AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1997
REGISTRATION NO. 333-25741
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------
LASALLE PARTNERS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 6531 36-4150422
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
-------------------------------
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 782-5800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
-------------------------------
WILLIAM E. SULLIVAN
EXECUTIVE VICE PRESIDENT
LASALLE PARTNERS INCORPORATED
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 782-5800
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
-------------------------------
WITH COPIES TO:
CHARLES W. MULANEY, JR., ESQ. THOMAS A. COLE, ESQ.
RODD M. SCHREIBER, ESQ. Sidley & Austin
Skadden, Arps, Slate, Meagher & Flom (Illinois) One First National Plaza
333 West Wacker Drive, Suite 2100 Chicago, Illinois 60603
Chicago, Illinois 60606 (312) 853-7000
(312) 407-0700
-------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this form are to be
offered on delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. |_|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
-------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to Section 8(a), may
determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS (Subject to Completion)
Issued May 8, 1997
Shares
LA SALLE PARTNERS
COMMON STOCK
-------------------------------
All of the shares of Common Stock offered hereby are being sold
by the Company. Prior to this Offering, there has been no
public market for the Common Stock of the Company. It is
currently estimated that the initial offering price per Share
of Common Stock will be between $ and $ . See
"Underwriters" for a discussion of the factors to be considered
in determining the initial public offering price.
-------------------------------
Application will be made to list
the Common Stock on the New York Stock Exchange.
-------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------
PRICE $ A SHARE
-------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Share ................ $ $ $
Total(3).................. $ $ $
- -------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses of the Offering payable by the Company,
estimated at $ .
(3) The Selling Stockholder has granted to the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of additional shares of Common Stock at the
price to public, less underwriting discounts and commissions, for the
purpose of covering over-allotments, if any. If the Underwriters
exercise such option in full, the total price to public, underwriting
discounts and commissions, and proceeds to the Selling Stockholder
will be $ , and , respectively.
The Company will not receive any proceeds from the exercise of the
over-allotment option. See "Underwriters."
-------------------------------
The Shares are offered, subject to prior sale, when, as and if
accepted by the Underwriters named herein and subject to approval of
certain legal matters by Sidley & Austin, counsel for the Underwriters. It
is expected that the delivery of the Shares will be made on or about
, 1997 at the offices of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
-------------------------------
MORGAN STANLEY & CO. WILLIAM BLAIR & COMPANY
Incorporated
, 1997
No person is authorized in connection with any offering made
hereby to give any information or to make any representation other than as
contained in this Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or by any Underwriter. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby by any person in any jurisdiction in which it is unlawful to make
such an offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any date
subsequent to the date hereof.
-------------------------------
Until , 1997 (25 days after the commencement
of this Offering), all dealers effecting transactions in the Common Stock,
whether or not participating in this distribution, may be required to
deliver a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus when acting as Underwriters
and with respect to unsold allotments or subscriptions.
-------------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary................................... 3
Risk Factors......................................... 8
Background of the Company............................15
Incorporation Transactions...........................16
Use of Proceeds......................................17
Dividend Policy......................................17
Capitalization.......................................18
Dilution.............................................19
Selected Financial Data..............................20
Pro Forma Consolidated Financial Statements..........21
Management's Discussion and Analysis of Financial
Condition and Results of Operations................23
Business............................................ 36
Management.......................................... 51
Principal Stockholders.............................. 57
Certain Transactions................................ 58
Description of Capital Stock........................ 60
Shares Eligible for Future Sale..................... 64
Underwriters........................................ 67
Legal Matters....................................... 69
Experts............................................. 69
Additional Information.............................. 69
Index to Financial Statements....................... F-1
-------------------------------
The Company intends to furnish to its stockholders annual
reports containing consolidated financial statements audited by an
independent public accounting firm and quarterly reports for the first
three quarters of each fiscal year containing interim unaudited financial
information.
-------------------------------
Certain persons participating in this Offering may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot in connection
with the Offering, and may bid for and purchase shares of the Common Stock
in the open market. For a description of these activities, see
"Underwriters."
-------------------------------
[Inside Front Cover]
Diagram depicting organizational
structure and representative clients.
[Inside Front Cover Foldout]
Map of United States depicting locations of
LaSalle Partners' principal offices and
pictures of buildings managed.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements and notes thereto appearing
elsewhere herein, including information under the heading "Risk Factors."
Unless otherwise indicated, all information in this Prospectus: (i) assumes
no exercise of the Underwriters' over-allotment option; (ii) reflects the
contribution of LaSalle Partners Limited Partnership ("LPL") and LaSalle
Partners Management Limited Partnership (together with LPL, the
"Predecessor Partnerships") to the Company and the transfer of the
operations of the Predecessor Partnerships to subsidiaries of LaSalle
Partners Incorporated, described under the caption "Incorporation
Transactions," which will be completed simultaneously with the closing of
the offering of the Company's Common Stock (the "Offering"); and (iii)
reflects the amendment and restatement of the Company's Articles of
Incorporation immediately prior to the closing of the Offering. Throughout
this Prospectus, except where the context otherwise requires, references to
the "Company" or "LaSalle Partners" mean the Predecessor Partnerships and
their subsidiaries as of and for the periods prior to the closing of the
Offering and, thereafter, collectively LaSalle Partners Incorporated and
its subsidiaries. See "Incorporation Transactions."
THE COMPANY
Company Overview
LaSalle Partners is a leading full-service real estate firm that
provides management services, corporate and financial services and
investment management services to corporations and other real estate
owners, users and investors worldwide. By offering a broad range of real
estate products and services, and through its extensive knowledge of
domestic and international real estate markets, the Company is able to
serve as a single source provider of solutions for its clients' full range
of real estate needs. The Company holds a leading market position in each
of its primary businesses. For example, the Company believes it is the
largest property manager of office buildings in the United States, one of
the largest outsource service providers for corporate occupied facilities
and the third largest manager of institutional equity capital invested in
domestic real estate assets and securities. The Company is also the fourth
largest manager of institutional real estate equity investments in the
United Kingdom. Founded in 1968, the Company is headquartered in Chicago,
Illinois, and maintains corporate offices in 10 United States cities and
four international markets. The Company also maintains over 300 property
and other offices throughout the United States. In 1996, the Company
generated total revenue of $176.0 million and earnings before interest,
taxes, depreciation and amortization of $32.3 million, representing an
increase of 15.9% and 32.7%, respectively, from the prior year's results.
On April 22, 1997, The Galbreath Company ("Galbreath"), a
property management, facility management and development management
company, merged with LaSalle Partners. Based on the 1996 Commercial
Property News survey of property managers (the "1996 CPN Survey"), the
combination of Galbreath and the Company would have ranked the Company as
the third largest property manager in the United States. The merger expands
the Company's geographic presence, adds additional client relationships and
offers the potential for significant economic synergies with the Company's
Management Services group. As a result of the merger, the Company assumed
management responsibility for an additional 71 million square feet of
commercial space.
Competitive Advantages
The Company believes that it has several competitive advantages
which have established it as a leader in the real estate services and
investment management industries. These advantages include the Company's:
o Relationship Orientation. The Company's client-driven focus
enables the Company to develop long-term relationships with
owners and users of real estate. By developing such
relationships, the Company generates repeat business and
creates recurring revenue sources; 87% of the Company's
1996 revenue was derived from clients for which the Company
provided services in prior years. The Company's
relationship orientation is supported by an employee
compensation system which is unique in the real estate
industry. LaSalle Partners compensates its professionals
with a salary, bonus and stock ownership plan which is
designed to reward client relationship building, teamwork
and quality performance, rather than on a commission basis
which is typical in the industry.
o Full Range of Services. By offering a wide range of high
quality, complementary services, the Company can combine
its services to develop and implement real estate
strategies that meet the increasingly complex needs of its
clients. The Company's product and service capabilities
include property management and leasing, facility
management, development management, tenant representation,
investment banking, land acquisition and development, and
investment management.
o Geographic Reach. With 10 corporate offices and over 300
property and other offices throughout the United States,
LaSalle Partners possesses in-depth knowledge of local
markets and can provide its full range of real estate
services throughout the country. In addition, the Company's
four international offices give the Company the ability to
serve its clients' needs in key international markets. The
international offices also serve as the platform from which
the Company will expand its international presence.
o Reputation. The Company is widely recognized by large
corporations and institutional owners and users of real
estate as a provider of high quality, professional real
estate services and investment management products. The
Company believes its name recognition and reputation for
quality services are significant advantages when pursuing
new business opportunities.
o Experienced Management/Employee Equity Incentives. The
Company's senior management team has an average of
approximately 18 years of experience in the real estate
services industry and, with the exception of Lizanne
Galbreath who joined the Company on April 22, 1997 in
connection with the Galbreath merger, has been with LaSalle
Partners for an average of approximately 16 years. The
Company uses equity-based incentive compensation and bonus
plans and minimum stock ownership guidelines to foster
employee commitment and align employee and stockholder
interests. Following the Offering, the Company's senior
management team will indirectly own % of the outstanding
Common Stock and total employee ownership will be %.
Business
To meet the diverse needs of its clients, the Company provides
its full range of real estate services through three principal business
groups: Management Services, Corporate and Financial Services and
Investment Management.
Management Services. The Company's Management Services group
develops and implements property level strategies to increase investment
value for real estate owners and optimize occupancy costs for corporate
owners and users of real estate. The Management Services group provides
three primary service capabilities: (i) property management and leasing for
property owners; (ii) facility management for properties occupied by
corporate owners and users; and (iii) development management for both
investors and real estate users seeking to develop new buildings or
renovate existing facilities. The Management Services group had property
and facility management responsibility for approximately 132 million square
feet of commercial space as of December 31, 1996.
Corporate and Financial Services. The Company's Corporate and
Financial Services group provides transaction and advisory services through
three primary service capabilities: (i) tenant representation for
corporations and professional service firms; (ii) investment banking
services to address the financing, acquisition and disposition needs of
real estate owners; and (iii) land acquisition and development services for
owners, users and developers of land. The Corporate and Financial Services
group executed over 250 tenant representation assignments in 1996,
representing approximately seven million square feet, and completed
institutional property sales, debt and equity financings and portfolio
advisory activities on assets and portfolios valued at approximately $4.9
billion.
Investment Management. The Company's Investment Management group
provides real estate investment management services to institutional
investors, corporations and high net worth individuals. The Company offers
its clients a broad range of private investments (i.e., purchases of real
estate assets) and public investments such as real estate investment trusts
("REITs") and commercial mortgage-backed securities ("CMBS"). Private real
estate investments have been made on a direct basis and through fund
investments in portfolios of assets. Investments in public REITs and CMBS
are generally managed through investment funds or client-specific
portfolios. As of December 31, 1996, the Company had approximately $15.2
billion of real estate assets under management, of which approximately $2.3
billion consisted of public real estate securities.
Growth Strategy
The Company is pursuing a growth strategy which capitalizes on
existing client relationships and emerging industry trends. Key components
of its growth strategy include:
o Expanding Client Relationships. The Company intends to
utilize its broad real estate services capabilities to
increase the range of services provided to existing clients
as well as to develop new client relationships.
o Broadening International Presence. The Company intends to
grow its existing international operations and enter new
markets to meet the increasingly global needs of its
clients.
o Selectively Pursuing Strategic Acquisitions. As the
industry consolidation among real estate service providers
continues, the Company intends to selectively pursue
strategic acquisitions which expand the Company's product
and service offerings and geographic presence and which
provide the opportunity for economies of scale.
o Pursuing Co-investment Opportunities. The Company intends
to accelerate its strategy of co-investing with its
investment management clients to take advantage of
recovering real estate markets. This strategy is intended
to increase the growth of assets under management, generate
return on investment and create potential opportunities to
provide services related to the acquisition, financing,
property management, leasing and disposition of such
investments.
THE OFFERING
Common Stock offered........................ shares
Common Stock to be outstanding
after the Offering...................... shares (1)
Use of proceeds............................. To repay certain outstanding
indebtedness of the Company.
See "Use of Proceeds."
Proposed New York Stock Exchange symbol..... LAP
- ----------------
(1) Excludes an aggregate of: (i) shares of Common Stock issuable upon
exercise of options to be granted under the Company's 1997 Stock
Incentive Plan upon closing of the Offering, with an exercise price
equal to the initial public offering price; and (ii) additional
shares of Common Stock reserved for future grants or awards under the
Company's 1997 Stock Incentive Plan. See "Management--1997 Stock
Incentive Plan."
SUMMARY FINANCIAL DATA
The information set forth below should be read in conjunction
with "Pro Forma Consolidated Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the Predecessor Partnerships' Combined Financial Statements and notes
thereto, all included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1996 PRO FORMA
1992 1993 1994 1995 1996 AS ADJUSTED(1)
-------- -------- -------- -------- -------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Total revenue ................................ $103,334 $104,049 $126,918 $151,827 $175,967
Total operating expenses ..................... 84,722 87,036 108,903 131,711 149,066
------- ------- ------- ------- -------
Operating income ............................. 18,612 17,013 18,015 20,116 26,901
Interest expense ............................. 5,590 5,257 5,159 3,806 5,730
Earnings before provision for ncome taxes .... 13,022 11,756 12,856 16,310 21,171
Net provision for income taxes ............... 355 300 554 505 1,207
------ ------- ------- ------- ------
Net earnings ................................. $ 12,667 $ 11,456 $ 12,302 $ 15,805 $ 19,964
======== ======== ======== ======== ========
Pro forma:
Net earnings per share ......................
Shares used in computation of pro forma
net earnings per share(2) .................
OTHER DATA:
EBITDA(3) .................................... $21,034 $19,544 $20,866 $24,356 $32,317
Investments under management(4) .............. $6,500,000 $7,000,000 $10,700,000 $11,500,000 $15,200,000
Total square feet-facility management(5) ..... 2,400 50,600 50,600 67,600 68,600
Total square feet under management(6)......... 47,000 98,300 102,400 125,700 131,600
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED(7)
------ --------------
(IN THOUSANDS)
BALANCE SHEET DATA:
<S> <C>
Cash and cash equivalents.......................................................................... $ 7,207
Total assets....................................................................................... 156,614
Long-term debt (8)................................................................................. 55,551
Total liabilities.................................................................................. 132,367
Partners' capital/stockholders' equity............................................................. 24,247
</TABLE>
- -------------------------
(1) As adjusted to give effect to the merger of Galbreath with the
Company, the Incorporation Transactions and the sale of the shares
of Common Stock offered by the Company hereby at an assumed initial
public offering price of $ per share and the receipt and
application of the net proceeds therefrom, as though they had
occurred on January 1, 1996. See "Use of Proceeds," "Background of
the Company" and "Incorporation Transactions."
(2) Includes the shares of Common Stock to be issued in
connection with the Incorporation Transactions and the shares of
Common Stock offered by the Company hereby.
(3) EBITDA represents earnings before interest, income taxes,
depreciation and amortization, thereby removing the effect of
certain non-cash charges on income, such as the amortization of
intangible assets relating to acquisitions. EBITDA is widely used in
the real estate industry as a measure of operating performance and
ability to service debt. However, EBITDA should not be considered as
an alternative either to: (i) net earnings (determined in accordance
with generally accepted accounting principles ("GAAP")); (ii)
operating cash flow (determined in accordance with GAAP); or (iii)
liquidity.
(4) Investments under management represents the aggregate fair market
value or cost basis of assets managed by the Investment Management
group as of the end of the periods shown.
(5) Represents the total square footage of properties for which the
Company provided facility management services as of the end of the
periods shown.
(6) Represents the total square footage of properties for which the
Company provided property management and leasing or facility
management services as of the end of the periods shown.
(7) As adjusted to give effect to the merger of Galbreath with the
Company, the Incorporation Transactions and the sale of the shares
of Common Stock offered by the Company hereby at an assumed initial
public offering price of $ per share and the receipt and
application of the net proceeds therefrom, as though they had
occurred on December 31, 1996. See "Use of Proceeds," "Background of
the Company" and "Incorporation Transactions."
(8) See Note 7 to Notes to the Predecessor Partnerships' Combined
Financial Statements.
RISK FACTORS
Prospective investors should carefully consider the following
information in addition to the other information presented in this
Prospectus before purchasing the shares of Common Stock offered hereby.
General Economic Conditions; Real Estate Economic Climate
Periods of economic slowdown or recession, rising interest rates
or declining demand for real estate could adversely affect certain segments
of the Company's business. Such economic conditions could result in a
general decline in rents which in turn would adversely affect revenue from
property management fees (which in certain cases are calculated as a
percentage of the revenue generated by the property under management) and
commissions or fees derived from property sales and leases (which are
typically based on the sale price or lease revenue commitment,
respectively). Such conditions could also lead to a decline in sale prices
as well as a decline in demand for capital invested in commercial real
estate and related assets.
The condition of the real estate market tends to be cyclical and
related to the condition of the economy as a whole or, at least, to the
perceptions of investors and users as to the economic outlook. The sharp
downturn in the commercial real estate market in the early 1990s has caused
and may continue to cause some property owners to dispose of their
properties or to lose them through foreclosures. Such changes in the
ownership of properties may be accompanied by a change in property and
investment management firms and could cause the Company to lose property
and investment management agreements or make the agreements it retains less
profitable. Many of the properties for which the Company provides
management and leasing or investment management services are office
buildings in the central business districts ("CBDs") of major urban cities.
Approximately 38% of the 132 million square feet under the Company's
property management and leasing agreements, and approximately 38% of the
$12.9 billion in private real estate assets under the Company's investment
management agreements, are related to properties located in CBDs. During
the early 1990s, rental rates and property values of CBD office buildings
experienced greater declines relative to other property types and
locations. This decline, and the slower recovery of this sector to date,
has been largely attributable to over-supply of new office space and
corporate restructurings affecting large businesses. The cyclical market
conditions of the CBD office sector will continue to have an important
impact on the Company's operations.
Risk of Termination or Other Loss of Management Agreements
The Company is substantially dependent on revenue received for
services performed under property management and leasing and investment
management agreements, and would be adversely affected if a significant
number of these agreements were terminated or were not renewed. For the
year ended December 31, 1996, revenue from property management and leasing
agreements and investment management agreements constituted approximately
37% and 32%, respectively, of total revenue. Most property management and
leasing and investment management agreements have terms of approximately
three years and typically are terminable by the client for any reason on as
little as 30 to 60 days' notice. There can be no assurance that any such
contracts will not be cancelled prior to expiration or will be renewed when
the term expires. In addition, the Company derives substantial property
management and leasing and investment banking fees from real estate assets
managed by its Investment Management group. Contracts for these related
services may be terminated or lost for a number of reasons, including the
termination or cancellation of the underlying asset management agreement or
disposition of the subject property. The loss of a substantial number of
these agreements could have a material adverse effect on the Company.
In addition, the Company will sell the remaining real estate
assets held by four multiple investor funds ("commingled funds") formed by
the Company in the 1980s to hold real estate investments on behalf of
numerous tax-exempt institutional investors. The Company receives
investment advisory, property management and leasing and investment banking
fees for services provided in connection with these funds. In 1996, 1995
and 1994, revenue derived from, or in connection with, these funds
represented 11.5%, 12.8% and 20.1%, respectively, of the Company's total
revenue. The Company expects that revenue derived from, or in connection
with, these funds will decrease and eventually be eliminated as the
remaining assets of the funds are sold. While the timing of the revenue
losses will depend on the timing of the dispositions, the Company expects
to complete substantially all of such dispositions prior to the end of
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Dependence on Property Performance
The Company's revenue from property management and leasing
services are generally based on percentages of the revenue generated by the
properties that it manages. In addition, leasing commissions typically are
based on the value of the lease revenue commitments. Accordingly, the
continued success of the Company will be dependent, in part, upon the
performance of the properties it manages. Such performance in turn will
depend in part upon the ability of the Company to attract and retain
creditworthy tenants for the properties it manages, the Company's ability
to control operating expenses (some of which are beyond the Company's
control), financial conditions prevailing generally and in the areas in
which such properties are located and the real estate market generally.
Risks Inherent in Pursuing Selective Acquisition Strategy
The Company intends to continue to selectively pursue domestic
and international acquisitions as a means of strengthening its position as
an industry leader, as well as expanding and enhancing its current product
and service offerings and geographic market coverage. The success of the
Company's acquisition strategy will be dependent upon the availability of
suitable acquisition candidates on favorable terms, of which there can be
no assurance. Further, there can be no assurance that any acquisition will
be integrated successfully into the Company's operations or will perform in
accordance with expectations or that business judgements as to the value or
consequences of any such acquisition will prove correct. The consideration
paid for any future acquisition may be in cash, debt or shares of the
Company's capital stock. The Company could incur substantial indebtedness
or substantial goodwill or both in connection with its acquisition
strategy. In addition, issuances of additional shares of the Company's
capital stock in connection with an acquisition could result in dilution to
stockholders.
Risks Associated with Co-investment Activities
The Company intends to use the increased financial flexibility
created by the Offering to expand its co-investment activities. The
Company's increased participation as a principal in real estate investments
could increase fluctuations in the Company's net earnings and cash flow.
The Company's co-investments also inherently involve the risk of loss of
the Company's investment. Moreover, in certain of these investments, the
Company will not have complete discretion to control the timing of the
disposition of such investments and, as a result, the recognition of any
related gain or loss. See "Management's Discussions and Analysis of
Financial Condition and Results of Operations."
Seasonality
Historically, the Company's revenue, operating income and net
earnings in the first three calendar quarters are substantially lower than
in the fourth quarter. This seasonality is due to a calendar year-end focus
on the completion of transactions, which is consistent with the real estate
industry generally. In addition, an increasing percentage of the Company's
management contracts contain clauses providing for performance bonuses to
be received if the Company achieves certain performance targets. Such
incentive payments are generally earned in the fourth quarter. In contrast,
the Company's non-variable operating expenses, which are treated as
expenses when incurred during the year, are relatively constant on a
quarterly basis. Therefore, the Company typically sustains a loss in the
first and second quarter of each calendar year, reports a small profit or
loss in the third quarter and records a substantial majority of the
Company's earnings in the fourth calendar quarter. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."
Competition
The Company competes in a variety of business disciplines within
the commercial real estate industry, including investment management,
tenant representation, corporate facility management, construction and
development management, on-site property management and leasing, and
investment banking. Each of these business disciplines is highly
competitive on a national as well as local level. Depending on the industry
segment, the Company faces competition from other real estate service
providers, institutional lenders, insurance companies, investment banking
firms, investment managers and accounting firms. Some of the Company's
principal competitors in certain of these business disciplines have greater
financial resources and a broader global presence. Many of the Company's
competitors are local or regional firms which are substantially smaller
than the Company on an overall basis; however, they may be substantially
larger on a local or regional basis. The Company has faced increased
competition in recent years in the Management Services and Investment
Management segments of its business which has, in some cases, resulted in
lower property and investment management fees, or compensation arrangements
more closely aligned with performance. In recent years, there has also been
a significant increase in the number of REITs which self-manage their real
estate assets, which could decrease the demand for property management
services, and thereby increase competition. In general, with respect to
each of the Company's business disciplines, there can be no assurance that
the Company will be able to continue to compete effectively, will be able
to maintain current fee or margin levels or arrangements or will not
encounter increased competition.
Risk Related to General Partner Status
Subsidiaries of the Company are general partners in numerous
general and limited partnerships which invest in or manage real estate
assets. As a general partner, these subsidiaries may be liable to their
partners as well as liable for the obligations of such partnerships.
Because all of the Company's general partnership interests are held through
its special purpose subsidiaries, the Company believes that its exposure to
contingent liabilities is limited to the total invested or committed
capital in and notes from or advances to such subsidiaries holding the
general partnership interests.
Environmental Concerns
Various federal, state and local laws and regulations impose
liability on current or previous real property owners or operators for the
cost of investigating, cleaning up or removing contamination caused by
hazardous or toxic substances at the property. In the Company's role as an
on-site property manager, it could be held liable as an operator for such
costs. Such liability may be imposed without regard to legality of the
original actions and without regard to whether the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances, and
such liability may be joint and several with other parties. If the
liability is joint and several, the Company could be responsible for
payment of the full amount of the liability, whether or not any other
responsible party is also liable. Further, any failure of the Company to
disclose environmental issues could subject the Company to liability to a
buyer or lessee of property. In addition, some environmental laws create a
lien on the contaminated site in favor of the government for damages and
costs it incurs in connection with the contamination. The operator of a
site may be liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating from the
site, including the presence of asbestos-containing materials. There can be
no assurance that any of such liabilities to which the Company or any of
its affiliates may become subject will not have a material adverse effect
upon the business or financial condition of the Company.
Shares Eligible for Future Sale
Upon completion of the Offering, the Company will have
shares of Common Stock outstanding. The shares sold in the
Offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), except for any shares held by an "affiliate" of the Company. The
shares to be held by the stockholders of the Company immediately
prior to the Offering are deemed to be "restricted securities," as that
term is defined in Rule 144 under the Securities Act ("Rule 144"), in that
such shares were issued in private transactions not involving a public
offering. None of such shares will be eligible for sale under Rule 144
prior to the first anniversary of the closing of the Offering. For a
summary description of the requirements of Rule 144, see "Shares Eligible
for Future Sale." The Company intends to file a registration statement on
Form S-8 with respect to the shares reserved for issuance under its 1997
Stock Incentive Plan, including the shares of Common Stock underlying
options which the Company expects to award to certain employees pursuant to
such plan upon the closing of the Offering.
The Company and each of the Company's existing stockholders will
enter into lock-up agreements with the Representatives (as herein defined)
not to sell or otherwise dispose of any of their shares of Common Stock for
a period of 180 days from the date of this Prospectus without the prior
written consent of Morgan Stanley & Co. Incorporated. Certain stockholders
of the Company are entitled to register their shares under the Securities
Act for resale, at the expense of the Company. See "Shares Eligible for
Future Sale -- Registration Rights" and "Underwriters."
In March 1997, DEL/LaSalle Finance Company, L.L.C.
("DEL/LaSalle"), a limited liability company, all of the membership
interests of which are owned by DEL-LPL Limited Partnership and DEL-LPAML
Limited Partnership (together, the "Employee Partnerships"), limited
partnerships which are comprised of approximately 200 of the Company's
employees, purchased the limited partnership interests in the Predecessor
Partnerships owned by a subsidiary of Dresdner Bank AG ("Dresdner").
Dresdner was required to sell the interests in order to comply with bank
regulatory requirements. As consideration for such purchase, DEL/LaSalle
issued to Dresdner a $35.0 million promissory note (the "Dresdner Note").
The purchase price was determined in May 1996 and was based on the original
purchase price for such interests plus Dresdner's share of expected
undistributed earnings for 1996. All of the shares of Common Stock to be
received by DEL/LaSalle in connection with the Incorporation Transactions
and shares of Common Stock held by the Employee Partnerships, representing
an aggregate of % of the outstanding Common Stock after giving effect to
the Offering, will be pledged to support DEL/LaSalle's obligations under
the Dresdner Note. The principal amount of the Dresdner Note is due in five
installments, with $3.5 million due on April 15, 2000 and $7.8 million due
on each April 15 thereafter, through 2004. The Dresdner Note bears interest
at 7.0% per annum, payable on each April 15 beginning on April 15, 1998.
DEL/LaSalle will not have any assets other than the Common Stock issued in
connection with the Incorporation Transactions. Funds for repayment of the
Dresdner Note, including interest thereon, will be provided by capital
contributions from the Employee Partnerships and through the sale of Common
Stock in the public market or in privately negotiated transactions.
DEL/LaSalle has granted the Underwriters a 30-day option to purchase up to
shares of Common Stock to cover over-allotments in connection with the
Offering. In the event that the Underwriters' over-allotment option is
exercised, the proceeds to DEL/LaSalle will be used to repay a portion of
the Dresdner Note. If DEL/LaSalle defaults in the repayment of the Dresdner
Note or interest thereon, Dresdner will have the right to sell any or all
of the pledged shares in the public market or in privately negotiated
transactions, subject to compliance with the Securities Act and applicable
law. See "Shares Eligible for Future Sale" and "Underwriters."
No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have
on the market price of the Common Stock.
Control by Principal Stockholder
Upon completion of this Offering, the Employee Partnerships,
directly and through DEL/LaSalle, will beneficially own % of the Company's
outstanding shares of Common Stock (approximately % if the Underwriters'
over-allotment option is exercised in full). Accordingly, the Employee
Partnerships will continue to be able to exercise substantial influence
over the business and affairs of the Company, including but not limited to
having sufficient voting power to substantially influence the election of
all of the directors to be elected at any annual or special meeting of
stockholders and, in general, to substantially influence the outcome of any
corporate transaction or other matter submitted to the stockholders for
approval, including mergers, consolidations, the sale of substantially all
of the Company's assets, charter amendments and other extraordinary
corporate transactions or may prevent or cause a change in the control of
the Company. The Common Stock held by the Employee Partnerships is voted in
accordance with the direction of its general partners, entities controlled
by 11 directors, officers and employees of the Company, including Messrs.
Scott, Spoerri, Cummings, Esler, Rose and Webb and Ms. Thurber. See
"Principal Stockholders."
Lack of Prior Public Market and Possible Volatility of Stock Price
Prior to the Offering, there has been no public market for the
Common Stock. Although application will be made to list the Common Stock on
the New York Stock Exchange, there can be no assurance that an active
trading market will develop or be sustained. The price of shares of Common
Stock to be sold in the Offering will be determined by negotiations among
the Company and the Underwriters and may be higher than the price at
which the Common Stock will trade after completion of the Offering. See
"Underwriters" for factors to be considered in determining such offering
price. The market price of the Common Stock could be subject to significant
fluctuations in response to quarter-to-quarter variations in operating
results of the Company or its competitors, conditions in the commercial
real estate industry, the commencement of, developments in or outcome of
litigation, changes in estimates of the Company's performance by securities
analysts, and other events or factors, including the events and other
factors described in this "Risk Factors" section. In addition, the stock
market in recent years has experienced price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance
of companies. These fluctuations, as well as general economic and market
conditions, may adversely affect the market price of the Common Stock. See
"Underwriters."
Anti-Takeover Provisions
The Company's Articles of Amendment and Restatement (the
"Restated Articles of Incorporation") and Amended and Restated Bylaws
(the "Bylaws") will include provisions that may delay, defer or prevent a
takeover attempt that may be in the best interest of stockholders. The
Company has a classified Board of Directors, pursuant to which directors
are divided into three classes, with three-year staggered terms. The
classified board provision could increase the likelihood that, in the event
an outside party acquired a controlling block of the Company's stock or
initiated a proxy contest, incumbent directors nevertheless would retain
their positions for a substantial period, which may have the effect of
discouraging, delaying or preventing a change in control of the Company. In
addition, the Restated Articles of Incorporation will provide for: (i) the
ability of the Board of Directors to issue up to shares of preferred stock
and up to shares of undesignated Common Stock and to determine the price,
rights, preferences and privileges of those shares without any further
stockholder approval; (ii) a requirement that any stockholder action
without a meeting be pursuant to unanimous written consent; and (iii)
certain advance notice procedures for nominating candidates for election to
the Board of Directors. Such provisions could discourage bids for the
Common Stock at a premium as well as affect the market price of the Common
Stock. In addition, certain provisions of the Maryland General Corporation
Law (the "MGCL") may also have the effect of delaying, deterring or
preventing a change in the control of the Company. The possible impact of
these provisions on takeover attempts could adversely affect the price of
the Common Stock. See "Description of Capital Stock."
Absence of Dividends; Dividend Policy
The Company does not currently intend to pay any dividends on
the Common Stock in the foreseeable future. Any payment of future dividends
and the amounts thereof will be dependent upon the Company's earnings,
financial requirements and other factors deemed relevant by the Company's
Board of Directors, including the Company's contractual obligations. The
Company expects that provisions to be contained in agreements governing the
Company's long-term indebtedness after the Offering will limit the amount
of dividends that the Company may pay to its stockholders. See "Dividend
Policy."
Dilution
The initial public offering price is expected to be
substantially higher than the pro forma net tangible book value per share
of Common Stock. As a result, purchasers of shares of Common Stock in the
Offering will incur immediate and substantial dilution in net tangible book
value per share. See "Dilution."
Forward-Looking Statements
This Prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act. Discussions containing such
forward-looking statements may be found in the material set forth under
"Prospectus Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as within this
Prospectus generally. In addition, when used in this Prospectus, the words
"believes," "intends," "anticipates," "expects" and words of similar import
may constitute "forward-looking statements" within the meaning of Section
27A of the Securities Act. Such statements are subject to a number of risks
and uncertainties. Actual results in the future could differ materially
from those described in the forward-looking statements as a result of the
risk factors set forth above and the matters set forth in the Prospectus
generally. The Company undertakes no obligation to publicly release any
updates or revisions to these forward-looking statements to reflect any
future events or circumstances.
BACKGROUND OF THE COMPANY
The Company, founded in 1968, is a leading full-service real
estate firm that provides management services, corporate and financial
services and investment management services to corporations and other real
estate owners and investors worldwide. The Company has grown by expanding
both its client base and its range of services and products in anticipation
of client needs and to seize market opportunities. Primarily providing
investment banking, investment management and land services in its early
years of existence, the Company expanded to offer development management
services beginning in 1975, property management and leasing services
beginning in 1978 and tenant representation services beginning in 1978. In
addition, the Company was a pioneer in the facility management services
business, first offered by the Company in 1990.
The Predecessor Partnerships were formed in 1986 by the Employee
Partnerships to conduct the Company's business. In 1988, DSA-LSPL, Inc. and
DSA-LSAM, Inc., affiliates of Dai-ichi Life (U.S.A.), Inc. ("Dai-ichi"),
became limited partners of the Predecessor Partnerships.
In November 1994, the Predecessor Partnerships acquired
substantially all of the assets of Alex. Brown Kleinwort Benson Realty
Advisors Corporation ("ABKB"), a real estate investment advisor, in
exchange for a 20% limited partnership interest in the Predecessor
Partnerships (the "ABKB Acquisition"). Through its acquisition of Kleinwort
Benson, the parent company of ABKB, Dresdner acquired these limited
partnership interests, but was required to sell such interests in order to
comply with bank regulatory requirements. In March 1997, DEL/LaSalle
purchased the Dresdner limited partnership interests in exchange for a
$35.0 million note. The purchase price was determined in May 1996 and was
based on the original purchase price for such interests plus Dresdner's
share of expected undistributed earnings for 1996. Following the
repurchase, the Employee Partnerships, directly and through DEL/LaSalle,
and Dai-ichi had ownership interests in the Predecessor Partnerships of
75.6% and 24.4%, respectively. The Employee Partnerships are the sole
general partners of the Predecessor Partnerships. See "Shares Eligible for
Future Sale."
In October 1996, the Predecessor Partnerships acquired all of
the capital stock of CIN Property Management Limited ("CIN Property
Management"), the affiliated real estate investment and property management
advisor for the British Coal Pension Fund. This entity immediately changed
its name to CIN LaSalle Investment Management Limited ("CIN LaSalle
Investment").
On April 22, 1997, Galbreath, a property management, facility
management and development management company, merged with the Predecessor
Partnerships. As consideration for Galbreath, the Predecessor Partnerships
issued to the stockholders of Galbreath limited partnership interests
representing an 18% interest in the Predecessor Partnerships. Following the
Galbreath merger, the Employee Partnerships, directly and through
DEL/LaSalle, and Dai-ichi had ownership interests in the Predecessor
Partnerships of approximately 62% and 20% respectively. See
"Business--Galbreath Acquisition."
The Company was incorporated in Maryland in April 1997 and will
succeed to the business of the Predecessor Partnerships simultaneously with
the closing of the Offering. See "Incorporation Transactions." The
Company's executive offices are located at 200 East Randolph Drive,
Chicago, Illinois 60601 and its telephone number is (312) 782-5800. The
Company has corporate offices in 10 United States cities and in London,
Paris, Mexico City and Beijing and has over 300 property and other offices
throughout the United States.
INCORPORATION TRANSACTIONS
Simultaneously with the closing of the Offering, pursuant to an
agreement among the partners, each of the general and limited partners of
the Predecessor Partnerships will contribute all of their respective
general and limited partnership interests (the "Partnership Interests
Contribution") in the Predecessor Partnerships to the Company in exchange
for an aggregate of shares of Common Stock. The Predecessor Partnerships
will then contribute, among other things, substantially all of their
respective assets and liabilities (the "Asset Contributions") relating to:
(i) management services to LaSalle Partners Management Services, Inc.
("LPMS") in exchange for all of the outstanding shares of common stock of
LPMS; (ii) corporate and financial services to LaSalle Partners Corporate &
Financial Services, Inc. ("LPCFS") in exchange for all of the outstanding
shares of common stock of LPCFS; and (iii) investment management to LaSalle
Advisors Capital Management, Inc. ("LACM") in exchange for all of the
outstanding shares of common stock of LACM. Following the Asset
Contributions, the Predecessor Partnerships will distribute the Common
Stock of LPMS, LPCFS and LACM to the Company and dissolve. The Partnership
Interests Contribution and the Asset Contributions are collectively
referred to as the "Incorporation Transactions." The closing of the
Offering is conditioned upon, among other things, the completion of the
Incorporation Transactions. In connection with the Incorporation
Transactions, the Company will amend and restate its Articles of
Incorporation. See "Description of Capital Stock."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the
shares of Common Stock offered hereby (assuming an initial public offering
price of $ per share), after deducting estimated underwriting
discounts and commissions and estimated expenses of the Offering payable by
the Company, are estimated to be approximately $ million. The
Company will not receive any proceeds from the exercise of the
over-allotment option.
The Company will use the net proceeds to repay the full amount
of the indebtedness outstanding under promissory notes issued to Dai-ichi
(the "Dai-ichi Notes"). Any remaining proceeds will be used to repay the
indebtedness outstanding under the Company's long-term credit facility (the
"Long-Term Facility") and for general corporate purposes. The Dai-ichi
Notes consist of approximately $6.2 million principal amount of Class A
Notes and $31.0 million principal amount of Class B Notes, each bearing
interest at 10.0%, payable annually on December 31. Principal payments on
the Class A Notes are due in two equal installments on June 30, 1997 and
1998. Principal payments on the Class B Notes are due in 10 equal
installments on June 30th of each year beginning in 1999. Borrowings under
the Long-Term Facility mature on September 6, 1999, and bear interest at
the greater of the lending bank's prime rate and the applicable federal
funds rate plus .5%. Principal payments on borrowings under the Long-Term
Facility are payable on June 15 of each year for amounts outstanding on
March 31, based on a defined amortization schedule. As of December 31,
1996, the principal amount of borrowings under the Long-Term Facility was
approximately $27.4 million. Upon completion of the Offering, the Company
intends to use its borrowing capacity and cash generated from operations to
pursue its growth strategy, including international expansion, selective
acquisitions and co-investment activities. Pending application of the net
proceeds of the Offering as described herein, the Company intends to invest
the proceeds in investment-grade, short-term, interest-bearing securities.
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock to
date. After the Offering, the Company intends to retain its earnings to
support the expansion of its business. Any dividends declared will be at
the discretion of the Board of Directors and will depend upon the Company's
financial condition, earnings and other factors, including the terms of the
Company's indebtedness. The Company expects that provisions to be contained
in agreements governing the Company's long-term indebtedness after the
Offering will limit the amount of dividends that the Company may pay to its
stockholders.
CAPITALIZATION
The following table sets forth the pro forma short-term debt and
capitalization of the Company at December 31, 1996, as adjusted to give
effect to the merger of Galbreath with the Company and the Incorporation
Transactions as if such transactions had occurred on December 31, 1996, and
as further adjusted to give effect to the sale of shares of Common Stock
offered hereby at an assumed initial public offering price of $ per share,
and the receipt and application of the net proceeds therefrom, as described
under "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Pro Forma Consolidated Financial Statements" and the
Predecessor Partnerships' Combined Financial Statements and the notes
thereto, all included elsewhere herein.
<TABLE>
<CAPTION>
December 31, 1996
Pro Forma
Pro Forma As Adjusted
(in thousands, except share data)
Short-term debt:
<S> <C> <C>
Borrowings under short-term credit facility................ $ 6,500
Current maturities of long-term debt(1).................... 9,064
--------- --------
Total short-term debt................................... $ 15,564 $
========= ========
Long-term debt:
Long-term credit facility, less current maturities(1) $ 21,445 $
Subordinated loans, less current maturities................ 34,106
--------- --------
Total long-term debt, less current maturities........... 55,551
--------- --------
Stockholders' equity:
Preferred stock, $.01 par value per share,
10,000,000 shares authorized;
no shares issued and outstanding.........................
Common Stock, $.01 par value per share,
50,000,000 shares authorized;
shares issued and outstanding pro
forma; shares issued and
outstanding pro forma as adjusted (2)....................
Undesignated Common Stock, $.01 par
value per share, 50,000,000 shares
authorized; no shares issued and outstanding.............
Additional paid-in capital..................................
Retained earnings........................................... --
-------- --------
Total stockholders' equity............................... 55,529
-------- --------
Total capitalization............................ $ 111,080 $
========= ========
</TABLE>
________________
(1) See Note 7 to Notes to the Predecessor Partnerships' Combined
Financial Statements.
(2) Excludes an aggregate of: (i) shares of Common Stock issuable upon
exercise of options to be granted under the Company's 1997 Stock
Incentive Plan upon closing of the Offering, with an exercise price
equal to the initial public offering price; and (ii)
additional shares of Common Stock reserved for future grants or awards
under the Company's 1997 Stock Incentive Plan. See "Management--1997
Stock Incentive Plan."
DILUTION
The pro forma net tangible book value of the Company as of
December 31, 1996 (as adjusted to give effect to the merger of Galbreath
with the Company and the Incorporation Transactions) was $ million, or $
per share of Common Stock. Pro forma net tangible book value per share is
determined by dividing the tangible net worth of the Company (total assets
less intangible assets and total liabilities) by the aggregate number of
shares of Common Stock outstanding, assuming the merger of Galbreath with
the Company and the Incorporation Transactions had taken place on December
31, 1996. Without taking into account any changes in such net tangible book
value after December 31, 1996, other than to give effect to the sale of the
shares of Common Stock offered hereby (at an assumed initial public
offering price of $ per share) and the receipt and application of the net
proceeds therefrom, pro forma net tangible book value of the Company as of
December 31, 1996 would have been approximately $ million, or $ per share.
This represents an immediate increase in net tangible book value of $ per
share to the current stockholders of the Company and an immediate dilution
in net tangible book value of $ per share to purchasers of Common Stock in
the Offering. The following table illustrates this per share dilution.
Assumed initial public offering price per share........ $
Pro forma net tangible book value per share at
December 31, 1996 .............................. $
Increase per share attributable to purchasers
in the Offering..................................... ____
Pro forma net tangible book value per share
after the Offering.................................
Dilution per share to purchasers in the Offering..... $
=====
The following table summarizes on a pro forma basis, as of
December 31, 1996, the difference between the existing stockholders and the
purchasers of shares in the Offering (at an assumed initial public offering
price of $ per share, before deducting estimated underwriting discounts and
commissions and estimated offering expenses) with respect to the number of
shares of Common Stock purchased from the Company, the total consideration
paid and the average price per share paid:
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Existing stockholders............ % $ % $
New investors....................
Total........................... 100% $ 100%
====== ==== ======= ===
</TABLE>
The foregoing calculations exclude an aggregate of: (i) shares
of Common Stock issuable upon exercise of options to be granted under the
Company's 1997 Stock Incentive Plan upon closing of the Offering, with an
exercise price equal to the initial public offering price; and (ii)
additional shares of Common Stock reserved for future grants or awards
under the Company's 1997 Stock Incentive Plan. See "Management--1997 Stock
Incentive Plan."
SELECTED FINANCIAL DATA
The following table sets forth, for the periods and as of the
dates indicated, selected financial and other data on a pro forma basis for
the Company and on a historical combined basis for the Predecessor
Partnerships. The selected financial data as of December 31, 1995 and 1996
and for the years ended December 31, 1994, 1995 and 1996 have been derived
from the Predecessor Partnerships' Combined Financial Statements audited by
KPMG Peat Marwick LLP, independent certified public accountants, included
elsewhere herein. The selected financial data as of December 31, 1992, 1993
and 1994 and for the years ended December 31, 1992 and 1993 have been
derived from the Predecessor Partnerships' Combined Financial Statements
audited by KPMG Peat Marwick LLP, not included herein. The unaudited pro
forma, as adjusted, statement of operations data for 1996 give effect to
the merger of Galbreath with the Company, the Incorporation Transactions
(as described under the heading "Incorporation Transactions") and the
Offering as if they occurred on January 1, 1996. In addition, the unaudited
pro forma, as adjusted, balance sheet data give effect to the merger of
Galbreath with the Company, the Incorporation Transactions and the Offering
as if they occurred on December 31, 1996. The information set forth below
should be read in conjunction with "Pro Forma Consolidated Financial
Statements," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Predecessor Partnerships' Combined
Financial Statements and the notes thereto, all included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1996 Pro Forma
1992 1993 1994 1995 1996 as Adjusted
-------- -------- -------- -------- -------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Total revenue................................. $103,334 $104,049 $126,918 $151,827 $175,967
Total operating expenses...................... 84,722 87,036 108,903 131,711 149,066
-------- -------- ------- ------- -------
Operating income.............................. 18,612 17,013 18,015 20,116 26,901
Interest expense.............................. 5,590 5,257 5,159 3,806 5,730
Earnings before provision for income taxes.... 13,022 11,756 12,856 16,310 21,171
Net provision for income taxes................ 355 300 554 505 1,207
-------- -------- -------- -------- --------
Net earnings.................................. $ 12,667 $ 11,456 $ 12,302 $ 15,805 $ 19,964
======== ======== ======== ======== ========
Pro forma:
Net earnings per share.......................
Shares used in computation of pro forma
net earnings per share (1)................
OTHER DATA:
EBITDA(2)..................................... $ 21,034 $ 19,544 $ 20,866 $ 24,356 $ 32,317
Investments under management (3).............. $6,500,000 $7,000,000 $10,700,000 $11,500,000 $15,200,000
Total square feet-facility management(4)...... 2,400 50,600 50,600 67,600 68,600
Total square feet under management(5)......... 47,000 98,300 102,400 125,700 131,600
DECEMBER 31,
--------------------------------------------------------------------------------
1996 Pro Forma
1992 1993 1994 1995 1996 AS ADJUSTED
-------- -------- -------- -------- -------- --------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 9,784 $ 5,125 $ 12,840 $ 8,322 $ 7,207
Total assets.................................. 72,590 84,512 107,055 115,001 156,614
Long-term debt (6)............................ 51,319 56,619 41,028 40,805 55,551
Total liabilities............................. 87,277 99,801 93,898 100,004 132,367
Partners' capital (deficit)/stockholders'
equity....................................... (14,687) (15,289) 13,157 14,997 24,247
</TABLE>
- -------------------------
(1) Includes the shares of Common Stock to be issued in connection with
the Incorporation Transactions, and shares of Common Stock offered
by the Company hereby.
(2) EBITDA represents earnings before interest, income taxes,
depreciation and amortization, thereby removing the effect of
certain non-cash charges on income, such as the amortization of
intangible assets relating to acquisitions. EBITDA is widely used in
the real estate industry as a measure of operating performance and
ability to service debt. However, EBITDA should not be considered as
an alternative either to: (i) net earnings (determined in accordance
with GAAP); (ii) operating cash flow (determined in accordance with
GAAP); or (iii) liquidity.
(3) Investments under management represents the aggregate fair market
value or cost basis of assets managed within the Investment
Management group as of the end of the periods shown.
(4) Represents the total square footage of properties for which the
Company provided facility management services as of the end of the
periods shown.
(5) Represents the total square footage of properties for which the
Company provided property management, leasing or facility management
services as of the end of the periods shown.
(6) See Note 7 to Notes to the Predecessor Partnerships' Combined
Financial Statements.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial
statements are derived from the Predecessor Partnerships' Combined
Financial Statements. The unaudited pro forma consolidated statement of
earnings gives effect to the merger of Galbreath with the Company and the
Incorporation Transactions, as if they had occurred on January 1, 1996. The
unaudited pro forma consolidated statement of earnings, as adjusted, gives
further effect to the Offering. The unaudited pro forma consolidated
balance sheet gives effect to the merger of Galbreath with the Company and
the Incorporation Transactions, as if they had occurred on December 31,
1996. The unaudited pro forma consolidated balance sheet, as adjusted,
gives further effect to the Offering. See "Incorporation Transactions,"
"Use of Proceeds," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The unaudited
pro forma consolidated financial statements should be read in conjunction
with the Predecessor Partnerships' Combined Financial Statements and the
notes thereto, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and other financial information, all included
elsewhere herein.
The pro forma adjustments are based upon available information
and certain assumptions that management of the Company believes are
reasonable under the circumstances. The pro forma consolidated financial
statements are not necessarily indicative of what the actual financial
position and results of operations would have been as of and for the year
ended December 31, 1996 had the Company completed the merger of Galbreath
with the Company and consummated the Incorporation Transactions and the
Offering as of the dates indicated nor does it purport to represent the
future financial position or results of operations of the Company.
Unaudited Pro Forma Consolidated Statement of Earnings
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------------
GALBREATH MERGER
------------------------------------------------------
HISTORICAL
COMBINED DISPOSITION OF
PREDECESSOR HISTORICAL BUSINESS UNITS OTHER INCORPORATION
PARTNERSHIPS(1) COMBINED(1) ADJUSTMENTS(2) ADJUSTMENTS PRO FORMA ADJUSTMENTS
--------------- ----------- -------------- ----------- --------- -------------
(IN THOUSANDS)
Revenue:
<S> <C> <C> <C> <C> <C> <C>
Fee-based services............... $ 170,709 $ 53,326 $ (25,731) $ 4,553 (3) $ 32,148 $
Equity in earnings from
unconsolidated ventures........ 3,220 572 --- (405)(3) 167
Construction operations, net..... 1,271 --- --- --- ---
Other income..................... 767 4,068 (643) 80 (3) 3,505
------- ------- --------- ------ ------- -------
Total revenue.................. 175,967 57,966 (26,374) 4,228 35,820 ---
Operating expenses:
Compensation and benefits......... 104,673 41,747 (23,965) 3,061 (3) 20,843
Other operating and
administrative.................. 38,977 12,055 (4,302) 840 (3) 8,593
Depreciation and amortization..... 5,416 701 --- 1,268 (4) 1,969
------- ------- -------- ------ ------- -------
Total operating expenses....... 149,066 54,503 (28,267) 5,169 31,405 ---
------- ------- -------- ------ ------- -------
Operating income............... 26,901 3,463 1,893 (941) 4,415 ---
Interest expense.................... 5,730 504 --- (504)(5) ---
------- ------- -------- ------ ------- -------
Earnings before provision
for income taxes............. 21,171 2,959 1,893 (437) 4,415 ---
Net provision for income taxes...... 1,207 210 --- 15 (3) 225 (8,002)(6)
------- ------- -------- ------ ------- -------
Net earnings................... $19,964 $ 2,749 $ 1,893 $ (452) $ 4,190 $(8,002)
======= ======= ======== ======= ======== =======
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------------
PRO FORMA
COMPANY/ OFFERING PRO FORMA
GALBREATH ADJUSTMENTS AS ADJUSTED
--------- ----------- -----------
Revenue:
Fee-based services............... $ 202,857 $ $
Equity in earnings from
unconsolidated ventures........ 3,387
Construction operations, net..... 1,271
Other income..................... 4,272
------- -------- --------
Total revenue.................. 211,787
Operating expenses:
Compensation and benefits......... 125,516
Other operating and
administrative.................. 47,570
Depreciation and amortization..... 7,385
------- -------- --------
Total operating expenses....... 180,471
------- -------- --------
Operating income............... 31,316
Interest expense.................... 5,730
------- -------- --------
Earnings before provision
for income taxes............. 25,586
Net provision for income taxes...... 9,434
------- -------- --------
Net earnings................... $16,152 $ $
======= ========= =========
</TABLE>
- ----------
(1) The "Historical" columns represent the combined statement of
operations of the Predecessor Partnerships for the year ended December
31, 1996, and the combined statement of income of Galbreath for the
year ended December 31, 1996.
(2) These adjustments represent the elimination of revenue and related
compensation, benefits, operating and other expenses associated with
Galbreath's tenant representation and investment banking units which,
in connection with the merger, will be disposed of or eliminated by the
Company.
(3) These adjustments represent the acquisition of the remaining minority
interest in an unconsolidated subsidiary of Galbreath and the resulting
consolidation of such subsidiary's operating results. The
unconsolidated subsidiary had historically been accounted for under the
equity method of accounting.
(4) The adjustment represents the annual amortization of goodwill of $1,244
associated with the merger of Galbreath with the Company, in addition
to depreciation of $24 resulting from the acquisition of the
unconsolidated subsidiary of Galbreath discussed in note (3).
(5) The adjustment represents interest expense of $19 related to the
unconsolidated subsidiary discussed in note (3) and the elimination of
interest expense of $523 related to Galbreath's debt which was repaid
in connection with the merger of Galbreath with the Company.
(6) The adjustment represents the net provision for income taxes relating
to the income tax benefits of approximately $800 associated with the
Company becoming a taxable entity and establishing deferred tax
accounts as of January 1, 1996, and the additional provision for taxes
of $8,802 related to 1996 pre-tax earnings as though the Company and
Galbreath were taxable entities as of January 1, 1996, at an estimated
effective tax rate of 40%.
Unaudited Pro Forma Consolidated Balance Sheet
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------------------
GALBREATH MERGER
------------------------------------------------------
HISTORICAL
COMBINED DISTRIBUTION
PREDECESSOR HISTORICAL TO GALBREATH OTHER INCORPORATION
PARTNERSHIPS(1) COMBINED(1) STOCKHOLDERS(2) ADJUSTMENTS PRO FORMA ADJUSTMENTS
--------------- ----------- -------------- ----------- --------- -------------
(IN THOUSANDS)
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents........ $ 7,207 $ 5,805 $ (1,713) $ (1,201)(3) $ 2,891 $
Trade receivables................ 87,283 8,310 (6,030) 496 (4) 2,776
Other receivables................ 3,005 1,238 (1,068) --- 170
Prepaid expenses................. 1,228 32 --- 25 (4) 57
Deferred tax asset............... --- --- --- 179 (5) 179 800(6)
Other assets..................... --- 3,536 (3,479) --- 57
------- ------- -------- ------ ------- -------
Total current assets........... 98,723 18,921 (12,290) (501) 6,130 800
Property and equipment.............. 14,549 2,120 (35) 103 (4) 2,188
Intangibles resulting from
business acquisitions............ 23,735 --- --- 31,090 (5) 31,090
Investments in real estate ventures. 13,687 56 (32) (125)(4) (101)
Long-term receivables, net.......... 5,052 380 --- --- 380
Other assets, net................... 868 633 (633) --- ---
------- ------- -------- ------ ------- -------
Total assets................... $156,614 $22,110 $(12,990) $ 30,567 $39,687 $ 800
======== ======= ======== ======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL\STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities.................... $ 34,228 $ 3,618 $ (264) $ 1,554 (7) $ 4,908 $
Accrued compensation............. 26,016 8,203 (4,293) 225 (4) 4,135
Borrowings under short-term
credit facility................ 6,500 930 (930) --- ---
Current maturities of
long-term debt................. 9,064 603 --- (603)(8) ---
------- -------- ------ --------- ------- --------
Total current liabilities...... 75,808 13,354 (5,487) 1,176 9,043 ---
Long-term debt:
Subordinated loans, less current
maturities....................... 34,106 --- --- --- ---
Long-term credit facility, less
current maturities............... 21,445 582 --- (582)(8) ---
-------- -------- ------- ---------- ------- --------
Total long-term debt........... 55,551 582 --- (582) --- ---
Other long-term liabilities......... 1,008 --- --- 162 (5) 162
------- ------- -------- --------- -------- --------
Total liabilities.............. 132,367 13,936 (5,487) 756 9,205 ---
Partners' Capital/Stockholders'
equity........................... 24,247 8,174 (7,503) 29,811 (9) 30,482 800
------- -------- ------- --------- ------- --------
Total liabilities and
partners' capital/
stockholders' equity......... $156,614 $22,110 $(12,990) $ 30,567 $ 39,687 $ 800
======== ======= ======== ======== ======== =======
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------------
PRO FORMA
COMPANY/ OFFERING PRO FORMA
GALBREATH ADJUSTMENTS AS ADJUSTED
--------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents........ $10,098 $ $
Trade receivables................ 90,059
Other receivables................ 3,175
Prepaid expenses................. 1,285
Deferred tax asset............... 979
Other assets..................... 57
------- --------- ---------
Total current assets........... 105,653
Property and equipment.............. 16,737
Intangibles resulting from
business acquisitions............ 54,825
Investments in real estate ventures. 13,586
Long-term receivables, net.......... 5,432
Other assets, net................... 868
-------
Total assets................... $197,101 $ $
======== ========= ==========
IABILITIES AND PARTNERS' CAPITAL\STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities.................... $ 39,136 $ $
Accrued compensation............. 30,151
Borrowings under short-term
credit facility................ 6,500
Current maturities of
long-term debt................. 9,064
-------
Total current liabilities...... 84,851
Long-term debt:
Subordinated loans, less current
maturities....................... 34,106
Long-term credit facility, less
current maturities............... 21,445
------- --------- ---------
Total long-term debt........... 55,551
Other long-term liabilities......... 1,170
------- --------- ---------
Total liabilities.............. 141,572
Partners' Capital/Stockholders'
equity........................... 55,529
------- --------- ---------
Total liabilities and
partners' capital/
stockholders' equity......... $197,101 $ $
======== ========= =========
</TABLE>
- ----------
(1) The "Historical" columns represent the combined balance sheet of the
Predecessor Partnerships as of December 31, 1996, and the combined
balance sheet of Galbreath as of December 31, 1996.
(2) These adjustments represent the distribution of certain assets and
liabilities, including assets and liabilities associated with
Galbreath's tenant representation and investment banking units, which
will be made in connection with the merger of Galbreath with the
Company.
(3) The adjustment represents the repayment of $1,325 of debt in connection
with the merger of Galbreath with the Company, offset by $124 of cash
associated with the acquisition of an unconsolidated subsidiary of
Galbreath and the resulting consolidation of such subsidiary's
financial position.
(4) These adjustments represent the acquisition of the remaining minority
interest in the unconsolidated subsidiary of Galbreath discussed in
note (3) and the resulting consolidation of such subsidiary's financial
position.
(5) These adjustments represent the allocation of the Galbreath purchase
price to goodwill and other assets and liabilities.
(6) The adjustment represents the deferred income taxes as of December 31,
1996, associated with the Company becoming a taxable entity.
(7) The adjustment represents additional liabilities of $161 related to the
acquisition of the unconsolidated subsidiary of Galbreath discussed in
note (3) and accrued liabilities of $886 related to the disposition of
Galbreath's tenant representation and investment banking units and
transaction costs of $507 associated with the merger of Galbreath with
the Company.
(8) These adjustments represent additional short-term debt of Galbreath of
$120 and long-term debt of $20 as a result of the acquisition of the
unconsolidated subsidiary of Galbreath discussed in note (3) offset by
the repayment of short-term debt of $723 and long-term debt of $603 by
Galbreath in connection with the merger of Galbreath with the Company.
(9) The adjustment represents the effect of recording goodwill in
connection with the Galbreath merger of $31,090 and additional equity
of $97 related to the acquisition of the remaining minority interest in
the unconsolidated subsidiary of Galbreath discussed in note (3),
offset by additional net liabilities of $1,376 recorded in connection
with the allocation of the purchase price for Galbreath.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
LaSalle Partners is a leading full service real estate firm that
provides management services, corporate and financial services and
investment management services to corporations and other real estate
owners, users and investors worldwide. The Management Services segment
provides three primary service capabilities: (i) property management and
leasing for property owners; (ii) facility management for properties
occupied by corporate owners and users; and (iii) development management
for both investors and real estate users seeking to develop new buildings
or renovate existing facilities. The Corporate and Financial Services
segment provides transaction and advisory services through three primary
service capabilities: (i) tenant representation for corporations and
professional service firms; (ii) investment banking services to address the
financing, acquisition and disposition needs of real estate owners; and
(iii) land acquisition and development services for owners, users and
developers of land. The Investment Management segment provides real estate
investment management services to institutional investors, corporations and
high net worth individuals.
The Company has benefited from the recovery in real estate
markets which began in 1993. Specifically, rising rental and occupancy
rates have positively affected revenue for the Company's property
management and leasing and tenant representation businesses. In addition,
improving real estate property values and improved trading values for
public real estate securities have resulted in higher revenue for the
Company's Investment Management segment.
Although a significant portion of the Company's revenue is
transactional in nature, 87% of the Company's 1996 revenue was derived from
clients for which the Company provided services in previous years. The
Company believes that its strong client-service orientation, its focus on
cross-selling its products and services, and its development of strategic
alliances with major users and owners of real estate strengthen its client
relationships and create recurring revenue sources. The Company's revenue
has increased at a compound rate of 12.4% over the past 10 years and at a
compound rate of 14.2% for the five year period ended December 31, 1996. In
addition, the Company's wide range of product and service offerings enabled
the Company to maintain a stable level of revenue from 1990 to 1993, the
sharpest downturn in the real estate markets in recent decades.
The Company's operating expenses consist principally of
compensation and benefits, fixed overhead and depreciation and
amortization. Compensation and benefits, which represented 59.5% of total
revenue in 1996, tend to be relatively constant as a percentage of revenue
on an annual basis. Other operating and administrative expenses consist
principally of overhead costs and to a lesser extent business development
expenses, professional fees and employee training and development. Overhead
generally consists of occupancy costs and other routine business expenses
(i.e., office equipment, supplies and telecommunications) necessary to
conduct the Company's day-to-day operations. Overhead costs, which
represented 6.5% of total revenue in 1996, tend to be relatively fixed,
with increases occurring as the Company expands into new geographic markets
and as significant changes occur in staffing levels. The remaining
components of other operating and administrative expenses are relatively
variable. Depreciation and amortization, which represented 3.1% of the
Company's total revenue in 1996, consist of expenses related to
depreciation of fixed assets and amortization of intangible assets
associated with corporate acquisitions. These expenses have increased in
recent years due to the acquisitions of ABKB and CIN Property Management,
increased investment in technology and the Company's relocation of its
Chicago headquarters. The Company expects that depreciation and
amortization expenses will increase as a result of the merger of Galbreath
with the Company.
Historically, the Company's revenue, operating income and net
earnings in the first three calendar quarters are substantially lower than
in the fourth quarter. This seasonality is due to a calendar year-end focus
on the completion of transactions, which is consistent with the real estate
industry generally. In addition, an increasing percentage of the Company's
management contracts contain clauses providing for performance bonuses to
be received if the Company achieves certain performance targets. Such
incentive payments are generally earned in the fourth quarter. In contrast,
the Company's non-variable operating expenses, which are treated as
expenses when incurred during the year, are relatively constant on a
quarterly basis. Therefore, the Company typically sustains a loss in the
first and second quarter of each calendar year, reports a small profit or
loss in the third quarter and records a substantial majority of the
Company's earnings in the fourth calendar quarter. See "--Quarterly Results
of Operations."
The Company receives investment advisory, property management
and leasing and investment banking fees for services provided in connection
with four multiple investor funds ("commingled funds") formed by the
Company in the 1980s to hold real estate investments on behalf of numerous
tax-exempt institutional investors. Revenue derived from, or in connection
with, these funds represented 11.5% of the Company's total revenue in 1996
compared to 12.8% and 20.1% in 1995 and 1994, respectively. The Company
expects that such revenue will decrease and eventually be eliminated as the
remaining assets of the funds are sold. While the timing of the revenue
loss will depend on the timing of the dispositions, the Company expects to
complete substantially all of such dispositions prior to the end of 1998.
The Company is pursuing a strategy of selective acquisitions in
order to expand its capability to serve clients and strengthen its position
as an industry leader. As a result of the merger of Galbreath with the
Company, the Company added 71 million square feet to its property and
facility management portfolio, added new client relationships and expanded
its market coverage. Previously, with the acquisition of ABKB's real estate
business in late 1994 and with the 1996 purchase of CIN Property
Management, the Company added approximately $5.3 billion to its assets
under management, extended the Company's securities advisory capabilities
and established the Company as the fourth largest manager of institutional
real estate equity investments in the United Kingdom.
As of December 31, 1996, the Company had a total net investment
of $13.7 million in 33 separate property or fund co-investments (which
properties and funds had a total acquisition cost exceeding $1.0 billion).
Twenty-nine of these co-investments were made in the last three years. The
holding period for co-investments typically ranges from three to seven
years. The Company intends to use the increased financial flexibility
created by the Offering to expand its co-investment activities. The
Company's increased participation as a principal in real estate investments
could increase fluctuations in the Company's net earnings and cash flow as
a result of the timing and magnitude of the gains or losses and potential
incentive participation fees, if any, to be recognized on the disposition
of the assets. In certain of these investments, the Company will not have
complete discretion to control the timing of the disposition of such
investments. Co-investment also creates opportunities for the Company to
provide services related to the acquisition, financing, property
management, leasing and disposition of such investments.
Pro Forma Financial Information; Galbreath
The Pro Forma Consolidated Financial Statements included
elsewhere herein give effect to, among other things, the merger of
Galbreath with the Company and the Incorporation Transactions. See "Pro
Forma Consolidated Financial Statements."
On a pro forma basis, the Company's revenue and operating
expenses for 1996 would have been $211.8 million, compared to actual
historical revenue of $176.0 million. Pro forma total revenue of Galbreath
includes fees generated primarily from management services activities, such
as property management and leasing, facility management and development
management assignments. Total revenue of Galbreath also includes other
income which consists of revenue generated from the management of various
insurance programs on behalf of properties, investment income and other
miscellaneous income.
Pro forma operating income for the Company in 1996 would have
been $31.3 million, compared to actual historical operating income of
$26.9 million. The increase in operating income of the Company on a
pro forma basis is primarily the result of the addition of $4.4 million of
pro forma Galbreath operating income, including the effect of eliminating
the net excess costs associated with Galbreath's tenant representation and
investment banking units which will be disposed of or eliminated by the
Company. Prior to the merger with Galbreath, the Company's operating income
as a percentage of total revenue was 15.3%, compared to 14.8% on a pro
forma basis. The decrease is attributable to the lower Galbreath pro forma
operating margin of 12.3%, which is primarily related to management services
activities, compared to the 14.9% operating margin of the Company's
management services segment. The Company believes that potential synergies
created by the merger will improve the operating margin for the combined
management services business.
Pro forma net income for 1996 would have been $16.2 million,
reflecting the increase in operating income, the $.8 million net provision
for income taxes relating to the income tax benefits associated with
becoming a taxable entity and the additional $8.8 million provision for
taxes for 1996 pre-tax earnings as though the Company and Galbreath were
taxable entities for the entire year.
The Galbreath combination is being treated for accounting
purposes as a purchase under Accounting Principles Board Opinion No. 16.
The excess purchase price over the fair value of the identifiable assets
and liabilities acquired was $31.1 million, which was allocated to goodwill
and other intangibles and is being amortized on a straight-line basis over
25 years.
Results of Operations
The following unaudited table sets forth for the periods
indicated the percentage of total revenue represented by certain items
reflected in the Company's statement of earnings.
Year Ended December 31,
1994 1995 1996
----- ---- ----
Revenue:
Management Services..................... 41.3% 40.7% 40.7%
Corporate and Financial Services 27.7 24.6 26.0
Investment Management................... 31.0 34.7 33.3
----- ----- -----
Total revenue........................ 100.0% 100.0% 100.0%
Operating expenses:
Compensation and benefits............... 61.6% 60.1% 59.5%
Other operating and administrative 22.0 23.9 22.2
Depreciation and amortization 2.2 2.8 3.0
----- ---- -----
Total operating expenses 85.8% 86.8% 84.7%
Operating income........................ 14.2% 13.2% 15.3%
Interest expense........................... 4.1 2.5 3.3
----- ----- -----
Earnings before provision
for income taxes ................. 10.1% 10.7% 12.0%
Net provision for income taxes .......... 0.4 0.3 0.7
----- ----- ----
Net earnings.............................. 9.7% 10.4% 11.3%
===== ===== =====
The following unaudited tables summarize the revenue, operating
expenses and operating income by segment, and the percentage of segment
revenue represented by such items, for the years ended December 31, 1994,
1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1994 1995 1996
----------------------- ----------------------- -----------------------
(DOLLARS IN THOUSANDS)
MANAGEMENT SERVICES:
Segment revenue:
<S> <C> <C> <C> <C> <C> <C>
Property management fees.... $ 32,465 61.7% $ 34,017 53.8% $ 37,465 52.1%
Leasing fees................ 9,747 18.5 13,951 22.2 14,819 20.6
Facility management fees.... 6,222 11.8 10,477 16.6 13,639 19.0
Development management fees. 3,557 6.8 3,125 4.9 5,465 7.6
Intersegment sales.......... 160 0.3 1,370 2.2 200 0.3
Other income................ 466 0.9 212 0.3 281 0.4
-------- --------- --------- --------- --------- ---------
$ 52,617 100.0% $ 63,152 100.0% $ 71,869 100.0%
Operating Expenses:
Compensation, benefits, other
operating and administrative. 46,267 87.9 50,859 80.5 59,486 82.8
Depreciation and amortization. 1,076 2.0 1,202 1.9 1,651 2.3
-------- --------- --------- --------- --------- ------
Operating income.......... $ 5,274 10.1% $ 11,091 17.6% $ 10,732 14.9%
======== ===== ========= ===== ========= =====
CORPORATE AND FINANCIAL SERVICES:
Segment revenue:
Tenant representation fees.. $ 19,359 55.2% $ 23,037 61.8% $ 31,200 66.8%
Investment banking fees..... 9,432 26.9 6,908 18.5 6,664 14.3
Land fees .................. 4,300 12.2 3,675 9.8 4,938 10.6
Construction operations, net 1,284 3.7 1,358 3.6 1,271 2.7
Equity in earnings from
unconsolidated ventures... 476 1.4 2,171 5.9 1,380 3.0
Intersegment sales.......... 1,000 2.1
Other income................ 233 0.6 154 0.4 253 0.5
-------- --------- --------- ------- --------- ---------
$ 35,084 100.0% $ 37,303 100.0% $ 46,706 100.0%
Operating expenses:
Compensation, benefits, other
operating and administrative. 27,463 78.3 28,604 76.7 34,831 74.6
Depreciation and amortization. 845 2.4 890 2.4 1,055 2.3
-------- --------- --------- --------- --------- ---------
Operating income ......... $ 6,776 19.3% $ 7,809 20.9% $ 10,820 23.1%
======== ===== ========= ===== ========= =====
INVESTMENT MANAGEMENT:
Segment revenue:
Advisory fees............... $ 35,734 90.7% $ 45,117 85.5% $ 53,618 91.5%
Acquisition fees............ 2,944 7.5 6,411 12.2 2,939 5.0
Equity in earnings from
unconsolidated ventures... 548 1.4 959 1.8 1,840 3.2
Other income................ 151 0.4 255 0.5 195 0.3
-------- --------- --------- --------- --------- ---------
$ 39,377 100.0% $ 52,742 100.0% $ 58,592 100.0%
Operating expenses:
Compensation, benefits, other
operating and administrative. 32,482 82.5 49,378 93.6 50,533 86.2
Depreciation and amortization. 930 2.4 2,148 4.1 2,710 4.6
-------- --------- --------- --------- --------- ---------
Operating income.......... $ 5,965 15.1% $ 1,216 2.3% $ 5,349 9.2%
======== ===== ========= ==== ========= ====
Total segment revenue.......... $127,078 $ 153,197 $ 177,167
Intersegment revenue eliminations. (160) (1,370) (1,200)
-------- ------- ---------
Total revenue............... $126,918 $ 151,827 $ 175,967
======== ========= =========
Total segment operating expenses. $109,063 $ 133,081 $ 150,266
Intersegment operating expenses. (160) (1,370) (1,200)
-------- --------- ---------
Total operating expenses... $108,903 $ 131,711 $ 149,066
======== ========= =========
Total operating income..... $ 18,015 $ 20,116 $ 26,901
======== ========= =========
</TABLE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Consolidated Results
Total Revenue. The Company's total revenue grew $24.1 million,
or 15.9%, to $176.0 million in 1996 from $151.8 million in 1995. In
general, the strong United States economy in 1996 and a lack of new
construction since the early 1990s have resulted in tightening supplies and
rising rental rates for commercial real estate in the United States.
Accordingly, the amount of public and private capital invested in
commercial real estate generally has increased with improving market
conditions. These conditions have resulted in revenue growth for all three
of the Company's business segments.
Operating Expenses. The Company's operating expenses increased
$17.4 million, or 13.2%, to $149.1 million in 1996 from $131.7 million in
1995. The increase in operating expenses generally reflected higher levels
of compensation and benefits associated with increased staffing and higher
incentive compensation associated with the Company's increased revenue. In
addition, depreciation and amortization expenses increased $1.2 million, or
27.7%, primarily as a result of amortization of goodwill and other
intangibles associated with the acquisition of CIN Property Management in
October 1996 (which are being amortized over five to 20 years) and
depreciation expense associated with the Company's investment in
technology-related assets and the relocation of its corporate headquarters.
As a percentage of total revenue, operating expenses declined to 84.7% in
1996 from 86.8% in 1995, primarily reflecting the relatively fixed nature
of certain administrative expenses as well as the impact in 1995 of the
$1.9 million provision for the estimated uncollectible portion of a
receivable from Diverse Real Estate Holdings Limited Partnership
("Diverse"). See "Certain Transactions."
Operating Income. Based on the factors noted above, the
Company's operating income increased $6.8 million, or 33.7%, to $26.9
million in 1996 from $20.1 million in 1995. As a percentage of total
revenue, operating income increased to 15.3% in 1996 from 13.2% in 1995.
Interest Expense. Interest expense increased $1.9 million, or
50.6%, to $5.7 million in 1996 from $3.8 million in 1995, principally as a
result of increased borrowings under the Long-Term Facility to fund the CIN
Property Management acquisition, technology and infrastructure investments
and co-investments.
Provision for Income Taxes. Provision for income taxes increased
$.7 million, or 139%, to $1.2 million in 1996 from $.5 million in 1995, due
to an increased volume of transactions performed in jurisdictions with
higher state taxes and increased foreign taxes paid in connection with
international operations.
Net Earnings. Net earnings increased $4.2 million, or 26.3%, to
$20.0 million in 1996 from $15.8 million in 1995. Net earnings in 1996
represented 11.3% of total revenue, compared with 10.4% in the previous
year.
Segment Operating Results
Management Services. The Management Services segment's revenue,
which represented approximately 40.7% of the Company's total revenue in
1996, increased $8.7 million, or 13.8%, to $71.9 million in 1996 from $63.2
million in 1995. This increase was primarily due to a $4.3 million increase
in property management and leasing fees and a $3.2 million increase in
facility management revenue. Property management and leasing fees increased
as a result of the net addition of approximately six million square feet of
new property management and leasing assignments in 1996 and, to a lesser
extent, rising rental rates for office buildings generally. The increase in
facility management fees was principally due to the initiation of a major
new facility management assignment and increased incentive-based fees
related to cost savings achieved for facility management accounts added in
prior years. The Company's property management and leasing revenue was
impacted by a $.6 million decline in revenue related to the sale of certain
commingled fund properties. Total revenue from property management and
leasing services provided to commingled fund properties in 1996 was $11.9
million compared to $12.5 million in 1995.
Operating expenses increased $9.1 million, or 17.4%, to $61.1
million in 1996 from $52.1 million in 1995 as a result of increased
staffing levels to meet the demands associated with an expansion of square
feet under management. In addition, the segment incurred approximately $2.0
million of incremental expenses associated with an increased commitment of
senior personnel to the national leasing effort. This effort included an
expansion in selected regional markets resulting in approximately $1.0
million of relocation and recruiting costs. The segment also incurred
approximately $.7 million in consulting fees to enhance client service and
information reporting for property management assignments and in training
costs expended on new technology implemented in 1996 regarding tenant
request and other systems. Operating income decreased by $.4 million, or
3.2%, to $10.7 million in 1996 from $11.1 million in 1995. The Management
Services segment's operating income represented 39.9% of the Company's
total operating income in 1996. As a percentage of segment revenue,
operating income decreased to 14.9% in 1996 from 17.6% in 1995.
Corporate and Financial Services. The Corporate and Financial
Services segment's revenue, which represented about 26.5% of the Company's
total revenue in 1996, increased $9.4 million, or 25.2%, to $46.7 million
in 1996 from $37.3 million in 1995. This record revenue resulted primarily
from an $8.2 million increase in revenue from the Company's tenant
representation business. A number of significant tenant representation
transactions and a series of transactions generated from a new facility
management client accounted for the majority of the increased tenant
representation revenue. The tenant representation business completed 257
transactions totaling over 6.7 million square feet in 1996 compared to 132
transactions and 3.6 million square feet in 1995. Approximately 79% of
tenant representation revenue in 1996 was generated from strategic
alliances with large corporations or professional service firms.
Operating expenses for the Corporate and Financial Services
segment increased $6.4 million, or 21.7%, to $35.9 million in 1996 from
$29.5 million in 1995, principally as a result of higher staffing levels to
meet the higher levels of activity throughout the year and as a result of
increased incentive compensation earned by employees. The Corporate and
Financial Services segment's operating income, which represented 40.2% of
the Company's total operating income in 1996, increased $3.0 million in
1996, or 38.6%, to $10.8 million in 1996 from $7.8 million in 1995. As a
percentage of segment revenue, operating income increased to 23.1% in 1996
from 20.9% in 1995.
Investment Management. The Investment Management segment's
revenue, which represented 33.3% of the Company's total revenue in 1996,
increased $5.9 million, or 11.1%, to $58.6 million in 1996 from $52.7
million in 1995. The net gain in revenue was primarily attributable to
growth in the Company's European advisory business resulting from the CIN
Property Management acquisition in October 1996, and, to a lesser extent,
the increase in assets under management from the Company's co-investment
activities and the Company's securities advisory business. Strong
fundamentals in the publicly traded real estate securities markets during
1996, and the resulting capital inflows to this sector, contributed to the
growth in the Company's securities advisory business.
Revenue was negatively impacted by a $1.0 million decline in
investment management fees from the Company's four large commingled funds
in 1996, as a result of the sale of several commingled fund assets during
the year. The funds had a net asset value of $726 million at the end of
1996, compared to $983 million at the end of 1995. Investment Management
segment revenue from these funds, which totaled $5.9 million in 1996, will
continue to decline as substantially all of the remaining properties are
expected to be sold by the end of 1998.
Operating expenses increased $1.7 million, or 3.3%, to $53.2
million in 1996 from $51.5 million in 1995. The increase is primarily
attributable to additional operating expenses and amortization of goodwill
and intangible assets associated with the acquisition of CIN Property
Management totaling $2.6 million and, to a lesser extent, to employee
relocation costs totaling $1.2 million. The 1996 increase in expenses was
offset by $2.0 million in certain one-time expenses incurred in 1995
related to the reorganization of this segment.
Operating income, which represented 19.9% of the Company's total
operating income in 1996, increased $4.1 million to $5.3 million in 1996
from $1.2 million in 1995. As a percentage of segment revenue, operating
income increased to 9.2% in 1996 from 2.3% in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Consolidated Results
Total Revenue. Total revenue increased $24.9 million, or 19.6%,
to $151.8 million in 1995 from $126.9 million in 1994. The revenue increase
resulted from the full year effect of the acquisition of ABKB's securities
and advisory business in late 1994 and from revenue growth in the
Management Services segment's leasing and facility management activities.
The Company's revenue growth also reflected improvements in both general
economic conditions and in real estate industry fundamentals.
Operating Expenses. The Company's operating expenses increased
$22.8 million, or 20.9%, to $131.7 million in 1995 from $108.9 million in
1994. As a percentage of total revenue, operating expenses increased to
86.8% in 1995 from 85.8% in 1994. The increase in operating expenses was
attributable primarily to a $13.1 million increase in compensation and
benefits expenses, an $8.3 million increase in other operating and
administrative expenses and, to a lesser extent, a $1.4 million increase in
depreciation and amortization expense. The increase in compensation and
benefits expenses reflected the effect of the ABKB acquisition in late 1994
and higher levels of employee incentive compensation associated with
certain segments exceeding their operating income objectives. The increase
in other operating and administrative expenses was primarily attributable
to the effect of the ABKB acquisition and, to a lesser extent, to certain
one-time costs and the $1.9 million provision for the uncollectible portion
of the Company's long-term receivable from Diverse. The increase in
depreciation and amortization expense principally resulted from the
full-year effect of the amortization of the intangible assets arising from
the acquisition of ABKB in late 1994. The $9.4 million in intangibles
recognized in that transaction are being amortized over a 10 year period.
In 1994, operating expenses included a $4.2 million charge related to the
commitment to relocate the Company's headquarters, which charge was
allocated to all of the Company's business segments, principally on a
head-count basis.
Operating Income. Operating income increased $2.1 million, or
11.7%, to $20.1 million in 1995 from $18.0 million in 1994. As a result of
the factors noted above, as a percentage of total revenue, operating income
represented 13.2% in 1995 compared to 14.2% in 1994.
Interest Expense. Interest expense declined to $3.8 million in
1995 from $5.2 million in 1994 and is substantially attributable to the
$14.1 million principal payment made on the Dai-ichi Notes in late 1994.
Net Earnings. Net earnings increased $3.5 million, or 28.5%, to
$15.8 million in 1995 from $12.3 million in 1994. Net earnings represented
10.4% of total revenue, compared with 9.7% in 1994.
Segment Operating Results
Management Services. The Management Services segment's revenue,
which represented 40.7% of the Company's total revenue in 1995, increased
$10.5 million, or 20.0%, to $63.2 million in 1995 from $52.6 million in
1994. Facility management revenue increased $4.3 million as the Company
obtained over 17.5 million square feet of new assignments. Improving
leasing markets drove leasing revenue to record levels in 1995, with
leasing revenue increasing $4.2 million over 1994 levels. Property
management fees also increased $1.6 million to $34.0 million, principally
as a result of new assignments.
Operating expenses increased $4.7 million, or 10.0%, to $52.1
million in 1995 from $47.3 million in 1994, primarily as a result of
increased staffing levels to support new assignments in addition to
expanded marketing costs associated with promoting the Company's facilities
management initiative. As a percentage of revenue, operating expenses
decreased to 82.4% in 1995 from 89.9% in 1994 primarily as a result of
higher than normal corporate overhead expenses incurred in 1994 as a result
of the Management Services segment's allocation of the headquarters
relocation charge. The Management Services segment's operating income,
which represented 55.1% of the Company's total operating income in 1995,
increased $5.8 million, or 110%, to $11.1 million in 1995 from $5.3 million
in 1994. As a percentage of segment revenue, operating income increased to
17.6% in 1995 from 10.0% in 1994.
Corporate and Financial Services. The Corporate and Financial
Services segment's revenue, which represented approximately 24.6% of the
Company's total revenue in 1995, increased $2.2 million, or 6.3%, to $37.3
million in 1995 from $35.1 million in 1994. The revenue growth resulted
from $3.7 million of increased revenue from tenant representation
activities. The tenant representation business completed 132 transactions
totaling 3.6 million square feet in 1995, compared with 98 transactions
totaling 3.8 million square feet in 1994. Although the total square footage
of transactions in 1995 was slightly less than in 1994, revenue per square
foot increased due to a concentration of activity in cities with higher
average rents. Revenue gains were offset principally by decreased revenue
from its investment banking activities. The reduction in the Company's
investment banking revenue was primarily attributable to senior personnel
being dedicated to the development of new products and initiatives in 1995,
including CMBS and hotel investments, rather than new business development.
Operating expenses increased $1.2 million, or 4.2%, to $29.5
million in 1995 from $28.3 million in 1994. As a percentage of revenue,
operating expenses represented 79.1% in 1995 compared to 80.7% in 1994. The
1994 operating expenses for this segment were adversely affected by the
one-time allocation of the headquarters relocation charge. The Corporate
and Financial Services segment's operating income, which represented 38.8%
of the Company's total operating income in 1995, increased $1.0 million in
1995, or 15.2%, to $7.8 million in 1995 from $6.8 million in 1994. The
increase was a result of the strengthening of the real estate market,
increased tenant representation fees and the investment in a commercial
land and residential development entity. As a percentage of segment
revenue, operating income increased to 20.9% in 1995 from 19.3% in 1994.
Investment Management. The Investment Management segment's
revenue, which represented 34.7% of the Company's total revenue in 1995,
increased $13.4 million, or 33.9%, to $52.7 million in 1995 from $39.4
million in 1994. The substantial majority of the increase in revenue was
associated with the ABKB acquisition, partially offset by a $7.0 million
decrease in commingled fund revenue. This decline in commingled fund
revenue was primarily attributable to the voluntary reduction in fees in
1995, as well as sales of real estate assets held by such funds. In
addition, as a result of the downturn in real estate markets, commingled
fund advisory fees, which are calculated as a percentage of real estate net
asset value ("NAV"), declined because of such reductions in property NAVs.
Operating expenses increased $18.1 million, or 54.2%, to $51.5
million in 1995 from $33.4 million in 1994. The substantial majority of the
increase is associated with the ABKB acquisition and the amortization of
the related goodwill and intangible assets in addition to certain one-time
expenses incurred in 1995 totaling $2.0 million related to the
restructuring of this segment. As a percentage of revenue, operating
expenses increased to 97.7% in 1995 from 84.9% in 1994. The Investment
Management segment's operating income, which represented 6.0% of the
Company's total operating income in 1995, decreased $4.7 million to $1.2
million in 1995 from $6.0 million in 1994. As a percentage of segment
revenue, operating income decreased to 2.3% in 1995 from 15.1% in 1994.
Quarterly Results of Operations
The following table sets forth certain unaudited combined
statements of operations data for each of the Company's last eight
quarters. In the opinion of management, this information has been presented
on the same basis as the audited financial statements appearing elsewhere
in this Prospectus, and includes all adjustments, consisting only of normal
recurring adjustments and accruals, that the Company considers necessary
for a fair presentation. The unaudited combined quarterly information
should be read in conjunction with the Predecessor Partnerships' Combined
Financial Statements and the notes thereto. The operating results for any
quarter are not necessarily indicative of the results for any future
period.
<TABLE>
<CAPTION>
1995 1996
----------------------------------------- -----------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- ------- -------- ------- -------- -------
Revenue(1):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Services............ $ 11,782 $ 13,777 $ 13,697 $ 22,526 $ 12,013 $ 14,832 $ 18,384 $ 26,440
Corporate and Financial
Services..................... 3,302 6,336 9,880 17,785 4,962 6,273 9,199 25,272
Investment Management.......... 11,336 12,693 13,105 15,608 11,360 12,466 11,979 22,787
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue.................. $ 26,420 $ 32,806 $ 36,682 $ 55,919 $ 28,335 $ 33,571 $ 39,562 $ 74,499
Operating expenses:
Compensation and benefits...... $ 21,489 $ 22,352 $ 22,145 $ 25,197 $ 23,327 $ 24,346 $ 24,995 $ 32,005
Other operating and
administrative (1).......... 7,083 8,702 8,467 12,036 7,052 9,831 10,088 12,006
Depreciation and
amortization................ 1,003 1,057 1,052 1,128 1,111 1,134 1,169 2,002
-------- -------- -------- -------- -------- -------- -------- --------
Operating income (loss)........ $ (3,155) $ 695 $ 5,018 $ 17,558 $ (3,155) $ (1,740) $ 3,310 $ 28,486
Interest expense............... 941 948 959 958 937 1,104 1,944 1,745
Income tax provision
(benefit).................... (127) (8) 126 514 (233) (162) 78 1,524
--------- ---------- -------- --------- -------- -------- --------- --------
Net earnings (loss)............$ (3,969) $ (245) $ 3,933 $ 16,086 $ (3,859) $ (2,682) $ 1,288 $ 25,217
========== ========= ======== ======== ======== ======== ======== ========
EBITDA(2)...................... $ (2,152) $ 1,752 $ 6,070 $ 18,686 $ (2,044) $ (606) $ 4,479 $ 30,488
======== ======== ======== ======== ======== ========== ======== ========
</TABLE>
The following table sets forth the above quarterly financial
information as a percentage of total revenue:
<TABLE>
<CAPTION>
1995 1996
----------------------------------------- -------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue (1):
Management Services............ 44.6 % 42.0 % 37.3 % 40.3 % 42.4 % 44.2 % 46.5 % 35.5 %
Corporate and Financial
Services..................... 12.5 19.3 26.9 31.8 17.5 18.7 23.3 33.9
Investment Management.......... 42.9 38.7 35.7 27.9 40.1 37.1 30.3 30.6
------ ------ ------ ------ ------ ------ ------ ------
Total revenue.................. 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0% 100.0 % 100.0 %
Operating expenses:
Compensation and benefit....... 81.3 % 68.1 % 60.4 % 45.1 % 82.3 % 72.5 % 63.2 % 43.0 %
Other operating and
administrative (1) ......... 26.8 26.5 23.1 21.5 24.9 29.3 25.5 16.1
Depreciation and
amortization................ 3.8 3.2 2.9 2.0 3.9 3.4 3.0 2.7
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)........ (11.9)% 2.1 % 13.7 % 31.4 % (11.1)% (5.2)% 8.4 % 38.2 %
Interest expense............... 3.6 2.9 2.6 1.7 3.3 3.3 4.9 2.3
Income tax provision
(benefit).................... (0.5) 0.0 0.3 0.9 (0.8) (0.5) 0.2 2.0
------ ------ ------ ------ ------- ------ ------ ------
Net earnings (loss)............ (15.0)% (0.7)% 10.7 % 28.8 % (13.6)% (8.0)% 3.3 % 33.8 %
====== ====== ====== ====== ======= ====== ====== ======
EBITDA (2)..................... (8.1)% 5.3 % 16.5 % 33.4 % (7.2)% (1.8)% 11.3 % 40.9 %
====== ====== ====== ====== ======= ====== ====== ======
</TABLE>
- --------------
(1) Excludes intersegment revenue and intersegment expense.
(2) EBITDA represents earnings before interest, income taxes,
depreciation and amortization, thereby removing the effect of certain
non-cash charges on income, such as the amortization of intangible
assets relating to acquisitions. EBITDA is widely used in the real
estate industry as a measure of operating performance and ability to
service debt. However, EBITDA should not be considered as an
alternative either to: (i) net earnings (determined in accordance
with GAAP; (ii) operating cash flow (determined in accordance with
GAAP); or (iii) liquidity.
Segment Revenue. A substantial majority of Management Services
revenue reflects property and facility management fees earned evenly
throughout the year. However, fourth quarter revenue is generally higher
due to higher levels of leasing fees earned in the fourth quarter as well
as incentive fees earned under performance-based agreements. Corporate and
Financial Services revenue has historically increased from quarter to
quarter in a given year with the largest proportion of transactions being
completed in the fourth quarter, consistent with the industry. Investment
Management revenue is generally earned evenly throughout the year with the
fourth quarter 1996 revenue reflective of the CIN Property Management
acquisition in October 1996.
Operating Expenses. Bonus accruals are made as revenue is
earned; consequently, fourth quarter compensation and benefit expenses
track the higher level of revenue generated in the fourth quarter. Other
operating and administrative expenses are generally relatively consistent
throughout the year.
Liquidity and Capital Resources
Net cash flows provided by operations totaled $14.0 million for
1996 compared to $13.6 million for 1995 and $24.6 million for 1994. The
primary element of change in these years is the increase in receivables,
which can be attributed to the significant increase in leasing commissions
being generated in the fourth quarter of each year for both the Management
Services and Corporate and Financial Services segments. Fees recognized
from lease transactions are typically collected half when the lease is
executed and half when the space is occupied with occupancy generally
occurring between six and 12 months after the lease execution. These
increases have been partially offset by steady increases in accounts
payable and accrued compensation which is also attributable to the increase
in fourth quarter revenue generation.
Since 1993, the Company has invested or committed approximately
$30 million (which has been reduced by approximately $16.3 million through
subsequent dispositions of a portion of these investments and through sales
of participations in these investments to employees and others) in over 30
separate properties or funds. In addition to its share of investment
returns, the Company typically earns property management, leasing, and
advisory fees on these investments. The equity earnings from these
co-investments have had a relatively small impact on the Company's current
earnings and cash flow. However, this impact will increase as such existing
co-investments are sold over the next several years, and as the Company's
co-investment activity accelerates following the Offering.
Net cash used in investing activities was $32.5 million in 1996,
compared to $5.7 million in 1995. The increase was attributable to the
acquisition of CIN Property Management for $15.7 million, as well as
increases in co-investment activity, expenditures on furniture and fixtures
at the Company's new corporate headquarters and increased investments in
technology. Net cash used in investing activities was $5.7 million in 1995,
compared to $4.9 million in 1994. Net co-investment activity in 1995 was
$2.0 million lower than in the prior year; however, capital investments in
technology in 1995 were $2.8 million higher than in 1994. As of December
31, 1996, the Company had unfunded commitments for existing co-investments
of $2.3 million.
Historically, the Company has financed its operations,
acquisitions and co-investments with internally generated funds,
partnership equity and borrowings under revolving credit facilities. In
September 1996, the Company replaced its $30 million revolving line of
credit with a $70 million credit agreement terminating on September 6,
1999. The agreement consists of a short-term facility and the Long-Term
Facility totaling $30 million and $40 million, respectively. The agreement
is secured by certain of the Company's receivables, fixed assets and
investments in ventures. The Company must maintain a certain level of net
worth and earnings before interest, taxes, depreciation and amortization,
and is prohibited, without the lenders' prior approval, from incurring
certain indebtedness (including certain levels of indebtedness in
connection with co-investments), guaranteeing certain obligations or
disposing of a significant portion of its assets. The facilities bear
variable rates of interest based on market rates.
The short-term facility is a revolving line of credit which must
be paid down annually for a 30-consecutive-day period and is restricted as
to use for general business purposes. Amounts outstanding on the short-term
facility at December 31, 1996 totaled $6.5 million. The Long-Term Facility
is limited in use to investments in real estate ventures, business
acquisitions and certain capital expenditures, subject to lender approval.
Principal payments on borrowings under the Long-Term Facility are payable
annually on June 15 for amounts outstanding as of March 31 based on a
defined amortization schedule. Principal payments made on June 15 of each
year increase the available balance on the facility from which to borrow.
Amounts outstanding on the Long-Term Facility as of December 31, 1996,
totaled $27.4 million.
At December 31, 1996, the Company also had outstanding $37.2
million in subordinated debt owed to affiliates of Dai-ichi in the form of
$6.2 million in Class A Notes and $31 million in Class B Notes (the
"Dai-ichi Notes"), each bearing interest at 10% payable annually on
December 31st. Principal payments on the Class A Notes are $3.1 million due
on June 30, 1997 and 1998. Principal payments on the Class B Notes are due
in ten equal payments of $3.1 million on June 30th of each year beginning
in 1999. The Notes are prepayable without penalty. In 1994, a principal
repayment of $14.1 million was made on the Class A Notes with capital
contributions received in connection with the ABKB acquisition.
Net cash provided by (used in) financing activities was $17.2
million in 1996, compared to ($12.4) million in 1995. Borrowings under the
Long-Term Facility in 1996 were used to fund the acquisition of CIN
Property Management, the increase in co-investment activity, and
infrastructure investments. Net cash used in financing activities was $12.4
million in 1995, compared to $12.0 million in 1994. Distributions to
partners increased by $3.0 million in 1995, compared to 1994.
Upon completion of the Offering, the Company intends to repay
the full amount of the indebtedness outstanding under the Dai-ichi Notes.
The remaining proceeds will be used to repay the indebtedness outstanding
under the Long-Term Facility. After the existing long-term debt is paid,
the Company plans to increase its long-term debt periodically in order to
continue to pursue international expansion, strategic acquisitions and
co-investments. See "Use of Proceeds."
Disposition
On December 31, 1996, the Company completed the sale of its
construction management business to a former member of the Company's
management. This business, which specializes in the interior build-out of
office and retail space for tenants in the Chicago and Los Angeles markets,
had 1996 revenue, which are shown net of related expenses on the Company's
combined statements of earnings, of $1.3 million. The business was sold in
exchange for a note of $9.1 million. The note, which is secured by the
current and future assets of the business, is due December 31, 2006. For
financial reporting purposes, the Company has not treated the transaction
as a divestiture. Principal and interest to be received under the note will
be treated as a reserve, if necessary, for any anticipated financial
exposure under the terms of the asset purchase agreement, with the
remainder recognized as income as principal and interest payments are
received.
Inflation
The Company's operations are directly affected by various
national and economic conditions, including interest rates, the
availability of credit to finance real estate transactions and the impact
of tax laws. To date, the Company does not believe that general inflation
has had a material impact on its operations, as revenue, commissions and
other variable costs related to revenue are primarily impacted by real
estate supply and demand rather than general inflation.
Other Matters
In connection with the Offering and the Incorporation
Transactions, the Company will become subject to Federal and additional
state and local income taxes as it converts from partnership to corporate
form. Concurrently with the Incorporation Transactions, the Company will
record a deferred tax asset and a corresponding tax benefit in its
statement of earnings in accordance with the provisions of SFAS No. 109.
Had such amount been recorded as of December 31, 1996, the effect would
have been approximately $.8 million inclusive of certain state and local
deferred tax assets recorded on a historical basis.
BUSINESS
Company Overview
LaSalle Partners is a leading full-service real estate firm that
provides management services, corporate and financial services and
investment management services to corporations and other real estate
owners, users and investors worldwide. By offering a broad range of real
estate products and services, and through its extensive knowledge of
domestic and international real estate markets, the Company is able to
serve as a single source provider of solutions for its clients' full range
of real estate needs. The Company holds a leading market position in each
of its primary businesses. For example, the Company believes it is the
largest property manager of office buildings in the United States, one of
the largest outsource service providers for corporate occupied facilities
and the third largest manager of institutional equity capital invested in
domestic real estate assets and securities. The Company is also the fourth
largest manager of institutional real estate equity investments in the
United Kingdom. Founded in 1968, the Company is headquartered in Chicago,
Illinois, and maintains corporate offices in 10 United States cities and
four international markets. The Company also maintains over 300 property
and other offices throughout the United States. In 1996, the Company
generated total revenue of $176.0 million and earnings before interest,
taxes, depreciation and amortization of $32.3 million, representing an
increase of 15.9% and 32.7%, respectively, from the prior year's results.
To meet the diverse needs of its clients, the Company provides
its full range of real estate services through three principal business
groups: Management Services, Corporate and Financial Services and
Investment Management. The Management Services group develops and
implements property level strategies to increase investment value for real
estate owners and optimize occupancy costs for corporate owners and users
of real estate. The Corporate and Financial Services group provides tenant
representation services, investment banking services and land acquisition
and development services. The Investment Management group provides real
estate investment management services to institutional investors,
corporations and high net worth individuals.
On April 22, 1997, Galbreath, a property management, facility
management and development management company, was merged with the Company.
Based on the 1996 CPN Survey, the combination of Galbreath and the Company
would have ranked the Company as the third largest property manager in the
United States. The merger expands the Company's geographic presence, adds
additional client relationships and offers the potential for significant
economic synergies with the Company's Management Services group. As a
result of the merger, the Company assumed management responsibility for an
additional 71 million square feet of commercial space.
Competitive Advantages
The Company believes that it has several competitive advantages
which have established it as a leader in the real estate services and
investment management industries. These advantages include the Company's:
o Relationship Orientation. The Company's client-driven focus
enables the Company to develop long-term relationships
with owners and users of real estate. By developing such
relationships, the Company generates repeat business and
creates recurring revenue sources; 87% of the Company's
1996 revenue was derived from clients for which the Company
provided services in prior years. The Company's
relationship orientation is supported by an employee
compensation system which is unique in the real estate
industry. LaSalle Partners compensates its professionals
with a salary, bonus and stock ownership plan which is
designed to reward client relationship building, teamwork
and quality performance, rather than on a commission basis
which is typical in the industry.
o Full Range of Services. By offering a wide range of high
quality, complementary services, the Company can combine
its services to develop and implement real estate
strategies that meet the increasingly complex needs of its
clients. The Company's product and service capabilities
include property management and leasing, facility
management, development management, tenant representation,
investment banking, land acquisition and development, and
investment management.
o Geographic Reach. With 10 corporate offices and over 300
property and other offices throughout the United States,
LaSalle Partners possesses in-depth knowledge of local
markets and can provide its full range of real estate
services throughout the country. In addition, the Company's
four international offices give the Company the ability to
serve its clients' needs in key international markets. The
international offices also serve as the platform from which
the Company will expand its international presence.
o Reputation. The Company is widely recognized by large
corporations and institutional owners and users of real
estate as a provider of high quality, professional real
estate services and investment management products. The
Company believes its name recognition and reputation for
quality services are significant advantages when pursuing
new business opportunities.
o Experienced Management/Employee Equity Incentives. The
Company's senior management team has an average of
approximately 18 years of experience in the real estate
services industry and, with the exception of Lizanne
Galbreath who joined the Company on April 22, 1997 in
connection with the Galbreath merger, has been with LaSalle
Partners for an average of approximately 16 years. The
Company uses equity-based incentive compensation and bonus
plans and minimum stock ownership guidelines to foster
employee commitment and align employee and stockholder
interests. Following the Offering, the Company's senior
management team will indirectly own % of the outstanding
Common Stock and total employee ownership will be %.
Industry Trends
The real estate services industry is emerging from the severe
downturn in the real estate markets in the early 1990s. Strong improvements
in commercial real estate fundamentals --supply, demand, vacancy and rental
rates -- have contributed to increased property values. The Company
believes that the recovery of the real estate markets and the trends
described below provide growth opportunities for the Company.
Consolidation
The real estate services industry is highly fragmented. For
example, the top 10 property managers (based on square footage) manage less
than 4% and the top 50 property managers manage less than 7% of the 61
billion total square feet of commercial property (industrial, office and
retail) located in the United States. Many large real estate service firms
engaged in the property management business, including the Company, believe
that, as a result of substantial existing infrastructure investments and
the ability to spread fixed costs over a broader base of business, it is
possible to recognize incrementally higher margins on property management
assignments as the amount of square footage under management increases. The
advantages of scale in the property management business, including the
ability to provide higher quality service at a lower cost to the user, has
led to a significant consolidation trend among real estate service
providers.
In addition, large users of commercial real estate services have
recently demonstrated a desire to use a smaller number of real estate firms
capable of providing a full range of services across multiple geographic
markets. The ability to offer a full range of services requires significant
corporate infrastructure investment, including information technology and
personnel training. Smaller regional and local real estate service firms,
with limited resources, are less able to make such investments.
Growth of Outsourcing
In recent years, outsourcing of professional real estate
services has increased substantially as corporations have focused corporate
resources, including capital, on their core competencies. In addition,
public and other non-corporate users of real estate, such as government
agencies and health and educational institutions, have begun outsourcing
real estate activities as a means of reducing costs. As a result, there are
significant growth opportunities for firms that can provide integrated real
estate services across many geographic markets.
Alignment of Interests of Investors and Investment Managers
As a result of recovering real estate markets, institutional
investors have increased their allocation of investment capital to real
estate and many investors have shown a desire to commit their capital to
investment managers willing to co-invest with them on specific investments.
In addition, investors are increasingly requiring that the fees paid to
investment managers be more closely aligned with investment performance. As
a result, the Company believes that those investment managers with
co-investment capital will have an advantage in attracting real estate
investment capital. Co-investment brings with it the opportunity to provide
additional services related to the acquisition, financing, property
management, leasing and disposition of such investments.
Increasing Demand for Global Services; Globalization of
Capital Flows
As many United States corporations have pursued growth
opportunities in international markets, they have increased their demand
for global real estate services, such as facility management, tenant
representation and development management. The Company believes that this
trend will favor those real estate service providers with the capability to
provide services in key international markets. Additionally, real estate
capital flows have become more global as foreign investors have invested in
United States assets, and United States investors have sought international
real estate investment opportunities. This trend has created new markets
for investment managers that can facilitate international real estate
capital flows and can execute cross-border real estate transactions.
Growth Strategy
Following the Offering, the Company intends to use its increased
financial flexibility to pursue its growth strategy, which is designed to
capitalize on existing client relationships and emerging industry trends.
Key components of its growth strategy include the following:
Expanding Client Relationships
Based on its ability to deliver high quality real estate
services, the Company has been able to successfully leverage discrete
client assignments into more comprehensive relationships utilizing some or
all of its business groups. Current industry trends, particularly improving
real estate markets and the increased outsourcing of real estate services,
provide a favorable environment for the Company to increase the scope of
its current client relationships and to develop new relationships through
its broad array of services. The Company's business groups identify new
clients and markets and pursue opportunities to sell the products and
services of many of the Company's business units. The Company's Client
Services Group, which is a dedicated firm-wide marketing organization, acts
as a catalyst in assisting Company professionals in all groups in marketing
multiple services of the firm to existing and prospective clients.
Broadening International Presence
To take advantage of the trend toward globalization of real
estate capital sources and investment opportunities and the international
business expansion of many of its corporate clients, the Company intends to
expand its existing international operations and enter new international
markets. This expansion is expected to include the opening of new
international offices and may include selective acquisitions of
international real estate services companies. In order to serve its
clients' increasingly global real estate needs, and to pursue new business
opportunities, the Company has opened offices in London, Paris, Mexico City
and Beijing. The Company intends to use these international offices to
serve as a platform from which the Company will expand its international
presence.
Selectively Pursuing Strategic Acquisitions
The Company intends to selectively pursue acquisition targets to
expand its capability to serve clients and strengthen its position as an
industry leader. The expected benefits of such acquisitions include
expanding and enhancing its product and service offerings, broadening its
geographic market coverage or generating economies of scale. The Company
will only pursue acquisitions which meet its standards for quality of
service and are compatible with the Company's culture. Consistent with this
strategy, the Company acquired the assets of ABKB, a domestic real estate
investment management business, in late 1994 and CIN Property Management,
an investment management business in the United Kingdom, in late 1996.
Through these acquisitions, the Company added over $5 billion to its assets
under management, extended the Company's securities advisory capabilities
and established the Company as one of the largest managers of real estate
investment equity capital in the United Kingdom. More recently, in April
1997, Galbreath, a national property management company with 71 million
square feet under management, merged with the Company. This merger expands
the Company's market presence in Ohio, Pennsylvania, New York, Florida and
other key markets and offers the potential for significant economic
synergies with its Management Services group.
Pursuing Co-investment Opportunities
The Company intends to accelerate its strategy of co-investing
with its investment management clients, to take advantage of recovering
real estate markets. As of December 31, 1996, the Company had a total net
investment of $13.7 million in 33 separate property or fund co-investments.
The acquisition cost of the properties acquired through these
co-investments exceeds $1.0 billion. Existing co-investments consist
primarily of office and hotel properties purchased within the last three
years.
The Company's co-investment strategy is supported by its broad
fundamental real estate research capabilities, which include identifying
trends in geographic regions and property types. The Company's extensive
knowledge of local markets drawn from each of its business segments
facilitates the identification and evaluation of specific investment
opportunities. Co-investments provide the Company with the opportunity to
participate in any returns generated by such investments and provide
services related to the acquisition, financing, property management,
leasing and disposition of such investments. As a result of the Offering,
the Company will have additional financial flexibility to pursue its
co-investment strategy.
Business Segments
The Company serves its clients through its three principal
business groups.
Management Services
The Company's Management Services group develops and implements
property level strategies to increase investment value for real estate
owners and optimize occupancy costs for corporate owners and users of real
estate. The Management Services group provides three primary service
capabilities: (i) property management and leasing for property owners
("Property Management and Leasing Services"); (ii) facility management for
properties occupied by corporate owners and users ("Facility Management
Services"); and (iii) development management for both investors and real
estate users seeking to develop new buildings or renovate existing
facilities ("Development Management Services"). As of December 31, 1996,
the Management Services group had responsibility for approximately 132
million square feet of commercial space. In 1996, the Management Services
group generated revenue of $71.9 million and operating income of $10.7
million, representing approximately 41% of the Company's total revenue and
approximately 40% of the Company's total operating income.
Based on the 1996 CPN Survey, the Company is the largest
property manager of office buildings in the United States and is the eighth
largest property manager in the United States overall. As a result of the
merger of Galbreath with the Company, the Management Services group assumed
management responsibility for approximately 71 million additional square
feet of primarily office and industrial space. Including Galbreath, the
Company would have ranked as the third largest property management firm in
the 1996 CPN Survey.
[Bar graph depicting the Management Services group's total square footage
under management for the period 1992-1996]
Property Management and Leasing Services. Active since 1978, the
Company's Property Management and Leasing Services group operates, markets
and leases commercial real estate. The Company was a pioneer in the
development of value-creating property management services. The Company's
goal is to enhance its clients' property values through aggressive
day-to-day management focused on maintaining high levels of occupancy and
tenant satisfaction, while lowering the operating costs of such properties.
The Company's Property Management and Leasing Services unit generated
approximately $52.3 million in revenue in 1996.
Prior to the merger of Galbreath with the Company, the Company
represented more than 70 property owners, providing on-site Property
Management and Leasing Services for approximately 170 office, retail,
mixed-use and industrial properties, in 29 of the country's largest
markets. During 1996, leasing professionals completed over 1,200 lease
transactions totaling approximately 10 million square feet. As a result of
the merger of Galbreath with the Company, the Company assumed management
responsibility for over 200 additional properties in five additional
markets for over 20 new institutional real estate owners.
The Company provides property management or leasing services, or
both, for many well-known buildings, including the Amoco Building in
Chicago, the Citicorp Center in New York, and the Transamerica Building in
San Francisco. While major office buildings represent the Company's most
visible assignments, the Company is also active in the management of retail
projects, industrial real estate, mid-size assets of all types and
portfolios of smaller properties. The clients of the Company's Property
Management and Leasing Services unit include domestic and international
pension funds, the Company's own investment funds and third-party corporate
and institutional investment clients. Representative clients served in 1996
included The Allstate Corporation, Amoco Corporation, Lincoln National
Corporation, Mitsui Fudosan Co. Ltd. and Transamerica Corporation.
Consolidation among property management and leasing companies,
in combination with improving leasing markets, provides significant
opportunities for the Company. Since the fee arrangements for most of the
Company's Property Management and Leasing Services assignments are largely
dependent on property revenues, the Company has benefited from the national
recovery in commercial real estate markets. This recovery has been
characterized by rising average commercial rental and occupancy rates
during the 1993-1996 time period.
The Company intends to expand its Property Management and
Leasing Services unit through a combination of targeted marketing
initiatives and acquisitions. The Company believes that its established
infrastructure and its reputation for high quality service make the Company
an attractive potential acquiror to many smaller local, regional and
national property management firms. The marketing efforts of the Property
Management and Leasing Services unit are directed toward pursuing new
third-party management assignments, expanding the Company's relationships
with existing clients and capitalizing on new business opportunities that
may arise from the Investment Management group's initiatives, such as
implementation of its co-investment strategy. As of December 31, 1996,
approximately 59% of the Company's 63 million square foot Property
Management and Leasing Services portfolio was composed of assets owned by
unrelated third party clients and approximately 41% was composed of assets
managed for clients for which LaSalle Partners also provides investment
advisory services. The Company believes that during the next several years,
this business mix will become increasingly weighted toward assets owned by
unrelated third-parties, with a decreasing emphasis on assets owned in the
Company's existing investment funds, as many of the commingled funds
created by the Company in the 1980s reach maturity and dissolution. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company's Property Management and Leasing Services are
typically provided by an on-site general manager and staff supported
through extensive regional supervisory teams as well as central resources
in areas such as training, technical and environmental services,
accounting, marketing and human resources. Property general managers assume
full responsibility for property management and leasing activities, client
satisfaction and financial results. Property Management and Leasing
Services personnel are compensated, not by fees or commissions, but through
a combination of base salary and performance bonus that is directly linked
to results produced for clients.
The Company typically receives fees based on the value of the
lease revenue commitment for leases consummated while it serves as
exclusive property leasing agent. Increasingly, management agreements
provide for incentive compensation relating to operating expense
reductions, gross revenue, occupancy objectives or tenant satisfaction
levels. As is customary in the industry, management contract terms
typically range from one to three years, but are cancellable at any time
upon a short notice period, usually 30 to 60 days. However, on a portfolio
basis, the Company's current average length per management assignment is
approximately four years.
Facility Management Services. The Company's Facility Management
Services unit provides comprehensive portfolio and property management
services to corporations and institutions that outsource their real estate
management functions. The properties under management range from corporate
headquarters to industrial complexes, sales offices and data centers.
Facility Management Services professionals create working partnerships with
each client to deliver fully-integrated real estate services that are
tailored to the specific needs of each organization. Typically, performance
measures are developed to quantify progress made toward the goals and
objectives that are set mutually with clients. The Company's Facility
Management Services unit also serves as an important "port of entry" for
the Company's other business units. Depending on client needs, the Facility
Management Services unit, either alone or through the Company's other
business units, provides services such as portfolio planning, property
management, leasing, tenant representation, acquisition, finance,
disposition, project management, development management and land advisory
services. In 1996, the Facility Management Services unit generated revenue
of approximately $13.6 million. Facility Management Services relationships
also generated revenue of approximately $12.8 million in 1996 for the
Company's other business units.
The Company was a pioneer in the facility management services
business and currently is one of the largest providers of facility
management services in the United States. The Company's target clients
typically have large portfolios (usually over one million square feet) with
significant opportunities to reduce costs and improve service delivery. At
December 31, 1996, the Company managed approximately 5,500 facilities,
totaling more than 68 million square feet of space for seven clients.
Representative clients served in 1996 included Ameritech, BankAmerica
Corporation and Sun Microsystems, Inc. As a result of the merger of
Galbreath with the Company, the Company has assumed management
responsibility for facilities totaling 13 million square feet for clients
such as Eli Lilly and Company, The LTV Corporation and The Mead
Corporation. The Facility Management Services unit is also exploring new
business opportunities with universities, health care institutions,
government agencies and other potential clients.
The Company believes that the global corporate trend of
outsourcing non-core business functions represents an important long-term
business opportunity for LaSalle Partners. The Company believes that its
broad-based service capabilities will become an increasingly valuable
competitive advantage in pursuing Facility Management Services assignments.
The Company believes that its demonstrated experience, cost-cutting
successes and client satisfaction also provide it with an important
competitive advantage. The Company has set and consistently met its
objective of cutting operating costs of its properties under management
between 10% and 30% within the first two years of the assignment. In order
to efficiently provide all services required to manage and operate large
facility portfolios, the Company forms partnerships with major building
services and architecture firms.
The Facility Management Services unit is compensated on the
basis of negotiated fees, which are typically structured to include a base
fee and a performance bonus. The performance bonus compensation is based on
a quantitative evaluation of progress toward performance measures and
regularly scheduled client satisfaction surveys. Facility Management
Services agreements are typically three to five years in duration.
Development Management Services. Active since 1975, the
Company's Development Management Services unit manages all aspects of the
development, redevelopment and renovation of commercial projects,
principally on a fee basis. The Company prepares projections, budgets,
schedules and cash flows for its clients in addition to undertaking
entitlement, zoning and a variety of other development-related
responsibilities. All of the Company's current development business is
conducted for third-party clients, many of which are corporations with
significant office space needs. The Development Management Services unit
frequently manages development initiatives for clients of the Company's
Facility Management Services, Tenant Representation Services and Land
Services units, as well as for clients of the Company's Investment
Management group which are pursuing development-related investment
strategies. In 1996, the Development Management Services unit generated
approximately $5.5 million in revenue.
The Company has extensive experience in ground-up development in
the office, retail and institutional sectors and has completed more than 41
million square feet of development and redevelopment projects for clients
such as Capital Cities/ABC, Inc., Duracell International Inc., McDonald's
Corporation and The Prudential Insurance Company of America. The
Development Management Services unit is currently managing the development
of 17 projects totaling approximately 4.5 million square feet nationally.
Capitalizing on experience gained in the redevelopment of Union Station in
Washington, D.C., the Company also specializes in mixed-use developments
and is currently managing the redevelopment of Grand Central Terminal in
New York as a combined transportation center and retail facility and the
redevelopment of Orchestra Hall in Chicago, Illinois.
The Development Management Services unit generates development
and advisory fees. Fees are typically fixed and are negotiated based upon
the cost of the developments or improvements. Assignments are typically
multi-year in nature.
Corporate and Financial Services
The Company's Corporate and Financial Services group provides
transaction and advisory services through three primary service
capabilities: (i) tenant representation for corporations and professional
service firms ("Tenant Representation Services"); (ii) investment banking
services to address the financing, acquisition and disposition needs of
real estate owners ("Investment Banking Services"); and (iii) land
acquisition and development services for owners, users and developers of
land ("Land Services"). In 1996, the Corporate and Financial Services group
generated revenue of $46.7 million and operating income of $10.8 million,
representing approximately 27% of the Company's total revenue and
approximately 40% of the Company's total operating income.
[Bar graph depicting revenue for the Tenant Representation Services
unit for the period 1992-1996]
Tenant Representation Services. First offered in 1978, the
Company's Tenant Representation Services unit assists clients by defining
space requirements, identifying suitable alternatives, recommending
appropriate occupancy solutions and negotiating lease and ownership terms
with third parties. This unit also includes the project management group
which provides strategic occupancy planning, field tenant improvement,
project management and relocation management to the Company's clients.
The Company seeks to lower its clients' real estate costs,
minimize real estate occupancy risks, improve clients' flexibility and
occupancy control and create more productive office environments. The
Company uses a multi-disciplined approach to develop occupancy strategies
that are linked to its clients' core business objectives. In 1996, the
Tenant Representation Services unit generated revenue of approximately
$31.2 million, completing over 250 transactions for a total of
approximately seven million square feet.
The domestic tenant representation industry includes a large
number of service providers offering a wide range of service quality and
capabilities. The Tenant Representation Services unit directs its marketing
efforts toward developing "strategic alliances" with clients whose real
estate requirements include ongoing assistance in meeting their real estate
needs and also toward clients who have the need to consider multiple real
estate options and to execute complex strategies. The Company believes that
it is recognized as one of the highest quality providers of tenant
representation services in the United States. Representative clients served
in 1996 included Amoco Corporation, Aon Corporation, R.R. Donnelley & Sons
Company and Towers Perrin.
In many cases, the Company develops a strategic alliance with
clients to deliver fully integrated real estate services, including
comprehensive on-going strategic planning and transaction execution
services across multiple office locations. The Company views its strategic
alliances as a competitive advantage since these long-term relationships
lower business development costs for the Company and create recurring
revenue sources. In 1996, approximately 79% of Tenant Representation
Services unit revenue was derived from strategic alliances. Through these
relationships, the Company gains a better understanding of its clients'
portfolio and occupancy requirements since the same professionals service
the client's needs nationwide. The Company believes that these
relationships enable it to deliver more consistent services and better
results than single-transaction, commissioned brokerage service providers.
Responsibility for the national occupancy needs of strategic
alliance clients is assigned to dedicated client teams. These teams
allocate resources to address specific client requirements in markets
throughout the United States. The Company's Tenant Representation Services
unit draws upon the resources and local market knowledge of the Company's
network of Property Management and Leasing Services professionals located
in over 300 property and other offices in 32 of the country's largest
markets.
In addition to its strategic alliances, the Company also
represents clients in large, complex transaction assignments that typically
involve relocations of headquarters facilities or major consolidations of
offices. In such assignments, the Company draws on other capabilities of
the firm to enable clients to consider development of new facilities, weigh
the benefits of purchase or lease decisions and evaluate long-term
financing options.
The Company believes that the educational background and skills
of its Tenant Representation professionals and its employee compensation
structure are uncommon in the industry and are a significant competitive
strength. The Company's Tenant Representation Services professionals are
recruited on the basis of strong educational credentials and broad business
experience, with approximately 90% holding Master of Business
Administration or other advanced degrees. In contrast to the Company's
major national brokerage competitors, the Company's Tenant Representation
Services professionals do not earn commissions, but are compensated by
means of a base salary and performance bonus that is determined by their
contribution to achieving predetermined client performance objectives.
The Tenant Representation Services unit uses state-of-the-art
computer technology, including proprietary software developed by the
Company, to improve productivity and enhance client service. For example,
it has created an on-line lease analysis/negotiation program that enables
users to scan in a lease from a third party, and then compare lease
language in each section against a database of "best-practices" lease
language drawn from previous engagements.
The Company is generally compensated for Tenant Representation
Services on a negotiated fee basis. Although fees are generated by lease
commissions, they are often also determined by performance related to
targets set by the Company and the client prior to the Company's engagement
and, in the case of strategic alliances, at annual intervals thereafter.
Quantitative and qualitative measurements assess progress relative to these
goals, and the Company is compensated accordingly, with incentive fees
often awarded for superior performance.
Investment Banking Services. Active since 1968, the Company's
Investment Banking Services unit is engaged in real estate finance,
portfolio advisory activities, corporate finance and institutional property
sales. In 1996, the Company completed institutional property sales, debt
financings, equity financings and portfolio advisory activities on assets
and portfolios valued at approximately $4.9 billion. The Investment Banking
Services unit generated revenue of approximately $6.7 million in 1996.
The Company believes that its Investment Banking Services unit
has a number of competitive strengths, including its broad accumulated base
of real estate investment banking knowledge and an ability to draw on the
Company's access to global capital sources. The Company's Management
Services group and Investment Management group are valuable resources for
the Investment Banking Services unit in providing local market and property
information and capital markets expertise.
The Investment Banking Services unit is integral to the business
development efforts of the Company's other business units by researching,
developing and introducing innovative new financial products and
strategies. Such efforts have included the development of the Company's
hotel investment capability and its commercial mortgage backed securities
operation, both of which are currently operated within the Company's
Investment Management group.
In 1996, approximately 61% of the Company's Investment Banking
Services assignments represented repeat business from its clients. In
addition, approximately 54% of Investment Banking Services revenue
represented fees derived from sales of assets for clients for which LaSalle
Partners also provides investment management services. Representative
clients served in 1996 included CIGNA Corporation, ENRON Corp., Equifax
Inc., G.E. Investment Corp. and Sumitomo Trust & Banking Co., Ltd.
The Company is typically compensated for Investment Banking
Services on the basis of the value of transactions completed or securities
placed, but in certain circumstances the Company receives retainer fees for
strategic advisory services.
Land Services. The Company has been active in the evaluation,
acquisition and disposition of land assets since 1970. The Company's Land
Services professionals offer clients expertise and broad experience in a
range of land-related competencies, including land planning and urban
design, political approvals, market and financial analysis and valuations.
The Land Services unit completed 37 transactions in 1996 in United States
markets as well as in several international markets. The Company's Land
Services unit benefits from LaSalle Partners' strong relationships with its
clients, with approximately 50% of Land Services unit transactions in 1996
involving clients serviced by other business units of the Company. The Land
Services unit generated approximately $4.9 million of revenue in 1996.
The Land Services unit acquires and sells urban and suburban
development projects and sites for future development, undertakes complex
land assemblages and site searches and provides advisory services for
owners of land and land-development projects. The Company's Land Services
unit also originates and executes land-related investment programs in
development properties and portfolios of land assets for the clients of the
Company's Investment Management group. In addition, the Company developed
expertise in the sale of portfolios of land and land-related assets by
completing such assignments for several corporate clients, as well as the
disposition of the $1.7 billion National Land Fund for the Resolution Trust
Corporation. The Company's Land Services professionals also have advised
public institutions on land-related assignments, including the conversion
of military base facilities, master planning of peripheral airport land and
the evaluation and disposition of land related to major transit systems.
Representative clients served in 1996 included the California
Public Employees' Retirement System, City of Chicago, Nippon Landic (USA),
Inc. and Shell Oil Company.
Investment Management
The Company's Investment Management group provides real estate
investment management services to institutional investors, corporations and
high net-worth individuals. The Company serves its clients through a broad
range of real estate money management products and services in the public
and private capital markets to meet various strategic, risk/return and
liquidity requirements, with a wide variety of equity and debt products.
This business is organized along two functional lines, private equity and
debt investments and public equity and debt investments. The Company offers
its clients a range of investment alternatives, including private direct
(i.e. single asset acquisitions) and fund (i.e. portfolios of assets)
investments in many real estate property types (e.g., office, retail,
hotel, industrial, residential, land and parking) and public investments,
primarily in REITs, other public real estate equities and CMBS. The Company
believes that the success of the Investment Management group is built on
the foundation of fully integrated research, innovative investment
strategies and a strong client focus. The Company has developed a
reputation as an industry leader and innovator in real estate investment
management. The Investment Management group's strategy is focused on three
fundamentals: (i) developing and executing tailored investment strategies
to meet a variety of client objectives; (ii) providing superior performance
for its clients; and (iii) delivering a high level of service.
As of December 31, 1996, the Company managed approximately $15.2
billion of real estate assets, making LaSalle Partners the third largest
manager of institutional equity capital invested in domestic real estate
assets and securities. Approximately $2.3 billion of this total represents
public real estate securities currently managed by the Company's
ABKB/LaSalle Securities unit ("ABKB/LaSalle Securities"), a leading
domestic institutional real estate money manager.
The investment and capital origination activities of the
Company's Investment Management group are becoming increasingly
international. As of December 31, 1996, 22% of the Company's assets under
management were invested outside of the United States. Additionally,
approximately 40% of equity capital currently under management by the
Company originated from international investors. The Company expects its
international Investment Management group to continue to increase as a
proportion of total capital raised and invested. In 1996, the Investment
Management group generated $58.6 million of revenue and $5.3 million of
operating income, representing approximately 33% of the Company's total
revenue and 20% of the Company's total operating income. Investment
Management group activities generate significant additional business for
other parts of the Company's operations, particularly in the areas of
Property Management and Leasing Services and Investment Banking Services.
The Company maintains an extensive real estate research
department which monitors real estate and capital market conditions to
enhance investment decisions and identify future opportunities. The Company
believes that its commitment of 12 professionals is one of the industry's
most significant commitments to fundamental research for real estate
investors. In addition to drawing on public sources for information, the
research department utilizes the extensive local presence of LaSalle
Partners professionals throughout the United States to gain proprietary
insight into local market conditions. Representative clients served in 1996
included the British Coal Pension Fund, California Public Employees'
Retirement System, Cargill, Dai-ichi Life (U.S.A.), Inc. and Oregon Public
Employees' Retirement Fund.
[Bar graph depicting the Investment Management group's assets under
management for the period 1992-1996]
Private Equity and Debt Investments. The Company introduced its
first institutional investment fund in 1979 and currently has a series of
commingled investment funds with over 115 investors. The Company also has
34 single client account relationships ("separate accounts") with domestic
and international investors for whom the Company manages private real
estate investments. On behalf of its Investment Management clients, the
Company acquires, manages, leases, finances and divests real estate
investments across a broad range of real estate property types.
To take advantage of the trend toward globalization of real
estate capital sources, the Company strengthened and extended its
international investment activities with the acquisition in October 1996,
of CIN Property Management (now renamed CIN LaSalle Investment). The
Company believes that CIN LaSalle Investment, the fourth largest manager of
real estate equity investments in the United Kingdom, will expand the
Company's investment activities and capital raising in the United Kingdom
and continental Europe. The Company also initiated opportunistic investment
programs in France in 1996, acquiring for clients one of the first
distressed French real estate loan portfolios sold by financial
institutions. The Company believes that significant additional investment
opportunities will arise in France due to existing economic conditions, and
that it is well positioned to play a role in the restructuring of French
real estate assets. The Company currently has approximately 300 assets
under investment or property management agreements in the United Kingdom
and France, with a total value of approximately $3.3 billion at December
31, 1996.
The Company continues to explore additional international
markets for its Investment Management group clients. The Company intends to
leverage its organizational strength through selective acquisitions and the
use of the Company's international offices to take advantage of the
accelerating interest in international investment, to expand investment
activity to new countries and to strengthen its position as a leading
intermediary for international real estate capital flows.
The trend among investors is to favor advisors that co-invest in
newly formed investment vehicles in order to better align the interests of
the investor and the advisor. The Company believes that co-investment will
become increasingly important in order for the Company to retain and expand
its competitive position. The Company also believes that its co-investment
strategy will greatly strengthen its ability to raise capital for new
investment funds over which the Company exercises discretionary investment
authority. After the Offering, the Company intends to accelerate its
co-investment activities. By increasing assets under management, the
Company will gain the opportunity to provide additional services related to
the acquisition, financing, property management, leasing and disposition of
such assets. Co-investment will also provide a vehicle for the Company to
participate in investment opportunities resulting from recovering real
estate markets. As of December 31, 1996, the Company had a net total
investment of $13.7 million in 33 separate property or fund co-investments.
The acquisition cost of the properties acquired through these
co-investments exceeds $1.0 billion. Existing co-investments consist
primarily of office and hotel properties purchased within the last three
years.
Investment Management group operations are conducted with teams
of professionals dedicated to achieving client objectives. The portfolio
managers serve as the relationship coordinators for the Company's clients
and are responsible for drawing on all of the resources of the Investment
Management group (including research, investment services and specialty
products) and the rest of the Company's global resources. All investment
decisions for private market investments must be approved by the Company's
five-member investment committee. The investment committee approval process
is utilized for both the Company's discretionary investment funds and for
all of its separate account clients.
The Company is generally compensated for investment management
services for private equity and debt investments based on initial capital
invested, with additional fees tied to investment performance above
benchmark levels. The term of the Company's advisory agreements varies by
the form of investment vehicle involved and the type of service provided.
The Company's investment funds have various lifespans, typically ranging
between five and ten years, with extension provisions based on a vote of
investors. Separate account advisory agreements generally have three year
terms with "at will" termination provisions.
Public Equity and Debt Investments. The Company offers its
clients the ability to invest in either separate account or fund investment
vehicles focused on public real estate equity and debt securities. The
Company principally invests its clients' capital in domestic REIT equities
and CMBS. LaSalle Partners is also active in private placement investments
in publicly traded real estate companies and selected investments in
private real estate companies seeking capital to ultimately gain access to
the public markets.
The Company conducts its securities investment business through
ABKB/LaSalle Securities, which was formed by the Company in 1994 in
connection with the acquisition of ABKB's real estate advisory business. As
of the end of 1994, ABKB/LaSalle Securities served 21 clients and had
approximately $630 million of assets under management. As of the end of
1996, ABKB/LaSalle Securities served 33 securities investment clients with
$2.3 billion of assets under management. The Company is typically
compensated by its securities investment clients on the basis of the market
value of assets under management with increasing use of incentive fees tied
to performance of investments above benchmark levels.
Galbreath Acquisition
On April 22, 1997, the Predecessor Partnerships acquired
Galbreath pursuant to a Contribution and Exchange Agreement, of the same
date, among the Employee Partnerships, the Predecessor Partnerships,
Galbreath, the former stockholders of Galbreath and certain related
entities (the "Contribution and Exchange Agreement"). Pursuant to the
Contribution and Exchange Agreement, all of the outstanding capital stock
of Galbreath and related entities was contributed to the Predecessor
Partnerships in exchange for limited partnership interests representing an
aggregate of 18% of the Predecessor Partnerships' general and limited
partnership interests.
The Employee Partnerships and the Predecessor Partnerships have
agreed to jointly and severally indemnify the former Galbreath
stockholders for any damage or loss resulting from, among other things, any
breach of the Employee Partnerships' or the Predecessor Partnerships'
representations and warranties contained in the Contribution and Exchange
Agreement. The former Galbreath stockholders have agreed to provide similar
indemnification to the Company and the Employee Partnerships. The
indemnification obligations of the Predecessor Partnerships and the
Employee Partnerships as a group and the former Galbreath stockholders as a
group are generally limited to an amount equal to 30% of the value of the
partnership interests transferred to the former Galbreath stockholders.
Pursuant to the Contribution and Exchange Agreement, the representations
and warranties will survive until the date of the issuance of the financial
statements of the Company for the year ending December 31, 1997, which date
shall not be later than March 31, 1998.
In connection with the Contribution and Exchange Agreement, the
Company granted the Employee Partnerships, Dai-ichi, and the former
Galbreath stockholders certain registration rights. See "Shares Eligible
for Future Sale--Registration Rights."
Competition
The market for commercial real estate services provided by the
Company is both highly fragmented and highly competitive. In each of its
business disciplines, the Company competes on the basis of the skill and
quality of its personnel, the variety of services offered, the cost of the
services offered, the ability to enhance asset values, the breadth of
geographic coverage and the quality of its infrastructure, including
training and technology. The Company believes it has a strong reputation
for the quality of its services as well as its client oriented approach.
The Company believes that its experienced employees, broad range of
services provided, local and broad market expertise, and operating
infrastructure enable it to compete effectively in each of its business
disciplines. See "Risk Factors -- Competition."
Facilities
The Company's principal executive office is located at 200 East
Randolph Drive, Chicago, Illinois, where the Company currently occupies
over 100,000 square feet of office space pursuant to a lease that expires
in February 2006. The Company has 10 United States corporate offices
located in Atlanta, Baltimore, Chicago, Columbus, Dallas, Denver, Los
Angeles, New York, San Francisco and Washington D.C. and four international
corporate offices located in London, Paris, Mexico City and Beijing. The
Company's corporate offices are each leased pursuant to agreements with
terms ranging from month-to-month to 10 years. In addition, the Company has
over 300 property and other offices throughout the United States. On-site
property management offices are generally located within properties under
management and are provided without cost.
Environmental
Various federal, state and local laws and regulations impose
liability on current or previous real property owners or operators for the
cost of investigating, cleaning up or removing contamination caused by
hazardous or toxic substances at the property. In the Company's role as an
on-site property manager, it could be held liable as an operator for such
costs. Such liability may be imposed without regard to fault or legality of
the original actions and without regard to whether the Company knew of, or
was responsible for, the presence of such hazardous or toxic substances,
and such liability may be joint and several with other parties. If the
liability is joint and several, the Company could be responsible for
payment of the full amount of the liability, whether or not any other
responsible party is also liable. Further, any failure of the Company to
disclose environmental issues could subject the Company to liability to a
buyer or lessee of property. In addition, some environmental laws create a
lien on the contaminated site in favor of the government for damages and
costs it incurs in connection with the contamination. The presence of
contamination or the failure to remediate contamination may adversely
affect the owner's ability to sell or lease real estate or to borrow using
the real estate as collateral. The owner or operator of a site may be
liable under common law to third parties for damages and injuries resulting
from environmental contamination emanating from the site, including the
presence of asbestos-containing materials. See "Risk Factors--Environmental
Concerns."
On November 29, 1996, Galbreath received a Citation and
Notification of Penalty from the Occupational Safety and Health
Administration ("OSHA") describing certain asbestos-related violations. The
citation set forth a proposed penalty amount of approximately $150,000.
Galbreath has complied with OSHA's requests, but has denied any wrongdoing.
Galbreath is currently in negotiations with OSHA with respect to the amount
due in connection with the citation. On March 7, 1997, the Secretary of
Labor of the United States Department of Labor brought an action against
Galbreath before the Occupational Safety and Health Review Commission
seeking an order affirming the citation and the amount proposed therein.
Galbreath has filed a motion for extension of time to answer the complaint.
Legal Proceedings
The Company is a defendant in various litigation matters arising
in the ordinary course of business, some of which involve claims for
damages that are substantial in amount. Most of these matters are covered
by insurance. In the opinion of the Company, the ultimate resolution of
such litigation matters will not have a material adverse effect on the
financial position, results of operations and liquidity of the Company.
Employees
As of December 31, 1996, the Company employed 1,055 people,
including 828 professional staff members and 227 support personnel. None of
the Company's employees are members of any labor union.
The Company has entered into an agreement with LPI Service
Corporation ("LPISC"), a company controlled by a former employee of LaSalle
Partners, pursuant to which LPISC provides the services of over 900
janitorial, engineering and property maintenance workers for certain
properties managed by the Company. LaSalle Partners has an option to
purchase LPISC. Approximately 210 of the employees of LPISC are members of
labor unions.
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as
follows:
Name Age Position
Stuart L. Scott 58 Chairman of the Board of Directors and
Chief Executive Officer
Robert C. Spoerri 48 President, Chief Operating Officer and
Director
William E. Sullivan 42 Executive Vice President, Chief Financial
Officer and Director
Daniel W. Cummings 44 Co-President - LaSalle Advisors Capital
Management, Inc. and Director
Charles K. Esler, Jr. 50 President and Chief Executive Officer -
LaSalle Partners Management Services, Inc.
and Director
Lizanne Galbreath 39 Chairman, LaSalle Partners Management
Services, Inc. and Director
M.G. Rose 57 President, Tenant Representation Division -
LaSalle Partners Corporate & Financial
Services, Inc. and Director
Lynn C. Thurber 50 Co-President - LaSalle Advisors Capital
Management, Inc. and Director
Earl E. Webb 40 Managing Director, Investment Banking
Division, LaSalle Partners Corporate &
Financial Services, Inc. and Director
The Company expects to appoint at least three independent
directors prior to consummation of the Offering.
Stuart L. Scott. Mr. Scott has been Chief Executive Officer and
Chairman of the Board of Directors of the Company since its incorporation,
and Chief Executive Officer and Chairman of the Management Committee of the
Predecessor Partnerships since December 1992. Prior to December 1992, Mr.
Scott was President of the Predecessor Partnerships for more than 15 years
and Co-Chairman of the Management Committee from January 1990 to December
1992. Mr. Scott originally joined the Company in 1973. He is a member of
the Board of Directors of Hartmarx Corporation, a clothing manufacturing
company. He holds a B.A. from Hamilton College and a J.D. from Northwestern
University.
Robert C. Spoerri. Mr. Spoerri has been President, Chief
Operating Officer and a director of the Company since its incorporation,
and Chief Operating Officer and Vice-Chairman of the Management Committee
of the Predecessor Partnerships since January 1994. From January 1990 to
December 1993, Mr. Spoerri was a Co-Director of the asset management group
of the Predecessor Partnerships and the Director of the property management
and leasing group of the Predecessor Partnerships from January 1980 to
December 1989. Mr. Spoerri originally joined the Company in 1977. He holds
a B.S. from Indiana University and an M.B.A. from Harvard University.
William E. Sullivan. Mr. Sullivan has been Executive Vice
President, Chief Financial Officer and a director of the Company since its
incorporation, and Executive Vice President and Chief Financial Officer of
the Predecessor Partnerships since February 1997. From September 1995 to
February 1997, Mr. Sullivan was a Managing Director of the special projects
group of the Predecessor Partnerships. From January 1992 to September 1995,
Mr. Sullivan was a Senior Vice President of the special projects group. Mr.
Sullivan originally joined the Company in 1984. He holds a B.S.B.A. from
Georgetown University and an M.M. from Northwestern University.
Daniel W. Cummings. Mr. Cummings has been a director of the
Company since its incorporation, and a Co-President of LaSalle Advisors
Capital Management, Inc., an operating subsidiary of the Company, since
April 1997. Mr. Cummings has been a Managing Director and Co-President of
LaSalle Advisors Limited Partnership, a subsidiary of one of the
Predecessor Partnerships, since November 1994. From January 1992 to
November 1994, Mr. Cummings was a Managing Director - Portfolio Management
of LaSalle Advisors Limited Partnership. Mr. Cummings originally joined the
Company in 1979. He holds a B.A. from Dartmouth College and an M.B.A. from
the University of Chicago.
Charles K. Esler. Mr. Esler has been a director of the Company
since its incorporation, and President and Chief Executive Officer of
LaSalle Partners Management Services, Inc., an operating subsidiary of the
Company, since April 1997. Since 1992, Mr. Esler has been President of
LaSalle Partners Management Limited, one of the Predecessor Partnerships.
Mr. Esler originally joined the Company in 1979. He holds a B.S.M.E. from
the University of Michigan and an M.B.A. from Northwestern University.
Lizanne Galbreath. Ms. Galbreath has been Chairman of LaSalle
Partners Management Services, Inc. and a director of the Company since
April 1997, when Galbreath was merged with the Company. Prior to the
merger, Ms. Galbreath was Chairman and Chief Executive Officer of Galbreath
from August 1995 to April 1997. From June 1993 to August 1995, Ms.
Galbreath served as Vice-Chairman of Galbreath, and from June 1992 to May
1993, Ms. Galbreath was Senior Managing Director in charge of national
accounts. Ms. Galbreath originally joined Galbreath in 1984. Ms. Galbreath
holds a B.A. from Dartmouth College and an M.B.A. from the University of
Pennsylvania.
M.G. Rose. Mr. Rose has been a director of the Company since its
incorporation, and President, Tenant Representation Division of LaSalle
Partners Corporate & Financial Services, Inc., an operating subsidiary of
the Company, since April 1997. Mr. Rose has been a Managing Director and
President of the tenant representation group of the Predecessor
Partnerships since September 1983. He originally joined the Company in
1978. Mr. Rose holds a mechanical engineering degree from the University of
Cincinnati.
Lynn C. Thurber. Ms. Thurber has been a director of the Company
since its incorporation, and a Co-President of LaSalle Advisors Capital
Management, Inc., an operating subsidiary of the Company, since April 1997.
Ms. Thurber has been a Managing Director and Co-President of LaSalle
Advisors Limited Partnership, a subsidiary of one of the Predecessor
Partnerships, since November 1994. Ms. Thurber was Chief Executive Officer
of ABKB from May 1993 to November 1994, at which time its assets were
acquired by the Company. From July 1992 to May 1993, Ms. Thurber served as
Chief Operating Officer and Director of Acquisitions of ABKB. Prior to that
time, Ms.Thurber was a Principal at Morgan Stanley & Co. Incorporated. She
holds an A.B. from Wellesley College and an M.B.A. from Harvard University.
Earl E. Webb. Mr. Webb has been a director of the Company since
its incorporation, and Managing Director, Investment Banking Division of
LaSalle Partners Corporate & Financial Services, Inc., an operating
subsidiary of the Company, since April 1997. Mr. Webb has been Managing
Director of the Investment Banking Division of the Predecessor Partnerships
since January 1995. From January 1992 to January 1995, Mr. Webb was a
Senior Vice-President of the Predecessor Partnerships. Mr. Webb originally
joined the Company in 1985. Mr. Webb has also been a member of the board of
directors of Players International, Inc., a multi-jurisdictional gaming
company, since September 1996. He holds a B.S. from the University of
Virginia and an M.M. from Northwestern University.
The Company's Board of Directors will be divided into three
classes, each of whose members will serve for a staggered three-year term.
The board will consist of three Class I Directors (Messrs. Spoerri, Esler
and Cummings), three Class II Directors (Messrs. Sullivan and Webb and Ms.
Galbreath) and three Class III Directors (Messrs. Scott and Rose and Ms.
Thurber). At each annual meeting of stockholders, a class of directors will
be elected for a three-year term to succeed the directors or director of
the same class whose terms are then expiring. The terms of the Class I
Directors, Class II Directors and Class III Directors will expire upon the
election and qualification of successor directors at the annual meeting of
stockholders held during the calendar years 1998, 1999 and 2000,
respectively.
Each officer serves at the discretion of the Board of Directors.
There are no family relationships among any of the directors and executive
officers of the Company.
Board of Directors Committees and Compensation
Effective upon the closing of the Offering, there will be two
committees of the Board of Directors of the Company: the Audit Committee
and the Compensation Committee. The members of the Audit Committee and the
Compensation Committee will be appointed prior to the closing of the
Offering. The Compensation Committee will review and approve all
compensation, including incentive compensation, for the executive officers
of the Company and administer the 1997 Stock Incentive Plan. The Audit
Committee will review the results and scope of the audit and other services
provided by the Company's independent auditors and will review and evaluate
the Company's internal control functions. The Audit Committee will consist
of directors who are neither officers, employees nor affiliates of the
Company.
Director Compensation
The Company's directors are not currently compensated. Following
the Offering, the Company expects that each non-employee director will
receive a fee, to be determined by the Board of Directors, for attendance
at meetings as well as an annual retainer. The Company is also considering
the adoption of a stock option program for its non-employee directors.
Executive Compensation
Since the Company had no operating history prior to the date
hereof, the following table sets forth, for the year ended December 31,
1996, the cash compensation paid to the Chief Executive Officer and the
other five most highly compensated executive officers of the Company (the
"Named Executive Officers") by the Predecessor Partnerships.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation (1)
All Other
Name and Principal Position Salary Bonus Compensation (2)
- --------------------------- ------ ----- ----------------
<S> <C> <C> <C>
Stuart L. Scott
Chairman of the Board of Directors
and Chief Executive Officer...................$336,000 $464,000 $ 14,203
Robert C. Spoerri
President and Chief Operating Officer......... 320,000 442,000 13,834
Daniel W. Cummings
Co-President - LaSalle Advisors Capital
Management, Inc............................... 260,000 352,000 12,447
Charles K. Esler, Jr.
President and Chief Executive Officer -
LaSalle Partners Management Services, Inc..... 270,000 380,000 12,328
M. G. Rose......................................
President, Tenant Representation Division -
LaSalle Partners Corporate & Financial 270,000 541,500 12,328
Services, Inc.................................
Lynn C. Thurber
Co-President - LaSalle Advisors Capital
Management, Inc............................... 260,000 352,000 245,500 (3)
</TABLE>
- ----------------
(1) Represents total cash compensation paid to the Named Executive
Officers for all services rendered to the Predecessor Partnerships
during the year ended December 31, 1996.
(2) The amounts shown in this column consist of: (i) "tax gross up"
payments made in respect to certain compensation; (ii) premiums paid
on life insurance policies; and (iii) contributions by the Company to
the Company's 401(k) savings plan for the benefit of the Named
Executive Officers.
(3) Included under All Other Compensation for Ms. Thurber was $232,292
for reimbursement of certain relocation expenses.
Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "Stock
Purchase Plan") is intended to qualify under Section 423 of the Internal
Revenue Code of 1986 (the "Code"). Purchases under the Stock Purchase Plan
will occur at the end of each option period. The first option period
will end on December 31, 1997. Thereafter, each option period will be
a successive six-month purchase period.
The Stock Purchase Plan permits eligible employees to purchase
Common Stock through payroll deductions that may not exceed $21,250 per
year. The purchase price of Common Stock available under the Stock Purchase
Plan is equal to 85% of the fair market value of the Common Stock at the
beginning or the end of a purchase period, whichever is lower. Unless
terminated sooner, the Stock Purchase Plan will terminate 10 years from its
effective date. The Board of Directors has authority to amend or terminate
the Stock Purchase Plan; provided, no such action may adversely affect the
rights of any participant.
1997 Stock Incentive Plan
General. The 1997 Stock Incentive Plan (the "Incentive Plan")
provides for the grant of various types of stock-based compensation to
eligible participants. The purpose of the Incentive Plan is to promote the
success of the Company's business in the best interests of its stockholders
by providing incentives to those individuals who are or will be responsible
for such success.
The Incentive Plan is designed to comply with the requirements
of Regulation G (12 C.F.R. ss.207), the requirements for "performance-based
compensation" under Section 162(m) of the Code and the conditions for
exemption from the short-swing profit recovery rules under Rule 16b-3 of
the Securities Exchange Act of 1934 (the "Exchange Act"). The summary that
follows is qualified by reference to the actual terms of the Incentive
Plan.
The Incentive Plan provides for the granting of stock options
("Options"), including "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Code and non-qualified stock options. Options
granted under the Incentive Plan may be accompanied by stock appreciation
rights or limited stock appreciation rights, or both ("Rights"). Rights may
also be granted independently of Options. The Incentive Plan also provides
for the granting of restricted stock and restricted stock units
("Restricted Awards"), dividend equivalents, performance shares and other
stock-and cash-based awards. The Incentive Plan also permits the plan's
administrator to make loans to participants in connection with the grant of
awards, on terms and conditions determined solely by the plan
administrator. All awards will be evidenced by an agreement (an "Award
Agreement") setting forth the terms and conditions applicable thereto.
Plan Administration. The Incentive Plan is administered by the
Board of Directors, and from and after the Offering will be administered by
a committee of the Board of Directors, the composition of which will at all
times satisfy the provisions of Rule 16b-3 of the Exchange Act (such Board
of Directors or committee is sometimes referred to herein as the "Plan
Administrator"). Subject to the terms of the Incentive Plan, the Plan
Administrator has the right to grant awards to eligible recipients and to
determine the terms and conditions of Award Agreements, including the
vesting schedule and exercise price of such awards, and the effect, if any,
of a change in control of the Company on such awards.
Shares Subject to the 1997 Stock Incentive Plan. The shares
reserved for issuance under the Incentive Plan may be authorized but
unissued shares of Common Stock or shares which have been or may be
reacquired by the Company in the open market, in private transactions or
otherwise.
Eligibility. Discretionary grants of Options, Rights, Restricted
Awards and dividend equivalents, performance shares and loans in connection
therewith may be made to any non-employee director, employee or any
independent contractor of the Company or its direct and indirect
subsidiaries and affiliates who is determined by the Plan Administrator to
be eligible for participation in the Incentive Plan, consistent with the
purpose of such plan; provided that ISOs may only be granted to employees
of the Company and its subsidiaries.
Exercise of Options. Options will vest and become exercisable
over the exercise period, at such times and upon such conditions, including
amount and manner of payment of the exercise price, as the Plan Administra-
tor determines and sets forth in the Award Agreement. The Plan
Administrator may accelerate the exercisability of any outstanding Option
at such time and under such circumstances as it deems appropriate. Options
that are not exercised within 10 years from the date of grant, however,
will expire without value. Options are exercisable during the optionee's
lifetime only by the optionee. The Award Agreements will contain provisions
regarding the exercise of Options following termination of employment with
or service to the Company, including terminations due to the death,
disability or retirement of an award recipient, or upon a change in control
of the Company. Initial Grants. The Board of Directors has authorized the
grant of options to purchase shares of Common Stock under the Incentive
Plan at the initial public offering price, upon the closing of the
Offering. Such options vest on the sixth anniversary of the date of grant,
subject to earlier vesting if the Company's Common Stock exceeds certain
targeted trading prices following the first anniversary of the date of
grant. Of such options, , , , , , ,
and will be granted to Messrs. Scott, Spoerri, Sullivan, Cummings, Esler,
Rose and Webb, respectively, and will be granted to Ms. Thurber.
Employee Stock Ownership Guidelines
Following the Offering, the Company will adopt stock ownership
guidelines for its executive officers and key employees (the "Covered
Employees"). These guidelines will require Covered Employees to maintain
certain specified levels of stock ownership based on a multiple of their
annual compensation levels. Compliance with such guidelines will be phased
in over two, four or six years, depending on the position of the Covered
Employee. Failure to maintain such ownership will disqualify the Covered
Employee from participating in the Company's option grant program.
Cash/Stock Bonus Plan
The Predecessor Partnerships maintained a bonus compensation
plan for employees whose targeted annual compensation exceeded $100,000
(the "Bonus Plan Employees"). Under such plan, Bonus Plan Employees were
paid a percentage of their total compensation in the form of limited
partnership interests in the Employee Partnerships. Following the Offering,
the Company intends to adopt a new bonus plan designed to continue the
equity participation emphasis of the earlier plan and to facilitate
compliance with the Company's equity ownership guidelines. Under the new
bonus plan, employees of the Company whose targeted annual compensation
exceeds $100,000 (the "New Bonus Plan Employees") will have the ability to
take a specified percentage of their annual compensation over $100,000 in
cash or in Common Stock. If the New Bonus Plan Employee elects to receive
Common Stock, the total amount of bonus received in Common Stock (the
"Bonus Allocation") will be increased by a percentage (the "Equity
Enhancement") sufficient to represent a 15% discount from the fair market
value of Common Stock on the date of payment. The number of shares issued
in respect of the Bonus Allocation and the Equity Enhancement will be based
on the fair market value of Common Stock on the date of payment. Shares
issued to the New Bonus Plan Employees attributable to the Bonus Allocation
will vest one year after the date of grant and shares attributable to the
Equity Enhancement will vest in 20% increments on each anniversary of the
date of payment. The shares of Common Stock used for the New Bonus Plan
will be shares which have or may be acquired by the Company in the open
market, in private transactions or otherwise.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning
the beneficial ownership of the Common Stock immediately prior to and
following the closing of the Offering by: (i) each director of the Company;
(ii) each of the Named Executive Officers; (iii) the directors and
executive officers of the Company as a group; and (iv) each person who at
such time will beneficially own more than 5% of the outstanding shares of
Common Stock. DEL/LaSalle has granted the Underwriters a 30-day option to
purchase up to an aggregate of additional shares of Common Stock on the
same terms and conditions as the Offering to cover over-allotments, if any,
in connection with the Offering. See "Shares Eligible for Future Sale" and
"Underwriters."
Shares of Common Stock
Beneficially Owned
Percent Percent
Number Before Offering After Offering (1)
Directors, Executive Officers
and Certain Stockholders
DEL-LPL Limited Partnership........
DEL-LPAML Limited
Partnership.....................
DSA-LPL, Inc.......................
c/o Dai-ichi Life (U.S.A.), Inc.
399 Park Avenue, 24th Floor
New York, New York 10022
DSA-LSAM, Inc......................
c/o Dai-ichi Life (U.S.A.), Inc.
399 Park Avenue, 24th Floor
New York, New York 10022
DEL/LaSalle Finance
Company, L.L.C. (2).............
Galbreath Holdings, L.L.C. (3)
Stuart L. Scott (4) (5)............
Robert C. Spoerri (4) (6).........
William E. Sullivan (7)............
Daniel W. Cummings (4) (8)
Charles K. Esler (9)...............
Lizanne Galbreath (10).............
M.G. Rose (4) (11).................
Lynn C. Thurber (4) (12)...........
Earl E. Webb (4) (13)
All directors and executive officers
as a group (9 persons)
- ---------------
(1) Beneficial ownership prior to the consummation of the Incorporation
Transactions has not been included because there were outstanding
only a nominal number of shares of Common Stock. Unless otherwise
indicated, each person listed above has sole investment and voting
power with respect to the shares listed. Assumes no exercise of the
Underwriters' over-allotment option. Unless otherwise indicated, the
address of each person or entity is c/o LaSalle Partners
Incorporated, 200 East Randolph Street, Chicago, IL 60601.
(2) DEL/LaSalle has granted the Underwriters a 30-day option to purchase
shares of Common Stock on the same terms and conditions as the
Offering. All of the outstanding membership interests in DEL/LaSalle
are owned by the Employee Partnerships. See "Incorporation
Transactions."
(3) Does not include the shares of Common Stock owned by Galbreath-LPL
L.L.C. ("Galbreath-LPL"). Galbreath Holdings L.L.C. ("Galbreath
Holdings") is the non-member manager of Galbreath-LPL and,
therefore, might be deemed to be the beneficial owner of such shares
for purposes of Rule 13d-3 ("Rule 13 d-3") promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Galbreath Holdings disclaims beneficial ownership of such
shares of Common Stock.
(4) Does not include the shares of Common Stock owned by DEL-LPL Limited
Partnership ("DEL-LPL") of which the listed person, as the sole
stockholder of a general partner of DEL-LPL, might be deemed to be
the beneficial owner for purposes of Rule 13d-3. The listed person
disclaims such beneficial ownership.
(5) Mr. Scott, either directly or through an affiliate, owns an 11.6%
interest in the Employee Partnerships. Mr. Scott owns all of the
issued and outstanding common stock of DEL-SLS, Inc., a general
partner of DEL-LPL.
(6) Mr. Spoerri, either directly or through an affiliate, owns an 8.1%
interest in the Employee Partnerships. Mr. Spoerri owns all of the
issued and outstanding common stock of DEL-RCS, Inc., a general
partner of DEL-LPL.
(7) Mr. Sullivan owns a .8% limited partnership interest in the Employee
Partnerships.
(8) Mr. Cummings, either directly or through an affiliate, owns a 2.3%
interest in the Employee Partnerships. Mr. Cummings owns all of the
issued and outstanding common stock of DEL-DWC, Inc., a general
partner of DEL-LPL.
(9) Mr. Esler, either directly or through an affiliate, has a 2.1%
interest in the Employee Partnerships. Mr. Esler owns all of the
issued and outstsnding common stock of DEL-CKE, Inc., a general
partner of DEL-LPAML Limited Partnership ("DEL-LPAML"). Does not
include the shares of Common Stock owned by DEL-LPAML of which Mr.
Esler might be deemed to be the beneficial owner for purposes of
Rule 13d-3. Mr. Esler disclaims such beneficial ownership.
(10) Ms. Galbreath owns, either directly or through a trust for which she
is the sole beneficiary, a 45.0% interest in, and is the managing
member of, Galbreath Holdings. Ms. Galbreath also owns a 40.3%
interest in Galbreath-LPL. Because Ms. Galbreath is the managing
member of Galbreath Holdings and Galbreath Holdings is the managing
member of Galbreath-LPL, Ms. Galbreath might be deemed to be the
beneficial owner of all shares of Common Stock owned by Galbreath
Holdings and Galbreath-LPL for purposes of Rule 13d-3. Ms. Galbreath
disclaims beneficial ownership of such shares of Common Stock,
except to the extent of her ownership interests.
(11) Mr. Rose, either directly or through an affiliate, owns a 7.3%
interest in the Employee Partnerships. Mr. Rose is a general partner
of DEL-LPL.
(12) Ms. Thurber, either directly or through an affiliate, owns a 1.4%
interest in the Employee Partnerships. Ms. Thurber owns all of the
issued and outstanding common stock of DEL-LCT, Inc., a general
partner of DEL-LPL.
(13) Mr. Webb, either directly or through an affiliate, owns a 1.0%
interest in the Employee Partnerships. Mr. Webb owns all of the
issued and outstanding common stock of DEL-EEW, Inc., a general
partner of DEL-LPL.
CERTAIN TRANSACTIONS
Messrs. Scott, Spoerri, Rose, Esler and Cummings, as well as
entities affiliated with Messrs. Scott and Spoerri, are limited partners of
Diverse. Diverse has an ownership interest in and operates investment
assets, primarily as the managing general partner of real estate
development ventures. Prior to January 1, 1992, the Company earned fees for
providing development advisory services to Diverse as well as fees for the
provision of administrative services. Effective January 1, 1992, the
Company discontinued charging fees to Diverse for these services. At the
end of 1994, 1995 and 1996, the total receivable due from Diverse in
connection with such fees and interest thereon was $5.3 million, $3.4
million and $2.4 million, respectively. In 1992, Diverse began the process
of discontinuing its operations and disposing of its assets. Diverse made a
payment of $1.5 million in 1994 and $1.0 million in 1996 to reduce the
receivable due to the Company. In 1995, the Company recorded a $1.9 million
provision for the estimated uncollectible portion of the receivable due to
the Company by Diverse. In addition, the Company also provides property
management and leasing services to properties in which Diverse has an
ownership interest. At the end of 1994, 1995 and 1996, the total receivable
due from these properties was $.6 million, $.3 million and $45,000,
respectively. The properties made payments to the Company in each of those
years totaling $1.8 million, $1.7 million and $.9 million, respectively.
The Company provides certain administrative services to the
Employee Partnerships for which the Company is not reimbursed. For the
years ended December 31, 1994, 1995 and 1996, respectively, the Company
believes that the estimated value of the services provided to the Employee
Partnerships was $.3 million, $.2 million and $.3 million. It is expected
that after the closing of the Offering, the Company will continue to
provide such services to the Employee Partnerships without charge. After
the Incorporation Transactions, the Company expects that the amount will be
substantially lower.
Through an affiliated entity, Mr. Scott beneficially owns all of
the outstanding shares of common stock of LP Finance 1996-1 Corporation
("LP Finance"). LP Finance owns a 37.3% limited partnership interest in
LaSalle Florida Business Environment Company, L.P., a fund being organized
by the Company to invest in real estate in Florida (the "Florida Fund").
Mr. Scott is also a director and the president of LaSalle FOF, Inc.
("LaSalle FOF"), the general partner of the Florida Fund. Mr. Scott also
owns approximately 37.3% of the outstanding shares of common stock of
LaSalle FOF. Since December 1996, the Company has provided and continues to
provide investment management services to the Florida Fund. The Company
earns an annual advisory fee of $.1 million plus a percentage of the fund
properties' net operating income. The Company was also paid an acquisition
fee of $.2 million in connection with a property purchased by the fund. The
Company believes that the services provided to the Florida Fund are on
terms no more favorable to the fund than those terms given to unaffiliated
persons.
The Company provides property management and leasing and
investment management services to Dai-ichi and affiliates of Dai-ichi. For
the years ended December 31, 1994, 1995 and 1996, respectively, Dai-ichi
paid $16.4 million, $9.3 million and $11.6 million for such services. At
the end of such years, the Company had receivables of $4.9 million, $3.6
million and $2.5 million due from Dai-ichi with respect to such services.
The Company believes that the services provided to Dai-ichi and its
affiliates are on terms no more favorable to Dai-ichi than those available
to unaffiliated persons. The Company has also issued to Dai-ichi the
Dai-ichi Notes, which will be repaid out of the net proceeds to the Company
from the Offering. At each of December 31, 1994, 1995 and 1996,
respectively, an aggregate of $37.2 million, was outstanding under the
Dai-ichi Notes. The largest aggregate indebtedness outstanding under the
Dai-ichi Notes since January 1, 1994 was $51.3 million. In 1994, a
principal payment of $14.1 million was made on the Class A Notes. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
In connection with the Incorporation Transactions and the merger
of Galbreath with the Company, the Company granted certain registration
rights to Dai-ichi, the Employee Partnerships and the former stockholders
of Galbreath with respect to the shares of Common Stock to be issued to
them in the Incorporation Transactions. See "Risk Factors--Shares Eligible
for Future Sale," "Incorporation Transactions" and "Shares Eligible for
Future Sale--Registration Rights."
DESCRIPTION OF CAPITAL STOCK
The following description briefly summarizes certain information
regarding the capital stock of the Company. This information does not
purport to be complete and is subject in all respects to the applicable
provisions of the Maryland General Corporation Law, as amended, the
Restated Articles of Incorporation and the Bylaws.
The authorized capital stock of the Company consists of (i)
100,000,000 shares of common stock, $.01 par value per share, of which
50,000,000 shares are designated "Common Stock" and 50,000,000 shares are
undesignated ("Undesignated Common Stock") and (ii) 10,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"). Upon the
closing of the Offering, shares of Common Stock will be issued and
outstanding, and no shares of Undesignated Common Stock will be issued and
outstanding. The Company has no shares of Preferred Stock issued and
outstanding, nor will any shares of Preferred Stock be issued and
outstanding upon the closing of the Offering.
Common Stock
Each share of Common Stock entitles the holder thereof to one
vote on all matters submitted to a vote of stockholders, including the
election of directors. There is no cumulative voting in the election of
directors. Consequently, the holders of a majority of the outstanding
shares of Common Stock can elect all of the directors then standing for
election.
Holders of the Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy."
Holders of Common Stock have no conversion, preemptive or other rights to
subscribe for any securities of the Company, and there are no redemption or
sinking fund provisions with respect to such shares. All outstanding shares
of Common Stock are, and the shares to be sold in the Offering when issued
and paid for will be, validly issued, fully paid and nonassessable. In the
event of any liquidation, dissolution or winding-up of the affairs of the
Company, holders of Common Stock will be entitled to share ratably in the
assets of the Company remaining after provision for payment of liabilities
to creditors. The rights, preferences and privileges of holders of Common
Stock are subject to the rights of the holders of any shares of Preferred
Stock which the Company may issue in the future.
Undesignated Common Stock
Subject to the limitations prescribed by law, the Company is
authorized to issue 50,000,000 shares of Undesignated Common Stock. The
Undesignated Common Stock may be issued from time to time in one or more
series, and the Board of Directors is authorized to fix the dividend
rights, dividends rates, any conversion rights or right of exchange, any
voting rights, rights or terms of redemption, the redemption price or
prices and any other rights, preferences, privileges and restrictions of
any series or class of Undesignated Common Stock and the number of shares
constituting such series or class and the designation thereof. The Company
has no present plans to issue any shares of Undesignated Common Stock.
Depending upon the rights of such Undesignated Common Stock, the
issuance of Undesignated Common Stock could have an adverse effect on
holders of Common Stock by delaying or preventing a change in control of
the Company, making removal of the present management of the Company more
difficult or resulting in restrictions upon the payment of dividends and
other distributions to the holders of Common Stock.
Preferred Stock
The Restated Articles of Incorporation will authorize the Board
of Directors to create and issue up to 10,000,000 shares of Preferred Stock
in one or more classes or series and to fix for each such class or series
the voting powers, designations, preferences and relative, participating,
optional or other special rights and any qualifications, limitations or
restrictions thereof. Upon the closing of the Offering, none of such shares
will be outstanding. The Board of Directors is authorized to, among other
things, provide that any such class or series of Preferred Stock may be (i)
subject to redemption at such time or times and at such price or prices as
the Board may establish; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, and at
such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or any other series as the
Board may establish; (iii) entitled to such rights upon the dissolution of,
or upon any distribution of the assets of, the Company as the Board may
establish; or (iv) convertible into, or exchangeable for, shares of any
other class or classes of stock, or of any other series of the same or any
other class or classes of stock, of the Company at such price or prices or
at such rates of exchange and with such adjustments as the Board may
establish. Issuance of Preferred Stock could discourage bids for the Common
Stock at a premium as well as create a depressive effect on the market
price of the Common Stock.
Liability of Directors and Officers; Indemnification
The Restated Articles of Incorporation will contain provisions
which eliminate the personal liability of a director or officer to the
Company and its stockholders for breaches of fiduciary duty to the fullest
extent provided by law. Under Maryland law, however, these provisions do
not eliminate or limit the personal liability of a director or officer (i)
to the extent that it is proved that the director or officer actually
received an improper benefit or profit or (ii) if a judgment or other final
adjudication is entered in a proceeding based on a finding that the
directors' or officers' action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action
adjudicated in such proceeding. These provisions do not affect the ability
of the Company or its stockholders to obtain equitable relief, such as an
injunction or rescission.
The Restated Articles of Incorporation and Bylaws will provide
that the Company shall indemnify and advance expenses to its directors and
officers to the fullest extent permitted by the MGCL, and that the Company
shall indemnify and advance expenses to its officers to the same extent as
its directors and to such further extent as is consistent with law. The
MGCL provides that a corporation may indemnify any director made a party to
any proceeding by reason of service in that capacity unless it is
established that (i) the act or omission of the director was material to
the matter giving rise to the proceeding and (a) was committed in bad faith
or (b) was the result of active and deliberate dishonesty, or (ii) the
director actually received an improper personal benefit in money, property
or services, or (iii) in the case of any criminal proceeding, the director
had reasonable cause to believe that the act or omission was unlawful. The
statute permits Maryland corporations to indemnify their officers,
employees or agents to the same extent as its directors and to such further
extent as is consistent with law.
The Company intends to obtain directors' and officers' liability
insurance ("D&O Insurance") prior to the effective date of the Offering,
and expects to maintain such insurance following such date. In addition,
the Company will enter into an indemnification agreement with each of its
directors and certain officers of the Company under which the Company will
indemnify each of them against expenses and losses incurred for claims
brought against them by reason of being a director or officer of the
Company. The Company expects that the indemnification agreements will
indemnify and advance expenses to its directors and officers to the fullest
extent permitted by the MGCL.
The Company believes that the limitation of liability and
indemnification provisions in its Articles of Incorporation, the D&O
Insurance and the indemnification agreements will enhance the Company's
ability to continue to attract and retain qualified individuals to serve as
directors and officers. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company
has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Certain Articles of Incorporation, Bylaw and Statutory
Provisions Affecting Stockholders
Certain provisions in the Restated Articles of Incorporation and
Bylaws and the MGCL may have the effect of delaying, deferring or
preventing a change of control of the Company or may operate only with
respect to extraordinary corporate transactions involving the Company.
The Restated Articles of Incorporation will provide for the
Board of Directors to be divided into three classes, as nearly equal in
number as possible, serving staggered terms. Approximately one-third of the
Board will be elected each year. See "Management." A director may be
removed by the stockholders, but only for cause, and only by the
affirmative vote of the holders, voting as a single class, of two-thirds of
the voting power of the Company's then outstanding capital stock entitled
to vote generally in the election of directors. The Company believes that
classification of the Board of Directors will help to assure the continuity
and stability of the Company's business strategies and policies as
determined by the Board of Directors. The provision for a classified board,
together with the director removal provisions, could prevent a party who
acquires control of a majority of the outstanding voting stock from
obtaining control of the Board until the second annual stockholders meeting
following the date the acquiror obtains the controlling stock interest. The
classified board provision, together with the director removal provisions,
could have the effect of discouraging a potential acquiror from making a
tender offer or initiating a proxy contest or otherwise attempting to gain
control of the Company and could increase the likelihood that incumbent
directors will retain their positions.
The Bylaws will provide that stockholders at an annual meeting
may only consider proposals or nominations specified in the notice of
meeting or brought before the meeting by or at the direction of the Board
or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to
the Company's Secretary timely written notice, in proper form, of the
stockholder's intention to bring that proposal or nomination before the
meeting. In addition to certain other applicable requirements, for a
stockholder proposal or nomination to be properly brought before an annual
meeting by a stockholder, such stockholder generally must have given notice
thereof in proper written form to the Secretary of the Company not less
than 60 days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. Although the Bylaws
will not give the Board the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be
conducted at a special or annual meeting, the Bylaws may have the effect of
precluding the conduct of certain business at a meeting if the proper
procedures are not followed or may discourage or defer a potential acquiror
from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company.
Pursuant to the MGCL, the Bylaws permit stockholders to call
special meetings of stockholders upon written request of holders of shares
entitled to cast not less than a majority of all votes entitled to be cast
at such meeting. The Bylaws will provide that only business specified in
the notice of a special meeting will be conducted at such meeting. Such
provisions do not, however, affect the ability of stockholders to submit a
proposal to the vote of all stockholders of the Company at an annual
meeting in accordance with the Bylaws, which provide for the additional
notice requirements for stockholder nominations and proposals at the annual
meetings of stockholders as described above. In addition, pursuant to the
MGCL, the Bylaws will provide that any action required to be taken at a
meeting of the stockholders may be taken without a meeting by unanimous
written consent, if such consent sets forth such action and is signed by
each stockholder entitled to vote on the matter and a written waiver of any
right to dissent signed by each stockholder entitled to notice of the
meeting but not entitled to vote thereat.
The Restated Articles of Incorporation and Bylaws will provide
that the affirmative vote of at least 80% of the total votes eligible to be
cast in the election of directors is required to amend, alter, change or
repeal certain of their provisions. This requirement of a super-majority
vote to approve amendments to certain provisions of the Articles of
Incorporation and Bylaws could enable a minority of the Company's
stockholders to exercise veto power over any such amendments.
Under the MGCL, certain "Business Combinations" (including a
merger, consolidation, share exchange or, in certain circumstances, an
asset transfer or issuance or reclassification of equity securities)
between a Maryland corporation and any person who beneficially owns 10% or
more of the voting power of the corporation's shares or an affiliate of the
corporation who, at any time within the two-year period prior to the date
in question, was the beneficial owner of 10% or more of the voting power of
the then-outstanding voting stock of the corporation (an "Interested
Stockholder") or an affiliate thereof are prohibited for five years after
the most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such Business Combination must be
recommended by the Board of Directors of such corporation and approved by
the affirmative vote of at least (i) 80% of the votes entitled to be cast
by holders of outstanding voting shares of the corporation and (ii) 66 2/3%
of the votes entitled to be cast by holders of outstanding voting shares of
the corporation other than shares held by the Interested Stockholder with
whom the Business Combination is to be effected, unless, among other
things, the corporation's stockholders receive a minimum price (as defined
in the MGCL) for their shares and the consideration is received in cash or
in the same form as previously paid by the Interested Stockholder for its
shares. It is anticipated that the Company's Board of Directors will exempt
from the Maryland statute any business combination with the Employee
Partnerships, any present or future affiliate or associate of any of them,
or any other person acting in concert or as a group with any of the
foregoing persons. Pursuant to the MGCL these provisions also do not apply
to Business Combinations which are approved or exempted by the Board of
Directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.
The Company will elect to include in its Restated Articles of
Incorporation provisions exempting it from the application of the Maryland
control share acquisition statute.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is .
Application will be made to list the Common Stock on the New York Stock
Exchange.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this Offering, the Company will have
approximately shares of Common Stock outstanding. The shares of Common
Stock sold in this Offering ( shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction
under the Securities Act, except for any such shares held at any time by an
"affiliate" of the Company, as such term is defined under Rule 144
promulgated under the Securities Act.
The remaining shares of Common Stock outstanding upon the
closing of the Offering will be owned by the Employee Partnerships,
including DEL/LaSalle, the former Galbreath stockholders and affiliates of
Dai-ichi and may be publicly sold only if such Common Stock is registered
under the Securities Act or sold in accordance with an applicable exemption
from registration, such as Rule 144. In general, under Rule 144, as
currently in effect, a person who has beneficially owned shares for at
least one year, including an "affiliate," as that term is defined in Rule
144, is entitled to sell, within any three-month period, a number of
"restricted" shares that does not exceed the greater of one percent (1%) of
the then outstanding shares of Common Stock (approximately shares
immediately after the Offering) or the average weekly trading volume during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale limitations, notice requirements and the
availability of current public information about the Company. Rule 144(k)
provides that a person who is not deemed an "affiliate" and who has
beneficially owned shares for at least two years is entitled to sell such
shares at any time under Rule 144 without regard to the limitations
described above.
Under the terms of the partnership agreement of the Employee
Partnerships, partners thereof generally will be entitled to receive upon
their withdrawal from the Employee Partnerships (which will be required
when any such person ceases to be an employee of the Company for any
reason), death or incapacity, or upon request, up to that number of shares
of Common Stock held by the Employee Partnerships which represents their
pro rata interest in the shares of Common Stock held by the Employee
Partnerships. Partners of the Employee Partnerships who receive shares upon
their withdrawal or by election will not be subject to any contractual
restrictions on resale with respect to shares of the Common Stock received
by them but will be subject to the restrictions on transfer described
above. However, unless such shares are registered for sale under the
Securities Act, for purposes of Rule 144 they would be considered
"restricted securities" and would be subject to the limitations on sale
pursuant to Rule 144 described above. For the purposes of determining
compliance with the volume limitations of Rule 144, all sales of Common
Stock by partners of the Employee Partnerships will be aggregated. In
addition, the holding period for partners of the Employee Partnerships
under Rule 144 will include the holding period of the Employee
Parnterships.
The Company will agree with the Underwriters, subject to certain
exceptions, not to sell or otherwise dispose of any shares of Common Stock
for a period of 180 days from the date of this Prospectus without the prior
written consent of Morgan Stanley & Co. Incorporated. Each of the Company's
current stockholders will enter into or is bound by a similar agreement.
See "Underwriters."
The Company is unable to estimate the number of shares of Common
Stock that may be sold in the future by the existing stockholders or the
effect, if any, that sales of shares by such stockholders will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock by such stockholders, or the perception
that such sales could occur, could adversely affect prevailing market
prices.
In March 1997, DEL/LaSalle, a limited liability company whose
only members are the Employee Partnerships, purchased the limited
partnership interests in the Predecessor Partnerships owned by a subsidiary
of Dresdner. Dresdner was required to sell the interests in order to comply
with bank regulatory requirements. As consideration for such purchase,
DEL/LaSalle issued to Dresdner the Dresdner Note. The purchase price was
determined in May 1996 and was based on the original purchase price for
such interests plus Dresdner's share of expected undistributed earnings for
1996. All of the shares of Common Stock to be received by DEL/LaSalle in
connection with the Incorporation Transactions and shares of Common Stock
held by the Employee Partnerships, representing % of the outstanding Common
Stock after giving effect to the Offering, will be pledged to support
DEL/LaSalle's obligations under the Dresdner Note. The principal amount of
the Dresdner Note is due in five installments, with $3.5 million due on
April 15, 2000 and $7.8 million due on each April 15 thereafter, through
2004. The Dresdner Note bears interest at 7.0% per annum, payable on each
April 15 beginning on April 15, 1998. DEL/LaSalle will not have any assets
other than the Common Stock issued in connection with the Incorporation
Transactions. Funds for repayment of the Dresdner Note, including interest
thereon, will be provided by capital contributions from the Employee
Partnerships and through the sale of Common Stock in the public market or
in privately negotiated transactions. DEL/LaSalle has granted the
Underwriters a 30-day option to purchase up to shares of Common Stock to
cover over-allotments in connection with the Offering. In the event that
the Underwriters' over-allotment is exercised, the proceeds to DEL/LaSalle
will be used to repay a portion of the Dresdner Note. If DEL/LaSalle
defaults in the repayment of the Dresdner Note or interest thereon,
Dresdner will have the right to sell any or all of the pledged shares in
the public market or in privately negotiated transactions, subject to
compliance with the Securities Act and applicable law.
Registration Rights
In connection with the merger of Galbreath with Predecessor
Partnerships, the Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") by and among the Employee Partnerships,
Dai-ichi, the former Galbreath stockholders (each a "Current Stockholder")
and the Company. The Registration Rights Agreement provides that subject to
certain limitations, at any time following 12 months from the date of
closing of the Offering (the "Effective Date"), each Current Stockholder
has the right to demand, on no more than two occasions, that the Company
register all or a portion of the shares of Common Stock owned by such
stockholder at the Effective Date, subject to a minimum demand of 20.0% of
the total shares originally issued to such stockholder or a lesser
percentage if the anticipated aggregate price to the public would exceed
$5.0 million. The Company generally will be required to use its best
efforts to effect any such registration statement on demand. Such
registrations will be at the Company's expense, except that each selling
stockholder will bear its pro rata share of the underwriting discounts and
commissions.
In addition, at any time after the expiration of 12 months from
the Effective Date, the Current Stockholders will have certain incidental
rights to require the Company to include in any registration statement
filed by the Company with respect to its securities (whether for its own
account or for the account of any securityholder) such amount of shares of
Common Stock requested by the Current Stockholders to be included therein,
subject to certain exceptions. Such registrations will be at the Company's
expense, except that each selling stockholder will bear its pro rata share
of the underwriting discounts and commissions.
The Registration Rights Agreement also provides that, prior to
the transfer of Common Stock by the Current Stockholders, such stockholders
must provide notice to the Company of the proposed transfer unless the
proposed transfer is to one of the Current Stockholders, certain
institutional investors, persons who would own after the transfer less than
5.0% of the Company's outstanding Common Stock, purchasers pursuant to Rule
144 under the Securities Act, or to an underwriter in a firm commitment
underwriting. The Company will then have the option of purchasing the
shares proposed to be transferred at a price equal to the average closing
market price of Common Stock during the five trading days prior to such
notice.
UNDERWRITERS
Under the terms and subject to conditions contained in an
Underwriting Agreement dated the date hereof, the Underwriters named below,
for whom Morgan Stanley & Co. Incorporated and William Blair & Company,
L.L.C. are serving as Representatives, have severally agreed to purchase,
and the Company has agreed to sell to the Underwriters, the respective
number of shares of Common Stock set forth opposite their name below:
Name Number of Shares
Morgan Stanley & Co. Incorporated....................
William Blair & Company, L.L.C.......................
-----------
Total.....................................
===========
The Underwriting Agreement provides that the obligations of the
several Underwriters to pay for and accept delivery of the shares of Common
Stock offered hereby are subject to the approval of certain legal matters
by counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all of the shares of Common Stock offered hereby (other
than those covered by the over-allotment option described below), if any
are taken.
The Underwriters initially propose to offer part of the shares
of Common Stock offered hereby directly to the public at the public
offering price set forth on the cover page hereof and part to certain
dealers at a price which represents a concession not in excess of $ per
share under the public offering price. Any Underwriter may allow, and such
dealers may re-allow, a concession not in excess of $ per share to other
Underwriters or to certain other dealers. After the initial offering of the
shares of Common Stock, the offering price and other selling terms may from
time to time be varied by the Representatives.
Pursuant to the Underwriting Agreement, the Selling Stockholder
has granted to the Underwriters an option, exercisable for 30 days from the
date of this Prospectus, to purchase up to an additional shares of Common
Stock at the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if
any, incurred in the sale of the shares of Common Stock offered hereby. To
the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares of Common Stock offered by the Underwriters hereby.
The Underwriters have informed the Company that they do not
intend sales to any accounts over which they have discretionary authority
to exceed five percent of the total number of shares of Common Stock
offered hereby.
The Company, on the one hand, and the Underwriters, on the other
hand, have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act. The Selling Stockholder has
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act.
The Company and the Selling Stockholder will agree in the
Underwriting Agreement that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, they will not,
during the period ending 180 days after the date of this Prospectus, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock, or file a registration
statement with the Securities and Exchange Commission relating to any of
the foregoing securities, or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, other than stock or stock
option issuances by the Company pursuant to existing employee benefit
plans. Each of the Company's other current stockholders will enter into a
similar agreement.
At the request of the Company, the Underwriters have reserved
for sale at the initial offering price, up to shares offered hereby for
directors, officers, employees, business associates and related persons of
the Company. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other shares offered hereby. All purchasers of the shares of Common Stock
reserved pursuant to this paragraph who are also directors or senior
officers of the Company will be required to enter into agreements identical
to those described in the immediately preceding paragraph restricting the
transferability of such shares for a period of 180 days after the date of
this Prospectus.
Prior to the Offering, there has been no public market for the
Common Stock. The Company intends to have the shares of Common Stock
offered hereby approved for listing on The New York Stock Exchange under
the symbol "LAP." The initial public offering price of the Common Stock
will be determined by negotiation between the Company and the
Representatives. Among the factors to be considered in determining the
initial public offering price will be the future prospects of the Company
and its industry in general; revenue, earnings and certain other financial
and operating information of the Company in recent periods; the general
condition of the securities market at the time of the Offering; and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in
activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this preliminary
Prospectus is subject to change as a result of market conditions and other
factors.
In order to facilitate the offering of the Common Stock, the
Underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the Common Stock. Specifically, the
Underwriters may over-allot in connection with the Offering, creating a
short position in the Common Stock for their own account. In addition, to
cover over-allotments or stabilize the price of the Common Stock, the
Underwriters may bid for, and purchase, shares of Common Stock in the open
market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing the Common Stock in
the Offering, if the syndicate repurchases previously distributed Common
Stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or
maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities and
may end any of these activities at any time.
The Representatives perform investment banking services to the
Company for which they receive customary compensation. An affiliate of
Morgan Stanley & Co. Incorporated has retained the Company for investment
advisory services on behalf of one of its clients. Such client pays
customary fees to the Company for such services.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will
be passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom
(Illinois) and for the Underwriters by Sidley & Austin, Chicago, Illinois.
Skadden, Arps, Slate, Meagher & Flom (Illinois) and Sidley & Austin will
rely upon the opinion of Piper & Marbury L.L.P., Baltimore, Maryland, as to
certain matters of Maryland law.
EXPERTS
The Combined Financial Statements of the Predecessor
Partnerships as of December 31, 1995 and 1996, and for each of the years in
the three-year period ended December 31, 1996 and the balance sheet of
LaSalle Partners Incorporated as of April 22, 1997 included in this
Prospectus and Registration Statement have been included herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, and upon the authority of
said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to
the Common Stock offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, and the exhibits and schedules to the
Registration Statement. Statements made in this Prospectus as to the
contents of any agreement or other document referred to herein are not
necessarily complete, and reference is made to the copy of such agreement
or other document filed as an exhibit or schedule to the Registration
Statement, and each such statement shall be deemed qualified in its
entirety by such reference. For further information, reference is made to
the Registration Statement and to the exhibits and schedules filed
therewith.
After consummation of the Offering, the Company will be subject
to the information and reporting requirements of the Exchange Act and, in
accordance therewith will be required to file proxy statements, reports and
other information with the Commission. The Registration Statement, as well
as any such report, proxy statement and other information filed by the
Company with the Commission, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and the Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that
file electronically with the Commission. Upon listing of the Common Stock
on the New York Stock Exchange, Inc. (the "NYSE"), reports, proxy
statements and other information concerning the Company may be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company intends to furnish to its stockholders annual
reports containing consolidated financial statements audited by an
independent public accounting firm accompanied by an opinion expressed by
such independent public accounting firm and quarterly reports for the first
three quarters of each fiscal year containing unaudited consolidated
financial information in each case prepared in accordance with generally
accepted accounting principles.
INDEX TO FINANCIAL STATEMENTS
Page
LaSalle Partners Limited Partnership and
LaSalle Partners Management Limited Partnership
Report of KPMG Peat Marwick LLP,
Independent Auditors..................................................F-2
Combined Balance Sheets as of December 31,
1995 and 1996.........................................................F-3
Combined Statements of Earnings For the Years Ended
December 31, 1994,
1995 and 1996....................................................F-4
Combined Statements of Partners' Capital (Deficit)
For the Years Ended December 31,
1994, 1995 and 1996 ..................................................F-5
Combined Statements of Cash Flows For the Years
Ended December 31, 1994,
1995 and 1996...................................................F-6
Notes to Combined Financial Statements.............................F-7
LaSalle Partners Incorporated
Report of KPMG Peat Marwick LLP,
Independent Auditors..................................................F-20
Balance Sheet as of April 22, 1997.................................F-21
Notes to Balance Sheet.............................................F-22
Independent Auditors' Report
The Partners
LaSalle Partners Limited Partnership
LaSalle Partners Management Limited Partnership:
We have audited the accompanying combined balance sheets of LaSalle
Partners Limited Partnership and subsidiaries and LaSalle Partners
Management Limited Partnership and subsidiaries as of December 31, 1995 and
1996, and the related combined statements of earnings, partners' capital
(deficit), and cash flows for each of the years in the three-year period
ended December 31, 1996. These combined financial statements are the
responsibility of the general partners of the Partnerships. Our
responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of LaSalle
Partners Limited Partnership and subsidiaries and LaSalle Partners
Management Limited Partnership and subsidiaries as of December 31, 1995 and
1996, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 21, 1997
except as to note 12
which is as of April 22, 1997
LA SALLE PARTNERS LIMITED PARTNERSHIP
AND SUBSIDIARIES
LA SALLE PARTNERS MANAGEMENT LIMITED PARTNERSHIP
AND SUBSIDIARIES
Combined Balance Sheets
(in thousands)
December 31, 1995 and 1996
ASSETS 1995 1996
- ------ ---- ----
Current assets:
Cash and cash equivalents 8,322 $ 7,207
Trade receivables 71,677 87,283
Other receivables 2,035 3,005
Prepaid expenses 1,016 1,228
--------- --------
Total current assets 83,050 98,723
Property and equipment, at cost, less accumulated
depreciation of $22,900 and $23,310 in 1995 and
1996, respectively (note 2) 10,132 14,549
Intangibles resulting from business acquisitions (note 3) 8,351 23,735
Investments in real estate ventures (note 6) 7,386 13,687
Long-term receivables, net 5,296 5,052
Other assets, net 786 868
---------- -------
$ 115,001 156,614
========= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $ 31,160 $34,228
Accrued compensation (note 9) 24,872 26,016
Borrowings under short-term credit facility (note 7) - 6,500
Current maturities of long-term debt (note 7) 1,308 9,064
----------- -------
Total current liabilities 57,340 75,808
Long-term debt (note 7):
Subordinated loans, less current maturities 37,213 34,106
Long-term credit facility, less current maturities 3,592 21,445
---------- --------
Total long-term debt 40,805 55,551
Other long-term liabilities 1,859 1,008
Commitments and contingencies (notes 4, 6, 8 and 11) --------- -------
Total liabilities 100,004 132,367
Partners' capital 14,997 24,247
---------- --------
$ 115,001 $156,614
========= ========
See accompanying notes to combined financial statements.
LA SALLE PARTNERS LIMITED PARTNERSHIP
AND SUBSIDIARIES
LA SALLE PARTNERS MANAGEMENT LIMITED PARTNERSHIP
AND SUBSIDIARIES
Combined Statements of Earnings
(in thousands)
Years ended December 31, 1994, 1995 and 1996
<TABLE>
1994 1995 1996
------- --------- -----
Revenue:
<S> <C> <C> <C>
Fee based services (note 5) $123,243 $146,282 $170,709
Equity in earnings from unconsolidated ventures (note 6) 1,024 3,130 3,220
Construction operations, net (note 4) 1,284 1,358 1,271
Other income 1,367 1,057 767
-------- -------- --------
Total revenue 126,918 151,827 175,967
Operating expenses:
Compensation and benefits (note 9) 78,108 91,183 104,673
Other operating and administrative 27,944 36,288 38,977
Depreciation and amortization (note 2) 2,851 4,240 5,416
-------- -------- --------
Total operating expenses 108,903 131,711 149,066
------- ------- -------
Operating income 18,015 20,116 26,901
Interest expense (note 7) 5,159 3,806 5,730
-------- -------- -------
Earnings before provision for income taxes 12,856 16,310 21,171
Net provision for income taxes (note 2) 554 505 1,207
-------- -------- -------
Net earnings $ 12,302 $ 15,805 $ 19,964
======== ======== ========
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
LA SALLE PARTNERS LIMITED PARTNERSHIP
AND SUBSIDIARIES
LA SALLE PARTNERS MANAGEMENT LIMITED PARTNERSHIP
AND SUBSIDIARIES
Combined Statements of Partners' Capital (Deficit)
(in thousands)
Years Ended December 31, 1994, 1995 and 1996
General Limited
Partners Partners Other Total
-------- -------- ----- --------
<S> <C> <C> <C>
Partners' capital (deficit), January 1, 1994 $ (50,356) 35,067 - $ (15,289)
Net Earnings 8,400 3,902 - 12,302
Distributions (7,614) (3,348) - (10,962)
Assets, net of liabilities contributed by limited - 13,000 - 13,000
partners
Limited partners' cash contributions - 14,106 - 14,106
------------ --------- ------ -----------
Total contributions - 27,106 - 27,106
------------ ---------
Partners' capital (deficit), December 31, 1994 (49,570) 62,727 - 13,157
Net Earnings 8,782 7,023 - 15,805
Distributions (8,839) (5,126) - (13,965)
------------ -------- ------ ------------
Partners' capital (deficit), December 31, 1995 (49,627) 64,624 - 14,997
Net Earnings 11,093 8,871 - 19,964
Distributions (6,563) (5,250) - (11,813)
Effect of cumulative translation adjustment - - 1,099 1,099
------------ --------- ------ -----------
Partners' capital (deficit), December 31, 1996 $ (45,097) 68,245 1,099 $ 24,247
=========== ======= ====== ===========
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
LA SALLE PARTNERS LIMITED PARTNERSHIP
AND SUBSIDIARIES
LA SALLE PARTNERS MANAGEMENT LIMITED PARTNERSHIP
AND SUBSIDIARIES
Combined Statements of Cash Flows
(in thousands)
Years ended December 31, 1994, 1995 and 1996
1994 1995 1996
----- ----- -----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 12,302 $ 15,805 $ 19,964
Reconciliation of net earnings to net cash provided
by operating activities:
Depreciation and amortization 2,851 4,240 5,416
Equity in earnings and gain on sale from
unconsolidated ventures (note 6) (1,349) (3,130) (3,220)
Provision for loss on receivables and other assets 247 2,732 986
Operating distributions from unconsolidated
ventures 398 1,078 3,571
Changes in:
Receivables 2,634 (9,699) (17,234)
Prepaid expenses and other assets (312) 172 37
Accounts payable, accrued liabilities and accrued
compensation 7,857 2,355 4,444
-------- -------- -------
Net cash provided by operating activities 24,628 13,553 13,964
Cash flows provided by (used in) investing activities:
Net capital additions - property and equipment (2,218) (5,055) (10,790)
Acquisition of CIN (note 3) - - (15,700)
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures (9,435) (1,941) (9,270)
Distributions, repayments of advances and
sale of investments 6,768 1,290 3,282
------- ------- --------
Net cash used in investing activities (4,885) (5,706) (32,478)
Cash flows provided by (used in) financing activities:
Net borrowings under credit facility (2,000) 1,600 29,002
Payment of subordinated notes payable (14,106) - -
Distributions to partners (10,962) (13,965) (11,813)
Contributions from partners 15,040 -
-------- -------
Net cash provided by (used in) financing
activities (12,028) (12,365) 17,189
Effects of foreign currency translation on
cash balances - - 210
-------- -------- ---------
Net increase (decrease) in cash and cash
equivalents 7,715 (4,518) (1,115)
Cash and cash equivalents, January 1 5,125 12,840 8,322
---------- -------- ---------
Cash and cash equivalents, December 31 $ 12,840 8,322 $ 7,207
========== ======== =========
Supplemental disclosure of cash flow information:
Combined interest paid was $5,217,
$3,798 and $5,191 for 1994, 1995
and 1996, respectively.
See accompanying notes to combined financial statements.
</TABLE>
LA SALLE PARTNERS LIMITED PARTNERSHIP
AND SUBSIDIARIES
LA SALLE PARTNERS MANAGEMENT LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands)
December 31, 1994, 1995 and 1996
(1) Organization
LaSalle Partners Limited Partnership ("LPL") and LaSalle
Partners Management Limited Partnership ("LPML"), two Delaware
limited partnerships (collectively, the "Partnerships"), were
formed on June 29, 1988 to provide real estate services to
clients including leasing, brokerage, construction and
development management, real property asset management and real
estate investment advice. Prior to June 29, 1988, these real
estate services were provided by the general partners of the
Partnerships, DEL-LPL Limited Partnership and DEL-LPAML Limited
Partnership (collectively "DEL"), respectively. Previous to
January 23, 1995, LPML transacted business under the name of
LaSalle Partners Asset Management Limited.
Prior to November 30, 1994, the sole limited partners of LPL and
LPML were DSA-LSPL, Inc. and DSA-LSAM, Inc. (collectively
"DSA"), respectively. On that date, the Partnerships admitted
Alex. Brown Kleinwort Benson Realty Advisors Corporation
("ABKB") as an additional limited partner (note 3). Effective
March 31, 1995, ABKB changed its name to KB-LPL, Inc. DEL, DSA
and KB-LPL, Inc. had ownership interests of 55.6%, 24.4% and
20.0%, respectively, at December 31, 1995 and 1996.
In August 1995, Dresdner Bank AG ("Dresdner") purchased the
parent company of KB-LPL, Inc. As a result of bank regulatory
requirements, Dresdner was required to sell its interests in the
Partnerships. Pursuant to an agreement reached with Dresdner in
May, 1996, DEL re-purchased KB-LPL, Inc.'s ownership in the
Partnerships during the first quarter of 1997.
The partnership agreements provide for changes in ownership
interests. DEL has the right to increase their ownership
interest by making additional capital contributions to the
Partnerships. Such additional capital would be used by the
Partnerships to repay subordinated notes payable, including
Class A and Class B notes, to DSA (note 7). If DEL does not
exercise their right, DSA has the right to convert any unpaid
principal on the subordinated notes into an additional capital
contribution thus increasing their ownership interests (note 7).
Provisions in the partnership agreements provide for the
repayment of the Class A notes payable to DSA to be made
directly by the Partnerships.
The Partnerships' net cash flow, after appropriate reserves, is
generally distributed to the partners in accordance with their
ownership interests. The partnership agreements permit
distributions during each year to the partners in connection
with estimated federal income tax payments owed by the partners.
Net profits and losses of the Partnerships are generally
allocated to the partners in accordance with their ownership
interests in effect during each year.
(2) Summary of Significant Accounting Policies
Principles of Combination and Consolidation
The combined financial statements include the accounts of the
Partnerships and their majority owned and controlled
partnerships and subsidiaries. All material intercompany
transactions between the Partnerships and their subsidiaries
have been eliminated in consolidation and combination.
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Held for Others
The Partnerships control certain cash and cash equivalents as
agents for their investment and property management clients.
Such amounts, which total $198,821 and $338,504 at December 31,
1995 and 1996, respectively, are not included in the
accompanying Combined Balance Sheets.
Statement of Cash Flows
Cash and cash equivalents include demand deposits and
investments in U.S. Treasury instruments (generally held
available for sale) with maturities of three months or less. The
combined carrying value of such investments of $5,979 and $1,000
approximates their market value at December 31, 1995 and 1996,
respectively.
Investments in Real Estate Ventures
The Partnerships have limited and general partner interests in
various real estate ventures with interests ranging from less
than 1% to 49.5% which are accounted for using the equity method
(note 6).
The Partnerships also have nominal limited and general partner
interests in certain real estate ventures for which no
significant capital will be contributed. These investments,
which represent ownership interests of up to 2%, are accounted
for under the cost method.
Intangibles Resulting from Business Acquisitions
The Partnerships periodically evaluate the recoverability of the
carrying amount of intangibles resulting from business
acquisitions by reviewing the current and planned results of the
acquired business. If such analysis indicates impairment, the
intangible asset would be adjusted in the period such changes
occurred based on its calculated fair value.
Fair Value of Financial Instruments
The Partnerships' financial instruments include cash and cash
equivalents, receivables, accounts payable and notes payable.
Excluding subordinated notes payable, the carrying values of the
financial instruments approximate their fair values at December
31, 1995 and 1996. A reasonable estimate of fair value is not
practicable for the subordinated debt due to the unique
conversion features of the debt (note 1).
Foreign Currency Translation
The financial statements of subsidiaries outside the United
States, except those subsidiaries located in highly inflationary
economies, are generally measured using the local currency as
the functional currency. The assets and liabilities of these
subsidiaries are translated at the rates of exchange at the
balance sheet date. The resultant translation adjustments are
included as a separate component of partners' capital. Income
and expense are translated at average monthly rates of exchange.
Gains and losses from foreign currency transactions of these
subsidiaries are included in net earnings. For subsidiaries
operating in highly inflationary economies, gains and losses
from balance sheet translation adjustments are included in net
earnings.
Revenue Recognition
Advisory and management fees are recognized in the period in
which the services are performed. Transaction commissions are
recorded as income at the time the related services are provided
unless significant future contingencies exist. Construction and
Development Management fees are generally recognized as billed,
which approximates the percentage of completion method of
accounting. Fees recognized in the current period that are
expected to be received beyond one year have been discounted to
the present value of future payments.
Depreciation
Depreciation and amortization is calculated for financial
reporting purposes using the straight-line method based on the
estimated useful lives of the assets. Furniture totaling $12,109
and $14,400 at December 31, 1995 and 1996, respectively, is
depreciated over seven years. Computer equipment and software
totaling $12,023 and $13,862 at December 31, 1995 and 1996,
respectively, are depreciated over three years. Leasehold
improvements totaling $8,900 and $9,597 at December 31, 1995 and
1996, respectively, are amortized over the lease periods ranging
from one to 10 years.
Income Tax Provision
Included in the accompanying Combined Statements of Earnings is
a federal and state income tax provision for wholly-owned
corporate subsidiaries and a state tax provision for certain
states which require partnerships to pay income taxes. No other
provision for income taxes has been made as any liability for
such taxes would be that of the respective partners.
Reclassifications
Certain 1994 and 1995 amounts have been reclassified to conform
to the 1996 presentation.
(3) Acquisitions
On October 17, 1996, subsidiaries of the Partnerships acquired
all of the common stock of CIN Property Management Limited, a
London, England investment and property management private
limited liability company, for $15,709 including transaction
expenses. The name of the entity was immediately changed to CIN
LaSalle Advisors Capital Management Limited ("CIN"). The
acquisition was accounted for as a purchase and accordingly,
operating results of this business subsequent to the date of
acquisition are included in the accompanying Combined Statements
of Earnings. The excess purchase price over the fair value of
the identifiable assets and liabilities acquired was $15,700
which was allocated to goodwill and other intangibles and is
being amortized on a straight-line basis over 5 to 20 years. The
effect of the year end translation adjustment (note 2) increased
the recorded amount of goodwill by $960. Intangibles resulting
from business acquisitions in the accompanying Combined Balance
Sheets includes $16,320 at December 31, 1996 related to the CIN
acquisition.
On November 30, 1994, ABKB contributed all of its net assets
valued at $13,000 (including cash of $934) to the Partnerships.
This transaction, in combination with ABKB's purchase of
partnership units from an affiliate of DEL, resulted in ABKB
acquiring a 20% limited partner interest (note 1). The asset
contribution transaction was accounted for using the purchase
method of accounting. Accordingly, the Partnerships allocated
the purchase price to the identifiable assets and liabilities
acquired based on their estimated fair values with the excess
being allocated to advisory contracts and goodwill. The excess
value of $9,361 is being amortized on a straight-line basis over
a period of 10 years. Intangibles resulting from business
acquisitions in the accompanying Combined Balance Sheets include
$8,351 and $7,415 at December 31, 1995 and 1996, respectively,
related to the ABKB acquisition. The results of the acquired
business subsequent to November 30, 1994 have been included in
the accompanying Combined Statements of Earnings.
The proforma results of such acquisitions are not material to
the Partnerships' combined financial statements.
(4) Dispositions
Effective December 31, 1996, the Partnerships sold its
construction management business and certain related assets to a
former member of management for a $9.1 million note. The note,
which is secured by the current and future assets of the
business, is due December 31, 2006 and bears interest at rates
of 6.8% to 10%, with interest payments due annually. Principal
payments are also due annually beginning January 1998 as
defined.
Under the terms of the Asset Purchase Agreement, the
Partnerships have agreed to provide certain administrative and
financial services, at cost, beginning January 1997 and may
provide certain financial assistance if necessary.
For financial reporting purposes, the Partnerships have not
treated the transaction as a divestiture. As such, the net
assets sold as part of the transaction aggregating $68 at
December 31, 1996 have been included in other assets in the
accompanying Combined Balance Sheets. Principal and interest to
be received under the note will be treated as a reduction of
such net assets and as a reserve, if necessary, for any
anticipated financial exposure under the terms of the Asset
Purchase Agreement with the remainder recognized as income.
The revenue related to the construction business sold for the
years ended December 31, 1994, 1995 and 1996 totaled $4,858,
$4,977 and $5,678, respectively. For financial statement
presentation purposes these revenues have been presented net of
related expenses totaling $3,574, $3,619 and $4,407,
respectively, in the accompanying Combined Statements of
Earnings.
The Partnerships pay subcontractors for expenses incurred on
behalf of construction management clients for which they are
reimbursed monthly. Included in trade receivables in the
accompanying Combined Balance Sheets are amounts due from
clients totaling $15,281 and $21,757, respectively, related to
construction fee and reimbursable receivables at December 31,
1995 and 1996, respectively. Corresponding liabilities related
to amounts payable to subcontractors are included in accounts
payable and accrued liabilities in the accompanying Combined
Balance Sheets totaling $17,926 and $20,109 at December 31, 1995
and 1996, respectively. In accordance with the Asset Purchase
Agreement, any trade receivables, net of related payables to
subcontractors, which are uncollected at April 30, 1997 will be
reimbursed to the Partnerships by the purchaser.
(5) Business Segments
The Partnerships' operations have been classified into three
business segments: Management Services, Corporate and Financial
Services and Investment Management. The Management Services
segment provides three primary service capabilities: (i)
property management and leasing for property owners, (ii)
facility management for properties occupied by corporate owners
and users; and (iii) development management for both investors
and real estate users seeking to develop new buildings or
renovate existing facilities. The Corporate and Financial
Services segment provides transaction and advisory services
through three primary service capabilities, including: (i)
tenant representation for corporations and professional services
firms; (ii) investment banking services to address the
financing, acquisition and disposition needs of real estate
owners; and (iii) land acquisition and development services for
owners, users and developers of land. The Investment Management
segment provides real estate investment management services to
institutional investors, corporations and high net worth
individuals.
Total revenue by industry segment includes revenue derived from
services provided to other segments. Operating income represent
total revenue less direct and indirect allocable expenses. The
Partnerships allocate all expenses, other than interest and
income taxes, as substantially all expenses incurred benefit one
or more of the segments. Identifiable assets by segment are
those assets that are used by or are a result of each segments'
business. Corporate assets are principally cash and cash
equivalents, office furniture and leasehold improvements.
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands)
Summarized financial information by business segment for 1994,
1995 and 1996 is as follows:
<TABLE>
1994 1995 1996
-------------- ------------ -----------
Management Services:
<S> <C> <C> <C>
Revenue $ 52,457 $ 61,782 $ 71,669
Intersegment sales 160 1,370 200
------------
---------------- ------------
Total Revenue 52,617 63,152 71,869
================ ============ ============
Operating income 5,274 11,091 10,732
================ ============ ============
Depreciation and amortization 1,076 1,202 1,651
Identifiable assets 21,193 20,154
Corporate and Financial Services:
Revenue $ 35,084 $ 37,303 $ 45,706
Intersegment sales - - 1,000
---------------- ------------ ------------
Total Revenue 35,084 37,303 46,706
================ ============ ============
Operating income 6,776 7,809 10,820
================ ============ ============
Depreciation and amortization 845 890 1,055
Identifiable assets 37,977 46,292
Investment Management:
Revenue $ 39,377 $ 52,742 $ 58,592
Intersegment sales - - -
---------------- ------------ ------------
Total Revenue 39,377 52,742 58,592
================ ============ ============
Operating income 5,965 1,216 5,349
================ ============ ============
Depreciation and amortization 930 2,148 2,710
Identifiable assets 26,898 53,337
---------------- ------------ ------------
Total Segment Operating Income $ 18,015 $ 20,116 $ 26,901
================ ============ ============
</TABLE>
The Partnerships maintain operations and provide services outside of the
United States. International revenue aggregated $4,311, $5,164 and $7,676
in 1994, 1995 and 1996, respectively. Identifiable assets of such
operations aggregated $5,827 and $26,702 at December 31, 1995 and 1996,
respectively.
(6) Investments in Real Estate Ventures
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands)
The Partnerships have invested in certain real estate ventures
which own and operate commercial real estate. These investments
include noncontrolling general and limited partnership ownership
interests ranging from less than 1% to 49.5% of the respective
ventures. The Partnerships have made initial capital
contributions to the ventures. The Partnerships have remaining
commitments to certain ventures for additional capital
contributions of approximately $2,300 as of December 31, 1996.
Substantially all venture interests are held by corporate
subsidiaries of the Partnerships. Accordingly, the Partnerships'
exposure to liabilities and losses of the ventures is limited to
its initial and remaining commitments.
Such investments have been accounted for under the equity method
of accounting in the accompanying combined financial statements.
As such, the Partnerships recognize their share of the
underlying profits and losses of the ventures as revenue in the
accompanying Combined Statements of Earnings. The Partnerships
generally are entitled to operating distributions in accordance
with their respective ownership interests.
Summarized combined financial information for the unconsolidated
ventures is presented below:
1994 1995 1996
---- ---- ----
Balance Sheet:
Investments in real estate $ 759,714 $1,043,074
Total assets 871,335 1,167,413
========= ==========
Mortgage indebtedness 376,151 67,971
Total liabilities 439,309 617,635
========== ===========
Total equity 432,026 549,778
========== ===========
Investments in unconsolidated
ventures $ 6,302 $ 12,562
========== ===========
Statements of Operations:
Revenues $ 119,664 $ 187,720 $ 212,048
Net earnings 13,235 31,783 35,333
========= ========== ============
Equity in earnings from
unconsolidated ventures $ 1,024 $ 3,130 $ 3,220
========= ========== ============
The Partnerships also have investments which are accounted for using the
cost method which totaled $1,084 and $1,125 at December 31, 1995 and 1996,
respectively (note 2). Certain of the Partnerships' capital contributions
to the ventures are represented by notes payable which totaled $515 and
$1,008 at December 31, 1995 and 1996, respectively. Such notes are
generally interest bearing and mature in 2000.
(7) Debt
Credit Facilities
In September 1996, the Partnerships replaced their $30 million
revolving line of credit ($4,900 outstanding at December 31,
1995), due annually on April 30, with a $70 million credit
agreement, terminating on September 6, 1999. The agreement
consists of a short-term and long-term facility totaling $30
million and $40 million, respectively. The credit agreement is
secured by certain of the Partnerships' receivables, fixed
assets and investments in ventures. The Partnerships must
maintain a certain level of combined net worth, earnings before
interest, taxes, depreciation and amortization, and are
prohibited, without the lenders' prior approval, from incurring
certain indebtedness (including certain levels of indebtedness
in connection with co-investments), guaranteeing certain
obligations, or disposing of a significant portion of their
assets. The facilities bear variable rates of interest based on
market rates.
The short-term facility is a revolving line of credit which must
be paid down annually for a 30 consecutive day period and is
restricted as to use for general business purposes. Amounts
outstanding on the short-term facility at December 31, 1996
aggregated $6,500.
The long-term facility is limited in use to fund investments in
real estate ventures, business acquisitions and certain capital
expenditures, subject to lender approval. Principal payments on
borrowings under the long-term facility are payable annually on
June 15 for amounts outstanding as of March 31 based on a
defined amortization schedule. Principal payments made on June
15 of each year increase the available balance on the facility
from which to borrow. Amounts outstanding on the long-term
facility at December 31, 1996 aggregated $27,402.
Subordinated Loans
Subordinated loans consist of Class A and Class B unsecured
notes payable to DSA. The amounts outstanding on the Class A and
Class B notes were $37,213 at December 31, 1995 and 1996.
Interest is payable annually on December 31 at a rate of 10%.
Aggregate principal payments related to long-term debt due in
each of the next five years ending December 31 are as follows:
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands)
Credit Facility Subordinated Total
1997 $ 5,957 3,107 $ 9,064
1998 5,617 3,106 8,723
1999 5,192 3,100 8,292
2000 5,107 3,100 8,207
2001 3,843 3,100 6,943
Thereafter 1,686 21,700 23,386
--------- ------- -------
$ 27,402 37,213 $ 64,615
========= ======= =========
The credit facility is subject to renewal in September 1 99. In
the event the lender does not renew the credit facility, all
amounts outstanding will be due on that date. The above payment
table assumes the facility will be renewed.
(8) Leases
The Partnerships lease office space in various buildings for its
own use with remaining lease terms ranging from one to ten
years. The terms of these operating leases provide for the
Partnerships to pay base rent and a share of increases in
operating expenses and real estate taxes in excess of defined
amounts.
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands)
Minimum future lease payments (i.e., base rent) due in each of
the next five years ending December 31 are as follows:
Amount
1997 $ 3,940
1998 3,384
1999 3,308
2000 3,203
2001 2,964
Thereafter 11,866
----------
$ 28,665
Rent expense was $4,825, $5,597 and $6,117 during 1994, 1995 and
1996, respectively. Of these amounts, $2,726, $2,560 and $218
were paid to affiliates during 1994, 1995 and 1996,
respectively.
In anticipation of the expiration of one of its leases on July
31, 1997, the Partnerships executed a lease to relocate its
corporate headquarters in February 1996. The present value of
the net lease obligation from the date of the move through the
end of the current lease term was accrued during 1994 when the
Partnerships committed to the relocation plan. Such accrual,
aggregating $3,503, is being amortized as paid over the
remaining lease term. The lease payments related to this period
have not been included in the schedule of minimum future lease
payments.
(9) Compensation and Employee Benefits
Compensation
Compensation for all professional employees consists of a
combination of a salary and target bonus, which is established
on an individual basis at the beginning of the employees'
compensation year. Actual bonuses are based on individuals
meeting stated objectives and other subjective criteria. These
amounts may vary in a year when the operating results of the
Partnerships are significantly above or below the year's
business plan. Prior to 1996, the general partners of DEL shared
in a compensation pool which was calculated as a percentage of
net earnings before interest expense on the subordinated notes
of the Partnerships, amortization of intangible assets and other
adjustments as defined in the partnership agreements. Effective
January 1, 1996, those individuals are compensated consistent
with the compensation program for all professional employees of
the Partnerships.
Effective January 1, 1996, the Partnerships implemented an
Employee Ownership Program ("Program") which allows employees
meeting certain criteria to receive a portion of their
compensation in ownership interests in DEL. The Partnerships are
required to reimburse DEL for the value of such ownership
interests.
The accompanying Combined Statements of Earnings for the years
ended December 31, 1994, 1995 and 1996 include bonus expense of
$18,184, $19,419 and $26,683, respectively, of which $4,584
related to the Program in 1996.
Retirement Plan
The Partnerships have a qualified profit sharing plan which
incorporates IRC Section 401(k) for their eligible employees.
Contributions under the qualified profit sharing plan are made
via a combination of employer match and an annual contribution
on behalf of eligible employees. Included in the accompanying
Combined Statements of Earnings for the years ended December 31,
1994, 1995 and 1996 are contributions of $598, $689 and $1,009,
respectively.
Related trust assets of the Plan are managed by trustees and are
excluded from the accompanying combined financial statements.
(10) Transactions with Affiliates
Certain partners of DEL have an ownership interest in Diverse
Real Estate Holdings Limited Partnership ("Diverse"). Diverse
has an ownership interest in and operates investment assets,
primarily as the managing general partner of real estate
ventures. Included in the accompanying Combined Balance Sheets
is a long term receivable, net of allowance, from Diverse
totaling $3,413 and $2,413 at December 31, 1995 and 1996,
respectively. A provision for the estimated uncollectible
portion of the receivable was recorded in the amount of $1,900
and is included in the accompanying Combined Statements of
Earnings for 1995.
Certain officers of the Partnerships are trustees for real
estate funds which were organized by a subsidiary. The
Partnerships earn advisory and management fees for services
rendered to the funds. Included in the accompanying combined
financial statements are revenues of $15,084, $10,502 and
$11,635 for 1994, 1995 and 1996, respectively, as well as
receivables of $1,247 and $1,793 at December 31, 1995 and 1996,
respectively, related to such services.
The Partnerships also earn fees and commissions for services
rendered to other affiliates. These affiliates include DSA and
its affiliates, real estate ventures in which the Partnerships
have an equity interest, and ventures in which Diverse has an
ownership interest. Included in the accompanying combined
financial statements are fees and commission revenues from such
affiliates of $16,189, $17,310 and $17,537 for 1994, 1995 and
1996, respectively, as well as receivables for reimbursable
expenses, fees and commissions as of December 31, 1995 and 1996
of $10,182 and $5,245, respectively.
In accordance with the partnership agreements, the Partnerships
provide certain administrative services to DEL for which they
are not reimbursed.
(11) Commitments and Contingencies
The Partnerships are defendants in various litigation matters
arising in the ordinary course of business, some of which
involve claims for damages that are substantial in amount. Most
of these litigation matters are covered by insurance. In the
opinion of management, the ultimate resolution of such
litigation matters will not have a material adverse effect on
the financial position, results of operation or liquidity of the
Company.
(12) Subsequent Event
On April 22, 1997, The Galbreath Company, a property management,
facility management and development management company, merged
with the Partnerships.
Independent Auditors' Report
The Board of Directors
LaSalle Partners Incorporated:
We have audited the accompanying balance sheet of LaSalle Partners
Incorporated as of April 22, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement 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 balance sheet is free of
material misstatement. An audit of a balance sheet includes examining, on a
test basis, evidence supporting the amounts and disclosures in that balance
sheet. An audit of a balance sheet also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe that our
audit of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of LaSalle Partners Incorporated
as of April 22, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
April 22, 1997
LASALLE PARTNERS INCORPORATED
Balance Sheet
APRIL 22, 1997
ASSETS
Cash $ 100
========
STOCKHOLDER'S EQUITY
Stockholder's equity:
Common Stock, $.01 par value; 10,000,000 shares
authorized; 10 shares issued and outstanding $ --
Additional paid-in capital 100
----------
Total stockholder's equity $ 100
==========
See accompanying notes to Balance Sheet
LASALLE PARTNERS INCORPORATED
NOTES TO BALANCE SHEET
APRIL 22,1997
(1) Organization
LaSalle Partners Incorporated was incorporated under the General
Corporation Laws of Maryland on April 15, 1997. The authorized capital
stock of the Company consists of 10,000,000 shares of Common Stock, $.01
par value per share. The Company expects to amend its Articles of
Incorporation to authorize capital stock of the Company consisting of
100,000,000 shares of Common Stock, $.01 par value per share and 10,000,000
shares of Preferred Stock, $.01 par value per share. Each outstanding share
of Common Stock will entitle the holder to one vote for each share on all
matters voted on by stockholders, including the election of Directors.
In the event the Offering is not completed, offering costs
incurred will be borne by LaSalle Partners Limited Partnership and
subsidiaries and LaSalle Partners Management Limited Partnership and
subsidiaries on behalf of the Company.
(2) Subsequent Events (Unaudited)
The Company expects to issue additional shares of Common Stock
in the Company through a public offering (the "Offering"). In connection
with the Offering, the Predecessor Partnerships, DEL-LPL Limited
Partnership and DEL-LPAML Limited Partnership (the "Employee
Partnerships"), DEL/LaSalle Finance Company, L.L.C. ("DEL/LaSalle") and
DSA, will contribute all of their respective general and limited
partnership interests in the Predecessor Partnerships to the Company in
exchange for shares of Common Stock. The Predecessor Partnerships will then
contribute, among other things, substantially all of their respective
assets and liabilities (the "Asset Contributions") relating to Investment
Management Services to LaSalle Advisors Capital Management, Inc. ("LACM")
in exchange for all of the outstanding shares of common stock of LACM,
Corporate and Financial Services to LaSalle Partners Corporate & Financial
Services, Inc. ("LPCFS") in exchange for all of the outstanding shares of
LPCFS, and Management Services to LaSalle Partners Management Services,
Inc. ("LPMS") in exchange for all of the outstanding shares of LPMS.
Following the Asset Contributions, the Predecessor Partnerships will
distribute the common stock of LACM, LPCFS and LPMS to the Company and
dissolve.
The Company expects to establish an Option and Stock Incentive
Plan as described under the caption "Management."
LA SALLE PARTNERS
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the Offering are as
follows:
Expenses Amount
SEC Registration Fee....................................... $27,879
NASD Fee................................................... 9,700
New York Stock Exchange Fee................................
Printing Expenses..........................................
Legal Fees and Expenses....................................
Transfer Agent and Registrar Fees..........................
Accounting Fees and Expenses...............................
Miscellaneous Expenses.....................................
Total........................................... _______
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Restated Articles of Incorporation will relieve the
Company's directors from monetary damages to the Company or its
stockholders for breach of such director's fiduciary duty as directors.
Section 2-418 of the MGCL empowers the Company to indemnify, subject to the
standards contained therein, any person in connection with any action, suit
or proceeding brought or threatened by reason of the fact that such person
was a director, officer, employee or agent of the Company, or is or was
serving as such with respect to another entity at the request of the
Company. The MGCL also provides that the Company may purchase insurance on
behalf of any such director, officer, employee or agent. The Company's
Restated Articles of Incorporation and Bylaws will provide for the
indemnification of each director and officer of the Company to the fullest
extent permitted by applicable law.
Section 8 of the Underwriting Agreement between the Company and
the Underwriters, a form of which is filed as Exhibit 1.01 hereto, provides
for indemnification by the Company of the Underwriters and each person, if
any, who controls any Underwriter, against certain liabilities and
expenses, as stated therein, including liabilities under the Securities Act
of 1933, as amended.
The Company intends to obtain directors' and officers' liability
insurance ("D&O Insurance") prior to the effective date of the Offering,
and expects to continue to carry D&O Insurance following such date. In
addition, the Company will enter into an indemnification agreement with
each of its directors and certain officers of the Company. The D&O
Insurance and the indemnification agreements will insure the Company's
officers and directors against certain liabilities, including liabilities
under the securities laws. The Company expects that the indemnification
agreements will indemnify and advance expenses to its directors and
officers to the fullest extent permitted by the MGCL.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Immediately prior to the closing of the Offering, each of the
general and limited partners of LaSalle Partners Limited Partnership and
LaSalle Partners Management Limited Partnership will contribute all of
their respective general and limited partnership interests in such
partnerships to the Company in exchange for an aggregate of shares of
Common Stock. The issuances of Common Stock will constitute a "transaction
by any issuer not involving any public offering" and thus will be exempt
from the registration requirements of the Securities Act of 1933 (the
"Act") under Section 4(2) thereof.
ITEM 16. EXHIBITS.
(a) Exhibits.
Exhibit
Number Description
1.01* Form of Underwriting Agreement
2.01* Subscription and Contribution Agreement
3.01* Articles of Incorporation of LaSalle Partners
Incorporated
3.02* Bylaws of LaSalle Partners Incorporated
3.03* Form of Articles of Amendment and Restatement of
LaSalle Partners Incorporated
3.04* Form of Amended and Restated Bylaws of LaSalle
Partners Incorporated
4.01* Form of certificate representing shares of Common
Stock
5.01* Opinion and consent of Skadden, Arps, Slate,
Meagher & Flom (Illinois)
10.01* Credit Agreement, dated as of September 6, 1996, by
and among LaSalle Partners Management Limited
Partnership ("LPML), LaSalle Partners Limited
Partnership ("LPL") and Harris Trust and Savings
Bank ("Harris")
10.02* Security Agreement, dated as of September 6, 1996,
by and among LPL, LPML and Harris
10.03* Supporting Subsidiary Security Agreement, dated as
of September 6, 1996, by and among certain
subsidiaries named therein and Harris
10.04* Pledge and Security Agreement, dated as of
September 6, 1996, by and among LPL, LPML and
Harris
10.05* Collateral Assignment of Partnership Interests,
dated as of September 6, 1996, by and among LPL,
LPML and Harris
10.06* Subsidiary Collateral Assignment of Partnership
Interests, dated as of September 6, 1996, by and
among certain subsidiaries named therein and Harris
10.07* Guaranty Agreement, dated as of September 6, 1996,
by and among certain subsidiaries or affiliates of
LPL or LPML and Harris
10.08* Security Agreement, dated as of August 27, 1996, by
and between LPL and DSA-LSPL, Inc. ("DSA-LSPL")
10.09* Security Agreement, dated as of August 27, 1996, by
and between LPML and DSA-LSAM, Inc. ("DSA-LSAM")
10.10* Security Agreement, dated as of August 27, 1996, by
and between LaSalle Construction Limited
Partnership, DSA-LSPL and DSA-LSAM
10.11* Subsidiary Security Agreement, dated as of August
27, 1996, by and among certain subsidiaries which
are signatories thereto, DSA-LSPL and DSA-LSAM
10.12* Second Amended and Restated Class A Subordinate
Promissory Note, dated as of August 27, 1996, from
LPL to DSA-LSPL
10.13* Second Amended and Restated Class A Subordinate
Promissory Note, dated as of August 27, 1996, from
LPML to DSA-LSAM
10.14* Amended and Restated Class B Subordinate Promissory
Note, dated as of August 27, 1996, from LPL to
DSA-LSPL
10.15* Amended and Restated Class B Subordinate Promissory
Note, dated as of August 27, 1996, from LPML to
DSA-LSAM
10.16* Contribution and Exchange Agreement, dated as of
April 21, 1997, by and among DEL-LPL Limited
Partnership, DEL-LPAML Limited Partnership, LPL,
LPML, The Galbreath Company ("Galbreath"),
Galbreath Company of California, Inc., Galbreath
Holdings, L.L.C. and the stockholders of Galbreath
10.17* Agreement for the sale and purchase of shares in
CIN Property Management Limited, dated October 8,
1996, by and between British Coal Corporation and
LaSalle Partners International
10.18* Asset Purchase Agreement, dated as of December 31,
1996, by and between LaSalle Construction Limited
Partnership, LPL, Clune Construction Company, L.P.
and Michael T. Clune
10.19* 1997 Stock Incentive Plan
10.20* Registration Rights Agreement
10.21* Form of Indemnification Agreement
11.01* Computation of Pro Forma Net Income Per Share
21.01* List of Subsidiaries
23.01 Consent of KPMG Peat Marwick LLP, independent auditors
23.02* Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois) (included in Exhibit 5.01)
23.03* Consent of Piper & Marbury L.L.P.
24.01** Power of Attorney
27.01 Financial Data Schedule
- ---------------------
* To be filed by Amendment
** Previously filed
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions, are
not applicable or the information has been provided in the Financial
Statements, or the notes thereto, included in this Registration Statement.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense in any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under
the Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago, State of Illinois, on May 8, 1997.
LASALLE PARTNERS INCORPORATED
By: *
----------------------------
Stuart L. Scott
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement to be signed by the following
persons in the capacities indicated on the dates indicated.
SIGNATURE TITLE DATE
* Chairman of the May 8, 1997
_________________ Board of Directors
Stuart L. Scott and Chief Executive
Officer (Principal
Executive Officer)
* President, Chief May 8, 1997
__________________ Operating Officer
Robert C. Spoerri and Director
* Executive Vice May 8, 1997
__________________ President, Chief
William E. Sullivan Financial Officer
and Director
(Principal
Financial Officer and
Principal
Accounting Officer)
* Co-President - May 8, 1997
___________________ LaSalle Advisors
Daniel W. Cummings Capital Management, Inc.
and Director
* President and Chief May 8, 1997
___________________ Executive Officer - LaSalle
Charles K. Esler Partners Management Services,
Inc. and Director
* President, Tenant May 8, 1997
____________________ Representation Division -
M. G. Rose LaSalle Partners
Management Services,
Inc. and Director
* Co-President - May 8, 1997
____________________ LaSalle Advisors Capital
Lynn C. Thurber Management, Inc. and
Director
* Managing Director, May 8, 1997
____________________ Investment Banking
Earl E. Webb Division, LaSalle
Partners
Corporate & Financial
Services, Inc.
and Director
* Chairman, LaSalle May 8, 1997
____________________ Partners Management Services,
Lizanne Galbreath Inc. and Director
* By /s/ William E. Sullivan
________________________
William E. Sullivan
Attorney-in-Fact
EXHIBIT INDEX
Exhibit Sequential
Number Description Page Number
1.01* Form of Underwriting Agreement
2.01* Subscription and Contribution Agreement
3.01* Articles of Incorporation
of LaSalle Partners Incorporated
3.02* Bylaws of LaSalle Partners Incorporated
3.03* Form of Articles of Amendment and
Restatement of LaSalle Partners
Incorporated
3.04* Form of Amended and
Restated Bylaws of LaSalle Partners
Incorporated
4.01* Form of certificate
representing shares of Common
Stock
5.01* Opinion and consent of
Skadden, Arps, Slate,
Meagher & Flom
(Illinois)
10.01* Credit Agreement, dated as
of September 6, 1996,
by and among LaSalle
Partners Management Limited
Partnership ("LPML),
LaSalle Partners Limited
Partnership ("LPL") and
Harris Trust and Savings Bank
("Harris")
10.02* Security Agreement, dated as
of September 6, 1996,
by and among LPL,
LPML and Harris
10.03* Supporting Subsidiary Security
Agreement, dated as of September 6, 1996, by
and among certain subsidiaries named
therein and Harris
10.04* Pledge and Security
Agreement, dated as of
September 6, 1996, by
and among LPL,
LPML and Harris
10.05* Collateral Assignment of
Partnership Interests, dated as
of September 6, 1996,
by and among LPL,
LPML and Harris
10.06* Subsidiary Collateral
Assignment of Partnership
Interests, dated as of
September 6, 1996, by
and among certain subsidiaries
named therein and Harris
10.07* Guaranty Agreement, dated as
of September 6, 1996,
by and among certain subsidiaries
or affiliates of LPL or
LPML and Harris
10.08* Security Agreement, dated as
of August 27,
1996, by and between LPL and
DSA-LSPL, Inc.
("DSA-LSPL")
10.09* Security Agreement, dated as
of August 27,
1996, by and between LPML and
DSA-LSAM, Inc.
("DSA-LSAM")
10.10* Security Agreement, dated as
of August 27,
1996, by and between LaSalle
Construction Limited
Partnership, DSA-LSPL
and DSA-LSAM
10.11* Subsidiary Security Agreement,
dated as of August 27,
1996, by and among
certain subsidiaries which are
signatories thereto,
DSA-LSPL and DSA-LSAM
10.12* Second Amended and Restated
Class A Subordinate
Promissory Note, dated as of
August 27, 1996,
from LPL to
DSA-LSPL
10.13* Second Amended and Restated
Class A Subordinate
Promissory Note, dated as
of August 27,
1996, from LPML
to DSA-LSAM
10.14* Amended and Restated Class B
Subordinate Promissory
Note, dated as of August
27, 1996, from
LPL to DSA-LSPL
10.15* Amended and Restated Class B
Subordinate Promissory
Note, dated as of August
27, 1996, from
LPML to DSA-LSAM
10.16* Contribution and Exchange
Agreement, dated as of
April 21, 1997,
by and among
DEL-LPL Limited Partnership,
DEL-LPAML Limited
Partnership, LPL,
LPML, The Galbreath
Company ("Galbreath"),
Galbreath Company of
California, Inc.,
Galbreath Holdings,
L.L.C. and the
stockholders of Galbreath
10.17* Agreement for the sale and
purchase of shares in CIN
Property Management
Limited, dated October 8,
1996, by and between
British Coal Corporation
and LaSalle Partners
International
10.18* Asset Purchase Agreement,
dated as of December 31,
1996, by and between
LaSalle Construction Limited
Partnership, LPL, Clune
Construction Company,
L.P. and Michael T. Clune
10.19* 1997 Stock Incentive Plan
10.20* Registration Rights Agreement
10.21* Form of Indemnification Agreement
11.01* Computation of Pro
Forma Net Income Per Share
21.01* List of Subsidiaries
23.01 Consent of KPMG Peat
Marwick LLP, independent
auditors
23.02* Consent of Skadden, Arps,
Slate, Meagher & Flom
(Illinois) (included in
Exhibit 5.01)
23.03* Consent of Piper &
Marbury L.L.P.
24.01** Power of Attorney
27.01 Financial Data Schedule
- ---------------------
* To be filed by Amendment
** Previously filed
The Board of Directors
LaSalle Partners Incorporated:
We consent to the use of our reports included herein and to the
reference to our firm under the headings "Selected Financial
Data" and "Experts" in the Prospectus.
Chicago, Illinois KPMG Peat Marwick LLP
May 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> The Schedule contains summary financial
information extracted from the Combined Balance
Sheets as of December 31, 1996 of LaSalle Partners
Limited Partnership and Subsidiaries and LaSalle
Partners Management Limited Partnership and
Subsidiaries and the related Combined Statements
of Earnings for the Year Ended December 31, 1996 and
is qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<CASH> 7,207
<SECURITIES> 0
<RECEIVABLES> 87,283
<ALLOWANCES> 2,100
<INVENTORY> 0
<CURRENT-ASSETS> 98,723
<PP&E> 37,859
<DEPRECIATION> 23,310
<TOTAL-ASSETS> 156,614
<CURRENT-LIABILITIES> 75,808
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 156,614
<SALES> 0
<TOTAL-REVENUES> 175,967
<CGS> 0
<TOTAL-COSTS> 148,080
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 986
<INTEREST-EXPENSE> 5,730
<INCOME-PRETAX> 21,171
<INCOME-TAX> 1,207
<INCOME-CONTINUING> 19,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,964
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
