SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 1998
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
------------------------------------
(Exact name of registrant as specified in their governing documents)
MARYLAND 1-13130 23-7768996
PENNSYLVANIA 1-13132 23-2766549
- --------------------------- ------------- -------------------
State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
65 VALLEY STREAM PARKWAY, SUITE 100
MALVERN, PENNSYLVANIA 19355
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 648-1700
<PAGE>
ITEM 5: OTHER EVENTS
- ---------------------
Liberty Property Limited Partnership is a Pennsylvania limited
partnership (the "Operating Partnership"). Liberty Property Trust, a
Maryland real estate investment trust (the "Trust"), owns an approximate
90.11% interest in the Operating Partnership (as of September 30, 1997)
(the Trust and the Operating Partnership are collectively referred to as
the "Company"):
On November 25, 1997, the Company entered into a contract to acquire
title to four industrial properties, comprising 314,365 leaseable square
feet, located in Allentown and Reading, Pennsylvania, which the Company
as of this date considers probable of closing, (the "First Industrial
Properties"). The Company's total investment in these properties is
anticipated to be approximately $16.9 million. The "total investment"
for a property is defined as the property's purchase price plus closing
costs and management's estimate, as determined at the time of
acquisition, of the cost of necessary building improvements in the case
of acquisitions, or land costs and land and building improvement costs
in the case of development projects, and where appropriate, other
development costs and carrying costs required to reach rent
commencement(the "Total Investment").
Pursuant to Rule 3-14 of Regulation S-X, audited historical financial
information concerning the First Industrial Properties, is provided in
Item 7 of this Current Report on Form 8-K. Additionally, certain pro
forma information is provided in Item 7.
Factors considered by the Company in determining the price to be paid
for the First Industrial Properties, included their historical and
expected cash flow, the nature of tenants and terms of leases in place,
occupancy rates, opportunities for alternative and new tenancies,
current operating costs and real estate taxes on the properties and
anticipated changes therein under Company ownership, physical condition
and locations of the properties, the anticipated effect to the Company's
financial results (particularly funds from operations), the ability to
sustain and potentially increase its distributions to Company
shareholders, and other factors. The Company took into consideration
the capitalization rates at which it believed other comparable buildings
were recently sold, but determined the price it was willing to pay
primarily on factors discussed above relating to the properties
themselves and their fit into the Company's operations. The Company,
after investigation of the properties, is not aware of any material
fact, other than those enumerated above, that would cause the financial
information reported not to be necessarily indicative of future
operating results.
- -------------------------------
Statements contained in this report contain forward-looking statements
with respect to estimates of Total Investment, pro forma financial
information and their underlying assumptions. As such, these statements
involve risks and uncertainties that could affect future results, and
accordingly, such results may differ from those expressed herein. These
risks and uncertainties include, but are not limited to, uncertainties
affecting real estate businesses generally, risks relating to
acquisition activities and risks relating to leasing and releasing
activities and rates.
- -2-
<PAGE>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
PAGE
----
(a) Financial Statements of Businesses Acquired
(1) Historical Summaries of Gross Income and
Direct Operating Expenses for the First
Industrial Properties
Report of Independent Auditors........................ 4
Historical Summaries of Gross Income and
Direct Operating Expenses for the First Industrial
Properties for the nine months ended September
30, 1997 (unaudited) and for the year ended
December 31, 1996.................................. 5
Notes to the Historical Summaries of the Gross Income
and Direct Operating Expenses for the First Industrial
Properties for the nine months ended September 30,
1997 (unaudited) and for the year December 31,
1996............................................... 6
(b) Pro Forma Financial Information (unaudited)
Liberty Property Trust...................................... 8
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997................................. 9
Pro Forma Consolidated Statement of Operations for
the nine months ended September 30, 1997........... 10
Notes to Pro Forma Condensed Consolidated Financial
Statements as of and for the nine months ended
September 30, 1997................................. 11
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996................... 12
Notes to Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996.... 13
Liberty Property Limited Partnership......................... 14
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997................................. 15
Pro Forma Consolidated Statement of Operations for
the nine months ended September 30, 1997........... 16
Notes to Pro Forma Condensed Consolidated Financial
Statements as of and for the nine months ended
September 30, 1997.................................. 17
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996................... 18
Notes to Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996.... 19
Signatures......................................................... 20
(c) Exhibits
23 Consent of Ernst & Young LLP........................ 21
- -3-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Management of Liberty Property Trust
We have audited the accompanying historical summary of gross income and
direct operating expenses of the First Industrial Properties (the
"Properties") for the year ended December 31, 1996. This statement is
the responsibility of the Properties' management. Our responsibility is
to express an opinion on this historical summary of gross income and
direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the historical summary of
gross income and direct operating expenses is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical summary of
gross income and direct operating expenses. An audit also includes
assessing the basis of accounting used and significant estimates made by
management, as well as evaluating the overall presentation of the
historical summary of gross income and direct operating expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying historical summary of gross income and direct operating
expenses of the Properties was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission
for inclusion in the Current Report on Form 8-K of Liberty Property
Trust as described in Note 1, and is not intended to be a complete
presentation of the Properties' revenue and expenses.
In our opinion, the historical summary of gross income and direct
operating expenses referred to above presents fairly, in all material
respects, the gross income and direct operating expenses described in
Note 1 of the Properties for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
February 12, 1998
Philadelphia, Pennsylvania
- -4-
<PAGE>
FIRST INDUSTRIAL PROPERTIES
HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
NINE
MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
Gross income:
Rental income $ 1,240 $ 1,596
Operating expense reimbursement 211 325
------- -------
1,451 1,921
------- -------
Direct operating expenses:
Real estate taxes 158 205
Rental property expenses
61 127
------- -------
219 332
------- -------
Gross income in excess of direct
operating expenses $ 1,232 $ 1,589
======= =======
See accompanying notes.
- -5-
<PAGE>
FIRST INDUSTRIAL PROPERTIES
NOTES TO HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING
EXPENSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------
ORGANIZATION
The First Industrial Properties (the "Properties") consist of four
individual single and multi-tenant office and industrial buildings
located in Allentown and Reading, Pennsylvania. The Properties are owned
and managed by First Industrial Realty Trust, Inc. who provides
operating services as well as accounting and recordkeeping services for
the Properties. The Properties are expected to be acquired by Liberty
Property Trust.
BASIS OF PRESENTATION
The accompanying historical summaries have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. The
accounts of each of the facilities comprising the Properties are
combined in the historical summaries of gross income and direct
operating expenses. There are no interproperty accounts to be
eliminated. The historical summary is not representative of the actual
operations for the periods presented as certain expenses that may not be
comparable to the expenses expected to be incurred in the proposed
future operations of the Properties have been excluded. Expenses
excluded consist of interest, depreciation, amortization, professional
fees, management fees, and other costs not directly related to the
future operations of the Properties.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Rental income is recognized on a straight-line basis over the term of
the lease.
UNAUDITED INTERIM FINANCIAL STATEMENT
With respect to the unaudited interim financial statement, in the
opinion of the management of the Properties, all adjustments and
eliminations, consisting only of normal recurring adjustments, necessary
to present fairly the historical summary of gross income and direct
operating expenses of the Properties for the nine months ended September
30, 1997, have been included. The results of operations for such
interim period are not necessarily indicative of the results for the
full year.
- -6-
<PAGE>
2. PROPERTIES
- -------------
The four properties are as follows:
PROPERTY NAME LOCATION
- -------------------------- --------------------
6923 Schantz Spring Road Allentown, PA
794 Roble Road Allentown, PA
7355 Williams Avenue Allentown, PA
2600 Beltline Avenue Reading, PA
3. LEASE ACTIVITY
- -----------------
The Properties earn rental income under noncancelable operating leases.
Generally, leases provide for minimum rent and require each tenant to
pay its pro rata share of building operating expenses, except for 794
Roble Road for which the sole tenant pays its own operating expenses.
The following schedule of future minimum rental payments due under
noncancelable operating leases as of December 31, 1997 does not include
any amounts due upon exercise of renewal options under existing leases.
Year ending December 31:
1998 $1,586,000
1999 1,638,000
2000 1,621,000
2001 977,000
2002 594,000
Thereafter 406,000
----------
$6,822,000
==========
In 1997 and 1996, two tenants combined to contribute approximately 68%
of total gross income. ABX Air, Inc. contributed 28% and 27% in 1997 and
1996, respectively, and Daytimers, Inc. contributed 40% and 41% in 1997
and 1996, respectively.
- -7-
<PAGE>
LIBERTY PROPERTY TRUST
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of
September 30, 1997 reflects the incremental effect of the First
Industrial Properties described in Item 5 as if the acquisitions had
occurred on September 30, 1997. The accompanying unaudited, pro forma
consolidated statement of operations for the nine months ended September
30, 1997 and the year ended December 31, 1996 reflect the incremental
effect of the First Industrial Properties, as if such acquisitions had
occurred on January 1, 1996. These statements should be read in
conjunction with respective consolidated financial statements and notes
thereto included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and its Annual Report on Form 10-K for
the year ended December 31, 1996. In the opinion of management, the
unaudited, pro forma consolidated financial information provides for all
adjustments necessary to reflect the effects of the First Industrial
Properties.
These pro forma statements may not necessarily be indicative of the
results that would have actually occurred if the acquisition of the
First Industrial Properties had been in effect on the dates indicated,
nor does it purport to represent the financial position, results of
operations or cash flows for future periods.
- -8-
<PAGE>
LIBERTY PROPERTY TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
LIBERTY
THE FIRST PROPERTY
HISTORICAL INDUSTRIAL TRUST
<F1> PROPERTIES CONSOLIDATED
---------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investment in real estate, net $1,625,549 $ 16,914 <F2> $1,642,463
Cash and cash equivalents 24,097 - 24,097
Deferred financing and
leasing costs, net 29,439 - 29,439
Other assets 56,114 - 56,114
---------- ----------- -----------
Total assets $1,735,199 $ 16,914 $1,752,113
========== =========== ===========
LIABILITIES:
Mortgage loans $ 391,055 $ - $ 391,055
Unsecured notes 200,000 - 200,000
Subordinated debentures 114,820 - 114,820
Line of credit 146,000 16,914 <F3> 162,914
Other liabilities 86,633 - 86,633
---------- ----------- -----------
Total liabilities 938,508 16,914 955,422
---------- ----------- -----------
MINORITY INTEREST 66,430 - 66,430
SHAREHOLDERS' EQUITY:
Series A preferred shares 125,000 - 125,000
Common shares 43 - 43
Additional paid-in capital 606,309 - 606,309
Unearned compensation (1,091) - (1,091)
Retained earnings - - -
---------- ----------- -----------
Total shareholders' equity 730,261 - 730,261
---------- ----------- -----------
Total liabilities and
shareholders' equity $1,735,199 $ 16,914 $1,752,113
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this unaudited, pro forma
condensed consolidated financial statement.
- -9-
<PAGE>
LIBERTY PROPERTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
THE FIRST LIBERTY
INDUSTRIAL PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
<F1> <F4> ADJUSTMENTS CONSOLIDATED
---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 119,223 $ 1,240 $120,463
Operating expense reim-
bursement 38,121 211 38,332
Management fees 516 - 516
Interest and other 2,244 - 2,244
---------- --------- -----------
Total revenue 160,104 1,451 161,555
---------- --------- -----------
OPERATING EXPENSES
Rental property expenses 29,849 158 30,007
Real estate taxes 12,297 61 12,358
General and administrative 7,602 - 7,602
Depreciation and amorti-
zation 28,787 - $ 317 <F5> 29,104
---------- --------- --------- -----------
Total operating expenses 78,535 219 317 79,071
---------- --------- --------- -----------
Operating income 81,569 1,232 (317) 82,484
Premium on debenture
conversion 98 - - 98
Write off of deferred
financing costs 2,919 - - 2,919
Interest expense 37,252 - 861 <F6> 38,113
---------- --------- --------- -----------
Income (loss) before
minority interest 41,300 1,232 (1,178) 41,354
Minority interest 3,815 117 (114) <F7> 3,818
---------- --------- --------- -----------
Net income (loss) 37,485 1,115 (1,064) 37,536 <F8>
Preferred dividend 1,497 - - 1,497
---------- --------- --------- -----------
Income available to
common shareholders $ 35,988 $ 1,115 $(1,064) $ 36,039
========== ========= ========== ===========
Net income per common
share - primary $ .93
===========
Weighted average number
of common shares out-
standing 38,551
===========
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
- -10-
<PAGE>
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical financial information of the Company as of
September 30, 1997 and for the nine months ended September 30, 1997.
<F2> Reflects the Total Investment in the First Industrial Properties.
<F3> Reflects the use of $16,914 from the line of credit to finance the
Total Investment in the First Industrial Properties.
<F4> Reflects incremental addition of revenues and certain expenses of
the First Industrial Properties in order to reflect a full nine months
of operations for these acquisitions.
<F5> Reflects incremental depreciation of the First Industrial
Properties based on asset lives of 40 years.
<F6> Reflects an incremental increase in interest expense from the
assumed borrowings of $16,914 on the line of credit to fund the purchase
of the First Industrial Properties.
<F7> Reflects the allocation of the pro forma adjustment to minority
interest based upon pro forma minority interest in the Operating
Partnership of approximately 9.58%.
<F8> The Company's pro forma taxable income for the nine month period
ended September 30, 1997 is approximately $35,079 which has been
calculated as pro forma income from operations of approximately $37,536
plus GAAP depreciation and amortization of $29,104 less tax basis
depreciation and amortization and other tax differences of approximately
$31,561.
- -11-
<PAGE>
LIBERTY PROPERTY TRUST
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
THE FIRST LIBERTY
INDUSTRIAL PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
<F1> <F2> ADJUSTMENTS CONSOLIDATED
---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 112,841 $ 1,596 $ 114,437
Operating expense reim-
bursement 35,886 325 36,211
Management fees 1,340 - 1,340
Interest and other 4,198 - 4,198
---------- -------- ---------
Total revenue 154,265 1,921 156,186
---------- -------- ---------
OPERATING EXPENSES
Rental property expenses 29,624 205 29,829
Real estate taxes 11,229 127 11,356
General and administrative 8,023 - 8,023
Depreciation and amorti-
zation 28,203 - $ 423 <F3> 28,626
---------- -------- -------- ---------
Total operating expenses 77,079 332 423 77,834
---------- -------- --------- ---------
Operating income 77,186 1,589 (423) 78,352
Premium on debenture con-
version 1,027 - - 1,027
Interest expense 38,528 - 1,148 <F4> 39,676
---------- -------- -------- ---------
Income (loss) before
minority interest 37,631 1,589 (1,571) 37,649
Minority interest 3,891 164 (162) <F5> 3,893
---------- -------- -------- ----------
Net income (loss) $ 33,740 $ 1,425 $(1,409) $ 33,756 <F6>
========== ======== ======== ==========
Net income per common
share - primary $ 1.14
==========
Weighted average number
of common shares out-
standing 29,678
==========
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
- -12-
<PAGE>
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical operations of the Company for the year ended
December 31, 1996.
<F2> Reflects the incremental addition of revenues and certain expenses
of the First Industrial Properties in order to reflect a full twelve
months of operations for these acquisitions.
<F3> Reflects incremental depreciation of the First Industrial
Properties based on asset lives of 40 years.
<F4> Reflects an incremental increase in interest expense from the
assumed borrowings of $16,914 on the line of credit to fund the purchase
of the First Industrial Properties.
<F5> Reflects the allocation of the pro forma adjustment to minority
interest based upon pro forma minority interest in the Operating
Partnership of approximately 10.34%.
<F6> The Company's pro forma taxable income for the year ended December
31, 1996 is approximately $32,425 which has been calculated as pro forma
income from operations of approximately $33,756 plus GAAP depreciation
and amortization of $28,626 less tax basis depreciation and amortization
and other tax differences of approximately $29,957.
- -13-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of
September 30, 1997 reflects the incremental effect of the First
Industrial Properties described in Item 5 as if the acquisitions had
occurred on September 30, 1997. The accompanying unaudited, pro forma
consolidated statement of operations for the nine months ended September
30, 1997 and the year ended December 31, 1996 reflects the incremental
effect of the First Industrial Properties, as if such acquisitions had
occurred on January 1, 1996. These statements should be read in
conjunction with respective consolidated financial statements and notes
thereto included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and its Annual Report on Form 10-K for
the year ended December 31, 1996. In the opinion of management, the
unaudited, pro forma consolidated financial information provides for all
adjustments necessary to reflect the effects of the First Industrial
Properties.
These pro forma statements may not necessarily be indicative of the
results that would have actually occurred if the acquisition of the
First Industrial Properties had been in effect on the dates indicated,
nor does it purport to represent the financial position, results of
operations or cash flows for future periods.
- -14-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
LIBERTY
PROPERTY
THE FIRST LIMITED
HISTORICAL INDUSTRIAL PARTNERSHIP
<F1> PROPERTIES CONSOLIDATED
---------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investment in real estate, net $1,625,549 $ 16,914 <F2> $1,642,463
Cash and cash equivalents 24,097 - 24,097
Deferred financing and
leasing costs, net 29,439 - 29,439
Other assets 56,114 - 56,114
---------- ----------- -----------
Total assets $1,735,199 $ 16,914 $1,752,113
========== =========== ===========
LIABILITIES:
Mortgage loans $ 391,055 $ - $ 391,055
Unsecured notes 200,000 - 200,000
Subordinated debentures 114,820 - 114,820
Line of credit 146,000 16,914 <F3> 162,914
Other liabilities 86,633 - 86,633
---------- ----------- -----------
Total liabilities 938,508 16,914 955,422
---------- ----------- -----------
OWNERS' EQUITY:
General partner's equity 730,261 - 730,261
Limited partners' equity 66,430 - 66,430
---------- ----------- -----------
Total owners' equity 796,691 - 796,691
---------- ----------- -----------
Total liabilities and
owners' equity $1,735,199 $ 16,914 $1,752,113
========== =========== ===========
</TABLE>
- -15-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
LIBERTY
THE FIRST PROPERTY
INDUSTRIAL PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
<F1> <F4> ADJUSTMENTS CONSOLIDATED
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 119,223 $ 1,240 $ 120,463
Operating expense reim-
bursement 38,121 211 38,332
Management fees 516 - 516
Interest and other 2,244 - 2,244
---------- --------- ------------
Total revenue 160,104 1,451 161,555
---------- --------- ------------
OPERATING EXPENSES
Rental property expenses 29,849 158 30,007
Real estate taxes 12,297 61 12,358
General and administrative 7,602 - 7,602
Depreciation and amorti-
zation 28,787 - $ 317 <F5> 29,104
---------- --------- ---------- ------------
Total operating expenses 78,535 219 317 79,071
---------- --------- ---------- ------------
Operating income 81,569 1,232 (317) 82,484
Premium on debenture
conversion 98 - - 98
Write off of deferred
financing costs 2,919 - - 2,919
Interest expense 37,252 - 861 <F6> 38,113
---------- --------- ---------- ------------
Net income (loss) $ 41,300 $ 1,232 $ (1,178) $ 41,354
========== ========= ========== ============
Net income (loss)
allocated to general
partner $ 37,485 $ 1,115 $ (1,064) $ 37,536
Net income (loss)
allocated to limited
partners 3,815 117 (114) <F7> 3,818
========== ========= ========== ============
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
- -16-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical financial information of the Company as of
September 30, 1997 and for the nine months ended September 30, 1997.
<F2> Reflects the Total Investment in the First Industrial Properties.
<F3> Reflects the use of $16,914 from the line of credit to finance the
Total Investment in the First Industrial Properties.
<F4> Reflects the incremental addition of revenues and certain expenses
of the First Industrial Properties in order to reflect a full nine
months of operations for these acquisitions.
<F5> Reflects incremental depreciation of the First Industrial
Properties based on asset lives of 40 years.
<F6> Reflects an incremental increase in interest expense from the
assumed borrowings of $16,914 on the line of credit to fund the purchase
of the First Industrial Properties.
<F7> Reflects the allocation of the pro forma adjustment to the net
income allocated to the limited partners based upon pro forma ownership
in the Operating Partnership of approximately 9.58%.
- -17-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
LIBERTY
THE FIRST PROPERTY
INDUSTRIAL PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
<F1> <F2> ADJUSTMENTS CONSOLIDATED
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 112,841 $ 1,596 $ 114,437
Operating expense reim-
bursement 35,886 325 36,211
Management fees 1,340 - 1,340
Interest and other 4,198 - 4,198
---------- ---------- ---------
Total revenue 154,265 1,921 156,186
---------- ---------- ---------
OPERATING EXPENSES
Rental property expenses 29,624 205 29,829
Real estate taxes 11,229 127 11,356
General and administrative 8,023 - 8,023
Depreciation and amorti-
zation 28,203 - $ 423 <F3> 28,626
---------- ---------- ---------- ---------
Total operating expenses 77,079 332 423 77,834
---------- ---------- ---------- ---------
Operating income 77,186 1,589 (423) 78,352
Premium on debenture con-
version 1,027 - - 1,027
Interest expense 38,528 - 1,148 <F4> 39,676
---------- ---------- ---------- ---------
Net income (loss) $ 37,631 $ 1,589 $ (1,571) $ 37,649
========== ========== ========== =========
Net income (loss)
allocated to general
partner $ 33,740 $ 1,425 $ (1,409) $ 33,756
Net income (loss)
allocated to limited
partners 3,891 164 (162) <F5> 3,893
========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
- -18-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical financial information of the Company for the
year ended December 31, 1996.
<F2> Reflects the incremental addition of revenue and certain expenses
of the First Industrial Properties in order to reflect a full twelve
months of operations for these acquisitions.
<F3> Reflects incremental depreciation of the First Industrial
Properties based on asset lives of 40 years.
<F4> Reflects an incremental increase in interest expense from the
assumed borrowings of $16,914 on the line of credit to fund the purchase
of the First Industrial Properties.
<F5> Reflects the allocation of the pro forma adjustment to the net
income allocated to the limited partners based upon pro forma ownership
in the Operating Partnership of approximately 10.34%.
- -19-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
LIBERTY PROPERTY TRUST
Dated: February 13, 1998 BY: /s/ WILLARD G. ROUSE, III
----------------------------------------
NAME: Willard G. Rouse, III
TITLE: Chief Executive Officer
LIBERTY PROPERTY LIMITED PARTNERSHIP
BY: LIBERTY PROPERTY TRUST,
SOLE GENERAL PARTNER
Dated: February 13, 1998 BY: /s/ WILLARD G. ROUSE, III
----------------------------------------
NAME: Willard G. Rouse, III
TITLE: Chief Executive Officer
- -20-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 333-43267), the Registration Statement (Form S-3
No. 33-94782), the Registration Statement (Form S-3 No. 333-14139), the
Registration Statement (Form S-3 No. 333-22211), the Registration
Statement (Form S-8 No. 33-94036) and the Registration Statement (Form
S-8 No. 333-44149) of Liberty Property Trust and Liberty Property
Limited Partnership and in the related Prospectus of our report dated
February 12, 1998, with respect to the Historical Summary of Gross
Income and Direct Operating Expenses of the First Industrial Properties
included in this Current Report (Form 8-K) for the year ended December
31, 1996.
February 12, 1998 /s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania ERNST & YOUNG LLP
- -21-
