<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-12528
SPIEKER PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 94-3185802
(State or other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
2180 SAND HILL ROAD, MENLO PARK, CA 94025
(Address of principal executive offices) (Zip code)
(415) 854-5600
(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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendments to this Form 10-K. [ ]
As of March 22, 1996, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was $869,624,174. The aggregate market value was
computed with reference to the closing price on the New York Stock Exchange on
such date. This calculation does not reflect a determination that persons are
affiliates for any other purpose.
As of March 22, 1996, 31,773,361 shares of Common Stock ($.0001 par value) were
outstanding.
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EXPLANATORY NOTE
The undersigned Registrant hereby amends Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations, and
Item 13 - Certain Relationships and Related Transactions of Part II and
Part III, respectively, of its Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 filed on March 29, 1996 pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
selected financial data and the Company's financial statements included
elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
OVERVIEW
During 1995, the Company continued to generate growth through its abilities
in both managing and leasing commercial property space and in finding attractive
acquisition and development opportunities. Throughout 1995, the Company's
portfolio of Properties was in excess of 95% leased. The Company's commitment to
superior tenant service and to maintaining a strong local presence in each of
its markets enabled the Company to lease over 3.6 million rentable square feet
of space in 1995. Significantly, effective rents on the 3.1 million square feet
of second generation space leased increased by 7.6% as compared to the ending
rental rates of expiring leases. Also in 1995, the Company acquired 17
Properties aggregating over 2.3 million rentable square feet for a total
capitalized cost of $164.8 million as of December 31, 1995 and committed $74.0
million to the development of another 1.0 million square feet. In 1994, the
Company added $149.7 million of new Properties, representing 2.4 million
rentable square feet, to its portfolio. The average annualized unleveraged
return on the 27 Properties acquired by the Company from January 1, 1994 through
November 30, 1995 was approximately 11.2%. The Company calculated this
unleveraged return by dividing actual property operating income (rental revenues
less rental expenses and real estate taxes excluding interest, depreciation and
amortization and general and administrative expenses) for 1995, which was
annualized from the date of acquisition in the case of Properties acquired in
1995, by capitalized costs, including acquisition costs and costs incurred to
renovate or reposition the asset or release space before stabilization, as of
December 31, 1995. Finally, in 1995 the Company strengthened its balance sheet
by using the net proceeds from the issuance of $260.0 million of unsecured
investment grade rated debt and $106.3 million of Series B Preferred Stock to
prepay a $347 million cross-collateralized mortgage obligation and by converting
its secured line of credit into an unsecured facility. By prepaying the mortgage
debt and converting its line of credit facility, the Company increased its
balance sheet flexibility by unencumbering a large pool of assets, and at the
same time the Company was able to extend the average maturity of its debt at
attractive interest rates. Management believes that the Company's ability to
access capital in the public and private debt and equity markets and to lower
its overall cost of capital will enable the Company to continue to capitalize on
attractive acquisition and development opportunities.
COMPARISON OF 1995 TO 1994
The following compares the Company's results for the year ended December 31,
1995 with its results for the year ended December 31, 1994.
Rental revenues increased by $30.2 million, or 25.4%, to $149.3 million in
1995, as compared with $119.1 million in 1994. Of this increase, $13.5 million
was generated by the Properties acquired during 1995 (the "1995 Acquisitions").
During 1995 the Company invested $164.8 million for the acquisition of
Properties with over 2.3 million rentable square feet of space. By property
type, 53.6% of the Company's 1995 Acquisitions were office Properties, 41.7%
were industrial Properties and 4.7% were retail Properties. Of the increase in
rental revenues $11.1 million was generated by the Properties acquired during
1994 (the "1994 Acquisitions") and $1.8 million was generated by the two
Properties developed during 1994 (the "1994 Developments"). The remaining
increase is attributable to contractual rent increases and increased effective
rents on leases signed for the renewal or releasing of previously leased space.
During 1995, the Company signed 552 leases for the renewal or releasing of over
3.1 million square feet of space. On average, the new effective rents were 7.6%
higher than ending rental rates on the expiring lease.
Interest and other income increased by $2.2 million, or 109.6%, to $4.1
million in 1995, as compared with $1.9 million in 1994. This increase is
predominantly due to $0.8 million in management fee income earned by the
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Company from the third-party management of certain properties during 1995.
Beginning in the first quarter of 1995, a portion of the third-party management
and other services previously performed by Spieker Northwest, Inc. ("SPNW"), an
unconsolidated subsidiary of the Company, was transferred to the Company.
Accordingly, certain revenue and expense items previously recorded by SPNW are
now recorded by the Company.
Rental expenses increased by $6.6 million, or 36.7%, to $24.6 million in
1995, as compared to $18.0 million in 1994. Real estate taxes increased by $1.8
million, or 18.0%, to $11.9 million in 1995, as compared to $10.1 million in
1994. Of the combined $8.4 million increase in rental expenses and real estate
taxes, $3.8 million is attributable to the 1995 Acquisitions and $3.4 million is
attributable to the 1994 Acquisitions and the 1994 Developments. In 1995, the
Company's rental expenses and real estate taxes in total were 24.5% of rental
revenues, as compared to 23.6% for 1994.
Interest expense increased by $2.0 million, or 4.5%, to $46.4 million in
1995, as compared to $44.4 million in 1994. The increase in interest expense
resulted primarily from higher average outstanding debt balances during 1995 as
compared with 1994. Such higher balances were due to the debt incurred to
complete the 1995 and 1994 Acquisitions, the 1994 Developments, and the Property
developments commenced in 1995 (the "1995 Developments"). The Company's 1995
Developments consist of 9 properties totaling over 1.0 million square feet with
an estimated total capitalized cost of $74.0 million.
Depreciation and amortization increased by $2.6 million, or 9.1%, to $31.6
million in 1995, as compared to $29.0 million in 1994. The increase is primarily
due to the 1995 and 1994 Acquisitions, the 1994 Developments and basis
adjustments relating to the purchases of limited partners' interests in
predecessor entities.
General and administrative and other expenses increased by $2.3 million, or
37.3%, to $8.5 million in 1995, as compared to $6.2 million in 1994. Of the
increase, $1.0 million is due to expenses incurred related to the increased
management fee income earned by the Company as discussed above. The remaining
increase is due to the increase in personnel and investments in upgrading the
Company's management information systems to support the Company's growth.
Net income before minority interests and extraordinary items increased by
$17.0 million, or 127.0%, to $30.3 million in 1995, as compared to $13.4 million
in 1994. This increase is primarily due to the net income from the 1995 and 1994
Acquisitions and the 1994 Developments and the increased effective rents on
leases signed for previously occupied space.
For the year ended December 31, 1995, the Company recorded a net loss of
$8.8 million as compared to net income of $10.5 million in 1994. The net loss in
1995 is attributable to a one time extraordinary loss of $40.8 million, before
minority interests share of the loss of $7.3 million, recorded during the fourth
quarter of 1995 in connection with the prepayment of a $347 million cross
collateralized mortgage obligation with the net proceeds from the issuance of
$260 million of unsecured investment grade debt and $106.3 million of Series B
Preferred Stock. The loss included a $28.1 million, non-cash charge related to
the write-off of unamortized debt discount and deferred financing fees and a
$12.7 million charge related to prepayment penalties and fees. By prepaying the
debt, the Company was able to increase its financial flexibility by
unencumbering a large pool of assets and to extend the weighted average maturity
of its debt at attractive interest rates.
COMPARISON OF 1994 TO 1993
The following compares the Company's results for the year ended December 31,
1994 with its results for the year ended December 31, 1993.
Rental revenue increased by $30.5 million or 34.4% to $119.1 million as
compared with $88.6 million in 1993. Of this increase, $13.4 million was
generated by four Properties (the "Stanford Properties" and the "Montague
Property") acquired simultaneously with the closing of the Company's initial
public offering. $10.1 million was generated by the twelve properties acquired
during 1994 (the "1994 Acquisitions"). The remaining increase is
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attributable to the lease-up of properties developed by Spieker Partners
Properties during 1993 and to higher occupancy levels in the Company's
previously developed and acquired properties.
Interest and other income decreased by $0.4 million or 17.4% to $1.9
million as compared to $2.3 million in 1993. The decrease was attributable to
the inclusion of management fee income in 1993. Actual interest and other
income increased during 1994 due to higher average cash balances and higher
interest rates on the companies' investments.
Total operating expenses, including interest, depreciation, and amortization
increased by $3.0 million or 2.9% to $107.7 million as compared with $104.7
million in 1993. Rental expenses and real estate taxes increased $5.6 million of
which $2.7 million was attributable to the 1994 Acquisitions and $1.6 million
was attributable to the Stanford Properties and the Montague Property.
Depreciation and amortization increased $3.3 million principally due to the
acquisition of the Stanford Properties, the Montague Property, and the 1994
Acquisitions. General and administrative expenses increased $1.3 million due to
expenses incurred as a result of operating as a public company and the Company's
ongoing acquisition and development activities. Interest expense decreased by
$7.3 million due to the repayment of $213.8 million of debt in connection with
the Company's initial public offering, which was offset somewhat by debt
incurred to complete the 1994 Acquisitions and the 1994 developments, as well as
the amortization of indebtedness discount incurred as a result of debt
structuring at the Company's initial public offering.
The Company recorded net income from operations before disposal of real
estate properties, minority interests, and extraordinary items of $13.4 million
for the year ended December 31, 1994, as compared with a $13.9 million net loss
in 1993. The increase in net income is the result of increased rental revenue
attributable to the Company's acquisitions in 1993 and 1994 and to higher
occupancy levels in the Company's portfolio, and to the decrease in interest
expense.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1995, cash provided by operating activities
increased by $26.8 million, or 59.2%, to $72.2 million, as compared to $45.4
million for the same period in 1994. The increase is primarily due to the
increase in net income before extraordinary item resulting from the 1995 and
1994 Acquisitions, the 1994 Developments and increasing rents on leases signed
for the renewal and releasing of space. Cash used for investing activities
increased by $38.1 million, or 24.1%, to $196.3 million during 1995, as compared
with $158.2 million during 1994. The increase is attributable to the Company's
ongoing acquisition and development of suburban office, industrial and retail
properties. Cash provided by financing activities increased by $25.4 million or
26.3% to $122.0 million during 1995, as compared to $96.6 million during 1994.
During 1995, cash provided by financing activities consisted, primarily, of net
proceeds from the issuance of preferred stock, common stock and unsecured
investment grade rated debt, line of credit borrowings and other property
indebtedness. During 1995, cash used for financing activities consisted,
primarily, of the repayment of mortgages, line of credit borrowings and other
property indebtedness, and payment of partner's distributions. During 1994, cash
provided by financing costs consisted primarily of net proceeds from the
issuance of preferred stock, line of credit borrowings and other property
indebtedness net of partners' distributions. Partners' distributions paid
increased by $17.1 million to $54.4 million during 1995, as compared with $37.3
million during 1994. The increase was the result of the higher number of
partnership units outstanding resulting from the additional partners' capital
contributions in 1994 and 1995 and a 5% increase in the distribution rate
beginning with the first quarter 1995 distribution.
The Company's principal sources of funding for the acquisition, development,
expansion and renovation of Properties are an unsecured line of credit,
construction and permanent secured debt financing, public and privately placed
equity financing, public unsecured debt financing, the issuance of partnership
units in the Operating Partnership and cash flow provided by operations. The
Company believes that its liquidity and capital resources are adequate to
continue to meet liquidity requirements for the foreseeable future.
At December 31, 1995, the Company had no material commitments for capital
expenditures related to the renewal or releasing of space. The Company believes
that the cash provided by operations and its line of credit provide sufficient
sources of liquidity to fund the capital expenditure costs associated with the
renewal or releasing of space.
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In December 1995, the Company issued in a public offering $260.0 million of
unsecured investment grade rated debt ((the "Unsecured Notes") and $106.3
million of Series B Preferred Stock (the offering of the Unsecured Notes and the
offering of the Series B Preferred Stock are collectively referred to as the
"December Offerings"). The Unsecured Notes were issued in three tranches as
follows: $100.0 million of 6.65% notes due December 15, 2000 priced to yield
6.683%, $50.0 million of 6.80% notes due December 15, 2001 priced to yield
6.823%, and $110.0 million of 6.95% notes due December 15, 2002 priced at par.
The Series B Preferred Stock was issued at $25.00 per share and a yield of
9.45%.
The proceeds from the December Offerings of $358.9 million were used to
prepay a cross-collateralized mortgage obligation outstanding to Prudential
Insurance Company. The amount paid to Prudential Insurance Company included the
repayment of principal, interest due through December 10, 1995 and a negotiated
prepayment penalty of $11.8 million. The prepayment resulted in the
unencumberance of 55 of the Company's properties.
On November 6, 1995, the Company converted its secured line of credit to a
$150 million unsecured line of credit facility (the "Facility") with interest at
London Interbank Offered Rates ("LIBOR") plus 1.5%. The Facility matures in
November 1997 and the Company has an option to extend the Facility for one year
upon payment of a fee equal to 0.12% of the total Facility. The Facility also
includes a fee on average unused funds, which varies between 0.125% and 0.20%
based on the average outstanding balance. At December 31, 1995 the Company had
$117.7 million outstanding under the Facility.
In addition to the Unsecured Notes and the Facility, the Company has $112.7
million of secured indebtedness (the "Mortgages") at December 31, 1995. The
Mortgages have interest rates varying from 7.00% to 13.75% and maturity dates
from 1996 to 2012. The Mortgages are secured by a first or second deed of trust
on the related Properties and generally require monthly principal and interest
payments. The Company also has $12.1 million of assessment bonds outstanding at
December 31, 1995.
The scheduled maturities for the Company's Unsecured Notes and Mortgages are
as follows:
<TABLE>
<CAPTION>
Year Amount
------
(in thousands)
<S> <C> <C>
1996........................................... $ 26, 689
1997........................................... 20,415
1998........................................... 37,907
1999........................................... 892
2000........................................... 100,973
Thereafter..................................... 185,826
</TABLE>
In addition to the Facility, $38.2 million of the Mortgages carry a floating
rate interest based on varying LIBOR spreads. The following table summarizes the
Company's debt, excluding the assessment bonds:
<TABLE>
<CAPTION>
PERCENT OF WEIGHTED WEIGHTED
TOTAL DEBT AVERAGE RATE AVERAGE MATURITY
---------- ------------ ----------------
(YEARS)
<S> <C> <C> <C>
Floating Rate Debt....... 31.8% 7.2% 2.0
Fixed Rate Debt.......... 68.2 7.2 5.4
----- --- ---
Total 100.0% 7.2% 4.3
===== === ===
</TABLE>
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On May 11, 1995, the Company completed an underwritten public offering of
5,750,000 shares of its Common Stock (including 750,000 shares sold pursuant to
the underwriters' exercise of their over-allotment option) at an offering price
per share of $19.75. Simultaneously, the Company completed the private placement
of 506,329 shares of Common Stock at a per share price of $19.75 and 2,000,000
shares of Class B Common Stock at a per share price of $25.00. The net proceeds
from the offerings of approximately $167.0 million were used to repay
indebtedness incurred to fund the Company's acquisition and development
activities.
On May 13, 1994, the Company issued $25.0 million of Series A Cumulative
Convertible Preferred Stock to an individual investor. The Company used the
proceeds from the sale of such preferred stock to fund its ongoing acquisition
and development activities.
During 1995 the Company filed two shelf registration statements with the
Securities and Exchange Commission (the "Commission"). On March 14, 1995 the
Company filed a shelf registration statement for up to $200 million of Common
Stock, Preferred Stock and Warrants to purchase Common and Preferred Stock (the
"March Shelf Registration Statement'). On October 19, 1995 the Company and the
Operating Partnership filed a shelf registration statement for up to $876.4
million (including $76.4 million remaining on the March Shelf Registration
Statement) of unsecured Debt Securities, Common Stock, Preferred Stock,
Depositary Shares and Warrants to purchase Common and Preferred Stock and
Guarantees. In January 1996, the Company and the Operating Partnership filed a
shelf registration statement (the "January 1996 Shelf Registration Statement")
with the Commission to register 1,407,005 shares of Common Stock issuable by the
Company upon conversion of shares of Series A Preferred Stock and upon
conversion of partnership units in the Operating Partnership by certain holders
thereof. The Company will receive no proceeds from the sale of Common Stock
under the 1996 Shelf Registration Statement.
Subsequent to year end, on January 19, 1996 the Company issued $100.0
million of investment grade rated 8 year unsecured notes. The notes carry an
interest rate of 6.90%, were priced to yield 6.97%, and mature on January 15,
2004. Net proceeds of $98.973 million were used to repay borrowings on the
unsecured line of credit. In addition, on February 28, 1996, the Company
concurrently sold 4,887,500 shares of Common Stock (including underwriters
option to cover over-allotments of 637,500 shares), through an underwritten
public offering and directly placed 1,176,470 shares of Class C Common Stock and
135,000 shares of Common Stock with a limited number of institutional investors
at $25.50 per share. The net proceeds were used primarily to repay floating rate
debt.
FUNDS FROM OPERATIONS
The Company considers Funds from Operations to be a useful financial
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, Funds from Operations provides
investors with an additional basis to evaluate the ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures. Funds
from Operations does not represent net income or cash flows from operations as
defined by GAAP and Funds from Operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of liquidity. Funds from
Operations does not measure whether cash flow is sufficient to fund all of the
Company's cash needs including principal amortization, capital improvements and
distributions to shareholders. Funds from Operations does not represent cash
flows from operating, investing or financing activities as defined by GAAP.
Further, Funds from Operations as disclosed by other REITs may not be comparable
to the Company's calculation of Funds from Operations, as described below.
The Company calculates Funds from Operations by adjusting net income before
minority interest, calculated in accordance with GAAP, for certain non-cash
items, principally the amortization and depreciation of real property and for
dividends on shares and other equity interests that are not convertible into
shares of Common Stock. The Company does not add back the depreciation of
corporate items, such as computers and furniture and fixtures. The Company's
Funds from Operations calculation includes an adjustment for the straight-lining
of rent under GAAP in order to present a more meaningful picture of rental
income over the period. The Company has not purchased interest rate caps or
hedges on its floating rate debt. Accordingly, no amortization of these items is
added back to net income in calculating Funds from Operations.
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In calculating Funds from Operations, the Company has, historically, added
back to net income an amount expensed each period relating to the amortization
of the indebtedness discount recorded at the Company's initial public offering
(the "IPO"). At the IPO, the Company incurred a onetime cost of $38.7 million as
a result of the prepayment of interest on, and the restructuring of, a majority
of its indebtedness. Pursuant to GAAP, this amount was recorded as a discount to
the remaining indebtedness. Had the Company chosen to repay and replace the debt
existing at the IPO with similar debt from a third party, the $38.7 million cost
would have been expensed as an extraordinary charge at the IPO rather than
amortized over the remaining term of the loans. Accordingly, the Company adds
such amortization to net income in calculating Funds from Operations for the
years 1993-1995. With the completion of the December Offerings, the remaining
indebtedness discount was written-off as part of the prepayment of a $347
million cross-collateralized mortgage obligation. The Company will therefore no
longer be adding back to Funds from Operations the amortization of debt
discount.
<TABLE>
<CAPTION>
OLD NAREIT DEFINITION
QUARTER PERIOD
---------------------------
(dollars in thousands)
YEAR ENDED
DECEMBER 31,
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 1995
-------------- ------------- ------------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
Income from operations before
minority interests and $ 4,440 $ 6,991 $ 8,811 $ 10,093 $ 30,335
extraordinary items:
Adjustments:
Depreciation and Amortization 7,339 7,855 8,081 8,136 31,411
Amortization of debt discount
and 2,519 2,455 2,443 1,945 9,362
deferred financing costs
Dividends on Series B
Preferred - - - (586) (586)
Stock
Other, net 75 65 107 88 335
Straight-lined rent (185) (78) (12) 208
----------- ------------ ------------ ------------ ------------
(67)
Funds from Operations - Old $ 14,188 $ 17,288 $ 19,430 $ 19,884 $ 70,790
============ ============ ============ ============ ============
Weighted Average Share
Equivalents Outstanding (1) 27,660,271 33,085,328 37,027,543 37,109,138 33,769,742
============ ============ ============ ============ ============
</TABLE>
(1) Assumes conversion of the shares of Class B Common Stock, shares of Series
A Preferred Stock and partnership units in the Operating Partnership into
shares of Common Stock.
Beginning with the first quarter of 1996, the Company will calculate its
Funds from Operations in accordance with the new NAREIT definition of Funds from
Operations. Accordingly, the Company will no longer add back amounts related to
the amortization of debt discount and deferred financing costs. However, the
Company will continue to include an adjustment for the straight-lining of rent
under GAAP, as management believes this presents a more meaningful picture of
rental income over the reporting period.
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The table below sets forth the Company's calculation of Funds from
Operations for 1995 based on the new NAREIT definition.
<TABLE>
<CAPTION>
NEW NAREIT DEFINITION
QUARTER ENDED
--------------------------
(dollars in thousands)
YEAR ENDED
DECEMBER 31,
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 1995.
-------------- ------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Income from operations before
minority interests and $ 4,440 $ 6,991 $ 8,811 $ 10,093 $ 30,335
extraordinary items:............
Adjustments:
Depreciation and Amortization... 7,339 7,855 8,081 8,136 31,411
Dividends on Series B Preferred
Stock........................... - - - (586) (586)
Other, net...................... 75 65 107 88 335
Straight-lined rent............. (185) (78) (12) 208
----------- ----------- ----------- -----------
(67)
Funds from Operations - New $ 11,669 $ 14,833 $ 16,987 $ 17,939 $ 61,428
=========== =========== =========== =========== ===========
Definition
Weighted Average Share Equivalents
Outstanding (1)................. 27,660,271 33,085,328 37,027,543 37,109,138 33,769,742
=========== =========== =========== =========== ===========
</TABLE>
(1) Assumes conversion of the shares of Class B Common Stock, shares of Series
A Preferred Stock and partnership units in the Operating Partnership into
shares of Common Stock.
Because of the impact of the December Offerings on the Company's balance
sheet and results of operations, the Company believes that an adjusted
calculation of 1995 Funds from Operations, based on the new NAREIT definition
and reflecting the effect of the December Offerings and the conversion of the
secured line of credit into an unsecured facility as if such transactions had
occurred on January 1, 1995, provides a helpful basis for analyzing the impact
of the new NAREIT definition.
The table below sets forth the Company's calculation of Funds from
Operations for 1995 based upon the new NAREIT definition and adjusted to reflect
the December Offerings and conversion of the secured line of credit into an
unsecured facility.
<TABLE>
<CAPTION>
ADJUSTED NEW NAREIT DEFINITION
QUARTER ENDED
---------------------------------
(dollars in thousands)
YEAR ENDED
DECEMBER 31,
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 1995.
-------------- ------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Income from operations before
minority interests and $ 8,136 $ 10,687 $ 12,507 $12,873 $ 44,203 (2)
extraordinary items:............
Adjustments:
Depreciation and Amortization... 7,339 7,855 8,081 8,136 31,411
Dividends on Series B Preferred
Stock........................... (2,510) (2,510) (2,510) (2,511) (10,041)
Other, net...................... 75 65 107 88 335
Straight-lined rent............. (185) (78) (12) 208
----------- ----------- ----------- -----------
(67)
Funds from Operations - Adjusted New
Definition...................... $ 12,855 $16,019 $ 18,173 $ 18,794 $ 65,841
=========== =========== =========== =========== ===========
Weighted Average Share Equivalents
Outstanding (1)................. 27,660,271 33,085,328 37,027,543 37,109,138 33,769,742
=========== =========== =========== =========== ===========
</TABLE>
(1) Assumes conversion of the shares of Class B Common Stock, shares of Series
A Preferred Stock and partnership units in the Operating Partnership into
shares of Common Stock.
(2) Reflects adjustments for the incremental effect on the interest expense of
the December 1995 issuances of $260,000 of unsecured investment grade debt
and $106,250 of Series B Preferred Stock, consisting of (i) the repayment
of secured debt, resulting in a result of interest expense of approximately
$29,761, including amortization of debt discount and deferred financing
costs of approximately $6,841, (ii) the conversion of the secured line of
credit into an unsecured facility resulting in a reduction of amortization
of deferred financing costs of approximately $1,176 and (iii) interest on
the $260,000 unsecured investment grade debt of approximately $17,069.
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ITEM 13. CERTAIN TRANSACTIONS
The Company owns 95% of the non-voting preferred stock of Spieker
Northwest, Inc. ("Spieker Northwest"), which provides fee management and other
services for properties not owned by the Company, including certain properties
in which Messrs. Spieker, French, Hosford and Singleton have ownership
interests. The fees charged by Spieker Northwest for managing properties are
comparable to the fees it charges for managing other properties. Messrs.
Spieker, French, Hosford and Singleton own 100% of the voting stock of Spieker
Northwest and the remaining 5% of the non-voting preferred stock. For the year
ended December 31, 1995, Spieker Northwest had revenues of $1.4 million, which
were mainly offset by operating expenses, and it did not pay any dividends on
its common or preferred stock.
On July 14, 1995, the Company acquired a 50% ownership interest and a
50% beneficial ownership interest in a 116,096 square-foot office building
located in San Mateo, California (the "San Mateo Property") valued at
approximately $13.5 million, through the purchase of partnership interests in an
entity in which Messrs. Spieker and Singleton held a general partnership
interest. The San Mateo Property had not been contributed to the Operating
Partnership at the time of the IPO because a satisfactory arrangement could not
be made with the unaffiliated partners in the partnership. The partners were
subsequently able to reach an agreement with the unaffiliated partners, and the
Company exercised its option to acquire the interests of the unaffiliated
partners. The Company paid approximately $3.4 million to the unaffiliated
partners and issued partnership units with an aggregate value of $776,000 to
Messrs. Spieker and Singleton in exchange for the beneficial ownership. A
mortgage of $9.3 million was assumed in connection with the purchase. The
monetary value of the Operating Partnership units issued to Messrs. Spieker and
Singleton of the Company was based upon the negotiated value paid to the
unaffiliated partners. The number of Operating Partnership units issued was
calculated by dividing such monetary value by the stock price of the Company's
Common Stock (into which such units are convertible) at the close of the day
prior to acquisition.
On March 31, 1995, the Company acquired a 175,900 square foot
industrial project valued at $5.9 million, located in Fresno, California through
the purchase of partnership interests in an entity in which Messrs. Spieker and
French held a general partnership interest, under similar circumstances as
described with regard to the San Mateo Property as discussed above. The Company
paid $2.3 million to the unaffiliated partners, assumed $2.2 million of debt and
issued partnership units in the Operating Partnership with a value of
approximately $1.4 million to Messrs. Spieker and French. The monetary value of
the Operating Partnership units issued to Messrs. Spieker and French was based
upon the negotiated value paid to the unaffiliated partners. The number of
Operating Partnership units issued was calculated by dividing such monetary
value by the stock price of the Company's Common Stock (into which such units
are convertible) at the close of the day prior to acquisition.
At the time of the Company's 1993 initial public offering, the Company
entered into land holding agreements ("Land Holding Agreements") with certain of
its executive officers with respect to vacant land parcels in which such
executive officers hold ownership interest. The Land Holding Agreements
generally provide the Company with the option to purchase the land subject to
the agreement for the lesser of a fixed price set forth in the Agreement or the
fair market value as determined by appraisal.
During the second quarter of 1995, the Company acquired four land
parcels pursuant to Land Holding Agreements. A 4.36 acre parcel of land located
in Sacramento, California in which Messrs, Spieker, Singleton and French held
ownership interests was acquired for a negotiated price of approximately $1.1
million, which was less than the fixed price set forth in the Land Holding
Agreement. The Company acquired the land for the purpose of developing a 45,000
square foot office building at an estimated total cost of approximately $5.4
million. As part of the land purchase price, the Company issued partnership
units in the Operating Partnership valued at approximately $324,000 to Messrs,
Spieker, Singleton and French. A 2.91 acre parcel of land located in Milpitas,
California in which Messrs. Spieker and French held ownership interests was
acquired for a negotiated price of $617,000, which was less than the fixed price
set forth in the Land Holding Agreement. The land was acquired for the purpose
of developing a 36,030 square foot industrial building at a total estimated cost
of approximately $2.4 million. A 3.78 acre parcel of land located in Monterey,
California in which Messrs. Spieker and French held ownership interests was
acquired for a negotiated price of $659,000, which was less than the
<PAGE> 11
fixed price set forth in the Land Holding Agreement. The land was acquired for
the purpose of developing a 31,560 square foot industrial complex at a total
estimated cost of approximately $2.6 million. Construction of these developments
commenced during the third quarter of 1995. A 3.40 acre parcel of land located
in Monterey, California in which Messrs. Spieker and French held ownership
interests was acquired for a negotiated price of approximately $400,000, which
was less than the fixed price set forth in the Land Holding Agreement. The
purchase agreement provides for certain further earn-out payments, which in
aggregate with the initial payment will not exceed the fixed price set forth in
the Land Holding Agreement. The land was acquired for the purpose of developing
a 23,000 square foot office complex at a total estimated cost of approximately
$3.0 million. Construction of this development began during the second quarter
of 1995. These four land acquisitions were each approved by the independent
directors of the Company.
<PAGE> 12
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Annual Report on Form 10-K filed on Form 10-K/A to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: June 19, 1996 SPIEKER PROPERTIES, INC.
By: /s/ Elke Strunka
--------------------
Elke Strunka
Vice President and
Principal Accounting Officer
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