<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended: March 31, 1999 Commission File Number: 1-13829
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CABOT INDUSTRIAL TRUST
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(Exact name of registrant as specified in its charter)
Maryland 04-3397866
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Two Center Plaza, Suite 200, Boston, Massachusetts 02108
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(Address of principal executive offices, including zip code)
(617) 723-0900
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(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 May 11, 1999, 40,518,271
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 1998 Form 10-K/A of the registrant ("Cabot Trust").
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 Cabot Trust'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, 1999
through March 31, 1999, are not necessarily indicative of the results that may
be expected for the period from January 1, 1999 through December 31, 1999.
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED BALANCE SHEET
As of March 31, 1999 and December 31, 1998
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
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(unaudited)
<S> <C> <C>
ASSETS:
INVESTMENT IN REAL ESTATE:
Rental Properties $ 1,150,535 $ 1,072,675
Less: Accumulated Depreciation (22,912) (17,290)
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Net Rental Properties 1,127,623 1,055,385
Properties under Development 32,830 23,108
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$ 1,160,453 $ 1,078,493
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OTHER ASSETS:
Cash and Cash Equivalents $ 34,558 $ 2,301
Rents and Other Receivables,
net of reserve for uncollectible accounts of $436 and $312
at March 31, 1999 and December 31, 1998, respectively 2,995 2,872
Deferred Rent Receivable 3,281 2,638
Deferred Lease Acquisition Costs, Net 17,921 17,362
Deferred Financing Costs, Net 1,910 1,255
Investment in and Advances to Cabot Advisors 820 582
Other Assets 3,151 5,067
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TOTAL ASSETS $ 1,225,089 $ 1,110,570
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Mortgage Debt $ 149,784 $ 48,206
Line of Credit Borrowings 211,000 200,000
Accounts Payable 1,508 511
Accrued Real Estate Taxes 7,300 7,309
Distributions Payable 14,835 14,134
Tenant Security Deposits and Prepaid Rents 5,429 4,956
Other Liabilities 18,014 18,156
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$ 407,870 $ 293,272
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MINORITY INTEREST $ 58,349 $ 468,311
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SHAREHOLDERS' EQUITY:
Common Shares, $0.01 par value, 150,000,000 shares authorized;
40,518,271 shares issued and outstanding at March 31, 1999,
and 18,586,764 shares issued and outstanding at December 31, 1998 $ 405 $ 186
Paid in Capital 761,168 348,912
Retained Deficit (2,703) (111)
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TOTAL SHAREHOLDERS' EQUITY $ 758,870 $ 348,987
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,225,089 $ 1,110,570
=========== ===========
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Three Months ended March 31, 1999 and March 31, 1998
(unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
Three Months Ended March 31, 1998
March 31, 1999 (Note 1)
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<S> <C> <C>
REVENUES:
Rental Income $ 29,221 $ 12,842
Tenant Reimbursements 4,917 1,891
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34,138 14,733
EXPENSES:
Property Operating 2,680 1,042
Property Taxes 3,845 1,642
Depreciation and Amortization 6,810 3,174
General and Administrative 2,185 1,068
Interest 4,315 155
Settlement of Treasury Lock 2,492 --
-------- --------
Total Expenses 22,327 7,081
Interest and Other Income 202 474
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Income Before Minority Interest Expense 12,013 8,126
Minority Interest Expense (4,322) (4,648)
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Net Income $ 7,691 $ 3,478
======== ========
Earnings per Share:
Basic $ .28 $ .19
======== ========
Diluted $ .28 $ .19
======== ========
Weighted Average Shares:
Basic 27,873 18,587
======== ========
Diluted 27,873 18,587
======== ========
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the Three Months ended March 31, 1999 and March 31, 1998
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended
Three Months Ended March 31, 1998
March 31, 1999 (Note 1)
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 7,691 $ 3,478
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and Amortization 6,810 3,174
Minority Interest Expense 4,322 4,648
Straight Line Rent Adjustment (643) (396)
Amortization of Deferred Financing Costs 164 --
Increase in Rents and Other Receivables (123) (1,603)
Increase in Accounts Payable 739 1,027
Increase in Other Assets (74) (930)
(Decrease) Increase in Accrued Real Estate Taxes (9) 2,875
Increase in Other Liabilities 1,957 3,732
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Net Cash Provided by Operating Activities 20,834 16,005
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property and Lease Acquisition Costs (71,324) (178,414)
Improvements to Property (417) (147)
Advances to Cabot Advisors (229) --
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Net Cash Used in Investing Activities (71,970) (178,561)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Secured Debt 87,617 --
Line of Credit Advances, net 11,000 --
Distributions Paid to Minority Interests (8,093) --
Distributions Paid to Common Shareholders (6,041) --
Debt Principal Repayments (560) (13,267)
Proceeds from the Issuance of Common Shares, net (371) 179,821
Increase in Deferred Financing Costs (159) (1,469)
Repurchase of Partnership Units -- (1,217)
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Net Cash Provided by Financing Activities 83,393 163,868
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Net Increase in Cash and Cash Equivalents 32,257 1,312
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CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 2,301 1
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 34,558 $ 1,313
========= =========
Cash paid for interest and settlement of treasury lock,
net of amounts capitalized $ 5,247 $ 155
========= =========
</TABLE>
DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with the Offering and Formation Transactions in 1998, Cabot Trust
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 $659,021 and $77, respectively.
During the quarter ended March 31, 1999, 21,932 Partnership Units were exchanged
for Common Shares.
In conjunction with the acquisition of certain real estate, Cabot Trust assumed
$14,521 of indebtedness and issued Units valued at $2,743 in 1999 and assumed
$8,299 of indebtedness in 1998.
At March 31, 1999, accrued capital expenditures (including amounts included in
accounts payable) totaled $9,037, accrued offering costs totaled $919 and
accrued financing costs totaled $170.
At March 31, 1998, accrued capital expenditures (including amounts included in
accounts payable) totaled $7,758, accrued offering costs totaled $3,160 and
accrued financing costs totaled $14.
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 1999
1. General
Organization
Cabot Industrial Trust (Cabot Trust), a Maryland real estate investment trust,
was formed on October 10, 1997. Cabot Trust is the managing general partner of a
limited partnership, Cabot Industrial Properties, L.P. (Cabot L.P.), and
conducts substantially all of its business through Cabot L.P. As the general
partner of Cabot L.P., Cabot Trust has the exclusive power under the agreement
of limited partnership to manage and conduct the business of Cabot L.P., and
therefore Cabot Trust consolidates the results of Cabot L.P. for financial
reporting purposes. Cabot Trust 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). Cabot Trust expects to
qualify as a real estate investment trust (a REIT) for federal income tax
purposes.
Since Cabot Trust was formed on October 10, 1997, and did not begin operations
until February 4, 1998 (see Note 2), the results for the three months ended
March 31, 1998, represent activity for 56 days, or approximately 2 months.
As of March 31, 1999, Cabot Trust owned 242 industrial properties located in 21
markets throughout the United States and containing approximately 30 million
rentable square feet. These properties were approximately 97% leased to 473
tenants at March 31, 1999.
2. The Formation Transactions, The Offerings and Ownership
Initial Capitalization
The initial capitalization of Cabot Trust consisted of 50 common shares of
beneficial interest (Common Shares), par value $.01 per share, issued for a
total consideration of $1,000. In connection with the Formation Transactions and
Offerings (described below), Cabot Trust issued an additional 18,586,714 Common
Shares.
The Formation Transactions
On February 4, 1998, under a Contribution Agreement executed by Cabot Trust,
Cabot L.P., Cabot Partners, and various other contributors, 122 real estate
properties, certain real estate advisory contracts and other assets were (i)
contributed to Cabot L.P. in exchange for Units in Cabot L.P. that are
exchangeable, subject to certain restrictions, for Common Shares of Cabot Trust
or (ii) contributed to Cabot Trust in exchange for Common Shares. The properties
contributed to Cabot Trust were contributed to Cabot L.P. in exchange for the
number of general partnership Units in Cabot L.P. equal to the number of Common
Shares exchanged for the property.
Cabot L.P. contributed the real estate advisory contracts to Cabot Advisors,
Inc. (Cabot Advisors) and received 100% of the non-voting preferred stock of
Cabot Advisors, which entitles it to 95% of Cabot Advisors' net operating cash
flow. All of the common stock of Cabot Advisors is owned by an officer of Cabot
Trust.
During the quarter ended March 31, 1999, Cabot L.P. issued 143,087 Units in
conjunction with an acquisition and Cabot Trust issued 21,931,507 Common Shares
in exchange for Units of Cabot L.P. As a result, Cabot Trust owned 92.9% of
Cabot L.P. as of March 31, 1999. The remaining 7.1%, which is owned by investors
holding Cabot L.P. Units, is considered minority interest.
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 1999
The Offerings
On February 4, 1998, Cabot Trust completed an offering of 8,625,000 Common
Shares at an offering price of $20.00 per share. In addition, Cabot Trust issued
1,000,000 Common Shares to a single investor in a private offering at $20.00 per
share (collectively, the Offerings). Cabot Trust contributed the net proceeds of
the Offerings to Cabot L.P. in exchange for the number of general partnership
interests in Cabot L.P. equal to the number of Common Shares sold in the
Offerings.
Distributions
On March 10, 1999, Cabot Trust and Cabot L.P. declared distributions of $.34 per
Share/Unit payable on April 30, 1999 to Shareholders or Unitholders of record as
of April 9, 1999.
3. Property Acquisitions
During the period from January 1, 1999 through March 31, 1999, Cabot Trust
acquired the following industrial properties:
<TABLE>
<CAPTION>
Property Location Property Type Square Feet Acquisition Cost
- -------------------------------------------------------------------------------------------------------
(000's)
<S> <C> <C> <C>
Diplomat Drive, Carrollton, TX Multitenant Distribution 82,756 $ 3,299
Bradley Lane, Carrollton, TX Workspace 56,531 $ 2,215
Stayton Drive, Jessup, MD Multitenant Distribution 125,800 $13,260
Bollman Place, Savage, MD Multitenant Distribution 104,409
Greenwood Place, Savage, MD Multitenant Distribution 77,424
Kentucky Drive, Florence, KY Workspace 128,077 $33,670
Foundation Drive, Elsmere, KY Workspace 62,560
Rudolph Way, Greendale, IN Workspace 50,000
Empire Drive, Bldg. B, Florence, KY Workspace 47,842
Empire Drive, Bldg. A, Florence, KY Workspace 47,840
Jamike Drive, Erlanger, KY Workspace 42,606
Turfway Road, Erlanger, KY Workspace 41,839
Turfway Road, Erlanger, KY Workspace 39,396
Jamike Drive, Erlanger, KY Workspace 38,900
Alum Creek Road, Columbus, OH Workspace 34,600
Commerce Boulevard, Loveland, OH Workspace 34,600
Foundation Drive, Elsmere, KY Workspace 33,000
Jamike Drive, Erlanger, KY Workspace 31,540
Turfway Road, Erlanger, KY Workspace 30,711
Jamike Drive, Erlanger, KY Workspace 26,949
Jamike Drive, Erlanger, KY Workspace 26,560
Jamike Drive, Erlanger, KY Workspace 24,640
Foundation Drive, Elsmere, KY Workspace 17,500
Jamike Drive, Erlanger, KY Workspace 15,000
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 1999
<TABLE>
<CAPTION>
Property Location Property Type Square Feet Acquisition Cost
- -------------------------------------------------------------------------------------------------------
(000's)
<S> <C> <C> <C>
Foundation Drive, Elsmere, KY Workspace 12,000
Foundation Drive, Elsmere, KY Workspace 12,000
Foundation Drive, Elsmere, KY Workspace 12,000
Foundation Drive, Elsmere, KY Workspace 10,000
Foundation Drive, Elsmere, KY Workspace 7,000
Power Line Drive, Elsmere, KY Workspace 6,000
Lexington Avenue, Eagan, MN Multitenant Distribution 184,429 $16,035
Trenton Lane, Plymouth, MN Multitenant Distribution 122,032
Cahill Road, Edina, MN Workspace 45,800
Monticello Lane, Maple Grove, MN Workspace 40,437
--------------- ---------
TOTALS 1,672,778 $68,479
=============== =========
</TABLE>
4. Debt Activity
In conjunction with certain acquisitions made during the quarter ended March 31,
1999, Cabot Trust assumed debt of $14.5 million with coupon interest rates
ranging from 7.375% to 9.375%, secured by properties with a net book value of
approximately $26 million. In addition, in February 1999, Cabot L.P. borrowed
$87.6 million secured by properties with a net book value of approximately $130
million at March 31, 1999. This borrowing has a fixed interest rate of 7.25% per
annum and a 10-year term. Monthly installments of principal and interest are due
based on a 25-year amortization rate, and any remaining balance outstanding is
due at the end of the 10-year term. An additional $5.6 million was borrowed
under this arrangement in April 1999. This borrowing is subject to various
customary covenants. The proceeds from the borrowing were used to repay a
portion of the balance outstanding under Cabot Trust's Acquisition Facility.
During 1998 Cabot Trust entered into an interest rate hedge transaction
(referred to as a Treasury Lock) involving the future sale of $100 million of
Treasury securities based on a rate of approximately 5.54% for such securities
in anticipation of a future debt issuance of at least $100 million with a
maturity of 10 years. At the March 31, 1999 contractual settlement date for this
transaction, Cabot Trust paid $2.5 million to its counter party in the
transaction, reflecting the decrease in Treasury security yields since the July
1998 commencement of the transaction. Because an offering of the size and
maturity contemplated when the interest rate hedge transaction was executed was
not completed by the time of, or shortly after, the March 31, 1999 settlement
date of the transaction, Cabot Trust recorded a loss related to the Settlement
of Treasury Lock of $2.5 million in the quarter ended March 31, 1999.
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 subsequent to Cabot Trust's commencement of operations (see Note 1).
Diluted earnings per share have been computed considering the dilutive effect of
the exercise
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 1999
of Unit and Share options granted by Cabot Trust. Basic and diluted earnings per
share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended
Three Months Ended March 31, 1998
March 31, 1999 (see Note 1)
------------------ ------------------
<S> <C> <C>
Basic:
Net Income $ 7,691,000 $ 3,478,000
------------ ------------
Weighted Average Shares 27,873,000 18,587,000
------------ ------------
Basic Earnings per Share $ .28 $ .19
============ ============
Diluted:
Net Income $ 7,691,000 $ 3,478,000
Effect of Unit Options -- (15,000)
------------ ------------
Income available to Common Shareholders, as adjusted $ 7,691,000 $ 3,463,000
------------ ------------
Weighted Average Shares 27,873,000 18,587,000
------------ ------------
Diluted Earnings per share $ .28 $ .19
============ ============
</TABLE>
Approximately 3 million of options granted are excluded from the above
calculations for 1999, since the impact of consideration of these options is
anti-dilutive.
<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
Cabot Trust 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. Cabot Trust
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. Cabot
Trust'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 Cabot Trust's cost of capital also influence operating
results.
Introduction
Cabot Trust 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. Cabot Trust owns and operates a diversified
portfolio of bulk distribution, multitenant distribution and "workspace" (light
industrial, R&D and similar facilities) properties throughout the United States.
At March 31, 1999, Cabot Trust owned 242 industrial properties, 34 of which
properties were acquired during the period from January 1, 1999, through March
31, 1999. Cabot Trust was formed on October 10, 1997, but did not begin
operations as a fully integrated real estate company until the completion of its
Formation Transactions and Offerings on February 4, 1998, the date of Cabot
Trust's initial public offering. Cabot Trust had no operations prior to February
4, 1998.
Results of Operations
Since Cabot Trust did not begin operations until February 4, 1998, the results
for the three months ended March 31, 1998, represent activity for only 56 days.
Quarter Ended March 31, 1999 Compared with Quarter Ended March 31, 1998
Net income attributable to common shareholders for the quarter ended March 31,
1999, totaled $7.7 million or $.28 per share, compared to $3.5 million or $.19
per share for the quarter ended March 31, 1998. The increase in net income
allocable to common shareholders is due to the conversion of Units to Common
Shares discussed in Note 2 to the financial statements, which resulted in a
decrease in the allocation of income to minority interest, but has no effect on
net income per share. The increase is also the result of the full quarter of
operations in 1999 compared to 56 days in 1998 and increased earnings due
primarily to increased investment in real properties.
Rental revenues were $34.1 million, including tenant reimbursements of $4.9
million, for the quarter ended March 31, 1999, compared to $14.7 million,
including tenant reimbursements of $1.9 million, for the quarter ended March 31,
1998. Total rental revenue of $20.9 million and $12.6 million was
<PAGE>
generated in 1999 and 1998, respectively, by the 121 properties owned as of
February 4, 1998 as a result of the Formation Transactions and still owned at
March 31, 1999, (the Baseline Properties) and total rental revenue of $13.2
million and $2.0 million in 1999 and 1998, respectively, was generated by the
121 properties acquired or developed subsequent to February 4, 1998. The
remainder of total rental revenue for 1998 relates to a property sold in 1998.
Depreciation and amortization related to real estate investments totaled $6.8
million and $3.2 million for the quarters ended March 31, 1999 and 1998,
respectively. The increase reflects the acquisition of real estate assets and 90
days of operations in 1999 compared to 56 days in 1998.
General and administrative expense increased $1.1 million, to $2.2 million for
the quarter ended March 31, 1999. The increase is primarily due to a full
quarter of operations in the quarter ended March 31, 1999, and also reflects an
increase in personnel as a result of the increase in the number of Cabot Trust's
properties from 152 to 242 at the end of each quarter.
Interest and other income which consists primarily of interest earned on Cabot
Trust's invested cash balances and earnings of Cabot Advisors, decreased
$272,000 from $474,000 for the quarter ended March 31, 1998 to $202,000 for the
quarter ended March 31, 1999. The decrease is primarily due to a decrease in the
average invested cash balance for the quarter ended March 31, 1999.
Interest expense for the quarter ended March 31, 1999 represents interest
incurred on $149.8 million of mortgage indebtedness outstanding at March 31,
1999, and interest on outstanding borrowings under Cabot Trust's Acquisition
Facility, net of $544,000 of interest capitalized to development projects.
Interest expense for 1998 was incurred for only 56 days on $13.4 million of
indebtedness.
During 1998 Cabot Trust entered into an interest rate hedge transaction
(referred to as a Treasury Lock) involving the future sale of $100 million of
Treasury securities based on a rate of approximately 5.54% for such securities
in anticipation of a future debt issuance of at least $100 million with a
maturity of 10 years. At the March 31, 1999 contractual settlement date for this
transaction, Cabot Trust paid $2.5 million to its counter party in the
transaction, reflecting the decrease in Treasury security yields since the July
1998 commencement of the transaction. Because an offering of the size and
maturity contemplated when the interest rate hedge transaction was executed was
not completed by the time of, or shortly after, the March 31, 1999 settlement
date of the transaction, Cabot Trust recorded a loss related to the Settlement
of Treasury Lock of $2.5 million in the quarter ended March 31, 1999.
Minority interest expense represents net income allocable to holders of Cabot
L.P. Units. At March 31, 1999, Cabot Trust owned 92.9% of Cabot L.P.; therefore,
minority interest ownership was 7.1%. For the quarter ended March 31, 1998,
minority interest ownership was 57.2%. As discussed in Note 2 to the financial
statements, during the quarter ended March 31, 1999 a significant number of
Units were converted to Common Shares, resulting in a decreased minority
interest expense.
Capital Resources and Liquidity
Cabot Trust 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. Cabot Trust may also consider equity financing when such financing
is available on attractive terms.
In March 1998 Cabot Trust established a $325, million unsecured revolving line
of credit facility (the Acquisition Facility) with Morgan Guaranty Trust Company
of New York as lead agent for a syndicate
<PAGE>
of banks. The Acquisition Facility is used to fund property acquisitions,
development activities, building expansions, tenant leasing costs and other
general corporate purposes. The Acquisition Facility contains certain limits and
requirements for debt to asset ratios, debt service coverage minimums, and other
limitations. Cabot Trust 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, Cabot Trust has purchased approximately $50
million of real estate assets subsequent to March 31, 1999, and as of May 11,
1999 has commitments to purchase approximately $36 million of additional real
estate assets. Because a number of conditions must be met prior to the closing,
it is uncertain as to whether all these assets will actually be purchased. The
completed real estate asset acquisitions were primarily funded through
Acquisition Facility borrowings and proceeds from the unsecured debt offering
described below.
Cabot Trust also has agreements to sell two buildings for an aggregate sales
price of approximately $17 million. These sales are expected to result in a net
gain of approximately $3.4 million for one transaction, and a net loss of
approximately $700,000 for the other. Because the sales are subject to a number
of conditions that must be met prior to closing, it is uncertain as to whether
these sales will actually be consummated.
As of March 31, 1999, Cabot L.P. had $149.8 million of fixed rate debt secured
by properties, $211 million of unsecured borrowings under its Acquisition
Facility and a 30.5% debt-to-total market capitalization ratio. The
debt-to-total market capitalization ratio is calculated based on Cabot Trust's
total consolidated debt as a percentage of the market value of outstanding
Common Shares and Units (not held by Cabot Trust) plus total debt. Cabot Trust
has entered into an interest rate cap arrangement relating to its LIBOR-based
Acquisition Facility for a notional amount of $124 million for the period
March 19, 1999 through June 19, 1999. The arrangement is intended to result in
limiting the LIBOR component of Cabot Trust's interest rate on an equivalent
amount of borrowings to 5.35% per annum.
On April 29, 1999, Cabot L.P. completed a private sale of $65 million of 8.625%
Series B Cumulative Redeemable Perpetual Preferred Units at $50 per unit.
Proceeds of the offering were used to repay borrowings under Cabot Trust's
Acquisition Facility. The Preferred Units, which may be called by Cabot Trust at
par on or after April 29, 2004, have no stated maturity or mandatory redemption
and are not convertible into any other securities of Cabot L.P.
On May 4, 1999, Cabot L.P. completed a $200 million senior unsecured debt
offering. The debt has a maturity of five years, a coupon rate of 7.125% and
was priced at 99.724%, resulting in a yield to maturity of 7.192%. The net
proceeds of the offering were $197.2 million and were used in part to repay
borrowings under Cabot Trust's Acquisition Facility.
Cabot Trust has assessed its Year 2000 readiness with respect to its internal
accounting and information systems. Cabot Trust 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 Cabot Trust. No significant
issues or costs of remediation have been identified with respect to such systems
or vendors. Cabot Trust has also completed its review of its other internal
systems (consisting primarily of property-related systems, such as elevators and
heating, ventilation and air conditioning systems) and has developed a
<PAGE>
Year 2000 remedial plan to address issues identified in such review, none of
which are considered by Cabot Trust to be material. Remediation costs to date
have not been material and Cabot Trust 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 its 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. Cabot Trust 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 Cabot Trust's
internal systems and significant vendors. Cabot Trust 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 third parties,
including tenants, with whom Cabot Trust conducts its business.
Cash and cash equivalents totaled $34.6 million at March 31, 1999. Cash provided
by operating activities for the three months ended March 31, 1999, was $20.8
million.
<PAGE>
ITEM 3. QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Cabot Trust's exposure to market risk has not changed materially from its
exposure at December 31, 1998.
<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 January 29, 1999, Cabot Trust filed a Form 8-K dated December
29, 1998, to report information, under Items 5 and 7 of Form 8-K,
including financial statements under Rule 3-14 of Regulation S-X
of acquired and to be acquired real estate.
On March 22, 1999, Cabot Trust filed a Form 8-K dated March 22,
1999, which was amended on April 26, 1999, to report information,
under Items 5 and 7 of Form 8-K, including pro forma financial
statements under Item 11 of Regulation S-X of Cabot Trust for the
year ended December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 13th day of May 1999.
CABOT INDUSTRIAL TRUST
Registrant
5/13/99 /s/ Neil E. Waisnor
- ------------------------- ------------------------------------
Date Neil E. Waisnor
Senior Vice President-Finance,
Treasurer, Secretary
5/13/99 /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 MARCH 31, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
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<PERIOD-END> MAR-31-1999
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