<PAGE> 1
As filed with the Securities and Exchange Commission on December 30, 1997
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 17, 1997
EOP OPERATING LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-13625 36-4156801
(STATE OR OTHER JURISDICTION OF (COMMISSION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
TWO NORTH RIVERSIDE PLAZA, SUITE 2200
CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's telephone number, including area code: (312) 466-3300
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITIONS
As used herein, the term Operating Partnership means either EOP Operating
Limited Partnership, a Delaware limited partnership, alone as an entity or, as
the context may require, the consolidated enterprise consisting of Equity
Office Properties Trust, a Maryland real estate investment trust, and their
subsidiaries. The Operating Partnership acquired 17 office properties and one
parking facility during the period from October 17, 1997 through December 17,
1997. The cash portion of these transactions was financed through the
Operating Partnership's revolving line of credit, the $1.5 billion term loan
credit facility (the "$1.5 billion Credit Facility") and working capital.
Descriptions of the acquired properties are as follows.
ONE LAFAYETTE CENTRE
The Operating Partnership acquired One Lafayette Centre in Washington, D.C.
from an unaffiliated party for approximately $81.7 million on October 17, 1997.
The acquisition was paid for with a combination of approximately $51.9 million
in cash, the assumption of $5.4 million of other liabilities and $24.4 million
in units of partnership interest in the Operating Partnership ("Units") at
$32.975 per Unit.
The 10-story building contains approximately 314,634 square feet of combined
office and retail space. The property was approximately 99.1% leased as of
November 30, 1997.
ACORN PROPERTIES
The Operating Partnership acquired an 89% managing general partner interest in
two office properties in suburban Philadelphia, Pennsylvania from an
unaffiliated party for approximately $17.2 million on November 21, 1997. The
acquisition was paid for with a combination of approximately $10.2 million in
cash, $4.1 million in Units at $28.775 per Unit and the assumption of $2.9
million in liabilities.
The two office properties are One Valley Square, containing approximately
70,289 square feet, and Three Valley Square, containing approximately
84,605 square feet. These properties were 100% and 97.7% leased as of November
30, 1997, respectively.
PPM PROPERTIES
The Operating Partnership acquired three office properties, two of which are in
Virginia and one of which is in Texas, from an unaffiliated party for
approximately $91.9 million in cash on November 24, 1997.
The three properties are Lakeside Square, containing approximately 392,537
square-feet in Dallas, Texas; Fair Oaks Plaza, containing approximately
177,917 square-feet in Fairfax, Virginia; and 1600 Duke Street, containing
approximately 68,770 square-feet in Alexandria, Virginia. These buildings
were 97% leased on a weighted average basis as of November 30, 1997.
LA SALLE OFFICE PLAZA
The Operating Partnership acquired LaSalle Office Plaza, located in the central
business district of Minneapolis, Minnesota, from an unaffiliated party on
November 23, 1997 for approximately $97.4 million in cash.
The property is a 30 story office building containing approximately 589,432
square feet and was approximately 97.1% leased as of November 30, 1997.
2
<PAGE> 3
STANWIX PARKING FACILITY
The Operating Partnership acquired the Stanwix Parking Facility located in
Pittsburgh, Pennsylvania from an unaffiliated party on November 25, 1997 for
approximately $17.3 million in cash.
The parking facility contains approximately 712 parking spaces, 45,780
square feet of office space, 80 residential units and 9,000 square feet
of retail space.
WRIGHT RUNSTAD PROPERTIES
The Operating Partnership has acquired one hundred percent ("100%") of the
equity interests in ten office properties located in Seattle and Bellevue,
Washington; Portland, Oregon; and Anchorage, Alaska, on December 17, 1997
pursuant to a contribution agreement by and among Wright Runstad Holdings,
L.P., Wright Runstad Asset Management, L.P. and Mellon Bank, N.A., as Trustee
for First Plaza Group Trust ("First Plaza"), as Contributors, and the Operating
Partnership. The purchase price was approximately $625.0 million, including
approximately $15 million in transaction related fees and expenses. The total
consideration included the assumption of approximately $240.0 million of
existing debt, $208.9 million in cash, $76.1 million in Units at $29.11 per
Unit and $100.0 million in Equity Office Properties Trust restricted common
shares of beneficial interest, $0.01 par value per share ("Common Shares") at
$29.11 per Common Share. In addition, five-year warrants to purchase an
aggregate of five million Common Shares were issued at an exercise price of
$39.375 per Common Share. In addition, the Operating Partnership acquired a
30% non-controlling interest in Wright Runstad Asset Limited Partnership
("WRALP") for $16.0 million in cash and $4.0 million in Units and agreed to
provide up to $20 million in additional financing or credit support for future
development activities of WRALP.
The ten office properties are comprised of First Interstate Center, a 48 story
office building in downtown Seattle, containing approximately 915,883
square-feet which was approximately 97.5% occupied as of December 15, 1997;
Second and Seneca Building, a 22 story office building and an adjacent 4 story
office building in downtown Seattle containing approximately 480,272
square-feet which was approximately 99.1% occupied as of December 15, 1997;
1111 Third Avenue, a 34 story office building in Seattle containing
approximately 528,282 square-feet which was approximately 99.2% occupied as of
December 15, 1997; Nordstom Medical Tower, an 11 story medical office facility
in Seattle which contains approximately 101,431 square-feet which was
approximately 93.9% occupied as of December 15, 1997; Rainier Plaza, a 25
story office building in Bellevue, Washington containing approximately 410,855
square-feet which was approximately 99.9% occupied as of December 15, 1997;
One Bellevue Center, a 22 story office building in Bellevue containing
approximately 344,715 square-feet which was approximately 98.6% occupied as of
December 15, 1997; 1001 Fifth Avenue, a 23 story office building in Portland,
Oregon, containing approximately 368,018 square-feet which was approximately
95.7% occupied as of December 15, 1997; and Calais Office Towers I & II,
comprised of an eight and five story office building in Anchorage, Alaska,
containing approximately 190,599 square-feet which was approximately 99.9%
occupied as of December 15, 1997.
Thomas E. Dobrowski, a Trustee of the Operating Partnership, is the managing
director of real estate and alternative investments of General Motors
Investment Management Corporation, an investment advisor to several pension
funds of General Motors Corporation ("GM") and its subsidiaries and to several
clients also controlled by GM, including First Plaza, which received $192.4
million in cash, 3,435,688 Common Shares, and warrants to purchase 3,350,000
Common Shares in exchange for First Plaza's interest in such office
properties.
H. Jon Runstad was elected as a Trustee of the Operating Partnership effective
January 1, 1998. Mr. Runstad received, directly and indirectly, 552,968 Units
in exchange for his interest in the ten office properties and WRALP.
MERGER
On December 19, 1997, the Operating Partnership merged with Beacon
Properties L.P. ("Beacon"). As provided in the merger agreement, each
Beacon operating partnership unit was exchanged for 1.4063 of the
Operating Partnership's Units. The Operating Partnership issued
approximately 93.7 million new Units. In addition, the Operating
Partnership assumed all outstanding Beacon consolidated debt of
approximately $1.168 billion and issued $200 million in Series A
Preferred Units at a one to one ratio for each Beacon preferred unit.
ITEM 5. OTHER EVENTS
The Operating Partnership has issued its commitment to purchase from an
unaffiliated party the Rand Tower Parking Garage in Minneapolis,
Minnesota upon its completion. The garage will include approximately 589
parking spaces and will cost approximately $19.3 million. The Operating
Partnership does not expect the garage to be completed until 1999.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Financial Statements as of and for the nine months
ended September 30, 1997 and for the year ended December 31, 1996.
(b) Financial Statements of acquired real estate properties:
One Lafayette Centre
Acorn Properties
PPM Properties
Wright Runstad Properties
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EOP Operating Limited Partnership
Date: December 30, 1997 By: /s/ Richard D. Kincaid
-------------------------------------------------
Richard D. Kincaid
Executive Vice President, Chief Financial Officer
5
<PAGE> 6
EOP Operating Limited Partnership
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet as
of September 30, 1997 reflects the following transactions which all occurred
subsequent to September 30, 1997: (a) the acquisition of 35 office properties
and one parking facility; (b) the sale of 9.7 million Units; (c) draws on the
$1.5 billion Credit Facility to fund acquisitions and repay mortgage
indebtedness; and (d) the acquisition of a 50% interest in the mortgage note
securing the 1325 Avenue of the Americas property acquired in November 1997.
The accompanying Unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended September 30, 1997 reflects the following
transactions as if they had occurred on January 1, 1997: (a) the acquisition of
46 office properties and seven parking facilities, including an interest in
four parking facilities, acquired between January 1, 1997 and December 17,
1997, and the disposition of two office properties; (b) the $180 million
private debt offering which occurred on September 3, 1997; (c)the
transactions that occurred in connection with the consolidation of the entities
which comprise the predecessors ("Equity Office Predecessors") of the
Operating Partnership (the "Consolidation") and the initial public
offering (the "Offering"), which closed on July 11, 1997, and the decrease in
interest expense resulting from the use of the net proceeds for the repayment
of mortgage debt; (d) the net change in interest expense from draws on the
$1.5 billion Credit Facility used to refinance existing mortgage debt; and (e)
interest income from the 50% interest in the mortgage note securing the 1325
Avenue of the Americas property.
The accompanying Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1996 reflects the following
transactions as if they had occurred on January 1, 1996: (a) the acquisition of
57 office properties and 14 parking facilities, including an interest in four
parking facilities, acquired between January 1, 1996 and December 17, 1997 and
the disposition of two office properties; (b) the $180 million private debt
offering which occurred on September 3, 1997; (c) the Consolidation and the
Offering, and the decrease in interest expense resulting from the use of the
net proceeds for the repayment of mortgage debt; (d) the net change in interest
expense from draws on the $1.5 billion Credit Facility used to refinance
existing mortgage debt; and (e) interest income from the 50% interest in the
mortgage note securing the 1325 Avenue of the Americas property.
On December 19, 1997, the Operating Partnership merged with Beacon
Properties L.P. ("Beacon"). As provided in the merger agreement, each Beacon
operating partnership unit was exchanged for 1.4063 of the Operating
Partnership's Units. The Operating Partnership issued approximately 93.7
million new Units. In addition, the Operating Partnership assumed all
outstanding Beacon consolidated debt of approximately $1.168 billion and
issued $200 million in Series A Preferred Units at a one to one ratio for each
Beacon preferred unit. The accompanying unaudited proforma condensed combined
financial statements do not reflect the merger of the Operating Partnership and
Beacon.
The accompanying unaudited pro forma condensed combined financial
statements have been prepared by management of the Operating Partnership and
do not purport to be indicative of the results which would actually have been
obtained had the transactions described above been completed on the dates
indicated or which may be obtained in the future. The pro forma condensed
combined financial statements should be read in conjunction with the
accompanying notes to the pro forma condensed combined financial statements, as
of and for the nine month period ended September 30, 1997 and the year ended
December 31, 1996, and the statements of revenue and certain expenses for
certain of the properties acquired by the Operating Partnership, all included
elsewhere herein.
<PAGE> 7
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
EOP OPERATING
LIMITED PARTNERSHIP ACQUIRED PROPERTIES ACQUIRED PROPERTIES
--------------------------------------------------------------
ASSETS (A) (B)
<S> <C> <C> <C>
INVESTMENT IN REAL ESTATE, NET $ 5,000,159 $ 997,301 $ 945,506
CASH AND CASH EQUIVALENTS 132,649 (871,814) (497,610)
RENTS AND OTHER RECEIVABLES 16,190 - -
ESCROW DEPOSITS AND RESTRICTED CASH 42,966 - -
INVESTMENT IN MORTGAGE NOTES - - -
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 93,826 - 20,000
OTHER ASSETS 70,132 - -
---------------------------------------------------------
TOTAL ASSETS $ 5,355,922 $ 125,487 $ 467,896
=========================================================
LIABILITIES AND PARTNERS' CAPITAL
MORTGAGE DEBT $ 1,325,333 $ 14,749 $ 242,925
UNSECURED NOTES 180,000 - -
LINE OF CREDIT 211,125 - -
DISTRIBUTION PAYABLE 42,964 - -
OTHER LIABILITIES 132,748 25,301 5,331
---------------------------------------------------------
TOTAL LIABILITIES 1,892,170 40,050 248,256
MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES 28,118 - -
PARTNERS' CAPITAL 3,435,634 85,437 219,640
---------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 5,355,922 $ 125,487 $ 467,896
=========================================================
</TABLE>
<TABLE>
<CAPTION>
EOP OPERATING
OTHER ACTIVITY LIMITED PARTNERSHIP
----------------------------------------
ASSETS
<S> <C> <C>
INVESTMENT IN REAL ESTATE, NET $ - $ 6,942,966
CASH AND CASH EQUIVALENTS 1,241,168 (C) 4,393
RENTS AND OTHER RECEIVABLES - 16,190
ESCROW DEPOSITS AND RESTRICTED CASH - 42,966
INVESTMENT IN MORTGAGE NOTES 25,150 (D) 25,150
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - 113,826
OTHER ASSETS 4,875 (E) 75,007
-------------------------------------
TOTAL ASSETS $ 1,271,193 $ 7,220,498
=====================================
LIABILITIES AND PARTNERS' CAPITAL
MORTGAGE DEBT $ (233,921) (F) $ 1,349,086
UNSECURED NOTES - 180,000
LINE OF CREDIT 1,232,574 (G) 1,443,699
DISTRIBUTION PAYABLE - 42,964
OTHER LIABILITIES - 163,380
-------------------------------------
TOTAL LIABILITIES 998,653 3,179,129
MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES - 28,118
PARTNERS' CAPITAL 272,540(H) 4,013,251
-------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,271,193 $ 7,220,498
=====================================
</TABLE>
<PAGE> 8
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATION
EOP OPERATING 1997 ACQUIRED AND OFFERING
LIMITED PARTNERSHIP PROPERTIES DISPOSITIONS FINANCING ACTIVITY ADJUSTMENTS
------------------- ------------- ------------ ------------------ -------------
(I) (J) (K)
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental $ 381,108 $ 101,215 $ (2,558) $ - $ 8,983 (O)
Tenant reimbursements 66,855 31,698 (62) - -
Parking 33,744 6,662 (573) - -
Other 7,600 2,356 (26) - -
Fees from noncombined affiliates 3,841 - - - -
Interest 10,524 65 - 2,188(L) -
---------- ---------- ---------- ---------------- ----------
Total revenues 503,672 141,996 (3,219) 2,188 8,983
---------- ---------- ---------- ---------------- ----------
EXPENSES:
Property operating 190,170 56,618 (1,595) - -
Interest 110,419 34,160 (36) 12,761(M) (25,343)(P)
Depreciation 80,166 22,882 - - 1,205 (Q)
Amortization 5,884 - (54) 4,141(N) (1,699)(R)
General and administrative 23,056 - - - 1,800 (S)
---------- ---------- ---------- ---------------- ----------
409,695 113,660 (1,685) 16,902 (24,037)
---------- ---------- ---------- ---------------- ----------
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
gain on sales of real estate and
extraordinary items 93,977 28,336 (1,534) (14,714) 33,020
Minority interests in
partially owned properties (1,191) - - - (42)
Income from investment in
unconsolidated joint ventures 3,408 1,023 - - -
Gain on sales of real estate 12,510 - (12,510) - -
---------- ---------- ---------- ---------------- ----------
Income before extraordinary items 108,704 29,359 (14,044) (14,714) 32,978
Extraordinary items (13,204) - 275 -
---------- ---------- ---------- ---------------- ----------
Net income $ 95,500 $ 29,359 $ (13,769) $ (14,714) $ 32,978
========== ========== ========== ================ ==========
Net income per Unit
Weighted Average Units
Outstanding
</TABLE>
<TABLE>
<CAPTION>
EOP OPERATING
GROUP A LIMITED PARTNERSHIP
PROPERTIES PRO FORMA
------------ -------------
(J)
<S> <C> <C>
REVENUES:
Rental $ 67,918 $ 556,666
Tenant reimbursements 10,050 108,541
Parking 8,452 48,285
Other 657 10,587
Fees from noncombined affiliates - 3,841
Interest - 12,777
---------- -------------
Total revenues 87,077 740,697
---------- -------------
EXPENSES:
Property operating 30,681 275,874
Interest 33,199 165,160
Depreciation 15,955 120,208
Amortization - 8,272
General and administrative - 24,856
---------- -------------
79,835 594,370
---------- -------------
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
gain on sales of real estate and
extraordinary items 7,242 146,327
Operating Partnership
Minority interests in
partially owned properties - (1,233)(T)
Income from investment in
unconsolidated joint ventures 440 4,871
Gain on sales of real estate - -
---------- -------------
Income before extraordinary items 7,682 149,965
Extraordinary items - (12,929)
---------- -------------
Net income $ 7,682 $ 137,036
========== =============
Net income per Unit $ .74 (U)
=============
Weighted Average Units
Outstanding 185,388
=============
</TABLE>
<PAGE> 9
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
EQUITY OFFICE 1996 ACQUIRED 1997 ACQUIRED
PREDECESSORS PROPERTIES PROPERTIES DISPOSITIONS FINANCING ACTIVITY
------------- ------------- -------------- -------------- -------------------
(I) (J) (J) (K)
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental $ 386,481 $ 53,340 $ 153,154 $ (8,303) $ -
Tenant reimbursements 62,036 9,967 39,028 (88) -
Parking 27,253 13,518 10,236 (1,462) -
Other 17,626 1,797 4,855 (99) -
Fees from noncombined affiliates 5,120 - - - -
Interest 9,608 - 249 (7) 2,917 (L)
----------- ------------- ----------- ----------- -------------
508,124 78,622 207,522 (9,959) 2,917
----------- ------------- ----------- ----------- -------------
EXPENSES:
Property operating 201,067 30,971 86,208 (5,046)
Interest 119,595 24,178 56,652 (956) 11,606 (M)
Depreciation 82,905 13,090 37,931 (1,941) -
Amortization 13,332 - - (346) 4,387 (N)
General and administrative 23,145 - - - -
----------- ------------- ----------- ----------- -------------
440,044 68,239 180,791 (8,289) 15,993
----------- ------------- ----------- ----------- -------------
Income before allocation to minority
interests, income from investment in
unconsolidated joint ventures, gain
on sale of real estate and
extraordinary items 68,080 10,383 26,731 (1,670) (13,076)
Minority interests in
partially owned properties (2,086) - - - -
Income from investment in
unconsolidated joint ventures 2,093 - 2,632 - -
Gain on sale of real estate 5,338 - - - -
----------- ------------- ----------- ----------- -------------
Income before extraordinary items 73,425 10,383 29,363 (1,670) (13,076)
Extraordinary items - - - - -
----------- ------------- ----------- ----------- -------------
Net income $ 73,425 $ 10,383 $ 29,363 $ (1,670) $ (13,076)
=========== ============= =========== =========== =============
Net income per Unit
Weighted average Units outstanding
<CAPTION>
CONSOLIDATION
AND OFFERING GROUP A
ADJUSTMENTS PROPERTIES
------------- --------------
(J)
<S> <C> <C>
REVENUES:
Rental $ 16,264 (O) $ 86,102
Tenant reimbursements - 12,767
Parking - 10,664
Other - 1,321
Fees from noncombined affiliates - -
Interest - -
----------- -----------
16,264 110,854
----------- -----------
EXPENSES:
Property operating - 39,453
Interest (43,041) (P) 46,884
Depreciation 7,183 (Q) 21,274
Amortization (8,591) (R) -
General and administrative 2,400 (S) -
----------- -----------
(42,049) 107,611
----------- -----------
Income before allocation to minority
interests, income from investment in
unconsolidated joint ventures, gain
on sale of real estate and
extraordinary items 58,313 3,243
Minority interests in
partially owned properties (56) -
Income from investment in
unconsolidated joint ventures - 586
Gain on sale of real estate - -
----------- -----------
Income before extraordinary items 58,257 3,829
Extraordinary items - -
----------- -----------
Net income $ 58,257 $ 3,829
=========== ===========
Net income per Unit
Weighted average Units outstanding
<CAPTION>
EOP OPERATING
LIMITED PARTNERSHIP
PRO FORMA
-------------------
<S> <C>
REVENUES:
Rental $ 687,038
Tenant reimbursements 123,710
Parking 60,209
Other 25,500
Fees from noncombined affiliates 5,120
Interest 12,767
-------------
914,344
-------------
EXPENSES:
Property operating 352,653
Interest 214,918
Depreciation 160,442
Amortization 8,782
General and administrative 25,545
-------------
762,340
-------------
Income before allocation to minority
interests, income from investment in
unconsolidated joint ventures, gain
on sale of real estate and
extraordinary items 152,004
Minority interests in
partially owned properties (2,142) (T)
Income from investment in
unconsolidated joint ventures 5,311
Gain on sale of real estate 5,338
-------------
Income before extraordinary items 160,511
Extraordinary items -
-------------
$ 160,511
Net income =============
$ .86 (U)
Net income per Unit =============
Weighted average Units outstanding 185,388
=============
</TABLE>
<PAGE> 10
EOP OPERATING LIMITED PARTNERSHIP
NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
A. To reflect the following acquisitions acquired during the period from
October 1, 1997 to October 16, 1997 as previously reported in Equity
Office Properties Trust's Current Report on Form 8-K dated October 1,
1997:
<TABLE>
<CAPTION>
LIABILITIES VALUE OF
PROPERTY NOTE PURCHASE COST CASH PAID ASSUMED UNITS ISSUED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prudential Properties (1) $289,000 $211,950 $ 6,000 $71,050
550 South Hope Street (2) 99,500 99,500 - -
Acorn Properties (3) 127,500 98,364 14,749 14,387
10 & 30 South Wacker Drive (4) 481,301 462,000 19,301 -
-------------------------------------------------------------------------------
Total $997,301 $871,814 $40,050 $85,437
===============================================================================
</TABLE>
(1) These properties were acquired on October 1, 1997, and consist of six
properties.
(2) This property was acquired on October 6, 1997, and consist of one property.
(3) These properties were acquired on October 7, 1997, and consist of nine
properties.
(4) These properties were acquired on October 7, 1997, and consist of
two properties. The purchase price includes approximately $19.3 million
related to real estate tax liability from closing prorations.
B. To reflect the following acquisitions during the period from October 17,
1997 to December 17, 1997, as reported in this Current Report on Form 8-K
dated December 17, 1997:
<TABLE>
<CAPTION>
LIABILITIES VALUE OF
PROPERTY NOTE PURCHASE COST CASH PAID ASSUMED UNITS ISSUED
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Lafayette Centre (1) $ 81,680 $ 51,910 $ 5,330 $ 24,440
Acorn Properties (2) 17,161 10,168 2,926 4,067
PPM Properties (3) 91,940 91,940 - -
LaSalle Office Plaza (4) 97,425 97,425 - -
Stanwix Parking Facility (5) 17,300 17,300 - -
Wright Runstad Properties (6) 640,000 208,867 240,000 191,133
------------------------------------------------------------------------------------
945,506 477,610 248,256 219,640
Investment in Wright Runstad Asset
Limited Partnership 20,000 20,000 - -
------------------------------------------------------------------------------------
Total $965,506 $497,610 $248,256 $219,640
====================================================================================
</TABLE>
(1) This property was acquired on October 17, 1997, and consists of one
property.
(2) These properties were acquired on November 21, 1997, and consist of two
properties.
(3) These properties were acquired on November 24, 1997, and consist of three
properties.
(4) This property was acquired on November 25, 1997, and consists of one
property.
(5) This property was acquired on November 25, 1997, and consists of one
property.
(6) These properties were acquired on December 17, 1997, and consist of ten
properties.
C. To reflect the following transactions:
<TABLE>
<S> <C>
Issuance of 6.7 million Units at $30.00 per Unit which occurred on $ 200,000
October 21, 1997
Issuance of 3.0 million Units at $24.50 per Unit which occurred on 73,950
October 1, 1997
Net proceeds from the $1.5 billion Credit Facility to fund acquisitions
and other activity (see Note G) 972,093
Payment of underwriting fees related to the $1.5 billion Credit
Facility (see Note E) (4,875)
----------
Net cash proceeds $1,241,168
==========
</TABLE>
D. To reflect the investment in the mortgage note securing the 1325 Avenue
of the Americas property made in November, 1997. The Operating
Partnership owns a 50% interest in the mortgage note which bears interest
at LIBOR plus 6%.
E. To reflect the underwriting fee paid by the Operating Partnership
pertaining to the $1.5 billion Credit Facility which was obtained in
October, 1997. The underwriting fee will be amortized to interest expense
over the term of the $1.5 billion Credit Facility, which is nine months.
<PAGE> 11
F. To reflect the mortgage debt repaid from draws on the $1.5 billion Credit
Facility and to write-off the unamortized mark-to-market adjustments for
the following properties recorded at the time of the Consolidation and the
Offering based on the outstanding principal balances as of September 30,
1997:
<TABLE>
<CAPTION>
MATURITY BALANCE AT
PROPERTY INTEREST RATE DATE 9/30/97
--------------------------------------------------------------------------
<S> <C> <C> <C>
1601 Market LIBOR + 1.25% June 30, 2001 $ 24,152
1620 L Street 8.00% Feb. 4, 2000 21,086
9400 NCX LIBOR + 1.65% May 10, 2001 14,218
Bank One Center LIBOR + 1.1% Mar. 19, 1999 83,500
NationsBank 8.00% Dec. 1, 2003 18,855
North Central Plaza LIBOR + 1.75% Aug. 3, 1999 14,930
San Jacinto LIBOR + 1.125% Dec. 13, 1998 18,212
Sterling Plaza LIBOR + 1.75% Dec. 8, 1998 15,628
The Quadrant EURODOLLAR + 2.00% May 31, 1999 18,000
Union Square EURODOLLAR + 2.00% May 31, 1999 6,750
------------
Subtotal 235,331
Less: Write-off of unamortized mark-to-market
adjustments for debt repaid on
San Jacinto, NationsBank and
Bank One Center (1,410)
------------
$ 233,921
============
</TABLE>
G. To record draws on the $1.5 billion Credit Facility for
the following transactions:
<TABLE>
<S> <C>
Draws to fund acquisitions and other activity (see Note C) $ 972,093
Draws to repay mortgage debt (see Note F) 235,331
Draw to fund investment in mortgage note (see Note D) 25,150
------------
$1,232,574
============
</TABLE>
<PAGE> 12
H. To reflect the net increase in partners' capital due to the following
transactions:
<TABLE>
<S> <C>
Units issued after September 30, 1997 (see Note C) $273,950
Write-off unamortized mark-to-market adjustments on mortgage
debt repaid with the $1.5 billion Credit Facility (see
Note F) (1,410)
--------
$272,540
========
</TABLE>
I. Represents the combined historical statements of operations of the
Operating Partnership for the period from July 11, 1997 to September 30,
1997 and Equity Office Predecessors for the period from January 1, 1997 to
July 10, 1997, for the Pro Forma Condensed Combined Statement of Operations
for the nine months ended September 30, 1997 and the historical statement
of operations of Equity Office Predecessors for the Pro Forma Condensed
Combined Statement of Operations for the year ended December 31, 1996.
J. To reflect the operations and the depreciation expense for (a) the pro
forma condensed combined statement of operations for the nine months ended
September 30, 1997; for the period from January 1, 1997 through the
earlier of the date of acquisition or September 30, 1997, as applicable,
for properties acquired in 1997, and (b) the pro forma condensed combined
statement of operations for the year ended December 31, 1996; for the
period from January 1, 1996 through the date of acquisition for properties
acquired in 1996, or December 31, 1996 for the properties acquired in
1997. Interest expense was also adjusted, where applicable, to reflect
nine months and a full year, for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively.
<TABLE>
<CAPTION>
PROPERTY DATE ACQUIRED NOTE REFERENCE
--------------------------------------------------------------------------
<S> <C> <C>
1601 Market Street January 18, 1996 1
Promenade II June 14, 1996 1
Two California Plaza August 23, 1996 1
BP Tower September 4, 1996 1
SunTrust Center September 18, 1996 1
Reston Town Center October 22, 1996 1
One Phoenix Plaza December 4, 1996 1
Colonnade I December 4, 1996 1
Boston Harbor Garage December 10, 1996 1
Milwaukee Center Parking Garage December 18, 1996 1
15th & Sansom Streets Garage December 27, 1996 1
1616 Chancellor Street Garage December 27, 1996 1
Juniper / Locusts Streets Garage December 27, 1996 1
1616 Sansom Street Garage December 27, 1996 1
1111 Sansom Street Garage December 27, 1996 1
177 Broad Street January 29, 1997 2
Biltmore Apartments January 29, 1997 2
Preston Commons March 21, 1997 2
Oakbrook Terrace Tower April 16, 1997 2
50% Interest in Civic
Parking, L.L.C. April 16, 1997 2
One Maritime Plaza April 21, 1997 2
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C>
Smith Barney Tower April 29, 1997 2
201 Mission Street April 30, 1997 2
30 N. LaSalle June 13, 1997 2
Adams - Wabash Parking Facility August 11, 1997 2
Columbus America Properties September 3, 1997 2
Prudential Properties October 1, 1997 2
550 South Hope Street October 6, 1997 2
10 & 30 South Wacker Drive October 7, 1997 2
Acorn Properties October 7, 1997 2
One Lafayette Centre October 17, 1997 3
Acorn Properties November 21, 1997 3
PPM Properties November 24, 1997 3
LaSalle Office Plaza November 25, 1997 3
Stanwix Parking Facility November 25, 1997 3
Wright Runstad Properties December 17, 1997 3
Wright Runstad Asset Limited
Partnership December 17, 1997 3
</TABLE>
Note 1: Included in the Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1996, in the column entitled "1996
Acquired Properties".
Note 2: Included in the Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1996 and for the nine months ended
September 30, 1997, in the column entitled "1997 Acquired Properties".
Note 3: Included in the Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1996 and for the nine months ended
September 30, 1997, in the column entitled "Group A Properties."
The depreciation adjustment of $22.9 million in the "1997 Acquired Properties"
column, and the $16.0 million in the "Group A Properties" column in the
statement of operations for the nine months ended September 30, 1997, and the
depreciation adjustment of $13.1 million in the "1996 Acquired Properties"
column, $37.9 million in the "1997 Acquired Properties" column, and the $21.3
million in the "Group A Properties" column in the statement of operations for
the year ended December 31, 1996, are based on the cost to acquire the above
listed properties, assuming that 10% of the purchase price is allocated to land
and the depreciable lives are 40 years. Depreciation is computed using the
straight-line method.
K. To eliminate the operations of Barton Oaks Plaza II and 8383 Wilshire for
the nine months ended September 30, 1997 and the year ended December 31,
1996, which were sold in January and May 1997, respectively.
L. To reflect interest income from the 50% investment in the mortgage note
(see Note D).
M. To reflect the additional interest expense on debt obtained in the
nine months ended September 30, 1997 on properties acquired before 1997
and to reflect the $180 million private debt offering which occurred on
September 3, 1997, and paydown of the revolving credit facility for the
nine months ended September 30, 1997 and the year ended December 31,
1996, and to reflect the $235.0 million of mortgage indebtedness repaid
from draws on the $1.5 billion Credit Facility (See Note F) and the
repayment of the revolving credit facility balance.
N. To eliminate the $.7 and $.5 million of amortization expense recorded on
the mark-to-market adjustment on debt repaid from draws on the $1.5 billion
Credit Facility and to reflect amortization of $4.9 and $4.9 million
related to the underwriting fees associated with the $1.5 billion Credit
Facility (see Note E) for the nine months ended September 30, 1997 and the
year ended December 31, 1996.
O. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Consolidation and the Offering closed on January 1,
1997 and 1996, respectively, for the pro forma condensed combined
statement of operations for the nine months ended September 30, 1997 and
the year ended December 31, 1996.
<PAGE> 14
P. To reflect the net change in interest expense associated with the
$15.0 million of mortgage debt on Denver Corporate Center Towers II and
III repaid in May 1997 and the $598.4 million repaid with the net
proceeds of the Offering and cash held by Equity Office Predecessors.
Q. To reflect depreciation expense related to the adjustment to record the
net equity value of the investment in real estate for the nine months
ended September 30, 1997 and for the year ended December 31, 1996, on a
straight-line basis, as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------------------------------
<S> <C> <C>
Historical investment in real
estate before accumulated
depreciation $5,022,946 $5,022,946
Less: Portion allocated to
land estimated to be 10% (502,295) (502,295)
----------------------------------------------
Depreciable basis $4,520,651 $4,520,651
==============================================
Depreciation expense based on
an estimated useful life of
40 years $ 84,762 $ 113,016
----------------------------------------------
Less: Historical depreciation
expense (80,166) (82,905)
Pro forma depreciation expense
on 1996 Acquired Properties - (13,090)
Pro forma depreciation expense
on properties acquired in 1997
prior to the Consolidation and
the Offering (3,391) (11,779)
Depreciation expense on
disposed properties - 1,941
----------------------------------------------
Depreciation expense adjustment $ 1,205 $ 7,183
==============================================
</TABLE>
R. To eliminate the $5.9 million and $13.3 million of amortization
historically recognized as a result of the write-off of deferred loan
costs, lease acquisition costs and organization costs, net of the $4.1
million and $4.4 million amortization of the discount required to record
the mortgage debt at fair value recorded in connection with the
Consolidation and the Offering, and the $0.1 million and $0.3 million of
amortization relating to disposed properties for the nine months ended
September 30, 1997 and the year ended December 31, 1996.
<PAGE> 15
S. To reflect additional general and administrative expenses expected to be
incurred as a result of reporting as a public company, as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
-----------------------------------------------------------
<S> <C> <C>
Directors and officers insurance $ 375 $ 500
Printing and mailing 375 500
Trustees and directors fees 225 300
Investor relations 225 300
Other 600 800
-----------------------------------------------------------
Total $1,800 $2,400
===========================================================
</TABLE>
T. To reflect the 5% economic interest that the Operating Partnership does
not own in Equity Office Properties Management Corp. (the "Management
Corp.").
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------------------------------
<S> <C> <C>
Historical ownership interest
in partially owned properties $ 1,191 $ 2,086
------------------------------------------------
Fees from noncombined affiliates 3,840 5,120
Management Corp. expenses 3,000 4,000
------------------------------------------------
Estimated Management Corp. net income 840 1,120
------------------------------------------------
Minority interest 5% economic
interest in the Management Corp. 42 56
------------------------------------------------
Net income allocated to
minority interests ownership in
partially owned properties $ 1,233 $ 2,142
================================================
</TABLE>
<PAGE> 16
U. Pro forma net income per Unit is based upon 185.4 million Units assumed
to be outstanding upon property acquisitions made during 1996 and 1997
(See Note J) and the issuances of Units (See Note C).
<PAGE> 17
Consent of Independent Auditors
We consent to the use of our reports indicated below in this Current Report on
Form 8-K of EOP Operating Limited Partnership.
<TABLE>
<CAPTION>
DATE OF AUDITOR'S
FINANCIAL STATEMENTS REPORT
- --------------------------------------------------------------------------------
<S> <C>
Combined Statement of Revenue and Certain Expenses of September 9, 1997
the Acorn Properties for the year ended December 31, 1996
Statement of Revenue and Certain Expenses of One September 5, 1997
Lafayette Centre for the year ended December 31, 1996
Combined Statement of Revenue and Certain Expenses of January 22, 1997
the PPM Properties for the year ended December 31, 1996
Combined Statement of Revenue and Certain Expenses of September 26, 1997
the Wright Runstad Properties for the year ended September
30, 1996
</TABLE>
ERNST & YOUNG LLP
Chicago, Illinois
December 18, 1997
<PAGE> 18
Report of Independent Auditors
The Board of Trustees of
Equity Office Properties Trust
We have audited the accompanying Statement of Revenue and Certain Expenses of
One Lafayette Centre (the Property) as described in Note 2 for the year ended
December 31, 1996. The Statement of Revenue and Certain Expenses is the
responsibility of the Property's management. Our responsibility is to express
an opinion on the Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statement of Revenue and Certain Expenses. An audit also includes assessing
the basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Equity
Office Properties Trust as described in Note 1, and is not intended to be a
complete presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses of
the Property described in Note 2 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 5, 1997
<PAGE> 19
One Lafayette Centre
Statements of Revenue and Certain Expenses
(Amounts in thousands)
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH
YEAR ENDED JULY 31, 1997
DECEMBER 31, 1996 (UNAUDITED)
-----------------------------------
<S> <C> <C>
REVENUE
Base rents $ 8,509 $ 5,409
Tenant reimbursements 855 582
Parking income 446 260
Other income 158 46
-----------------------------------
Total revenue 9,968 6,297
-----------------------------------
EXPENSES
Property operating and maintenance 2,238 1,360
Real estate taxes 1,154 625
Management fee 300 186
Insurance 57 34
-----------------------------------
Total expenses 3,749 2,205
-----------------------------------
Revenue in excess of certain expenses $ 6,219 $ 4,092
===================================
</TABLE>
See accompanying notes.
<PAGE> 20
One Lafayette Centre
Notes to Statements of Revenue and Certain Expenses
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Statements of Revenue and Certain Expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Current Report on Form 8-K of Equity
Office Properties Trust. The accompanying statements are not representative of
the actual operations of the Property for the periods presented nor indicative
of future operations as certain expenses, primarily depreciation, amortization
and interest expense, which may not be comparable to the expenses expected to
be incurred by Equity Office Properties Trust in future operations of the
Property, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Statements of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of the revenue and
expenses during the reporting periods. Actual results could differ from these
estimates.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for a fair presentation of the results of the interim
period. All such adjustments are of a normal, recurring nature.
2. DESCRIPTION OF PROPERTY
The accompanying Statements of Revenue and Certain Expenses relate to the
operations of One Lafayette Centre, an office building with approximately
314,634 rentable square feet, located in Washington, D.C. (the "Property"). It
is expected that the Property will be acquired for $81.7 million by Equity
Office Properties Trust from an unrelated party.
<PAGE> 21
One Lafayette Centre
Notes to Statements of Revenue and Certain Expenses (continued)
3. RENTALS
The Property has entered into tenant leases that provide for tenants to share
in the operating expenses and real estate taxes on a pro rata basis, as
defined.
<PAGE> 22
Report of Independent Auditors
The Board of Trustees of
Equity Office Properties Trust
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Acorn Properties (the Properties) as described in Note 2 for
the year ended December 31, 1996. The combined Statement of Revenue and
Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue
and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statement of Revenue and Certain Expenses. An audit also includes assessing
the basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Current Report on Form
8-K of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' combined revenue and
expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses of the Properties described in Note 2 for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 9, 1997
<PAGE> 23
Acorn Properties
Combined Statements Of Revenue And Certain Expenses
(Amounts in thousands)
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH
YEAR ENDED JULY 31, 1997
DECEMBER 31, 1996 (UNAUDITED)
-----------------------------------
<S> <C> <C>
REVENUE
Base rents $ 16,999 $ 11,592
Tenant reimbursements 2,055 1,327
Other income 202 181
-----------------------------------
Total revenue 19,256 13,100
-----------------------------------
EXPENSES
Property operating and maintenance 4,526 2,665
Real estate taxes 1,378 853
Management fees 649 428
Insurance 160 92
-----------------------------------
Total expenses 6,713 4,038
-----------------------------------
Revenue in excess of certain expenses $ 12,543 $ 9,062
===================================
</TABLE>
See accompanying notes.
<PAGE> 24
Acorn Properties
Notes to Combined Statements of Revenue and Certain Expenses
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying combined Statements of Revenue and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Current Report on Form
8-K of Equity Office Properties Trust. The accompanying financial statements
are not representative of the actual operations of the Properties, as defined
in Note 2, for the periods presented nor indicative of future operations as
certain expenses, primarily depreciation, amortization and interest expense,
which may not be comparable to the expenses expected to be incurred by Equity
Office Properties Trust in future operations of the Properties, have been
excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the combined Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of the combined
revenue and expenses during the reporting periods. Actual results could differ
from these estimates.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for a fair presentation of the results of the interim
period. All such adjustments are of a normal, recurring nature.
2. DESCRIPTION OF PROPERTIES
The accompanying combined Statements of Revenue and Certain Expenses relate to
the combined operations of the Acorn Properties (the "Properties"). Equity
Office Properties Trust expects to acquire an 89% managing general partnership
interest in each of the partnerships that hold title to the Properties for
approximately $144.7 million, including the assumption of debt. The Acorn
Properties have been presented on a combined basis because all of the
Properties are under common control and management. The following Properties
are included in the combined financial statements:
<PAGE> 25
Acorn Properties
Notes to Combined Statements of Revenue and Certain Expenses (continued)
2. DESCRIPTION OF PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
APPROXIMATE
RENTABLE
PROPERTY NAME LOCATION SQUARE FOOTAGE
------------- -------- --------------
<S> <C> <C>
One Valley Square Plymouth Meeting, PA 70,289
Two Valley Square Plymouth Meeting, PA 70,622
Three Valley Square Plymouth Meeting, PA 84,605
Four Valley Square Plymouth Meeting, PA 49,757
Five Valley Square Plymouth Meeting, PA 18,564
Oak Hill Plaza King of Prussia, PA 164,360
Walnut Hill Plaza King of Prussia, PA 149,716
One Devon Square Wayne, PA 77,267
Two Devon Square Wayne, PA 63,226
Three Devon Square (a) Wayne, PA 6,000
Four Falls Corporate Center Conshohocken, PA 254,355
---------
1,008,761
=========
(a) In addition, this property includes land leased to a third party.
</TABLE>
3. RENTALS
The Properties have entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.
4. RELATED PARTY TRANSACTIONS
The Properties were managed by an affiliated party to the sellers. The
management agreements provided for a fee of 4% of gross receipts, as defined.
Janitorial services were provided by an affiliated party to the sellers.
During the year ended December 31, 1996, the Properties incurred approximately
$714,000 in janitorial fees.
<PAGE> 26
Report of Independent Auditors
The Board of Trustees of
Equity Office Properties Trust
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the PPM Properties (the Properties) as described in Note 2 for the
year ended December 31, 1996. The combined Statement of Revenue and Certain
Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue
and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statement of Revenue and Certain Expenses. An audit also includes assessing
the basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Current Report on Form
8-K of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' combined revenue and
expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses of the Properties described in Note 2 for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 22, 1997
<PAGE> 27
PPM Properties
Combined Statements of Revenue and Certain Expenses
(Amounts in thousands)
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH
YEAR ENDED AUGUST 31, 1997
DECEMBER 31, 1996 (UNAUDITED)
-----------------------------------
<S> <C> <C>
REVENUE
Base rents $ 9,784 $ 7,038
Tenant reimbursements 344 262
Parking income 152 119
Other income 144 56
-----------------------------------
Total revenue 10,424 7,475
-----------------------------------
EXPENSES
Property operating and maintenance 3,062 2,122
Real estate taxes 1,170 824
Management fees 228 168
Insurance 92 76
-----------------------------------
Total expenses 4,552 3,190
-----------------------------------
Revenue in excess of certain expenses $ 5,872 $ 4,285
===================================
</TABLE>
See accompanying notes.
<PAGE> 28
PPM Properties
Notes to Combined Statements of Revenue and Certain Expenses
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying combined Statements of Revenue and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Current Report on Form
8-K of Equity Office Properties Trust. The accompanying financial statements
are not representative of the actual operations of the Properties for the
periods presented nor indicative of future operations as certain expenses,
primarily depreciation, amortization and interest expense, which may not be
comparable to the expenses expected to be incurred by Equity Office Properties
Trust in future operations of the Properties, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the combined Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of the combined
revenue and expenses during the reporting periods. Actual results could differ
from these estimates.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for a fair presentation of the results of the interim
period. All such adjustments are of a normal, recurring nature.
2. DESCRIPTION OF PROPERTIES
The accompanying combined Statements of Revenue and Certain Expenses relate to
the combined operations of the PPM Properties which are to be acquired by Equity
Office Properties Trust for approximately $92 million from an unrelated party.
The PPM Properties have been presented on a combined basis because all
of the Properties are under common control and management. The following
properties are included in the combined financial statements:
<PAGE> 29
PPM Properties
Notes to Combined Statements of Revenue and Certain Expenses (continued)
2. DESCRIPTION OF PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
APPROXIMATE
RENTABLE
PROPERTY NAME SQUARE FOOTAGE
---------------- --------------
<S> <C>
Lakeside Square 392,500
1600 Duke Street 68,800
Fair Oaks Plaza 177,900
-------
639,200
=======
</TABLE>
3. RENTALS
The Properties have entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.
4. RELATED PARTY TRANSACTIONS
The Properties were managed by an affiliated party to the seller. The
management agreements provided for fees of 2.25% of gross receipts, as defined.
<PAGE> 30
Report of Independent Auditors
The Board of Trustees of
Equity Office Properties Trust
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Wright Runstad Properties (the Properties) as described in Note
2 for the year ended September 30, 1996. The combined Statement of Revenue and
Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue
and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statement of Revenue and Certain Expenses. An audit also includes assessing
the basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, for inclusion in the Current Report on
Form 8-K of Equity Office Properties Trust as described in Note 1 and is not
intended to be a complete presentation of the Properties' combined revenue and
expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses of the Properties described in Note 2 for the year ended
September 30, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 26, 1997
<PAGE> 31
Wright Runstad Properties
Combined Statements of Revenue and Certain Expenses
(Amounts in Thousands)
<TABLE>
OCTOBER 1, 1996
THROUGH
YEAR ENDED AUGUST 31, 1997
SEPTEMBER 30, 1996 (UNAUDITED)
-------------------------------------
<S> <C> <C>
REVENUE
Base rents $ 57,191 $ 54,796
Tenant reimbursements 3,294 3,293
Parking income 5,838 5,780
Other income 1,052 446
-------------------------------------
Total revenue 67,375 64,315
-------------------------------------
EXPENSES
Property operating and maintenance 15,427 14,890
Real estate taxes 4,881 4,616
Management fee 1,855 1,793
Insurance 468 427
Ground rent and air rights 1,577 1,440
-------------------------------------
Total expenses 24,208 23,166
-------------------------------------
Revenue in excess of certain expenses $ 43,167 $ 41,149
=====================================
</TABLE>
See accompanying notes.
<PAGE> 32
Wright Runstad Properties
Notes to Combined Statements of Revenue and Certain Expenses
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying combined Statements of Revenue and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Current Report on Form
8-K of Equity Office Properties Trust. The accompanying financial statements
are not representative of the actual operations of the Wright Runstad
Properties (the "Properties") for the periods presented nor indicative of
future operations as certain expenses, primarily depreciation, amortization and
interest expense, which may not be comparable to the expenses expected to be
incurred by Equity Office Properties Trust in future operations of the
Properties, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the combined Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of the combined
revenue and expenses during the reporting periods. Actual results could differ
from these estimates.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for a fair presentation of the results of the interim
period. All such adjustments are of a normal, recurring nature.
<PAGE> 33
Wright Runstad Properties
Notes to Combined Statement of Revenue and Certain Expenses (continued)
2. DESCRIPTION OF PROPERTIES
The accompanying combined Statements of Revenue and Certain Expenses relate to
the combined operations of the Properties which are to be acquired by Equity
Office Properties Trust for approximately $640 million from an unrelated party.
The Properties have been presented on a combined basis because all of the
Properties are under common ownership and management. The following office
properties are included in the combined financial statements:
<TABLE>
<CAPTION>
APPROXIMATE
RENTABLE SQUARE
PROPERTY NAME LOCATION FOOTAGE
------------------------ -------------------- ---------------
<S> <C> <C>
1111 Third Avenue Seattle, Washington 528,282
First Interstate Center Seattle, Washington 915,883
Second & Seneca Building Seattle, Washington 480,272
Nordstrom Medical Tower Seattle, Washington 101,431
One Bellevue Center Bellevue, Washington 344,715
Rainier Plaza Bellevue, Washington 410,855
1001 Fifth Avenue Portland, Oregon 368,018
Calais Office Center Anchorage, Alaska 190,599
---------
3,340,055
=========
</TABLE>
3. RENTALS
The Properties have entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.
4. RELATED PARTY TRANSACTIONS
The Properties were managed by an affiliated party to the seller, except for
Nordstrom Medical Tower, which is managed by a third party. The management
agreements provided for a fee of 3.0% of gross receipts and reimbursements for
on-site personnel.
The Partnership owning the Properties is a member of the J. Nordstrom Medical
Tower Condominium Association (the Association), which provides administrative
services relating to building operations of the Nordstrom Medical Tower. The
Association is managed by an affiliate. The Association pays all operating
expenses associated with the building and is reimbursed annually by condominium
unit owners, including Nordstrom Medical Tower. The Properties incurred
$510,000 under this agreement during 1996.
The Properties lease each of their parking garages to an affiliate of the
seller in exchange for a percentage of the parking revenue, net of expenses.
<PAGE> 34
Wright Runstad Properties
Notes to Combined Statement of Revenue and Certain Expenses (continued)
5. COMMITMENTS
The land underlying Rainier Plaza is leased under a 55-year lease agreement
expiring in 2040, plus an option for an additional 35 years. The minimum
annual rent is $566,800 at September 30, 1996. The lease also provides for
contingent rent based upon the gross income of the property, as defined in the
lease. No contingent rentals were due for 1996.
The land underlying One Bellevue Center is leased under a 70-year lease
expiring on June 30, 2052 with an option to extend for an additional 20 years.
The basic rent under the ground lease agreement is $39,055 per month at
September 30, 1996, plus all taxes, utility charges, and other assessments on
the property. In July of each year, the basic rent increases 2%. Additional
rent may be due based on adjusted gross revenue, as defined in the lease
agreement. No additional rent was due in 1996.
The parking garage facilities located adjacent to the 1001 Fifth Avenue are
leased through May 31, 1998, with renewal options for ten and five years. The
lease provides for minimum payments of $175,000 per year, plus 50% of the
adjusted gross annual revenues in excess of $300,000 from the garage
operations. Rent expense under this lease was $637,000 in 1996.
The land underlying the Calais I & II are leased under a ground lease, expiring
in 2029, with four ten-year options to extend. Monthly rental payments are
$8,000 per month until December 31, 1999, at which time monthly payments will
increase to approximately $9,000. Beginning in 2005, monthly payments are
subject to annual adjustments based on office rentals and changes in the
consumer price index.
There is an agreement with a bank through 2037, whereby the bank agreed to
certain building restrictions that limit the height and bulk of current and
future improvements, if any, to be placed on the bank's land, which is adjacent
to 1111 Third Avenue. There are options to extend this agreement for at least
an additional 39 years. In return for these restrictions, 1111 Third Avenue is
obligated to pay the bank $75,000 per year, plus 4% of annual net proceeds from
the property (prior to debt service) in excess of $4,847,000 on an annual
basis. Total amounts paid or accrued under this agreement were $75,000 for the
year ended September 30, 1996.
