<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended: September 30, 1998 Commission File Number: 1-13829
------------------ -------
CABOT INDUSTRIAL TRUST
----------------------
(Exact name of registrant as specified in its charter)
Maryland 04-3397866
- ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Two Center Plaza, Suite 200, Boston, Massachusetts 02108
--------------------------------------------------------
(Address of principal executive offices, including zip code)
(617) 723-0900
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
_____ _____
Indicate the number of shares outstanding of each of the registrant's classes of
Common Stock, as of the latest practicable date: As of November 13, 1998,
18,586,764 Common Shares of Beneficial Interest, $.01 par value, of the
Registrant were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements should be
read in conjunction with the 1997 Form 10-K/A of the registrant (the "Company").
These consolidated condensed statements have been prepared in accordance with
the instructions of the Securities and Exchange Commission for Form 10-Q and do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of the Company's management, all material adjustments (consisting
solely of items of a normal, recurring nature) considered necessary for a fair
presentation of results of operations for the interim period have been included.
The results of consolidated operations for the period from January 1, 1998
through September 30, 1998 are not necessarily indicative of the results that
may be expected for the period from January 1, 1998 through December 31, 1998.
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
INVESTMENT IN REAL ESTATE:
Rental Properties $1,051,650 $ -
Less: Accumulated Depreciation (11,836) -
Properties under Development 11,522 -
---------- ---------
$1,051,336 $ -
---------- ---------
OTHER ASSETS:
Cash and Cash Equivalents $ 4,864 $ 1
Rents and Other Receivables 1,159 -
Deferred Rent Receivable 1,738 -
Deferred Lease Acquisition Costs, Net 15,435 -
Deferred Financing Costs, Net 1,360 -
Due from Related Party 121 -
Other Assets 1,624 3,480
---------- ---------
TOTAL ASSETS $1,077,637 $ 3,481
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Mortgage Debt $ 48,648 $ -
Line of Credit Borrowings 169,000 -
Accounts Payable 658 2,255
Distributions Payable 14,143 -
Due to Related Party - 1,225
Accrued Real Estate Taxes 7,924 -
Other Liabilities 19,520 -
---------- ---------
$ 259,893 $ 3,480
---------- ---------
MINORITY INTEREST $ 468,569 $ -
---------- ---------
SHAREHOLDERS' EQUITY:
Common Shares, $0.01 par value, 150,000,000 shares authorized;
18,586,764 shares issued and outstanding at September 30, 1998
and 50 shares issued and outstanding at December 31, 1997 $ 186 $ -
Paid in Capital 349,264 1
Retained Deficit (275) -
---------- ---------
TOTAL SHAREHOLDERS' EQUITY $ 349,175 $ 1
---------- ---------
TOTAL LIABILITIES AHD SHAREHOLDERS' EQUITY $1,077,637 $ 3,481
=========== =========
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (NOTE 1)
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
------------------
<S> <C>
REVENUES:
Rental Income $ 60,569
Tenant Reimbursements 8,740
--------
69,309
EXPENSES:
Property Operating 4,079
Property Taxes 7,982
Depreciation and Amortization 14,108
General and Administrative 4,514
Interest 3,317
--------
Total Expenses 34,000
Interest and Other Income 1,114
--------
Income Before Minority Interest Expense 36,423
Minority Interest Expense (20,863)
--------
Net Income $ 15,560
========
Earnings per Share:
Basic $ 0.84
========
Diluted $ 0.83
========
Weighted Average Shares:
Basic 18,587
========
Diluted 18,587
========
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1998
------------------
<S> <C>
REVENUES:
Rental Income $24,914
Tenant Reimbursements 3,503
-------
28,417
EXPENSES:
Property Operating 1,563
Property Taxes 3,240
Depreciation and Amortization 5,862
General and Administrative 1,724
Interest 2,365
-------
Total Expenses 14,754
Interest and Other Income 392
-------
Income Before Minority Interest Expense 14,055
Minority Interest Expense (8,054)
-------
Net Income $ 6,001
=======
Earnings per Share:
Basic $ 0.32
======
Diluted $ 0.32
======
Weighted Average Shares:
Basic 18,587
=======
Diluted 18,587
=======
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (NOTE 1)
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 15,560
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and Amortization 14,108
Straight Line Rent Adjustment (1,738)
Amortization of Deferred Financing Costs 308
Minority Interest Expense 20,863
Increase in Rents and Other Receivables (1,159)
Increase in Accounts Payable 494
Increase in Other Assets (1,692)
Increase in Accrued Real Estate Taxes 7,924
Increase in Other Liabilities 6,812
----------
Net Cash Provided by Operating Activities 61,480
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and Lease Acquisition Costs (362,921)
Improvements to Property (973)
----------
Net Cash Used in Investing Activities (363,894)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Deferred Financing Costs (1,668)
Debt Principal Repayments (13,790)
Line of Credit Advances, net 169,000
Proceeds from the Issuance of Common Shares, net 177,885
Repurchase of Partnership Units (1,217)
Distributions paid to Common Shareholders (9,795)
Distributions paid to Minority Interest (13,138)
----------
Net Cash Provided by Financing Activities 307,277
----------
Net Increase in Cash and Cash Equivalents 4,863
----------
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 1
----------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 4,864
==========
Cash paid for interest, net of amounts capitalized $ 1,242
==========
</TABLE>
DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with the Offering and Formation Transactions, the Company
assumed $18,413 of indebtedness and issued 33,850 Common Shares and
Partnership Units in exchange for real estate assets and the advisory business
of Cabot Partners valued at $659,072 and $77, respectively.
In conjunction with the acquisition of certain real estate, the Company
assumed $44,025 of indebtedness and issued Units valued at $2,268.
At September 30, 1998, accrued capital expenditures (including amounts
included in accounts payable) totaled $11,597 and accrued offering costs
totaled $1,224.
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE, SHARE AND PER SHARE DATA)
1. General
Organization
Cabot Industrial Trust (the Company), a Maryland real estate investment trust,
was formed on October 10, 1997. The Company is the managing general partner of
a newly formed limited partnership, Cabot Industrial Properties, L.P. (the
Operating Partnership), and will conduct substantially all of its business
through the Operating Partnership. As the general partner of the Operating
Partnership, the Company has the exclusive power under the agreement of limited
partnership to manage and conduct the business of the Operating Partnership, and
therefore the Company consolidates the results of the Operating Partnership for
financial reporting purposes. The Company is a fully integrated, internally
managed real estate company formed to continue and expand the national real
estate business of Cabot Partners Limited Partnership (Cabot Partners). The
Company expects to qualify as a real estate investment trust (a REIT) for
federal income tax purposes.
Since the Company was formed on October 10, 1997 and did not begin operations
until February 4, 1998 (see note 2), the results for the nine months ended
September 30, 1998 represent activity for 239 days, or approximately 8 months.
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 Equivalents
The Company considers all short-term investments with an original maturity of
three months or less to be cash equivalents.
Rental Income
All leases are classified as operating leases. Certain leases provide for tenant
occupancy during periods for which no rent is due and minimum rent payments that
increase during the term of the lease. The Company records rental income for the
full term of each lease on a straight-line basis. The resulting Deferred Rent
represents the receivables from tenants, net of reserves, which the Company
expects to collect over the remaining life of the leases rather than currently.
Deferred Rent is not recognized for income tax purposes until received.
2. The Formation Transactions, The Offerings and Ownership
Initial Capitalization
The initial capitalization of the Company consisted of 50 shares of common
stock, par value $.01 per share, issued for a total consideration of $1. In
connection with the Formation Transactions and Offerings (described below), the
Company issued an additional 18,586,714 shares of common stock.
The Formation Transactions
On February 4, 1998, under a Contribution Agreement executed by the Company, the
Operating Partnership, Cabot Partners, and various other contributors, 122 real
estate properties, certain real estate advisory contracts and other assets were
(i) contributed to the Operating Partnership in exchange for Units in the
Operating Partnership that may, subject to certain restrictions, be exchanged
for common shares of the Company or (ii) contributed to the Company in exchange
for common shares. The properties contributed to the Company were contributed
to the Operating Partnership in exchange for the number of general partnership
Units in the Operating Partnership equal to the number of common shares
exchanged for the property.
The Operating Partnership contributed the real estate advisory contracts to
Cabot Advisors, Inc. (the Management Company) and received 100% of the non-
voting preferred stock of the Management Company, which entitles it to 95% of
the Management Company's net operating cash flow. All of the common stock of
the Management Company is owned by an officer of the Company.
At September 30, 1998, the Company owned 42.7% of the Operating Partnership.
The remaining 57.3%, which is owned by investors that elected to receive
Operating Partnership Units, is considered minority interest.
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE, SHARE AND PER SHARE DATA)
The Offerings
On February 4, 1998, the Company completed the offering of 8,625,000 common
shares of beneficial interest (Common Shares) at an offering price of $20.00 per
share. In addition, the Company issued 1,000,000 Common Shares to a single
investor in a private offering at $20.00 per share (collectively, the
Offerings). The Company contributed the net proceeds of the Offerings to the
Operating Partnership in exchange for the number of general partnership
interests in the Operating Partnership equal to the number of Common Shares sold
in the Offerings.
Distributions
On April 8, 1998 the Company and the Operating Partnership declared
distributions payable on April 30, 1998 to Shareholders or Unitholders of record
as of April 22, 1998, of $.202 per Share/Unit; on June 11, 1998 the Company and
the Operating Partnership declared distributions payable on July 30, 1998 to
Shareholders or Unitholders of record as of July 10, 1998, of $.325 per
Share/Unit and on September 10, 1998 the Company and the Operating Partnership
declared distributions payable on October 28, 1998 to Shareholders or
Unitholders of record as of October 9, 1998, of $.325 per Share/Unit.
3. Investment in Real Estate
In accordance with generally accepted accounting principles, the Company has
accounted for the Formation Transactions using the purchase method of
accounting. As such, the assets and liabilities acquired in connection with the
Formation Transactions are recorded at the fair value of the consideration
surrendered and liabilities assumed, except for the net assets contributed by
Cabot Partners, the sponsor and organizer, which were recorded at carryover
historical cost basis. The acquisition cost was then allocated to all
identifiable assets based upon their individual estimated fair market values.
The following is a summary of the acquisition cost recorded in connection with
the Formation Transactions:
<TABLE>
<S> <C>
Fair value of the Company's Common Shares and
the Operating Partnership's Units, based on the
February 4, 1998 value of $20 per Share/Unit, issued
to the Contributing Investors (except Cabot Partners) $640,608
Value of Partnership Units issued to Cabot Partners,
recorded at carryover historical cost basis 77
Mortgage debt assumed 18,413
Other acquisition costs and liabilities assumed 8,713
--------
Acquisition cost basis $667,811
========
Acquisition cost basis allocated to:
Land $125,850
Buildings 529,498
Lease Acquisition Costs 12,412
--------
Acquisition cost basis allocated to Real Estate
as a result of the Formation Transactions $667,760
Acquisition cost basis allocated to Other Net Assets 51
Total cost basis allocated $667,811
========
</TABLE>
Investments in real estate are depreciated over 40 years using the straight-line
method. Expenditures for ordinary maintenance and repairs are charged to
operations as incurred. Significant building renovations and improvements that
improve or extend the useful life of the assets are capitalized. Tenant
improvements and leasing commissions are capitalized and amortized on the
straight-line method over the terms of the related lease.
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE, SHARE AND PER SHARE DATA)
4. Property Acquisitions
During the period from July 1, through September 30, 1998 the Company
acquired the following industrial properties:
<TABLE>
<CAPTION>
Property Location Property Type Square Feet Acquisition Cost
- ------------------ ----------------- ----------- -----------------
<S> <C> <C> <C>
Bensenville, IL Workspace 76,737 $ 4,769
Orlando, FL Multitenant Distribution 115,728 3,572
Baltimore, MD Workspace 96,686 23,513
Workspace 73,071
Workspace 49,100
Workspace 39,041
Workspace 47,434
Workspace 61,320
Jessup, MD Multitenant Distribution 94,381 4,948
Batavia, IL Bulk Distribution 170,462 7,122
City of Industry, CA Bulk Distribution 181,635 8,865
Atlanta, GA Multitenant Distribution 216,074 8,565
Multitenant Distribution 130,722
Atlanta, GA Multitenant Distribution 161,965 4,045
Erlanger, KY Workspace 67,749 4,569
Phoenix, AZ Multitenant Distribution 159,450 36,005
Multitenant Distribution 126,701
Multitenant Distribution 126,701
Bulk Distribution 223,740
Multitenant Distribution 161,230
Bulk Distribution 114,871
Multitenant Distribution 127,680
Tempe, AZ Workspace 30,606 5,643
Workspace 30,606
Workspace 30,606
Workspace 30,606
Tempe, AZ Workspace 54,900 4,083
St. Charles, IL Multitenant Distribution 81,110 3,148
Chino, CA Multitenant Distribution 88,134 15,565
Rancho Cucamonga, CA Multitenant Distribution 104,600
Corona, CA Multitenant Distribution 162,900
----------------- -------------
3,236,546 $ 134,412
================= =============
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SQUARE FOOTAGE, SHARE AND PER SHARE DATA)
5. Earnings per Share
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share", basic earnings per share have been computed by dividing
net income by the weighted average number of shares outstanding during the
period. Diluted earnings per share have been computed considering the dilutive
effect of the exercise of Unit options granted by the Operating Partnership.
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, 1998 September 30, 1998
------------------ ------------------
Basic:
<S> <C>
Net Income $ 15,560 $ 6,001
--------- ----------
Weighted Average Shares 18,587 18,587
---------- ----------
Basic Earnings per Share $ .84 $ .32
========== =========
Diluted:
Net Income $ 15,560 $ 6,001
Effect of Unit Options (70) -
---------- ---------
Income available to Common Shareholders, as adjusted $ 15,490 $ 6,001
---------- ---------
Weighted Average Shares 18,587 18,587
---------- ---------
Diluted Earnings per share $ .83 $ .32
========== =========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this discussion and elsewhere in this report that
are not historical facts are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are based on current
expectations, estimates and projections about the industry and markets in which
the Company operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions are intended to
identify such forward-looking statements. Such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties.
Therefore, actual outcomes and results may differ materially from what is
expressed or suggested by such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. The
Company's operating results depend primarily on income from industrial
properties, which may be affected by various factors, including changes in
national and local economic conditions, competitive market conditions,
uncertainties and costs related to and the imposition of conditions on receipt
of governmental approvals and costs of material and labor, all of which may
cause actual results to differ materially from what is expressed herein.
Capital and credit market conditions which affect the Company's cost of capital
also influence operating results.
Introduction
The Company is an internally managed, fully integrated real estate company,
focused on serving a variety of industrial space users in the country's
principal commercial markets. The Company owns and operates a diversified
portfolio of bulk distribution, multitenant distribution and "workspace" (light
assembly and flex/R & D) properties throughout the United States. At September
30, 1998 the Company owned 202 properties, 122 of which properties were acquired
in connection with the Formation Transactions described in Note 2 to the
consolidated financial statements herein, and 80 of which properties were
acquired during the period from February 4, 1998 through September 30, 1998 (21
of the 80 properties were identified in the prospectus for the Company's initial
public offering dated January 30, 1998). The Company was formed on October 10,
1997, but did not begin operations as a fully integrated real estate company
until the completion of the Formation Transactions and Offerings on February 4,
1998, the date of the Company's initial public offering. The Company had no
operations prior to February 4, 1998.
Results of Operations
Since the Company was formed in October 1997 and did not begin operations until
February 4, 1998, the results for the nine months ended September 30, 1998
represent activity for 239 days, and no comparison of results to prior periods
are available.
Three Months Ended September 30, 1998
Net income attributable to common shareholders for the quarter ended September
30, 1998 totaled $6.0 million or $.32 Per Share.
Rental revenues for the quarter September 30, 1998 were $28.4 million, including
tenant reimbursements of $3.5 million. Total rental revenue of $20.4 million
was generated by the 122 properties owned as of February 4, 1998 as a result of
the Formation Transactions (the Baseline Properties) and $8.0 million was
generated by the 80 properties acquired subsequent to February 4, 1998. The
ratio of tenant reimbursements to property operating and real estate tax
expenses was approximately 73%. Depreciation and amortization related to real
estate investments totaled $5.9 million for the three months ended September 30,
1998.
Interest and other income of $392,000 consists primarily of interest earned on
the Company's invested cash balances and earnings of the Management Company of
$173,000. Interest expense represents interest incurred on $48.6 million of
mortgage indebtedness outstanding at September 30, 1998 and interest on
outstanding borrowings under the Company's Acquisition Facility, net of interest
capitalized to development projects.
Minority interest expense represents net income allocable to holders of
Operating Partnership Units. At September 30, 1998, the Company owned 42.7% of
the Operating Partnership; therefore, minority interest ownership was 57.3%.
<PAGE>
Nine Months Ended September 30, 1998
Net income attributable to common shareholders for the nine months ended
September 30, 1998 totaled $15.6 million, or $.83 per share on a diluted basis.
Rental revenues for the nine months ended September 30, 1998 were $69.3 million,
including tenant reimbursements of $8.7 million. Total rental revenue of $53.6
million was generated by Baseline Properties and $15.7 million was generated by
the 80 properties acquired subsequent to February 4, 1998. The ratio of tenant
reimbursements to operating and real estate tax expenses was approximately 72%.
Depreciation and amortization related to real estate investments totaled $14.1
million for the nine months ended September 30, 1998.
Interest and other income included $333,000 of earnings from the Management
Company, and the remainder consists primarily of interest income earned on the
Company's invested cash balances. Interest expense represents $1.0 million of
interest incurred on $48.6 million of mortgage indebtedness outstanding and also
includes interest expense of $2.3 million related to borrowings under the
Acquisition Facility, net of amounts capitalized to development projects.
Capital Resources and Liquidity
As a result of the completion of the Offerings in February 1998, the Company
issued 8,625,000 Common Shares to the public and 1,000,000 Common Shares to a
group of investors in a private placement of shares. All of the Common Shares
were sold at a price of $20.00 per share. The proceeds from the Offerings, net
of offering costs, were $176.7 million.
The Company intends to rely on cash provided by operations, unsecured and
secured borrowings from institutional sources, and public debt as its primary
sources of funding for acquisition, development, expansion and renovation of
properties. The Company may also consider equity financing when such financing
is available on attractive terms. In March 1998 the Company executed a $325
million unsecured revolving line of credit, which is the Acquisition Facility,
with Morgan Guaranty Trust Company of New York as lead agent to a syndicate of
banks. The Acquisition Facility will be used to fund property acquisitions,
development activities, building expansions, tenant leasing costs and other
general corporate purposes. The Acquisition Facility contains certain
restrictions and requirements, such as total debt-to-assets, debt service
coverage, minimum unencumbered assets to unsecured debt ratios, and other
limitations. The Company believes cash flow from operations not distributed to
shareholders and unitholders will be sufficient to cover tenant allowances and
costs associated with renewal or replacement of current tenants as their leases
expire and recurring non-incremental revenue generating capital expenditures.
In the normal course of operations, the Company has purchased approximately $12
million of real estate assets subsequent to September 30, 1998. The real estate
assets acquired were primarily funded through Acquisition Facility borrowings.
As of September 30, 1998, the Operating Partnership had $48.6 million of fixed
rate debt secured by properties, $169.0 million of unsecured borrowings under
its Acquisition Facility and had a 19% debt-to-total market capitalization
ratio. The debt-to-total market capitalization ratio is calculated based on the
Company's total consolidated debt as a percentage of the market value of
outstanding Common Shares and Units (not held by the Company) plus total debt.
The Company has entered into an interest rate collar arrangement relating to its
LIBOR-based Acquisition Facility for a notional amount of $65 million for the
period August 1, 1998 through December 31, 1998. The arrangement is intended to
result in limiting the LIBOR component of the Company's interest rate on an
equivalent amount of borrowings to the range of 5.64% to 5.9% per annum. The
Company has also entered into an interest rate hedge transaction involving the
notional future sale of $100 million of Treasury Securities based on a
rate of 5.541% for such securities in anticipation of a future debt issuance
with a maturity of ten years.
Based on the rate for 10-year Treasury Securities as of close of business on
November 12, 1998, the hedge transaction would have the effect of increasing the
Company's borrowing rate on $100 million of anticipated borrowings by
approximately .5%.
<PAGE>
The Company has assessed its Year 2000 readiness with respect to its internal
accounting and information systems. The Company also has contacted its
significant vendors, including banks and software providers, to determine
whether those vendors are satisfactorily addressing the Year 2000 problem with
respect to the products and services they provide to the Company. No significant
issues or costs of remediation have been identified with respect to such systems
or vendors. As of November 13, 1998, the Company is in the process of reviewing
its other internal systems (consisting primarily of property-related systems,
such as elevators and heating, ventilation and air conditioning systems) and
developing a Year 2000 remedial plan to address such issues as may be identified
in such review, none of which are expected by the Company to be material.
Remediation costs to date have not been material, and the Company does not
expect any significant issues or remediation costs as a result of completion of
its remedial plan due to the relatively uncomplicated nature of it real estate
assets (industrial properties) and the general nature of its leases, which in
many instances provide for the reimbursement of costs from its tenants. The
Company believes that there will be no direct material effects on its operating
performance or results of operations from the Year 2000 problem as it relates to
the Company's internal systems and significant vendors. The Company further
believes that adequate alternative service providers will be available to it if
any of its vendors experience unexpected difficulties as a result of Year 2000
systems failures and accordingly, has not established any specific contingency
plans in this regard. It is not possible to quantify any potential indirect
effects that may result from the lack of Year 2000 readiness on the part of
other third parties, including tenants, with whom the Company conducts its
business.
Cash and cash equivalents totaled $4.9 million at September 30, 1998. Cash
provided by operating activities for the nine months ended September 30, 1998
was $61.5 million.
<PAGE>
ITEM 3. QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
On September 14, 1998, the Company filed a Form 8-K dated
September 10, 1998 to report, under Item 5 of Form 8-K, the
Company's modification of its previously adopted Shareholder
Rights Plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 16th day of November 1998.
CABOT INDUSTRIAL TRUST
-----------------------------------
Registrant
11/16/98 /s/ Neil E. Waisnor
--------------- -----------------------------------
Date Neil E. Waisnor
Senior Vice President-Finance,
Treasurer, Secretary
11/16/98 /s/ Robert E. Patterson
--------------- -----------------------------------
Date Robert E. Patterson
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH
REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,864
<SECURITIES> 0
<RECEIVABLES> 2,897
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,023
<PP&E> 1,080,857
<DEPRECIATION> 14,086
<TOTAL-ASSETS> 1,077,637
<CURRENT-LIABILITIES> 22,725
<BONDS> 217,648
0
0
<COMMON> 186
<OTHER-SE> 348,989
<TOTAL-LIABILITY-AND-EQUITY> 1,077,637
<SALES> 0
<TOTAL-REVENUES> 69,309
<CGS> 0
<TOTAL-COSTS> 12,061
<OTHER-EXPENSES> 14,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,317
<INCOME-PRETAX> 15,560
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,560
<EPS-PRIMARY> .84
<EPS-DILUTED> .83
</TABLE>
