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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] 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 (IRS Employer
incorporation or 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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
31,779,861 shares of Common Stock, $0.0001 par value as of May 7, 1996.
2,000,000 shares of Class B Common Stock, $0.0001 par value as of May 7, 1996.
1,176,470 shares of Class C Common Stock, $0.0001 par value as of May 7, 1996.
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SPIEKER PROPERTIES, INC.
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements .............................................................................. 3
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 ............................ 4
Consolidated Statements of Operations for the Three Months Ended March 31, 1996
and March 31, 1995.............................................................................. 6
Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 1996........... 7
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996
and March 31, 1995.............................................................................. 8
Notes to Consolidated Financial Statements ........................................................ 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............ 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities.............................................................................. 19
Item 6. Exhibits and Reports on Form 8-K .................................................................. 19
Signatures................................................................................................. 20
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Attached are the following financial statements of Spieker Properties, Inc.
("the Company"):
(i) consolidated balance sheets as of March 31, 1996 and December 31, 1995,
(ii) consolidated statements of operations for the three months ended March 31,
1996 and March 31, 1995,
(iii) consolidated statement of stockholders' equity for the three months ended
March 31, 1996,
(iv) consolidated statements of cash flows for the three months ended March 31,
1996 and March 31, 1995, and
(v) notes to consolidated financial statements.
The financial statements referred to above should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
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SPIEKER PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
INVESTMENTS IN REAL ESTATE:
Properties:
Land, land improvements and leasehold interests $ 318,638 $ 303,157
Buildings and improvements 797,486 756,734
Construction in progress 49,933 38,980
---------- ----------
1,166,057 1,098,871
Less - Accumulated depreciation (126,194) (124,612)
---------- ----------
Net investments in properties 1,039,863 974,259
Investments in mortgages 14,333 -
---------- ----------
Net investments in real estate 1,054,196 974,259
CASH AND CASH EQUIVALENTS 16,833 7,573
ACCOUNTS RECEIVABLE 3,588 3,351
DEFERRED RENT RECEIVABLE 4,768 4,698
RECEIVABLE FROM RELATED PARTY 270 386
DEFERRED FINANCING AND LEASING COSTS, net of
accumulated amortization of $9,107 and $9,586 as
of March 31, 1996 and December 31, 1995, respectively 15,055 13,485
FURNITURE, FIXTURES AND EQUIPMENT, net 1,769 1,678
PREPAID EXPENSES AND OTHER ASSETS 4,375 6,067
---------- ----------
$1,100,854 $1,011,497
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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SPIEKER PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
(dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
DEBT:
Unsecured notes $ 360,000 $ 260,000
Unsecured line of credit 4,000 117,700
Mortgage loans 61,696 112,702
----------- ----------
Total debt 425,696 490,402
----------- ----------
ASSESSMENT BONDS PAYABLE 12,489 12,140
ACCOUNTS PAYABLE 3,223 3,804
ACCRUED REAL ESTATE TAXES 3,922 506
ACCRUED INTEREST 7,255 2,510
UNEARNED RENTAL INCOME 4,939 6,972
DIVIDENDS AND DISTRIBUTIONS PAYABLE 18,638 15,588
OTHER ACCRUED EXPENSES AND LIABILITIES 11,995 12,202
----------- ----------
Total liabilities 488,157 544,124
----------- ----------
MINORITY INTERESTS 46,394 47,526
----------- ----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Series A Preferred Stock: cumulative, convertible, $.0001 par value,
1,000,000 shares authorized, issued and outstanding, $25,000
liquidation preference 23,949 23,949
Series B Preferred Stock: cumulative, redeemable, $.0001 par value,
5,000,000 shares authorized, 4,250,000 issued and outstanding,
$106,250 liquidation preference 102,064 102,064
Common Stock: $.0001 par value, 660,500,000 shares authorized,
31,773,361 and 26,724,024 shares issued and outstanding as of
March 31, 1996 and December 31, 1995, respectively 3 3
Class B Common Stock: $.0001 par value, 2,000,000 shares authorized,
issued and outstanding - -
Class C Common Stock: $.0001 par value, 1,500,000 shares authorized,
1,176,470 issued and outstanding as of March 31, 1996 - -
Excess Stock: $.0001 par value per share, 330,000,000 shares authorized,
no shares issued or outstanding - -
Additional paid-in capital 441,042 303,320
Deferred compensation (755) (652)
Retained earnings (deficit) - (8,837)
----------- ----------
Total stockholders' equity 566,303 419,847
----------- ----------
$ 1,100,854 $1,011,497
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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SPIEKER PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(dollars in thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31
--------
1996 1995
REVENUE: ---- ----
<S> <C> <C>
Rental income $ 44,345 $ 34,672
Interest and other income 823 609
--------- ---------
45,168 35,281
--------- ---------
OPERATING EXPENSES:
Rental expenses 7,236 5,496
Real estate taxes 3,446 2,845
Interest expense, including amortization of finance costs 8,837 12,969
Depreciation and amortization 8,538 7,379
General and administrative and other expenses 2,282 2,152
--------- ---------
30,339 30,841
--------- ---------
Income from operations before minority interests and
extraordinary items 14,829 4,440
--------- ---------
MINORITY INTERESTS' SHARE IN NET INCOME (2,061) (960)
--------- ---------
Net income before extraordinary items 12,768 3,480
EXTRAORDINARY ITEMS, net of minority interests of $25
for the three months ended March 31, 1996 125 -
--------- ---------
Net income 12,893 3,480
--------- ---------
PREFERRED DIVIDENDS:
Series A Preferred Stock (524) (512)
Series B Preferred Stock (2,510) -
--------- ---------
Net income available to Common Stockholders $ 9,859 $ 2,968
========= =========
INCOME PER SHARE OF COMMON STOCK:
Income before extraordinary items $ .31 $ .14
Extraordinary items, net of minority interests - -
--------- ---------
Net income $ .31 $ .14
========= =========
DIVIDENDS AND DISTRIBUTIONS PER SHARE:
Series A Preferred Stock $ .52 $ .51
========= =========
Series B Preferred Stock $ .59 $ -
========= =========
Common Stock, including Class B and Class C $ .49 $ .42
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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SPIEKER PROPERTIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Series A Series B Common Class B Class C Common Additional
Preferred Preferred Stock Common Common Stock Par Paid-in
Stock Stock Shares Stock Shares Stock Shares Value Capital
----- ----- ------ ------------ ------------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ 23,949 $102,064 26,724,074 2,000,000 - $ 3 $303,320
Common Stock Offering - - 5,022,500 - - - 121,369
Class C Common Stock Offering - - - - 1,176,470 - 29,963
Stock Options Exercised - - 3,250 - - - 56
Restricted Stock Grant - - 8,000 - - - 200
Non-Cash Compensation Merit Fund - - - - - - 25
Conversion Of Operating Partnership
Interests - - 15,537 - - - 386
Amortization of Deferred Compensation - - - - - - -
Dividends Declared - - - - - - (18,333)
Net Income - - - - - - 4,056
-------- -------- -------- -------- --------- -------- --------
BALANCE AT MARCH 31, 1996 $ 23,949 $102,064 31,773,361 2,000,000 1,176,470 $ 3 $441,042
======== ======== ========== ========= ========= ========= ========
<CAPTION>
Retained
Deferred Earnings
Compensation (Deficit) Total
------------ --------- -----
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ (652) $ (8,837) $419,847
Common Stock Offering - - 121,369
Class C Common Stock Offering - - 29,963
Stock Options Exercised - - 56
Restricted Stock Grant (200) - -
Non-Cash Compensation Merit Fund - - 25
Conversion Of Operating Partnership
Interests - - 386
Amortization of Deferred Compensation 97 - 97
Dividends Declared - - (18,333)
Net Income - 8,837 12,893
-------- -------- --------
BALANCE AT MARCH 31, 1996 $ (755) $ - $566,303
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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SPIEKER PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31
--------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 12,893 $ 3,480
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 8,538 7,379
Amortization of prepaid interest and deferred financing costs 377 2,519
Non-cash compensation 127 83
Minority share of net income 2,086 960
Extraordinary item (150) -
Increase in deferred rent receivable (70) (185)
(Increase) decrease in accounts receivable (237) 82
Decrease in receivables from related parties 116 568
Additions to leasing costs (1,532) (966)
Decrease in prepaid expenses and other assets 1,318 333
(Decrease) increase in accounts payable (581) 157
Increase in accrued real estate taxes 3,416 2,490
Increase in accrued interest 4,745 234
(Decrease) increase in other accrued expenses and liabilities (207) 302
(Decrease) increase in unearned rental income (2,033) 691
Decrease in payable to related party - (1,186)
--------- -------
Net cash provided by operating activities 28,806 16,941
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties (72,896) (53,089)
Additions to investment in mortgages (14,333) -
--------- -------
Net cash used for investing activities (87,229) (53,089)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 100,000 56,492
Payments on debt (164,556) (1,007)
Payments of financing fees (1,029) -
Payment of dividends/distributions (18,120) (11,027)
Proceeds from sale of Common Stock, net of issuance costs 121,369 -
Proceeds from sale of Class C Common Stock, net of issuance costs 29,963 -
Proceeds from stock options exercised 56 -
--------- -------
Net cash provided by financing activities 67,683 44,458
--------- -------
Net increase in cash and cash equivalents 9,260 8,310
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,573 9,663
--------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,833 $17,973
========= =======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest 4,294 10,229
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Debt assumed in relation to property acquisitions - 13,452
Increase to land and assessment bonds payable 349 -
Minority interest capital recorded in relation to property acquisitions - 10,258
Write-off of fully depreciated property 6,059 1,192
Write-off of fully amortized deferred financing and leasing costs 1,388 539
Conversion of operating partnership units to Common Stock with resulting
reduction in minority interest and increase in additional 386 343
paid-in-capital
</TABLE>
The accompanying notes are an integral part of these statements.
8
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SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
MARCH 31, 1996 AND 1995
1. ORGANIZATION AND BASIS OF PRESENTATION:
Spieker Properties, Inc.
Spieker Properties, Inc. (the "Company") was organized in the state of
Maryland on August 20, 1993, and commenced operations on November 19, 1993.
On November 18, 1993, the Company completed an initial public offering
("IPO") and issued 20,400,000 shares of Common Stock at $20.50 per share,
or $418,200. Net proceeds of $386,800 were used to purchase an approximate
77.6 percent general partnership interest in Spieker Properties L.P. (the
"Operating Partnership"). The Company and the Operating Partnership are
collectively referred to as the Company. The Company qualifies as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986
(the "Code"), as amended.
The Company is primarily engaged in the ownership, operation, management,
leasing, acquisition, expansion and development of industrial, suburban
office, and retail income-producing properties. As of March 31, 1996, the
Company owned (i) 100 percent of 119 properties, (ii) an effective 100
percent general partner interest in Spieker Washington Interest Partners
("SWIP"), a California general partnership, which owns 100 percent of 13
properties, (iii) a 90 percent interest in 1 property, (iv) a 93 percent
interest with SWIP in 1 property, and (v) 95 percent of the Series A
Preferred Stock of Spieker Northwest, Inc., which provides fee management
and other services for properties not owned by the Company. The Company's
134 stabilized properties, aggregating approximately 18.0 million leasable
square feet, are comprised of 74 industrial properties, 44 office
properties, and 16 retail properties. All of the properties are located in
California and the Pacific Northwest.
The Company owned approximately 84.9 percent of the Operating Partnership
as of March 31, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The Company's consolidated financial statements include the consolidated
financial position of the Operating Partnership as of March 31, 1996 and
December 31, 1995 and its consolidated results of operations and cash flows
for the three months ended March 31, 1996 and 1995. The Company's
investment in Spieker Northwest, Inc. is accounted for under the equity
method. The carrying value of Spieker Northwest, Inc. of $53 at March 31,
1996 and December 31, 1995 is included in prepaid expenses and other
assets. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Properties
Properties are recorded at cost and are depreciated using the straight-line
method over the estimated useful lives of the properties. The estimated
lives are as follows:
<TABLE>
<S> <C>
Land improvements and leasehold interests 18 to 40 years
Buildings and improvements 10 to 40 years
Tenant improvements Term of the related lease
</TABLE>
Investments in properties are stated at the lower of depreciated cost or
estimated fair value. Fair value for financial reporting purposes is
evaluated periodically by the Company on a property by property basis using
undiscounted cash flow. If a potential impairment is identified, it is
measured by the property's fair value based on either sales comparables or
the net cash expected to be generated by the property, less estimated
carrying costs (including interest) during the anticipated holding period,
plus the estimated cash proceeds from the ultimate disposition of the
property. To the extent that the carrying value exceeds the estimated fair
value, a provision for decrease in net realizable value is recorded.
Estimated fair value is not necessarily an indication of a property's
current value or the amount that will be
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realized upon the ultimate disposition of the property. As of March 31,
1996, none of the carrying values of the properties exceeded their
estimated fair values. As of March 31, 1996, the properties are located
primarily in California, Oregon and Washington. As a result of this
geographic concentration, the operations of these properties could be
adversely affected by a recession or general economic downturn in the areas
where these properties are located.
Construction in Progress
Project costs clearly associated with the development and construction of a
real estate project are capitalized as construction in progress. In
addition, interest, real estate taxes, insurance and other holding costs
are capitalized during the period in which activities necessary to get the
property ready for its intended use are in progress.
Investment in Mortgages
The Company has invested in mortgages purchased at a discount. In January
1996, the Company acquired two mortgage loans for $14,333. The mortgages
are secured by real estate, have an aggregate face value of $21,000,
require monthly principal and interest payments of $163, and mature in
December 1999.
The Company assesses possible impairment of these loans on a quarterly
basis. At March 31, 1996, the value of the underlying real estate was in
excess of the carrying value of the mortgage loans.
Cash and Cash Equivalents
Highly liquid investments with an original maturity of three months or less
when purchased are classified as cash equivalents.
Ground Leases
The land on which three of the Company's properties are located is owned by
Stanford University and is subject to ground leases. The ground leases
expire in 2039 or 2040, and unless the leases are extended, the use of the
land, together with all improvements, will revert back to Stanford
University. The former owners of the three properties prepaid the ground
leases through 2011, 2012 and 2017; thereafter, the Company will be
responsible for the ground lease payments, as defined under the terms of
the leases. These ground lease payments have been segregated from the total
purchase price of the properties, capitalized as leasehold interests in the
accompanying consolidated balance sheet, and are being amortized ratably
over the terms of the related original prepayment periods (18 to 24 years).
Deferred Financing and Leasing Costs
Costs incurred in connection with financing or leasing are capitalized and
amortized on a straight-line basis over the term of the related loan or
lease for periods ranging from 2 to 25 years. Unamortized leasing costs are
charged to expense upon the early termination of the lease.
Fair Value of Financial Investments
Based on the borrowing rates currently available to the Company, the
carrying amount of debt approximates fair value. Cash and cash equivalents
consist of demand deposits, certificates of deposit, overnight repurchase
agreements, and short-term commercial with financial institutions. The
carrying amount of cash and cash equivalents approximates fair value.
Minority Interest
Minority interest in the Company represents (i) the individual Spieker
Partners' approximate 15.1 percent limited partnership interest in the
Operating Partnership, and (ii) a 10 percent interest in one property and a
7.5 percent interest in another property held by outside interests.
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Revenues
All leases are classified as operating leases. Rental income is recognized
on the straight-line basis over the terms of the leases. Deferred rent
receivable represents the excess of rental revenue recognized on a
straight-line basis over cash received under the applicable lease
provisions.
Extraordinary Items
Extraordinary items for the three months ended March 31, 1996, represent a
gain on the early extinguishment of debt. See Note 9 - Extraordinary Item.
Net Income (Loss) Per Share of Common Stock
Per share amounts for the Company are computed using the weighted average
common shares outstanding (includes Class B Common and Class C Common
Stock) during the period. The weighted average common shares outstanding
for the three months ended March 31, 1996 and 1995 are 31,336,085 and
20,434,245, respectively. Earnings used in the calculation are reduced by
dividends owed to preferred stockholders.
Reclassifications
Certain items in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. RELATED PARTY TRANSACTIONS
Receivable From Related Party
The receivable from related party at March 31, 1996 and December 31, 1995
represents management fees and reimbursements from Spieker Partners related
entities.
4. DEBT
Unsecured Notes
The Company has issued unsecured investment grade notes in four tranches
totaling $360,000 in principal with varying interest rates from 6.65% to
6.95% payable semi-annually. The notes are due on various dates from 2000
to 2004.
On January 19, 1996, the Company sold $100,000 of unsecured investment
grade notes bearing interest at 6.90% and due January 15, 2004. Interest is
payable semiannually. Net proceeds were used to repay borrowings on the
unsecured line of credit.
Unsecured Line of Credit
The maximum amount available under the unsecured line of credit facility
is $150,000. The facility carries interest at LIBOR plus 1.5% and matures
in November 1997. The facility also includes a fee on average unused funds
which varies between 0.125% and 0.20% based on the average outstanding
balance. As of March 31, 1996 the amount drawn on the facility was $4,000.
Mortgage Loans
Mortgage loans of $61,696 as of March 31, 1996 are secured by a first or
second deed of trust on related properties. The mortgage loans carry
interest rates ranging from 7.5% to 13.75%, require monthly principal and
interest payments, and mature from 1996 to 2012.
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5. DIVIDENDS AND DISTRIBUTIONS PAYABLE
The dividends and distributions payable at March 31, 1996 and December 31,
1995 represent amounts payable to stockholders of record and distributions
payable to minority interest holders as of the same dates. The stockholders
of record and minority interests holders as of March 31, 1996 and December
31, 1995 are as follow:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Shares of:
Common Stock 31,773,361 26,724,074
Class B Common Stock 2,000,000 2,000,000
Class C Common Stock 1,176,470 -
Series A Preferred Stock 1,000,000 1,000,000
Series B Preferred Stock 4,250,000 4,250,000
Minority Interest Holders 6,549,819 6,565,356
</TABLE>
6. STOCKHOLDERS' EQUITY
Equity Offerings
On February 28, 1996, the Company concurrently sold 4,887,500 shares of
Common Stock, 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. Net
proceeds of $151,332 were used primarily to repay floating rate debt.
In December 1995, the Company sold 4,250,000 shares of Series B Preferred
Stock at $25.00 per share and concurrently sold $260,000 of unsecured
investment grade rated notes through underwritten public offerings
(collectively referred to as the "December 1995 Offerings"). Net proceeds
of $360,242 were used to prepay cross-collateralized mortgage obligations
outstanding and certain fees to Prudential Insurance Company (the
"Prudential Debt").
On May 11, 1995, the Company sold 5,750,000 shares of Common Stock for
$19.75 per share through an underwritten public offering. Concurrently, the
Company sold 506,329 shares of Common Stock at $19.75 per share and
2,000,000 shares of Class B Common Stock at $25.00 per share to a limited
number of institutional investors (collectively referred to as the
"Concurrent Offerings"). Net proceeds from the underwritten public offering
and the Concurrent Offerings totaling $167,119 were used to repay
indebtedness incurred by the Company to fund acquisition and development
activities.
Preferred Stock
The 1,000,000 shares of Series A Cumulative, Convertible, Preferred Stock
ranks senior to the Company's Common Stock as to dividends and liquidation
rights. The shares are convertible into 1,219,512 shares of the Company's
Common Stock and have voting rights equal to 1,219,512 shares of Common
Stock. The dividend per share, calculated on the converted numbers of
shares, is equal to the Common Stock dividend, provided that the dividend
yield on the preferred stock may not be less than the initial dividend rate
thereof. With respect to the payment of dividends and amounts upon
liquidation, the Series A Preferred Stock ranks on parity with the
Company's Series B Preferred Stock and ranks senior to the Company's Common
Stock, Class B Common Stock and Class C Common Stock.
The Series B Preferred Stock dividends are paid quarterly in arrears at
9.45% of the initial liquidation preference per annum. The Series B
Preferred Stock is redeemable on or after December 11, 2000 at the option
of the Company in whole or in part at a redemption price of $25.00 per
share, plus accrued and unpaid dividends. With respect to the payments of
dividends and amounts upon liquidation, the Series B Preferred Stock ranks
on parity with the Company's Series A Preferred Stock and ranks senior to
the Company's Common Stock, Class B Common Stock and Class C Common Stock.
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Class B Common Stock
The Class B Common Stock ranks on parity with the Company's Common Stock
and Class C Common Stock with respect to dividends. In the event of any
liquidation, the holders of Class B Common Stock rank on parity with Class
C Common Stock and are entitled to receive prior and in preference to
holders of Common Stock, an amount per share of Class B Common Stock equal
to all declared but unpaid dividends for each share of Class B Common
Stock.
Class C Common Stock
The Class C Common Stock ranks on parity with the Company's Common Stock
and Class B Common Stock with respect to dividends. In the event of any
liquidation of the Company, the holders of Class C Common Stock rank on
parity with Class B Common Stock and are entitled to receive prior to and
in preference to the holders of Common Stock, an amount per share of Class
C Common Stock equal to all declared but unpaid dividends for each share of
Class C Common Stock.
Ownership Limitations
To maintain its qualification as a REIT, not more than 50 percent in value
of the outstanding shares of the Company may be owned, directly or
indirectly, by five or fewer individuals (defined to include certain
entities), applying certain constructive ownership rules. To help ensure
that the Company will not fail this test, the Company's Charter provides
for certain restrictions on the transfer of the Common Stock to prevent
further concentration of stock ownership. Moreover, to evidence compliance
with these requirements, the Company must maintain records that disclose
the actual ownership of its outstanding Common Stock and will demand
written statements each year from the record holders of designated
percentages of its Common Stock disclosing the actual owners of such Common
Stock.
7. EMPLOYEE STOCK PLANS
Employee Stock Incentive Pool
At the time of the Company's initial public offering, the Senior Officers
of the Company reserved a portion of their limited partnership interests in
the Operating Partnership for awards and conversion into Common Stock to
existing employees at that time. The aggregate amount of interests reserved
for the Employee Stock Incentive Pool is equivalent to 69,990 shares of
Common Stock. The participants in the Pool were granted 25% of their
respective allocations on January 1, 1994, January 1, 1995 and January 1,
1996, resulting in a total of 75% of stock awards having been granted. The
remainder of the employees' allocations will be granted on January 1, 1997,
provided that the employee has not previously terminated employment.
The initial deferred compensation of $1,320 pertaining to the 69,990 units
was recorded on the books of the Company, and is being amortized annually
based on the vesting period. The initial value was calculated by converting
the 69,990 partnership units into shares of Common Stock and multiplying by
the Company's Common Stock price on the date of the grant.
Non-cash compensation expense for the awards is measured by the number of
Operating Partnership units converted multiplied by the Company's Common
Stock price on the date of conversion.
For the three months ended March 31, 1996, non-cash compensation expense
arising from the conversion of 15,537 shares of common stock equivalents
was $97, and deferred compensation was $755.
Stock Incentive Plan
The Company has adopted the Spieker Properties, Inc. 1993 Stock Incentive
Plan (the "Stock Incentive Plan") to provide incentives to attract and
retain officers and key employees. The Stock Incentive Plan provides for
the grants of options to purchase a specified number of shares of Common
Stock. Under the Stock Incentive Plan, the total number of shares available
for grant will be 2,000,000. As of March 31, 1996, options on approximately
1,514,750 shares of Common Stock for an exercise price of $20.50 per share,
and 200,000 shares of Common Stock for an exercise price of $25.00 per
share have been granted under the Plan. To date, 36,750 shares have been
exercised and 795,688 shares are currently exercisable.
13
<PAGE> 14
8. ACQUISITIONS
The Company acquired the following properties and made the following
investments during the quarter ended March 31, 1996:
<TABLE>
<CAPTION>
Total Rentable
Project Name Location Property Type Square Feet Date Acquired Initial Cost
(1)
- ------------ -------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Bayside Corporate Center Foster City, CA O 84,925 Jan '96 $ 10,035
Benecia Industrial Benecia, CA I 1,822,788 Jan '96 $ 41,060
Marine Drive Distribution Center Portland, OR I 106,000 Mar '96 $ 622
II (2)
Everett Industrial Everett, WA I 150,154 Mar '96 $ 7,421
</TABLE>
(1) "O" indicates office property; "I" indicates industrial property.
(2) Purchase of land to be developed.
Additionally, the Company acquired two mortgages secured by two office
properties in San Jose, California for $14,333.
9. EXTRAORDINARY ITEM
On February 14, 1996, the Company recognized an extraordinary gain on the
early extinguishment of certain debt. A secured mortgage with $7,455 in
remaining principal was retired at a discount for $7,305.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following comparison is of the Company's consolidated operations for
the three months ended March 31, 1996 as compared to the Company's
consolidated operations for the three months ended March 31, 1995.
Rental revenues for the first quarter of 1996 increased by $9.6 million or
28% to $44.3 million, as compared with $34.7 million for the quarter ended
March 31, 1995. Of this increase, $6.3 million was generated by properties
acquired during 1995 (the "1995 Acquisitions"). During 1995, the Company
spent approximately $164.8 million to acquire properties totaling 2.3
million square feet. Of the increase in rental revenues, $1.1 million was
generated by developments begun during 1995 and completed during 1996 (the
"1995 Developments"). During the quarter ended March 31, 1996, three
projects representing a total projected cost of $42.5 million and totaling
0.6 million square feet have been completed and added to the Company's
portfolio of stabilized properties. In addition, $1.1 million of the
increase in rental revenue was generated by properties acquired during the
quarter ended March 31, 1996. During the first quarter of 1996, the Company
spent $58.5 million to acquire properties totaling 2.1 million square feet
(the "1996 Acquisitions"). The remaining $1.1 million of the increase in
rental revenues is attributable to revenue increases in the properties
owned at January 1, 1995 (the "Core Portfolio"). The revenue increase in
the Core Portfolio is due to increases in occupancy in certain properties,
contractual rent increases and increased rental rates realized on the
renewal and re-leasing of second generation space.
As a result of the 1995 Acquisitions, 1996 Acquisitions, and 1995
Developments, the Company's rentable square footage increased by 3.0
million square feet or 21% to 18.0 million square feet on March 31, 1996
from 15.0 million on March 31, 1995. At March 31, 1996 the portfolio was
96.5% leased. By property type, the office portfolio was 95.1% leased, the
industrial portfolio was 97.7% leased and the retail portfolio was 92.8%
leased.
Interest and other income increased by $0.2 million or 35% for the three
months ended March 31, 1996, as compared with the same period in 1995. The
net increase in interest and other income is due to a $0.3 million increase
in interest income related to the Company's $14.3 million investment to
acquire two mortgages secured by two office properties in San Jose,
California at approximately 68% of face value, which was partially offset
by a $0.1 million decrease in management fee income. The decrease in
management fee income is attributable to the Company's acquisition of
certain properties previously managed by the Company.
Rental expenses increased by $1.7 million or 32% for the three months ended
March 31, 1996, as compared with the same period in 1995. Real estate taxes
increased by $0.6 million or 21% for the three months ended March 31, 1996,
as compared with the same period in 1995. The overall increase in rental
expenses and real estate taxes (collectively referred to as "operating
expenses") is primarily a result of the growth in the total square footage
of the Company's portfolio of properties. On a percentage basis, operating
expenses were 24% of rental revenues for both the first quarter of 1996 and
the first quarter of 1995. The total increase in operating expenses is due
to a $1.9 million increase attributable to the 1995 Acquisitions, a $0.3
million increase attributable to the 1995 developments, a $0.2 million
increase attributable to the 1996 Acquisitions, and a $0.1 million decrease
attributable to the Core Portfolio.
Interest expense decreased by $4.1 million or 32% to $8.8 million for the
three months ended March 31, 1996 from $13.0 million for the same period in
1995. The decrease in interest expense is due to both a reduction in total
debt outstanding from $571.4 million as of March 31, 1995 to $425.7 million
as of March 31, 1996, and to the elimination of the amortization of debt
discount as part of the December 1995 refinancing of $347 million of
secured mortgage debt (the "Prudential Debt"). The Prudential Debt was
prepaid with the net proceeds from the concurrent underwritten public
offering of $260.0 million of investment grade rated unsecured notes and
4.25 million shares of Series B Preferred Stock. The prepayment of the
Prudential Debt resulted in the write-off of approximately $28.1 million in
debt discount which was previously being amortized over the remaining term
of the loans and recorded as interest expense.
General and administrative expenses and other expenses increased by $0.1
million for the three months ended March 31, 1996, as compared with the
same period in 1995, primarily as a result of employee growth.
Net income before minority interest increased by $10.4 million or 234% to
$14.8 million for the three months ended March 31, 1996 from $4.4 million
for the same period in 1995. The increase in net income is principally due
(i) to income from the 1995 and 1996 Acquisitions, the 1995 Developments
and the increased property operating income (rental revenue less operating
expenses) generated by the Core Portfolio as a result of increased
occupancy in certain
15
<PAGE> 16
properties, contractual rent increases and increased rental rates realized
on the renewal and re-leasing of second generation space and (ii) the
decrease in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended March 31, 1996, cash provided by operating
activities increased by $11.9 million or 70% to $28.8 million, as compared
to $16.9 million for the same period in 1995. The increase is primarily due
to the increase in net income resulting from the 1995 and 1996
Acquisitions, 1995 Developments, increased property operating income
generated by the Core Portfolio and a decrease in interest expense. Cash
used for investing activities increased by $34.1 million or 64% to $87.2
million for the first three months of 1996, as compared to $53.1 million
for the same period in 1995. 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 $23.2
million or 52% to $67.7 million for the first three months of 1996, as
compared to $44.5 million for the same period in 1995. During the first
three months of 1996, cash provided by financing activities consisted,
primarily, of $151.3 million in net proceeds from the sale of Common Stock
and Class C Common Stock, $100.0 million from the issuance of unsecured
investment grade notes and the payment of $164.6 million on a combination
of the line of credit and mortgage loans. Additionally, payments of
distributions increased by $7.1 million to $18.1 million for the first
three months of 1996, as compared with $11.0 million for the same period in
1995. The increase is due to the greater number of shares outstanding and a
2.4% increase in the distribution rate.
The principal sources of funding for acquisitions, development, expansion
and renovation of the properties are an unsecured line of credit,
construction and permanent secured debt financings, 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 March 31, 1996, the Company had no mutual commitments for capital
expenditures related to the renewal or re-leasing of space. The Company
believes that the cash provided by operations and its line of credit
provide sufficient sources of liquidity to fund capital expenditure costs
associated with renewal or re-leasing of space.
On November 6, 1995, the Company converted its secured line of credit to a
$150.0 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 March 31, 1996, the Company had $4.0 million outstanding under the
Facility.
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 dividend yield of 9.45%.
The proceeds from the December Offerings of $360.2 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 unencumbrance of 55 of the Company's properties.
On January 19, 1996 the Company issued $100.0 million of investment grade
rated 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
$99.0 million were used to repay borrowings on the unsecured line of
credit. As a result of the December 1995 and January 1996 offerings of
unsecured notes, as of March 31, 1996, the Company had $360.0 million
outstanding of investment grade rated unsecured notes in four tranches that
mature from 2000 to 2004.
In addition to the Unsecured Notes and the Facility, the Company has $61.7
million of secured indebtedness (the "Mortgages") at March 31, 1996. The
Mortgages have interest rates varying from 7.5% 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
16
<PAGE> 17
require monthly principal and interest payments. The Company also has $12.5
million of assessment bonds outstanding as of March 31, 1996.
On February 28, 1996, the Company concurrently sold 4,887,500 shares of
Common Stock (including 637,500 shares sold pursuant to the underwriters'
exercise of their over-allotment option), 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 of $151.3 million were used
primarily to repay floating rate debt.
In January 1996, the Company and the Operating Partnership filed a shelf
registration statement (the "January 1996 Shelf Registration Statement")
with the Securities and Exchange 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 January 1996 Shelf
Registration Statement.
After the completion of its February 28, 1996 equity offering, the Company
has capacity pursuant to its October 1995 Shelf Registration Statement to
issue up to $140.0 million in debt securities (such securities would be
offered by the Operating Partnership) and approximately $142.0 million in
equity securities.
FUNDS FROM OPERATIONS
The Company considers Funds from Operations to be a useful financial
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, developments, and other capital
expenditures. Funds from Operations does not represent net income or cash
flows from operations as defined by generally accepted accounting
principles ("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.
Pursuant to the National Association of Real Estate Investment Trusts
("NAREIT") new definition of Funds from Operations, beginning with the
quarter ended March 31, 1996, the Company calculated 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 will not add back the depreciation of corporate items,
such as computers or furniture and fixtures, or the amortization of
deferred financing costs or debt discount. However, the Company will
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.
Funds from Operations per share can be calculated based on average shares
equivalents outstanding, assuming the conversion of all shares of Series A
Preferred Stock and all partnership units in the Operating Partnership into
shares of Common Stock. Assuming such conversion, the average number of
shares outstanding for the three months ended March 31, 1996 and 1995 are
39,105,416 and 27,660,271, respectively.
17
<PAGE> 18
STATEMENT OF FUNDS FROM OPERATIONS
(based on the new NAREIT definition)
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Net income before minority interest $ 14,829 $ 4,440
Add:
Depreciation and Amortization 8,475 7,339
Dividends on Series B Preferred Stock (2,510) -
Other, net 115 75
Straight-lined rent (70) (185)
-------- --------
Funds from Operations $ 20,839 $ 11,669
======== ========
</TABLE>
Because of the impact of the December Offerings on the Company's balance
sheet and result 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 the quarter
ended March 31, 1995, based on the new NAREIT definition and adjusted to
reflect the December Offerings and the conversion of the secured line of
credit into an unsecured facility.
STATEMENT OF FUNDS FROM OPERATIONS
1995 New NAREIT Definition Adjusted
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1995
--------------
<S> <C>
Funds From Operations - New Definition $ 11,669
Add:
Amortization of Discount and Deferred Financing Fees 2,519
--------
Funds From Operations - Old Definition 14,188
Less:
Restructuring of Secured Debt (1) (958)
Amortization of Discount and Deferred Financing Fees (2) (375)
--------
Funds From Operations - Pro Forma New Definition $ 12,855
========
</TABLE>
(1) Adjustment reflects interest cost of unsecured notes and dividend cost of
Series B Preferred Stock less previously recorded cash interest cost on
$347 million of prepaid debt.
(2) Adjustment reflects amortization of discount and deferred financing
fees added back in calculating FFO based on old NAREIT definition less
amortization on the $347 million of prepaid debt and the previous secured
line of credit and adding in amortization on the new unsecured line of
credit.
18
<PAGE> 19
PART II OTHER INFORMATION
Item 2. Changes in Securities
On February 28, 1996, concurrent with the completion of a public offering
of its Common Stock, the Company completed the sale of 1,176,470 shares of
Class C Common Stock ("Class C Shares") at a per share price of $25.50 to
an institutional investor. The holder of Class C Shares is not entitled to
vote on matters voted on by stockholders of the Company and Class C Shares
are not registered under the Securities Act of 1933, as amended. Subject to
certain limitations, the Class C Shares may be converted into Common Stock
on a one-for-one basis three years after the closing of the shares' sale or
earlier upon the occurrence of certain events. The holder of Class C Shares
has certain demand registration rights for eight years following the
closing of the shares' sale to require the Company in each instance to
register Common Stock issued upon conversion of the Class C Shares having a
market value of $1.0 million or more. See Exhibit 4.13 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995. The holder
of Class C Shares is entitled to an initial per annum dividend distribution
equal to $1.73 per share, which will thereafter be increased or decreased
by the same dollar amount as any increase or decrease in the dividend
distributions made to the holders of Common Stock. For a description of the
terms of the Class C Shares, see Exhibit 3.6 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
The exhibits listed below are filed or incorporated by reference as part
of this quarterly report on Form 10-Q.
<TABLE>
<CAPTION>
Exhibit Number
--------------
<S> <C>
3.6 Articles Supplementary of Spieker Properties, Inc. for Class C Common Stock
(incorporated by reference to Exhibit 3.6 to Spieker Properties, Inc.'s Form 10-K
Report for the year ended December 31, 1995)
4.9 Fourth Supplemental Indenture relating to the 2004 Notes and the
2004 Note (incorporated by reference to Exhibit 4.9 to Spieker
Properties, Inc.'s Form 10-K Report for the year ended December
31, 1995)
4.12 Class C Common Stock Purchase Agreement (incorporated by
reference to Exhibit 4.12 to Spieker Properties, Inc.'s Form 10-K
Report for the year ended December 31, 1995)
4.13 Investor's Rights Agreement relating to Class C Common Stock
(incorporated by reference to Exhibit 4.13 to Spieker Properties,
Inc.'s Form 10-K Report for the year ended December 31, 1995)
10.14 Fourth Amendment, Fifth Amendment, and Sixth Amendment to First
Amended and Restated Agreement of Limited Partnership of Spieker
Properties, L.P. (incorporated by reference to Exhibit 10.14 to
Spieker Properties, Inc.'s Form 10-K Report for the year ended
December 31, 1995)
10.16 Seventh Amendment to First Amended and Restated Agreement of Limited Partnership
of Spieker Properties, L.P.
12.1 Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends
27.1 Article 5 Financial Data Schedule (EDGAR filing only)
</TABLE>
(B) Reports on Form 8-K
The Company filed a current report on Form 8-K dated January 24,
1996, to file as an exhibit an opinion of counsel relating to the
offering by Spieker Properties, L.P. of 6.90% Notes due January 15,
2004.
The Company filed a current report on Form 8-K dated February 26,
1996, to file as an exhibit an opinion of counsel relating to the
offering by the Company of its Common Stock.
19
<PAGE> 20
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Spieker Properties, Inc.
(Registrant)
Dated: May 7, 1996 /s/ Elke Strunka
----------- ----------------------------
Elke Strunka,
Vice President
Principal Accounting Officer
20
<PAGE> 21
<PAGE> 1
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Spieker Properties, Inc.
(Registrant)
Dated: May 7, 1996 /s/ Elke Strunka
----------- ----------------------------
Elke Strunka,
Vice President
Principal Accounting Officer
20
<PAGE> 2
<PAGE> 3
EXHIBIT 10.16
SEVENTH AMENDMENT TO FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SPIEKER PROPERTIES, L.P.
This Seventh Amendment ("Seventh Amendment") to the First Amended and
Restated Agreement of Limited Partnership of Spieker Properties, L.P., a
California limited partnership, dated as of February 2, 1995, as subsequently
amended (collectively, the "Partnership Agreement"), is executed as of this
20th day of March, 1996, by and among Spieker Properties, Inc., a Maryland
corporation, the General Partner of the Partnership, and the undersigned
Limited Partners of the Partnership, who constitute a Majority-in-Interest of
the Limited Partners as of the date hereof.
The Partners hereby agree as follows:
1. Capitalized terms used herein, unless otherwise defined herein, shall
have the same meanings as set forth in the Partnership Agreement.
2. Notwithstanding anything to the contrary provided in the Partnership
Agreement, including, without limitation, Section 9.2(c) thereof, Common
Stock that is transferred to employees of the General Partner during
1996 pursuant to the terms of the Partnership Agreement and Employee
Stock Incentive Pool of Spieker Properties, L.P. dated November 18, 1993
(the "Stock Pool") and that is subsequently sold by such employees shall
not be subject to the restrictions on such Common Stock that were
imposed on the transferor immediately prior to such transfer under the
Partnership Agreement, including, without limitation, the lien on the
Partnership Interests described in Section 12.5 of the Partnership
Agreement, provided that the aggregate number of shares of Common Stock
released from such restrictions pursuant to this Paragraph 2 shall not
exceed 16,000 shares of Common Stock.
3. This Seventh Amendment may be executed in two or more counterparts, each
of which shall be deemed originals, and all of which taken together
shall constitute one instrument.
4. This Seventh Amendment shall be governed by and construed in conformity
with the laws of the State of California.
5. Except as specifically provided herein, the Partnership Agreement shall
remain in full force and effect.
6. This Seventh Amendment shall become effective only upon the execution
of this Seventh Amendment by the General Partner and a
Majority-In-Interest of the Limited Partners.
<PAGE> 1
EXHIBIT 12.1
SPIEKER PROPERTIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
Earnings:
Income from operations before minority
interest and extraordinary items $14,829 $ 4,440
Interest expense(1) 8,837 12,969
Amortization of capitalized interest 55 46
------- -------
Total earnings $23,721 $17,455
======= =======
Fixed charges:
Interest expense(1) $ 8,837 $12,969
Capitalized interest 581 325
Series A Preferred Dividends 524 512
Series B Preferred Dividends(2) 2,510 --
------- -------
Total fixed charges and preferred dividends $12,452 $13,806
======= =======
Ratio of earnings to fixed charges
(excluding preferred dividends) 2.52 1.31
======= =======
Ratio of earnings to combined fixed
charges and preferred dividends(2) 1.90 1.26
======= =======
Fixed charges in excess of earnings $ -- $ --
======= =======
</TABLE>
- --------------
Notes:
(1) Includes amortization of debt discount and deferred financing fees.
(2) The Company issued 4,250 shares of Series B preferred stock in
December 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Spieker
Properties, Inc. quarterly report for the period ended March 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 16,833
<SECURITIES> 0
<RECEIVABLES> 3,588
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,166,057
<DEPRECIATION> 126,194
<TOTAL-ASSETS> 1,100,854
<CURRENT-LIABILITIES> 0
<BONDS> 425,696
0
126,013
<COMMON> 3
<OTHER-SE> 440,287
<TOTAL-LIABILITY-AND-EQUITY> 1,100,854
<SALES> 0
<TOTAL-REVENUES> 45,168
<CGS> 0
<TOTAL-COSTS> 10,682
<OTHER-EXPENSES> 10,820
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,837
<INCOME-PRETAX> 14,829
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,829
<DISCONTINUED> 0
<EXTRAORDINARY> 150
<CHANGES> 0
<NET-INCOME> 12,893
<EPS-PRIMARY> .31
<EPS-DILUTED> 0
</TABLE>
