<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-12528
SPIEKER PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 94-3185802
- ------------------------------- ------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2180 SAND HILL ROAD, MENLO PARK, CA 94025
- ------------------------------------------ ------------------
(Address of principal executive offices) (Zip code)
(415) 854-5600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
43,532,923 shares of Common Stock, $0.00001 par value as of August 11, 1997.
2,000,000 shares of Class B Common Stock, $0.0001 par value as of August 11,
1997. 1,176,470 shares of Class C Common Stock, $0.0001 par value as of August
11, 1997.
Page 1 of 22
Exhibit Index is located on Page 21.
<PAGE> 2
SPIEKER PROPERTIES, INC.
QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statements......................................................... 3
Consolidated Balance Sheets as of June 30, 1997, and December 31, 1996....... 4
Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 1997 and 1996............................................... 6
Consolidated Statement of Stockholders' Equity for the Six Months
Ended June 30, 1997........................................................ 7
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996............................................... 8
Notes to Consolidated Financial Statements................................... 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 16
PART II. OTHER INFORMATION
Item 2. Changes in Securities........................................................ 21
Item 6. Exhibits and Reports on Form 8-K............................................. 21
Signatures........................................................................... 22
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Attached are the following financial statements of Spieker Properties, Inc. (the
"Company"):
(i) Consolidated Balance Sheets as of June 30, 1997, and December 31, 1996
(ii) Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 1997 and 1996
(iii) Consolidated Statement of Stockholders' Equity for the Six Months
Ended June 30, 1997
(iv) Consolidated Statements of Cash Flows for the Six Months Ended June
30, 1997 and 1996
(v) Notes to Consolidated Financial Statements
The financial statements referred to above should be read in conjunction with
the Company's Annual Report on the Form 10-K for the year ended December 31,
1996.
3
<PAGE> 4
SPIEKER PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997, AND DECEMBER 31, 1996
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
(unaudited)
----------- -----------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE
Land, land improvements and leasehold interests $ 471,846 $ 338,445
Buildings and improvements 1,382,276 944,646
Construction in progress 65,429 31,969
----------- -----------
1,919,551 1,315,060
Less - Accumulated depreciation (145,572) (127,701)
----------- -----------
1,773,979 1,187,359
Investments in mortgages 14,381 14,381
Property held for disposition, net 56,340 117,732
----------- -----------
Net investments in real estate 1,844,700 1,319,472
CASH AND CASH EQUIVALENTS 9,249 29,336
ACCOUNTS RECEIVABLE 3,748 3,799
DEFERRED RENT RECEIVABLE 3,713 3,242
RECEIVABLE FROM AFFILIATES 3,050 117
DEFERRED FINANCING AND LEASING COSTS, net of
accumulated amortization of $8,745 and $7,682
as of June 30, 1997, and December 31, 1996, 16,935 15,860
respectively
FURNITURE, FIXTURES AND EQUIPMENT, net 2,717 2,386
PREPAID EXPENSES AND OTHER ASSETS 8,392 16,102
----------- -----------
$ 1,892,504 $ 1,390,314
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
SPIEKER PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997, AND DECEMBER 31, 1996
(dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
(unaudited)
----------- -----------
<S> <C> <C>
DEBT
Unsecured notes $ 635,000 $ 635,000
Unsecured line of credit 57,000 39,000
Mortgage loans 94,745 45,997
----------- -----------
Total debt 786,745 719,997
----------- -----------
ASSESSMENT BONDS PAYABLE 5,321 4,758
ACCOUNTS PAYABLE 10,324 3,258
ACCRUED REAL ESTATE TAXES 828 731
ACCRUED INTEREST 11,154 10,471
UNEARNED RENTAL INCOME 9,747 6,345
DIVIDENDS AND DISTRIBUTIONS PAYABLE 26,199 18,660
OTHER ACCRUED EXPENSES AND LIABILITIES 22,478 16,406
----------- -----------
Total liabilities 872,796 780,626
----------- -----------
MINORITY INTERESTS 72,465 45,760
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Series A Preferred Stock: cumulative, convertible, $.0001
par value, 1,000,000 shares authorized, issued and
outstanding, $25,000 liquidation preference 23,949 23,949
Series B Preferred Stock: cumulative, redeemable, $.0001 par
value, 5,000,000 shares authorized, 4,250,000 issued and
outstanding, $106,250 liquidation preference 102,064 102,064
Common Stock: $.0001 par value, 660,500,000 shares
authorized, 43,532,923 and 31,821,861 shares issued and
outstanding as of June 30, 1997, and December 31, 1996, 4 3
respectively
Class B Common Stock: $.0001 par value, 2,000,000 shares
authorized, issued and outstanding - -
Class C Common Stock: $.0001 par value, 1,500,000 shares
authorized, 1,176,470 issued and outstanding - -
Excess Stock: $.0001 par value per share, 330,000,000 shares
authorized, no shares issued or outstanding - -
Additional paid-in capital 816,274 438,376
Deferred compensation (753) (464)
Retained earnings 5,705 -
----------- -----------
Total stockholders' equity 947,243 563,928
----------- -----------
$ 1,892,504 $ 1,390,314
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
SPIEKER PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 and 1996
(dollars in thousands, except share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June30 June30
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 74,459 $ 46,707 $ 138,921 $ 91,052
Interest and other income 1,419 989 3,374 1,962
--------- --------- --------- ---------
75,878 47,696 142,295 93,014
--------- --------- --------- ---------
OPERATING EXPENSES
Rental expenses 15,411 7,537 27,083 14,774
Real estate taxes 5,785 3,858 11,039 7,304
Interest expense, including amortization of 12,687 7,845 24,700 16,682
finance costs
Depreciation and amortization 12,416 8,801 23,015 17,339
General and administrative and other expenses 3,468 2,524 6,535 4,805
--------- --------- --------- ---------
49,767 30,565 92,372 60,904
--------- --------- --------- ---------
Income from operations before disposition of
property and minority interests 26,111 17,131 49,923 32,110
--------- --------- --------- ---------
GAIN ON DISPOSITION OF PROPERTY 12,691 - 14,180 -
--------- --------- --------- ---------
Income from operations before minority interests 38,802 17,131 64,103 32,110
--------- --------- --------- ---------
MINORITY INTERESTS' SHARE IN NET INCOME (4,722) (2,208) (7,819) (4,294)
--------- --------- --------- ---------
Net income 34,080 14,923 56,284 27,816
--------- --------- --------- ---------
PREFERRED DIVIDENDS
Series A Preferred Stock (573) (524) (1,146) (1,048)
Series B Preferred Stock (2,510) (2,510) (5,020) (5,020)
--------- --------- --------- ---------
Net income available to Common Stockholders $ 30,997 $ 11,889 $ 50,118 $ 21,748
========= ========= ========= =========
INCOME PER SHARE OF COMMON STOCK
Net income $ .65 $ .33 $ 1.09 $ .65
========= ========= ========= =========
DIVIDENDS PER SHARE
Series A Preferred Stock $ .57 $ .52 $ 1.15 $ 1.05
========= ========= ========= =========
Series B Preferred Stock $ .59 $ .59 $ 1.18 $ 1.18
========= ========= ========= =========
Common Stock, including Class B and Class C $ .47 $ .43 $ .98 $ .91
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
SPIEKER PROPERTIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Series A Series B Common Class B Class C
Preferred Preferred Stock Common Common
Stock Stock Shares Stock Stock
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ 23,949 $ 102,064 31,821,861 2,000,000 1,176,470
Common Stock Offering - 11,500,000 - -
Conversion of Operating
Partnership Units to Common - - 78,790 - -
Stock
Stock Options Exercised - - 91,375 - -
Restricted Stock Grant - - 25,913 - -
Non-cash Compensation Merit - - - - -
Fund
Conversion of Operating
Partnership Units - Employee - - 14,984 - -
Stock Incentive Pool
Amortization of Deferred - - - - -
Compensation
Dividends Declared - - - - -
Net Income - - - - -
----------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1997 $ 23,949 $ 102,064 43,532,923 2,000,000 1,176,470
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Common Additional Retained
Stock Par Paid-in Deferred Earnings
Value Capital Compensation (Deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ 3 $ 438,376 $ (464) $ - $ 563,928
Common Stock Offering 1 374,834 - - 374,835
Conversion of Operating
Partnership Units to Common - - - - -
Stock
Stock Options Exercised - 1,871 - - 1,871
Restricted Stock Grant - 491 (491) - -
Non-cash Compensation Merit - 118 - - 118
Fund
Conversion of Operating
Partnership Units - Employee - 524 - - 524
Stock Incentive Pool
Amortization of Deferred - 60 202 - 262
Compensation
Dividends Declared - - (50,579) (50,579)
Net Income - - 56,284 56,284
----------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1997 $ 4 $ 816,274 $ (753) $ 5,705 $ 947,243
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
SPIEKER PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended June 30
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 56,284 $ 27,816
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 23,015 17,339
Amortization of prepaid interest and deferred financing costs 532 729
Non-cash compensation 398 255
Minority share of net income 7,819 4,294
Gain on disposition of property (14,180) -
(Increase) decrease in deferred rent receivable (471) 55
Decrease in accounts receivable 51 511
Increase in receivable from affiliates (2,933) (15)
Decrease in prepaid expenses and other assets 6,611 636
Decrease in assessment bonds payable (486) (385)
Increase (decrease) in accounts payable 7,066 (168)
Increase in accrued real estate taxes 97 253
Increase in accrued interest 683 2,078
Increase in other accrued expenses and liabilities 6,072 378
Increase (decrease) in unearned rental income 3,402 (3,299)
--------- ---------
Net cash provided by operating activities 93,960 50,477
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to properties (529,445) (138,535)
Additions to leasing costs (3,200) (2,829)
Additions to investment in mortgages - (14,334)
Proceeds from disposal of property 76,862 -
--------- ---------
Net cash used for investing activities (455,783) (155,698)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 127,000 265,550
Payments on debt (112,104) (269,518)
Payment of financing fees (146) (1,422)
Payment of dividends/distributions (49,745) (36,758)
Proceeds from sale of Common Stock, net of issuance costs 374,835 121,369
Proceeds from sale of Class C Common Stock, net of issuance - 29,963
costs
Proceeds from stock options exercised 1,871 404
Proceeds from the sale of Operating Partnership Units 25 -
--------- ---------
Net cash provided by financing activities 341,736 109,588
--------- ---------
Net (decrease) increase in cash and cash equivalents (20,087) 4,367
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 29,336 7,573
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,249 $ 11,940
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest 26,014 15,399
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Debt assumed in relation to property acquisitions 51,852 -
Increase to land and assessment bonds payable 1,049 600
Minority interest capital recorded in relation to property 26,072 -
acquisitions
Write-off of fully depreciated property 3,103 10,266
Write-off of fully amortized deferred financing and leasing 1,170 3,217
costs
Conversion of operating partnership units into Common Stock
with resulting reduction in minority interest and increase in 524 386
additional paid-in-capital
Restricted Stock Grants 491 200
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 9
SPIEKER PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 and 1996
(in thousands, except share data)
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Spieker Properties, Inc.
Spieker Properties, Inc. (the "Company") was organized in the state of
Maryland on August 20, 1993, and commenced operations 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 June 30,
1997, the Company owned an approximate 87.0 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
June 30, 1997, and December 31, 1996, and its consolidated results of
operations for the three and six months ended June 30, 1997 and 1996 and
its consolidated cash flows for the six months ended June 30, 1997 and
1996. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Interim Financial Information
The consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC")
and, in management's opinion, include all adjustments necessary for a fair
presentation of results for such interim periods. Certain information and
note disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to SEC rules or regulations; however, the
Company believes that adequate disclosures have been made.
The interim results for the three and six months ended June 30, 1997 and
1996, are not necessarily indicative of results for the full year. It is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
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.
9
<PAGE> 10
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 June 30, 1997, and December 31, 1996,
none of the carrying values of the properties exceeded their estimated fair
values. As of June 30, 1997, and December 31, 1996, the properties are
located primarily in California, Oregon and Washington. As a result of this
geographic concentration, the operations of these properties could be
adversely affected by a recession or general economic downturn in the areas
where these properties are located.
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 June 30, 1997, 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.
Ground Leases
The land on which three of the Company's properties are located is owned by
Stanford University and is subject to ground leases. The ground leases
expire in 2039 or 2040 and, unless the leases are extended, the use of the
land, together with all improvements, will revert back to Stanford
University. The former owners of the three properties prepaid the ground
leases through 2011, 2012 and 2017; thereafter, the Company will be
responsible for the ground lease payments, as defined under the terms of
the leases. These ground lease payments have been segregated from the total
purchase price of the properties, capitalized as leasehold interests in the
accompanying consolidated balance sheet, and are being amortized ratably
over the terms of the related original prepayment periods (18 to 24 years).
Cash and Cash Equivalents
Highly liquid investments with an original maturity of three months or less
when purchased are classified as cash equivalents.
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 financing and
leasing costs are charged to expense upon the early termination of the
lease or upon early payment of financing.
Fair Value of Financial Investments
Based on the borrowing rates currently available to the Company, the
carrying amount of debt approximates fair value. Cash and cash equivalents
consist of demand deposits, certificates of deposit, overnight repurchase
10
<PAGE> 11
agreements, and investments in money market funds, with financial
institutions. The carrying amount of cash and cash equivalents approximates
fair value.
Minority Interest
Minority interest in the Company consists primarily of the individual
Spieker Partners' limited partnership as well as other limited partners'
interest in the Operating Partnership of approximately 13.0 percent and
15.1 percent at June 30, 1997 and 1996, respectively.
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.
Interest and Other Income
Interest and other income includes interest income on cash, cash
equivalents, investments in mortgages, and management fee income.
Net Income (Loss) Per Share of Common Stock
Per share amounts for the Company are computed using the weighted average
common shares outstanding (including convertible Class B Common Stock and
convertible Class C Common Stock) during the period, including the dilutive
effect of stock options. The weighted average common shares outstanding for
the three and six months ended June 30, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
Weighted Average
Common Shares Outstanding
-------------------------
<S> <C>
Three months ended:
June 30, 1997 47,919,448
June 30, 1996 35,668,801
Six months ended:
June 30, 1997 46,120,388
June 30, 1996 33,502,443
</TABLE>
Earnings used in the calculation are reduced by dividends owed to preferred
stockholders.
11
<PAGE> 12
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 ("SFAS No. 128"), Earnings Per Share.
SFAS No. 128 requires the disclosure of basic earnings per share and
modifies existing guidance for computing fully diluted earnings per share.
Under the new standard, basic earnings per share is computed as earnings
divided by weighted average shares, excluding the dilutive effects of stock
options and other potentially dilutive securities. The effective date of
SFAS No. 128 is December 15, 1997, and early adoption is not permitted. The
Company intends to adopt SFAS No. 128 during the quarter and year ended
December 31, 1997. Had the provisions of SFAS No. 128 been applied to the
Company's results of operations for the three months ended June 30, 1997
and 1996, the Company's basic earnings per share would have been $.66 and
$.33 per share, respectively, and its fully diluted earnings per share
would have been $.65 and $.33 per share, respectively. Had the provisions
of SFAS No. 128 been applied to the Company's results of operations for the
six months ended June 30, 1997 and 1996, the Company's basic earnings per
share would have been $1.10 and $.65 per share, respectively, and its fully
diluted earnings per share would have been $1.09 and $.65 per share,
respectively.
Reclassifications
Certain items in the 1996 financial statements have been reclassified to
conform to the 1997 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
Receivable From Affiliates
The receivable from affiliates at June 30, 1997, and December 31, 1996, is
summarized as follows:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Note receivable from Spieker
Northwest, Inc. secured by real 3,033 -
property
Management fees and reimbursements
due from Spieker Partners
related entities (certain 17 117
officers of Spieker Properties,
Inc. are partners in Spieker
Partners)
</TABLE>
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
retail properties (thirteen properties at the time of the determined
divestiture) 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. Of the remaining six properties, one closed on January 6, 1997,
resulting in a gain on disposition of $1,489; four properties closed on
April 9, 1997, resulting in a gain on disposition of $9,640; and the final
property is scheduled to close by December 31, 1997.
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<PAGE> 13
In addition, the Company is in the process of divesting itself of four
other retail properties. Two of the four other properties closed on April
9, 1997. The gain on disposition of these two properties located in Fresno,
California, was $3,051. The divestiture of the two remaining properties is
subject to the identification of a purchaser, negotiation of acceptable
terms and other customary conditions.
The net carrying amount of the three remaining retail properties held for
disposition as of June 30, 1997, is $56,340.
5. DEBT
Unsecured Notes
As of June 30, 1997, the Company has outstanding $635,000 in investment
grade rated unsecured notes with varying interest rates from 6.65% to 8.00%
payable semi-annually. The notes are due on various dates from 2000 to
2016.
Unsecured Line of Credit
As of June 30, 1997, the maximum amount available under the Company's
unsecured line of credit facility was $150,000. The facility carries
interest at LIBOR plus 1.25%. The line of credit matures in November 1997
and the Company has an option to extend it for one year upon payment of a
fee equal to 0.12% of the total amount available. The facility also
includes a fee on average unused funds which varies between 0.125% and
0.20% based on the average outstanding balance. As of June 30, 1997, the
amount drawn on the facility was $57,000.
Mortgage Loans
Mortgage loans of $94,745 as of June 30, 1997, are secured by deeds of
trust on related properties. The mortgage loans carry interest rates
ranging from 7.37% to 9.75%, require monthly principal and interest
payments, and mature on various dates from 1997 to 2012.
6. DIVIDENDS AND DISTRIBUTIONS PAYABLE
The dividends and distributions payable at June 30, 1997, and December 31,
1996, represent amounts payable to stockholders of record and distributions
payable to minority interest holders as of the same dates. The number of
shares held by the stockholders of record and Operating Partnership Units
held by the minority interests holders as of June 30, 1997, and December
31, 1996, are as follows:
<TABLE>
<CAPTION>
June 30, 1997 December 31,1996
------------- ----------------
<S> <C> <C>
Shares of:
Common Stock 43,532,923 31,821,861
Class B Common Stock 2,000,000 2,000,000
Class C Common Stock 1,176,470 1,176,470
Series A Preferred 1,000,000 1,000,000
Stock
Series B Preferred 4,250,000 4,250,000
Stock
Minority Interest Units 7,213,675 6,549,819
</TABLE>
13
<PAGE> 14
7. STOCKHOLDERS' EQUITY
Equity Offerings
On January 21, 1997, the Company sold 11,500,000 shares of Common Stock at
$34.50 per share through an underwritten public offering, including the
underwriters' exercise of their over-allotment option. The aggregate net
proceeds of $374,835 were used primarily to acquire properties under
contract at the time of the offering.
8. ACQUISITIONS
The Company acquired the following properties during the six months ended
June 30, 1997:
<TABLE>
<CAPTION>
Property Total Rentable
Project Name Location Type (1) Square Feet Initial Cost
--------------------------------- -------------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Southcenter West Business Park(2) Tukwila, WA I 286,921 $6,300
Mission West Portfolio San Diego, CA O 619,935 44,800
Emeryville Portfolio (3) Emeryville, CA O 946,385 125,400
Brea Park Centre Brea, CA O 141,837 10,800
555 Twin Dolphin Drive Redwood Shores, CA O 198,494 41,000
North Creek Parkway Centre (4) Bothell, WA O 204,871 22,600
Riverside Centre Portland, OR O 98,434 9,300
Metro Plaza San Jose, CA O 411,288 73,900
1740 Technology (5) San Jose, CA O 194,538 31,300
Fountaingrove Santa Rosa, CA O 160,808 16,100
Pasadena Financial Pasadena, CA O 145,702 26,700
Century Square Pasadena, CA O 205,653 41,500
Point West Corporate Center Sacramento, CA O 145,184 17,200
Sierra Point Brisbane, CA O 99,150 10,300
Brea Corporate Plaza Brea, CA O 119,406 10,800
McKesson Building Pasadena, CA O 150,951 19,100
Coral Tree Commerce Center Vista, CA I 130,866 8,400
Progress Industrial Park Vista, CA I 123,275 7,500
Lafayette Terrace Lafayette, CA O 47,392 7,500
</TABLE>
<TABLE>
<S> <C>
(1) "O" indicates office property; "I" indicates industrial property.
(2) Previously identified as Andover Park in the January 1997 Equity Offering Prospectus.
(3) The Company paid cash and issued Operating Partnership Units to the sellers of this portfolio.
(4) Previously identified as Quadrant Corporate Center in the January 1997 Equity Offering Prospectus.
(5) Previously identified as Kodak Center in the January 1997 Equity Offering Prospectus.
</TABLE>
6. DEVELOPMENTS
During the six months ended June 30, 1997, the Company acquired five
parcels of land for development. The total initial cost of these five
parcels was $17,126.
14
<PAGE> 15
10. SUBSEQUENT EVENTS
On July 14, 1997, the Company sold $150,000 of unsecured investment grade
rated notes bearing interest at 7.125% and due July 1, 2009. Net proceeds
of $146,112 were used principally to repay borrowings on the unsecured line
of credit and to fund ongoing acquisition and development of property.
The Company has amended the line of credit facility. Effective August 8,
1997, the amount available under the facility has been increased to
$250,000, the interest rate has been reduced to LIBOR plus 0.80% and the
facility will mature in August 2001. In addition the facility includes a
competitive bid option.
In July 1997 the Company purchased one office and one industrial property.
These properties combined represent 665,000 square feet of rentable space
at an initial acquisition cost of $68,800.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Statements contained in this Item 2, "Management's Discussion and Analysis of
Financial Conditions and Results of Operations," and elsewhere in this Quarterly
Report on Form 10-Q which are not historical facts may be forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected, including,
but not limited to, those risks and special considerations set forth in the
Company's other SEC filings. Readers are cautioned not to place undue reliance
on these forward-looking statements which speak only as of the date hereof. The
Company undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
The following comparison is of the Company's consolidated operations for the
three and six month periods ended June 30, 1997, as compared to the
corresponding periods ended June 30, 1996.
Rental revenues for the second quarter of 1997 increased by $27.8 million or
59.5% to $74.5 million, as compared with $46.7 million for the quarter ended
June 30, 1996. Of this increase, $17.7 million was generated by properties
acquired during the first six months of 1997 (the "1997 Acquisitions"). In the
second quarter of 1997 the Company acquired properties totaling 1.2 million
square feet for a total investment of $152.6 million. During the first six
months of 1997 the Company acquired properties totaling 4.4 million square feet
for a total investment of $560.5 million. As used herein, the terms "invested"
and "total investment" represent the initial purchase price of acquisitions,
plus projected cost of certain repositioning and rehab capital expenditures
anticipated at the time of purchase. The properties acquired in the second
quarter were acquired on various dates throughout the quarter and, as such, a
full quarter's revenue and expenses was not recognized during the quarter.
$9.1 million of the rental revenue increase in the second quarter of 1997 was
generated by properties acquired during 1996. During 1996, the Company invested
$329.3 million to acquire properties totaling 4.7 million square feet (the "1996
Acquisitions").
$2.5 million of the increase in rental revenues is attributable to revenue
increases in properties owned at January 1, 1996, and still owned at June 30,
1997 (the "Core Portfolio"). This increase in the Core Portfolio is due to
increased rental rates realized on the renewal and re-leasing of
second-generation space and contractual rent increases in existing leases.
During the quarter ended June 30, 1997, the Company completed 221 lease
transactions for the renewal or re-leasing of 1.2 million square feet of
second-generation space. On average for the quarter, the new effective rates
were 33.8% higher than the expiring coupon rent. This brings the total
second-generation activity for the first half of 1997 to 399 completed lease
transactions for 2.4 million square feet at a 21.3% increase in effective rates,
over expiring coupon rents.
$2.1 million of the rental revenue increase in the second quarter of 1997 was
generated by properties developed by the Company (the "Developments"). The
Developments include both properties completed and added to the Company's
portfolio of stabilized properties during 1996 and 1997, as well as properties
currently under development. During the six months ended June 30, 1997, three
properties totaling 236,100 square feet have been completed and added to the
Company's portfolio of stabilized properties. The total cost of these
properties, including the estimated cost to complete initial tenant
improvements, is $17.5 million. The Company also has a current development
pipeline of 3.2 million square feet representing a total projected cost of
$168.6 million. Certain of the properties in the development pipeline are shell
complete and partially occupied.
The increases in rental revenue are partially offset by a decrease of $3.6
million attributable to the disposition of properties which were owned by the
Company during the quarter ended June 30, 1996 (the "Property Dispositions").
16
<PAGE> 17
Rental revenues for the six month period ended June 30, 1997, increased by $47.8
million or 52.5% to $138.9 million as compared to $91.1 million for the same
period ended June 30, 1996. $25.3 million and $19.5 million, respectively, of
this increase was attributable to the 1997 and 1996 Acquisitions; $4.2 million
relates to the Core Portfolio, $3.8 million is attributable to the Developments,
with the remainder attributable to a $5.0 million decrease from Property
Dispositions.
In December 1996, the Company announced the strategic decision to divest itself
of its retail properties and focus exclusively on office and industrial
properties. As such, the following analysis of the office and industrial
properties (i.e. non-retail properties) is presented: Rental revenues net of
property operating expenses increased by $21.1 million or 69.6% to $51.4
million, as compared to $30.3 million for the quarter ended June 30, 1996. Of
this increase, $11.5 million and $5.9 million relates to the 1997 and 1996
Acquisitions, $1.7 million is attributable to the Developments, and $2.0 million
is attributable to the Core Portfolio. For the six month period ended June 30,
1997, rental revenues net property operating expenses increased by $35.6 million
or 59.6% from $59.7 million to $95.3 million at June 30, 1997. $16.8 million and
$13.2 million related to the 1997 and 1996 Acquisitions, $3.0 million is
attributed to the Developments, and $2.6 million is related to the Core
Portfolio.
As a result of the 1997 Acquisitions, the 1996 Acquisitions, and the
Developments, the Company's rentable square footage, not including retail
properties, increased by 7.7 million square feet or 45.0% to 24.8 million square
feet on June 30, 1997, from 17.1 million on June 30, 1996. At June 30, 1997, the
portfolio of stabilized properties was 95.8% occupied. By property type, the
office portfolio was 95.1% occupied and the industrial portfolio was 96.2%
occupied.
Interest and other income increased by $0.4 million and $1.4 million or 40.0%
and 70.0% for the three and six month periods ended June 30, 1997, over the same
respective periods ended June 30, 1996. The net increase in interest and other
income is due to higher average cash balances of $29.9 million and $57.9 million
for the three and six month periods ended June 30, 1997, as compared to $9.5
million and $9.4 million for the corresponding periods in 1996.
Rental expenses increased by $7.9 million or 105.3% for the three months ended
June 30, 1997, as compared with the same period in 1996. Real estate taxes
increased by $1.9 million or 48.7% for the three months ended June 30, 1997, as
compared with the same period in 1996. The overall increase in rental expenses
and real estate taxes (collectively referred to as "property operating
expenses") is primarily a result of the growth in the total square footage of
the Company's portfolio of properties. Of the total $9.8 million increase in
property operating expenses $6.2 million is attributable to the 1997
Acquisitions, $3.2 million is attributable to the 1996 Acquisitions, $0.6
million is attributable to the Core Portfolio, $0.4 million is attributable to
the Developments, and there is a $0.6 million decrease attributable to the
Property Dispositions. On a percentage basis, property operating expenses were
28.5% and 24.4% of rental revenues for the quarters ended June 30, 1997, and
June 30, 1996, respectively. The increase in property operating expenses as a
percentage of rental revenues is attributable to the increased percentage of
office properties in the Company's portfolio. For the quarter ended June 30,
1997, 60.6% of the Company's net operating income (rental revenues less property
operating expenses) was generated by office properties as compared with 45.6%
during the same period in 1996.
For the six month period ended June 30, 1997, rental expenses increased by $12.3
million from $14.8 million for the six months ended June 30, 1996. This
represents a 83.1% increase year over year. Real estate taxes increased by $3.7
million or 50.7% to $11.0 million for the first half of 1997 as compared to $7.3
million for the same period in 1996. The total increase in the property
operating expenses is attributable to a $8.5 million increase for the 1997
Acquisitions, a $6.3 million increase for the 1996 Acquisitions, a $1.2 million
increase in the Core Portfolio, a $0.8 million increase for the Developments,
and a $0.8 reduction attributable to the Property Dispositions. On a percentage
basis property operating expenses were 27.4% and 24.3% of rental revenues for
the six months ended June 30, 1997, and 1996, respectively.
Interest expense increased by $4.9 million or 62.8% to $12.7 million for the
three months ended June 30, 1997, from $7.8 million for the same period in 1996.
For the six month period ended June 30, 1997, interest expense
17
<PAGE> 18
increased by $8.0 million or 47.9% to $24.7 million from $16.7 million for the
same period in 1996. These increases in interest expense are due to increases in
the total average outstanding debt balances. The average outstanding debt for
the three months ended June 30, 1997, and 1996 was $755.1 million and $459.4
million respectively. The average balance outstanding for the six months ended
June 30, 1997, was $728.2 million and $494.5 million for the same period in
1996. The increases in the average outstanding debt balances are consistent with
the increases in the size of the Company's portfolio of properties.
Depreciation and amortization expenses increased by $3.6 million and $5.7
million or 40.9% and 32.9% for the three and six month periods ended June 30,
1997, as compared with the same periods in 1996, due to the 1997 and 1996
Acquisitions and the completed Developments.
General and administrative expenses and other expenses increased by $1.0 million
and $1.7 million for the three and six month periods ended June 30, 1997,
respectively, as compared with the same periods in 1996, primarily as a result
of the increased number of employees. On a percentage basis, general and
administrative expenses were 4.7% of rental revenues for both the three and six
month periods ended June 30, 1997, respectively, as compared with 5.4% and 5.3%
for the same periods in 1996.
During the second quarter of 1997, the Company disposed of an additional six
retail properties resulting in a gain on disposition of $12.7 million. This
brings the total gain on disposition of property for the first half of 1997 to
$14.2 million on seven retail properties sold.
Net income before minority interests and disposition of property increased by
$9.0 million or 52.6% to $26.1 million for the three month period ended June 30,
1997, from $17.1 million for the same period in 1996. For the six month period
ended June 30, 1997, net income before minority interests and disposition of
property increased by $17.8 million or 55.5% to $49.9 million, from $32.1
million for the same period in 1996. The increase in net income is principally
due to the 1997 and 1996 Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
For the six-month period ended June 30, 1997, cash provided by operating
activities increased by $43.5 million or 86.1% to $94.0 million, as compared to
$50.5 million for the same period in 1996. The increase is primarily due to the
increase in net income resulting from the 1996 and 1997 Acquisitions, a decrease
in prepaid expenses and other assets, and an increase in unearned rental income.
Cash used for investing activities increased by $300.1 million or 192.7% to
$455.8 million for the first six months of 1997, as compared to $155.7 million
for the same period in 1996. 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 $232.1 million or
211.8% to $341.7 million for the first six months of 1997, as compared to $109.6
million for the same period in 1996. During the first six months of 1997, cash
provided by financing activities consisted, primarily, of $374.8 million in net
proceeds from the sale of Common Stock, net borrowings of $18.0 million on the
line of credit and net payments of $3.1 million on mortgage loans. Additionally,
payments of distributions increased by $12.9 million to $49.7 million for the
first six months of 1997, as compared with $36.8 million for the same period in
1996. The increase is due to the greater number of shares outstanding and a 9.3%
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, public and
privately placed equity financing, public unsecured debt financing, the issuance
of partnership units in the Operating Partnership, the assumption of secured
debt on properties acquired and cash flow provided by operations. The Company
believes that its liquidity and capital resources are adequate to continue to
meet liquidity requirements for the foreseeable future.
At June 30, 1997, the Company had no material commitments for capital
expenditures related to the renewal or re-leasing of space. The Company believes
that the cash provided by operations and its line of credit provide sufficient
sources of liquidity to fund capital expenditure costs associated with the
renewal or re-leasing of space.
18
<PAGE> 19
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
June 30, 1997, the Company had $57.0 million outstanding under the Facility.
Subsequent to the end of the quarter, the Company amended the current unsecured
line of credit facility, increasing the available funds to $250.0 million and
reducing the interest rate to LIBOR plus 0.8%. The amended facility matures in
August 2001. This increased facility has a competitive bid option that allows
the Company to request bids from the Lenders for advances up to $150.0 million.
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 $98.9 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 Notes"). The
net proceeds of $149.2 million from the issuance of the July Notes were used to
repay borrowings on the line of credit and to fund ongoing acquisition and
development projects. 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
June 30, 1997, $50.0 million of debt securities remained available for issuance
under the medium-term note program.
As of June 30, 1997, the Company had $635 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.
On July 14, 1997, the Company issued $150.0 million of investment grade rated
unsecured notes. The notes carry an interest rate of 7.125%, were priced to
yield 7.183%, and mature on July 1, 2009. Net proceeds of $146.1 million were
used to repay borrowings on the unsecured line of credit and to fund the ongoing
acquisition and development of properties.
In addition to the Unsecured Notes and the Facility, the Company has $94.7
million of secured indebtedness (the "Mortgages") at June 30, 1997. The
Mortgages have interest rates varying from 7.37% 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 $5.3 million of assessment bonds outstanding as
of June 30, 1997.
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 in February 1997) 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 and the July 1997 notes
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
January 1997 Shelf Registration Statement to issue up to $465.0 million in debt
securities (including the $50.0 million of medium-term notes available under the
Company's existing medium-term note program).
19
<PAGE> 20
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, and including
the dilutive effect of stock options. Assuming such conversion, the average
number of shares outstanding for the three and six months ended June 30, 1997,
are 56,352,635 and 54,466,117, respectively, and 43,438,132 and 41,271,774 for
the same periods in 1996.
STATEMENT OF FUNDS FROM OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C>
Net income before
disposition of property
and minority interest $ 26,111 $ 17,131 $ 49,923 $ 32,110(1)
Add:
Depreciation and Amortization 12,276 8,723 22,753 17,197
Dividends on Series B (2,510) (2,510) (5,020) (5,020)
Preferred Stock
Other, net 187 120 375 86(1)
Straight-lined rent (579) 125 (576) 55
-------- -------- -------- --------
Funds from Operations $ 35,485 $ 23,589 $ 67,455 $ 44,428
======== ======== ======== ========
</TABLE>
(1) Includes reclassification of extraordinary gain realized on the early
extinguishment of debt of $150.
20
<PAGE> 21
PART II. OTHER INFORMATION
Item 2. Changes in Securities
In connection with the acquisition of the Emeryville Portfolio in January
1997, the Operating Partnership issued 756,855 units to the seller of such
properties with an aggregate value of $26.0 million, based on the average
stock price of Spieker Properties, Inc. Common Stock during a specified
period of time prior to closing. Such units were issued in a private
negotiated transaction to four partnerships and a trust, pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act.
Such units are convertible on a one for one basis into shares of Common
Stock of the Company after January 1998.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
The exhibits listed below are filed or incorporated by reference as part
of this quarterly report on Form 10-Q.
<TABLE>
<CAPTION>
Exhibit Number
------ ------
<S> <C>
12.1 Statement of Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends
27.1 Article 5 Financial Data Schedule (EDGAR Filing Only)
</TABLE>
(B) Reports on Form 8-K
The Company filed a current report on form 8-K dated June 27, 1997,
containing combined statements of revenue and certain expenses for the
Pasadena Portfolio, Metro Plaza and the Three Property Transactions.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Spieker Properties, Inc.
(Registrant)
Dated: August 13, 1997 /s/ Elke Strunka
--------------------- ------------------------------
Elke Strunka
Vice President and
Principal Accounting Officer
22
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
- ----- --------
<S> <C>
12.1 Statement of Computation of Ratio of Earnings
to Combined Fixed Charges and Prefered Dividends
27.1 Financial Data Schedule
</TABLE>
<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>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Income from operations before disposition of
property and minority interest $26,111 $17,131 $49,923 $32,110
Interest expense(1) 12,687 7,845 24,700 16,682
Amortization of capitalized interest 79 60 158 115
------- ------- ------- -------
Total earnings $38,877 $25,036 $74,781 $48,907
======= ======= ======= =======
Fixed charges:
Interest expense(1) $12,687 $ 7,845 $24,700 $16,682
Capitalized interest 1,407 620 2,641 1,201
Series A Preferred Dividends 573 524 1,146 1,048
Series B Preferred Dividends 2,510 2,510 5,020 5,020
------- ------- ------- -------
Total fixed charges and preferred dividends $17,177 $11,499 $33,507 $23,951
======= ======= ======= =======
Ratio of earnings to fixed charges
(excluding preferred dividends) 2.76 2.96 2.74 2.73
======= ======= ======= =======
Ratio of earnings to combined fixed charges
and preferred dividends 2.26 2.18 2.23 2.04
======= ======= ======= =======
Fixed charges in excess of earnings $ -- $ -- $ -- $ --
======= ======= ======= =======
</TABLE>
Notes:
(1) Includes amortization of debt discount and deferred financing fees.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911361
<NAME> SPIEKER PROPERTIES INC.
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 0.00001
<CASH> 9,249
<SECURITIES> 0
<RECEIVABLES> 3,748
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,975,891
<DEPRECIATION> 145,572
<TOTAL-ASSETS> 1,892,504
<CURRENT-LIABILITIES> 0
<BONDS> 786,745
0
126,013
<COMMON> 4
<OTHER-SE> 821,226
<TOTAL-LIABILITY-AND-EQUITY> 1,892,504
<SALES> 0
<TOTAL-REVENUES> 142,295
<CGS> 0
<TOTAL-COSTS> 38,122
<OTHER-EXPENSES> 29,550
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,700
<INCOME-PRETAX> 49,923
<INCOME-TAX> 0
<INCOME-CONTINUING> 56,284
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,118
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 0
</TABLE>
