UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number: 1-13130 (Liberty Property Trust)
1-13132 (Liberty Property Limited Partnership)
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Exact name of registrants as specified in their governing documents)
MARYLAND (Liberty Property Trust) 23-7768996
PENNSYLVANIA (Liberty Property Limited Partnership) 23-2766549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
65 Valley Stream Parkway, Suite 100, Malvern, Pennsylvania 19355
(Address of Principal Executive Offices) (Zip Code)
Registrants' Telephone Number, Including Area Code (610)648-1700
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve (12) months (or for such shorter
period that the registrants were required to file such reports) and (2)
have been subject to such filing requirements for the past ninety (90)
days. YES X NO
On May 10, 1999, 66,303,163 Common Shares of Beneficial Interest, par
value $.001 per share, of Liberty Property Trust were outstanding.
<PAGE>
LIBERTY PROPERTY TRUST/LIBERTY PROPERTY LIMITED PARTNERSHIP
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1999
INDEX
- -----
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements (unaudited) Page
----
Consolidated balance sheets of Liberty Property
Trust at March 31, 1999 and December 31, 1998. 4
Consolidated statements of operations of Liberty
Property Trust for the three months ended March
31, 1999 and March 31, 1998. 5
Consolidated statements of cash flows of Liberty
Property Trust for the three months ended March
31, 1999 and March 31, 1998. 6
Notes to consolidated financial statements for
Liberty Property Trust. 7
Consolidated balance sheets of Liberty Property
Limited Partnership at March 31, 1999 and
December 31, 1998. 10
Consolidated statements of operations of Liberty
Property Limited Partnership for the three months
ended March 31, 1999 and March 31, 1998. 11
Consolidated statements of cash flows of Liberty
Property Limited Partnership for the three months
ended March 31, 1999 and March 31, 1998. 12
Notes to consolidated financial statements for
Liberty Property Limited Partnership. 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 15
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 23
Part II. Other Information
- ---------------------------
Signatures 25
Exhibit Index 26
-2-
<PAGE>
- -----------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in
this Quarterly Report on Form 10-Q contain statements that are or will be
forward-looking, such as statements relating to acquisitions and other
business development and development activities, future capital
expenditures, the costs and risks associated with the Year 2000 issue,
financing sources and availability, and the effects of regulation
(including environmental regulation) and competition. Such
forward-looking information involves important risks and uncertainties
that could significantly affect anticipated results in the future and,
accordingly, such results may differ from those expressed in any
forward-looking statements made by, or on behalf of, Liberty Property
Trust and Liberty Property Limited Partnership (together, the "Company").
These risks and uncertainties include, but are not limited to,
uncertainties affecting real estate businesses generally (such as entry
into new leases, renewals of leases and dependence on tenants' business
operations), risks relating to acquisition, construction and development
activities, possible environmental liabilities, risks relating to
leverage and debt service (including availability of financing terms
acceptable to the Company and sensitivity of the Company's operations to
fluctuations in interest rates), the potential for the use of borrowings
to make distributions necessary to qualify as a REIT, dependence on the
primary markets in which the Company's properties are located, the
existence of complex regulations relating to status as a REIT and the
adverse consequences of the failure to qualify as a REIT, the potential
adverse impact of market interest rates on the market price for the
Company's securities and risks relating to the Year 2000 issue.
-3-
<PAGE>
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land and land improvements $ 375,690 $ 366,853
Buildings and improvements 2,434,491 2,378,272
Less accumulated depreciation (226,977) (209,023)
---------- ----------
Operating real estate 2,583,204 2,536,102
Development in progress 218,600 207,563
Land held for development 77,381 75,454
---------- ----------
Net real estate 2,879,185 2,819,119
Cash and cash equivalents 14,726 14,391
Accounts receivable 9,879 15,391
Deferred financing and leasing costs,
net of accumulated amortization
(1999, $52,476; 1998, $49,390) 40,434 39,475
Prepaid expenses and other assets 40,988 44,995
---------- ----------
Total assets $2,985,212 $2,933,371
========== ==========
LIABILITIES
Mortgage loans $ 407,686 $ 413,224
Unsecured notes 780,000 645,000
Credit facility 197,000 264,000
Convertible debentures 96,836 101,619
Accounts payable 25,651 20,216
Accrued interest 8,691 18,263
Dividend payable 33,887 33,734
Other liabilities 61,095 69,025
---------- ----------
Total liabilities 1,610,846 1,565,081
Minority interest 95,244 101,254
SHAREHOLDERS' EQUITY
8.80% Series A cumulative redeemable preferred
shares, $.001 par value, 5,000,000 shares
authorized, issued and outstanding as of
March 31, 1999 and December 31, 1998 120,814 120,814
Common shares of beneficial interest, $.001
par value, 200,000,000 shares authorized,
66,294,961 and 65,645,340 shares issued
and outstanding as of March 31, 1999
and December 31, 1998, respectively 66 66
Additional paid-in capital 1,181,511 1,168,663
Unearned compensation (1,168) (562)
Dividends in excess of net income (22,101) (21,945)
---------- -----------
Total shareholders' equity 1,279,122 1,267,036
---------- -----------
Total liabilities and shareholders' equity $2,985,212 $2,933,371
========== ===========
</TABLE>
See accompanying notes.
-4-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
REVENUE
Rental $ 81,468 $ 61,015
Operating expense reimbursement 29,523 20,250
Management fees 150 147
Gain on sale 1,269 -
Interest and other 1,079 1,207
--------- ---------
Total revenue 113,489 82,619
--------- ---------
OPERATING EXPENSES
Rental property expenses 21,193 14,916
Real estate taxes 9,777 7,019
General and administrative 3,985 3,350
Depreciation and amortization 20,143 14,219
--------- ---------
Total operating expenses 55,098 39,504
--------- ---------
Operating income 58,391 43,115
Interest expense 23,753 16,566
--------- ---------
Income before minority interest 34,638 26,549
Minority interest 2,210 1,809
--------- ---------
Net income 32,428 24,740
Preferred distributions 2,750 2,750
--------- ---------
Income available to common shareholders $ 29,678 $ 21,990
========= =========
Income per common share - basic $ 0.45 $ 0.40
========= =========
Income per common share - diluted $ 0.45 $ 0.40
========= =========
Distributions declared per common share $ 0.45 $ 0.42
========= =========
Weighted average number of common shares
outstanding - basic 66,018 55,279
========= =========
Weighted average number of common shares
outstanding - diluted 66,177 55,667
========= =========
</TABLE>
See accompanying notes.
-5-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 32,428 $ 24,740
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,143 14,219
Amortization of deferred financing costs 1,152 1,103
Minority interest in net income 2,210 1,809
Gain on sale (1,269) -
Noncash compensation 1,309 793
Changes in operating assets and liabilities:
Accounts receivable 5,512 115
Prepaid expenses and other assets 3,590 (1,126)
Accounts payable 5,435 3,099
Accrued interest (9,572) (2,784)
Other liabilities (7,930) 7,123
---------- ---------
Net cash provided by operating activities 53,008 49,091
---------- ---------
INVESTING ACTIVITIES
Investment in properties (32,921) (248,417)
Proceeds from disposition of properties 12,920 -
Investment in development in progress (50,992) (68,249)
Investment in land held for development (5,654) (11,879)
Increase in deferred leasing costs (3,288) (2,195)
---------- ---------
Net cash used in investing activities (79,935) (330,740)
---------- ---------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 284 103,438
Proceeds from issuance of unsecured notes 135,000 175,000
Repayments of mortgage loans (5,538) (1,271)
Proceeds from credit facility 36,000 229,000
Repayments on credit facility (103,000) (216,000)
(Increase) decrease deferred financing costs (808) 576
Distributions paid on common shares (29,540) (22,130)
Distributions paid on preferred shares (2,750) (2,750)
Distributions paid on units (2,386) (2,174)
---------- ---------
Net cash provided by financing activities 27,262 263,689
Increase (decrease) in cash and cash equivalents 335 (17,960)
Cash and cash equivalents at beginning of period 14,391 55,079
---------- ---------
Cash and cash equivalents at end of period $ 14,726 $ 37,119
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ - $ 20
Acquisition of properties - (14,612)
Assumption of mortgage loans - 14,381
Issuance of operating partnership units - 231
Conversion of convertible debentures 4,674 2,212
========== =========
</TABLE>
See accompanying notes.
-6-
<PAGE>
LIBERTY PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Liberty
Property Trust (the "Trust") and its subsidiaries, including Liberty
Property Limited Partnership (the "Operating Partnership") (the Trust,
Operating Partnership and their respective subsidiaries referred to
collectively as the "Company"), have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Annual Report on Form 10-K of the Trust and the Operating Partnership for
the year ended December 31, 1998. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial statements for these interim
periods have been included. The results of interim periods are not
necessarily indicative of the results to be obtained for a full fiscal
year. Certain amounts from prior periods have been restated to conform
to current period presentation.
The following table sets forth the computation of basic and diluted
income per common share for the three month periods ended March 31, 1999
and 1998:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, 1999 ENDED MARCH 31, 1998
------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 32,428 $ 24,740
Less: Preferred
distributions 2,750 2,750
-------- --------
Basic income per
common share
Income available
to common share-
holders 29,678 66,018 $ 0.45 21,990 55,279 $ 0.40
======= =======
Effect of dilutive
securities
Options - 159 - 388
-------- ------- -------- -------
Diluted income per
common share
Income available
to common share-
holders and assumed
conversions $ 29,678 66,177 $ 0.45 $ 21,990 55,667 $ 0.40
======== ======= ======= ======== ======= =======
</TABLE>
Diluted income per common share includes the weighted average common
shares and dilutive effect of the outstanding options, and excludes the
effects of the conversion of the units of limited partnership interest in
the Operating Partnership (the "Units") and the Exchangeable Subordinated
-7-
<PAGE>
Debentures due 2001 of the Operating Partnership (the "Convertible
Debentures") into common shares, as to do so would have been antidilutive
for the periods presented. The securities excluded from the diluted
calculation could potentially dilute basic income per common share in the
future.
NOTE 2 - ORGANIZATION
- ---------------------
Liberty Property Trust (the "Trust") is a self-administered and self-
managed Maryland real estate investment trust (a "REIT"). Substantially
all of the Trust's assets are owned directly or indirectly, and
substantially all of the Trust's operations are conducted directly or
indirectly, by its subsidiary, Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust, the "Company"). The Trust is the sole general
partner and also a limited partner of the Operating Partnership, with a
combined equity interest in the Operating Partnership of 93.1% at March
31, 1999. The Company provides leasing, property management,
development, acquisition, construction management and design management
for a portfolio of industrial and office properties which are located
principally within the Southeastern, Mid-Atlantic and Midwestern United
States.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed on a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
Liberty Property Trust operates its portfolio of properties throughout
the Southeastern, Mid-Atlantic and Midwestern United States. The
Company reviews performance of the portfolio on a geographical basis, as
such, the following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey/Delaware; Lehigh
Valley, Pennsylvania; Maryland; Virginia; the Carolinas; Jacksonville,
Florida; Tampa, Florida; South Florida; Minneapolis, Minnesota; Detroit,
Michigan; and the United Kingdom. The Company's reportable segments are
distinct business units which are each managed separately in order to
concentrate market knowledge within a geographical area. Within these
reportable segments, the Company derives its revenues from its two
product types: industrial properties and office properties.
The Company evaluates performance of the reportable segments based on
property-level net operating income, which is calculated as rental
revenue and operating expense reimbursement less rental expenses and
real estate taxes. The accounting policies of the reportable segments
are the same as those for the Company on a consolidated basis. The
operating information by segment is as follows (in thousands):
-8-
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $ 26,808 $ 11,655 $ 10,739 $ 9,978 $ 9,510 $ 9,881 $ 11,686 $ 20,734 $110,991
Rental operating
expenses and real
estate taxes 7,850 3,472 2,377 2,264 2,724 2,296 3,737 6,250 30,970
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 18,958 8,183 8,362 7,714 6,786 7,585 7,949 14,484 80,021
Other income/
expenses, net 45,383
--------
Income before
minority interest 34,638
Minority interest 2,210
Preferred distributions 2,750
--------
Income available
to common shareholders $ 29,678
========
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $ 22,720 $ 7,596 $ 8,851 $ 7,967 $ 6,329 $ 7,927 $ 7,932 $ 11,943 $ 81,265
Rental operating
expenses and real
estate taxes 6,621 2,184 1,743 1,695 1,700 1,744 2,751 3,497 21,935
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 16,099 5,412 7,108 6,272 4,629 6,183 5,181 8,446 59,330
Other income/
expenses, net 32,781
--------
Income before
minority interest 26,549
Minority interest 1,809
Preferred distributions 2,750
--------
Income available
to common shareholders $ 21,990
========
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(IN THOUSANDS)
MARCH 31, 1999 DECEMBER 31, 1998
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land and land improvements $ 375,690 $ 366,853
Buildings and improvements 2,434,491 2,378,272
Less accumulated depreciation (226,977) (209,023)
---------- ----------
Operating real estate 2,583,204 2,536,102
Development in progress 218,600 207,563
Land held for development 77,381 75,454
---------- ----------
Net real estate 2,879,185 2,819,119
Cash and cash equivalents 14,726 14,391
Accounts receivable 9,879 15,391
Deferred financing and leasing costs,
net of accumulated amortization
(1999, $52,476; 1998, $49,390) 40,434 39,475
Prepaid expenses and other assets 40,988 44,995
---------- ----------
Total assets $2,985,212 $2,933,371
========== ==========
LIABILITIES
Mortgage loans $ 407,686 $ 413,224
Unsecured notes 780,000 645,000
Credit facility 197,000 264,000
Convertible debentures 96,836 101,619
Accounts payable 25,651 20,216
Accrued interest 8,691 18,263
Dividend payable 33,887 33,734
Other liabilities 61,095 69,025
---------- ----------
Total liabilities 1,610,846 1,565,081
OWNERS' EQUITY
General partner's equity-preferred units 120,814 120,814
-common units 1,158,308 1,146,222
Limited partners' equity 95,244 101,254
---------- ----------
Total owners' equity 1,374,366 1,368,290
---------- ----------
Total liabilities and owners' equity $2,985,212 $2,933,371
========== ==========
</TABLE>
See accompanying notes.
-10-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
--------------- --------------
<S> <C> <C>
REVENUE
Rental $ 81,468 $ 61,015
Operating expense reimbursement 29,523 20,250
Management fees 150 147
Gain on sale 1,269 -
Interest and other 1,079 1,207
----------- ---------
Total revenue 113,489 82,619
----------- ---------
OPERATING EXPENSES
Rental property expenses 21,193 14,916
Real estate taxes 9,777 7,019
General and administrative 3,985 3,350
Depreciation and amortization 20,143 14,219
----------- ---------
Total operating expenses 55,098 39,504
----------- ---------
Operating income 58,391 43,115
Interest expense 23,753 16,566
----------- ---------
Net income 34,638 26,549
Net income allocated to general partner - preferred units 2,750 2,750
----------- ---------
Net income available to partners - common interest $ 31,888 $ 23,799
=========== =========
Net income allocated to general partner - common units $ 2,210 $ 1,809
=========== =========
Net income allocated to limited partners $ 29,678 $ 21,990
=========== =========
</TABLE>
See accompanying notes.
-11-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 34,638 $ 26,549
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,143 14,219
Amortization of deferred financing costs 1,152 1,103
Gain on sale (1,269) -
Noncash compensation 1,309 793
Changes in operating assets and liabilities:
Accounts receivable 5,512 115
Prepaid expenses and other assets 3,590 (1,126)
Accounts payable 5,435 3,099
Accrued interest (9,572) (2,784)
Other liabilities (7,930) 7,123
---------- ---------
Net cash provided by operating activities 53,008 49,091
---------- ---------
INVESTING ACTIVITIES
Investment in properties (32,921) (248,417)
Proceeds from disposition of properties 12,920 -
Investment in development in progress (50,992) (68,249)
Investment in land held for development (5,654) (11,879)
Increase in deferred leasing costs (3,288) (2,195)
---------- ---------
Net cash used in investing activities (79,935) (330,740)
---------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of unsecured notes 135,000 175,000
Repayments of mortgage loans (5,538) (1,271)
Proceeds from credit facility 36,000 229,000
Repayments on credit facility (103,000) (216,000)
(Increase) decrease in deferred financing costs (808) 576
Capital contributions 284 103,438
Distributions to partners (34,676) (27,054)
---------- ---------
Net cash provided by financing activities 27,262 263,689
Increase (decrease) in cash and cash equivalents 335 (17,960)
Cash and cash equivalents at beginning of period 14,391 55,079
---------- ---------
Cash and cash equivalents at end of period $ 14,726 $ 37,119
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ - $ 20
Acquisition of properties - (14,612)
Assumption of mortgage loans - 14,381
Issuance of operating partnership units - 231
Conversion of convertible debentures 4,674 2,212
========== =========
</TABLE>
See accompanying notes.
-12-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Liberty
Property Limited Partnership (the "Operating Partnership") and its direct
and indirect subsidiaries have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Annual Report on Form 10-K of the Trust and the Operating Partnership for
the year ended December 31, 1998. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial statements for these interim
periods have been included. The results of interim periods are not
necessarily indicative of the results to be obtained for a full fiscal
year. Certain amounts from prior periods have been restated to conform
to current period presentations.
NOTE 2 - ORGANIZATION
- ---------------------
Liberty Property Trust (the "Trust") is a self-administered and self-
managed Maryland real estate investment trust (a "REIT"). Substantially
all of the Trust's assets are owned directly or indirectly, and
substantially all of the Trust's operations are conducted directly or
indirectly, by its subsidiary, Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust and its consolidated subsidiaries, the
"Company"). The Trust is the sole general partner and also a limited
partner of the Operating Partneship, with a combined equity interest in
the Operating Partnership of 93.1% at March 31, 1999. The Company
provides leasing, property management, acquisition, development,
construction management and design management for a portfolio of
industrial and office properties which are located principally within the
Southeastern, Mid-Atlantic and Midwestern United States.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed on a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
-13-
<PAGE>
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
Liberty Property Trust operates its portfolio of properties throughout
the Southeastern, Mid-Atlantic and Midwestern United States. The
Company reviews performance of the portfolio on a geographical basis, as
such, the following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey/Delaware; Lehigh
Valley, Pennsylvania; Maryland; Virginia; the Carolinas; Jacksonville,
Florida; Tampa, Florida; South Florida; Minneapolis, Minnesota; Detroit,
Michigan; and the United Kingdom. The Company's reportable segments are
distinct business units which are each managed separately in order to
concentrate market knowledge within a geographical area. Within these
reportable segments, the Company derives its revenues from its two
product types: industrial and office properties.
The Company evaluates performance of the reportable segments based on
property-level net operating income, which is calculated as rental
revenue and operating expense reimbursement less rental expenses and
real estate taxes. The accounting policies of the reportable segments
are the same as those for the Company on a consolidated basis. The
operating information by segment is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $ 26,808 $ 11,655 $ 10,739 $ 9,978 $ 9,510 $ 9,881 $ 11,686 $ 20,734 $110,991
Rental operating
expenses and real
estate taxes 7,850 3,472 2,377 2,264 2,724 2,296 3,737 6,250 30,970
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 18,958 8,183 8,362 7,714 6,786 7,585 7,949 14,484 80,021
Other income/
expenses, net 45,383
--------
Net income 34,638
Net income allocated to general partner - preferred units 2,750
--------
Net income allocated to partners - common interest $ 31,888
========
Net income allocated to general partner - common units $ 2,210
========
Net income allocated to limited partners $ 29,678
========
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real-estate
related revenues $ 22,720 $ 7,596 $ 8,851 $ 7,967 $ 6,329 $ 7,927 $ 7,932 $ 11,943 $ 81,265
Rental operating
expenses and real
estate taxes 6,621 2,184 1,743 1,695 1,700 1,744 2,751 3,497 21,935
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 16,099 5,412 7,108 6,272 4,629 6,183 5,181 8,446 59,330
Other income/
expenses, net 32,781
--------
Net income 26,549
Net income allocated to general partner - preferred units 2,750
--------
Net income allocated to partners - common interest $ 23,799
========
Net income allocated to general partner - common units $ 1,809
========
Net income allocated to limited partners $ 21,990
========
</TABLE>
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------
OVERVIEW
The following discussion and analysis is based on a consolidated view of
the Company. Geographic segment data for the three month periods ended
March 31, 1999 and 1998 is included in Note 3 of the Notes to the Liberty
Property Trust and Liberty Property Limited Partnership Financial
Statements, respectively.
In 1999, the Company continued to pursue development and acquisition
opportunities and continued to focus on increasing the cash flow from its
Properties in Operation by increasing property occupancy and increasing
rental rates.
The composition of the Company's properties in operation as of March 31,
1999 and 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
TOTAL PERCENT OF TOTAL
SQUARE FEET SQUARE FEET PERCENT OCCUPIED
----------------- ---------------- -----------------
MARCH 31, MARCH 31, MARCH 31,
TYPE 1999 1998 1999 1998 1999 1998
- ------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Industrial - Distribution 19,244 15,644 42.7% 43.2% 95.7% 94.6%
Industrial - Flex 13,213 10,108 29.4% 28.0% 93.8% 94.7%
Office 12,561 10,398 27.9% 28.8% 94.2% 95.4%
------ ------ ------- ------- ------- -------
Total 45,018 36,150 100.0% 100.0% 94.7% 94.9%
====== ====== ====== ====== ====== ======
</TABLE>
The expiring square feet and annual base rent by year for the properties
in operation as of March 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
INDUSTRIAL-
DISTRIBUTION INDUSTRIAL-FLEX OFFICE TOTAL
------------------ ------------------ ------------------ ------------------
SQUARE ANNUAL SQUARE ANNUAL SQUARE ANNUAL SQUARE ANNUAL
YEAR FEET BASE RENT FEET BASE RENT FEET BASE RENT FEET BASE RENT
- ---------- ------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 2,366 $10,648 2,041 $ 14,683 1,598 $ 16,403 6,005 $ 41,734
2000 2,063 9,295 2,267 16,755 1,934 24,108 6,264 50,158
2001 2,904 13,093 2,101 14,680 1,543 19,247 6,548 47,020
2002 3,209 13,397 1,574 11,898 1,126 13,730 5,909 39,025
2003 1,852 8,882 1,903 17,567 1,139 15,435 4,894 41,884
2004 1,248 6,081 564 5,197 565 8,212 2,377 19,490
Thereafter 4,775 23,667 1,948 20,234 3,922 56,999 10,645 100,900
------ ------- ------ -------- ------ -------- ------ --------
Total 18,417 $85,063 12,398 $101,014 11,827 $154,134 42,642 $340,211
====== ======= ====== ======== ====== ======== ====== ========
</TABLE>
-15-
<PAGE>
The scheduled deliveries of the 3.3 million square feet of properties
under development as of March 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
SQUARE FEET
-----------------------------
SCHEDULED IND- IND- PERCENT PRE-LEASED
IN-SERVICE DATE DIST. FLEX OFFICE TOTAL MARCH 31, 1999 TOTAL INVESTMENT
- ---------------- ------ ------ ------- ------ ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
2nd Quarter 1999 697 81 456 1,234 91.4% $ 90,618
3rd Quarter 1999 250 123 255 628 92.2% 49,347
4th Quarter 1999 170 - 435 605 53.1% 81,635
1st Quarter 2000 - - 191 191 91.9% 24,530
Thereafter - 188 503 691 24.9% 76,061
------ ------ ------- ------ ------ ----------
Total 1,117 392 1,840 3,349 70.9% $322,191
===== ===== ====== ===== ====== ==========
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
The following discussion is based on the consolidated financial
statements of the Company. It compares the results of operations of the
Company for the three months ended March 31, 1999 (unaudited) with the
results of operations of the Company for the three months ended March 31,
1998 (unaudited). As a result of the significant level of acquisition
and development activities by the Company in 1999 and 1998, the overall
operating results of the Company during such periods are not directly
comparable. However, certain data, including the "Same Store"
comparison, do lend themselves to direct comparison. As used herein, the
term "Company" includes the Trust, the Operating Partnership and their
subsidiaries.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes included elsewhere in this
report.
For the three months ended March 31, 1999 compared to the three months
ended March 31, 1998.
- -----------------------------------------------------------------------
Total revenue (principally rental revenue and operating expense
reimbursement) increased to $113.5 million from $82.6 million for the
three months ended March 31, 1999 compared to 1998. These increases are
primarily due to the increase in the number of properties in operation
during the respective periods. As of March 31, 1998, the Company had 496
properties in operation and, as of March 31, 1999, the Company had 625
properties in operation. From January 1, 1998 through March 31, 1998, the
Company acquired or completed the development on 26 properties, for a
Total Investment (as defined below) of approximately $158.9 million.
From January 1, 1999 through March 31, 1999, the Company acquired or
completed the development on 19 properties, for a Total Investment of
approximately $71.2 million. Furthermore, total revenue increased
because the operating expense recovery percentage (the ratio of operating
expense reimbursement to rental property expenses and real estate taxes)
increased to 95.3% for the three months ended March 31, 1999 from 92.3%
for the three months ended March 31, 1998 due to the increase in
occupancy. 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
-16-
<PAGE>
where appropriate, other development costs and carrying costs required to
reach rent commencement.
Rental property and real estate tax expenses increased to $31.0 million
from $21.9 million for the three months ended March 31, 1999 compared to
1998. These increases are due to the increase in the number of properties
owned during the respective periods.
Property-level operating income for the "Same Store" properties
(properties owned as of January 1, 1998) increased to $56.3 million for
the three months ended March 31, 1999 from $53.8 million for the three
months ended March 31, 1998, with straightlining (which recognizes rental
revenue evenly over the life of the lease), and increased to $55.5
million for the three months ended March 31, 1999 from $52.8 million for
the three months ended March 31, 1998, without straightlining. These
increases of 4.7% and 5.1%, respectively, are due to increases in the
rental rates for the properties and increases in occupancy.
Set forth below is a schedule comparing the property-level operating
income for the Same Store properties for the three month periods ended
March 31, 1999 and 1998 (in thousands).
<TABLE>
<CAPTION>
WITH STRAIGHTLINING WITHOUT STRAIGHTLINING
------------------------------ ------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
------------------------------ ------------------------------
MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Rental Revenue $ 57,605 $ 55,441 $ 56,769 $ 54,408
Operating expense reimbursement 20,912 18,293 20,912 18,293
-------- -------- -------- --------
78,517 73,734 77,681 72,701
Rental property expenses 15,477 13,605 15,477 13,605
Real estate taxes 6,709 6,313 6,709 6,313
-------- -------- -------- --------
Property level operating income $ 56,331 $ 53,816 $ 55,495 $ 52,783
======== ======== ======== ========
</TABLE>
General and administrative expenses increased to $4.0 million for the
three months ended March 31, 1999 from $3.4 million for the three months
ended March 31, 1998, due to the increase in personnel and other related
overhead costs necessitated by the increase in the number of properties
owned during the respective periods. This increase is somewhat mitigated
by the benefit of certain economies of scale experienced by the Company
in owning and operating the increased number of properties.
Depreciation and amortization expense increased to $20.1 million for the
three months ended March 31, 1999 from $14.2 million for the three months
ended March 31, 1998. This increase is due to an increase in the number
of properties owned during the respective periods.
Interest expense increased to $23.8 million for the three months ended
March 31, 1999 from $16.6 million for the three months ended March 31,
1998. This increase is due to an increase in the average debt
outstanding for the respective periods which was $1,452.7 million for the
first three months of 1999 and $1,059.5 million for the first three
months of 1998. This increase is offset by a decrease in the weighted
average interest rates for the periods, to 7.2% for the three months
ended March 31, 1999 from 7.4% for the three months ended March 31, 1998.
-17-
<PAGE>
As a result of the foregoing, the Company's operating income increased to
$58.4 million for the three months ended March 31, 1999 from $43.1
million for the three months ended March 31, 1998. In addition, income
before minority interest for the three months increased to $34.6 million
for the three months ended March 31, 1999 from $26.5 million for the
three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had cash and cash equivalents of $14.7
million.
Net cash flow provided by operating activities increased to $53.0 million
for the three months ended March 31, 1999 from $49.1 million for the
three months ended March 31, 1998. This $3.9 million increase was
primarily due to the cash provided by the additional Operating Properties
in service during the latter period.
Net cash used in investing activities decreased to $79.9 million for the
three months ended March 31, 1999 from $330.7 million for the three
months ended March 31, 1998. This decrease primarily resulted from
decreased acquisition activity in 1999, and an increase in property
dispositions.
Net cash provided by financing activities decreased to $27.3 million for
the three months ended March 31, 1999 from $263.7 million for the three
months ended March 31, 1998. This decrease is due to a decrease in the
Company's financing requirements consistent with its decrease in
investment activities.
The Company believes that its undistributed cash flow from operations is
adequate to fund its short-term liquidity requirements.
The Company funds its acquisitions and completed development with long-
term capital sources. These activities may be funded on a temporary
basis through its $325.0 million unsecured line of credit (the "Credit
Facility"), which matures May 2000.
The interest rate on borrowings under the Credit Facility fluctuates
based upon the Company's leverage levels or ratings from Moody's and S&P.
Moody's and S&P have assigned senior debt ratings to the Company of Baa3
and BBB-, respectively. At these ratings, the interest rate for
borrowings under the Credit Facility is 110 basis points over LIBOR.
As of March 31, 1999, $407.7 million in mortgage loans, $645.0 million in
unsecured notes and $135.0 million in an unsecured term loan were
outstanding. The interest rates on $1,036.2 million of mortgage loans
and unsecured notes are fixed and range from 5.0% to 9.1%. Interest
rates on $151.5 million of mortgage loans and the unsecured term loan
float with LIBOR, prime or a municipal bond index, $10.0 million of which
is subject to certain caps. The weighted average remaining term for the
mortgage loans, unsecured notes and the unsecured term loan is 7.5 years.
The scheduled maturities of principal amortization of the Company's
mortgage loans, unsecured notes and the unsecured term loan outstanding
-18-
<PAGE>
and the related weighted average interest rates are as follows (in
thousands):
<TABLE>
<CAPTION>
MORTGAGES UNSECURED WEIGHTED
-------------------------- NOTES AND AVERAGE
AMORTIZATION MATURITIES TERM LOAN TOTAL INTEREST RATE
------------ ---------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
1999 $ 6,676 $ 16,412 $ - $ 23,088 6.7%
2000 9,228 26,521 - 35,749 8.4%
2001 8,860 23,298 135,000 167,158 6.5%
2002 7,676 - 100,000 107,676 6.7%
2003 7,621 26,606 50,000 84,227 7.3%
2004 7,661 15,911 100,000 123,572 7.0%
2005 6,847 99,018 - 105,865 7.6%
2006 5,544 30,078 100,000 135,622 7.2%
2007 5,133 - 100,000 105,133 7.3%
2008 4,868 28,835 - 33,703 7.2%
2009 2,587 42,096 20,000 64,683 8.1%
2010 1,608 - - 1,608 7.8%
2011 1,737 - - 1,737 7.8%
2012 882 17,674 - 18,556 7.7%
2013 641 1,571 75,000 (1) 77,212 6.4%
2014 468 - - 468 7.7%
2015 505 - - 505 7.7%
2016 546 - - 546 7.7%
2017 578 - - 578 7.7%
2018 - - 100,000 100,000 7.5%
--------- --------- ---------- ----------- -------
$ 79,666 $328,020 $ 780,000 $ 1,187,686 7.1%
========= ========= ========== =========== =======
</TABLE>
(1) Callable 2003.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
General
The Company believes that its existing sources of capital will provide
sufficient funds to finance its continued development and acquisition
activities. The Company's need for capital has been somewhat reduced by
a decline in acquisition activity throughout the year, resulting from a
general marketplace decline in initial returns on acquisitions. The
Company's existing sources of capital include the public debt and equity
markets, proceeds from property dispositions and net cash provided from
its operating activities. Additionally, the Company expects to incur
variable rate debt, including borrowings under the Credit Facility, from
time to time.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
-19-
<PAGE>
The Company has an effective S-3 shelf registration statement on file
with the Securities and Exchange Commission. As of May 1, 1999, the
Company had the capacity pursuant to the Shelf Registration Statement to
issue $696.4 million in equity securities and the Operating Partnership
has the capacity to issue $108.0 million in debt securities.
Calculation of Funds from Operations
Management generally considers Funds from operations (as defined below) 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
capital expenditures. Funds from operations is defined by NAREIT as net
income or loss after preferred distributions (computed in accordance with
generally accepted accounting principles ("GAAP")), excluding gains (or
losses) from debt restructuring and sales of property, plus real estate-
related depreciation and amortization and minority interest and excluding
significant nonrecurring events that materially distort the comparative
measurement of the Company's performance over time. 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 also does not represent cash flows generated from operating,
investing or financing activities as defined by GAAP. Funds from
operations for the three months ended March 31, 1999 and March 31, 1998
are as follows (in thousands):
THREE MONTHS ENDED
(IN THOUSANDS)
----------------------
MARCH 31, MARCH 31,
1999 1998
---------- ----------
Income available to common shareholders $ 29,678 $ 21,990
Add back:
Minority interest 2,210 1,809
Depreciation and amortization 19,834 14,080
Gain on sale (1,269) -
======== ========
Funds from operations $ 50,453 $ 37,879
======== ========
YEAR 2000
Background
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the
year 1900 rather than the year 2000. This is generally referred to as
the Year 2000 issue. If this situation occurs, the potential exists for
computer system failures or miscalculations by computer programs, which
could disrupt operations.
-20-
<PAGE>
Approach
The Company has established a group to coordinate the Company's response
to the Year 2000 issue. This group, which reports to the President and
Chief Operating Officer, includes the Company's MIS Director, a Vice-
President-Property Management and its General Counsel, as well as
support staff. The Company is in the process of implementing a Year
2000 compliance program at the Company's offices and properties
consisting of the following phases:
PHASE 1 Compilation of an inventory of information technology
(IT) and non-IT systems that may be sensitive to the Year 2000 problem.
PHASE 2 Identification and prioritization of the critical systems
from the systems inventory compiled in Phase 1 and inquiries of third
parties with whom the Company does significant business (i.e., vendors,
service providers and certain tenants) as to the state of their Year
2000 readiness.
PHASE 3 Analysis of critical systems to determine which systems
are not Year 2000 compliant and evaluation of the costs to repair or
replace those systems.
PHASE 4 Repair or replace noncompliant systems and testing of
critical systems.
Status
The Company's property management and accounting system uses four-digit
year fields and consequently is believed to be Year 2000 compliant.
Phases 1, 2, and 3 are substantially complete but for the process of
making inquiries of significant third parties as to their Year 2000
readiness, which is currently ongoing.
Phase 4 is ongoing and will continue through the first half of calendar
1999. It is the Company's goal to have this project completed by
mid-1999. Based upon the analysis conducted to date, the Company
believes the major critical systems at the Company's properties are
currently compliant or will be compliant by mid-1999.
Costs
The total cost to the Company of making its systems Year 2000 compliant
is currently estimated to be in the range of $200,000-$300,000. The
majority of this cost relates to repairing certain software, testing
systems and retrofitting or replacing energy management systems at
certain of the properties. The cost for the replacement of the
equipment and the software will be capitalized and depreciated over
their expected useful life. To the extent existing hardware or software
is replaced, the Company will write off the cost incurred. This write-
off is included in the above cost estimate. Furthermore, all costs
related to software modification, as well as all costs associated with
the Company's administration of its Year 2000 project, are being
expensed as incurred and are likewise included in the cost estimate
above.
Risks Associated with the Year 2000 Problem
The Company utilizes computer systems in many aspects of its business.
As noted, the Company's property management and accounting systems use
-21-
<PAGE>
four-digit year fields and are believed to be Year 2000 compliant.
Additionally, with respect to the hardware and software systems utilized
by the Company in its management information systems, the Company's
assessment to date indicates that these systems are Year 2000 compliant
or can readily be made Year 2000 compliant on a stand-alone basis.
Testing of this preliminary assessment and of the operation of these
systems together is ongoing.
The Company's also utilizes microprocessors which are imbedded in
systems which are part of the building operations (e.g., a
microprocessors contained within the buildings' energy management
systems or fire and life safety systems). In particular, Year 2000
problems in the HVAC, elevator, security or other such systems at the
properties could disrupt operations at the affected properties. The
properties generally consist of suburban office and industrial
properties. The properties are also principally single-story and low-
rise buildings. The Company has reviewed its building operating systems
on a building-by-building basis. At this point, based on the status of
its assessment, the Company does not believe a material number of these
systems will be non-compliant. Additionally, many of these systems,
which operate automatically, can be operated manually and consequently
in the event these systems experience a failure as a result of the Year
2000 problem, the disruption caused by such failure should not be
material to the Company's operations.
The Company is also exposed to the risk that one or more of its vendors
or service providers could experience Year 2000 problems that impact the
ability of such vendor or service provider to provide goods and
services. Though this is not considered as significant a risk with
respect to the suppliers of goods, due to the availability of
alternative suppliers, the disruption of certain services, such as
utilities, could, depending upon the extent of the disruption, have a
material adverse impact on the Company's operations. To date, the
Company is not aware of any vendor or service provider Year 2000 issue
that management believes would have a material adverse impact on the
Company's operations. However, the Company has no means of ensuring
that its vendors or service providers will be Year 2000 ready. The
inability of vendors or service providers to complete their Year 2000
resolution process in a timely fashion could have a adverse impact on
the Company. The effect of non-compliance by vendors or service
providers is not determinable at this time.
In addition, the Company is exposed to the risk that one or more of its
tenants could experience Year 2000 problems that impact the ability of
such tenant to pay its rent to the Company in a timely fashion. The
Company does not believe that such a problem is likely to affect enough
tenants to pose a material problem for the Company. To date, the
Company is not aware of any tenant Year 2000 issue that would have a
material adverse impact on the Company's operations. However, the
Company has no means of ensuring that its tenants will be Year 2000
ready. The inability of tenants to complete their Year 2000 resolution
process in a timely fashion could have an adverse impact on the Company.
The effect of non-compliance by tenants is not determinable at this
time.
Widespread disruptions in the national or international economy,
including disruptions affecting the financial markets, resulting from
Year 2000 issues, or in certain industries, such as commercial or
investment banks, could also have an adverse impact on the Company. The
likelihood and effect of such disruptions is not determinable at this
time.
-22-
<PAGE>
Readers are cautioned that forward-looking statements contained in the
Year 2000 discussion should be read in conjunction with the Company's
disclosures regarding forward-looking statements previously disclosed.
INFLATION
- ---------
Inflation has remained relatively low during the last three years, and as
a result, it has not had a significant impact on the Company during this
period. The Credit Facility bears interest at a variable rate; therefore,
the amount of interest payable under the Credit Facility will be
influenced by changes in short-term interest rates, which tend to be
sensitive to inflation. To the extent an increase in inflation would
result in increased operating costs, such as in insurance, real estate
taxes and utilities, substantially all of the tenants' leases require the
tenants to absorb these costs as part of their rental obligations. In
addition, inflation also may have the effect of increasing market rental
rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
There have been no material changes to the Company's exposure to market
risk since its Annual Report on Form 10-K for 1998.
-23-
<PAGE>
PART II: OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
4 Third Supplemental Indenture, dated as of April 20,
1999, between the Operating Partnership, as Issuer, and The First
National Bank of Chicago, as Trustee, supplementing the Senior Indenture,
dated as of October 24, 1997, between the Operating Partnership, as
Obligor, and The First National Bank of Chicago, as Trustee, and relating
to the $250,000,000 principal amount of 7.75% Senior Notes, due 2009 of
the Operating Partnership.
27 Financial Data Schedule (EDGAR VERSION ONLY)
b. Reports on Form 8-K
None
-24-
<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 thereunto duly authorized.
LIBERTY PROPERTY TRUST
/s/ JOSEPH P. DENNY May 11, 1999
- ------------------------------ --------------------------------
Joseph P. Denny Date
President
/s/ GEORGE J. ALBURGER, JR. May 11, 1999
- ------------------------------ --------------------------------
George J. Alburger, Jr. Date
Chief Financial Officer
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: LIBERTY PROPERTY TRUST, GENERAL PARTNER
/s/ JOSEPH P. DENNY May 11, 1999
- ------------------------------ --------------------------------
Joseph P. Denny Date
President
/s/ GEORGE J. ALBURGER, JR. May 11, 1999
- ------------------------------ --------------------------------
George J. Alburger, Jr. Date
Chief Financial Officer
-25-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------
4 Third Supplemental Indenture, dated as of April 20,
1999 between the Operating Partnership, as Issuer, and
The First National Bank of Chicago, as Trustee,
supplementing the Senior Indenture, dated as of
October 24, 1997, between the Operating Partnership,
as Obligor, and The First National Bank of Chicago, as
Trustee, and relating to the $250,000,000 principal
amount of 7.75% Senior Notes, due 2009 of the
Operating Partnership.
27 Financial Data Schedule (EDGAR VERSION ONLY)
-26-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1999 and the Consolidated Statement of
Operations for the three months ended March 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000921112
<NAME> LIBERTY PROPERTY TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,726
<SECURITIES> 0
<RECEIVABLES> 9,879
<ALLOWANCES> 3,119
<INVENTORY> 0
<CURRENT-ASSETS> 24,605
<PP&E> 3,113,133
<DEPRECIATION> 231,514
<TOTAL-ASSETS> 2,985,212
<CURRENT-LIABILITIES> 34,342
<BONDS> 1,481,522
0
120,814
<COMMON> 66
<OTHER-SE> 1,158,242
<TOTAL-LIABILITY-AND-EQUITY> 2,985,212
<SALES> 0
<TOTAL-REVENUES> 113,489
<CGS> 0
<TOTAL-COSTS> 30,970
<OTHER-EXPENSES> 24,128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,753
<INCOME-PRETAX> 34,638
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,678
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
EXHIBIT 4
LIBERTY PROPERTY LIMITED PARTNERSHIP
ISSUER
TO
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
THIRD SUPPLEMENTAL INDENTURE
DATED AS OF APRIL 20, 1999
7.75% SENIOR NOTES DUE 2009
SUPPLEMENT TO INDENTURE,
DATED AS OF OCTOBER 24, 1997, BETWEEN
LIBERTY PROPERTY LIMITED PARTNERSHIP AND
THE FIRST NATIONAL BANK OF CHICAGO
THIRD SUPPLEMENTAL INDENTURE, dated as of April 20, 1999, between
LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership
(the "Company"), having its principal offices at 65 Valley Stream
Parkway, Malvern, Pennsylvania 19355, and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association organized under the laws of the
United States of America, as trustee (the "Trustee"), having its
Corporate Trust Office at One First National Plaza, Suite 0126, Chicago,
Illinois 60670-0126.
RECITALS
WHEREAS, the Company executed and delivered its Indenture (the "Original
Indenture"), dated as of October 24, 1997, to the Trustee to issue from
time to time for its lawful purposes debt securities evidencing its
unsecured indebtedness.
WHEREAS, the Original Indenture provides that by means of a supplemental
indenture, the Company may create one or more series of its debt
securities and establish the form and terms and conditions thereof.
WHEREAS, the Company intends by this Third Supplemental Indenture to (i)
create a series of debt securities to be issued from time to time in an
unlimited principal amount entitled "Liberty Property Limited
Partnership 7.75% Senior Notes due 2009" (the "Notes"); and (ii)
establish the forms and the terms and conditions of such Notes.
WHEREAS, the Board of Trustees of Liberty Property Trust (the "Trust"),
the general partner of the Company, has approved the creation of the
Notes and the form, terms and conditions thereof.
WHEREAS, the consent of Holders to the execution and delivery of this
Third Supplemental Indenture is not required, and all other actions
required to be taken under the Original Indenture with respect to this
Third Supplemental Indenture have been taken.
NOW, THEREFORE IT IS AGREED:
ARTICLE ONE
Definitions, Creation, Form and Terms and Conditions
of the Debt Securities
SECTION 1.01 Definitions. Capitalized terms used in this Third
Supplemental Indenture and not otherwise defined shall have the meanings
ascribed to them in the Original Indenture. In addition, the following
terms shall have the following meanings to be equally applicable to both
the singular and the plural forms of the terms defined:
"Closing Date" means April 20, 1999.
"Global Note" means a single fully-registered global note in book entry
form, without coupons, substantially in the form of Exhibit A attached
hereto.
"Indenture" means the Original Indenture as supplemented by this Third
Supplemental Indenture.
"Intercompany Debt" means Debt to which the only parties are the Trust,
any of its subsidiaries, the Company and any Subsidiary, or Debt owed to
the Trust arising from routine cash management practices, but only so
long as such Debt is held solely by any of the Trust, any of its
subsidiaries, the Company and any Subsidiary.
SECTION 1.02 Creation of the Debt Securities. In accordance with
Section 301 of the Original Indenture, the Company hereby creates the
Notes as a separate series of its debt securities issued pursuant to the
Indenture. The Notes shall be issued in an aggregate principal amount
initially limited to $250,000,000.
The Company may issue, in addition to the Notes originally issued on the
Closing Date, additional Notes. The Notes originally issued on the
Closing Date and any additional Notes originally issued subsequent to
the Closing Date shall be a single series for all purposes under the
Indenture.
SECTION 1.03 Form of the Debt Securities. The Notes will be
represented by one or more fully-registered global notes in book-entry
form, without coupons, registered in the name of the nominee of DTC. The
Notes shall be in the form of Exhibit A attached hereto. So long as
DTC, or its nominee, is the registered owner of a Global Note, DTC or
its nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by such Global Note for all purposes
under the Indenture. Ownership of beneficial interests in the Global
Note will be shown on, and transfers thereof will be effected only
through, records maintained by DTC (with respect to beneficial interests
of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial
owners).
SECTION 1.04 Terms and Conditions of the Debt Securities. The Notes
shall be governed by all the terms and conditions of the Original
Indenture, as supplemented by this Third Supplemental Indenture, and in
particular, the following provisions shall be the terms of the Notes:
(a) Optional Redemption. The Issuer may redeem the Notes at any
time at the option of the Issuer, in whole or from time to time in part,
at a redemption price equal to the Redemption Price.
If notice of redemption has been given as provided in the
Indenture and funds for the redemption of any Notes called for
redemption shall have been made available on the Redemption Date
referred to in such notice, such Notes will cease to bear interest on
the date fixed for such redemption specified in such notice and the only
right of the Holders of such Notes from and after the Redemption Date
will be to receive payment of the Redemption Price upon surrender of
such Notes in accordance with such notice.
Notice of any optional redemption of any Notes will be given to
Holders at their addresses, as shown in the security register for the
Notes, not more than 60 nor less than 30 days prior to the date fixed
for redemption. The notice of redemption will specify, among other
items, the Redemption Price and the principal amount of the Notes held
by such Holder to be redeemed.
If all or less than all of the Notes are to be redeemed at the
option of the Issuer, the Issuer will notify the Trustee at least 45
days prior to giving notice of redemption (or such shorter period as is
satisfactory to the Trustee) of the aggregate principal amount of Notes
to be redeemed, if less than all of the Notes are to be redeemed, and
their Redemption Date. The Trustee shall select, in such manner as it
shall deem fair and appropriate, no less than 60 days prior to the date
of redemption, the Notes to be redeemed in whole or in part.
(b) Payment of Principal and Interest. Principal and interest
payments on interests represented by a Global Note will be made to DTC
or its nominee, as the case may be, as the registered owner of such
Global Note. All payments of principal and interest in respect of the
Notes will be made by the Issuer in immediately available funds.
(c) Applicability of Defeasance or Covenant Defeasance. The
provisions of Article 14 of the Original Indenture shall apply to the
Notes.
ARTICLE TWO
Additional Covenants
The Notes shall be governed by all the covenants contained in the
Original Indenture, as supplemented by this Third Supplemental
Indenture, and in particular, this Third Supplemental Indenture amends
Section 1004 of the Original Indenture to read as follows:
"SECTION 1004. Limitations on Incurrence of Debt.
(a) The Company will not, and will not permit any Subsidiary to,
incur any Debt, other than Intercompany Debt, that is subordinate in
right of payment to the Notes, if, immediately after giving effect to
the incurrence of such Debt and the application of the proceeds thereof,
the aggregate principal amount of all outstanding Debt of the Company
and its Subsidiaries on a consolidated basis determined in accordance
with GAAP is greater than 60% of the sum of (i) the Company's Adjusted
Total Assets as of the end of the most recent fiscal quarter prior to
the incurrence of such additional Debt and (ii) the increase in Adjusted
Total Assets since the end of such quarter (including any increase
resulting from the incurrence of additional Debt).
(b) The Company will not, and will not permit any Subsidiary to,
incur any Debt if the ratio of Consolidated Income Available for Debt
Service to the Annual Service Charge on the date on which such
additional Debt is to be incurred, on a pro forma basis, after giving
effect to the incurrence of such Debt and to the application of the
proceeds thereof would have been less than 1.5 to 1.
(c) The Company will not, and will not permit any Subsidiary to,
incur any Debt secured by any mortgage, lien, charge, pledge,
encumbrance or security interest of any kind upon any of the properties
of the Company or any Subsidiary ("Secured Debt"), whether owned at the
date hereof or hereafter acquired, if, immediately after giving effect
to the incurrence of such Secured Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding
Secured Debt of the Company and its Subsidiaries on a consolidated basis
is greater than 40% of the sum of (i) the Company's Adjusted Total
Assets as of the end of the most recent fiscal quarter prior to the
incurrence of such additional Debt and (ii) the increase in Adjusted
Total Assets since the end of such quarter (including any increase
resulting from the incurrence of additional Debt).
(d) The Company will at all time maintain an Unencumbered Total
Asset Value in an amount not less than 150% of the aggregate principal
amount of all outstanding unsecured Debt of the Company and its
Subsidiaries on a consolidated basis.
For purposes of the foregoing provisions regarding the
limitation on the incurrence of Debt, Debt shall be deemed to be
"incurred" by the Company or a Subsidiary whenever the Company or such
Subsidiary shall create, assume, guarantee or otherwise become liable in
respect thereof."
ARTICLE THREE
Trustee
SECTION 3.01 Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of
this Third Supplemental Indenture or the due execution thereof by the
Company. The recitals of fact contained herein shall be taken as the
statements solely of the Company, and the Trustee assumes no
responsibility for the correctness thereof.
ARTICLE FOUR
Miscellaneous Provisions
SECTION 4.01 Ratification of Original Indenture. This Third
Supplemental Indenture is executed and shall be construed as an
indenture supplemental to the Original Indenture, and as supplemented
and modified hereby, the Original Indenture is in all respects ratified
and confirmed, and the Original Indenture and this Third Supplemental
Indenture shall be read, taken and construed as one and the same
instrument.
SECTION 4.02 Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction
hereof.
SECTION 4.03 Successors and Assigns. All covenants and agreements in
this Third Supplemental Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 4.04 Separability Clause. In case any one or more of the
provisions contained in this Third Supplemental Indenture shall for any
reason be held to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
SECTION 4.05 Governing Law. This Third Supplemental Indenture shall
be governed by and construed in accordance with the laws of the State of
New York. This Third Supplemental Indenture is subject to the
provisions of the Trust Indenture Act, that are required to be part of
this Third Supplemental Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 4.06 Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, and each of such counterparts
shall for all purposes be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, all as of the date
first above written.
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust,
as its sole General Partner
By: /s/ George J. Alburger, Jr.
-------------------------------------
Name: George J. Alburger, Jr.
Title: Chief Financial Officer
Attest:
/s/ James J. Bowes
- ---------------------------
Name: James J. Bowes
Title: General Counsel and Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ Mark J. Frye
-------------------------------------
Name: Mark J. Frye
Title: Asst. Vice President
Attest:
/s/ Jeffrey L. Kinney
- ----------------------------
Name: Jeffrey L. Kinney
Title: Vice President
STATE OF Pennsylvania )
) ss:
COUNTY OF Chester )
On the 19th day of April 1999, before me personally came George
J. Alburger, Jr., to me known, who, being by me duly sworn, did depose
and say that he/she resides at 65 Valley Stream Parkway, that he/she is
Chief Financial Officer of LIBERTY PROPERTY TRUST, the sole general
partner of LIBERTY PROPERTY LIMITED PARTNERSHIP, one of the parties
described in and which executed the foregoing instrument, and that
he/she signed his/her name thereto by authority of the Board of
Trustees.
[Notarial Seal]
/s/ Christina Kane
----------------------------
Notary Public
COMMISSION EXPIRES
STATE OF Illinois )
) ss:
COUNTY OF Cook )
On the 20th day of April 1999, before me personally came Mark J. Frye,
to me known, who, being by me duly sworn, did depose and say that he/she
resides at 15031 S. Ridgewood Drive, Oak Forest, that he/she is a Asst.
Vice President of THE FIRST NATIONAL BANK OF CHICAGO, one of the parties
described in and which executed the foregoing instrument, and that
he/she signed his/her name thereto by authority of the Board of
Directors.
[Notarial Seal]
/s/ Maria C. Birrueta
---------------------------------
Notary Public
COMMISSION EXPIRES
Exhibit A
[FACE OF NOTE]
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO
DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A
SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR.
REGISTERED REGISTERED
NO. [ ] PRINCIPAL AMOUNT
CUSIP NO. [ ] $[ ]
LIBERTY PROPERTY LIMITED PARTNERSHIP
[ ]% Senior Notes due [ ]
Liberty Property Limited Partnership, a Pennsylvania limited partnership
(the "Issuer," which term includes any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
Cede & Co. or its registered assigns, the principal sum of [ ]
Dollars on [ ] (the "Maturity Date"), and to pay interest
thereon from [ ] (or from the most recent interest payment
date to which interest has been paid or duly provided for), semi-
annually in arrears on [ ] and [ ] of each year
(each, an "Interest Payment Date"), commencing on [ ], and
on the Maturity Date, at the rate of [ ]% per annum, until
payment of said principal sum has been made or duly provided for.
The interest so payable and punctually paid or duly provided for on any
Interest Payment Date and on the Maturity Date will be paid to the
Holder in whose name this Note (or one or more predecessor Notes) is
registered at the close of business on the "Record Date" for such
payment, which will be 15 days (regardless of whether such day is a
Business Day (as defined below)) prior to such payment date or the
Maturity Date, as the case may be. Any interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder
on such record date, and shall be paid to the Holder in whose name this
Note (or one or more predecessor Notes) is registered at the close of
business on a subsequent record date for the payment of such defaulted
interest (which shall be not more than 15 days and not less than 10 days
prior to the date of the payment of such defaulted interest) established
by notice given by mail by or on behalf of the Issuer to the Holders of
the Notes not less than 10 days preceding such subsequent record date.
Interest on this Note will be computed on the basis of a 360-day year of
twelve 30-day months.
The principal of this Note payable on the Maturity Date will be paid
against presentation and surrender of this Note at the corporate trust
office of the Trustee at One First National Plaza, Chicago, Illinois
60670-0126, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public or private
debt.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest
accrued from and including the immediately preceding Interest Payment
Date (or from and including [ ], in the case of the initial
Interest Payment Date) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be. If any Interest Payment
Date or the Maturity Date falls on a day that is not a Business Day (as
defined below), the required payment of interest or principal or both,
as the case may be, will be made on the next Business Day with the same
force and effect as if it were made on the date such payment was due and
no interest will accrue on the amount so payable for the period from and
after such Interest Payment Date or the Maturity Date, as the case may
be. "Business Day" means any day, other than a Saturday or a Sunday,
that is neither a legal holiday nor a day on which banking institutions
in The City of New York or Chicago are authorized or required by law,
regulation or executive order to close.
Payments of principal and interest in respect of this Note will be made
by wire transfer of immediately available funds in such coin or currency
of the United States of America as at the time of payment is legal
tender for the payment of public and private debts.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Note shall not be entitled to the benefits of the Indenture
referred to on the reverse hereof or be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have
been signed by the Trustee under such Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its authorized officers.
Dated: [ ], 1999
LIBERTY PROPERTY LIMITED PARTNERSHIP,
as Issuer
By: LIBERTY PROPERTY TRUST,
as its sole General Partner
--------------------------------------
By:
Name:
Title:
--------------------------------------
By:
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
-----------------------------------
By:
Authorized Officer
[REVERSE OF NOTE]
LIBERTY PROPERTY LIMITED PARTNERSHIP
[ ]% Senior Notes due [ ]
This security is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of indebtedness of the Issuer (hereinafter
called the "Securities") of the series hereinafter specified, all issued
or to be issued under and pursuant to an Indenture dated as of [ ]
(herein called the "Indenture"), duly executed and delivered by the
Issuer to The First National Bank of Chicago, as Trustee (herein called
the "Trustee," which term includes any successor trustee under the
Indenture with respect to the series of Securities of which this Note is
a part), to which Indenture and all indentures supplemental thereto
relating to this security reference is hereby made for a description of
the rights, limitations of rights, obligations, duties, and immunities
thereunder of the Trustee, the Issuer, and the Holders of the
Securities, and of the terms upon which the Securities are, and are to
be, authenticated and delivered. The Securities may be issued in one or
more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if
any) at different rates, may be subject to different redemption
provisions (if any), and may otherwise vary as provided in the Indenture
or any indenture supplemental thereto. This security is one of a series
designated as the [ ]% Notes due [ ] of the Issuer.
In case an Event of Default with respect to this security shall have
occurred and be continuing, the principal hereof and Make-Whole Amount,
if any, may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect, and subject to the conditions
provided in the Indenture.
The Issuer may redeem this security at any time at the option of the
Issuer, in whole or from time to time in part, at a redemption price
equal to the sum of (i) the principal amount of this security being
redeemed plus accrued interest thereon to the Redemption Date and (ii)
the Make-Whole Amount, if any, with respect to this security. Notice of
any optional redemption of any Securities will be given to Holders at
their addresses, as shown in the security register for the Securities,
not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items,
the Redemption Price and the principal amount of the Securities held by
such Holder to be redeemed.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the
aggregate principal amount of the Securities at the time Outstanding of
all series to be affected (voting as one class), evidenced as provided
in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the Holders of the Securities of
each series; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Security so affected,
(i) change the Stated Maturity of the principal of (or premium or Make-
Whole Amount, if any, on) or any installment of interest on, any such
Security, (ii) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of the Notes, or
adversely affect any right of repayment of the Holder of any Securities;
(iii) change the place of payment, or the coin or currency, for payment
of principal or premium, if any, or interest on the Securities; (iv)
impair the right to institute suit for the enforcement of any payment on
or with respect to the Securities on or after the stated maturity of any
such Security; (v) reduce the above-stated percentage in principal
amount of outstanding Securities, the extent of whose Holders is
necessary to modify or amend the Indenture, for any waiver with respect
to the Securities or to waive compliance with certain provisions of the
Indenture or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the Indenture; or (vi)
modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide
that certain other provisions of the Indenture may not be modified or
waived without the consent of the Holder of each Security. It is also
provided in the Indenture that, with respect to certain defaults or
Events of Default regarding the Securities of any series, the Holders of
a majority in aggregate principal amount outstanding of the Securities
of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the Holders of all
the Securities of such series (or all of the Securities, as the case may
be) waive any such past default or Event of Default and its
consequences, prior to any declaration accelerating the maturity of such
Securities, or, subject to certain conditions, may rescind a declaration
of acceleration and its consequences with respect to such Securities.
Any such consent or waiver by the Holder of this Security (unless
revoked as provided in the Indenture) shall be conclusive and binding
upon such Holder and upon all future Holders and owners of this Security
and any Securities that may be issued in exchange or substitution
herefor, irrespective of whether or not any notation thereof is made
upon this security or such other securities.
No reference herein to the Indenture and no provision of this security
or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and any
Make-Whole Amount and interest on this security in the manner, at the
respective times, at the rate and in the coin or currency herein
prescribed.
This security is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Securities may
be exchanged for a like aggregate principal amount of securities of this
series of other authorized denominations at the office or agency of the
Issuer in The Borough of Manhattan, The City of New York, in the manner
and subject to the limitations provided in the Indenture, but without
the payment of any service charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of Securities at the
office or agency of the Issuer in The Borough of Manhattan, The City of
New York, one or more new Securities of the same series of authorized
denominations in an equal aggregate principal amount will be issued to
the transferee in exchange therefor, subject to the limitations provided
in the Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Issuer, the Trustee or any authorized agent of the Issuer or the
Trustee may deem and treat the Person in whose name this security is
registered as the absolute owner of this security (whether or not this
security shall be overdue and notwithstanding any notation of ownership
or other writing hereon), for the purpose of receiving payment of, or on
account of, the principal hereof and Make-Whole Amount, if any, and
subject to the provisions on the face hereof, interest hereon, and for
all other purposes, and neither the Issuer nor the Trustee nor any
authorized agent of the Issuer or the Trustee shall be affected by any
notice to the contrary.
The Indenture and each Security shall be deemed to be a contract under
the laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of such state, except as may
otherwise be required by mandatory provisions of law.
Capitalized terms used herein which are not otherwise defined shall have
the respective meanings assigned to them in the Indenture and all
indentures supplemental thereto relating to this security.
