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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] 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)
<TABLE>
<S> <C>
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)
</TABLE>
(415) 854-5600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on which Registered
------------------- ------------------------------------
Series B Preferred Stock New York Stock Exchange
Common Stock New York Stock Exchange
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 or any
amendments to this Form 10-K. [ ]
As of March 18, 1997, the aggregate market value of the voting stock held
by nonaffiliates of the registrant was $1,714,544,900. The aggregate market
value was computed with reference to the closing price on the New York Stock
Exchange on such date. This calculation does not reflect a determination that
persons are affiliates for any other purpose.
As of March 18, 1997, 43,406,200 shares of Common Stock ($.0001 par value)
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PART III: Portions of the registrant's definitive proxy statement to be
issued in conjunction with the registrant's annual stockholders' meeting to be
held on June 10, 1997.
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TABLE OF CONTENTS
FORM 10-K
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<S> <C> <C>
PART I
Item 1 Business...........................................................
Item 2 Properties.........................................................
Item 3 Legal Proceedings..................................................
Item 4 Submission of Matters to a Vote of Security Holders................
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder
Matters............................................................
Item 6 Selected Financial Data............................................
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................
Item 8 Financial Statements and Supplementary Data........................
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................
PART III
Item 10 Directors and Executive Officers of the Registrant.................
Item 11 Executive Compensation.............................................
Item 12 Security Ownership of Certain Beneficial Owners and Management.....
Item 13 Certain Relationships and Related Transactions.....................
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K....
</TABLE>
<PAGE> 3
PART I
This Annual Report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements as a
result of various factors, including general real estate investment risks,
competition, risks associated with acquisition and development activities and
debt financing, environmental matters, general uninsured losses and seismic
activity.
ITEM 1. BUSINESS
Description of Business
Spieker Properties, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") that acquires,
develops and operates commercial properties in California and Washington, Oregon
and Idaho (the "Pacific Northwest"). As of December 31, 1996, the Company owned
income-producing properties (the "Properties") aggregating approximately 21.4
million rentable square feet. The portfolio consists of industrial properties
aggregating approximately 13.7 million rentable square feet, office properties
aggregating approximately 6.3 million rentable square feet and retail properties
aggregating approximately 1.4 million rentable square feet. The Company has
acquired 3.3 million net rentable square feet of office and industrial
properties since December 31, 1996, and has completed the disposal of one
additional retail property. As of December 31, 1996, the average occupancy rate
of the properties was approximately 96.6%.
The Company was incorporated in the state of Maryland on August 20, 1993,
and commenced operations effective with the completion of its initial public
offering ("IPO") on November 18, 1993. In the IPO, the Company issued 20,400,000
shares of Common Stock at $20.50 per share, or $418.2 million and used net
proceeds of $386.8 million to purchase an approximate 77.6% general partnership
interest in Spieker Properties L.P. (the "Operating Partnership"). Unless the
context otherwise requires, the Company and the Operating Partnership are
collectively referred to as the "Company." As of December 31, 1996, the Company
owned an approximate 84.9% general partnership interest in the Operating
Partnership. Following the equity offering in January 1997 described herein, the
percentage ownership was increased to 86.9% as of March 18, 1997.
Business Strategy and Operational Philosophy
The Company's principal objective is to achieve sustainable long-term
growth in Funds from Operations per share. The Company has pursued this goal
since its inception through a focused, strategic approach to acquisition,
development and property management.
BUSINESS STRATEGY
Focus on Quality Commercial Property. The Company invests in quality
office and industrial properties that possess attributes that enable the
properties to be competitive in both the short and the long run. The Company
seeks to own properties in locations which provide easy access to major
transportation arteries and are close to important services. With more than 25
years of experience in owning and operating income-producing properties, the
Company's management possesses a high degree of knowledge of the physical and
locational characteristics that give a property long-term viability.
The Company takes significant steps to differentiate its properties from
those of nearby competitors, so as to maximize their attractiveness to potential
users. The Company focuses on office properties that have ample glass line per
square foot of office space, and user-friendly common areas, stairs, elevators
and restrooms, convenient parking and efficient suite layouts. Additionally, the
Company seeks to provide amenities and services such as conference rooms and
health clubs. The Company's warehouse properties typically have high clear
heights, numerous dock facilities, appropriate truck staging and high-capacity
sprinkler systems. The
<PAGE> 4
Company also seeks to differentiate its industrial properties through the use of
landscaping as well as exterior glass walls.
The Company pays careful attention to the long-term quality of the
buildings that it develops by emphasizing first-class materials, systems and
workmanship during their construction. The exterior appearances of the
Properties are designed to be attractive, enduring and appropriately simple. The
Company avoids projects which are lavish or unnecessarily intricate, as these
features tend to prematurely date buildings and often fail to deliver value from
the tenants' perspective.
Serve Wide Range of Tenants. The Company focuses on leasing space to
tenants of various sizes and on owning properties that are easily divisible and
therefore appeal to a wide range of potential tenants. Such property flexibility
also allows the Company to better serve existing tenants by accommodating their
inevitable expansion and contraction needs. In addition, the Company's
experience is that such project flexibility helps it maintain high occupancy
rates particularly when market conditions are less favorable.
By focusing on divisible projects and a wide range of tenants, the Company
has been able to control the capital expenditures associated with re-leasing
space. Consequently, the Company's capital expenditure requirements are
relatively lower than those associated with downtown office buildings or large
single tenant suburban projects. The Company also attempts to limit tenant
improvement expenditures to those which are in demand by, and adaptable to, a
high number of users.
Own Suburban Properties. The Company focuses its efforts on properties in
suburban markets surrounding major metropolitan areas. The Company believes that
a number of significant demographic and technological factors have caused, and
will continue to cause, properties in suburban areas to perform better than
properties in central business districts. The desire of employees to work near
their residence as well as transportation difficulties and safety concerns
associated with central business districts have generally caused employers to
seek facilities in the suburbs in the recent past. These factors are reinforced
by technological changes which have enabled companies to operate efficiently
from disparate locations.
In each specific local submarket of a suburban area in which it operates,
the Company generally seeks to own a number of properties and to be one of the
most significant commercial landlords in that market. The Company believes that
this strategy gives it a measure of control over the rental rates it charges for
its properties. Through this approach, the Company can also offer prospective
tenants a variety of property options and can provide existing tenants, who are
expanding, additional space in properties owned by the Company in the same area.
The Company believes that it has achieved significant market penetration within
a number of the submarkets in which it operates.
Invest in Growing Regions. The Company focuses its activities in
California and the Pacific Northwest, where it believes economic growth will
exceed national averages. The Company believes these regions possess diverse and
vibrant economies with strong prospects for future growth due to their Pacific
Rim location, quality of life, well-developed transportation infrastructures,
high technology industries, well-educated employee base and excellent
universities. Within California and the Pacific Northwest, the Company focuses
its activities on the major metropolitan areas of Seattle, Portland, San
Francisco, San Jose, Sacramento, Los Angeles, Orange County and San Diego, which
have shown to be desired locations of a large number of businesses.
Provide Superior Level of Service. The Company's goal is to provide a
superior level of service to its tenants in order to achieve high occupancy and
rental rates, as well as low turnover. The Company's office property managers
are located on-site, providing tenants with convenient access to management and
allowing tenants to focus on their business rather than on property issues.
On-site staff enable the Company's properties to be well-maintained and to
convey a sense of quality, order and security that complements the suburban
environments in which the properties are located. The Company has significant
experience in acquiring properties managed by others and thereafter improving
tenant satisfaction, occupancy levels, renewal rates and rental income by
implementing the Company's tenant service programs.
<PAGE> 5
OPERATING PHILOSOPHY
Fully-Integrated Management Capabilities. The Company has had, and will
continue to have, a philosophy of maintaining in-house resources to add value to
properties through the entire cycle of acquisition, development, and ownership,
including design, construction, leasing and management. The Company utilizes
in-house resources to market, lease and manage its properties and does not
typically list its properties with outside businesses or use third-party
management contractors. All of the Company's officers with real estate
responsibility have had extensive experience marketing various properties and
have, at least one time in their careers, been directly responsible for leasing
specific properties. The Company believes this approach gives it a significant
advantage as such depth of experience provides it with a detailed knowledge of
markets and tenant preferences.
Accountability. The Company has a philosophy of holding one senior officer
or a small group of senior officers accountable, under the supervision and
direction of the Company's executive officers, for all phases of a property's
development, from purchase, design and budgeting through construction, leasing
and ongoing management. The Company believes that this approach increases the
likelihood of a project's success because of the senior officer's
accountability, continuity of involvement in the project and resulting detailed
knowledge of the property and its tenants, particularly as compared to a
compartmentalized approach to the real estate business where individuals are
responsible only for certain limited areas of a project.
Training and Retention. The Company's hiring, training and retention of a
talented management group has been an important factor in its success. The
Company expends significant efforts in the training of new employees in
fundamental real estate skills as well as in the continuing education of
existing employees. All of the Company's officers, including the executive
officers, are involved in the education program, which reinforces the program's
importance to the Company and its personnel. The Company's officer compensation
program includes cash bonuses and restricted stock payments tied largely to
growth in net operating income from existing properties under their management,
as well as contribution to Funds from Operations from new acquisitions and
developments in their regions. Non-officer compensation includes subjective
bonuses based upon, among other factors, tenant satisfaction and leasing and
re-leasing success. The Company also believes that stock options are an
effective means of linking employees' actions to stockholder value and has
granted options to 70 of the Company's 212 employees.
Employees
As of December 31, 1996, the Company had 212 employees.
Competition
Other properties within the Company's markets compete with the Properties
in attracting tenants, primarily on the bases of location, rental rates,
services provided, and the design and condition of the improvements. In each of
the Company's markets, the competition for tenants has been, and continues to
be, intense. Some of these competing properties are newer, better located or
better capitalized than the Company's properties. The number of competitive
commercial properties in a particular area could have a material effect on the
Company's ability to lease space in its properties or at newly developed or
acquired properties and on the rents charged.
The Company also faces competition in its efforts to acquire equity
interests in desirable real estate; such competitors include domestic and
foreign financial institutions, other REITs, life insurance companies, pension
funds, trust funds, partnerships and individual investors.
Working Capital
The Company believes that the cash provided by operations and its unsecured
line of credit provide sufficient sources of liquidity to fund the Company's
working capital requirements.
<PAGE> 6
Environmental Matters
Compliance with laws and regulations relating to the protection of the
environment, including those regarding the discharge of materials into the
environment, has not had any material effects upon the capital expenditures,
earnings or competitive position of the Company.
The 97 Properties owned by the Company at December 31, 1993, were each
subject to a Phase I environmental audit or update during the twelve-month
period ended December 31, 1993, certain of the Properties were subject to Phase
II environmental investigations, and all buildings on properties constructed
prior to 1985 have been subject to asbestos detection investigations. In
addition, for each of the properties acquired subsequent to December 31, 1993,
and for each parcel of land purchased for development, a Phase I environmental
audit or update was completed as part of the acquisition due diligence process.
These investigations have not revealed any environmental condition that the
Company believes would have a material effect on its business, assets or results
of operations. Independent parties have reported that no asbestos-containing
materials were used in buildings constructed on the Properties during or after
1985.
Site assessments have revealed soil and ground water contamination at the
Stender Way II property in Santa Clara, California. A third party is primarily
bearing the costs relating to this environmental condition and the Company
believes that its exposure, if any, is not material. Additionally, three
properties located in Stanford Research Park in Palo Alto, California, are
subject to varying degrees of known environmental contamination. The remediation
costs associated with this contamination have also been, and are expected to
continue to be, borne by other parties. Furthermore, the Company has entered
into indemnification agreements whereby the Company has been, and is to be,
indemnified for liabilities arising from clean-up costs relating to these three
properties. Environmental contamination has been found to have originated on the
industrial development project site in Santa Clara, which is known as Walsh at
Lafayette, and which was acquired by the Company in 1995. The relevant
government agency has identified a third party as responsible for remediation,
and the remediation process is continuing. The Company is being indemnified for
environmental contamination on the Walsh at Lafayette property by a third party
that was the former owner of the property.
Site assessments have revealed that soil and groundwater at the Company's
Montgomery Ward property in Pleasant Hill, California, have been contaminated
with volatile organic compounds. The likely sources of this contamination are
on-site underground storage tanks and a potential off-site contamination source.
To date, no government agency has issued any directives requiring that a
remediation plan be filed or the contamination be cleaned up. The Spieker
partnership (the "Spieker Predecessor") that transferred this property to the
Company previously filed a lawsuit against the seller to enforce an indemnity
agreement and against certain other potentially responsible parties to have
those parties bear any clean-up costs. Settlement has been reached with certain
of the defendants in the lawsuit, resulting in cash payments to the Company. A
trial involving the remaining defendants ended without any additional cash
awards being made. Due to the nature of this environmental condition and the
Company's expectation that other parties will be primarily responsible for the
clean-up costs, the Company believes that its exposure, if any, for clean-up
costs would not have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
Site assessments have revealed soil and groundwater contamination at the
Arden Square property in Sacramento, California. This property is one of the
retail properties which are under contract to be sold to Pacific Retail Trust
("PRT"). The Company has agreed to indemnify PRT for the contamination. However,
the Company believes that the liabilities and clean-up costs associated with
this contamination are covered under the Company's pollution insurance policy
(except to the extent of the deductible under such policy). A possible similar
situation was recently discovered in Woodside, California, which retail property
is also under contract to be sold to PRT. The extent of this possible
contamination, if any, is still being tested. The Company also has pollution
insurance coverage for this property and believes that such contamination will
be covered by such insurance (except to the extent of the deductible under such
policy).
Although the environmental investigations conducted to date have not
revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets or results of
operations, and the Company is not aware of any such liability, it is possible
that these investigations
<PAGE> 7
did not reveal all environmental liabilities or that there are material
environmental liabilities of which the Company is unaware. No assurances can be
given that (i) future laws, ordinances, or regulations will not impose any
material environmental liability, or (ii) the current environmental condition of
the Properties has not been, or will not be, affected by tenants and occupants
of the Properties, by the condition of properties in the vicinity of the
Properties, or by third parties unrelated to the Company.
ITEM 2. PROPERTIES
General
As of December 31, 1996, the Company's portfolio of properties consisted of
industrial, suburban office and retail income-producing properties located in
California and the Pacific Northwest. The total rentable square footage of the
Properties at December 31, 1996, was approximately 21.4 million rentable square
feet, consisting of approximately 13.7 million square feet of industrial
property, approximately 6.3 million square feet of office property and
approximately 1.4 million square feet of retail property. As of December 31,
1996, the average occupancy rate of the Properties was approximately 96.6%.
After an extensive review of the Company's investment opportunities and
strategic position, the Company has decided to focus exclusively on office and
industrial properties. The Company has therefore decided to divest itself of its
retail properties and reinvest the proceeds from these properties in office and
industrial properties, which the Company believes offer better growth prospects.
During 1996, the Company completed the disposal of three of its retail
properties at an aggregate consideration of $45.4 million, and signed definitive
agreements to dispose of six other retail properties for aggregate consideration
of approximately $61.1 million. Of the six properties under contract, five will
be disposed of before May 1, 1997, on dates to be determined by the Company,
with the final property to be disposed of by December 31, 1997. In connection
with these dispositions, the Company's retail employees have become employees of
PRT, and PRT has agreed to manage the Company's remaining retail properties
pending disposition. The Company is in the process of marketing and divesting
other retail properties and it anticipates that the divestiture will be
completed in 1998.
For the year ended December 31, 1996, none of the Properties had net book
values equal to 10% or more of the Company's total assets or aggregate gross
revenues. The Company's largest property represents 3.2% of net book value and
2.6% of base rental revenues.
The Location and Type of the Company's Properties
The Properties are located in six geographic areas within California and
the Pacific Northwest, which are comprised of numerous local markets. The
following table sets forth, as of December 31, 1996, the location and type of
the Properties by rentable square feet.
RENTABLE SQUARE FOOTAGE OF PROPERTIES BY LOCATION AND TYPE OF PROPERTY
<TABLE>
<CAPTION>
GEOGRAPHIC AREA INDUSTRIAL OFFICE RETAIL TOTAL PERCENT OF TOTAL
- ----------------------------- ---------- --------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Greater Seattle Area,
WA/Boise, ID............... 3,093,023 667,265 214,195 3,974,483 18.6%
Greater Portland Area, OR.... 1,758,627 423,989 89,624 2,272,240 10.6
Sacramento/Central Valley,
CA......................... 1,124,293 1,225,681 360,531 2,710,505 12.6
East Bay -- San Francisco,
CA......................... 3,685,995 274,394 624,155 4,584,544 21.4
South Bay -- San Francisco,
CA......................... 3,014,860 2,089,060 168,734 5,272,654 24.6
Orange County/San Diego,
CA......................... 1,041,726 1,573,580 -- 2,615,306 12.2
---------- --------- --------- ----------- ----
Total................... 13,718,524 6,253,969 1,457,239 21,429,732 100.0%
========== ========= ========= =========== ====
Percent of total........ 64.0% 29.2% 6.8% 100.0%
========== ========= ========= ===========
</TABLE>
<PAGE> 8
Property Operating Income
The following table sets forth for the quarter ended December 31, 1996, the
Company's property operating income, which is rental revenue less rental
expenses and real estate taxes and excluding interest, depreciation and
amortization and general and administrative expenses, on a percentage basis by
the location and type of the Properties.
PERCENTAGE OF NET OPERATING INCOME BY LOCATION AND TYPE OF PROPERTY
FOR THE QUARTER ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GEOGRAPHIC AREA INDUSTRIAL OFFICE RETAIL PERCENT OF TOTAL
- ----------------------------------------------------- ---------- ------ ------ ----------------
<S> <C> <C> <C> <C>
Greater Seattle Area, WA/Boise, ID................... 8.5% 4.5% 2.8% 15.8%
Greater Portland Area, OR............................ 4.5 3.1 0.7 8.3
Sacramento/Central Valley, CA........................ 2.6 8.8 2.5 13.9
East Bay -- San Francisco, CA........................ 12.8 1.7 4.3 18.8
South Bay -- San Francisco, CA....................... 12.6 18.9 1.3 32.8
Orange County/San Diego, CA.......................... 3.6 6.8 -- 10.4
---- ---- ---- -----
Percent of Total................................ 44.6% 43.8% 11.6% 100.0%
==== ==== ==== =====
</TABLE>
Average Occupancy Rates
The following table sets forth the aggregate average occupancy rates of the
Properties during the years specified.
AVERAGE OCCUPANCY
<TABLE>
<CAPTION>
YEAR TOTAL RENTABLE AVERAGE OCCUPANCY
(AS OF DECEMBER 31) SQUARE FOOTAGE AT YEAR END
---------------------------------------------- -------------- -----------------
<S> <C> <C>
1996.................................... 21,429,732 96.6%
1995.................................... 16,282,278 96.9
1994.................................... 13,933,113 97.6
1993.................................... 11,072,796 92.1
1992.................................... 9,724,363 92.1
</TABLE>
The following table sets forth the aggregate average occupancy rates as of
December 31, 1996, of the Properties, in terms of location and type of the
Properties.
AVERAGE OCCUPANCY BY LOCATION AND TYPE OF PROPERTY
<TABLE>
<CAPTION>
GEOGRAPHIC AREA INDUSTRIAL OFFICE RETAIL TOTAL
- ----------------------------------------------------------- ---------- ------ ------ -----
<S> <C> <C> <C> <C>
Greater Seattle Area, WA/Boise, ID......................... 96.0% 97.8% 95.4% 96.3 %
Greater Portland Area, OR.................................. 96.5 99.8 96.6 97.1
Sacramento/Central Valley, CA.............................. 96.7 90.4 98.2 94.0
East Bay -- San Francisco, CA.............................. 98.1 99.0 92.6 97.4
South Bay -- San Francisco, CA............................. 99.8 98.7 93.5 99.1
Orange County/San Diego, CA................................ 94.2 91.2 -- 92.4
---- ---- ---- ----
Weighted Average...................................... 97.4% 95.2% 94.7% 96.6 %
==== ==== ==== ====
</TABLE>
Tenant Improvements and Leasing Commissions
While maintaining high occupancy levels in each of its property types and
markets, the Company also focuses on controlling the expenditures associated
with renewing or re-leasing space. For the year ended December 31, 1996, the
Company renewed or re-leased 3.7 million square feet of space, and the average
committed capitalized tenant improvement and leasing commission expenditures per
square foot of renewed or re-leased space was $2.20.
<PAGE> 9
Lease Expirations
The following tables set forth the lease expirations in summary and by type
for leases in place in the Properties as of January 1, 1997, assuming none of
the tenants exercises renewal options or termination rights. The tables do not
include month-to-month leases.
LEASE EXPIRATIONS OF THE COMPANY'S PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES(1)
-------------------------- -------------------------- ---------------------- --------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997...................... 4,516,401 $ 34,167 17.0%
1998...................... 3,930,160 36,148 18.0
1999...................... 2,601,714 26,879 13.4
2000...................... 2,845,376 29,476 14.7
2001...................... 3,556,258 38,156 19.0
2002...................... 878,034 10,816 5.4
2003...................... 370,764 4,404 2.2
2004...................... 802,470 7,576 3.8
2005...................... 327,932 2,431 1.2
2006...................... 194,634 2,376 1.2
2007 and Thereafter....... 666,044 8,347 4.1
---------- -------- -----
Total................ 20,689,787 $200,776 100.0%
========== ======== =====
</TABLE>
- ---------------
(1) Calculated by dividing annual base rent (amounts contractually due, which
may include taxes, insurance, and common area maintenance ("Annual Base
Rent")) as adjusted for contractual increases expiring during each period by
the total Annual Base Rent inclusive of contractual increases.
LEASE EXPIRATIONS OF THE INDUSTRIAL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES(1)
- ------------------------------ -------------------------- ---------------------- --------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997.......................... 3,286,003 $ 15,881 21.0%
1998.......................... 2,727,560 14,637 19.4
1999.......................... 1,653,116 9,774 12.9
2000.......................... 2,022,303 12,115 16.0
2001.......................... 2,195,648 13,017 17.2
2002.......................... 331,316 1,685 2.2
2003.......................... 204,419 2,103 2.8
2004.......................... 578,840 4,182 5.5
2005.......................... 280,654 1,451 1.9
2006.......................... 77,284 804 1.1
2007 and Thereafter........... 0 0 0.0
---------- ------- -----
Total.................... 13,357,143 $ 75,649 100.0%
========== ======= =====
</TABLE>
- ---------------
(1) Calculated by dividing Annual Base Rent as adjusted for contractual
increases expiring during each period by the Total Base Rent inclusive of
contractual increases.
<PAGE> 10
LEASE EXPIRATIONS OF THE OFFICE PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES(1)
- ------------------------------ -------------------------- ---------------------- --------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997.......................... 1,021,708 $ 17,079 15.8%
1998.......................... 1,125,547 20,091 18.6
1999.......................... 899,343 16,140 14.9
2000.......................... 761,724 16,223 15.0
2001.......................... 1,333,776 24,612 22.8
2002.......................... 534,859 8,855 8.2
2003.......................... 93,688 1,688 1.6
2004.......................... 140,242 2,523 2.3
2005.......................... 14,752 375 0.4
2006.......................... 10,114 212 0.2
2007 and Thereafter........... 16,234 226 0.2
--------- -------- -----
Total.................... 5,951,987 $108,024 100.0%
========= ======== =====
</TABLE>
- ---------------
(1) Calculated by dividing Annual Base Rent as adjusted for contractual
increases expiring during each period by the Total Base Rent inclusive of
contractual increases.
LEASE EXPIRATIONS OF THE RETAIL PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL ANNUAL
YEAR OF LEASE RENTABLE SQUARE FOOTAGE ANNUAL BASE RENT UNDER BASE RENT REPRESENTED
EXPIRATION SUBJECT TO EXPIRING LEASES EXPIRING LEASES BY EXPIRING LEASES(1)
- ------------------------------ -------------------------- ---------------------- --------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
1997.......................... 208,690 $ 1,207 7.1%
1998.......................... 77,053 1,420 8.3
1999.......................... 49,255 965 5.6
2000.......................... 61,349 1,138 6.6
2001.......................... 26,834 527 3.1
2002.......................... 11,859 276 1.6
2003.......................... 72,657 613 3.6
2004.......................... 83,388 871 5.1
2005.......................... 32,526 605 3.5
2006.......................... 107,236 1,360 8.0
2007 and Thereafter........... 649,810 8,121 47.5
--------- ------- -----
Total.................... 1,380,657 $ 17,103 100.0%
========= ======= =====
</TABLE>
- ---------------
(1) Calculated by dividing Annual Base Rent as adjusted for contractual
increases expiring during each period by the Total Base Rent inclusive of
contractual increases.
<PAGE> 11
1996 Acquisitions
The following table sets forth certain information regarding properties
acquired by the Company during the year ended December 31, 1996.
PROPERTIES ACQUIRED IN 1996
<TABLE>
<CAPTION>
TOTAL OCCUPANCY
MONTH RENTABLE RATE AT TOTAL
PROPERTY NAME LOCATION ACQUIRED SQUARE FEET 12/31/96 INVESTMENT(1)
- ----------------------------------- --------------------- -------- ----------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Benicia Industrial I(2)............ Benicia, CA January 904,473 95.2% $ 26,485
Everett Industrial Center.......... Everett, WA March 150,154 100.0 7,484
Everett 526........................ Everett, WA May 97,523 100.0 4,388
Port of Oakland Center............. Oakland, CA May 199,733 96.9 7,160
Doolittle Business Center.......... San Leandro, CA May 113,195 91.9 3,767
MacArthur Park..................... Santa Ana, CA August 94,014 71.1 6,370
Stadium Plaza...................... Anaheim, CA August 806,678 95.9 40,278
Charcot Business Park.............. San Jose, CA October 163,370 95.7 12,235
Kifer Road Industrial Center....... Sunnyvale, CA November 287,300 100.0 14,449
Airport Service Center............. Burlingame, CA November 36,310 97.3 2,816
Ravendale.......................... Mountain View, CA December 80,450 100.0 8,150
--------- --------- --------
SUBTOTAL OR WEIGHTED AVERAGE... 2,933,200 95.0% $133,582
========= ========= ========
OFFICE PROPERTIES
Bayside Corporate Ctr.............. Foster City, CA January 84,925 100.0% $ 10,074
Airport Office Center(3)........... San Jose, CA January N/A N/A 14,400
Carmel Valley Centre I and II...... Del Mar, CA April 106,920 99.8 14,328
2290 North First Street............ San Jose, CA May 75,680 95.8 6,669
10700 Building..................... Bellevue, WA May 55,854 100.0 4,675
Dove Street........................ Newport Beach, CA June 78,052 93.5 8,330
Fidelity Plaza..................... Sacramento, CA July 77,452 76.2 5,779
The City(4)........................ Orange, CA July 429,756 87.2 30,483
Fairchild Corporate Center......... Irvine, CA August 104,823 92.3 10,670
One Pacific Plaza.................. Huntington Beach, CA November 111,718 83.4 10,986
Central Park Plaza................. Santa Clara, CA December 305,918 99.9 35,584
Corona Corporate Center............ Corona, CA December 46,227 100.0 4,239
One Lakeshore Plaza................ Ontario, CA December 175,840 86.8 19,245
Wood Island Office Complex......... Larkspur, CA December 73,731 96.4 14,544
Pacific View Plaza................. Carlsbad, CA December 48,680 81.5 5,666
--------- --------- --------
SUBTOTAL OR WEIGHTED AVERAGE... 1,775,576 91.9% $195,672
========= ========= ========
TOTAL OR WEIGHTED
AVERAGE................. 4,708,776 93.9% $329,254
========= ========= ========
</TABLE>
- ---------------
(1) Represents capitalized cost as of December 31, 1996, plus estimated
repositioning costs.
(2) In addition to the square footage and total investment shown in this table,
the purchase included eight buildings totaling 895,530 square feet that are
currently under development. See the development project titled "Benicia
Industrial II" in the table titled "Developments in Process."
(3) Represents an investment in two mortgages with an aggregate face value of
$21.0 million secured by this property.
(4) In addition to the square footage and total investment shown in this table,
the purchase included one building totaling 146,300 square feet that is
currently under redevelopment. See the development project titled "The
City -- 3800 Chapman" in the table titled "Developments in Process."
<PAGE> 12
1996 Developments
The following table sets forth certain information regarding property
developments completed by the Company during the year ended December 31, 1996.
DEVELOPMENTS COMPLETED IN 1996
<TABLE>
<CAPTION>
RENTABLE TOTAL
PROPERTY NAME LOCATION SQUARE FEET INVESTMENT (1)
- ------------------------------------------------- --------------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
INDUSTRIAL
Walsh @ Lafayette.............................. Santa Clara, CA 320,505 $ 13,070
Cadillac Court II.............................. Milpitas, CA 36,120 2,554
Marine Drive Dist Ctr Phase I.................. Portland, OR 226,478 7,185
------- -------
SUBTOTAL.................................... 583,103 $ 22,809
------- -------
OFFICE
Ryan Ranch Office Phase II..................... Monterey, CA 25,864 $ 2,947
4004 S.W. Kruse Way Place...................... Portland, OR 56,245 7,049
------- -------
SUBTOTAL.................................... 82,109 $ 9,996
------- -------
RETAIL
Broadway Faire(2).............................. Fresno, CA 60,383 $ 8,174
Metro 580(2)................................... Pleasanton, CA 172,878 18,286
------- -------
SUBTOTAL.................................... 233,261 $ 26,460
------- -------
TOTAL COMPLETED DEVELOPMENTS........... 898,473 $ 59,265
======= =======
</TABLE>
- ---------------
(1) Represents capitalized cost as of December 31, 1996.
(2) Properties to be disposed of pursuant to retail divestiture.
<PAGE> 13
Developments In Process
The following table sets forth certain information regarding the Company's
property developments in process as of December 31, 1996.
DEVELOPMENTS IN PROCESS
<TABLE>
<CAPTION>
ACTUAL OR
ESTIMATED
SHELL
COMPLETION RENTABLE TOTAL
PROPERTY NAME LOCATION DATE(1) SQUARE FEET INVESTMENT(2)
- -------------------------------- --------------- --------------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INDUSTRIAL
Benicia Industrial II........... Benicia, CA February 1996 895,530 $ 18,471
Ryan Ranch Industrial (14B)..... Monterey, CA April 1996 31,560 1,806
Woodinville III................. Seattle, WA May 1996 239,570 11,812
Marine Drive II................. Portland, OR November 1996 106,000 3,309
Concord North Commerce Ctr...... Concord, CA November 1996 191,150 9,074
Airport Way Commerce Park....... Portland, OR February 1997 205,000 7,590
Riverside Business Center....... Sacramento, CA April 1997 174,624 7,430
Sorrento Vista.................. San Diego, CA June 1997 226,478 9,945
Dixon Landing North II.......... Milpitas, CA July 1997 83,890 7,408
Marine Drive III................ Portland, OR July 1997 258,500 8,545
Bay Center III Business Park.... Hayward, CA August 1997 118,056 6,563
Dixon Landing North I........... Milpitas, CA September 1997 116,890 10,956
--------- --------
SUBTOTAL...................... 2,647,248 $102,909
--------- --------
OFFICE
Gateway Oaks III................ Sacramento, CA March 1996 45,321 $ 5,533
Bellefield Maplewood Bldg....... Seattle, WA January 1997 34,763 5,015
Ridder Park..................... San Jose, CA February 1997 83,841 8,515
Ryan Ranch Office Center III.... Monterey, CA February 1997 24,343 3,001
The City -- 3800 Chapman........ Orange Co., CA July 1997 146,300 9,638
4949 Meadows Building........... Lake Oswego, OR November 1997 119,000 16,409
Bellefield Building "N"......... Bellevue, WA December 1997 45,000 6,137
--------- --------
SUBTOTAL...................... 498,568 $ 54,248
--------- --------
TOTAL DEVELOPMENTS IN
PROCESS.................. 3,145,816 $157,157
========= ========
</TABLE>
- ---------------
(1) Shell completion date refers to the date when the property is first
available for occupancy.
(2) Represents total estimated cost of development.
<PAGE> 14
Acquisitions Completed Subsequent to Year-End
The following table sets forth certain information regarding the properties
acquired by the Company between January 1, 1997, and March 15, 1997.
PROPERTIES ACQUIRED IN 1997 (THROUGH MARCH 15, 1997)
<TABLE>
<CAPTION>
TOTAL
MONTH RENTABLE TOTAL
PROPERTY NAME LOCATION ACQUIRED SQUARE FEET INVESTMENT(1)
- --------------------------------------- ------------------- -------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Andover Park West...................... Tukwila, WA January 286,921 $ 6,545
--------- --------
OFFICE PROPERTIES
Mission West........................... San Diego, CA January 818,836 $ 53,982
Emeryville Portfolio................... Emeryville, CA January 946,385 134,033
Brea Park Centre....................... Brea, CA January 141,837 11,856
555 Twin Dolphin Drive................. Redwood Shores, CA February 198,941 43,400
Quadrant Corporate Center.............. Bothell, WA February 204,871 23,000
Riverside Centre....................... Portland, OR February 99,233 9,500
Metro Plaza............................ San Jose, CA March 414,737 75,500
Kodak.................................. San Jose, CA March 196,444 39,716
--------- --------
SUBTOTAL............................. 3,021,284 $390,987
========= ========
TOTAL............................. 3,308,205 $397,532
========= ========
</TABLE>
- ---------------
(1) Represents initial purchase price plus estimated repositioning costs.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which either the Company
or the Properties is a party, or to which any of the assets of the Company or
the Properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders in the
fourth quarter of the fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of the Company's Common Stock are traded on the New York Stock
Exchange under the symbol SPK.
<PAGE> 15
Market Information
The Company's Common Stock has been traded on the New York Stock Exchange
since November 18, 1993. The high, low, and closing price per share of Common
Stock for the four quarters of fiscal 1995 and the four quarters of fiscal 1996
are as follows:
<TABLE>
<CAPTION>
COMMON STOCK
HIGH LOW CLOSE DIVIDENDS DECLARED
------ ------ ------ ------------------
<S> <C> <C> <C> <C>
1995
First quarter........................... $21.00 $19.38 $19.88 $.42
Second quarter.......................... $22.50 $19.38 $22.38 $.42
Third quarter........................... $24.88 $21.13 $24.00 $.42
Fourth quarter.......................... $25.88 $23.50 $25.13 $.42
1996
First quarter........................... $27.25 $24.38 $25.38 $.43
Second quarter.......................... $28.25 $23.75 $27.25 $.43
Third quarter........................... $30.63 $26.75 $29.38 $.43
Fourth quarter.......................... $36.00 $29.00 $36.00 $.43
</TABLE>
On March 18, 1997, the closing price of the Common Stock on the NYSE was
$39.50 per share.
There is no established public trading market for the Company's Class B and
Class C Common Stock.
Holders
The approximate number of holders of record of the shares of the Company's
Common Stock was 403 as of March 18, 1997. As of such date, there was one record
holder of the Company's Class B Common Stock and one record holder of the
Company's Class C Common Stock. The Company is not aware of the number of
beneficial owners of the Class B and Class C Common Stock.
Dividends and Distributions
On March 12, 1997, the Company announced that the dividend payable to
holders of Common Stock for the first quarter of 1997 would be $0.47 per share.
This represents a 9.3% increase over the quarterly dividend declared for each of
the four quarters of 1996. Concurrent with the increase in the dividend on
Common Stock, the dividends declared on shares of Class B and Class C Common
Stock and Series A Preferred Stock were increased to $0.5975, $0.4825 and
$0.5732, respectively.
For each of the four quarters of 1996, the Company declared quarterly
dividends to holders of Common Stock of $0.43 per share, which was 2.4% higher
than the $0.42 per share for each of the four quarters of 1995. In addition to
the dividends declared to holders of Common Stock, the Company also declared
dividends to holders of its Class B and Class C Common Stock, Series A Preferred
Stock and Series B Preferred Stock. The Company declared dividends to holders of
Series A Preferred Stock of $0.5122 per share for each of the four quarters of
1995 and $0.5244 per share for each of the four quarters of 1996. For the fourth
quarter of 1995, the Company declared dividends to the holders of Series B
Preferred Stock of $0.1379 per share. For the four quarters of 1996, the Company
declared dividends to the holders of Series B Preferred Stock of $0.59 per
share. For the second, third and fourth quarters of 1995, the Company declared
quarterly dividends to holders of Class B Common Stock of $0.5472 per share and
for the four quarters of 1996, the Company declared quarterly dividends of
$0.5575 per share. For the four quarters of 1996, the Company declared quarterly
dividends of $0.4425 per share to holders of Class C Common Stock.
Future dividends by the Company will be at the discretion of the Board of
Directors and will depend upon the actual Funds from Operations of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code, applicable
legal restrictions and such other factors as the Board of Directors deems
relevant. Although the Company intends to continue to make quarterly
distributions to its stockholders, no assurances can be given as to the amounts
of dividends, if any, distributed in the future. The Company's policy is to
review its dividends on an annual basis.
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for:
- Spieker Properties, Inc. consolidated operating data presented for the
years ended December 31, 1996, December 31, 1995, and December 31,
1994, and for the period from November 19, 1993, to December 31, 1993.
The consolidated balance sheet data presented as of December 31, 1996,
1995, 1994, and 1993.
- Spieker Partner Properties combined operating data presented for the
period from January 1, 1993, to November 18, 1993, and for the year
ended December 31, 1992. The combined balance sheet data presented as
of December 31, 1992.
This selected financial data should be read in conjunction with financial
statements (including the notes thereto) of the Company included in Item 14.
<PAGE> 17
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF PROPERTIES)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------------------------------- -----------------------------
NOV. 19, 1993 JAN. 1, 1993
YEAR ENDED YEAR ENDED YEAR ENDED TO TO YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 NOV. 18, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............... $ 200,699 $ 153,391 $ 121,037 $12,696 $ 78,157 $ 83,804
Income (loss) from
operations before
disposal of
properties, minority
interests and
extraordinary
items................ 65,764 30,335 13,363 1,699 (15,574) (12,428)
Income (loss) before
extraordinary
items................ 64,190 24,666 10,541 1,316 (13,363) (7,819)
Net income (loss)...... 64,190 (8,837) 10,541 (980) (13,363) (7,819)
Net income (loss)
available to Common
Stockholders......... 52,051 (11,471) 9,303 (980) N/A N/A
Net income per share of
Common Stock before
extraordinary
items(1)............. 1.50 .84 .46 .06 N/A N/A
Net income (loss) per
share of Common
Stock(1)............. 1.50 (.44) .46 (.05) N/A N/A
Dividends and
distributions per
share:
Series A Preferred
Stock............. 2.10 2.05 1.24 N/A N/A N/A
Series B Preferred
Stock............. 2.36 .14 N/A N/A N/A N/A
Common Stock(1)...... 1.77 1.68 1.60 .19 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------------------------------------- -------------
AS OF AS OF AS OF AS OF AS OF
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate
(before accumulated
depreciation)............ $ 1,447,173 $ 1,098,871 $ 870,613 $ 722,928 $ 533,282
Net investment in real
estate................... 1,319,472 974,259 770,827 638,533 463,959
Total assets............... 1,390,314 1,011,497 809,938 691,909 489,916
Mortgage loans, net(2)..... 45,997 112,702 514,098 403,676 589,737
Unsecured debt............. 674,000 377,700 -- 900 10,765
Total debt................. 719,997 490,402 514,098 404,576 600,502
Stockholders' equity
(deficit)................ 563,928 419,847 206,304 205,061 (144,002)
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------------------------------- -----------------------------
NOV. 19, 1993 JAN. 1, 1993
YEAR ENDED YEAR ENDED YEAR ENDED TO TO YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 NOV. 18, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from
Operations(3)......... $ 93,293 $ 61,428 $ 41,935 $ 5,622 $ 7,426 $ 8,186
Cash flow provided by
(used in):
Operating
activities......... 103,607 75,567 47,750 5,935 3,806 8,362
Investing
activities......... (378,593) (199,611) (161,332) (169,050) (16,972) (20,203)
Financing
activities......... 296,749 121,954 97,378 175,611 24,637 11,840
Total rentable square
footage of properties
at end of period...... 21,430 16,282 13,933 11,073 10,317 9,724
Number of properties at
end of period......... 156 128 111 97 93 89
Occupancy rate at end of
period................ 96.6% 96.9% 97.6% 92.1% N/A 92.1%
</TABLE>
- ---------------
(1) Per share amounts are presented for the period for the years ended December
31, 1996, 1995 and 1994, based upon weighted average shares outstanding of
34,691,140, 26,140,488 and 20,417,513, respectively, and for the period from
November 19, 1993, to December 31, 1993, based upon weighted average shares
outstanding of 20,400,000. Dividends and distributions per share include
dividends on the Class B and Class C Common Stock. The actual Class B Common
Stock dividends declared in 1996 and 1995 were $2.23 and $1.64 per share,
and the actual Class C Common Stock dividends declared in 1996 and 1995 were
$1.77 and $0 per share.
(2) Net of discount of approximately $31.6 million and $38.3 million as of
December 31, 1994 and 1993, respectively.
(3) Funds from Operations means income (loss) from operations before disposal of
real estate properties, minority interests and extraordinary items plus
depreciation and amortization and an adjustment for straight-lined rents
less cash distributable to minority interests in certain properties owned by
the Company. In February 1995, the National Association of Real Estate
Investment Trusts ("NAREIT") established new guidelines clarifying its
definition of Funds from Operations and requested that REITs adopt this new
definition beginning in 1996. The new definition provides that the
amortization of debt discount and deferred financing costs is no longer to
be added back to net income to calculate Funds from Operations. In 1996, the
Company substantially implemented the new NAREIT definition for calculating
Funds from Operations. The amounts presented above for the years ended
December 31, 1995 and 1994, have been restated to reflect the new NAREIT
definition. Funds from Operations previously reported by the Company based
on the old NAREIT definition for the years ended December 31, 1995 and 1994,
were $70,790 and $52,142, respectively. Management generally 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 does not necessarily indicate that cash flows will be sufficient to fund
cash needs. It should not be considered as an alternative to net income as
an indicator of the Company's operating performance or 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
stockholders. Funds from Operations also does not represent cash flows
generated 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.
<PAGE> 19
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
In 1996, the Company continued to identify and complete attractive
acquisition and development transactions and to focus on increasing the cash
flow from its existing core portfolio of properties by maintaining high
occupancy levels and increasing effective rents. The Company also continued to
strengthen its balance sheet and to establish a capital structure that allows
the Company to take advantage of growth opportunities.
During 1996, the Company added 4.7 million square feet to its portfolio by
completing acquisitions representing a total investment of approximately $329.3
million (the "1996 Acquisitions"). As used herein, the term "total investment"
represents the initial purchase price of acquisitions, plus the estimated cost
of certain repositioning capital expenditures anticipated at the time of
purchase. Significantly, the Company increased its presence in Southern
California by completing nine transactions representing a total investment of
$150.6 million and over 2.0 million square feet.
While the Company was able to complete a number of acquisition transactions
during 1996, the overall market for property acquisitions is getting more
challenging. In all of the markets in which the Company operates, the Company is
experiencing an increased level of competition for acquisitions, including
competition from a number of REITs. The Company believes that as the
fundamentals of these markets continue to strengthen and the number of qualified
buyers increases, the average initial return achievable on new acquisitions may
decrease and the acquisition cost of new properties may begin to approach
replacement cost.
The Company also increased its level of development activity. In 1996,
seven projects totaling 0.9 million square feet were completed at a total
investment of $59.3 million. In addition, as of December 31, 1996, the Company
had developments in process in each of its operating regions representing an
estimated total investment of $157.2 million and a total of 3.1 million square
feet of suburban office and industrial space. The developments completed during
1996 and the developments in process at December 31, 1996, are collectively
referred to as the "Developments." Certain of the developments in process,
though not yet completed, were partially leased and occupied during 1996 and,
accordingly, certain revenue and expense amounts for such developments are
included in the Company's operating results for the year ended December 31,
1996.
The Company was also able to increase rents in its core portfolio. On the
3.7 million square feet of second-generation space renewed or re-leased during
the year, new effective rents were, on average, 10.7% higher than the expiring
coupon rent. At year end, the Company's portfolio of properties was 96.6%
leased.
The Company continued to strengthen its balance sheet by accessing both the
public and private equity markets and the public debt market. The Company raised
more than $151.3 million in equity capital in 1996 by completing a concurrent
public and private offering of Common Stock and Class C Common Stock. In
addition, over the course of the year, the Company issued $375.0 million of
investment grade rated unsecured notes with maturities ranging from five to
twenty years.
Finally, in 1996 the Company announced a strategic decision to dispose of
its existing portfolio of retail properties and replace such properties with
office and industrial properties, which the Company believes provide superior
long-term growth prospects. In December 1996, the Company disposed of three
retail properties and signed definitive contracts to dispose of six additional
retail properties to Pacific Retail Trust ("PRT"). The aggregate consideration
for the dispositions to PRT will amount to approximately $106.5 million. Of this
total amount, transactions valued at $45.4 million closed in December 1996. On
the three properties disposed of in December 1996, the Company recognized a book
gain of approximately $9.7 million. Of the six properties under contract, five
will be disposed of before May 1, 1997, on dates to be determined by
<PAGE> 20
the Company, with the final property to be disposed of by December 31, 1997. In
connection with these dispositions, the Company's retail employees have become
employees of PRT, and PRT has agreed to manage the Company's remaining retail
properties pending disposition. The Company is in the process of divesting its
other retail properties and it anticipates that such divestiture will be
completed by the end of 1998.
COMPARISON OF 1996 TO 1995
The following compares the Company's results for the year ended December
31, 1996, with its results for the year ended December 31, 1995.
For the year ended December 31, 1996, rental revenues increased by $45.1
million, or 29.8%, to $196.5 million, as compared to $151.4 million for the
corresponding period ended December 31, 1995. The increase was attributable to
revenues in the amount of $18.9 million from the 1996 Acquisitions, $16.1
million from properties acquired during 1995 (the "1995 Acquisitions"), $7.9
million from the Developments, and $2.2 million from the Core Portfolio. As used
herein, the term "Core Portfolio" refers to those stabilized properties owned by
the Company as of January 1, 1995.
Interest and other income increased by $2.2 million, or 110.0%, to $4.2
million for the year ended December 31, 1996, as compared to the year ended
December 31, 1995. The net increase in interest and other income was primarily
due to $1.8 million in interest income earned on the Company's investment in two
mortgages, which were acquired in January 1996.
Rental expenses increased by $10.1 million, or 41.1%, to $34.7 million for
the year ended December 31, 1996, as compared to $24.6 million for 1995. Real
estate taxes increased by $3.6 million, or 30.3%, to $15.5 million in 1996, as
compared to $11.9 million in 1995. The total increase in property operating
expenses (rental expenses and real estate taxes) is due to a $5.9 million
increase attributable to the 1996 Acquisitions, a $5.3 million increase
attributable to the 1995 Acquisitions, a $2.0 million increase attributable to
the Developments, and a $0.5 million increase attributable to the Core
Portfolio. On a percentage basis, property operating expenses were 25.5% and
24.1% of rental revenues for the years ended December 31, 1996 and 1995,
respectively. The higher percentage of property operating expenses is
attributable to an increasing percentage of office properties in the Company's
portfolio, and to the Company's acquisition of properties with occupancy levels
less than the expected stabilized occupancy, resulting in the Company
recognizing the full expense burden of a property before recognizing the full
revenue potential of the property, which doesn't occur until the acquired vacant
space is leased.
The net property operating income (rental revenues less rental expenses and
real estate taxes) in the Core Portfolio increased by $1.7 million or
approximately 1.6% from the year ended December 31, 1995, to the year ended
December 31, 1996. The increase is principally the result of increasing
effective rents on leases signed for the renewal or releasing of
second-generation space and contractual rent increases included in leases signed
in prior years. For both the year ended December 31, 1995, and the year ended
December 31, 1996, the occupancy in the Core Portfolio was stable at
approximately 97%.
Interest expense decreased by $9.2 million, or 19.8%, to $37.2 million in
1996, from $46.4 million in 1995. The decrease in interest expense is due to the
elimination of the amortization of debt discount as a result of the December
1995 refinancing of $347.0 million of secured mortgage debt (the "Prudential
Debt"). 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.
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.
Depreciation and amortization expenses increased by $5.8 million, or 18.4%,
to $37.4 million for the year ended December 31, 1996, as compared with the same
period in 1995, due to the 1995 and 1996 Acquisitions and the Developments.
General and administrative expenses and other expenses increased by $1.6
million, or 18.8%, to $10.1 million for the year ended December 31, 1996, as
compared with 1995, primarily as a result of the increased number of employees,
which rose from 175 at December 31, 1995, to 212 at December 31, 1996. On a
<PAGE> 21
percentage basis, general and administrative expenses were 5.1% of rental
revenues for the year ended December 31, 1996, as compared with 5.6% for 1995.
In 1996, net income before minority interests and disposal of real estate
properties increased by $35.5 million, or 117.2%, to $65.8 million as compared
to $30.3 million in 1995. The increase in net income is principally due to (i)
the increase in income from the 1995 and 1996 Acquisitions, the Developments and
the increased property operating income generated by the Core Portfolio as a
result of increased rental rates realized on the renewal and re-leasing of
second-generation space and (ii) the decrease in interest expense.
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 $31.0 million, or 25.7%, to $151.4 million in
1995, as compared with $120.4 million in 1994. Of this increase, $13.5 million
was generated by 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 re-
leasing 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 $1.3 million, or 185.7%, to $2.0
million in 1995, as compared with $0.7 million in 1994. This increase is
predominantly due to $0.8 million in management fee income earned by the 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 17.8%, 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. The remainder
is attributable to the Core Portfolios. In 1995, the Company's rental expenses
and real estate taxes in total were 24.1% of rental revenues, as compared to
23.3% 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 nine 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 9.0%, 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
37.1%, 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
<PAGE> 22
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
$16.9 million, or 126.1%, 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 $347.0 million cross
collateralized mortgage obligation with the net proceeds from the issuance of
$260.0 million of unsecured investment grade debt and $106.3 million of Series B
Preferred Stock. The loss included a $28.1 million, noncash 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.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1996, cash provided by operating activities
increased by $28.0 million, or 37.0%, to $103.6 million, as compared to $75.6
million for 1995. The increase is primarily due to the increase in net income
resulting from the 1995 and 1996 Acquisitions, the Developments, increased
property operating income generated by the Core Portfolio and a decrease in
interest expense. Cash used for investing activities increased by $179.0
million, or 89.7%, to $378.6 million for 1996, as compared to $199.6 million for
1995. The increase is attributable to the Company's ongoing acquisition and
development of suburban office and industrial properties. Cash provided by
financing activities increased by $174.7 million, or 143.2%, to $296.7 million
for 1996, as compared to $122.0 million for 1995. During 1996, cash provided by
financing activities consisted, primarily, of $152.4 million in net proceeds
from the sale of Common Stock and Class C Common Stock, and $371.5 million in
net proceeds from the issuance of unsecured notes, which was offset by net
payments of $78.7 million on the Facility (as defined below) and net payments of
$66.7 million on mortgage loans. Additionally, payments of distributions
increased by $27.2 million to $81.6 million for 1996, as compared with $54.4
million for 1995. The distribution payment 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, 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. In addition, during 1996 the
Company made the strategic decision to sell its retail assets and use the
proceeds from the sale of the retail properties for the acquisition and
development of office and industrial properties. The Company believes that its
liquidity and its ability to access capital are adequate to continue to meet
liquidity requirements for the foreseeable future.
At December 31, 1996, 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 capital expenditure costs associated with the
renewal or re-leasing of space.
The Company has a $150.0 million unsecured line of credit facility (the
"Facility") with interest at London Interbank Offered Rates ("LIBOR") plus
1.25%. 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, 1996, the Company had $39.0 million outstanding under the Facility.
<PAGE> 23
In December 1995, the Company issued in a public offering $260.0 million of
unsecured investment grade rated notes (the "Unsecured Notes") and the Company
issued $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 1995 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 1995 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
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 $98.8 million were
used to repay borrowings on the unsecured line of credit. In June 1996, the
Company commenced a $200.0 million medium-term note program. In July 1996, the
Company issued $100.0 million of 8.00% medium-term notes due July 19, 2005, and
$50.0 million of 7.58% medium-term notes due December 17, 2001, (the "July 1996
Notes"). The net proceeds of $148.8 million from the issuance of the July 1996
Notes were used to repay borrowings on the line of credit and to fund the
ongoing acquisition and development of properties. In December 1996, the Company
issued $100.0 million of 7.125% investment grade rated unsecured notes, priced
to yield 7.14% and maturing on December 1, 2006, and $25.0 million of 7.875%
investment grade rated unsecured notes, priced to yield 7.91% and maturing on
December 1, 2016. The net proceeds of $123.9 million were used to pay down
borrowings on the line of credit and to fund the ongoing acquisition and
development of properties.
As of December 31, 1996, the Company had $635.0 million of investment grade
rated unsecured notes outstanding. The notes have interest rates which vary from
6.65% to 8.00%, and various maturity dates which range from 2000 to 2016.
In addition to the Unsecured Notes and the Facility, the Company has $46.0
million of secured indebtedness (the "Mortgages") at December 31, 1996. The
Mortgages have interest rates varying from 7.5% to 9.75% and maturity dates from
1997 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 $4.8 million of assessment bonds outstanding as
of December 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 filed a shelf registration statement (the
"January 1996 Shelf Registration Statement") with the SEC 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 January 1996 Shelf
Registration Statement was declared effective by the SEC on February 28, 1996.
The Company will receive no proceeds from the sale of Common Stock under the
January 1996 Shelf Registration Statement.
In May 1996, the Company and the Operating Partnership filed a shelf
registration statement (the "May 1996 Shelf Registration Statement") with the
SEC which registered $250.0 million of equity securities of the Company and
$250.0 million of debt securities of the Operating Partnership. The May 1996
Shelf Registration Statement was declared effective by the SEC on June 20, 1996.
In August 1996, the Company filed a shelf registration statement (the
"August 1996 Shelf Registration Statement") with the SEC to register 50,000
shares of Common Stock issuable by the Company upon
<PAGE> 24
exchange of partnership units in the Operating Partnership by certain holders
thereof. In October 1996, the Company filed a registration statement (the
"October 1996 Shelf Registration Statement") with the SEC to register 245,738
shares of Common Stock issuable by the Company upon exchange 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 August 1996 Shelf
Registration Statement or the October 1996 Shelf Registration Statement.
Subsequent to year-end, in January 1997, the Company sold 11,500,000 shares
of Common Stock (including 1,500,000 shares sold to the underwriters in the
exercise of their over-allotment option) through an underwritten public offering
at $34.50 per share. The net proceeds of $374.8 million were used to purchase
properties during the first quarter of 1997, many of which were under contract
or letter of intent at the time of the offering, and to repay indebtedness.
Also, in January 1997, the Company and the Operating Partnership filed a shelf
registration statement (the "January 1997 Shelf Registration Statement") with
the SEC which registered $500.0 million of equity securities of the Company and
$500.0 million of debt securities of the Operating Partnership and became
effective in January 1997.
After completion of the January 1997 equity offering, the Company has the
capacity pursuant to the January 1997 Shelf Registration Statement to issue up
to approximately $500.0 million in equity securities and the Operating
Partnership has the capacity pursuant to the May 1996 Shelf Registration
Statement and the January 1997 Shelf Registration Statement to issue up to
$615.0 million in debt securities (including the $50.0 million of medium-term
notes available under the Company's existing medium-term note program).
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 stockholders.
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") revised 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 does 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 includes 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 is calculated based on weighted average
shares equivalents outstanding, assuming the conversion of all shares of Series
A Preferred Stock, Class B Common Stock, Class C Common Stock and all
partnership units in the Operating Partnership into shares of Common Stock.
<PAGE> 25
The tables below sets forth the Company's calculation of Funds from
Operations for 1996 and 1995, based on the new NAREIT definition.
STATEMENT OF FUNDS FROM OPERATIONS
(BASED ON THE NEW NAREIT DEFINITION)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1996 1996 1996
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Income from operations before
disposal of real estate and
minority interests:........... $14,829 $ 17,131 $16,096 $ 17,557 $ 65,764
Adjustments:
Depreciation and
amortization............... 8,475 8,723 9,938 9,904 37,040
Dividends on Series B
Preferred Stock............ (2,510) (2,510) (2,510) (2,510) (10,041)
Other, net.................... 115 120 116 103 303
Straight-lined rent........... (70) 125 252 (80) 227
------- ------- ------- ------- --------
Funds from Operations........... $20,839 $ 23,589 $23,892 $ 24,974 $ 93,293
======= ======= ======= ======= ========
Weighted average share
equivalents outstanding(1).... 39,105 43,438 43,498 43,777 42,460
======= ======= ======= ======= ========
</TABLE>
- ---------------
(1) Assumes conversion of the shares of Class B and Class C Common Stock, shares
of Series A Preferred Stock and partnership units in the Operating
Partnership into shares of Common Stock.
STATEMENT OF FUNDS FROM OPERATIONS
(BASED ON THE NEW NAREIT DEFINITION)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income before minority
interest:..................... $ 4,440 $ 6,991 $ 8,811 $ 10,093 $ 30,335
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........... $11,669 $ 14,833 $16,987 $ 17,939 $ 61,428
======= ======= ======= ======= =======
Weighted average share
equivalents outstanding(1).... 27,660 33,085 37,028 37,109 33,770
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Assumes conversion of the shares of Class B and Class C 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 1995 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 1995 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 1995 Offerings and conversion of
the secured line of credit into an unsecured facility as if they occurred on
January 1, 1995.
<PAGE> 26
PRO-FORMA STATEMENT OF FUNDS FROM OPERATIONS
(BASED ON THE NEW NAREIT DEFINITION)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Funds from Operations -- New
Definition.................... $11,669 $ 14,833 $16,987 $ 17,939 $ 61,428
Add:
Amortization of discount and
deferred financing fees.... 2,519 2,455 2,443 1,945 9,362
------- ------- ------- ------- -------
Funds from Operations -- Old
Definition.................... 14,188 17,288 19,430 19,884 70,790
Less:
Restructuring of secured
debt(1).................... (958) (958) (958) (730) (3,604)
Amortization of discount and
deferred financing
fees(2).................... (375) (311) (299) (360) (1,345)
------- ------- ------- ------- -------
Funds from Operations -- Pro
Forma New Definition.......... $12,855 $ 16,019 $18,173 $ 18,794 $ 65,841
======= ======= ======= ======= =======
Weighted average share
equivalents outstanding(3).... 27,660 33,085 37,028 37,109 33,770
======= ======= ======= ======= =======
</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 the 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.
(3) Assumes conversion of the shares of Class B and Class C Common Stock, shares
of Series A Preferred Stock and partnership units in the Operating
Partnership into shares of Common Stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this Form
10-K. See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on June 10, 1997.
<PAGE> 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS AND REPORTS OF ARTHUR ANDERSON LLP, INDEPENDENT
AUDITORS
<TABLE>
<CAPTION>
<S> <C>
Reports of Independent Public Accountants.....................................
Financial Statements:
Balance Sheets:
Spieker Properties, Inc. Consolidated as of December 31, 1996 and 1995......
Statements of Operations:
Spieker Properties, Inc. Consolidated for the Years Ended December 31, 1996,
December 31, 1995, and December 31, 1994.................................
Statements of Stockholders' Equity:
Spieker Properties, Inc. Consolidated for the Years Ended December 31, 1996,
December 31, 1995, and December 31, 1994.................................
Statements of Cash Flows:
Spieker Properties, Inc. Consolidated for the Years Ended December 31, 1996,
December 31, 1995, and December 31, 1994.................................
Notes to Financial Statements.................................................
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES:
<TABLE>
<S> <C>
Schedule III -- Real Estate and Accumulated Depreciation as of December 31,
1996........................................................................
</TABLE>
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes thereto.
(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 1996, the Company filed the following
report on Form 8-K:
(i) Form 8-K dated December 4, 1996, which includes combined
statements of revenues and certain expenses of the Three Property
Transactions (as defined therein)
(C) EXHIBITS
The exhibits cited in the following Index to Exhibits are filed herewith or
are incorporated by reference to exhibits previously filed.
<PAGE> 28
EXHIBITS (ENCLOSED ATTACHMENTS ARE SEQUENTIALLY NUMBERED)
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NUMBER
- ------ ----------------------------------------------------------------------------- ------
<S> <C> <C>
3.1 Articles of Incorporation of Spieker Properties, Inc.(1)
3.1A Articles of Amendment of Spieker Properties, Inc. (amending Articles of
Incorporation)
3.2 Bylaws of Spieker Properties, Inc. (1)
3.3 Articles Supplementary of Spieker Properties, Inc. for Series A Preferred
Stock (incorporated by reference to Exhibit 4.2 to Spieker Properties, Inc.'s
Report on Form 10-Q for the quarter ended March 31, 1994)
3.4 Articles Supplementary of Spieker Properties, Inc. for Class B Common Stock
(incorporated by reference to Exhibit 4.2 to Spieker Properties, Inc.'s
Report on Form 10-Q for the quarter ended March 31, 1995)
3.5 Articles Supplementary of Spieker Properties, Inc. for the Series B Preferred
Stock(2)
3.6 Articles Supplementary of Spieker Properties, Inc. for the Class C Common
Stock(2)
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K(1)
4.2 Intentionally omitted
4.3 Series A Preferred Stock Purchase Agreement, (incorporated by reference to
Exhibit 4.1 to Spieker Properties, Inc.'s Form 10-Q Report for the quarter
ended March 31, 1994)
4.4 Investor Rights Agreement relating to A Series Preferred Stock (incorporated
by reference to Exhibit 4.3 to Spieker Properties, Inc.'s Form 10-Q Report
for the quarter ended March 31, 1994)
4.5 Indenture dated as December 6, 1995, among Spieker Properties, L.P., Spieker
Properties, Inc. and State Bank and Trust, as Trustee(2)
4.6 First Supplemental Indenture relating to the 2000 Notes, the 2000 Note and
Guarantee(2)
4.7 Second Supplemental Indenture relating to the 2001 Notes, 2001 Note and
Guarantee(2)
4.8 Third Supplemental Indenture relating to the 2002 Notes, the 2002 Note and
Guarantee(2)
4.9 Fourth Supplemental Indenture relating to the 2004 Notes and the 2004 Note(2)
4.10 Class B Common Stock Purchase Agreement (incorporated by reference to Exhibit
4.1 to Spieker Properties, Inc.'s Form 10-Q Report for the quarter ended
March 31, 1994)
4.11 Investor's Rights Agreement relating to Class B Common Stocks (incorporated
by reference to Exhibit 4.3 to Spieker Properties, Inc.'s Form 10-Q Report
for the quarter ended March 31, 1994)
4.12 Class C Common Stock Purchase Agreement(2)
4.13 Investor's Rights Agreement relating to Class C Common Stock(2)
4.14 Fifth Supplemental Indenture relating to the Medium Term Note Program and
Forms of Medium Term Notes (incorporated by reference to Exhibit 4.1 to
Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996)
4.15 Sixth Supplemental Indenture relating to the 7 1/8 Notes Due 2006 and Form of
2006 Note (incorporated by reference to Exhibit 4.1 of Spieker Properties,
Inc.'s Current Report on Form 8-K filed with the Commission on December 19,
1996)
4.16 Seventh Supplemental Indenture relating to the 7 7/8 Notes Due 2016 and Form
of 2016 Note (incorporated by reference to Exhibit 4.2 of Spieker Properties,
Inc.'s Current Report on Form 8-K filed with the Commission on December 19,
1996)
10.1 First Amended and Restated Agreement of Limited Partnership of Spieker
Properties, L.P. and First and Second Amendment thereto (incorporated by
reference to exhibits 10.1, 10.2, and 10.3 of Spieker Properties, Inc.'s Form
8-K dated April 10, 1995)
10.2* Form of Employment Agreement between the Company and each of Warren E.
Spieker, Jr., John K. French, Bruce E. Hosford, and Dennis E. Singleton(1)
10.3* Form of Spieker Merit Plan(1)
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NUMBER
- ------ ----------------------------------------------------------------------------- ------
<S> <C> <C>
10.4* Amended and Restated Spieker Properties, Inc. 1993 Stock Incentive Plan
(incorporated by reference to Exhibit 4.3 to Spieker Properties, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996)
10.5 Form of Indemnification Agreement between the Company and its directors and
officers (incorporated by reference to Exhibit 10.21 to Spieker Properties,
Inc.'s Registration Statement on Form S-11 (File No. 33-67906))
10.6 Form of Land Holding Agreement among the Company, Spieker Northwest, Inc.,
the Operating Partnership and owner of the applicable Land Holding
(incorporated by reference to Exhibit 10.22 to Spieker Properties, Inc.'s
Registration Statement on Form S-11 (File No. 33-67906))
10.7* Form of Employee Stock Incentive Pool (incorporated by reference to Exhibit
10.35 to Spieker Properties, Inc.'s Registration Statement on Form S-11 (File
No. 33-67906))
10.8 Form of Excluded Property Agreement between the Operating Partnership and
certain of the Senior Officers (incorporated by reference to Exhibit 10.36 to
Spieker Properties, Inc.'s Registration Statement on Form S-11 (File No.
33-67906))
10.9* Amended and Restated Spieker Properties, Inc. 1993 Directors' Stock Option
Plan (incorporated by reference to Exhibit 4.2 to Spieker Properties, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996)
10.10 Third Amendment to First Amended and Restated Agreement of Limited
Partnership of Spieker Properties, L.P. (incorporated by reference to Exhibit
10.1 to Spieker Properties, Inc.'s Report on Form 10-Q for the quarter ended
September 30, 1995)
10.11 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)
10.12 Credit Agreement among Spieker Properties, L.P. as borrower, and Wells Fargo
Bank, The First National Bank of Boston, First Bank National Association,
Seattle-First National Bank and Union Bank, as lenders, dated as of November
6, 1995, and Loan Notes pursuant to the Credit Agreement (incorporated by
reference to Exhibit 4.8 to Spieker Properties, Inc.'s Registration Statement
on Form S-3 (File No. 33-98372))
10.13 Amendment No. 1 to the Credit Agreement among Spieker Properties, L.P., as
borrower and Wells Fargo Bank, The First National Bank of Boston, First Bank
National Association, Seattle-First National Bank and Union Bank as lenders,
dated as of July 24, 1996 (incorporated by reference to Exhibits 4.1 to
Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996)
10.14 Seventh Amendment to First Amended and Restated Agreement of Limited
Partnership of Spieker Properties, L.P. (incorporated by reference to Exhibit
10.16 to Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996)
10.15 Eighth Amendment to First Amended and Restated Agreement of Limited
Partnership of Spieker Properties, L.P.
12.1 Schedule of Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends
21.1 List of Subsidiaries of Spieker Properties, Inc.
23.1 Consent of Independent Public Accountants
</TABLE>
- ---------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-11 (Registration No. 33-67906),
which became effective on November 10, 1993.
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
<PAGE> 30
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Spieker Properties, Inc.:
We have audited the accompanying consolidated balance sheets of Spieker
Properties, Inc. (a Maryland corporation) as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1996, 1995 and 1994. These consolidated
financial statements and the schedule referred to below are the responsibility
of the management of Spieker Properties, Inc. Our responsibility is to express
an opinion on these consolidated financial statements and the schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Spieker
Properties, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years ended December 31, 1996, 1995 and
1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule listed in the
index to the financial statements is presented for purposes of complying with
the Securities and Exchange Commission rules and is not a required part of the
basic financial statements. This information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
January 24, 1997
<PAGE> 31
SPIEKER PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
INVESTMENTS IN REAL ESTATE:
Land, land improvements and leasehold interests............................. $ 338,445 $ 303,157
Buildings and improvements.................................................. 944,646 756,734
Construction in progress.................................................... 31,969 38,980
---------- ----------
1,315,060 1,098,871
Less - accumulated depreciation............................................. (127,701) (124,612)
---------- ----------
1,187,359 974,259
Investment in mortgages..................................................... 14,381 --
Property held for disposition, net.......................................... 117,732 --
---------- ----------
Net investments in real estate............................................ 1,319,472 974,259
CASH AND CASH EQUIVALENTS..................................................... 29,336 7,573
ACCOUNTS RECEIVABLE........................................................... 3,799 3,351
DEFERRED RENT RECEIVABLE...................................................... 3,242 4,698
RECEIVABLE FROM AFFILIATES.................................................... 117 386
DEFERRED FINANCING AND LEASING COSTS, net of accumulated amortization of
$7,682 and $9,586 as of December 31, 1996 and 1995, respectively............ 15,860 13,485
FURNITURE, FIXTURES & EQUIPMENT, net.......................................... 2,386 1,678
PREPAID EXPENSES AND OTHER ASSETS............................................. 16,102 6,067
---------- ----------
$1,390,314 $1,011,497
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEBT:
Unsecured notes............................................................. $ 635,000 $ 260,000
Unsecured line of credit.................................................... 39,000 117,700
Mortgage loans.............................................................. 45,997 112,702
---------- ----------
Total debt................................................................ 719,997 490,402
---------- ----------
ASSESSMENT BONDS PAYABLE...................................................... 4,758 12,140
ACCOUNTS PAYABLE.............................................................. 3,258 3,804
ACCRUED REAL ESTATE TAXES..................................................... 731 506
ACCRUED INTEREST.............................................................. 10,471 2,510
UNEARNED RENTAL INCOME........................................................ 6,345 6,972
DIVIDENDS AND DISTRIBUTIONS PAYABLE........................................... 18,660 15,588
OTHER ACCRUED EXPENSES AND LIABILITIES........................................ 16,406 12,202
---------- ----------
Total liabilities........................................................... 780,626 544,124
---------- ----------
MINORITY INTERESTS............................................................ 45,760 47,526
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A Preferred Stock: convertible, cumulative, $.0001 par value,
1,000,000 shares authorized, issued and outstanding as of December 31,
1996 and 1995, $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, as of
December 31, 1996 and 1995, $106,250 liquidation preference............... 102,064 102,064
Common Stock: $.0001 par value, 660,500,000 shares authorized, 31,821,861
and 26,724,074 shares issued and outstanding as of December 31, 1996 and
1995, respectively........................................................ 3 3
Class B Common Stock: $.0001 par value, 2,000,000 shares authorized, issued
and outstanding as of December 31, 1996 and 1995.......................... -- --
Class C Common Stock: $.0001 par value, 1,500,000 shares authorized,
1,176,470 issued and outstanding as of December 31, 1996.................. -- --
Excess Stock: $.0001 par value per share, 330,000,000 shares authorized, no
shares issued or outstanding.............................................. -- --
Additional paid-in capital.................................................. 438,376 303,320
Deferred compensation....................................................... (464) (652)
Retained earnings (deficit)................................................. -- (8,837)
---------- ----------
Total stockholders' equity................................................ 563,928 419,847
---------- ----------
$1,390,314 $1,011,497
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 32
SPIEKER PROPERTIES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Rental income............................................ 196,471 151,412 120,355
Interest and other income................................ 4,228 1,979 682
-------- -------- --------
200,699 153,391 121,037
-------- -------- --------
OPERATING EXPENSES:
Rental expenses.......................................... 34,690 24,601 17,998
Real estate taxes........................................ 15,510 11,934 10,111
Interest expense, including amortization of discount and
financing costs....................................... 37,235 46,386 44,395
Depreciation and amortization............................ 37,385 31,602 28,953
General and administrative and other expenses............ 10,115 8,533 6,217
-------- -------- --------
134,935 123,056 107,674
-------- -------- --------
Income from operations before disposal of real estate
properties, minority interests and extraordinary
items............................................... 65,764 30,335 13,363
-------- -------- --------
DISPOSAL OF REAL ESTATE PROPERTIES:
Gain on disposition of property.......................... 8,350 -- --
-------- -------- --------
Income from operations before minority interests and
extraordinary items................................. 74,114 30,335 13,363
MINORITY INTERESTS' SHARE IN NET INCOME.................... (9,924) (5,669) (2,822)
-------- -------- --------
Net income before extraordinary items................. 64,190 24,666 10,541
EXTRAORDINARY ITEMS, net of minority interests of $7,302
for the year ended December 31, 1995..................... -- (33,503) --
-------- -------- --------
Net income (loss)..................................... $ 64,190 $ (8,837) $ 10,541
-------- -------- --------
PREFERRED DIVIDENDS:
Series A Preferred Stock................................. (2,098) (2,048) (1,238)
Series B Preferred Stock................................. (10,041) (586) --
-------- -------- --------
Net income (loss) available to Common Stockholders....... $ 52,051 $(11,471) $ 9,303
======== ======== ========
INCOME (LOSS) PER SHARE OF COMMON STOCK:
Income before extraordinary items........................ $ 1.50 $ .84 $ .46
Extraordinary items, net of minority interests........... -- (1.28) --
-------- -------- --------
Net income (loss) available to Common Stockholders.... $ 1.50 $ (.44) $ .46
======== ======== ========
DIVIDENDS AND DISTRIBUTIONS PER SHARE:
Series A Preferred Stock................................. $ 2.10 $ 2.05 $ 1.24
======== ======== ========
Series B Preferred Stock................................. $ 2.36 $ .14 --
======== ======== ========
Common Stock, including Class B and Class C.............. $ 1.77 $ 1.74 $ 1.60
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 33
SPIEKER PROPERTIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A SERIES B COMMON CLASS B CLASS C COMMON
PREFERRED PREFERRED STOCK COMMON COMMON STOCK PAR
STOCK STOCK SHARES STOCK SHARES STOCK SHARES VALUE
--------- --------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993............... $ -- $ -- 20,400,000 -- -- $ 2
Series A Preferred Stock offering........ 23,949 -- -- -- -- --
Conversion of Operating Partnership
units.................................. -- -- 17,513 -- -- --
Deferred compensation amortization....... -- -- -- -- -- --
Dividends declared....................... -- -- -- -- -- --
Net income............................... -- -- -- -- -- --
------- -------- ---------- ---------- ---------- ---
BALANCE AT DECEMBER 31, 1994............... 23,949 -- 20,417,513 -- -- 2
Series B Preferred Stock offering........ -- 102,064 -- -- -- --
Conversion of Operating Partnership
units.................................. -- -- 16,732 -- -- --
Common Stock offering.................... -- -- 6,256,329 -- -- 1
Class B Common Stock offering............ -- -- -- 2,000,000 -- --
Exercise of Stock options................ -- -- 33,500 -- -- --
Deferred compensation amortization....... -- -- -- -- -- --
Dividends declared....................... -- -- -- -- -- --
Net loss................................. -- -- -- -- -- --
------- -------- ---------- ---------- ---------- ---
BALANCE AT DECEMBER 31, 1995............... 23,949 102,064 26,724,074 2,000,000 -- 3
Conversion of Operating Partnership
units.................................. -- -- 15,537 -- -- --
Common Stock offering.................... -- -- 5,022,500 -- -- --
Class C Common Stock offering............ -- -- -- -- 1,176,470 --
Restricted Stock grant................... -- -- 8,000 -- -- --
Exercise of Stock options................ -- -- 51,750 -- -- --
Non-cash Compensation Merit Fund......... -- -- -- -- -- --
Deferred compensation amortization....... -- -- -- -- -- --
Dividends declared....................... -- -- -- -- -- --
Net income............................... -- -- -- -- -- --
------- -------- ---------- ---------- ---------- ---
BALANCE AT DECEMBER 31, 1996............... $23,949 $102,064 31,821,861 2,000,000 1,176,470 $ 3
======= ======== ========== ========== ========== ===
<CAPTION>
ADDITIONAL RETAINED
PAID-IN DEFERRED EARNINGS
CAPITAL COMPENSATION (DEFICIT) TOTAL
---------- ------------ -------- --------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993............... $206,039 $ -- $ (980) $205,061
Series A Preferred Stock offering........ -- -- -- 23,949
Conversion of Operating Partnership
units.................................. 330 -- -- 330
Deferred compensation amortization....... 1,321 (991) -- 330
Dividends declared....................... (24,346) -- (9,561) (33,907)
Net income............................... -- -- 10,541 10,541
-------- ----- -------- --------
BALANCE AT DECEMBER 31, 1994............... 183,344 (991) -- 206,304
Series B Preferred Stock offering........ -- -- -- 102,064
Conversion of Operating Partnership
units.................................. 343 -- -- 343
Common Stock offering.................... 117,157 -- -- 117,158
Class B Common Stock offering............ 49,961 -- -- 49,961
Exercise of Stock options................ 686 -- -- 686
Deferred compensation amortization....... -- 339 -- 339
Dividends declared....................... (48,171) -- -- (48,171)
Net loss................................. -- -- (8,837) (8,837)
-------- ----- -------- --------
BALANCE AT DECEMBER 31, 1995............... 303,320 (652) (8,837) 419,847
Conversion of Operating Partnership
units.................................. 386 -- -- 386
Common Stock offering.................... 121,368 -- -- 121,368
Class C Common Stock offering............ 29,963 -- -- 29,963
Restricted Stock grant................... 200 (200) -- --
Exercise of Stock options................ 1,061 -- -- 1,061
Non-cash Compensation Merit Fund......... 100 -- -- 100
Deferred compensation amortization....... -- 388 -- 388
Dividends declared....................... (18,022) -- (55,353) (73,375)
Net income............................... -- -- 64,190 64,190
-------- ----- -------- --------
BALANCE AT DECEMBER 31, 1996............... $438,376 $ (464) $ -- $563,928
======== ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 34
SPIEKER PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)..................................... $ 64,190 $ (8,837) $ 10,541
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation and amortization......................... 37,385 31,602 28,953
Amortization of discount and deferred financing
costs.............................................. 1,224 9,362 9,727
Non-cash compensation................................. 508 368 330
Minority interests' share of net income............... 9,924 5,669 2,822
Extraordinary items................................... -- 33,503 --
Gain on disposition of property....................... (8,350) -- --
Increase in accounts receivable and other assets...... (11,865) (2,858) (2,046)
Decrease (increase) in receivables from related
parties............................................ 269 453 (839)
Decrease in assessment bonds payable.................. (849) (726) (843)
Increase in accounts payable and accrued expenses and
other liabilities.................................. 2,985 8,959 418
Increase (decrease) in accrued real estate taxes...... 225 328 (154)
Increase (decrease) in accrued interest............... 7,961 (1,070) 803
Decrease in payable to related party.................. -- (1,186) (1,962)
--------- --------- ---------
Net cash provided by operating activities.......... 103,607 75,567 47,750
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties............................... (406,552) (195,528) (159,154)
Additions to investment in mortgages.................. (14,381) -- --
Additions to leasing costs............................ (5,627) (4,083) (3,235)
Decrease in restricted cash........................... -- -- 1,057
Proceeds from disposition of properties............... 47,967 -- --
--------- --------- ---------
Net cash used for investing activities............. (378,593) (199,611) (161,332)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt.................................... 684,800 472,677 191,004
Payments on debt...................................... (455,205) (550,763) (78,327)
Payments of financing fees............................ (3,612) (2,746) (1,929)
Payments of dividends and distributions............... (81,626) (54,377) (37,319)
Proceeds from sale of Series B and Series A Preferred
Stock, net of issuance costs....................... -- 102,064 23,949
Proceeds from sale of Common Stock, net of issuance
costs.............................................. 121,368 117,157 --
Proceeds from sale of Class B Common Stock, net of
issuance costs..................................... -- 49,961 --
Proceeds from sale of Class C Common Stock, net of
issuance costs..................................... 29,963 -- --
Proceeds from stock options exercised................. 1,061 686 --
Prepayment of interest, restructuring fees, and
penalties.......................................... -- (12,705) --
--------- --------- ---------
Net cash provided by financing activities.......... 296,749 121,954 97,378
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents...................................... 21,763 (2,090) (16,204)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 7,573 9,663 25,867
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............. $ 29,336 $ 7,573 $ 9,663
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 35
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
Spieker Properties, Inc. (the "Company") was organized in the state of
Maryland on August 20, 1993, and commenced operations effective with the
completion of its initial public offering ("IPO") on November 18, 1993. The
Company qualifies as a real estate investment trust ("REIT") under the Internal
Revenue Code of 1986 (the "Code"), as amended. As of December 31, 1996, the
Company owned an approximate 84.9 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".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The Company's consolidated financial statements include the consolidated
financial position of the Operating Partnership and its subsidiaries as of
December 31, 1996 and 1995, and its consolidated results of operations and cash
flows for the years ended December 31, 1996, 1995 and 1994. 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 December 31, 1996 and
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>
The cost of buildings and improvements includes the purchase price of the
property or interests in property, legal fees, acquisition costs and interest,
property taxes and other costs incurred during the period of construction.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments which extend the economic
useful life of assets are capitalized.
Investments in real estate 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) throughout 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 realized
upon the ultimate disposition of the property. As of December 31, 1996 and 1995,
none of the carrying values of the properties exceeded their estimated fair
values. As of December 31, 1996 and 1995, 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.
<PAGE> 36
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company owns two mortgage loans that are secured by real estate. The
Company assesses possible impairment of these loans by reviewing the fair value
of the underlying real estate. As of December 31, 1996, the fair value of the
underlying real estate was in excess of the Company's book value of the mortgage
loans.
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 and other costs are capitalized during the period in
which activities necessary to get the property ready for its intended use are in
progress.
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 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 1 to 23 years. Unamortized leasing costs are charged to
expense upon the early termination of the lease or upon the early payment of
financing.
Fair Value of Financial Investments
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments. 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 and overnight repurchase agreements 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' limited partnership interest in the Operating Partnership of
approximately 15.1 percent and 17.7 percent at December 31, 1996 and 1995,
respectively, and (ii) a 10 percent interest in one property and a 7.5 percent
interest in a second property held by outside interests.
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.
<PAGE> 37
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest and Other Income
Interest and other income includes interest income on cash, cash
equivalents, and investment in mortgages and management fee income.
Extraordinary Items
Extraordinary items for the year ended December 31, 1995, consist of (i)
$11,767 in prepayment penalties, and a write-off of $28,100 in previously
capitalized debt discount (prepaid interest and arrangement fee paid to
Prudential at the time of the IPO and until December 1995 was amortized to
interest expense) related to the Prudential Debt paydown as a result of the
stock offering in December 1995, and (ii) a fee of $938 paid in connection with
the conversion of the secured line of credit into an unsecured facility.
Net Income (Loss) Per Share of Common Stock
Per share amounts for the Company are computed using the weighted average
common shares outstanding (including Class B Common Stock and Class C Common
Stock) during the period, including the dilutive effect of stock options. The
weighted average common shares outstanding for the year ended December 31, 1996,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
-------------------------
<S> <C>
Year ended:
December 31, 1996.................. 34,691,140
December 31, 1995.................. 26,140,488
December 31, 1994.................. 20,417,513
</TABLE>
Earnings used in the calculation are reduced by dividends owed to preferred
stockholders.
Reclassifications
Certain items in the 1995 and 1994 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. TRANSACTIONS WITH AFFILIATES
Revenues and Expenses
The Company received $802, $1,427 and $0 during 1996, 1995 and 1994,
respectively, for management services provided to certain properties that are
controlled and operated by Spieker Partners, a California general partnership,
and its affiliates (collectively, "Spieker Partners"). Certain officers of
Spieker Properties, Inc., are partners in Spieker Partners.
Acquisition of Properties
During the years ended December 31, 1996 and 1995, the Company purchased
certain properties and land parcels from Spieker Partners totaling $1,783 and
$22,216, respectively, pursuant to the provisions of
<PAGE> 38
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain landholding and excluded property agreements entered into during the
Company's IPO. Under the landholding agreements, the Company has an option to
purchase specific land parcels from Spieker Partners at the lower of an
established fixed price or independently appraised value. Under the excluded
property agreements, the Company has an option to acquire certain properties or
partnership interests after a purchase agreement can be reached with certain
unaffiliated partners in the partnerships. Acquisitions from Spieker Partners
are subject to approval by the Board of Directors.
Receivable From Affiliates
The $117 and $386 receivable from affiliates at December 31, 1996 and 1995,
respectively, primarily represents management fees and reimbursements due from
Spieker Partners affiliates.
4. PROPERTY HELD FOR DISPOSITION
The Company has determined to focus exclusively on office and industrial
properties. The Company has therefore decided to divest itself of its thirteen
retail properties and to reinvest the proceeds from these properties in office
and industrial properties.
In December 1996, the Company entered into agreements to dispose of nine
retail properties located in California, Oregon, and Washington to a third party
for $106,500. Three of the nine properties closed on December 20, 1996. Five of
the remaining properties are scheduled to be disposed of by May 1, 1997, and the
final property by December 31, 1997.
The following summarizes the condensed results of operations of the
properties disposed of in 1996 for the years ended December 31, 1996, 1995 and
1994:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Income........................................... $5,332 $5,168 $3,289
Expenses......................................... 1,797 1,987 1,130
------ ------ ------
Net Income....................................... $3,535 $3,181 $2,159
====== ====== ======
</TABLE>
In addition, the Company is in the process of divesting itself of four
other retail properties. The divestiture of the remaining four retail properties
is subject to negotiation of acceptable terms and other customary conditions.
The following summarizes the condensed results of operations of the ten
retail properties held for disposition for the years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income........................................ $18,815 $15,013 $13,152
Expenses...................................... 7,330 5,989 5,700
------- ------ ------
Net Income.................................... $11,485 $ 9,024 $ 7,452
======= ====== ======
</TABLE>
The net carrying amount of the ten retail properties held for disposition
as of December 31, 1996, is $117,732.
<PAGE> 39
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT
As of December 31, 1996 and 1995, debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Unsecured investment grade notes, varying fixed
interest rates from 6.65% to 8.00% payable
semi-annually, due 2000 to 2016...................... $635,000 $260,000
Unsecured line of credit, LIBOR + 1.25%, 6.63% at
December 31, 1996, due November 1997................. 39,000 117,700
Mortgage loans, varying interest rates from 7.5% to
9.75%, due 1997 to 2012.............................. 45,997 112,702
-------- --------
$719,997 $490,402
======== ========
</TABLE>
On November 6, 1995, the Company converted its secured line of credit to a
$150 million unsecured line of credit (the "line"). The line matures in November
1997 and the Company has an option to extend the line for one year upon payment
of a fee equal to 0.12% of the total line. The line also includes a fee on
average unused funds, which varies between 0.125% and 0.20% based on the average
outstanding balance.
Mortgage loans generally require monthly principal and interest payments.
The mortgage loans are secured by deeds of trust on fourteen properties. The
undepreciated book value of real estate assets pledged as collateral under deeds
of trust for mortgage loans at December 31, 1996, and December 31, 1995, is
$79,440 and $162,885, respectively.
Interest capitalized for the years ended December 31, 1996, 1995 and 1994,
was $3,116, $1,301 and $468, respectively.
Maturity Schedule
The scheduled maturities of all debt outstanding as of December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------------- --------
<S> <C>
1997 (includes line of credit, see paragraph
above).......................................... $ 51,429
1998.............................................. 821
1999.............................................. 895
2000.............................................. 100,975
2001.............................................. 109,016
Thereafter........................................ 456,861
--------
$719,997
========
</TABLE>
<PAGE> 40
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LEASING ACTIVITY
Future minimum rentals due under noncancelable operating leases in effect
at December 31, 1996, with tenants are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------------- --------
<S> <C>
1997.............................................. $184,418
1998.............................................. 151,943
1999.............................................. 121,929
2000.............................................. 93,118
2001.............................................. 63,813
Thereafter........................................ 127,819
--------
$743,040
========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $44,155,
$32,125 and $16,463 for the years ended December 31, 1996, 1995 and 1994,
respectively. These amounts are included as rental revenue and rental expense in
the accompanying statements of operations. Certain of the leases also provide
for the payment of additional rent based on a percentage of the tenant's
revenues. Additional rents under these leases for the years ended December 31,
1996, 1995 and 1994, were $362, $310 and $298 respectively. Certain leases
contain options to renew.
7. DIVIDENDS AND DISTRIBUTIONS PAYABLE
The dividends and distributions payable at December 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 December 31, 1996, and December 31,
1995, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Shares of:
Common Stock..................................... 31,821,861 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>
8. INCOME TAXES
The Company has elected to be taxed as a REIT pursuant to Section 856(c)(1)
of the Code. As a REIT, the Company generally will not be subject to federal
income tax to the extent that it distributes at least 95 percent of its taxable
income to its stockholders. Additionally, REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to federal income tax
(including any applicable alternative minimum tax) based on its taxable income
using corporate income tax rates. Even if the Company qualifies for taxation as
a REIT, the Company may be subject to certain state and local taxes on its
income and property and to federal income and excise taxes on its undistributed
taxable income.
Taxable income allocable to the Company, excluding minority interests, for
the years ended December 31, 1996, 1995 and 1994, was approximately $66,200,
$3,800 and $20,000, respectively. The taxable
<PAGE> 41
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income for the years ended December 31, 1996, 1995 and 1994, includes $12,138,
$2,634 and $1,238, respectively, allocable to the preferred stockholders.
The differences between book income and taxable income primarily result
from timing differences consisting of depreciation expense for tenant
improvements and unearned rental income.
Approximately 10%, 90% and 39% of the dividends paid or payable to Common
Stockholders for the years ended December 31, 1996, 1995 and 1994, respectively,
represents a return of capital for income tax purposes. In addition,
approximately 0.66% of the dividends paid or payable for the year ended December
31, 1996, represents a dividend taxable as a long-term capital gain.
9. STOCKHOLDERS' EQUITY
Preferred Stock
The 1,000,000 shares of Series A Cumulative, Convertible, Preferred Stock
rank 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.
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 of the Company, 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 of the
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
<PAGE> 42
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
10. EMPLOYEE RETIREMENT AND STOCK PLANS
Retirement Savings Plan
Effective January 1, 1994, the Company adopted a retirement savings plan
pursuant to Section 401(k) of the Internal Revenue Code, whereby participants
may contribute a percentage of compensation, but not in excess of the maximum
allowed under the Code. The plan provides for a matching contribution by the
Company which amounted to $292 and $266 for the years ended December 31, 1996
and 1995. In addition, the Company may make additional contributions at the
discretion of management. Management authorized additional contributions of $230
and $126 for the years ended December 31, 1996 and 1995.
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. Under the Plan as amended on May 22, 1996, the
number of shares available for option grant is 9.9% of the number of shares of
Common Stock, on a fully-converted basis, outstanding as of the last day of the
immediately preceding quarter, reduced by the number of shares of Common Stock
reserved for issuance under other stock compensation plans of the Company. As of
December 31, 1996, options on approximately 3,138,750 shares of Common Stock at
an average exercise price of $25.39 per share have been granted under the Plan.
To date, 85,250 share options have been exercised and 1,157,249 share options
are currently exercisable.
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 Operating Partnership Units for
awards to personnel employed by the Company at the time of the IPO. The units
are converted into Common Stock at the time of grant. The aggregate number of
units 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 potential 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 years ended December 31, 1996, 1995 and 1994, non-cash compensation
expense recognized for such awards was $388, $339 and $0, respectively.
Merit Plan
The Senior Officers of the Company reserved a portion of their limited
partnership interests in the Operating Partnership, equivalent to 153,659
Operating Partnership units, to reward Senior Officers and other key employees
of the Company for significant individual contributions to the enhancement of
the Company's value and to encourage further equity interests in the Company.
<PAGE> 43
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On an annual basis, the Executive Officers will review the performance of
the Senior Officers and other key employees and will award, at their discretion,
options to acquire limited partnership interests from the Merit Plan to
qualifying individuals. The Merit Plan represents a reallocation of the Senior
Officers' ownership of limited partnership interests and does not have a
dilutive effect on the stockholders of the Company. As of December 31, 1996,
49,730 units have been awarded under the Merit Plan.
To the extent that awards are made under the Merit Plan, they will be
compensatory. Accordingly, non-cash compensation expense is recorded in the
Company's financial statements. For the years ended December 31, 1996, 1995 and
1994, non-cash compensation expense recognized under the Merit Plan was $120,
$29 and $0.
Directors Stock Option Plan
On May 22, 1996, the Directors' Stock Option Plan was amended to increase
the number of shares of Common Stock subject to automatic annual option grants
to the Company's independent directors from 500 shares to 4,000 shares, to
increase the number of shares of Common Stock available for option grant from
30,000 to 150,000, and to provide that, in the event of a Change in Control,
outstanding options will become fully vested. To date 14,000 shares have been
granted under the plan.
Stock Options
The Company applies APB 25 and related interpretations in accounting for
its stock option plan. Accordingly, no compensation cost has been recognized.
Had compensation cost for the plan been determined based on the fair value at
the grant dates for awards under the plan consistent with the method prescribed
by Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
------- --------
<S> <C> <C>
Net income (loss)
As reported........................................... $52,051 $(11,471)
Pro forma............................................. 51,359 (11,874)
Earnings per share
As reported........................................... $ 1.50 $ (.44)
Pro forma............................................. 1.49 (.46)
</TABLE>
For these disclosure purposes, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1996 and 1995,
respectively; dividend yield of 6.15% for both years; expected volatility of
13.28% for both years; expected lives of seven years for both years; and
risk-free interest rates of 6.21% for both years.
During the initial phase-in period, the effects of applying SFAS No. 123
may not be representative of the effects on disclosed pro forma net income for
future years because options vest over several years and additional awards can
be made each year.
11. COMMITMENTS AND CONTINGENCIES
Environmental Matters
The Company follows the policy of monitoring its properties for the
presence of hazardous or toxic substances. The Company is not aware of any
environmental liability with respect to the properties that would have a
material adverse effect on the Company's business, assets or results of
operations. There can be no
<PAGE> 44
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assurance that such a material environmental liability does not exist. The
existence of any such material environmental liability would have an adverse
effect on the Company's results of operations and cash flow.
Lease Commitments
The Company will be responsible for minimum ground lease payments of $213,
$900 and $1,108 beginning in 2011, 2012 and 2017, respectively, through 2040,
2039 and 2040, respectively.
General Uninsured Losses
The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with policy specifications, limits and deductibles
customarily carried for similar properties. There are, however, certain types of
extraordinary losses which may be either uninsurable, or not economically
insurable. Should an uninsured loss occur, the Company could lose its investment
in, and anticipated profits and cash flows from, a property.
Certain of the properties are located in areas that are subject to
earthquake activity; the Company has therefore obtained limited earthquake
insurance. In the event of an earthquake, properties are self-insured for the
first $25,000 of loss. The Company is insured for the next $50,000 of loss, any
losses in excess of $75,000 will be borne by the Company.
12. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest...................... $ 31,167 $ 39,876 $ 34,116
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS:
Extraordinary loss write-off of deferred
financing costs.......................... -- 28,100 --
Debt assumed in relation to property
acquisitions............................. -- 22,827 --
Minority interest capital recorded in
relation to property acquisitions........ -- 8,877 --
Increase to land and assessment bond
payable.................................. 1,283 4,687 92
Write-off of fully depreciated property..... 15,469 3,662 10,672
Write-off of fully amortized deferred
financing and leasing costs.............. 4,696 1,847 2,618
Conversion of operating partnership units to
Common Stock with resulting reduction in
minority interest and increase in
additional paid-in capital............... 386 343 330
</TABLE>
<PAGE> 45
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
---------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $45,318(1) $47,696 $52,143 $55,542 $200,699
Income from operations before disposal
of real estate properties, minority
interests and extraordinary items... 14,980(1) 17,131 16,096 17,557 65,764
Net income available to Common
Stockholders........................ 9,859 11,889 9,753 20,550 52,051
Income per share of Common Stock...... $ .31 $ .33 $ .27 $ .57 $ 1.50
</TABLE>
- ---------------
(1) Includes reclassification of extraordinary gain on early extinguishment of
debt of $150.
14. SUBSEQUENT EVENTS
On January 21, 1997, the Company sold 10,000,000 shares of Common Stock at
$34.50 per share through an underwritten public offering. In addition, shortly
thereafter, the underwriters exercised their over-allotment option resulting in
the Company selling an additional 1,500,000 shares of Common Stock. The
aggregate net proceeds of $374,835 were used primarily to acquire properties
under contract at the time of the offering.
On various dates subsequent to December 31, 1996 the Company acquired nine
properties totaling 3.3 million rentable square feet at a total initial
acquisition cost of $369,751.
<PAGE> 46
SPIEKER PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------
LAND AND ADDITIONS LAND
ENCUMBRANCES LEASEHOLD AND LAND IMP. AND
PROJECT LOCATION AND LIENS(1) INTEREST BUILDINGS IMPROVEMENTS LEASEHOLD INT.
----------------------------- -------------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
10011 Stender Way II Santa Clara, CA $ 118,274 $ 840,169 $ 1,250,787 $ 491,822
10041 Scott Blvd. Santa Clara, CA 128,623 583,455 1,811,630 554,191
10061 Fresno Warehouse II Fresno, CA $ 31,311 310,908 1,616,875 1,731,587 784,254
10071 Bakersfield Warehouse Bakersfield, CA 519,900 1,623,282 2,004,571 1,090,739
10091 Terminal St. Warehouse Sacramento, CA 198,113 1,181,083 219,706 202,000
10101 Stender Way I Santa Clara, CA 98,915 536,920 230,416 170,073
10111 Applied Materials I Santa Clara, CA 381,686 1,625,507 3,690 381,686
10121 Sunnyvale Business Center Santa Clara, CA 67,145 257,035 811,284 555,713 241,207
10161 Cupertino Business Center Cupertino, CA 3,876,840 3,970,597 882,898 4,082,078
10171 Fresno Warehouse III Fresno, CA 405,166 1,407,087 423,844 482,421
10191 North American Van Lines San Jose, CA 2,191,699 4,999,710 786,893 2,199,552
10241 Applied Materials II Santa Clara, CA 1,535,741 651,943 3,392,605 3,040,850 1,270,250
10261 Front Street Warehouse Sacramento, CA 294,674 908,485 207,700 294,674
10271 Aspect Building San Jose, CA 164,751 2,223,805 2,265,103 281,512 2,229,772
10301 Cadillac Court Milpitas, CA 127,601 959,042 1,493,087 972,430 1,131,026
10331 Ryan Ranch Industrial Monterey, CA 422,500 969,386 798,752 557,763
10371 Fremont Bayside Fremont, CA 6,659,809 1,245,617 2,704,137 534,183 1,247,069
10381 Livermore Commerce Ctr. Livermore, CA 39,127 1,312,199 3,563,238 865,239 1,499,807
10401 Fairfield Business Center Fairfield, CA 7,130 439,350 2,662,769 1,086,488 1,079,336
10421 Patrick Henry Drive San Jose, CA 13,748 933,058 2,702,038 2,277,020 993,156
10431 COG Warehouse Milpitas, CA 503,104 2,549,224 1,907,937 1,086,032 3,026,377
10451 Okidata Distribution Center Milpitas, CA 347,394 1,808,159 1,750,086 1,132,809 2,163,397
10461 Pro Log Monterey, CA 780,000 1,148,054 1,058,360 1,121,135
10481 Huntwood Business Center Hayward, CA 13,467 198,026 686,076 1,271,015 434,534
10491 Independent Rd Warehouse Oakland, CA 237,380 706,174 313,217 332,303
10501 Grandview Drive So. San Fran, CA 562,050 259,751 561,224 520,092 468,097
10511 Baycenter Business Park II Hayward, CA 248,456 1,228,225 3,116,626 2,179,728 1,781,453
10521 Keebler Warehouse Hayward, CA 97,563 569,642 1,568,210 188,521 605,637
10531 Fremont Commerce Center Fremont, CA 614,357 1,588,166 570,393 708,494
10571 Montague Industr. Center Palo Alto, CA 1,482,000 5,131,899 5,869,335 2,820,461
10591 Dubuque Business Center So. San Fran, CA 2,912,158 3,128,405 2,952,407 3,491,267
10601 Cabot Blvd. Warehouse Hayward, CA 1,550,174 4,531,092 1,197,467 1,559,831
<CAPTION>
BUILDINGS AND CONSTRUCTION DEPRECIABLE
BUILDING ACCUMULATED AND/OR LIVES
IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
10011 $ 1,717,408 $ 2,209,230 $ 579,358 1978 4-40
10041 1,969,517 2,523,708 493,591 1976 4-40
10061 2,875,116 3,659,370 922,278 1981 3-40
10071 3,057,014 4,147,753 941,807 1982 20-40
10091 1,396,902 1,598,902 640,763 1975 3-40
10101 696,177 866,250 283,932 1978 20-40
10111 1,629,197 2,010,883 887,796 1975 20-40
10121 1,382,825 1,624,032 423,364 1987 4-40
10161 4,648,256 8,730,335 1,168,711 1985 32-40
10171 1,753,676 2,236,097 422,819 1987 5-40
10191 5,778,750 7,978,302 1,723,431 1988 10-40
10241 5,815,147 7,085,397 2,450,625 1979 16-40
10261 1,116,185 1,410,859 250,525 1988 5-40
10271 2,540,648 4,770,420 477,028 1989 6-40
10301 2,293,533 3,424,559 726,136 1991 5-40
10331 1,632,875 2,190,638 530,755 1991 5-40
10371 3,236,868 4,483,937 820,266 1990 3-40
10381 4,240,869 5,740,676 837,993 1988 3-40
10401 3,109,271 4,188,607 817,521 1991 3-40
10421 4,918,960 5,912,116 1,173,140 1991 12-40
10431 2,516,816 5,543,193 633,459 1992 11-40
10451 2,527,657 4,691,054 765,427 1993 4-40
10461 1,865,279 2,986,414 309,133 1993 12-40
10481 1,720,583 2,155,117 568,640 1979 7-40
10491 924,468 1,256,771 470,538 1972 5-40
10501 872,970 1,341,067 385,256 1979 20-40
10511 4,743,126 6,524,579 1,333,825 1984 3-40
10521 1,720,736 2,326,373 456,122 1985 10-40
10531 2,064,422 2,772,916 391,973 1989 5-40
10571 9,662,773 12,483,234 3,748,559 1993 5-40
10591 5,501,702 8,992,969 1,212,560 1986 3-40
10601 5,718,902 7,278,733 1,401,374 1988 3-40
</TABLE>
<PAGE> 47
SPIEKER PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------
LAND AND ADDITIONS LAND
ENCUMBRANCES LEASEHOLD AND LAND IMP. AND
PROJECT LOCATION AND LIENS(1) INTEREST BUILDINGS IMPROVEMENTS LEASEHOLD INT.
----------------------------- -------------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
10611 Benicia Commmerce Center Benicia, CA $ 434,027 $ 3,810,746 $ 1,327,501 $ 683,781
10621 Montgomery Ward Pleasant Hill, CA 717,750 3,485,901 95,406 717,750
10631 Eden Landing Bus. Center Hayward, CA 1,152,163 1,940,740 308,962 1,158,197
10641 Good Guys Dist. Center Hayward, CA $ 21,320 4,923,246 9,254,184 142,304 4,936,467
10651 Fleetside Comrce Center Benicia, CA 382,613 1,080,303 2,952,609 540,501 1,080,303
10661 Industrial Dr. Warehouse Fremont, CA 2,292,211 1,822,496 3,793,609 457,451 1,822,496
10711 Redwood Shores Redwood City, CA 3,437,897 3,702,938 1,489,219 3,796,415
10741 Baycenter Business Park I Hayward, CA 1,500,000 4,105,976 69,318 1,500,000
10761 2905-2909 Stender Way Santa Clara, CA 385,992 1,174,719 444,000 385,992
10781 Meier--Central South Santa Clara, CA 0 2,571,112 7,177,524 163,565 2,571,112
10791 Meier--Mountain View Santa Clara, CA 6,092,762 5,265,351 14,236,164 55,704 5,265,351
10801 Meier--Central North Santa Clara, CA 1,753,361 4,740,570 0 1,753,361
10811 Meier--Sunnyvale Santa Clara, CA 352,776 953,800 0 352,776
10821 732-834 Striker Ave Sacramento, CA 1,009,601 2,767,658 215,283 1,024,488
10831 Fresno Warehouse I Fresno, CA 2,140,209 841,100 2,304,645 0 841,100
10871 Walsh & Lafayette Ind Park Santa Clara, CA 3,359,291 7,808,387 1,382,535 3,359,291
10881 Ridder Park San Jose, CA 169,298 1,794,057 0 1,794,057
10901 Ryan Ranch--Lot 14B Monterey, CA 311,835 0 311,835
10911 Cadillac Court II Milpitas, CA 174,005 817,334 1,162,712 663,659 817,334
10931 Northgate Commerce Ctr Sacramento, CA 1,854,090 5,594,480 326,316 1,854,090
10941 Doolittle Business Center San Leandro, CA. 866,075 2,598,689 228,279 977,416
10951 Benicia Ind I (Stone) Benicia, CA. 5,238,267 15,735,277 0 5,238,267
10961 Benicia Ind I (Getty Ct) Benicia, CA. 1,134,212 3,402,635 0 1,134,212
11001 Carlsbad Airport Plaza Carlsbad, CA 1,532,406 4,597,219 20,427 1,532,406
11041 Concord North Comm Ctr Concord, CA 2,340,139 0 2,340,139
11071 Benicia Ind II Benicia, CA. 3,891,910 11,673,229 0 3,891,910
11161 Port of Oakland Oakland, CA 1,693,760 5,080,325 0 1,693,760
11181 MacArthur Park Santa Ana, CA 1,556,617 4,693,089 0 1,556,617
11191 Stadium Plaza Anaheim, CA 9,134,965 29,269,756 0 9,134,965
11211 Sorrento Vista San Diego, CA 2,754,158 0 2,754,158
11231 Charcot Business Center San Jose, CA 2,983,255 8,949,598 0 2,983,255
11241 Airport Service Center San Jose, CA 668,240 2,004,907 0 668,240
<CAPTION>
BUILDINGS AND CONSTRUCTION DEPRECIABLE
BUILDING ACCUMULATED AND/OR LIVES
IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
10611 $ 4,888,494 $ 5,572,275 $ 1,104,272 1989 3-40
10621 3,581,308 4,299,058 702,897 1989 35-40
10631 2,243,668 3,401,865 472,894 1990 3-40
10641 9,383,267 14,319,734 1,098,118 1990 5-40
10651 3,493,110 4,573,413 691,202 1990 6-40
10661 4,251,060 6,073,557 748,633 1993 3-40
10711 4,833,639 8,630,054 907,892 1987 7-40
10741 4,175,294 5,675,294 301,522 1994 3-40
10761 1,618,719 2,004,711 172,671 1995 6-40
10781 7,341,089 9,912,201 339,961 1995 5-40
10791 14,291,868 19,557,218 659,433 1995 5-40
10801 4,740,570 6,493,931 217,277 1995 40
10811 953,800 1,306,576 43,716 1995 40
10821 2,968,054 3,992,543 150,531 1995 5-40
10831 2,304,645 3,145,745 104,889 1995 5-40
10871 9,190,922 12,550,213 218,694 1995 5-40
10881 0 1,794,057 0 1995 40
10901 0 311,835 0 1995 40
10911 1,826,371 2,643,706 88,666 1995 7-40
10931 5,925,353 7,779,442 221,735 1995 10-40
10941 2,715,627 3,693,043 44,946 1996 12-40
10951 15,735,277 20,973,544 360,601 1996 40
10961 3,402,635 4,536,847 77,977 1996 40
11001 4,624,246 6,156,652 137,480 1995 5-40
11041 0 2,340,139 0 1995 40
11071 11,673,229 15,565,139 267,512 1996 40
11161 5,080,325 6,774,085 74,088 1996 40
11181 4,693,089 6,249,707 39,100 1996 40
11191 29,269,756 38,404,722 243,899 1996 40
11211 0 2,754,158 0 1996 40
11231 8,949,598 11,932,853 37,290 1996 40
11241 2,004,907 2,673,147 8,354 1996 40
</TABLE>
<PAGE> 48
SPIEKER PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------
LAND AND ADDITIONS LAND
ENCUMBRANCES LEASEHOLD AND LAND IMP. AND
PROJECT LOCATION AND LIENS(1) INTEREST BUILDINGS IMPROVEMENTS LEASEHOLD INT.
----------------------------- -------------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
11251 Dixon Landing North Milpitas, CA $ 6,355,274 $ 0 $ 6,355,274
11261 Kifer Road Industrial Park Sunnyvale, CA 3,528,693 $ 10,587,055 0 3,528,693
11281 Baycenter Business Park III Hayward, CA $ 200,885 1,248,216 0 1,248,216
11291 Riverside Business Center Sacramento, CA 1,259,389 0 1,259,389
11361 Ravendale at Central Mountain View, CA 2,017,212 6,051,636 0 2,017,212
20001 West Valley Business Ctr Kent, WA 56,284 681,200 2,124,967 2,242,955 1,286,458
20011 Cascade Comrce. Park Kent, WA 43,069 2,430,989 5,005,502 1,726,844 3,129,620
20031 Valley Freeway Bus. Center Kent, WA 1,061,293 2,243,650 469,519 1,262,572
20071 Woodinville Corp. Center I Woodinville, WA 1,321,071 3,712,131 696,817 1,740,944
20081 Woodinville Corp. Center II Woodinville, WA 1,851,708 6,391,154 3,563,648 4,258,674
20111 Georgetown Center Seattle, WA 4,274,197 4,165,405 412,689 4,517,411
20121 City Commerce Park Seattle, WA 1,855,377 2,548,461 1,315,036 2,218,399
20141 Vancouver Comrce. Park Vancouver, WA 337,930 1,359,073 218,838 451,891
20151 Millcreek Distribution Ctr Kent, WA 36,609 2,541,162 7,738,028 29,305 2,541,162
20161 Sea-Tac Industrial Park SeaTac, WA 1,953,528 5,538,926 30,089 1,953,528
20171 Valley Industrial Park Kent, WA 30,807 6,765,505 17,221,447 286,803 6,862,205
20221 Woodinville Corp Ctr Bellevue, WA 2,588,694 5,757,519 2,820,903 4,160,957
20231 Everett Industrial Center Everett, WA 9,479 1,863,532 5,566,581 0 1,863,532
20251 Everett 526 Everett, WA 1,087,615 3,262,856 15,046 1,087,615
30001 Park 217 I Portland, OR 1,359,958 2,346,881 3,219,851 2,472,845
30011 Park 217 Phase II Portland, OR 0 490,845 1,762,678 1,472,708 780,261
30021 Park 217 Phase III Portland, OR 101,555 601,310 201,653 132,615
30031 Sunset Science Park Portland, OR 403,359 147,569 581,642 781,585 322,532
30041 Swan Island Portland, OR 916,417 290,504 758,714 436,534 369,011
30071 Nelson Business Center I&II Tigard, OR 37,293 3,454,590 5,905,233 4,574,656 4,944,462
30081 SW Commerce Ctr. Portland, OR 499,146 1,390,426 745,582 707,816
30101 Columbia IV Portland, OR 833,668 4,430,444 37,876 833,668
30051 Columbia Commerce Park Portland, OR 1,939,782 6,606,003 2,387,418 2,527,306
30141 Marine Dr Distribution Ctr Portland, OR 1,166,743 3,482,832 1,519,766 1,870,511
30151 Marine Drive Dist. Ctr II Portland, OR 622,307 1,867,657 622,956 1,110,852
30161 Airport Way Commerce Park Portland, OR 80,549 1,581,544 0 1,581,544
30171 4949 Meadows Building Lake Oswego, OR 2,003,180 0 2,003,180
<CAPTION>
BUILDINGS AND CONSTRUCTION DEPRECIABLE
BUILDING ACCUMULATED AND/OR LIVES
IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
11251 $ 0 $ 6,355,274 $ 0 1996 40
11261 10,587,055 14,115,748 44,113 1996 40
11281 0 1,248,216 0 1996 40
11291 0 1,259,389 0 1996 40
11361 6,051,636 8,068,848 0 1996 40
20001 3,762,664 5,049,121 1,218,028 1980 20-40
20011 6,039,010 9,168,630 1,101,496 1989 5-40
20031 2,511,890 3,774,462 585,986 1990 7-40
20071 3,994,424 5,735,368 1,121,611 1988 3-40
20081 7,547,836 11,806,510 2,176,236 1991 4-40
20111 4,334,881 8,852,291 1,117,826 1984 5-40
20121 3,500,474 5,718,873 786,022 1988 5-40
20141 1,467,189 1,919,081 329,494 1990 3-40
20151 7,767,332 10,308,495 430,089 1994 5-40
20161 5,569,015 7,522,543 308,941 1994 4-40
20171 17,411,550 24,273,755 980,711 1994 3-40
20221 7,006,159 11,167,116 237,751 1995 5-40
20231 5,566,581 7,430,113 104,374 1996 40
20251 3,277,901 4,365,516 47,895 1996 12-40
30001 4,453,844 6,926,689 1,644,200 1980 5-40
30011 2,945,970 3,726,231 872,679 1981 10-40
30021 771,904 904,519 324,980 1981 5-40
30031 1,188,264 1,510,796 420,885 1975 5-40
30041 1,116,741 1,485,752 392,039 1978 5-40
30071 9,011,623 13,956,085 1,686,769 1990 3-40
30081 1,930,703 2,638,519 429,520 1989 5-40
30101 4,468,319 5,301,988 301,157 1994 40
30051 8,408,812 10,936,117 1,761,429 1988 3-40
30141 4,298,829 6,169,341 118,941 1995 5-40
30151 2,002,068 3,112,920 8,167 1996 5-40
30161 0 1,581,544 0 1996 40
30171 0 2,003,180 0 1996 40
</TABLE>
<PAGE> 49
SPIEKER PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------
LAND AND ADDITIONS LAND
ENCUMBRANCES LEASEHOLD AND LAND IMP. AND
PROJECT LOCATION AND LIENS(1) INTEREST BUILDINGS IMPROVEMENTS LEASEHOLD INT.
----------------------------- -------------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
30181 Marine Drive Dist. Ctr III Portland, OR $ 1,760,241 $ 0 $ 1,760,241
40011 Cole Rd. Warehouse Boise, ID $ 313,392 103,617 $ 416,506 166,205 114,465
------------ ------------ ------------ ------------ --------------
TOTAL INDUSTRIAL $23,818,958 $161,714,060 $354,077,572 $76,230,995 $182,702,463
------------ ------------ ------------ ------------ --------------
10001 Santa Clara Office Center I Santa Clara, CA $ 1,275,227 $ 187,326 $ 1,392,344 $ 2,736,970 $ 883,440
10021 Santa Clara Office Center II Santa Clara, CA 173,317 2,581,836 2,820,672 931,364
10031 Gateway Ofc. Phase I San Jose, CA 721,215 9,010,137 4,158,074 1,552,568
10051 Santa Clara Office Center III Santa Clara, CA 36,746 2,193,334 2,011,652 596,050
10081 Gateway Ofc. Phase II San Jose, CA 1,562,154 20,337,863 14,718,756 4,116,198
10131 The Alameda San Jose, CA 774,316 4,278,623 929,502 966,236
10141 Creekside Phase I San Jose, CA 436,655 10,385,797 8,518,712 4,046,490 10,965,419
10151 North First Ofc. Ctr. San Jose, CA 6,698,611 5,900,388 2,455,237 6,973,869
10181 455 University Sacramento, CA 925,000 1,305,000 571,310 993,704
10201 650 & 701 Howe Sacramento, CA 1,665,000 4,996,755 3,716,304 2,120,259
10211 8880 Cal Center Sacramento, CA 3,252,741 8,493,503 2,293,382 3,804,401
10231 740 University Sacramento, CA 261,250 793,750 165,414 261,250
10251 Denny's Restaurant Santa Clara, CA 181,634 551,427 1,225 181,634
10281 Gateway Oaks II Sacramento, CA 1,510,137 4,258,061 1,577,894 1,996,441
10291 Gateway Oaks I Sacramento, CA 2,926,887 9,856,301 1,404,531 2,938,968
10311 701 University Sacramento, CA 1,051,108 3,239,007 506,139 1,247,111
10321 Ryan Ranch Ofc. Ctr. Monterey, CA 1,048,740 3,951,223 2,361,010 2,093,355
10341 The Orchard Sacramento, CA 1,505,937 4,517,810 344,211 1,539,497
10351 555 University Sacramento, CA 2,432,533 1,467,023 4,401,069 221,218 1,484,661
10361 575 and 601 University Sacramento, CA 1,677,507 5,720,244 484,557 1,915,967
10391 655 University Sacramento, CA 1,147,733 3,443,200 228,357 1,159,673
10411 Arden Office Sacramento, CA 576,552 1,729,656 2,168,824 751,483
10541 Lockheed Bldg. Palo Alto, CA 1,735,789 6,264,357 1,126,913 1,735,789
10551 Xerox Campus Palo Alto, CA 9,145,484 29,360,411 5,281,728 9,145,484
10561 Foothill Research Ctr. Palo Alto, CA 7,474,154 30,819,577 5,592,931 7,474,154
10671 2180 Sand Hill Road Menlo Park, CA 466,525 1,281,023 123,918 466,525
10681 Point West Executive Ctr. Sacramento, CA 2,538,020 5,952,306 746,330 2,573,522
10701 McCarthy Milpitas, CA 5,777 845,039 4,219,348 274,879 845,039
<CAPTION>
BUILDINGS AND CONSTRUCTION DEPRECIABLE
BUILDING ACCUMULATED AND/OR LIVES
IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
30181 $ 0 $ 1,760,241 $ 0 1996 40
40011 571,863 686,328 230,356 1976 16-40
------------- ------------ ------------
$409,373,087 $592,075,550 $ 56,566,649
------------- ------------ ------------
10001 $ 3,465,805 $ 4,349,245 $ 1,012,557 1977 3-40
10021 4,664,639 5,596,003 1,585,650 1980 2-40
10031 12,364,657 13,917,226 4,322,857 1981 3-40
10051 3,652,942 4,248,992 1,171,185 1981 3-40
10081 32,528,584 36,644,781 9,176,742 1983 3-40
10131 5,016,206 5,982,441 1,430,095 1984 3-40
10141 11,989,446 22,954,866 2,847,119 1985 5-40
10151 8,080,367 15,054,236 2,117,385 1985 3-40
10181 1,865,536 2,859,240 407,048 1987 3-40
10201 8,260,688 10,380,947 1,661,757 1987 2-40
10211 10,296,155 14,100,556 1,936,914 1989 3-40
10231 971,994 1,233,244 239,368 1987 3-40
10251 552,652 734,286 121,885 1988 34-40
10281 5,365,890 7,362,331 1,259,986 1992 3-40
10291 11,313,704 14,252,672 2,678,248 1990 2-40
10311 3,549,142 4,796,253 794,888 1991 3-40
10321 5,299,989 7,393,344 1,302,940 1992 3-40
10341 4,828,460 6,367,957 865,529 1990 3-40
10351 4,610,173 6,094,834 801,671 1990 3-40
10361 6,022,912 7,938,880 1,171,784 1990 3-40
10391 3,703,199 4,862,872 765,278 1990 2-40
10411 3,725,565 4,477,048 1,307,860 1990 7-40
10541 7,391,270 9,127,059 1,255,646 1993 8-40
10551 34,642,139 43,787,623 5,577,232 1993 8-40
10561 36,412,508 43,886,662 6,463,234 1993 6-40
10671 1,412,286 1,878,811 790,804 1973 3-40
10681 6,664,520 9,238,042 457,907 1994 10-40
10701 4,494,227 5,339,266 305,077 1994 1-40
</TABLE>
<PAGE> 50
SPIEKER PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------
LAND AND ADDITIONS LAND
ENCUMBRANCES LEASEHOLD AND LAND IMP. AND
PROJECT LOCATION AND LIENS(1) INTEREST BUILDINGS IMPROVEMENTS LEASEHOLD INT.
----------------------------- -------------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
10751 Point West Commercenter Sacramento, CA $ 3,443,730 $ 9,025,615 $ 371,430 $ 3,443,730
10851 Ryan Ranch Off -- Ph II Monterey, CA 402,750 2,004,132 497,760 402,750
10891 Gateway Oaks III Sacramento, CA 1,151,181 0 1,151,181
10981 La Jolla Centre II San Diego, CA 3,252,653 13,057,444 61,398 3,252,653
10991 One Pacific Heights San Diego, CA 3,089,433 8,352,911 0 3,089,433
11011 Pacific Point San Diego, CA 3,111,202 9,333,605 248,664 3,111,202
11021 Bayside Corporate Center Foster City, CA $ 519,706 2,455,163 7,597,914 291,091 2,465,778
11031 Ryan Ranch Office II Bldg D Monterey, CA 420,000 0 420,000
11051 3600 American River Dr Sacramento, CA 1,059,222 4,266,132 5,748 1,059,222
11052 3610 American River Dr Sacramento, CA 490,859 1,963,435 19,892 490,859
11053 3620 American River Dr Sacramento, CA 1,033,387 4,133,548 5,102 1,033,387
11061 Inwood Business Park Irvine, CA 2,232,769 8,934,175 0 2,232,769
11141 Carmel Valley Centre San Diego, CA 2,792,159 11,207,702 84,296 2,792,159
11151 2290 North First Street San Jose, CA 1,222,335 4,891,759 0 1,222,335
11171 Dove Street Newport Beach, CA 1,568,509 6,278,089 0 1,568,509
11221 Fairchild Corporate Center Irvine, CA 2,011,443 8,054,128 0 2,011,443
11271 One Pacific Plaza Huntington Beach, CA 2,020,486 8,085,263 0 2,020,486
11301 Fidelity Plaza Sacramento, CA 1,354,983 3,695,222 0 1,354,983
11311 Central Park Plaza Santa Clara, CA 246,039 9,446,335 24,866,654 0 9,446,335
11321 Corona Corporate Center Southern Cal 741,710 2,966,841 0 741,710
11331 Wood Island Office Complex Larkspur, CA 72,109 3,789,482 10,050,094 0 3,789,482
11341 One Lakeshore Centre Southern Cal 73,114 3,892,211 15,275,917 0 3,892,211
11351 Pacific View Plaza San Diego, CA 1,404,336 3,796,910 0 1,404,336
11401 The City Orange County, CA 5,585,542 22,355,536 0 5,585,542
11501 The City Orange County, CA 1,309,617 5,243,681 0 1,309,617
19881 San Mateo Baycenter San Mateo, CA 9,175,644 2,464,154 10,331,261 554,478 2,688,531
20021 Federal Way Office Fed Way, WA 297,202 765,990 112,005 297,202
20041 Bellevue Gtwy I Bellevue, WA 2,681,773 6,064,829 7,222,290 4,526,668
20051 Bellevue Gateway II Bellevue, WA 1,201,588 4,859,552 2,499,448 1,867,498
20061 Main Street Office Bellevue, WA 13,738 1,917,015 1,385,821 396,056 1,927,586
20211 Bellefield Office Park Bellevue, WA 12,659,811 5,530,275 12,623,527 2,936,910 5,623,429
20241 10700 Building Bellevue, WA 24,384 24,384 4,651,580 0 24,384
<CAPTION>
BUILDINGS AND CONSTRUCTION DEPRECIABLE
BUILDING ACCUMULATED AND/OR LIVES
IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
10751 $ 9,397,045 $ 12,840,775 $ 572,285 1994 4-40
10851 2,501,892 2,904,642 112,133 1995 3-40
10891 0 1,151,181 0 1995 40
10981 13,301,773 16,554,426 401,220 1995 4-40
10991 8,352,911 11,442,345 243,627 1995 40
11011 9,582,269 12,693,471 308,494 1995 4-40
11021 7,878,390 10,344,168 221,371 1996 7-40
11031 0 420,000 0 1996 40
11051 4,271,879 5,331,101 115,679 1995 12-40
11052 1,983,327 2,474,186 54,834 1995 5-40
11053 4,138,650 5,172,037 112,126 1995 12-40
11061 9,266,014 11,498,783 261,069 1995 3-40
11141 11,291,998 14,084,158 230,392 1996 40
11151 4,891,759 6,114,094 81,529 1996 40
11171 6,278,089 7,846,598 78,476 1996 40
11221 8,054,128 10,065,572 67,088 1996 40
11271 8,085,263 10,105,749 33,687 1996 40
11301 3,695,222 5,050,205 46,190 1996 40
11311 24,866,654 34,312,989 51,806 1996 40
11321 2,966,841 3,708,552 0 1996 40
11331 10,050,094 13,839,576 0 1996 40
11341 15,275,917 19,168,128 0 1996 40
11351 3,796,910 5,201,246 0 1996 40
11401 22,355,536 27,941,078 279,345 1996 40
11501 5,243,681 6,553,297 65,507 1996 40
19881 10,674,459 13,362,990 3,162,173 1995 3-40
20021 877,995 1,175,197 142,087 1989 20-40
20041 11,442,223 15,968,891 2,660,123 1985 2-40
20051 6,803,580 8,671,078 1,357,604 1988 3-40
20061 1,790,773 3,718,359 279,933 1990 2-40
20211 15,467,283 21,090,711 839,258 1995 3-40
20241 4,651,580 4,675,964 67,836 1996 40
</TABLE>
<PAGE> 51
SPIEKER PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST TO COMPANY
--------------------------
LAND AND ADDITIONS LAND
ENCUMBRANCES LEASEHOLD AND LAND IMP. AND
PROJECT LOCATION AND LIENS(1) INTEREST BUILDINGS IMPROVEMENTS LEASEHOLD INT.
---------------------------- -------------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
30091 5550 Macadam Office Portland, OR $ 764,081 $ 3,646,922 $ 241,485 $ 765,082
30111 River Forum Portland, OR 2,462,767 16,637,177 627,018 2,462,767
30121 Kruse Way Portland, OR $ 0 2,785,451 7,911,320 728,674 2,825,101
30131 4004 S.W. Kruse Way Place Lake Oswego, OR 0 981,486 3,986,194 1,422,662
40001 Key Financial Tower Boise, ID 236,501 2,864,931 5,245,557 305,943
------------ ------------ ------------ ------------ --------------
TOTAL OFFICE $26,934,737 $142,569,916 $460,533,074 $85,217,730 $155,743,029
------------ ------------ ------------ ------------ --------------
GRAND TOTALS $50,753,695 $304,283,976 $814,610,647 $161,448,725 $338,445,492
============ ============ ============ ============ ==============
<CAPTION>
BUILDINGS AND CONSTRUCTION DEPRECIABLE
BUILDING ACCUMULATED AND/OR LIVES
IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION (YEARS)
------------- -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
30091 $ 3,903,271 $ 4,668,353 $ 723,767 1990 3-40
30111 17,264,196 19,726,963 1,241,942 1994 5-40
30121 8,600,343 11,425,444 493,367 1994 5-40
30131 5,055,020 6,477,682 203,357 1995 3-40
40001 8,070,045 8,375,988 2,797,297 1977 5-40
------------- -------------- ------------
$535,272,666 $ 691,015,694 $ 71,134,245
------------- -------------- ------------
$944,645,753 $1,283,091,245 $127,700,893
============= ============== ============
</TABLE>
(1) Includes assessment bonds payable
<PAGE> 52
SCHEDULE III -- (CONTINUED)
SPIEKER PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
A summary of activity for real estate and accumulated depreciation is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
REAL ESTATE:
Balance at beginning of year.......................... $1,098,871 $ 870,613 $722,928
Acquisition of properties and limited partners'
interests........................................ 340,298 185,862 144,757
Improvements....................................... 67,537 46,058 13,600
Cost of real estate disposed of.................... (42,206) -- --
Property held for disposition...................... (133,971) -- --
Disposition of and write-off of fully depreciated
property......................................... (15,469) (3,662) (10,672)
---------- ---------- --------
Balance at end of year................................ $1,315,060 $1,098,871 $870,613
========== ========== ========
ACCUMULATED DEPRECIATION:
Balance at beginning of year.......................... $ 124,612 $ 99,786 $ 84,395
Depreciation expense............................... 33,487 28,488 26,063
Disposal of property............................... (3,102) -- --
Property held for disposition...................... (11,827) -- --
Disposition of and write-off of fully depreciated
property......................................... (15,469) (3,662) (10,672)
---------- ---------- --------
Balance at end of year................................ $ 127,701 $ 124,612 $ 99,786
========== ========== ========
</TABLE>
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPIEKER PROPERTIES, INC.
(Registrant)
<TABLE>
<S> <C>
Dated: MARCH 28, 1997 /s/ WARREN E. SPIEKER, JR.
--------------------------------- -----------------------------------------------
Warren E. Spieker, Jr.
Chairman of the Board, Director and
Chief Executive Officer
Dated: MARCH 28, 1997 /s/ CRAIG G. VOUGHT
--------------------------------- -----------------------------------------------
Craig G. Vought
Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)
Dated: MARCH 28, 1997 /s/ JOHN K. FRENCH
--------------------------------- -----------------------------------------------
John K. French
Director, Executive Vice President
and Chief Operating Officer
Dated: MARCH 28, 1997 /s/ ELKE STRUNKA
--------------------------------- -----------------------------------------------
Elke Strunka
Vice President and Principal Accounting Officer
Dated: MARCH 28, 1997 /s/ DAVID M. PETRONE
--------------------------------- -----------------------------------------------
David M. Petrone
Director
</TABLE>
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NUMBER
- ------ --------------------------------------------------------------------------------- ------
<S> <C> <C>
3.1 Articles of Incorporation of Spieker Properties, Inc.(1)
3.1A Articles of Amendment of Spieker Properties, Inc. (amending Articles of
Incorporation)
3.2 Bylaws of Spieker Properties, Inc. (1)
3.3 Articles Supplementary of Spieker Properties, Inc. for Series A Preferred Stock
(incorporated by reference to Exhibit 4.2 to Spieker Properties, Inc.'s Report on
Form 10-Q for the quarter ended March 31, 1994)
3.4 Articles Supplementary of Spieker Properties, Inc. for Class B Common Stock
(incorporated by reference to Exhibit 4.2 to Spieker Properties, Inc.'s Report on
Form 10-Q for the quarter ended March 31, 1995)
3.5 Articles Supplementary of Spieker Properties, Inc. for the Series B Preferred
Stock(2)
3.6 Articles Supplementary of Spieker Properties, Inc. for the Class C Common
Stock(2)
4.1 Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K(1)
4.2 Intentionally omitted
4.3 Series A Preferred Stock Purchase Agreement, (incorporated by reference to
Exhibit 4.1 to Spieker Properties, Inc.'s Form 10-Q Report for the quarter ended
March 31, 1994)
4.4 Investor Rights Agreement relating to A Series Preferred Stock (incorporated by
reference to Exhibit 4.3 to Spieker Properties, Inc.'s Form 10-Q Report for the
quarter ended March 31, 1994)
4.5 Indenture dated as December 6, 1995, among Spieker Properties, L.P., Spieker
Properties, Inc. and State Bank and Trust, as Trustee(2)
4.6 First Supplemental Indenture relating to the 2000 Notes, the 2000 Note and
Guarantee(2)
4.7 Second Supplemental Indenture relating to the 2001 Notes, 2001 Note and
Guarantee(2)
4.8 Third Supplemental Indenture relating to the 2002 Notes, the 2002 Note and
Guarantee(2)
4.9 Fourth Supplemental Indenture relating to the 2004 Notes and the 2004 Note(2)
4.10 Class B Common Stock Purchase Agreement (incorporated by reference to Exhibit 4.1
to Spieker Properties, Inc.'s Form 10-Q Report for the quarter ended March 31,
1994)
4.11 Investor's Rights Agreement relating to Class B Common Stocks (incorporated by
reference to Exhibit 4.3 to Spieker Properties, Inc.'s Form 10-Q Report for the
quarter ended March 31, 1994)
4.12 Class C Common Stock Purchase Agreement(2)
4.13 Investor's Rights Agreement relating to Class C Common Stock(2)
4.14 Fifth Supplemental Indenture relating to the Medium Term Note Program and Forms
of Medium Term Notes (incorporated by reference to Exhibit 4.1 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1996)
4.15 Sixth Supplemental Indenture relating to the 7 1/8 Notes Due 2006 and Form of
2006 Note (incorporated by reference to Exhibit 4.1 of Spieker Properties, Inc.'s
Current Report on Form 8-K filed with the Commission on December 19, 1996)
4.16 Seventh Supplemental Indenture relating to the 7 7/8 Notes Due 2016 and Form of
2016 Note (incorporated by reference to Exhibit 4.2 of Spieker Properties, Inc.'s
Current Report on Form 8-K filed with the Commission on December 19, 1996)
10.1 First Amended and Restated Agreement of Limited Partnership of Spieker
Properties, L.P. and First and Second Amendment thereto (incorporated by
reference to exhibits 10.1, 10.2, and 10.3 of Spieker Properties, Inc.'s Form 8-K
dated April 10, 1995)
10.2* Form of Employment Agreement between the Company and each of Warren E. Spieker,
Jr., John K. French, Bruce E. Hosford, and Dennis E. Singleton(1)
10.3* Form of Spieker Merit Plan(1)
10.4* Amended and Restated Spieker Properties, Inc. 1993 Stock Incentive Plan
(incorporated by reference to Exhibit 4.3 to Spieker Properties, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996)
10.5 Form of Indemnification Agreement between the Company and its directors and
officers (incorporated by reference to Exhibit 10.21 to Spieker Properties,
Inc.'s Registration Statement on Form S-11 (File No. 33-67906))
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NUMBER
- ------ --------------------------------------------------------------------------------- ------
<S> <C> <C>
10.6 Form of Land Holding Agreement among the Company, Spieker Northwest, Inc., the
Operating Partnership and owner of the applicable Land Holding (incorporated by
reference to Exhibit 10.22 to Spieker Properties, Inc.'s Registration Statement
on Form S-11 (File No. 33-67906))
10.7* Form of Employee Stock Incentive Pool (incorporated by reference to Exhibit 10.35
to Spieker Properties, Inc.'s Registration Statement on Form S-11 (File No.
33-67906))
10.8 Form of Excluded Property Agreement between the Operating Partnership and certain
of the Senior Officers (incorporated by reference to Exhibit 10.36 to Spieker
Properties, Inc.'s Registration Statement on Form S-11 (File No. 33-67906))
10.9* Amended and Restated Spieker Properties, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.2 to Spieker Properties, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996)
10.10 Third Amendment to First Amended and Restated Agreement of Limited Partnership of
Spieker Properties, L.P. (incorporated by reference to Exhibit 10.1 to Spieker
Properties, Inc.'s Report on Form 10-Q for the quarter ended September 30, 1995)
10.11 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)
10.12 Credit Agreement among Spieker Properties, L.P. as borrower, and Wells Fargo
Bank, The First National Bank of Boston, First Bank National Association
Seattle-First National Bank and Union Bank, as lenders, dated as of November 6,
1995, and Loan Notes pursuant to the Credit Agreement (incorporated by reference
to Exhibit 4.8 to Spieker Properties, Inc.'s Registration Statement on Form S-3
(File No. 33-98372))
10.13 Amendment No. 1 to the Credit Agreement among Spieker Properties, L.P., as
borrower and Wells Fargo Bank, The First National Bank of Boston, First Bank
National Association Seattle-First National Bank and Union Bank as lenders, dated
as of July 24, 1996 (incorporated by reference to Exhibits 4.1 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1996)
10.14 Seventh Amendment to First Amended and Restated Agreement of Limited Partnership
of Spieker Properties, L.P. (incorporated by reference to Exhibit 10.16 to
Spieker Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996)
10.15 Eighth Amendment to First Amended and Restated Agreement of Limited Partnership
of Spieker Properties, L.P.
12.1 Schedule of Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends
21.1 List of Subsidiaries of Spieker Properties, Inc.
23.1 Consent of Independent Public Accountants
27.1 Financial Data Schedule
</TABLE>
- ---------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-11 (Registration No. 33-67906),
which became effective on November 10, 1993.
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
<PAGE> 1
EXHIBIT 3.1A
[STATE DEPARTMENT OF ASSESSMENTS
AND TAXATION
APPROVED FOR RECORD
6/18/96 AT 10:09 a.m.]
SPIEKER PROPERTIES, INC.
ARTICLES OF AMENDMENT
SPIEKER PROPERTIES, INC., a Maryland corporation, having its principal
office in the City of Baltimore, Maryland (the "Corporation"), hereby certifies
to the Maryland State Department of Assessments and Taxation that:
FIRST: The Charter of the Corporation is hereby amended as follows:
1. Subparagraph (a)(9) of Article NINTH is amended to read in its
entirety as follows:
Exception. The Board of Directors, upon receipt of a ruling from the
Internal Revenue Service or an opinion of counsel in each case to the effect
that the restrictions contained in subparagraph (a)(2)(C) and/or subparagraph
(a)(2)(D) will not be violated, may exempt (i) a Person from the Ownership
Limit if such Person is not an individual for purposes of Section 542(a)(2) of
the Code (as modified by Section 856(h) of the Code) or (ii) is an underwriter
which participates in a public offering of the Equity Stock for a period of 90
days following the purchase by such underwriter of the Equity Stock and the
Board of Directors obtains such representations and undertakings from such
Person as are reasonably necessary to ascertain that no individual's Beneficial
Ownership of Equity Stock will violate the Ownership Limit and such Person
agrees that any violation or attempted violation will result in such Equity
Stock being exchanged for Excess Stock in accordance with subparagraph (a)(3)
of this Article NINTH and provided that any exemption of a Person under clause
(i) of this subparagraph shall not allow the Person to exceed 13.0% of the
value of the outstanding Equity Stock of the Corporation.
2. Subparagraph (b)(1) of Article NINTH is amended to read in its
entirety as follows:
Ownership in Trust. Upon any purported Transfer that results in Excess
Stock pursuant to subparagraph (a)(3) of this Article NINTH, such Excess Stock
shall be deemed to have been transferred to the Corporation, as Trustee of a
Trust for the Exclusive benefit of such Beneficiary or Beneficiaries to whom an
interest in such Excess Stock may later be transferred pursuant to subparagraph
(b)(5). Shares of Excess Stock so held in trust shall be issued and outstanding
stock of the Corporation. The Purported Record Transferee shall have no rights
in such Excess Stock except the right to receive a price for its interest in
the shares of Equity Stock which were exchanged for Excess Stock. The Purported
Beneficial Transferee shall have no rights in such Excess Stock except as
provided in subparagraph (b)(5).
3. Subparagraphs (b)(5)(A) and (b)(5)(B) of Article NINTH are amended
to read in their entirety as follows:
Restrictions on Transfer; Designation of Beneficiary.
(A) Excess Stock shall not be transferable. The Corporation may
designate a Beneficiary of an interest in the Trust (representing the number of
shares of Excess Stock held by the Trust attributable to a purported Transfer
that resulted in the Excess Stock), if the shares of Excess
<PAGE> 2
Stock held in Trust would not be Excess Stock in the hands of such Beneficiary.
The Purported Beneficial Transferee may receive a price for its interest in the
shares of Equity Stock which were exchanged for Excess Stock provided that the
Purported Beneficial Transferee does not receive a price that reflects a price
per share for such Equity Stock that exceeds (i) the price per share such
Purported Beneficial Transferee paid for the Equity Stock in the purported
Transfer that resulted in the Excess Stock, or (ii) if the Purported Beneficial
Transferee did not give value for such shares of Equity Stock (through a gift,
devise or otherwise), a price per share equal to the Market Price on the date
of the purported Transfer that resulted in the Excess Stock. Upon such transfer
of an interest in the Trust, the corresponding shares of Excess Stock in the
Trust shall be automatically exchanged for an equal number of shares of Equity
Stock, and such shares of Equity Stock shall be transferred of record to the
Beneficiary of the interest in the Trust designated by the Corporation as
described above if such Equity Stock would not be Excess Stock in the hands of
such Beneficiary.
(B) Notwithstanding the foregoing, if a Purported Beneficial Transferee
receives a price for its interest in the shares of Equity Stock which were
exchanged for Excess Stock that exceeds the amounts allowable under
subparagraph (b)(5)(A) of this Article NINTH, such Purported Beneficial
Transferee shall pay, or cause to be paid, such excess to the Corporation, or,
at the Corporation's sole election, such excess shall be offset against any
future dividends or distributions payable to such Purported Beneficial
Transferee.
4. Subparagraph (b)(3) of Article NINTH is amended to read in its
entirety as follows:
Rights upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of, or any distribution of the assets
of, the Corporation, the shares of Excess Stock shall not be entitled to share
in any portion of the assets of the Corporation. At such time as (i) the
Corporation has received the necessary stockholder approval with respect to a
voluntary liquidation or dissolution of the Corporation, or (ii) the
Corporation has become the subject of an order of a court of competent
jurisdiction compelling an involuntary liquidation or dissolution of the
Corporation, such shares of Excess Stock held in Trust shall without further
act be extinguished and each Purported Beneficial Transferee whose acquisition
of Equity Stock resulted in the Excess Stock which has been extinguished
pursuant to this subparagraph (b)(3) of this Article NINTH shall without
further act become a creditor of the Corporation. The amount by which each such
Purported Beneficial Transferee shall become a creditor of the Corporation with
respect to its now-extinguished interest in the Trust (representing the number
of shares of Excess Stock held by the Trust attributable to a purported
Transfer that resulted in the Excess Stock) will be equal to the lesser of (a)
that amount of the distributable assets of the Corporation to which such Excess
Stock would be entitled if such Excess Stock were entitled to share ratably in
the distributable assets of the Corporation as shares of Common Stock, or (b)
as appropriate, either (1) the price per share paid by such Purported
Beneficial Transferee for the shares of Equity Stock which were exchanged for
Excess Stock, or (2) if the Purported Beneficial Transferee did not given value
for such shares of Equity Stock (having received such through a gift, device or
otherwise), a price per share equal to the Market Price on the date of the
purported Transfer that resulted in the Excess Stock. Payment to the Purported
Beneficial Transferee shall be without interest and shall be due concurrently
with the date of first distribution of liquidation proceeds to the holders of
Equity Stock. If the Corporation causes such liquidation or dissolution to be
revoked or otherwise rescinded any Excess Stock previously automatically
extinguished pursuant to this subparagraph (b)(3) of this Article NINTH
2
<PAGE> 3
shall be automatically revived and any Purported Beneficial Transferees shall
without further act cease to be creditors of the Corporation as otherwise
provided above.
SECOND. The foregoing amendments to the Charter of the Corporation have
been approved by the shareholders of the Corporation at the Annual Meeting held
on May 22, 1996.
IN WITNESS WHEREOF, SPIEKER PROPERTIES, INC. has caused these present
to be signed in its name and on its behalf by its Chairman of the Board and
Chief Executive Officer and witnessed by its Chief Financial Officer and
Executive Vice President on June 17, 1996.
ATTEST: SPIEKER PROPERTIES, INC.
/s/ Craig G. Vought /s/ Warren E. Spieker, Jr.
- ----------------------------- -----------------------------
Craig G. Vought Warren E. Spieker, Jr.
Chief Financial Officer and Chairman of the Board and
Executive Vice President Chief Executive Officer
THE UNDERSIGNED, Chairman of the Board and Chief Executive Officer of
SPIEKER PROPERTIES, INC., who executed on behalf of the Corporation the
Articles of Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Amendment to be the corporate act of said Corporation and hereby
certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
/s/ Warren E. Spieker, Jr.
-----------------------------
Warren E. Spieker, Jr.
3
<PAGE> 4
[SEAL]
SPIEKER, PROPERTIES, INC.
ARTICLES SUPPLEMENTARY
SPIEKER PROPERTIES, INC., a Maryland corporation, having its principal
office in Baltimore City, Maryland (the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to a power contained in Article SIXTH, Section (d) of
the charter of the Corporation (the "Charter"), the Board of Directors of the
Corporation (the "Board of Directors"), has duly reclassified 1,500,000 shares
of the Common Stock (par value $.0001 per share) of the Corporation into
1,500,000 shares of a class designated as Class C Common Stock (par value
$.0001 per share) of the Corporation (the "Class C Common Stock"), and has
provided for the issuance of such shares.
SECOND: Subject in all cases to the provisions of Article NINTH of the
Charter with respect to Excess Stock, the following is a description of the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the Class C Common stock of the Corporation:
1. DESIGNATION AND AMOUNT. The designation of the Class C Common
Stock described in Article FIRST hereof shall be "Class C Common Stock (par
value $.0001 per share)." The number of shares of the Class C Common Stock to
be authorized shall be 1,500,000.
2. DIVIDEND AND DISTRIBUTION PROVISIONS.
(a) Subject to the rights of series of Preferred Stock, now in
existence or which may from time to time come into existence, the holders of
shares of Class C Common Stock shall be entitled to receive dividends, when, as
and if authorized by the Board of Directors, out of any assets legally
available therefor, pari passu with any dividend (payable other than in Common
Stock of the Corporation) on Class B Common Stock and Common Stock of the
Corporation, in the amount per share of the Class C Dividend Amount, as in
effect from time to time. The initial per share Class C Dividend Amount per
annum shall be $1.73. In the event of any change in the per share dividend
amount (expressed in dollars) applicable to the Common Stock after the date of
filing of these Articles Supplementary, the Class C Dividend Amount shall be
adjusted by an equal dollar amount.
(b) In the event the Board of Directors shall authorize a
distribution payable in (i) securities of other persons, (ii) evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or (iii) options or rights to purchase stock or evidences of
indebtedness in the Corporation or other persons, then, in each such case for
the purpose of this subsection 2(b), the holders of the Class C Common Stock
shall be entitled to a
-1-
[SEAL]
<PAGE> 5
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Class C Common Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
3. LIQUIDATION PAYMENTS.
(a) Subject to any prior rights of any other class or
series of stock, in the event of any liquidation, dissolution, or winding up of
the Corporation, either voluntary or involuntary, the holders of Class C Common
Stock shall be entitled to receive, pari passu with the holders of the Class B
Common Stock, and prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Common Stock by
reason of their ownership of such 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 then held by them. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Class C Common Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Class C Common Stock in proportion to the aggregate
preferential amounts owned to each such holder.
(b) Subject to any prior rights of any other class or
series of stock, after the payment or setting apart of payment to the holders
of Class C Common Stock of the full preferential amounts to which they shall be
entitled pursuant to paragraph 3(a) above, the holders of Class C Common Stock,
shall be entitled to receive the remaining assets of the Corporation ratably on
a per share basis (based on the number of shares of Common Stock held or Common
Stock issuable upon conversion of the Class C Common Stock held).
(c) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of the Corporation or the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, shall not be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section 3.
(d) In determining whether a distribution (other than upon
voluntary or involuntary liquidation), by dividend, redemption or other
acquisition of shares or otherwise, is permitted under the Maryland General
Corporation Law, amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of Class B Common Stock, Class C Common Stock or
Preferred Stock whose preferential rights upon dissolution are superior to
those receiving the distribution shall not be added to the Corporation's total
liabilities.
-2-
<PAGE> 6
4. CONVERSION. The holders of the Class C Common Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) Subject to subsections 4(a)(ii) and 4(c), on or
after the date three years after the closing of the initial issuance of Class C
Common Stock, each share of Class C Common Stock shall be convertible, at the
option of the holder thereof, at the office of the Corporation or any transfer
agent for the Class C Common Stock, into one fully paid and nonassessable share
of Common Stock (the "Conversion Ratio"). The Conversion Ratio for the Class C
Common Stock shall be subject to adjustment as set forth in subsection 4(d).
(ii) Subject to subsection 4(c), each holder shall
have the right and option to convert all or a portion of its shares of Class C
Common Stock held into Common Stock before the date specified in subsection
4(a)(i) immediately after any of the following events:
(A) The Corporation's management does not
include at least any two of John K. French, Warren E. Spieker, Jr., Dennis E.
Singleton and Craig G. Vought;
(B) For any two consecutive quarters, the
Corporation's outstanding mortgage and other senior unsecured indebtedness is
greater than 65% of the Corporation's revenue less real estate taxes and rental
expenses (all as reported in the Corporation's Form 10Qs filed with the
Securities and Exchange Commission) for such two quarters, multiplied by two
and divided by nine percent; or
(C) If (a) the Corporation shall be party
to, or shall have executed a definitive agreement for, any transaction
(including, without limitation, a merger, consolidation, statutory share
exchange or sale of all or substantially all of its assets (each of the
foregoing a "Transaction")), in each case as a result of which all or
substantially all shares of Common Stock shall have been or will be converted
into the right to receive stock, securities or other property (including cash
or any combination thereof) of an unrelated entity or which has resulted or
will result in the holders of the Corporation's outstanding voting securities
(including the Common Stock and the Series A Preferred Stock) immediately prior
to the Transaction owning less than 50% of the Corporation's outstanding voting
securities (including the Common Stock and the Series A Preferred Stock) after
the Transaction, or (b) a "change of control" as defined in the next sentence
occurs with respect to the Corporation. A change of control shall mean the
acquisition (including by virtue of a merger, share exchange or other business
combination) by one stockholder or a group of stockholders acting in concert of
the power to elect a majority of the Corporation's board of directors. The
Corporation shall notify the holders of Class C Common Stock promptly if any of
the events listed in this Section 4(a)(ii) shall occur.
- 3 -
<PAGE> 7
(b) MECHANICS OF CONVERSION. Before any holder of Class C Common
Stock shall be entitled to convert such shares into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Class C Common Stock,
and shall give written notice by mail, postage prepaid, to the Corporation at
its principal corporate office, of the election to convert such shares and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Class C Common Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Class C Common Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
(c) LIMITATION ON NUMBER OF SHARES CONVERTED. Each underlying holder
of a pecuniary interest in Class C Common Stock (a "Pecuniary Owner") shall be
limited in its right to convert shares of Class C Common Stock into Common
Stock as follows. At any time that a Pecuniary Owner holds 3.0% or more of the
Corporation's issued and outstanding Common Stock, such Pecuniary Owner at such
time shall not be entitled to convert any shares of Class C Common Stock. At
any time that a Pecuniary Owner holds less than 3.0% of the Corporation's issued
and outstanding Common Stock, such Pecuniary Owner shall at that time be
entitled to convert only up to such number of shares such that, immediately
after such conversion, such Pecuniary Owner will hold 3.0% of the Corporation's
issued and outstanding Common Stock. Any conversion in excess of the foregoing
limits or otherwise in violation of this subsection 4(c) shall to that extent be
void ab initio. If, for any reason, the foregoing sentence shall be
unenforceable at any time or with respect to any conversion, then any stock
converted in excess of the foregoing limits or otherwise in violation of this
subsection 4(c) shall be deemed and shall become Excess Stock, subject to all of
the rights, requirements and restrictions related thereto.
(d) CONVERSION RATIO ADJUSTMENTS OF CLASS C COMMON STOCK. The
Conversion Ratio of the Class C Common Stock shall be subject to adjustment
from time to time as follows:
(i) In the event the Corporation should at any time or from
time to time after the initial date of issuance of shares of Class C Common
Stock (the "Purchase Date") fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination
of holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common
-4-
<PAGE> 8
Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Ratio of the Class C Common Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
(ii) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination,
the Conversion Ratio for the Class C Common Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of each share of such series shall be decreased in proportion to such decrease
in outstanding shares.
(e) RECAPITALIZATIONS. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision, combination
or other transaction provided for elsewhere in this Section 4), provision shall
be made so that each holder of the Class C Common Stock shall thereafter be
entitled to receive upon conversion of the Class C Common Stock the number of
shares of stock or other securities or property of the Corporation or otherwise,
to which such holder of Class C Common Stock would have been entitled on such
recapitalization had the holder of Class C Common Stock converted his shares
into Common Stock immediately prior to the record date set for holders of Common
Stock to participate in the recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Class C Common Stock, after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Ratio then in effect and the number of shares
issuable upon conversion of the Class C Common Stock) shall be applicable after
that event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. The Corporation will not, by amendment of the Charter
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Class C Common Stock against impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS. No
fractional shares shall be issued upon conversion of the Class C Common Stock,
and the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total
-5-
<PAGE> 9
number of shares of Class C Common Stock the holder is at the time converting
into Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(h) SHAREHOLDER COMMUNICATIONS. Holders of Class C Common Stock
shall be entitled to receive copies of all communications by the Corporation to
its holders of Common Stock, concurrently with the distribution to such
shareholders.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Class C Common Stock such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Class C Common Stock; and if, at
any time, the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
the Class C Common Stock, in addition to such other remedies as shall be
available to the holder of such Class C Common Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Class C Common Stock shall be
deemed given if sent by overnight courier service and addressed to each holder
of record at his address appearing on the books of the Corporation.
5. NO VOTING RIGHTS. The holders of shares of Class C Common
Stock shall have no right to vote with respect to any question upon which
holders of any other class of the Corporation's stock have the right to vote, or
on any other matters.
6. STATUS OF CONVERTED STOCK. In the event any shares of Class
C Common Stock shall be converted pursuant to Section 4 hereof, the shares of
Class C Common Stock so converted shall revert to the status of authorized but
unissued shares available for future issuance and reclassification by the
Corporation.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned acknowledges these Articles Supplementary to be
the act of the Corporation and states as to all matters and facts required to
be verified under oath, that, to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and such
statement is made under penalties for perjury.
- 6 -
<PAGE> 10
IN WITNESS WHEREOF, SPIEKER PROPERTIES, INC. has caused these presents
to be signed in its name and on its behalf by its President and witnessed by
its Secretary on February 26, 1996.
WITNESS: SPIEKER PROPERTIES, INC.
/s/ Adrian J. Gordon By: /s/ Warren E. Spieker, Jr.
- ---------------------------- ---------------------------
Adrian J. Gordon Warren E. Spieker, Jr.
Secretary President
- 7 -
<PAGE> 1
EIGHTH AMENDMENT TO FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SPIEKER PROPERTIES, L.P.
This Eighth Amendment ("Eighth 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 amended (the
"Partnership Agreement"), is executed and made effective for all purposes as of
this 24th day of January, 1997 (the "Effective Date"), by and among Spieker
Properties, Inc., a Maryland corporation, the General Partner of the
Partnership, those Persons identified on Schedule 1 attached hereto (the "New
Limited Partners") and the undersigned existing Limited Partners of the
Partnership, who constitute a Majority-in-Interest of the Limited Partners as
of the date hereof. The term "New Limited Partners" shall include those
partners and interest holders of a Partnership Transferor identified on
Schedule 1A hereto to the extent that, and upon and after the date that, any
Partnership Units are distributed to such partner or interest holder by a
Partnership Transferor (as defined in the Contribution Agreement), at which
time (i) each such partner and interest holder shall be, and such Partnership
Units shall continue to be, bound by, and entitled to the benefits of, those
provisions of this Eighth Amendment applicable to a New Limited Partner and a
New Limited Partner's Partnership Units, (ii) each such partner and interest
holder shall execute a Subscription Agreement in a form reasonably requested by
the Partnership and shall execute a counterpart copy of the Partnership
Agreement, and (iii) to the extent that any Partnership Units distributed to
any such partner or interest holder are subject to a lien and security interest
in favor of the Partnership, such partner or interest holder shall execute a
Security Agreement and UCC-1 Financing Statement in form reasonably requested by
the Partnership.
WHEREAS, Section 4.3 of the Partnership Agreement provides that the
General Partner may, without the consent of any Limited Partner, from time to
time, upon its determination that the issuance of Additional Units is in the
best interests of the partnership, cause the Partnership to issue Additional
Units to a Person and, if necessary, admit such Person as an Additional Limited
Partner, in exchange for the Capital Contribution by such Person of cash and/or
property;
WHEREAS, pursuant to the terms of that certain Contribution Agreement
dated as of September 30, 1996, by and among the Partnership, the General
Partner, Watergate Tower Associates, Tower II, Watergate Tower III Associates,
Baybridge Office Plaza Associates, F.P. Lathrop, Marcia Fay Lathrop and Sandra
L. Hyde, as Trustees of The Lathrop Trust, and F.P. Lathrop (the "Contribution
Agreement"), the Transferors (as defined in the Contribution Agreement) are
concurrently herewith making the Capital Contribution to the Partnership of
certain real, personal and intangible property described in the Contribution
Agreement (the "Emeryville Capital Contribution");
WHEREAS, the General Partner has determined that the issuance of
Additional Units in the respective amounts set forth on Schedule 2 of the New
Limited Partners in exchange
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<PAGE> 2
for the Transferors' making of the Emeryville Capital Contribution is in the
best interests of the Partnership;
WHEREAS, the General Partner, the New Limited Partners and the
undersigned existing Limited Partners of the Partnership, who constitute a
Majority-in-Interest of the Limited Partners as of the date hereof, desire to
enter into this Eighth Amendment to set forth the terms and conditions on
which the Transferors shall make the Emeryville Capital Contribution and to
amend certain other provisions of the partnership Agreement as set forth herein,
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto 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. Pursuant to Section 4.7 of the Partnership Agreement, each of
the New Limited Partners is hereby admitted to the Partnership as a Limited
Partner, and the names of the New Limited Partners are hereby recorded in the
books and records of the Partnership, effective as of the date first written
above. By executing this Eighth Amendment, the General Partner hereby consents
to the admission of the New Limited Partners as Limited Partners in the
Partnership.
3. Each of the New Limited Partners hereby agrees to be subject
and bound at all times to all of the terms and conditions of the Partnership
Agreement, as now in effect or hereafter amended. Without limitation, each of
the New Limited Partners acknowledges and agrees that it is bound by Article
XIV of the Partnership Agreement which provides for the arbitration of disputes
arising under the Partnership Agreement. Notwithstanding the foregoing, the
Partnership, the General Partner and each of the New Limited Partners
acknowledges and agrees that the provisions of Article XIV of the Partnership
Agreement shall not be applicable to disputes arising out of or relating to the
provisions of Paragraph 12 of the Contribution Agreement. BY INITIALING IN THE
SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS
INCLUDED IN ARTICLE XIV "ARBITRATION OF DISPUTES" DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL EXCEPT AS
SPECIFICALLY INCLUDED IN THIS "ARBITRATION OF DISPUTES" PROVISION. BY
INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING
AND AGREE TO SUBMIT DISPUTES
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<PAGE> 3
ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
(INITIALED) (INITIALED) (INITIALED)
----------- ----------- -----------
WT III WTA Tower II
(INITIALED) (INITIALED) (INITIALED) (INITIALED)
----------- ----------- ----------- -----------
Baybridge FPL, Trustee MFL, Trustee SLH, Trustee
4. The Partnership hereby issues to the New Limited Partners the
respective number of Partnership Partners the respective number of Partnership
Units set forth adjacent to the name of each of the New Limited Partners on
Schedule 2 attached hereto (the "Emeryville Additional Units").
5. The parties hereto hereby acknowledge that the Transferors have
made the Emeryville Capital Contribution to the Partnership and the Gross Asset
Value of the Emeryville Capital Contribution with respect to each New Limited
Partner is as set forth adjacent to the name of each of the New Limited
Partners on Schedule 3 attached hereto.
6. The General Partner hereby approves the acquisition of Rights by
each of the New Limited Partners with respect to the Emeryville Additional
Units and hereby grants to each of the New Limited Partners the Rights with
respect to the Emeryville Additional Units on the terms and subject to the
conditions and restrictions contained in Exhibit G to the Partnership
Agreement, provided that, notwithstanding anything to the contrary provided in
the Partnership Agreement or this Eighth Amendment, none of the New Limited
Partners shall have the right to exercise the Rights with respect to all or any
portion of the Emeryville Additional Units prior to the first anniversary of
the Closing (as defined in the Contribution Agreement). For purposes of Section
11.1 of the Partnership Agreement, the General Partner's approval and grant set
forth in this Paragraph 6 shall be deemed to have occurred prior to the New
Limited Partners' admission to the Partnership as Additional Limited Partners.
7. Each of the New Limited Partners hereby acknowledges and agrees
that it has relied fully upon the advice of its own legal counsel and/or
accountant in determining the tax consequences of the transactions contemplated
hereby and not upon any representations or advice by the General Partner or by
any other Partner, except to the extent expressly set forth in Paragraph 11 of
the Contribution Agreement. Each of the New Limited Partners hereby represents
and warrants to the Partnership and the General Partner that it (i) is
acquiring its respective portion of the Emeryville Additional Units for itself
for investment purposes only, and not with a view to any resale or distribution
of such Partnership Units, (ii) has been advised and understands that the
Emeryville Additional Units are registered under the Securities Act and all
applicable state securities laws, or unless exemptions from registration are
available, and (iii) has, either alone or with its "purchaser representative"
as that term is defined in Rule 501(h) under the Securities Act, such knowledge
and experience in financial and business matters that is capable of evaluating
<PAGE> 4
the merits and risks of its investment in the Partnership. Each of the New
Limited Partners hereby acknowledges that the partnership and the General
Partner have made available to such New Limited Partner, at a reasonable time
prior to its acquisition of the Emeryville Additional Units, the opportunity to
ask questions and receive answers concerning the terms and conditions of such
acquisition and to obtain any additional information which the Partnership
and/or the General Partner possessed or could acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished by the Partnership and the General Partner in connection with such
acquisition.
8. The following new Section 4.11 is hereby added to the
Partnership Agreement as follows:
4.11 PARTNER ASSUMPTION OF INDEBTEDNESS. Each Limited Partner
listed on Exhibit Y hereto unconditionally and severally guarantees to
the Debtor the full payment and performance of all of the Partnership's
present and future indebtedness and obligations under the Note or Notes
listed next to such Limited Partner's name on Exhibit Y and any other
Loan Documents relating to such Note or Notes, provided that,
notwithstanding anything to the contrary contained in this Section 4.11,
each Limited Partner's obligation shall be limited to the amount(s) set
for on Exhibit Y next to such Limited Partner's name (with respect to
each Limited Partner, an "Emeryville Limited Partner's Share") and shall
be limited to guaranteeing the payment and performance of only the Note
or Notes set forth on Exhibit Y next to such Limited Partner's name.
Exhibit Y may be amended from time to time to increase (but not
decrease) one or more Limited Partner's obligations, such amendment
needing the approval only of the Partnership and by only that Limited
Partner whose obligation is to be increased by such amendment. All such
indebtedness and obligations under such Loan Documents are referred to
in this Section 4.11 as the "Section 4.11 Indebtedness." Without
limiting the provisions of this Section 4.11, it is the Limited
Partners' and the Debtor's intent that each Limited Partner shall have
liability for such Emeryville Limited Partner's Share of the Section
4.11 Indebtedness to the same extent that the General Partner, as a
general partner of the Partnership, is liable for the Section 4.11
Indebtedness under the laws of the State of California. Each Emeryville
Limited Partner's Share of the Section 4.11 Indebtedness will be payable
by such Limited Partner to the Partnership as a Capital Contribution
immediately on written demand of Debtor in the event of any default of
Debtor (beyond the expiration of any applicable grace period) with
respect to the Section 4.11 Indebtedness or any part thereof.
Notwithstanding anything to the contrary contained in the Partnership
Agreement or the Bylaws or Articles of Incorporation of the General
Partner, as each may be amended from time to time, any decision by
Debtor hereunder, including a decision to make a demand on the Limited
Partners under this Section 4.11, shall require the majority vote of the
independent directors of the General Partner. Each Limited Partner
authorizes Debtor at any time in its
4
<PAGE> 5
discretion to alter any of the terms of the Section 4.11 Indebtedness
and to make such modifications to the Section 4.11 Indebtedness that
have the effect of releasing the Debtor from liability for all or any
part of the Section 4.11 Indebtedness. Debtor and the Note Holders may
take any of the foregoing actions upon any terms and conditions as the
Debtor and the Note Holders may elect, without giving notice to any
Limited Partner or obtaining the consent of any Limited Partner and
without affecting the liability of any Limited Partner under this
Section 4.11. It is understood and agreed by each Limited Partner that
until the Section 4.11 Indebtedness is fully paid and until each and
every term, covenant and condition of this Section 4.11 is fully
performed, no Limited Partner shall be released by any act or event
which might, but for this provision of this Section 4.11, be deemed a
legal or equitable discharge of a surety, or by reason of any waiver,
extension, modification, forbearance or delay or other act or omission
of the Note Holders' or the Partnership's failure to proceed promptly or
otherwise as against the General Partner or Debtor's failure to proceed
promptly or otherwise as against any Limited Partner or Note Holder's
failure to proceed promptly or otherwise against the Debtor, or by
reason of any action taken or omitted or circumstance which may or might
vary the risk or affect the rights or remedies of any Limited Partner as
against Debtor or the Note Holders, or by reason of any Limited Partner
as against Debtor or the Note Holders, or by reason of any further
dealings between the Debtor and the Note Holders, whether relating to
the Section 4.11 Indebtedness, the Debt Offering or otherwise, and each
Limited Partner hereby expressly waives and surrenders any defense to
its liability hereunder based upon any of the foregoing acts, omissions,
things, agreements, waivers or any of them; it being the purpose and
intent of this Section 4.11 that the obligations of each Limited Partner
hereunder are absolute and unconditional under any and all
circumstances. Each Limited Partner's obligations under this Section
4.11 are independent of those of Debtor. The Debtor's rights under this
Section 4.11 will not be exhausted by any action by it until all of the
Section 4.11 Indebtedness and all other obligations of the Partnership
under the Notes have been fully paid and performed and the period of
time has expired during which any payment made to the Note Holders by
the Debtor under the Notes or to the Debtor by each Limited Partner
under this Section 4.11 may be determined to be a Preferential Payment
(as defined below) without such determination, in fact being made. Each
Limited Partner further agrees that to the extent all or any part of any
payment made to the Note Holders under the Notes or by a Limited Partner
under this Section 4.11 is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid by the
recipient thereof or paid over to a trustee, receiver or any other
entity, whether under any bankruptcy act or otherwise (any such payment
is hereinafter referred to as a "Section 4.11 Preferential Payment"),
then this Section 4.11 shall continue to be effective or shall be
reinstated, as the case may be, and, to the extent of such payment or
repayment, the Limited
5
<PAGE> 6
Partners' obligations under this Section 4.11 intended to be satisfied by such
Section 4.11 Preferential Payment shall be revived and continued in full force
and effect as if said Section 4.11 Preferential Payment had not been made. Each
Limited Partner waives: (a) all statutes of limitations as a defense to any
action brought against any Limited Partner pursuant to this Section 4.11, to
the fullest extent permitted by law; (b) any defense based upon any legal
disability of Debtor or any discharge or limitation of the liability of Debtor
to the Note Holders, whether consensual or arising by operation of law or any
bankruptcy, reorganization, receivership, insolvency, or debtor-relief
proceeding, or from any other cause; (c) presentment, demand, protest and
notice of any kind, provided that the foregoing waiver shall not be construed
to waive any demand or notice to the Limited Partners expressly provided for in
this Section 4.11; and (d) any defense based upon or arising out of any defense
which Debtor may have to the payment or performance of any part of the Section
4.11 Indebtedness. Notwithstanding any other provision of this Section 4.11 to
the contrary, each Limited Partner may now have or hereafter acquire against
Debtor, or each of them, or any other Limited Partner, or any other person, of
all or any of the Section 4.11 Indebtedness that arise from the existence or
performance of such Limited Partner's obligations under this Section 4.11, the
Notes or any of the Loan Documents (all such claims and rights are referred to
as the "Emeryville Limited Partner's Conditional Rights"), including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
or indemnification, any right to participate in any claim or remedy of the
Partnership against the General Partner or the Note Holders against the Debtor,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, by any payment made hereunder or otherwise, including
without limitation, the right to take or receive from Debtor, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights. If,
notwithstanding the foregoing provisions, any amount shall be paid to any
Limited Partner on account of any such Emeryville Limited Partner's Conditional
Rights and either (i) such amount is paid to such Limited Partner at any time
when the Section 4.11 Indebtedness shall not have been paid or performed in
full, or (ii) regardless of when such amount is paid to such Limited Partner,
any payment made by Debtor to the Note Holders or by a Limited Partner under
this Section 4.11 is at any time determined to be a Section 4.11 Preferential
Payment, then such amount paid to such Limited Partner shall be held in trust
for the benefit of Debtor and the Note Holders, as their interests may appear,
and shall forthwith be paid to the Partnership as a Capital contribution to be
credited and applied upon the Section 4.11 Indebtedness, whether matured or
unmatured, in such order as the Debtor, in its sole and absolute discretion,
shall determine. To the extent that any of the provisions of this Section 4.11
shall not be
6
<PAGE> 7
enforceable, each Limited Partner agrees that until such time as the
Section 4.11 Indebtedness has been paid and performed in full and the
period of time has expired during which any payment made by Debtor to
the Note Holders or by a Limited Partner under this Section 4.11 may be
determined to be a Section 4.11 Preferential Payment, the Emeryville
Limited Partner's Conditional Rights to the extent not validly waived
shall be subordinate to the Note Holders' right to full payment and
performance of the Section 4.11 Indebtedness, and such Limited Partner
shall not enforce such Emeryville Limited Partner's Conditional Rights
during such period. Each Limited Partner assumes full responsibility
for keeping fully informed of the financial condition of Debtor and each
other Limited Partner and all other circumstances affecting Debtor's
ability to perform its obligations under the Loan Documents and each
other Limited Partner's ability to perform its obligations hereunder and
agrees that neither Debtor nor the Note Holders will have any duty to
report to any Limited Partner any information which Debtor or the Note
Holders receive about Debtor's or any Limited Partner's financial
condition or any circumstances being on Debtor's or any Limited
Partner's ability to perform. Upon a default of the Partnership under
the Loan Documents, the Note Holders may elect to compromise, or adjust
any part of the Section 4.11 Indebtedness, or make any other
accommodation with the Debtor, or exercise any other remedy against the
Debtor. No such action by the Note Holders will release or limit the
liability of any Limited Partner. In addition to all rights of setoff
or lien against any moneys, securities or other property of any Limited
Partner given to the Partnership by law, the Partnership shall have a
right of setoff against all distributions to which a Limited Partner may
be entitled from the Partnership, and every such right of setoff may be
exercised without demand upon or notice to any Limited Partner (except
the notice expressly provided for above). No right of setoff shall be
deemed to have been waived by any act or conduct on the part of the
Partnership or by any neglect to exercise such right of setoff, or by
any delay in doing so; and every right of setoff shall continue in full
force and effect until specifically waived or released by an instrument
in writing executed by the Partnership or until a Limited Partner has
satisfied in full all of such Limited Partner's obligations under this
Section 4.11. In the event that any Limited Partner shall advance or
become obligated to pay any sums toward the Section 4.11 Indebtedness,
or in the event that for any reason whatsoever Debtor is now, or shall
hereafter become, indebted to any Limited Partner, each Limited Partner
agrees that the amount of such sums and of such indebtedness and all
interest thereon shall at all times be subordinate as to lien, time of
payment and in all other respects to the full and prior repayment to
Note Holders of the Section 4.11 Indebtedness, and no Limited Partner
shall be entitled to enforce or receive payment thereof until all such
sums owing to the Note Holders have been paid in full and the period of
time has expired during which any payment made by Debtor to the Note
Holders or the
7
<PAGE> 8
Limited Partners pursuant to this Section 4.11 may be determined to be a
Section 4.11 Preferential Payment. Each Limited Partner agrees to pay
its pro rata share (based on the ratio that each such Emeryville Limited
Partner's Share bears to the total of all of the Emeryville Limited
Partners' Shares) of Debtor's reasonable out-of-pocket costs and
expenses, including but not limited to legal fees and disbursements,
incurred in any effort to collect or enforce any of the Section 4.11
Indebtedness or this Section 4.11, whether or not any lawsuit is filed.
Any payment made by any Limited Partner under this Section 4.11 shall be
deemed to be a Capital Contribution by said Limited Partner to the
Partnership. This Section 4.11 shall be governed by California law, and
may be amended only by a written instrument executed by the Limited
Partners listed on Exhibit Y hereto and Debtor; provided, however, that
a Emeryville Limited Partner's Share may be increased (but not
decreased) pursuant to a written instrument executed by the Debtor and
such Limited Partner so long as such action does not increase or
decrease any other Emeryville Limited Partner's Share. The provisions
of this Section 4.11 shall bind and benefit the heirs' executors,
administrators, legal representatives, successors and assigns of each
Limited Partner and Debtor. Whenever the context requires, all terms
used in the singular will be construed in the plural and vice versa, and
each gender will include each other gender. Notwithstanding anything to
the contrary provided herein, in no event shall any Limited Partner be
entitled to the issuance of any Additional Units as a result of any
contribution made by such Limited Partner pursuant to this Section 4.11,
nor shall the Percentage Interests of the Partners be adjusted as a
result thereof. Subject to the foregoing sentence, if any Limited
Partner makes a payment under that certain Reimbursement Agreement
between the Limited Partners listed on Exhibit Y hereto and the General
Partner, dated January __, 1997, such payment shall for all other
purposes be deemed to constitute a Capital Contribution to the
Partnership pursuant to this Section 4.11.
9. The following new Section 4.12 is hereby added to the
Partnership Agreement as follows:
4.12 NON-DISCRIMINATION. The Partnership and the
General Partner agree to exercise all of their rights under said
Sections 4.10 and 4.11 in a non-discriminatory manner with respect to
the Limited Partners and in a manner that is not disproportionate to any
of the Limited Partner's Shares of the Indebtedness (including, for the
purposes of this Section 4.12, any of the Emeryville Limited Partner's
Shares of the Section 4.11 Indebtedness), provided that the foregoing
shall not impair or limit either the Partnership's or the General
Partner's right to exercise all of their rights under said Sections 4.10
and 4.11 to the fullest extent permitted under this Agreement.
8
<PAGE> 9
10. The following new Section 4.13 is hereby added to the
Partnership Agreement as follows:
4.13 RIGHT TO ASSUME OTHER INDEBTEDNESS. In the event
that any of the Guarantees defined in the Reimbursement Agreements that
are referenced in the last sentences of Sections 4.10 and 4.11 of this
Agreement, respectively, are released or any of the Notes are repaid or
otherwise extinguished, the Limited Partners that have agreed to
reimburse the General Partner for an amount paid by the General Partner
with respect to such Guarantee and those Limited Partners that have
guaranteed the Partnership's obligations under such Note (all such
Limited Partners being referred to herein as "Section 4.13 Limited
Partners) shall have the right to agree to reimburse the General Partner
for amounts paid by the General Partner with respect to any other
Guarantee or any replacement Guarantee and to guaranty the Partnership's
obligations under any other Note or any replacement Note pro rata based
on (i) that portion of the Guarantees with respect to which no Person
has agreed to reimburse the General Partner and that portion of the
indebtedness under the Notes with respect to which no Person has agreed
to guaranty the Partnership's obligations and (ii) the relative amounts
that the Section 4.13 Limited Partners had agreed to reimburse the
General Partner with respect to such released Guarantee(s) and had
agreed to guaranty the Partnership's obligations with respect to such
repaid or otherwise extinguished Note(s). Nothing contained in this
Section 4.13 shall be construed in any manner as requiring the
Partnership to incur any indebtedness (including, without limitation, by
executing any replacement Note) or the Company to guarantee any
indebtedness (including, without limitation, by executing any
replacement Guarantee).
11. Exhibit M to the Partnership Agreement is hereby
amended to add the addresses for the New Limited Partners that are set forth on
Schedule 4 attached hereto.
12. Each of the New Limited Partners hereby acknowledges
that, in connection with any proposed merger, tender offer or acquisition of
the Company or the Partnership or similar event, the General Partner's
obligations to its shareholders may conflict with the interests of the Limited
Partners. Each of the New Limited Partners hereby further acknowledges that
such New Limited Partner has consulted with its advisors, including legal
counsel, regarding such conflicts and understands such conflicts. Each of the
New Limited Partners hereby waives, and agrees that it shall not pursue, any
claims against the General Partner to the extent that the General Partner is
fulfilling its obligations to its shareholders in connection with any such
proposed merger, tender offer, acquisition or similar event and agrees, to the
extent that the General Partner is fulfilling its obligations to its
shareholders in connection with any such proposed merger, tender offer,
acquisition or similar event and agrees, to the extent that the General Partner
is fulfilling its obligations to its shareholders, not to enjoin or to attempt
to enjoin any such proposed merger, tender offer, acquisition or similar event.
13. This Eighth 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
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<PAGE> 10
instrument. By executing this Eighth Amendment below, each signatory hereby
agrees that a facsimile signature shall be deemed to have the same effect as an
original signature.
14. This Eighth Amendment shall be governed by and construed in
conformity with the laws of the State of California.
15. Except as specifically provided herein, the Partnership
Agreement shall remain in full force and effect.
16. The provisions of the Contribution Agreement and the parties
obligations thereunder shall not be merged into the provisions of this Eighth
Amendment and shall survive the execution and delivery of this Eighth Amendment
to the extent that the Contribution Agreement provides that the parties
obligations thereunder shall survive the Closing.
IN WITNESS WHEREOF, this Eighth Amendment is hereby entered into among
the undersigned parties as of the Effective Date.
GENERAL PARTNER; SPIEKER PROPERTIES, INC.
a Maryland corporation
By: /s/ [SIG]
-------------------------------
Its: Vice President
------------------------------
EXISTING LIMITED PARTNERS:
/s/ Warren E. Spieker, Jr.
----------------------------------
Warren E. Spieker, Jr.
/s/ Dennis E. Singleton
----------------------------------
Dennis E. Singleton
/s/ John K. French
----------------------------------
John K. French
/s/ Bruce H. Hosford
----------------------------------
Bruce H. Hosford
10
<PAGE> 11
/s/ PETER H. SCHNUGG
-----------------------------------
Peter H. Schnugg
/s/ CRAIG G. VOUGHT
-----------------------------------
Craig G. Vought
/s/ JOHN A. FOSTER
-----------------------------------
John A. Foster
NEW LIMITED PARTNERS: WATERGATE TOWER ASSOCIATES,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
TOWER II,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
WATERGATE TOWER III ASSOCIATES,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
11
<PAGE> 12
BAYBRIDGE OFFICE PLAZA ASSOCIATES,
a California limited partnership
By: /s/ F P LATHROP
-------------------------------
F.P. Lathrop
General Partner
/s/ F P LATHROP
-------------------------------
F.P. LATHROP
as Trustee of The Lathrop Trust
/s/ MARCIA FAY LATHROP
-------------------------------
MARCIA FAY LATHROP
as Trustee of The Lathrop Trust
/s/ SANDRA L. HYDE
-------------------------------
SANDRA L. HYDE
as Trustee of The Lathrop Trust
12
<PAGE> 13
SCHEDULE 1 TO EIGHTH AMENDMENT
LIST OF NEW LIMITED PARTNERS
Watergate Tower Associates, a California limited partnership
Tower II, a California limited partnership
Watergate Tower III Associates, a California limited partnership
Baybridge Office Plaza Associates, a California limited partnership
F.P. Lathrop, Marcia Fay Lathrop and Sandra L. Hyde, as Trustees of The Lathrop
Trust (u/t/d November 19, 1993)
<PAGE> 14
Schedule 1A to Eighth Amendment
List of Partners and Interest Holders
F.P. Lathrop, Marcia Fay Lathrop and Sandra L. Hyde, as Trustees of The Lathrop
Trust (u/t/d November 19, 1993)
F. Pierce Lathrop
Marcia Fay Lathrop
Steven P. Lathrop
Thomas N. Lathrop
Shand L. Green
Robert H. Goldsmith
Betty G. Austin
<PAGE> 15
SCHEDULE 2 TO EIGHTH AMENDMENT
ALLOCATION OF EMERYVILLE PARTNERSHIP UNITS
New Limited Partners Emeryville Partnership Units**
- ----------------------------------------- ------------------------------
Watergate Tower Associates, 252,537
a California limited partnership
Tower II, a California limited partnership 302,026
Watergate Tower III Associates, 27,603
a California limited partnership
Baybridge Office Plaza Associates, 84,823
a California limited partnership
F.P. Lathrop, Marcia Fay Lathrop and 98,141
Sandra L. Hyde, as Trustees of
The Lathrop Trust
(u/t/d November 19, 1993)
** Subject to post-closing adjustments
<PAGE> 16
Schedule 3 to Eighth Amendment
Gross Asset Values
New Limited Partner Gross Asset Values
- ------------------- ------------------
Watergate Tower Associates, a California $21,200,000
limited partnership
Tower II, a California limited partnership $25,800,000
Watergate Tower III Associates, $67,500,000
a California limited partnership
Baybridge Office Plaza Associates $7,300,000
a California limited partnership
F.P. Lathrop, Marcia Fay Lathrop and $3,400,000
Sandra L. Hyde, as Trustees of
The Lathrop Trust (u/t/d/ November 19, 1993)
<PAGE> 17
Schedule 4 to Eighth Amendment
Addresses of New Limited Partners
New Limited Partners Addresses
- -------------------- ---------
Watergate Tower Associates, a California c/o F.P. Lathrop
limited partnership 2000 Powell Street, Suite 1600
Emeryville, California 94608
Tower II, a California limited partnership c/o F.P. Lathrop
2000 Powell Street, Suite 1600
Emeryville, California 94608
Watergate Tower III Associates, a California c/o F.P. Lathrop
limited partnership 2000 Powell Street, Suite 1600
Emeryville, California 94608
Baybridge Office Plaza Associates, a c/o F.P. Lathrop
California limited partnership 2000 Powell Street, Suite 1600
Emeryville, California 94608
F.P. Lathrop, Marcia Fay Lathrop and Sandra c/o F.P. Lathrop
L. Hyde, as Trustees of The Lathrop Trust 2000 Powell Street, Suite 1600
(u/t/d November 19, 1993) Emeryville, California 94608
<PAGE> 18
Exhibit Y to Eighth Amendment
Emeryville Limited Partner's Shares
New Limited Partners Emeryville Limited Partner's Shares
- -------------------- -----------------------------------
Watergate Tower Associates, a California $2,510,000
limited partnership
Tower II, a California limited partnership $4,477,000
Watergate Tower III Associates, a California $50,689,000
limited partnership
Baybridge Office Plaza Associates, a $1,500,000
California limited partnership
<PAGE> 1
EXHIBIT 12.1
SPIEKER PROPERTIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
SPIEKER PARTNERS
SPIEKER PROPERTIES, INC. CONSOLIDATED PROPERTIES COMBINED
--------------------------------------------------------- ---------------------------
PERIOD OF PERIOD OF
NOVEMBER 19, JANUARY 1,
YEAR ENDED YEAR ENDED YEAR ENDED 1993 TO 1993 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, NOVEMBER 18, DECEMBER 31,
1996 1995 1994 1993 1993 1992
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from operations
before disposal of real
estate properties and
minority interest........... $ 65,764 $ 30,335 $ 13,363 $1,699 $(15,144) $ (8,497)
Interest expense(1)............ 37,235 46,386 44,395 4,522 47,176 50,640
Amortization of capitalized
interest.................... 266 195 183 21 154 169
-------- ------- ------- ------ -------- -------
Total earnings................. $103,265 $ 76,916 $ 57,941 $6,242 $ 32,186 $ 42,312
======== ======= ======= ====== ======== =======
Fixed charges:
Interest expense(1)............ $ 37,235 $ 46,386 $ 44,395 $4,522 $ 47,176 $ 50,640
Capitalized interest........... 3,116 1,301 468 -- 265 1,107
Series A Preferred
Dividends(2)................ 2,098 2,048 1,238 -- -- --
Series B Preferred
Dividends(3)................ 10,041 586 -- -- -- --
-------- ------- ------- ------ -------- -------
Total fixed charges and
preferred dividends......... $ 52,490 $ 50,321 $ 46,101 $4,522 $ 47,441 $ 51,747
======== ======= ======= ====== ======== =======
Ratio of earnings to fixed
charges (excluding preferred
dividends)..................... 2.56 1.61 1.29 1.38(4) 0.68(4) 0.82
======== ======= ======= ====== ======== =======
Ratio of earnings to combined
fixed charges and preferred
dividends(2)(3)................ 1.97 1.53 1.26
======== ======= =======
Fixed charges in excess of
earnings....................... $ -- $ -- $ -- $ -- $ 15,255 $ 9,435
======== ======= ======= ====== ======== =======
</TABLE>
- ---------------
Notes:
(1) Includes amortization of debt discount and deferred financing fees.
(2) The Company issued 1,000 shares of Series A Preferred Stock on May 13, 1994.
Prior to that date there was no preferred stock outstanding.
(3) The Company issued 4,250 shares of Series B Preferred Stock in December
1995.
(4) The ratio for the year ended December 31, 1993 (which combines the result of
operations of Spieker Properties, Inc. and Spieker Partners Properties) is
0.74 and fixed charges in excess of earnings is $13,535.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF SPIEKER PROPERTIES, INC.
1. Spieker Properties, L.P., a California limited partnership
2. Spieker Washington Interest Partners, a California general partnership
3. Fremont Bayside Associates, L.P., a California limited partnership
4. Spieker Partners-Livermore Ltd., a California limited partnership
5. Spieker Properties #172, Limited Partnership, a California limited
partnership
6. Spieker Properties #221 Partners, Limited Partnership, a California general
partnership
7. Spieker Properties #178, Limited Partnership, a California limited
partnership
8. Spieker Properties #166, Limited Partnership, a California limited
partnership
9. Spieker Properties #177, Limited Partnership, a California limited
partnership
10. Spieker Properties #237 Partners, a California general partnership
11. Spieker Properties #122, Limited Partnership, a California limited
partnership
12. Spieker Properties #219 Partners, a California general partnership
13. Spieker Properties #185, Limited Partnership, a California limited
partnership
14. Spieker Properties #183, Limited Partnership, a California limited
partnership
15. Spieker Properties #144, Limited Partnership, a Texas limited partnership
16. Spieker Properties #179, Limited Partnership, a California limited
partnership
17. Spieker Properties #238 Partners, a California general partnership
18. Spieker Properties #154, Limited Partnership, a California limited
partnership
19. Sand Hill Northwest Properties, LLC
20. San Mateo Office Limited, a California limited partnership
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 24, 1997, included in this Form 10-K of
Spieker Properties, Inc. (the "Company") for the year ended December 31, 1996,
filed with the Company's previously filed Registration Statements on Form S-3
(File Nos. 333-18483, 333-14325, 333-09425, 333-04299 and 333-00346).
ARTHUR ANDERSEN LLP
San Francisco, California
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 29,336
<SECURITIES> 0
<RECEIVABLES> 3,799
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,315,060
<DEPRECIATION> 127,701
<TOTAL-ASSETS> 1,390,314
<CURRENT-LIABILITIES> 0
<BONDS> 719,997
0
126,013
<COMMON> 3
<OTHER-SE> 437,912
<TOTAL-LIABILITY-AND-EQUITY> 1,390,314
<SALES> 0
<TOTAL-REVENUES> 200,699
<CGS> 0
<TOTAL-COSTS> 50,200
<OTHER-EXPENSES> 47,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,235
<INCOME-PRETAX> 65,764
<INCOME-TAX> 0
<INCOME-CONTINUING> 74,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,051
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 0.00
</TABLE>
