===============================================================================
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, 2000
Commission file number 000-30571
ARDEN REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland 95-4599813
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11601 Wilshire Boulevard,
4th Floor
Los Angeles, California 90025-1740
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (310) 966-2600
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.
(1) Yes X No
----- -----.
(2) Yes No X
----- -----.
As of May 31, 2000 there were 65,466,794 shares of the registrant's common
operating partnership units issued and outstanding.
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
ARDEN REALTY LIMITED PARTNERSHIP
FORM 10-Q
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and
<S> <C>
December 31, 1999..................................................................3
Consolidated Statements of Income for the three months ended
March 31, 2000 and 1999 (Unaudited).................................................4
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 (Unaudited).................................................5
Notes to Consolidated Financial Statements.............................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk...........................18
PART II. OTHER INFORMATION..............................................................................19
SIGNATURES.....................................................................................20
</TABLE>
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
------- --------------------
<TABLE>
<CAPTION>
Arden Realty Limited Partnership
Consolidated Balance Sheets
(in thousands, except unit data)
March 31, December 31,
2000 1999
---------------- ------------
(unaudited)
ASSETS
Commercial properties:
<S> <C> <C>
Land.................................................................... $ 467,157 $ 467,157
Buildings and improvements.............................................. 1,846,183 1,833,052
Tenant improvements and leasing costs................................... 175,253 153,161
----------- -----------
2,488,593 2,453,370
Less: accumulated depreciation......................................... (176,545) (158,590)
----------- -----------
2,312,048 2,294,780
Properties under development............................................ 210,514 183,349
----------- -----------
Net investment in real estate......................................... 2,522,562 2,478,129
Cash and cash equivalents.................................................. 2,501 7,056
Restricted cash............................................................ 18,685 18,513
Rent and other receivables, net of allowance............................... 11,486 11,785
Due from general partner................................................... 2,595 2,446
Mortgage notes receivable, net of discount................................. 13,783 13,847
Deferred rent.............................................................. 25,330 23,932
Prepaid financing costs, expenses and other assets, net of amortization.... 20,313 17,196
----------- -----------
Total assets.......................................................... $ 2,617,255 $ 2,572,904
=========== ===========
LIABILITIES
Mortgage loans payable..................................................... 621,171 740,806
Unsecured lines of credit.................................................. 212,850 288,850
Unsecured senior notes, net of discount.................................... 249,079 --
Accounts payable and accrued expenses...................................... 28,181 34,482
Security deposits.......................................................... 18,074 16,073
------------- -----------
Total liabilities..................................................... 1,129,355 1,080,211
Minority interests......................................................... 2,980 2,953
PARTNER'S CAPITAL
Preferred partner, 2,000,000 Series B Cumulative Redeemable Preferred Units 50,000
outstanding at March 31, 2000 and December 31, 1999..................... 50,000
General and limited partners, 65,467,000 and 65,509,000 common operating
partnership units outstanding at March 31, 2000 and December 31, 1999,
respectively........................................................... 1,436,240 1,441,907
Receivable from general partner for common operating partnership units..... (1,320) (2,167)
----------- -----------
Total partners' capital............................................... 1,484,920 1,489,740
----------- -----------
Total liabilities and partners' capital............................... $ 2,617,255 $ 2,572,904
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
Arden Realty Limited Partnership
Consolidated Statements of Income
(in thousands, except per unit data)
(unaudited)
Three Months Ended
March 31,
------------------------
2000 1999
---------- ---------
<S> <C> <C>
Revenue............................................................................ $ 89,678 $ 79,336
Property operating expenses........................................................ 25,347 23,510
--------- --------
64,331 55,826
General and administrative expenses................................................ 1,669 1,291
Interest expense................................................................... 17,852 13,183
Depreciation and amortization...................................................... 20,147 16,215
Interest and other income.......................................................... (855) (670)
--------- --------
Income before minority interest.................................................... 25,518 25,807
Minority interests................................................................. (30) (54)
--------- --------
Net income......................................................................... $ 25,488 $ 25,753
========= ========
Net income allocated to:
Preferred units............................................................... $ 1,078 $ --
========= ========
Common units.................................................................. $ 24,410 $ 25,753
========= ========
Net income per common operating partnership unit:
Basic......................................................................... $ 0.37 $ 0.39
========= ==========
Diluted....................................................................... $ 0.37 $ 0.39
========= ==========
Weighted average common operating partnership units outstanding:
Basic......................................................................... 65,490 65,509
========= =========
Diluted....................................................................... 65,564 65,602
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Arden Realty Limited Partnership
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
--------------------------------
2000 1999
--------------- --------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income........................................................................ $ 25,488 $ 25,753
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests.............................................................. 30 54
Depreciation and amortization................................................... 20,147 16,215
Amortization of loan costs...................................................... 884 568
Changes in operating assets and liabilities:
Rent and other receivables................................................... 363 1,801
Due from general partner..................................................... (149) (176)
Deferred rent................................................................ (1,398) (1,609)
Prepaid financing costs, expenses and other assets........................... (4,001) (6,091)
Accounts payable and accrued expenses........................................ 2,124 5,730
Security deposits............................................................ 2,001 178
----------- ----------
Net cash provided by operating activities......................................... 45,489 42,423
----------- ----------
INVESTING ACTIVITIES:
Acquisitions and improvements to investment in real estate........................ (73,082) (44,614)
----------- ----------
FINANCING ACTIVITIES:
Proceeds from mortgage loans...................................................... 31,500 30,002
Repayments of mortgage loans...................................................... (151,135) (170)
Proceeds from unsecured lines of credit........................................... 21,000 12,200
Repayments of unsecured lines of credit........................................... (97,000) (12,200)
Proceeds from unsecured senior notes, net of discount............................. 249,079 --
Distributions to preferred operating partnership unit holders..................... (1,078) --
Distributions and redemption paid to common operating partnership unit holders.... (29,153) (27,514)
Increase in restricted cash....................................................... (172) (2,776)
Distributions to minority interests............................................... (3) (28)
----------- ----------
Net cash provided by (used in) financing activities............................... 23,038 (486)
----------- ------------
Net decrease in cash and cash equivalents......................................... (4,555) (2,677)
Cash and cash equivalents at beginning of period.................................. 7,056 4,578
----------- ----------
Cash and cash equivalents at end of period........................................ $ 2,501 $ 1,901
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, net of amount capitalized............... $ 19,227 $ 15,102
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Arden Realty Limited Partnership
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
1. DESCRIPTION OF BUSINESS
The terms "Operating Partnership", "us", "we" and "our" as used in this
report refer to Arden Realty Limited Partnership. The term "Arden Realty" refers
to Arden Realty, Inc., or Arden Realty Limited Partnership.
We are an operating partnership that owns, manages, leases, develops,
renovates and acquires commercial properties located in Southern California.
Arden Realty, a real estate investment trust, or REIT, is our sole general
partner and, as of March 31, 2000 and December 31, 1999, owned 96.7% of our
common partnership units, or common OP Units. Commencing with its taxable year
ended December 31, 1996, Arden Realty has operated and qualified as a REIT for
federal income tax purposes.
Arden Realty conducts substantially all of its operations through us
and our subsidiaries. As of March 31, 2000, we directly or indirectly owned a
portfolio of 142 primarily offices properties containing approximately 18.5
million net rentable square feet and three properties with approximately 700,000
square feet under development.
Arden Realty's interest in us entitles it to share in cash
distributions from, and in our profits and losses in proportion to its
percentage ownership. Specific individuals and entities own our remaining common
OP Units, including Messrs. Ziman and Coleman, our Chairman and Chief Executive
Officer and our President and Chief Operating Officer, respectively, together
with other entities and persons who were issued common OP Units in connection
with our acquisition of specific properties previously owned by those entities
and persons. Holders of common OP Units are entitled to cause us to redeem their
common OP Units for cash. Arden Realty, however, may, instead of paying cash,
elect to exchange those common OP Units for shares of its common stock on a
one-for-one basis, subject to specific limitations. With each redemption or
exchange of common OP Units, Arden Realty's percentage interest in us will
increase.
As our sole general partner, Arden Realty generally has the exclusive
power under our partnership agreement to manage us and conduct our business,
subject to limited exceptions. Arden Realty's board of directors manages our
affairs. We cannot be terminated until the year 2096 without the approval of a
majority of our partners or in connection with the sale of all or substantially
all of our assets, a business combination, a judicial decree or the redemption
of all the OP Units held by our limited partners.
The accompanying consolidated financial statements include our
accounts, and the accounts of our other subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
2. INTERIM FINANCIAL DATA
The accompanying consolidated financial statements should be read in
conjunction with our 1999 financial statements and related notes thereto
included in our registration statement on Form S-4 as filed with the Securities
and Exchange Commission on April 21, 2000. The accompanying financial
information reflects all adjustments, which are, in our opinion, of a normal
recurring nature and necessary for a fair presentation of our financial
position, results of operations and cash flows for the interim periods. Interim
results of operations are not necessarily indicative of the results to be
expected for the full year.
Certain prior period amounts have been reclassified to conform with the
current period presentation.
6
<PAGE>
3. MORTGAGE LOANS PAYABLE, UNSECURED LINES OF CREDIT AND UNSECURED SENIOR
NOTES
<TABLE>
<CAPTION>
A summary of our outstanding indebtedness as of March 31, 2000 and
December 31, 1999 is as follows:
Stated Annual
March 31, Interest Rate at Number of Maturity
2000 December 31, March 31, 2000 Fixed/Floating Properties Month/
Type of Debt (unaudited) 1999 (unaudited) Rate Securing Loan Year
------------ ----------- ------------- ----------------- ------------- ------------- ------
(in thousands)
MORTGAGE LOANS PAYABLE:
Fixed Rate
----------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Financing I(1).... $ 175,000 $ 175,000 7.52% Fixed 18 6/04
Mortgage Financing III(2).. 136,100 136,100 6.74 Fixed 22 4/08
Mortgage Financing IV(2)... 111,200 111,200 6.61 Fixed 12 4/08
Mortgage Financing V(3).... 113,566 114,016 6.94 Fixed 12 4/09
Mortgage Financing VI(3)... 22,392 22,426 7.54 Fixed 3 4/09
Westwood Center(3)......... 14,778 14,859 8.09 Fixed 1 5/03
Activity Business Center(3) 7,981 8,003 8.85 Fixed 1 5/06
299 North Euclid(1)........ -- 5,000 7.00 Fixed 1 7/02
145 South Fairfax(3)....... 4,042 4,050 8.93 Fixed 1 1/27
Marin Corporate Center(3).. 3,137 3,168 9.00 Fixed 1 7/15
Conejo Business Center(3).. 3,083 3,114 8.75 Fixed (Note 4) 7/15
Conejo Business Center(3).. 1,343 1,358 7.88 Fixed (Note 4) 7/15
----------- -----------
592,622 598,294
Floating Rate
-------------
Lehman Prepayable Term Loan
II and III(1)........... -- 120,475 -- LIBOR + 2.25% 9 11/00
Construction Loan(6)....... 28,549 22,037 8.13 LIBOR + 2.0% (Note 5) 12/00
----------- -----------
621,171 740,806
UNSECURED LINES OF CREDIT:
Floating Rate
-------------
Wells Fargo(1)............. 212,850 280,850 7.38 LIBOR + 1.3% -- 6/00
City National Bank(1)...... -- 8,000 -- Prime Rate - 0.875% -- 8/00
----------- -----------
212,850 288,850
UNSECURED SENIOR NOTES:
Fixed Rate
----------
2005 Notes(7).............. 199,488 -- 8.88 Fixed -- 3/05
2010 Notes(7).............. 49,591 -- 9.15 Fixed -- 3/10
----------- -----------
249,079 --
----------- -----------
Total Debt.............. $ 1,083,100 $ 1,029,656
=========== ===========
</TABLE>
----------
(1) Requires monthly payments of interest only, with outstanding principal
balance due upon maturity.
(2) Requires monthly payments of interest only for five years and monthly
payments of principal and interest thereafter.
(3) Requires monthly payments of principal and interest.
(4) Both mortgage loans are secured by the Conejo Business Center property.
(5) This loan is secured by certain property and construction improvements
relating to the 6060 Center Drive office building in the Howard Hughes
Center.
(6) All interest and principal due upon maturity. This loan matures in
December 2000 with two one-year extension options.
(7) Requires semi-annual interest payments only, with principal balance due
upon maturity.
On January 25, 2000, we expanded one of our two prepayable term loans
with an affiliate of Lehman Brothers totaling $120.5 million by $25 million,
resulting in a combined outstanding balance of $145.5 million for both loans.
On March 17, 2000, we issued $250 million of senior unsecured notes in
two tranches. One tranche was for $200 million at an interest rate of 8.875% due
in March 2005 and the other tranche was for $50 million at an interest rate of
9.150% due in March 2010. These notes are our senior unsecured obligations and
pay interest semi-annually on March 1, and September 1, of each year. Net
proceeds from this offering were used to repay two prepayable term loans to an
affiliate of Lehman Brothers described above totaling $145.5 million, a $5.0
million mortgage loan and approximately $96.1 million under our unsecured lines
of credit. These senior unsecured notes were issued in a private placement in
reliance upon an exemption from registration provided by Rule 144A under the
Securities Act. On April 21, 2000, we filed a registration statement with the
Securities and Exchange Commission enabling the holders of the notes to exchange
the privately placed notes for publicly traded notes.
7
<PAGE>
That registration statement became effective on May 10, 2000 and the
holders of the privately placed notes will have until June 5, 2000 to exchange
such notes for our registered notes.
On May 3, 2000, we extended our unsecured line of credit with a group
of banks led by Wells Fargo, or the Lenders. The extended line of credit
provides for borrowings up to $275 million with an option to increase the amount
to $325 million and bears interest at a rate ranging between LIBOR plus 1.15%
and LIBOR plus 1.80% (including an annual facility fee ranging from 0.20% to
0.40% based on the aggregate amount of the facility) depending on our unsecured
debt rating. In addition, as long as we maintain an unsecured debt rating of
BBB-/Baa3 or better, the agreement contains a competitive bid option, whereby
the Lenders may bid on the interest rate to be charged for up to $137.5 million
of the unsecured line of credit. Under certain circumstances, we also have the
option to convert the interest rate on this line of credit to the prime rate
plus 0.5%. This line of credit matures in May 2003 with an option to extend the
maturity date for one year.
4. PARTNERS' CAPITAL
In January 2000, we made distributions of $0.445 per common operating
partnership unit.
5. REVENUE FROM RENTAL OPERATIONS AND PROPERTY OPERATING EXPENSES
Revenue from rental operations and property operating expenses are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
2000 1999
---------- ----------
(unaudited)
Revenue from Rental Operations:
<S> <C> <C>
Rental................................................. $ 77,513 $ 69,510
Tenant reimbursements.................................. 3,592 3,467
Parking, net of expenses .............................. 3,972 3,182
Other rental operations................................ 4,601 3,177
---------- ----------
89,678 79,336
---------- ----------
Property Operating Expenses:
Repairs and maintenance................................ 8,402 7,670
Utilities.............................................. 6,110 6,341
Real estate taxes...................................... 6,264 5,747
Insurance.............................................. 1,041 982
Ground rent............................................ 198 181
Marketing and other.................................... 3,332 2,589
---------- ----------
25,347 23,510
---------- ----------
$ 64,331 $ 55,826
========== ==========
</TABLE>
6. RELATED PARTY TRANSACTIONS
Andrew Sobel resigned as Executive Vice President and Director of
Property Operations of Arden Realty effective February 18, 2000. At the time of
his termination, Mr. Sobel surrendered 42,553 shares of Arden Realty common
stock underlying a promissory note in the amount of $1.0 million payable to
Arden Realty and executed a new promissory note in the amount of $223,887,
representing the difference between the value of the common stock surrendered
and the unpaid principal and interest on his original promissory note. The new
promissory note bears interest at 6.56%, with all accrued interest and principal
due on February 18, 2002. In addition, effective with his termination, Mr. Sobel
entered into a consulting and non-competition agreement with Arden Realty for a
term of two years. Under this agreement, Mr. Sobel will receive compensation of
$6,000 per month, which will be applied against the unpaid interest and
principal on the new promissory note.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
------ -----------------------------------------------------------------------
Overview
THE FOLLOWING DISCUSSION RELATES TO OUR CONSOLIDATED FINANCIAL
STATEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE 1999 FINANCIAL STATEMENTS
AND RELATED NOTES THERETO INCLUDED IN OUR REGISTRATION STATEMENT ON FORM S-4. IN
THIS FORM 10-Q, THE TERMS "US," "WE," AND "OUR" REFERS TO ARDEN REALTY LIMITED
PARTNERSHIP AND OUR AFFILIATED ENTITIES AS A CONSOLIDATED GROUP AND THE TERM
"ARDEN REALTY" REFERS TO ARDEN REALTY, INC.
We are a full service real estate organization that owns, manages,
leases, develops, renovates and acquires commercial properties located in
Southern California. Arden Realty, Inc., a real estate investment trust, or
REIT, is our sole general partner and, as of March 31, 2000, owned 96.7% of our
common operating partnership units. Arden Realty conducts substantially all of
its operations through us and our subsidiaries. We are managed by 11 senior
executive officers who have an average of 16 years of experience in the real
estate industry. We perform all property management, accounting, finance and
acquisition activities and a majority of our leasing transactions with our own
staff of approximately 300 employees.
We are Southern California's largest publicly traded office landlord as
measured by total net rentable square feet owned, as of March 31, 2000. Since
our formation in 1996, we have acquired 118 properties containing approximately
14.5 million net rentable square feet for a total purchase price of
approximately $1.9 billion. As of March 31, 2000, our portfolio consisted of 142
primarily suburban office properties containing approximately 18.5 million net
rentable square feet and three properties with approximately 700,000 net
rentable square feet under development. As of March 31, 2000, our properties
were approximately 95.4% leased, excluding three existing properties under
renovation.
Our primary business strategy is to actively manage our portfolio to
achieve gains in occupancy and rental rates, maximize income from ancillary
operations and services and to reduce operating expenses. When market conditions
permit, we may also develop or acquire new properties in submarkets where we can
use our local market expertise and extensive real estate experience.
9
<PAGE>
RESULTS OF OPERATIONS
Our financial position and operating results are primarily comprised of
our portfolio of commercial properties and income derived from those properties.
Therefore, financial data from period to period will be affected by the timing
of significant property renovations, development and acquisitions.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE MONTHS
ENDED MARCH 31, 1999 (IN THOUSANDS, EXCEPT NUMBER OF PROPERTIES AND
PERCENTAGES):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------- Dollar Percent
2000 1999 Change Change
---------- ---------- ------- --------
(unaudited)
REVENUE
Revenue from rental operations:
<S> <C> <C> <C> <C>
Rental................................. $ 77,513 $ 69,510 $ 8,003 12%
Tenant reimbursements.................. 3,592 3,467 125 4%
Parking, net of expenses............... 3,972 3,182 790 25%
Other rental operations................ 4,601 3,177 1,424 45%
----------- ----------- ---------- -----
89,678 79,336 10,342 13%
Interest and other income................ 855 670 185 28%
----------- ----------- ---------- -----
Total revenue.......................... $ 90,533 $ 80,006 $ 10,527 13%
=========== =========== ========== =====
EXPENSES
Property operating expenses:
Repairs and maintenance................ $ 8,402 $ 7,670 $ 732 10%
Utilities.............................. 6,110 6,341 (231) (4%)
Real estate taxes...................... 6,264 5,747 517 9%
Insurance.............................. 1,041 982 59 6%
Ground rent............................ 198 181 17 9%
Marketing and other.................... 3,332 2,589 743 29%
----------- ----------- ---------- -----
Total property operating expenses... 25,347 23,510 1,837 8%
General and administrative............... 1,669 1,280 389 30%
Interest................................. 17,852 13,183 4,669 35%
Depreciation and amortization............ 20,147 16,215 3,932 24%
----------- ----------- ---------- -----
Total expenses......................... $ 65,015 $ 54,188 $ 10,827 20%
=========== =========== ========== =====
OTHER DATA:
NUMBER OF PROPERTIES
Acquired during period................... -- 1
Owned at end of period................... 142 139
NET RENTABLE SQUARE FEET:
Acquired during period................... -- 60
Owned at end of period................... 18,492 18,028
</TABLE>
10
<PAGE>
The increase in revenue from rental operations and property operating
expenses for the three months ended March 31, 2000 as compared to the same
period in 1999 was primarily due to the four properties we acquired after
January 1, 1999.
Following is a summary of the increase in revenue from rental
operations and property operating expenses that relates to the nine properties
we acquired or placed in renovation after January 1, 1999 and for the 133
stabilized properties we owned for all of the three month periods ended March
31, 2000 and 1999 (in thousands, except number of properties).
<TABLE>
<CAPTION>
Stabilized Properties Owned
Properties Acquired or for all of the
Placed in Renovation Three Months Ended
Total Variance after January 1, 1999 March 31, 1999 and 2000 (1)
-------------- ----------------------- ----------------------------
REVENUE FROM RENTAL OPERATIONS:
<S> <C> <C> <C>
Rental....................................... $ 8,003 $ 4,143 $ 3,860
Tenant reimbursements........................ 125 314 (189)
Parking, net of operations................... 790 321 469
Other rental operations...................... 1,424 485 939
-------- --------- --------
$ 10,342 $ 5,263 $ 5,079
======== ========= ========
PROPERTY OPERATING EXPENSES:
Repairs and maintenance...................... $ 732 $ 519 $ 213
Utilities.................................... (231) 407 (638)
Real estate taxes............................ 517 383 134
Insurance.................................... 59 54 5
Ground rent.................................. 17 - 17
Marketing and other.......................... 743 157 586
-------- --------- --------
$ 1,837 $ 1,520 $ 317
======== ========= ========
OTHER DATA:
Number of properties......................... 9 133
Net rentable square feet..................... 1,592 16,900
</TABLE>
----------
(1) See the Same Properties analysis below.
Interest and other income increased by approximately $185,000 or 28%
during the three months ended March 31, 2000, as compared to the same period in
1999, primarily due to higher interest income earned in 2000 on higher
restricted cash balances required by certain mortgage loans entered into after
March 31, 1999.
General and administrative expenses as a percentage of total revenues
were approximately 1.8% of total revenues during the three months ended March
31, 2000, which were consistent with general and administrative expenses of 1.6%
of total revenues during the same period in 1999.
Interest expense increased approximately $4.7 million or 35% during the
three months ended March 31, 2000, as compared to the same period in 1999. This
increase was due to higher outstanding debt balances in 2000, primarily used to
fund property acquisitions, capital expenditures and tenant improvements, as
well as higher effective interest rates in 2000.
Depreciation and amortization expense increased by approximately $3.9
million, or 24%, during the three months ended March 31, 2000, primarily due to
depreciation related to properties acquired and for capital expenditures and
tenant improvements placed in service since April 1, 1999.
11
<PAGE>
Same Properties
Following is a comparison of property operating data computed under
generally accepted accounting principles, "GAAP Basis," and excluding the
straight-line rent adjustment "Cash Basis," for the 133 stabilized properties we
owned for the entire three month periods ended March 31, 2000 and 1999 (in
thousands, except number of properties and percentages):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
Dollar Percent
2000 1999 Change Change
------------- ------------- ------------- ------------
(Unaudited)
GAAP BASIS:
<S> <C> <C> <C> <C>
Revenue from rental operations................. $ 83,066 $ 77,987 $ 5,079 6.5%
Property operating expenses.................... 23,433 23,116 317 1.3%
--------- --------- --------- ---------
Net..................................... $ 59,633 $ 54,871 $ 4,762 8.7%
========= ========= ======== =========
CASH BASIS (1):
Revenue from rental operations................. $ 81,892 $ 76,376 $ 5,516 7.2%
Property operating expenses.................... 23,433 23,116 317 1.3%
--------- --------- --------- ---------
Net..................................... $ 58,459 $ 53,260 $ 5,199 9.8%
========= ========= ======== =========
Number of stabilized properties................ 133 133
Average occupancy.............................. 93.9% 91.0%
Net rentable square feet....................... 16,900 16,900
Percentage of total portfolio.................. 91.4% 96.2%
</TABLE>
----------
(1) Excludes straight-line rent adjustments.
Revenue from rental operations for these properties, computed on a GAAP
basis, increased by approximately $5.1 million, or 6.5%, during the three months
ended March 31, 2000, compared to the same period in 1999, primarily due to a
2.9% increase in average occupancy and increases in average rental rates. This
increase in occupancy not only contributed to higher rental revenue but also
resulted in higher parking income and miscellaneous tenant charges.
Miscellaneous tenant charges include revenue from after-hour utility billings,
signage, satellite income and lease termination settlements. Lease termination
settlements totaled approximately $2.5 million in 2000 compared to $2.6 million
in 1999 for these properties.
Excluding only the straight-line rent adjustments for these properties,
revenue from rental operations for the three months ended March 31, 2000,
computed on a Cash Basis, increased by approximately $5.5 million or 7.2%.
Property operating expenses for these properties increased by
approximately $300,000, or 1.3%, during the three months ended March 31, 2000,
compared to the same period in 1999, primarily due to higher repair and
maintenance, real estate taxes, and marketing and other expenses in 2000,
partially offset by lower utilities expense. Increases in certain repair and
maintenance expense items were primarily due to the approximate 2.9% increase in
average occupancy for these properties in 2000. Due to our continued focus on
raising our portfolio-wide occupancy, certain marketing and tenant retention
related expenses were also higher in 2000. These increases in property operating
expenses in 2000 were partially offset by an approximate $638,000 decrease in
utility expense in 2000 as a result of energy savings achieved from energy
enhancing capital improvements completed during 1999.
Liquidity and Capital Resources
Cash Flows
Cash provided by operating activities increased by approximately $3.1
million to $45.5 million for the three months ended March 31, 2000, as compared
to $42.4 million for the same period in 1999, primarily due to the operating
results of the four properties acquired since January 1, 1999 as well as the
increases in occupancy and rates throughout our portfolio.
12
<PAGE>
Cash used in investing activities increased by approximately $28.5
million, to approximately $73.1 million for the three months ended March 31,
2000 compared to approximately $44.6 million for the same period in 1999,
primarily due to our increased development and renovation activity and tenant
improvements build out in 2000.
Cash provided by financing activities increased by approximately $23.5
million to $23.0 million for the three months ended March 31, 2000, as compared
to an outflow of $0.5 million for the same period in 1999. Cash provided by
financing activities for the three months ended March 31, 2000 consisted
primarily of net proceeds from our offering of unsecured senior notes partially
offset by repayments of mortgage loans, paydowns of our unsecured lines of
credit and distributions to stockholders and minority interests.
Available Borrowings, Cash Balance and Capital Resources
We have an unsecured line of credit with a total commitment of $10
million from City National Bank (the "City National Bank Credit Facility"). The
City National Bank Credit Facility accrues interest at the City National Bank
Prime Rate less 0.875% and is scheduled to mature on August 1, 2000. Proceeds
from the City National Bank Credit Facility will be used, among other things, to
provide funds for tenant improvements and capital expenditures and provide for
working capital and other corporate purposes. As of March 31, 2000, there was no
outstanding balance on the City National Bank Credit Facility and $10 million
was available for additional borrowing.
On January 25, 2000, we expanded one of our two prepayable term loans
with an affiliate of Lehman Brothers totaling $120.5 million by $25 million,
resulting in a combined outstanding balance of $145.5 million for both loans.
The total outstanding balance on these loans was repaid on March 17, 2000 with
the proceeds from the issuance of $250 million in senior unsecured notes
described below.
On March 17, 2000, we issued $250 million of senior unsecured notes in
two tranches. One tranche was for $200 million at an interest rate of 8.875% due
in March 2005 and the other tranche was for $50 million at an interest rate of
9.150% due in March 2010. These notes are our senior unsecured obligations and
pay interest semi-annually on March 1, and September 1, of each year. Net
proceeds from this offering were used to repay the two prepayable term loans to
an affiliate of Lehman Brothers described above totaling $145.5 million, a $5.0
million mortgage loan and approximately $96.1 million under our unsecured lines
of credit.
On May 3, 2000, we extended our unsecured line of credit with a group
of banks led by Wells Fargo, or the Lenders. The extended line of credit
provides for borrowings up to $275 million with an option to increase the amount
to $325 million and bears interest at a rate ranging between LIBOR plus 1.15%
and LIBOR plus 1.80% (including an annual facility fee ranging from .20% to .40%
based on the aggregate amount of the facility) depending on our unsecured debt
rating. In addition, as long as we maintain an unsecured debt rating of
BBB-/Baa3 or better, the agreement contains a competitive bid option, whereby
the Lenders may bid on the interest rate to be charged for up to $137.5 million
of the unsecured line of credit. Under certain circumstances, we also have the
option to convert the interest rate on this line of credit to the prime rate
plus 0.5%. This line of credit matures in May 2003 with an option to extend the
maturity date for one year.
Following is a summary of scheduled principal payments for our total
debt outstanding as of March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
2000....................................................... $ 30,664(1)
2001....................................................... 3,004
2002....................................................... 3,236
2003....................................................... 232,307
2004....................................................... 182,445
2005....................................................... 207,472
2006....................................................... 15,344
2007....................................................... 8,936
2008....................................................... 230,429
2009....................................................... 112,104
Thereafter................................................. 57,159
----------
Total.................................................... $1,083,100
==========
</TABLE>
----------
(1) Reflects extension of our Wells Fargo line of credit to May 2003.
13
<PAGE>
Following is certain other information related to our indebtedness as
of March 31, 2000 (in thousands, except percentage data):
<TABLE>
<CAPTION>
Unsecured and Secured Debt Analysis:
------------------------------------
Weighted
Average
Balance Percent Interest Rate(1)
--------------- ---------------- ----------------
<S> <C> <C> <C>
Unsecured Debt...................... $ 461,929 43% 8.47%
Secured Debt........................ 621,171 57% 7.47%
----------- ------ -----
Total Debt.......................... $ 1,083,100 100% 7.90%
=========== ====== =====
Floating and Fixed Rate Debt Analysis:
--------------------------------------
Weighted
Average
Balance Percent Interest Rate(1)
--------------- ---------------- ----------------
Floating Rate Debt.................. $ 241,399 22% 7.99%
Fixed Rate Debt..................... 841,701 78% 7.87%
----------- ------ -----
Total Debt.......................... $ 1,083,100 100% 7.90%
=========== ====== =====
----------
(1) Includes amortization of prepaid financing costs.
Total interest incurred and the amount capitalized was as follows (in
thousands):
For the Three Months Ended March 31,
------------------------------------
2000 1999
-------- ------
Total interest incurred............... $20,693 $ 15,487
Amount capitalized.................... (2,841) (2,304)
------- --------
Amount expensed....................... $17,852 $ 13,183
======= ========
</TABLE>
As of March 31, 2000, we had $21.2 million in cash and cash
equivalents, including $18.7 million in restricted cash representing interest
bearing cash deposits required by five of our mortgage loans payable. Also
included in restricted cash was $4.9 million in cash impound accounts for real
estate taxes and insurance as required by several of our mortgage loans payable.
As of March 31, 2000, we had $97.1 million available under our lines of
credit.
We expect to continue meeting our short-term liquidity and capital
requirements generally through net cash provided by operating activities and
proceeds from our lines of credit. We believe that the net cash provided by
operating activities will continue to be sufficient to pay any distributions
necessary to enable Arden Realty to continue qualifying as a REIT. We also
believe the foregoing sources of liquidity will be sufficient to fund our
short-term liquidity needs for the foreseeable future, including recurring
non-revenue enhancing capital expenditures, tenant improvements and leasing
commissions.
We expect to meet our long-term liquidity and capital requirements such
as scheduled principal repayments, renovation costs, property acquisitions and
other non-recurring capital expenditures through the refinancing of existing
indebtedness and/or the issuance of long-term debt and equity securities.
14
<PAGE>
FUNDS FROM OPERATIONS
The following table reflects the calculation of our funds from
operations for the three month periods ended March 31, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
--------- -------
Funds From Operations(1): (Unaudited)
<S> <C> <C>
Net income.......................................... $ 25,488 $ 25,753
Depreciation and amortization of real estate assets. 20,147 16,215
Distributions on Preferred Operating Partnership Units (1,078) -
-------- --------
Funds From Operations............................ $ 44,557 $ 41,968
======== ========
</TABLE>
----------
(1) We consider funds from operations, as defined by The National Association
of Real Estate Investment Trusts, or NAREIT, to be a useful financial
measure of our operating performance. We believe that funds from
operations provides investors with an additional basis to evaluate our
ability to service debt and to fund acquisitions and other capital
expenditures. Funds from operations should not be considered an
alternative to net income determined in accordance with GAAP, as an
indicator of our financial performance, as a substitute for cash flow from
operating activities determined in accordance with GAAP or as a measure of
our liquidity. Funds from operations also is not necessarily indicative of
funds available to fund our cash needs, including our ability to service
our debt.
The White Paper on funds from operations approved by the Board of
Governors of NAREIT in October 1999 defines funds from operations as net
income or loss computed in accordance with GAAP, excluding gains or
losses, from extraordinary items, as defined by GAAP, and gains and losses
from sales of depreciable operating property plus real estate-related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. We compute funds from operations in
accordance with standards established by the White Paper which may differ
from the standards used by other real estate companies and, accordingly,
our funds from operations may not be comparable to those companies' funds
from operations.
PORTFOLIO AND LEASE INFORMATION
The following tables set forth certain information regarding our
properties as of March 31, 2000.
<TABLE>
<CAPTION>
PORTFOLIO SUMMARY
Property Operating
Income for the Three
Months Ended
Approximate Net Rentable Square Feet March 31, 2000
Location Number of Properties (in thousands) (in thousands)
--------------------- --------------------------------------- ------------------------------------------ -------------------
Industrial % of Industrial % of % of
Office and Retail Total Total Office and Retail Total Total Total Total
------ ---------- ----- ----- ------ ---------- ----- ----- ----- -----
Los Angeles County
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
West.............. 28 1 29 20% 4,684 37 4,721 26% $ 23,432 36%
North............. 31 - 31 22% 2,767 - 2,767 15% 9,664 15%
South 16 - 16 12% 2,202 - 2,202 12% 6,236 10%
Central 3 - 3 2% 609 - 609 3% 1,799 3%
-------- ----------- -------- --------- --------- ----------- ---------- --------- ---------- --------
Subtotal........ 78 1 79 56% 10,262 37 10,299 56% 41,131 64%
Orange County....... 21 - 21 15% 3,317 - 3,317 18% 10,675 17%
San Diego County.... 21 - 21 15% 2,487 - 2,487 13% 7,881 12%
Ventura County...... 4 - 4 3% 562 - 562 3% 1,679 3%
Riverside/San 8 12 8% 1,897
Bernardino 4 554 415 969 6% 3%
Counties............
Kern County......... 2 - 2 1% 216 - 216 1% 778 1%
-------- ----------- -------- --------- --------- ----------- ---------- --------- ---------- --------
Subtotal.......... 134 5 139 98% 17,398 452 17,850 97% 64,041 100%
Renovation
Properties.......... 3 - 3 2% 642 - 642 3% 290 0%
-------- ----------- -------- --------- --------- ----------- ---------- --------- ---------- --------
Total............. 137 5 142(1) 100% 18,040 452 18,492(1) 100% $ 64,331 100%
======== =========== ======== ========= ========= =========== ========== ========= ========== ========
</TABLE>
----------
(1) Including three properties currently under development, our total
portfolio consists of 145 properties and approximately 19.2 million net
rentable square feet.
15
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OCCUPANCY SUMMARY
Percent Occupied Percent Leased Annualized Base Rent
Location at March 31, 2000 at March 31, 2000 Per Leased Square Foot (1)
------------------------------ --------------------------- ---------------------------- ---------------------------------------
Full
Industrial Industrial Industrial Service
and and and Gross
Office Retail Total Office Retail Total Office Retail Total Leases(2)
------ -------- ----- ------ ------ ----- ------ --------- ----- ---------
Los Angeles County:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
West...................... 93.8% 100.0% 93.9% 95.0% 100.0% 95.0% $ 22.26 $24.60 $ 22.28 $ 22.26
North..................... 94.7% - 94.7% 95.4% - 95.4% 19.87 - 19.87 21.40
South..................... 93.9% - 93.9% 95.7% - 95.7% 17.63 - 17.63 19.23
Central................... 85.7% - 85.7% 94.8% - 94.8% 19.74 - 19.74 19.74
Orange County............... 95.3% - 95.3% 96.3% - 96.3% 16.38 - 16.38 19.15
San Diego County............ 97.5% - 97.5% 98.0% - 98.0% 15.89 - 15.89 18.74
Ventura County.............. 98.3% - 98.3% 98.3% - 98.3% 17.26 - 17.26 17.26
Riverside/San
Bernardino Counties....... 79.8% 94.8% 86.2% 79.8% 96.2% 86.8% 14.48 8.56 11.67 17.31
Kern County................. 88.7% - 88.7% 88.7% - 88.7% 21.28 - 21.28 -
------ -------- ----- ------ ------ ----- ------ --------- ----- ---------
SUBTOTAL/ WEIGHTED AVG... 94.1% 95.2% 94.2% 95.3% 96.5% 95.4% 18.75 9.92 18.52 20.47
Renovation Properties....... 27.3% - 27.3% 64.9% - 64.9% 30.01 - 30.01 30.01
------ -------- ----- ------ ------ ----- ------ --------- ----- ---------
TOTAL/ WEIGHTED AVG...... 91.7% 95.2% 91.8% 94.3% 96.5% 94.3% $ 19.02 $ 9.92 $ 18.80 $ 20.78
====== ======== ===== ====== ====== ===== ====== ========= ===== =========
</TABLE>
----------
(1) Based on monthly contractual base rent under existing leases as of March
31, 2000, multiplied by 12 and divided by leased net rentable square feet;
for those leases where rent has not yet commenced or which are in a free
rent period, the first month in which rent is to be received is used to
determine annualized base rent.
(2) Excludes 48 properties and 4,722,281 net rentable square feet under triple
net and modified gross leases.
<TABLE>
<CAPTION>
LEASE EXPIRATIONS
As of March 31, 2000
Square Footage Percentage of Estimated Market
Number of of Expiring Aggregate Annualized Base Rent Rent of
Year of Lease Leases Leases Portfolio Leased of Expiring Leases Expiring Leases
Expiration Expiring (in thousands) Square Feet (per square foot) (per square foot)(1)
------------------ ------------ ---------------- -------------------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C>
Month-to-Month 195 352 2.02% $ 21.84 $ 25.08
2000 (2)........ 489 1,647 9.45% $ 18.09 $ 21.61
2001............ 626 2,435 13.96% $ 18.63 $ 22.93
2002............ 615 2,742 15.72% $ 18.78 $ 25.35
2003............ 465 2,908 16.68% $ 20.10 $ 26.00
2004............ 393 2,734 15.68% $ 20.30 $ 26.22
</TABLE>
----------
(1) Calculation based on our estimate of current market rental rates and
annual increases in such rates of 8%, 6%, 4%, 3% and 3%, in 2000, 2001,
2002, 2003 and 2004, respectively. Our estimates of these rental rates are
based on current trends which could change or reverse at any time as a
result of future events. Our ability to rent expiring lease space at
estimated levels is highly dependent upon many factors over which we have
no control. We undertake no obligation to update or correct these
estimates if future events prove them to be inaccurate.
(2) Represents leases expiring from April 1, 2000 through December 31, 2000.
16
<PAGE>
<TABLE>
<CAPTION>
LEASING ACTIVITY
For the Three Months Ended March 31, 2000
Net Absorption Weighted Average Tenant Improvements
(square feet) New Lease Term and Commissions
(in thousands) Retention Rate (1) (in months) (per square foot) (2)
-------------------------- ------------------------ -------------------- -----------------------
New Renewal
<S> <C> <C> <C> <C> <C>
291 72.0% 60.5 $ 15.80 $ 10.35
===== ======= ======= ======== ========
</TABLE>
----------
(1) Percentage of leases in which tenants were retained at lease expiration.
(2) Excludes properties under renovation and development.
<TABLE>
<CAPTION>
DEVELOPMENT/RENOVATION SUMMARY
As of March 31, 2000
Estimated
Costs Percent Estimated Year 1
Incurred Estimated Leased Construction Estimated Stabilized Estimated
To Date Total Cost(1) at Completion Stabilization NOI Annual
Property Square Feet (in thousands) (in thousands) 4/24/00 Date Date (in thousands) Yield
-------- ----------- -------------- ------------- ------- ----------- ----------- ---------------- --------
Development:
Howard Hughes Center
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6060 Center Drive 240,724 $ 38,017 $ 56,000 100% 2nd Qtr 2000 3rd Qtr 2000 $ 6,250 11.2%
Univision Building 158,473 4,944 51,700 100% 3rd Qtr 2001 3rd Qtr 2001 $ 5,199 10.1%
6080 Center Drive 283,204 15,822 75,330 0% 2nd Qtr 2001 4th Qtr 2002 $ 8,288 11.0%
Unallocated Acquisition
and Master Plan
Costs (1),(2) -- 20,750 34,600
---------- ---------- ----------
Total Development
Properties 682,401 79,533 217,630
Renovation:
535 Brand Boulevard 109,187 20,418 20,750 90% Complete 2nd Qtr 2000 $ 1,876 9.0%
Westwood Center 313,000 78,196 91,122 90% Complete 4th Qtr 2000 $ 9,568 10.5%
Tourney Pointe 219,991 32,367 33,500 35% Complete 4th Qtr 2000 $ 2,943 8.8%
---------- ---------- ----------
Total Properties under
Renovation 642,178 130,981 145,372
---------- ---------- ----------
Total Properties under
Development and 1,324,579 $ 210,514 $ 363,002
========== ========= ==========
Renovation
</TABLE>
----------
(1) Estimated total cost includes purchase and closing costs, capital
expenditures, tenant improvements, leasing commissions and carrying costs
during renovation or development, and for the Howard Hughes Center
properties an allocation of land and Master Plan costs. Master Plan costs
include the costs of road and bridge construction and other Howard Hughes
Center infrastructure and master planning costs.
(2) We acquired the undeveloped commercial property portions of the Howard
Hughes Center for $28.5 million. In August 1999, subject to a sales
agreement entered into upon our initial acquisition, we sold approximately
5.4 acres for $7.5 million to a third party who is currently developing a
250,000 square foot retail and entertainment complex. This amount also
excludes approximately $4.3 million allocated to 6060 Center Drive, $5.1
million allocated to 6080 Center Drive, and approximately $1.6 million
allocated to the Univision building. We have entitlements to construct an
additional approximately 720,000 net rentable square feet of office space
at the Howard Hughes Center.
17
<PAGE>
Our ability to rent expiring lease space at estimated levels is highly
dependent upon many factors over which we have no control. These factors include
the national economic climate, perceptions of prospective tenants of the
attractiveness of our properties, and our ability to maintain and manage the
properties. We also have numerous competitors and some of the competing
properties may be newer, better located or owned by parties better capitalized
than us. As new commercial properties are developed and the number of
competitive commercial properties in a particular area increases, competitive
pressures will increase as well. Additionally, all of our properties are located
in Southern California. Our ability to charge estimated rents may be adversely
affected by the local economic climate (which could be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and local real estate conditions (such as oversupply of or
reduced demand for office and other competing commercial properties). The
preceding discussion is not intended as an exhaustive list of the risks
associated with rent rate projections and should be read in conjunction with the
"Risk Factors" as stated in our registration statement on Form S-4, particularly
"--Real Estate Investment Risks," "--An Inability To Retain Tenants Or Rent
Space Upon Lease Expirations May Adversely Affect Our Ability To Service Our
Debt," "--Our Operating Performance And Property Values Will Be Affected By
Changes In The Economic Climate In Southern California", "--Competition Affects
Occupancy Levels And Rents Which Could Adversely Affect Our Revenue," "--The
Financial Condition And Solvency Of Our Tenants May Reduce Our Cash Flow,"
"--Increases In Taxes And Regulatory Compliance Costs May Reduce Our Revenue,"
"--We May Acquire Properties Through Partnerships Or Joint Ventures With Third
Parties That Could Result In Financial Dependency And Management Conflicts,"
"--We May Not Be Able To Integrate Or Finance Our Acquisitions And Renovation
Activities And Our Acquisitions And Renovations May Not Perform As Expected,"
"--We May Not Be Able To Integrate Or Finance Our Development Activities," and
"--We May Not Be Able To Expand Into New Markets Successfully" in our
registration statement on Form S-4.
We undertake no obligation to update or correct these estimates if
future events prove them to be inaccurate.
As a result of the foregoing, you should not unduly rely on these
estimated rental rates.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
------- ---------------------------------------------------------
Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices. The
primary market risk to which we are exposed is interest rate risk, which is
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond our control.
Interest Rate Risk
Even though we currently have no such agreements, in order to modify
and manage the interest characteristics of our outstanding debt and limit the
effects of interest rates on our operations, we may utilize a variety of
financial instruments, including interest rate swaps, caps, floors, and other
interest rate exchange contracts. The use of these types of instruments to hedge
our exposure to changes in interest rates carries additional risks such as
counter-party credit risk and legal enforceability of hedging contracts. We do
not enter into any transactions for speculative or trading purposes.
Certain of our future earnings, cash flows and fair values relating to
financial instruments are dependent upon prevailing market rates of interest,
such as LIBOR. Based on interest rates and outstanding balances at March 31,
2000, a one percentage point increase in interest rates on our $241.4 million of
floating rate debt would decrease annual future earnings and cash flows by
approximately $2.4 million and would not have an impact on the floating rate
debt fair value. A one percentage point decrease in interest rates on our $241.4
million of floating rate debt would increase annual future earnings and cash
flows by approximately $2.4 million and would not have an impact on the floating
rate debt fair value. A one percentage point increase or decrease in interest
rates on our secured note receivable would not have a material impact on annual
future earnings, cash flows and its fair value.
These amounts are determined by considering the impact of the
hypothetical interest rates on our borrowing cost. These analyses do not
consider the effects of the reduced level of overall economic activity that
could exist in such an environment. Further, in the event of a change of such
magnitude, we would consider taking actions to further mitigate our exposure to
the change. However, due to the uncertainty of the specific actions that would
be taken and their possible effects, this sensitivity analysis assumes no
changes in our capital structure.
18
<PAGE>
Part II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
3.1 Second Amended and Restated Agreement of Limited Partnership of the
Arden Realty Limited Partnership dated as of September 7, 1999, filed
as an exhibit to Arden Realty, Inc.'s quarterly report on Form 10-Q,
filed with the Commission on November 15, 1999 and incorporated
herein by reference.
10.41 Second Amended and Restated Revolving Credit Agreement between Arden
Realty Limited Partnership and Wells Fargo Bank, dated May 2, 2000,
filed as an exhibit to Arden Realty, Inc.'s quarterly report on Form
10-Q, filed with the Commission on May 12, 2000 and incorporated
herein by reference.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None
19
<PAGE>
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 thereunto duly authorized.
ARDEN REALTY LIMITED PARTNERSHIP
By: Arden Realty, Inc.
Its:General Partner
Date: June 2, 2000 By: /s/ Diana M. Laing
----------------------------------------
Diana M. Laing
Executive Vice President and
Chief Financial Officer
Date: June 2, 2000 By: /s/ Richard S. Davis
----------------------------------------
Richard S. Davis
Senior Vice President and
Chief Accounting Officer
20
