the merger had occurred
on January 1, 1999. The pro forma financial information presented
is not necessarily indicative of what the Partnership's actual
operating results would have been had Weeks Operating Partnership
and Duke Operating Partnership constituted a single entity during
such periods (in thousands, except per unit amounts):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
2000 1999 2000 1999
----- ---- ---- ----
(Actual) (Pro Forma) (Actual) (Pro Forma)
Rental income $174,182 $150,657 $346,092 $294,931
======= ======= ======= =======
Net income available
for common
unitholders $ 52,402 $ 44,023 $108,695 $ 88,618
======= ======= ======= =======
Weighted average
common units
outstanding:
Basic 145,719 135,423 145,422 134,979
======= ======= ======= =======
Diluted 147,181 136,704 146,754 136,157
======= ======= ======= =======
Net income per
common unit:
Basic $ 0.36 $ 0.33 $ 0.75 $ 0.66
======= ====== ======= =======
Diluted $ 0.36 $ 0.32 $ 0.74 $ 0.65
======= ====== ======= =======
RESULTS OF OPERATIONS
--------------------
Following is a summary of the Partnership's operating results and
property statistics for the three and six months ended June 30,
2000 and 1999 (in thousands, except number of properties and per
unit amounts):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental Operations
revenue $178,408 $107,148 $353,142 $209,135
Service Operations
revenue 25,041 8,893 39,106 21,160
Earnings from Rental
Operations 55,061 39,909 109,973 76,008
Earnings from Service
Operations 10,953 3,582 16,329 8,618
Operating income 61,504 39,995 116,628 77,515
Net income available
for common units $ 52,402 $ 32,702 $108,695 $ 63,631
Weighted average common
units outstanding 145,719 97,894 145,422 97,548
Weighted average common
and dilutive potential
common units 147,181 98,855 146,754 98,477
Basic income per
common unit $ 0.36 $ 0.33 $ 0.75 $ 0.65
Diluted income
per common unit $ 0.36 $ 0.33 $ 0.74 $ 0.65
Number of in-service
properties
at end of period 886 486 886 486
In-service square
footage at
end of period 95,831 57,777 95,831 57,777
Under development
square footage
at end of period 7,456 7,303 7,456 7,303
</TABLE>
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 TO THREE MONTHS ENDED JUNE
30, 1999
---------------------------------------------------------------------------
Rental Operations
-----------------
Rental Operations revenue increased to $178.4 million from $107.1
million for the three months ended June 30, 2000, compared to the
same period in 1999. This increase is primarily due to the increase
in the number of in-service properties during the respective
periods. As of June 30, 2000, the Partnership had 886 properties in
service compared to 486 properties at June 30, 1999. The following
summary of the Partnership's acquisition and development activity
since January 1, 1999:
- 15 -
<PAGE>
Square
Buildings Feet
--------- ------
Properties owned as of:
January 1, 1999 453 52,028
Weeks merger 335 28,569
Acquisitions 30 2,867
Developments placed in service 68 10,903
Dispositions (21) (1,890)
Building remeasurements - 25
--- ------
December 31, 1999 865 92,502
Acquisitions 2 169
Developments placed in service 38 6,587
Dispositions (19) (3,434)
Building remeasurements - 7
--- ------
June 30, 2000 886 95,831
=== ======
Rental property, real estate tax and depreciation and amortization
expenses increased for the three months ended June 30, 2000,
compared to the same period in 1999 due to the increase in the
number of in-service properties during the respective periods.
The $19.1 million increase in interest expense is primarily
attributable to higher outstanding debt balances associated with
the financing of the Partnership's investment activities. The
increased balances include $450 million of unsecured debt issued in
1999, the assumption of $185 million of secured debt and $287
million of unsecured debt in the merger with Weeks Corporation in
July 1999, and increased borrowings on the Partnership's lines of
credit. These higher borrowing costs were partially offset by the
capitalization of interest on increased property development
activities.
As a result of the above-mentioned items, earnings from Rental
Operations increased $15.2 million from $39.9 million for the three
months ended June 30, 1999, to $55.1 million for the three months
ended June 30, 2000.
Service Operations
------------------
Service Operations revenues increased by $16.1 million from $8.9
million for the three months ended June 30, 1999, to $25.0 million
for the three months ended June 30, 2000, primarily as a result of
increases in construction and development income from increased
third party construction.
Service Operations operating expenses increased from $5.3 million
for the three months ended June 30, 1999, to $14.1 million for the
three months ended June 30, 2000, primarily due to increases in
payroll and maintenance expenses due to the overall growth of the
Partnership and the increased portfolio of buildings associated
with this growth.
As a result, earnings from Service Operations increased from $3.6
million for the three months ended June 30, 1999, to $11.0 million
for the three months ended June 30, 2000.
- 16 -
<PAGE>
Other Income and Expenses
-------------------------
Interest income increased from $546,000 for the three months ended
June 30, 1999, to $2.3 million for the same period in 2000 primarily
through earnings on funds deposited in tax deferred exchange escrows
of $1.6 million.
The Partnership has a disposition strategy to pursue favorable
opportunities to dispose of real estate assets that no longer meet
long-term investment objectives of the Partnership, which resulted
in net sales proceeds of $50.5 million and a net gain of $3.4
million during the three months ended June 30, 2000.
In conjunction with this disposition strategy, included in net real
estate investments are 47 buildings with a net book value of $318.7
million which were classified as held for sale by the Partnership
at June 30, 2000. The Partnership expects to complete these and
other dispositions and use the proceeds to fund future investments
in real estate assets.
Net Income Available for Common Unitholders
-------------------------------------------
Net income available for common unitholders for the three months
ended June 30, 2000, was $52.4 million compared to net income
available for common unitholders of $32.7 million for the three
months ended June 30, 1999. This increase results primarily from
the operating result fluctuations in rental and service operations
explained above.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30,
1999
---------------------------------------------------------------------------
Rental Operations
-----------------
Rental Operations revenue increased to $353.1 million from $209.1
million for the six months ended June 30, 2000, compared to the same
period in 1999. This increase is primarily due to the increase in
the number of in-service properties during the respective periods.
As of June 30, 2000, the Partnership had 886 properties in service
compared to 486 properties at June 30, 1999. The following summary
of the Partnership's acquisition and development activity since
January 1, 1999:
Square
Buildings Feet
--------- ------
Properties owned as of:
January 1, 1999 453 52,028
Weeks merger 335 28,569
Acquisitions 30 2,867
Developments placed in service 68 10,903
Dispositions (21) (1,890)
Building remeasurements - 25
--- ------
December 31, 1999 865 92,502
Acquisitions 2 169
Developments placed in service 38 6,587
Dispositions (19) (3,434)
Building remeasurements - 7
--- ------
June 30, 2000 886 95,831
=== ======
- 17 -
<PAGE>
Rental property, real estate tax and depreciation and amortization
expenses increased for the six months ended June 30, 2000, compared
to the same period in 1999 due to the increase in the number of in-
service properties during the respective periods.
The $35.8 million increase in interest expense is primarily
attributable to higher outstanding debt balances associated with
the financing of the Partnership's investment activities. The
increased balances include $450 million of unsecured debt issued in
1999, the assumption of $185 million of secured debt and $287
million of unsecured debt in the merger with Weeks Corporation in
July 1999, and increased borrowings on the Partnership's lines of
credit. These higher borrowing costs were partially offset by the
capitalization of interest on increased property development
activities.
As a result of the above-mentioned items, earnings from Rental
Operations increased $34.0 million from $76.0 million for the six
months ended June 30, 1999, to $110.0 million for the six months
ended June 30, 2000.
Service Operations
------------------
Service Operations revenues increased by $17.9 million from $21.2
million for the six months ended June 30, 1999, to $39.1 million for
the six months ended June 30, 2000, primarily as a result of
increases in construction and development income from increased
third party construction.
Service Operations operating expenses increased from $12.5 million
for the six months ended June 30, 1999, to $22.8 million for the
six months ended June 30, 2000, primarily due to increases in
payroll and maintenance expenses due to the overall growth of the
Partnership and the increased portfolio of buildings associated
with this growth.
As a result, earnings from Service Operations increased from $8.6
million for the six months ended June 30, 1999, to $16.3 million
for the six months ended June 30, 2000.
Other Income and Expenses
-------------------------
Interest income increased from $1.1 million for the six months
ended June 30, 1999, to $3.9 million for the same period in 2000
primarily through earnings on funds deposited in tax deferred exchange
escrows of $2.5 million.
The Partnership has a disposition strategy to pursue favorable
opportunities to dispose of real estate assets that no longer meet
long-term investment objectives of the Partnership, which resulted
in net sales proceeds of $214.3 million and a net gain of $18.1
million during the six months ended June 30, 2000.
- 18 -
<PAGE>
Net Income Available for Common Unitholders
-------------------------------------------
Net income available for common unitholders for the six months
ended June 30, 2000, was $108.7 million compared to net income
available for common unitholders of $63.6 million for the six
months ended June 30, 1999. This increase results primarily from
the operating result fluctuations in rental and service operations
explained above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaling $174.6 million
and $82.6 million for the six months ended June 30, 2000 and 1999,
respectively, represents the primary source of liquidity to fund
distributions to unitholders and the other minority interests and
to fund recurring costs associated with the renovation and re-
letting of the Partnership's properties.
Net cash used by investing activities totaling $258.5 million and
$323.0 million for the six months ended June 30, 2000 and 1999,
respectively, represents the investment of funds by the Partnership
to expand its portfolio of rental properties through the
development and acquisition of additional rental properties net of
proceeds received from property sales.
Net cash provided by financing activities totaling $106.8 million
and $401.9 million for the six months ended June 30, 2000 and 1999,
respectively, is comprised of debt and equity issuances, net of
distributions to unitholders and minority interests and repayments
of outstanding indebtedness. In the first six months of 2000, the
Partnership received $13.9 million of net proceeds from the General
Partner's issuance of common shares. The Partnership used the net
proceeds to reduce amounts outstanding under the Partnership's
lines of credit and to fund the development and acquisition of
additional rental properties.
In the first six months of 1999, the Partnership received $37.9
million of net proceeds from the General Partner's issuance of
common shares and $96.5 million of net proceeds from the General
Partner's preferred stock offering. The Partnership also issued
$300.0 million of unsecured debt. The Partnership used the net
proceeds to reduce amounts outstanding under the Partnership's lines
of credit and to fund the development and acquisition of additional
rental properties.
The Partnership has the following lines of credit available:
Borrowing Outstanding
Capacity Maturity Interest at June 30, 2000
Description (in 000's) Date Rate (in 000's)
------------------------ ---------- ---------- ----------- ---------------
Unsecured Line of Credit $450,000 April 2001 LIBOR + .70% $428,000
Unsecured Line of Credit $300,000 June 2001 LIBOR + .90% $ 35,000
Secured Line of Credit $150,000 January 2003 LIBOR + 1.05% $ 40,228
The lines of credit are used to fund development and acquisition of
additional rental properties and to provide working capital.
The $450 million line of credit allows the Partnership an option to
obtain borrowings from the financial institutions that participate
in the line of credit at rates lower than the stated interest rate,
subject to certain restrictions. Amounts outstanding on the line of
credit at June 30, 2000 are at LIBOR + .57% to .70%.
- 19 -
<PAGE>
The General Partner and the Partnership currently have on file
Form S-3 Registration Statements with the Securities and Exchange
Commission ("Shelf Registrations") which had remaining availability
as of June 30, 2000, of approximately $792.9 million to issue common
stock, preferred stock or unsecured debt securities. The General
Partner and the Partnership intend to issue additional equity or
debt under these Shelf Registrations as capital needs arise to fund
the development and acquisition of additional rental properties.
The General Partner and the Partnership also plan to file
additional shelf registrations as necessary.
The total debt outstanding at June 30, 2000, consists of notes
totaling approximately $2.4 billion with a weighted average
interest rate of 7.33% maturing at various dates through 2028. The
Partnership has $1.8 billion of unsecured debt and $560.0 million
of secured debt outstanding at June 30, 2000. Scheduled principal
amortization of such debt totaled $5.6 million for the six months
ended June 30, 2000.
Following is a summary of the scheduled future amortization and
maturities of the Partnership's indebtedness at June 30, 2000 (in
thousands):
<TABLE>
<CAPTION>
Future Repayments
--------------------------------------- Weighted Average
Scheduled Interest Rate of
Year Amortization Maturities Total Future Repayments
---- ------------ ---------- ---------- -----------------
<S> <C> <C> <C> <C>
2000 $ 6,827 $ 62,318 $ 69,145 7.33%
2001 13,733 642,381 656,114 7.34%
2002 14,130 55,037 69,167 7.36%
2003 13,979 321,535 335,514 7.71%
2004 12,590 176,146 188,736 7.41%
2005 11,612 213,662 225,274 7.25%
2006 10,856 146,178 157,034 7.13%
2007 9,172 116,576 125,748 7.14%
2008 8,386 100,000 108,386 6.79%
2009 9,010 150,000 159,010 7.73%
Thereafter 32,455 223,113 255,568 7.00%
------- --------- ---------
Total $142,750 $2,206,946 $2,349,696 7.33%
======= ========= =========
</TABLE>
FUNDS FROM OPERATIONS
Management believes that Funds From Operations ("FFO"), which is
defined by the National Association of Real Estate Investment
Trusts as net income or loss excluding gains or losses from debt
restructuring and sales of depreciated operating property, plus
operating depreciation and amortization, and adjustments for
minority interest and unconsolidated companies (adjustments for
minority interest and unconsolidated companies are calculated to
reflect FFO on the same basis), is the industry standard for
reporting the operations of real estate investment trusts.
The following table reflects the calculation of the Partnership's
FFO for the three and six months ended June 30 as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income available
for common units $52,402 $ 32,702 $108,695 $ 63,631
Add back:
Depreciation and
amortization 39,766 20,935 79,545 41,389
Share of joint
venture
adjustments 1,633 1,241 3,050 2,756
Earnings from
depreciated
operating property
sales (3,108) (1,084) (14,178) (3,398)
------ ------- ------- -------
FUNDS FROM OPERATIONS $90,693 $ 53,794 $177,112 $104,378
====== ======= ======= =======
CASH FLOW PROVIDED BY
(USED BY):
Operating
activities $97,171 $ 50,502 $174,565 $ 82,570
Investing
activities (98,142) (155,907) (258,468) (322,976)
Financing
activities 4,518 238,520 106,792 401,876
</TABLE>
- 20 -
The increase in FFO for the three and six months ended June 30,
2000, compared to the three and six months ended June 30, 1999,
results primarily from the increased in-service rental property
portfolio as discussed above under "Results of Operations."
While management believes that FFO is the most relevant and widely
used measure of the Partnership's operating performance, such
amount does not represent cash flow from operations as defined by
generally accepted accounting principles, should not be considered
as an alternative to net income as an indicator of the
Partnership's operating performance, and is not indicative of cash
available to fund all cash flow needs.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
None
Item 2. Changes in Securities
------------------------------
None
Item 3. Defaults upon Senior Securities
----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
At the annual meeting of the shareholders of the General Partner
held on April 26, 2000, there were 126,494,219 common shares
outstanding and entitled to vote on the following matters received
the following votes:
1. The election of the five (5) Directors named on the proxy card; and
That the General Partner did canvass the votes cast, and that the
result of the vote taken at such Meeting was as follows:
FOR AGAINST
--- -------
Howard L. Feinsand 101,427,208 1,641,486
William O. McCoy 101,617,210 1,451,484
James E. Rogers 100,292,530 2,776,164
Thomas A. Senkbeil 101,405,154 1,663,540
Jay J. Strauss 93,952,013 9,116,681
2. A proposal to approve the amendment to the 1995 Stock Option Plan to
increase the number of units authorized for issuance by 5,000,000 units:
FOR AGAINST ABSTAIN
--- ------- -------
96,812,723 5,874,126 381,845
- 21 -
<PAGE>
Item 5. Other Information
--------------------------
When used in this Form 10-Q, the words "believes," "expects,"
"estimates" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ
materially. In particular, among the factors that could cause
actual results to differ materially are continued qualification as
a real estate investment trust, general business and economic
conditions, competition, increases in real estate construction
costs, interest rates, accessibility of debt and equity capital
markets and other risks inherent in the real estate business
including tenant defaults, potential liability relating to
environmental matters and illiquidity of real estate investments.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. The
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.
Readers are also advised to refer to the Partnership's Form 8-K
Report as filed with the U.S. Securities and Exchange Commission on
March 28, 1996 for additional information concerning these risks.
Item 6. Exhibits and Reports on Form 8-K
-------------------------------------------
Exhibits
--------
Exhibit 15. Letter regarding unaudited interim financial information
Exhibit 27. Financial Data Schedule (EDGAR Filing Only)
Reports on Form 8-K
-------------------
None.
- 22 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DUKE-WEEKS REALTY LIMITED PARTNERSHIP
Registrant
Date: August 11, 2000 /s/ Thomas L. Hefner
------------------ ------------------------
President and
Chief Executive Officer
/s/ Darell E. Zink, Jr.
--------------------------
Executive Vice President and
Chief Financial Officer
/s/ Dennis D. Oklak
---------------------------
Executive Vice President and
Chief Administrative Officer
(Chief Accounting Officer)
