<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): AUGUST 27, 1997
PRENTISS PROPERTIES TRUST
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
MARYLAND 1-14516 75-2661588
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
3890 WEST NORTHWEST HIGHWAY, SUITE 400, DALLAS, TEXAS 75220
(Address of Principal Executive Office)
(214) 654-0886
(Registrant's telephone number, including area code)
N/A
__________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
This Amendment No. 1 to Form 8-K amends and restates the current report on Form
8-K filed with the Securities and Exchange Commission on February 16, 1999 (the
"Form 8-K") of Prentiss Properties Trust. The Form 8-K is hereby amended and
restated by amending and restating in their entirety the Financial Statements
included in Item 7 of this Form 8-K to include certain unaudited interim
financial statements.
ITEM 5. OTHER EVENTS
ACQUISITION OF PROPERTIES
On August 27, 1997, the Company completed the acquisition of three Class
"A" suburban office properties (the "Calverton Office Park Properties"). The
Calverton Office Park Properties total 307,802 square feet and are located in
suburban Maryland near Washington, D.C. The Calverton Office Park Properties
were purchased for approximately $28.5 million which was funded primarily with
borrowings under the Company's line of credit.
On December 30, 1997, the Company completed the acquisition of a single
Class "A" office property (the "7101 Wisconsin Avenue Property"). The property
totals 237,265 square feet and is located in suburban Maryland near Washington,
D.C. The 7101 Wisconsin Avenue Property was purchased for approximately $33.8
million which was funded primarily with borrowings under the Company's line of
credit.
On June 12, 1998, the Company completed the acquisition of seven Class "A"
office properties (the "Fidinam Office Portfolio"). The Fidinam Office Portfolio
totals 1,045,000 square feet and is located in the suburban markets of Houston,
Texas. The Fidinam Office Portfolio was purchased for approximately $84.6
million which was funded primarily with borrowings under the Company's line of
credit.
On August 27, 1998, the Company acquired a single Class "A" suburban office
property (the "One O'Hare Centre Property"). The One O'Hare Centre Property
totals 379,685 square feet and is located in the suburban Chicago area. The One
O'Hare Centre Property was purchased for approximately $65.0 million which was
funded primarily with borrowings under the Company's line of credit.
The acquisitions of the Calverton Office Park Properties, 7101 Wisconsin
Avenue Property, Fidinam Office Portfolio and One O'Hare Centre Property (the
"Acquired Properties") do not individually constitute acquisitions of a
"significant amount of assets" as defined under Item 2 of Form 8-K or Rule 3-14
of Regulation S-X. Rather, these acquisitions are below the 10% individual
significance level but exceed the 5% level and, when combined with other
individually insignificant acquisitions previously reported, constitute a
mathematical majority of individually insignificant acquisitions, for which
audited combined statements of revenues and certain operating expenses are
required under Rule 3-14 of Regulation S-X. Accordingly, the audited statement
of revenues and certain operating expenses of the Acquired Properties are filed
herewith.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements for Properties Acquired
Statements of revenues and certain operating expenses of the Fidinam Office
Portfolio and the One O'Hare Centre Property (the "1998 Acquired Properties")
for the periods listed in the index are presented as prescribed by Rule 3-14 of
Regulation S-X.
Statements of revenues and certain operating expenses of the Calverton
Office Park Properties and the 7101 Wisconsin Avenue Property (the "1997
Acquired Properties") for the year ended December 31, 1998.
(B) Pro Forma Financial Information
Prentiss Properties Trust Consolidated Balance Sheet as of December 31,
1998 and Pro Forma Statement of Income for the year ended December 31, 1998.
2
<PAGE>
(C) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP.
3
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
The following represents certain of the properties acquired by the Company during 1997 and 1998: PAGE
NUMBER
INDIVIDUALLY INSIGNIFICANT ACQUISITIONS:
The Calverton Office Park Properties
<S> <C>
Report of Independent Accountants................................................................ 5
Combined Statement of Revenues and Certain Operating Expenses for the Year Ended
December 31, 1998............................................................................. 6
Notes to Statement of Revenues and Certain Operating Expenses.................................... 7
The 7101 Wisconsin Avenue Property
Report of Independent Accountants................................................................ 9
Statement of Revenues and Certain Operating Expenses for the Year Ended
December 31, 1998............................................................................. 10
Notes to Statement of Revenues and Certain Operating Expenses.................................... 11
The Fidinam Office Portfolio
Report of Independent Accountants................................................................ 13
Combined Statement of Revenues and Certain Operating Expenses for the Three Months Ended
March 31, 1998 (unaudited) and the Year Ended December 31, 1997............................... 14
Notes to Statement of Revenues and Certain Operating Expenses.................................... 15
The One O'Hare Centre Property
Report of Independent Accountants................................................................ 17
Statement of Revenues and Certain Operating Expenses for the Six Months Ended June 30, 1998
(unaudited) and the Year Ended December 31, 1997.............................................. 18
Notes to Statement of Revenues and Certain Operating Expenses.................................... 19
PRO FORMA FINANCIAL STATEMENTS:
Prentiss Properties Trust Consolidated Balance Sheet as of December 31, 1998..................... 21
Prentiss Properties Trust Pro Forma Consolidated Statement of Income for the
Year Ended December 31, 1998.................................................................. 22
</TABLE>
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Prentiss Properties Trust
We have audited the accompanying combined statement of revenues and certain
operating expenses of the Calverton Properties (the "Calverton Office Park
Properties") for the year ended December 31, 1998. The combined statement of
revenues and certain operating expenses is the responsibility of the Calverton
Office Park Properties' owners. Our responsibility is to express an opinion on
the combined statement of revenues and certain operating expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined statement of revenues and certain operating expenses. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the combined
statement of revenues and certain operating expenses. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain operating
expenses was prepared for the purpose of complying with rules and regulations of
the Securities and Exchange Commission, as described in Note 1, and is not
intended to be a complete presentation of the Calverton Office Park Properties'
revenues and expenses and may not be comparable to results from proposed future
operations of the Calverton Office Park Properties.
In our opinion, the combined statement of revenues and certain operating
expenses referred to above presents fairly, in all material respects, the
revenues and certain operating expenses described in Note 1 for the year ended
December 31, 1998, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
February 5, 1999
Dallas, Texas
5
<PAGE>
THE CALVERTON OFFICE PARK PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Rental income............................................. $ 5,082
-------
Certain operating expenses:
Real estate taxes......................................... 320
Repairs and maintenance................................... 577
Property management....................................... 526
Utilities................................................. 608
Insurance................................................. 18
-------
2,049
-------
Revenues in excess of certain operating expenses $ 3,033
=======
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
6
<PAGE>
THE CALVERTON OFFICE PARK PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUES
AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The combined statement of revenues and certain operating expenses for the
year ended December 31, 1998 relate to the operations of the Calverton
Properties (the "Calverton Office Park Properties"), which were acquired in
August 1997, by the Company from an unaffiliated third-party for an aggregate
purchase price of $28.5 million. The Calverton Office Park Properties consists
of three Class "A" office buildings totaling 301,019 square feet of office space
and a 6,783 square foot day care center situated on a 22-acre site. The
Calverton Office Park Properties are located in suburban Maryland near
Washington, D.C.
The accompanying statement excludes certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the properties that may not be comparable to the expenses expected
to be incurred in the proposed future operations of these properties. Management
is not aware of any material factors relating to the properties which would
cause the reported financial information not to be necessarily indicative of
future operating results.
The combined statement of revenues and certain operating expenses has been
prepared on the accrual basis of accounting.
REVENUE AND EXPENSE RECOGNITION
Rental income is recorded when due from tenants. The effects of scheduled
rent increases and rental concessions, if any, are recognized on a straight-line
basis over the term of the tenant's lease.
During the year ended December 31, 1998, three separate tenants represented
40%, 23% and 20% of the total base rental income of Calverton I, three separate
tenants represented 41%, 32% and 22% of the total base rental income of
Calverton II and one tenant represented 78% of the total base rental income of
Calverton III.
FUTURE RENTAL REVENUES
The properties are leased to tenants under net operating leases. Minimum
lease payments receivable, excluding tenant reimbursement of expenses, under
noncancellable operating leases in effect as of December 31, 1998, are
approximately as follows:
1999........................................................... $ 4,862
2000........................................................... 2,612
2001........................................................... 2,392
2002........................................................... 1,576
2003........................................................... 762
Thereafter..................................................... 1,539
--------
$13,743
========
Office space in the Calverton Office Park Properties is generally leased to
tenants under lease terms that provide for tenants to pay for increases in
operating expenses in excess of specified amounts.
USE OF ESTIMATES
The preparation of the combined statement of revenues and certain operating
expenses requires management to make estimates and assumptions that affect the
reported amounts, revenues and certain operating expenses during the reporting
period. Actual results could differ from those estimates.
7
<PAGE>
2. RELATED PARTY TRANSACTIONS
Under the terms of the management agreement, the Calverton Office Park
Properties paid $149 in management fees during the year ended December 31, 1998
to affiliates of the entities owning the properties.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Prentiss Properties Trust
We have audited the accompanying statement of revenues and certain
operating expenses of the 7101 Wisconsin Avenue Property (the "7101 Wisconsin
Avenue Property") for the year ended December 31, 1998. The statement of
revenues and certain operating expenses is the responsibility of the 7101
Wisconsin Avenue Property's owners. Our responsibility is to express an opinion
on the statement of revenues and certain operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and certain
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and certain operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement of
revenues and certain operating expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses was
prepared for the purpose of complying with rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the 7101 Wisconsin Avenue Property's revenues
and expenses and may not be comparable to results from proposed future
operations of the 7101 Wisconsin Avenue Property.
In our opinion, the statement of revenues and certain operating expenses
referred to above presents fairly, in all material respects, the revenues and
certain operating expenses described in Note 1 for the year ended December 31,
1998, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
February 5, 1999
Dallas, Texas
9
<PAGE>
THE 7101 WISCONSIN AVENUE PROPERTY
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Revenues:
<S> <C>
Rental income............................................................................. $4,869
Other income.............................................................................. 2
------
4,871
------
Certain operating expenses:
Real estate taxes......................................................................... 423
Repairs and maintenance................................................................... 423
Property management....................................................................... 507
Utilities................................................................................. 443
Insurance................................................................................. 11
------
1,807
------
Revenues in excess of certain operating expenses $3,064
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
10
<PAGE>
THE 7101 WISCONSIN AVENUE PROPERTY
NOTES TO STATEMENT OF REVENUES
AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The statement of revenues and certain operating expenses for the year ended
December 31, 1998 relate to the operations of the 7101 Wisconsin Avenue Property
(the "7101 Wisconsin Avenue Property"), which was acquired on December 30, 1997,
by the Company from an unaffiliated third-party for an aggregate purchase price
of $33.8 million. The 7101 Wisconsin Avenue Property is a 14-story Class "A"
office building located in suburban Maryland, near Washington, D.C., totaling
approximately 237,265 net rentable square feet.
The accompanying statement excludes certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the property that may not be comparable to the expenses expected
to be incurred in the proposed future operations of these property. Management
is not aware of any material factors relating to the property which would cause
the reported financial information not to be necessarily indicative of future
operating results.
The statement of revenues and certain operating expenses has been prepared
on the accrual basis of accounting.
REVENUE AND EXPENSE RECOGNITION
Rental income is recorded when due from tenants. The effects of scheduled
rent increases and rental concessions, if any, are recognized on a straight-line
basis over the term of the tenant's lease.
During the year ended December 31, 1998, two tenants represented 20% and
16% of the total base rental income of the 7101 Wisconsin Avenue Property.
FUTURE RENTAL REVENUES
The property is leased to tenants under net operating leases. Minimum lease
payments receivable, excluding tenant reimbursement of expenses, under
noncancellable operating leases in effect as of December 31, 1998, are
approximately as follows:
1999........................................................ $ 4,668
2000........................................................ 4,262
2001........................................................ 3,407
2002........................................................ 3,019
2003........................................................ 2,641
Thereafter.................................................. 2,916
------------
$20,913
============
Office space in the 7101 Wisconsin Avenue Property is generally leased to
tenants under lease terms that provide for tenants to pay for increases in
operating expenses in excess of specified amounts.
USE OF ESTIMATES
The preparation of the statement of revenues and certain operating expenses
requires management to make estimates and assumptions that affect the reported
amounts, revenues and certain operating expenses during the reporting period.
Actual results could differ from those estimates.
11
<PAGE>
2. RELATED PARTY TRANSACTIONS
Under terms of various management agreements, the 7101 Wisconsin Avenue
Property paid $138 in management fees during the year ended December 31, 1998 to
affiliates of the entities owning the Property.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Prentiss Properties Trust
We have audited the accompanying combined statement of revenues and certain
operating expenses of the Fidinam Office Properties (the "Fidinam Office
Portfolio") for the year ended December 31, 1997. The combined statement of
revenues and certain operating expenses is the responsibility of the Fidinam
Office Portfolio's owners. Our responsibility is to express an opinion on the
combined statement of revenues and certain operating expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined statement of revenues and certain operating expenses. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the combined
statement of revenues and certain operating expenses. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain operating
expenses was prepared for the purpose of complying with rules and regulations of
the Securities and Exchange Commission, as described in Note 1, and is not
intended to be a complete presentation of the Fidinam Office Portfolio's
revenues and expenses and may not be comparable to results from proposed future
operations of the Fidinam Office Portfolio.
In our opinion, the combined statement of revenues and certain operating
expenses referred to above presents fairly, in all material respects, the
revenues and certain operating expenses described in Note 1 for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
February 12, 1999
Dallas, Texas
13
<PAGE>
THE FIDINAM OFFICE PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
-------------------- ------------------
(UNAUDITED)
Revenues:
<S> <C> <C>
Rental income.................................................. $11,035 $3,023
Other income................................................... 260 165
------- ------
11,295 3,188
------- ------
Certain operating expenses:
Real estate taxes.............................................. 1,280 379
Repairs and maintenance........................................ 1,918 425
Management fees................................................ 463 123
Property management............................................ 1,246 375
Utilities...................................................... 1,556 380
Insurance...................................................... 97 29
------- ------
6,560 1,711
------- ------
Revenues in excess of certain operating expenses $ 4,735 $1,477
======= ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
14
<PAGE>
THE FIDINAM OFFICE PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUES
AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The combined statement of revenues and certain operating expenses for the
three months ended March 31, 1998 and the year ended December 31, 1997 relate to
the operations of the Fidinam Office Properties (the "Fidinam Office
Portfolio"), which was acquired on June 12, 1998, by the Company from an
unaffiliated third-party for an aggregate purchase price of $84.6 million. The
Fidinam Office Portfolio consists of seven office buildings totaling 1,045,000
square feet of office space located in the suburban markets of Houston, Texas.
The accompanying statement excludes certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the properties that may not be comparable to the expenses expected
to be incurred in the proposed future operations of these properties. Management
is not aware of any material factors relating to the properties which would
cause the reported financial information not to be necessarily indicative of
future operating results.
The combined statement of revenues and certain operating expenses has been
prepared on the accrual basis of accounting.
The accompanying unaudited interim combined statements of revenues and
certain operating expenses for the three months ended March 31, 1998 have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. These statements reflect, in the opinion of management, all
adjustments necessary for a fair presentation of the interim combined
statements. All such adjustments are of a normal and recurring nature.
REVENUE AND EXPENSE RECOGNITION
Rental income is recorded when due from tenants. The effects of scheduled
rent increases and rental concessions, if any, are recognized on a straight-line
basis over the term of the tenant's lease.
During the year ended December 31, 1997, two tenants represented 20% and
13% of the total base rental income of the Northchase building, three separate
tenants represented 29%, 24% and 12% of the total base rental income of 7575 San
Felipe, two separate tenants represented 14% and 11% of the total base rental
income of the Torrey Chase Office Building, two separate tenants represented 20%
and 16% of the Westheimer Central building, three separate tenants represented
17%, 15% and 15% of the total base rental income of 11811 North Freeway, one
tenant represented 26% of the total base rental income of JFP Energy, and two
separate tenants represented 26% and 16% of the One Westchase building.
FUTURE RENTAL REVENUES
The properties are leased to tenants under net operating leases. Minimum
lease payments receivable, excluding tenant reimbursement of expenses, under
noncancellable operating leases in effect as of December 31, 1997, are
approximately as follows:
1998....................................................... $10,641
1999....................................................... 7,177
2000....................................................... 5,313
2001....................................................... 3,582
2002....................................................... 2,466
Thereafter................................................. 5,054
-------------
$34,233
=============
15
<PAGE>
Office space in the Fidinam Office Portfolio is generally leased to tenants
under lease terms that provide for tenants to pay for increases in operating
expenses in excess of specified amounts.
2. RELATED PARTY TRANSACTIONS
Under terms of various management agreements, the Fidinam Office Portfolio
paid $463 in management fees during the year ended December 31, 1997 to
affiliates of the entities owning the Properties.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Prentiss Properties Trust
We have audited the accompanying statement of revenues and certain
operating expenses of the One O'Hare Centre Property (the "One O'Hare Centre
Property") for the year ended December 31, 1997. The statement of revenues and
certain operating expenses is the responsibility of the One O'Hare Centre
Property's owners. Our responsibility is to express an opinion on the statement
of revenues and certain operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and certain
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and certain operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement of
revenues and certain operating expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses was
prepared for the purpose of complying with rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the One O'Hare Centre Property's revenues and
expenses and may not be comparable to results from proposed future operations of
the One O'Hare Centre Property.
In our opinion, the statement of revenues and certain operating expenses
referred to above presents fairly, in all material respects, the revenues and
certain operating expenses described in Note 1 for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
February 12, 1999
Dallas, Texas
17
<PAGE>
THE ONE O'HARE CENTRE PROPERTY
STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Revenues: YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
-------------------- ----------------
(UNAUDITED)
<S> <C> <C>
Rental income.................................................. $8,693 $4,821
Other income................................................... 65 50
------ ------
8,758 4,871
------ ------
Certain operating expenses:
Real estate taxes.............................................. 2,592 1,281
Repairs and maintenance........................................ 1,089 419
Property management............................................ 729 409
Utilities...................................................... 506 205
Insurance...................................................... 46 44
------ ------
4,962 2,358
------ ------
Revenues in excess of certain operating expenses $3,796 $2,513
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
THE ONE O'HARE CENTRE PROPERTY
NOTES TO STATEMENT OF REVENUES
AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The statement of revenues and certain operating expenses for the six months
ended June 30, 1998 and the year ended December 31, 1997 relate to the
operations of One O'Hare Centre (the "One O'Hare Centre Property"), which was
acquired in August 1998, by the Company from an unaffiliated third-party for an
aggregate purchase price of $65.0 million. The One O'Hare Centre Property is a
12-story office building located in the O'Hare submarket of Chicago, Illinois
totaling approximately 379,685 square feet of office space.
The accompanying statement excludes certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the property that may not be comparable to the expenses expected
to be incurred in the proposed future operations of this property. Management is
not aware of any material factors relating to the property which would cause the
reported financial information not to be necessarily indicative of future
operating results.
The statement of revenues and certain operating expenses has been prepared
on the accrual basis of accounting.
The accompanying unaudited interim combined statements of revenues and
certain operating expenses for the six months ended June 30, 1998 have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. These statements reflect, in the opinion of management, all
adjustments necessary for a fair presentation of the interim combined
statements. All such adjustments are of a normal and recurring nature.
REVENUE AND EXPENSE RECOGNITION
Rental income is recorded when due from tenants. The effects of scheduled
rent increases and rental concessions, if any, are recognized on a straight-line
basis over the term of the tenant's lease.
During the year ended December 31, 1997, one tenant represented 21% of the
total base rental income of the One O'Hare Centre Property.
FUTURE RENTAL REVENUES
The property is leased to tenants under net operating leases. Minimum lease
payments receivable, excluding tenant reimbursement of expenses, under
noncancellable operating leases in effect as of December 31, 1997, are
approximately as follows:
1998........................................................ $ 5,038
1999........................................................ 5,313
2000........................................................ 4,952
2001........................................................ 4,272
2002........................................................ 3,508
Thereafter.................................................. 4,136
-------------
$27,219
=============
19
<PAGE>
Office space in the One O'Hare Centre Property is generally leased to
tenants under lease terms that provide for tenants to pay for increases in
operating expenses in excess of specified amounts.
USE OF ESTIMATES
The preparation of the statement of revenues and certain operating expenses
requires management to make estimates and assumptions that affect the reported
amounts, revenues and certain operating expenses during the reporting period.
Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
Under the terms of the management agreement, the One O'Hare Centre Property
paid $412 in management fees during the year ended December 31, 1997 to
affiliates of the entities owning the Property.
20
<PAGE>
PRENTISS PROPERTIES TRUST
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
This consolidated balance sheet should be read in conjunction with the pro
forma consolidated statements of income of the Company for the year ended
December 31, 1998 included elsewhere in this Form 8-K.
The consolidated balance sheet does not purport to represent the future
financial position of the Company.
<TABLE>
<CAPTION>
(UNAUDITED)
PRENTISS
PROPERTIES
TRUST
DEC. 31, 1998/(1)/
------------------
Assets:
<S> <C>
Real estate, net........................................................................ $1,749,503
Deferred charges and other assets, net.................................................. 74,560
Receivables, net........................................................................ 20,484
Cash and cash equivalents............................................................... 5,523
Escrowed cash and deposits on real estate............................................... 8,172
Other receivables (affiliates).......................................................... 2,245
Investments in joint venture and unconsolidated subsidiaries............................ 10,658
----------------
Total Assets........................................................................ $1,871,145
================
Liabilities:
Debt on real estate..................................................................... $ 800,263
Accounts payable and other liabilities.................................................. 62,410
Distributions payable................................................................... 17,774
----------------
Total Liabilities................................................................... 880,447
----------------
Minority interest in operating partnership..................................................... 128,775
----------------
Minority interest in real estate partnership................................................... 1,345
----------------
Shareholders' Equity:
Preferred shares........................................................................ 100,000
Common shares........................................................................... 399
Additional paid-in capital.............................................................. 787,193
Distributions in excess of accumulated earnings......................................... (3,700)
Common shares in treasury, at cost, 998,800 shares at Dec. 31, 1998..................... (23,314)
----------------
Total Shareholders' Equity.......................................................... 860,578
----------------
Total Liabilities and Shareholders' Equity.......................................... $1,871,145
================
</TABLE>
(1) The acquisitions of the Calverton Office Park Properties, 7101 Wisconsin
Avenue Property, Fidinam Office Portfolio and One O'Hare Centre Property
were completed prior to December 31, 1998; therefore, the balance sheet at
12/31/98 included the effect of the acquisitions.
21
<PAGE>
PRENTISS PROPERTIES TRUST
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following unaudited pro forma consolidated statement of income is
presented as if the acquisition of Calverton Office Park Properties, 7101
Wisconsin Avenue Property, Fidinam Office Portfolio, One O'Hare Centre Property
and the other properties acquired during 1998 had occurred on January 1, 1998.
This pro forma consolidated statement of income should be read in
conjunction with the pro forma consolidated balance sheet at December 31, 1998
included elsewhere in this current report on Form 8-K.
The pro forma consolidated statement of income is not necessarily
indicative of what actual results would have been had the previously described
transactions actually occurred as of January 1, 1998 nor does it purport to
represent the operations of the Company for future periods.
<TABLE>
<CAPTION>
(UNAUDITED) PRO FORMA ADJUSTMENTS PRENTISS
-------------------------------------
PRENTISS PROPERTIES TRUST
PROPERTIES TRUST PRO FORMA
YEAR ENDED OTHER YEAR ENDED
DEC. 31, 1998 ACQUIRED PROPERTIES/(1)/ ADJUSTMENTS DEC. 31, 1998
----------------- ------------------------ ------------- ----------------
Revenues:
<S> <C> <C> <C> <C>
Rental income................................. $ 235,650 $ 32,160 $ 267,810
Mortgage interest............................. 3,835 3,835
Management fees............................... 883 883
Development, leasing, sale and
other fees................................... 1,246 1,246
----------------- ---------------------- ------------- ----------------
Total revenues............................... 241,614 32,160 273,774
----------------- ---------------------- ------------- ----------------
Expenses:
Property operating and maintenance............ 57,191 6,336 63,527
Real estate taxes............................. 25,512 4,095 29,607
General and administrative and personnel cost. 8,000 8,000
Interest expense.............................. 41,718 16,356/(2)/ 58,074
Amortization of deferred financing
costs........................................ 963 963
Depreciation and amortization................. 41,828 5,255/(3)/ 47,083
----------------- ---------------------- ------------- ----------------
Total expenses............................... 175,212 10,431 21,611 207,254
----------------- ---------------------- ------------- ----------------
Equity in income of joint venture and
unconsolidated subsidiaries................... 7,398 7,398
----------------- ---------------------- ------------- ----------------
Income before gain on sale and
minority interest............................. 73,800 21,729 (21,611) 73,918
Gain on sale................................... 14,416 (14,416)/(4)/
Minority interest.............................. (7,796) 655/(5)/ (7,141)
----------------- ---------------------- ------------- ----------------
Income before extraordinary item............... 80,420 21,729 (35,372) 66,777
Extraordinary item............................. (9,001) 9,001/(6)/
----------------- ---------------------- ------------- ----------------
Net income..................................... $ 71,419 21,729 (26,371) 66,777
Preferred dividends............................ (5,655) (5,655)
----------------- ---------------------- ------------- ----------------
Net income attributable to common
Shareholders.................................. $ 65,764 21,729 $ (26,371) $ 61,222
================= ====================== ============= ================
Net income per common share-before
extraordinary item-basic...................... $ 1.93 $ 1.58
Extraordinary item............................. (0.23) -
----------------- ----------------
Net income per common share -basic............. $ 1.70 $ 1.58
================= ================
Weighted average number of
shares outstanding............................ 38,742 38,742
================= ================
Net income per common share-before
extraordinary item-diluted.................... $ 1.89 $ 1.57
Extra ordinary item............................ (0.21) -
----------------- ----------------
Net income per common share -diluted........... $ 1.68 $ 1.57
================= ================
Weighted average common shares outstanding..... 42,497 42,497
================= ================
</TABLE>
22
<PAGE>
(1) During 1998, the Company has acquired 84 Properties containing
approximately 5.0 million square feet for an approximate purchase price of
$562.6 million. The financial information of the 1998 Acquired Properties
reflects the historical revenues and certain operating expenses of the
properties for the period prior to acquisition by the Company.
(2) Represents additional interest expense on borrowings to acquire the 1998
Acquired Properties as if the acquisitions had been acquired on January 1,
1998.
(3) Represents additional depreciation expense as if the 1998 Acquired
Properties had been acquired on January 1, 1998.
(4) Represents elimination of nonrecurring gains on sale and extraordinary
items.
(5) Represents minority interest share of pro forma adjustments to income and
expense.
23
<PAGE>
SIGNATURE
---------
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.
PRENTISS PROPERTIES TRUST
Date: April 1, 1999 By: /s/ Thomas P. Simon
-------------------------------------
Thomas P. Simon
(Vice President and Principal
Accounting Officer)
24
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.1 Consent of PricewaterhouseCoopers LLP.
25
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Prentiss Properties Trust on Form S-3 (File Nos. 333-38079, 333-49295,
333-49433, and 333-60785) and Form S-8 (File No. 333-20329) of our reports dated
(i) February 5, 1999 on our audits of the combined statement of revenues and
certain operating expenses of the Calverton Office Park Properties and the
statement of revenues and certain operating expenses of the 7101 Wisconsin
Avenue Property and (ii) February 12, 1999 on our audits of the statement of
revenues and certain operating expenses of the One O'Hare Centre Property and
the combined statement of revenues and certain operating expenses of the Fidinam
Office Portfolio, all of which reports are included in this Current Report on
Form 8-K/A.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
March 31, 1999
