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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 001-13254
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WEEKS CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 58-1525322
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(State of Incorporation) (I.R.S. Employer Identification No.)
4497 Park Drive, Norcross, Georgia 30093
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(Address of principal executive offices, including zip code)
(770) 923-4076
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(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO___
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ___
The aggregate market value of the shares of common stock held by non-
affiliates (based upon the closing sale price on the New York Stock Exchange on
March 20, 1997) was approximately $485,132,000. As of March 20, 1997, there
were 14,061,786 shares of common stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement in connection with its
Annual Meeting of Shareholders to be held May 21, 1997 are incorporated by
reference in Part III, Items 10, 11, and 13.
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TABLE OF CONTENTS
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ITEM NO. FINANCIAL INFORMATION PAGE NO.
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PART I
1. Business............................................. 3
2. Properties........................................... 14
3. Legal Proceedings.................................... 29
4. Submission of Matters to a Vote of Security Holders.. 29
X. Executive Officers................................... 30
PART II
5. Market for Registrant's Common Equity
and Related Shareholder Matters.................. 33
6. Selected Financial Data.............................. 35
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 36
8. Financial Statements and Supplementary Data.......... 49
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 49
PART III
10. Directors and Executive Officers of the Registrant... 49
11. Executive Compensation............................... 49
12. Security Ownership of Certain Beneficial Owners and
Management........................................... 50
13. Certain Relationships and Related Transactions....... 53
PART IV
14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K.......................................... 53
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PART I
ITEM 1. BUSINESS
THE COMPANY
Weeks Corporation (the "Company" or "Registrant") is a self-administered, self-
managed, geographically focused real estate investment trust ("REIT") that was
organized in 1994 to continue and expand the fully integrated real estate
business previously conducted by the Company and its affiliates. Since 1965, the
Company, together with its affiliates and predecessors, has developed, owned,
managed, constructed and acquired primarily institutional-quality industrial and
suburban office properties in Metropolitan Atlanta and in selected metropolitan
markets in the Southeast. The Company is one of the largest industrial real
estate companies in the Southeast based on square footage owned and managed.
As of December 31, 1996, the Company owned 168 industrial properties, 17
suburban office properties and three retail properties comprising 13.0 million
square feet. The Company's primary markets and the concentration of the
Company's portfolio (based on square footage) are Atlanta, Georgia (74%),
Nashville, Tennessee (11%), Raleigh-Durham-Chapel Hill, North Carolina (9%),
Orlando, Florida (3%), and Spartanburg, South Carolina (3%). In addition, 24
industrial and suburban office properties and two property expansions were under
development or in lease-up at December 31, 1996, comprising an additional 3.0
million square feet (see "Properties" below).
As used herein, the term "Company" includes Weeks Corporation and its
subsidiaries, including Weeks Realty, L.P. (the "Operating Partnership"), unless
the context indicates otherwise. The Company, through its wholly owned
subsidiaries, is the general partner and owns a majority interest in the
Operating Partnership which, including the operations of its subsidiaries,
conducts substantially all of the on-going operations of the Company. The
Company has elected to qualify and operate as a self-administered and self-
managed REIT under the Internal Revenue Code of 1986, as amended (the "Code").
As a REIT, the Company will not generally be subject to corporate federal income
taxes as long as it satisfies certain technical requirements of the Code
relating to the composition of its income and assets, and the requirement to
distribute 95% of its taxable income to its shareholders.
As of December 31, 1996, the Company had outstanding 14,048,593 shares of common
stock and owned the same number of units of partnership interest ("Units") in
the Operating Partnership, representing a 75.8% ownership interest in the
Operating Partnership. Units held by persons other than the Company totaled
4,485,190 as of December 31, 1996, and represented a 24.2% minority interest in
the Operating Partnership. Units are convertible by their holders into shares of
common stock on a one-for-one basis, or into cash, at the Company's option,
subject to certain restrictions discussed under "Security Ownership of Certain
Beneficial Owners and Management" in Item 12. The Company's weighted average
ownership interest in the Operating Partnership was 80.6% and 75.9% for the
years ended December 31, 1996 and 1995, respectively. Of the 75.8% interest in
the Operating Partnership held by the Company as of December 31, 1996, the
Company owned the sole 1.3% general partnership interest in the Operating
Partnership through Weeks GP Holdings, Inc., a wholly owned Georgia corporation
("Weeks GP"), and a 74.5% limited partnership interest in the Operating
Partnership through
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Weeks LP Holdings, Inc., a wholly owned Georgia corporation ("Weeks LP"). Both
Weeks GP and Weeks LP are qualified REIT subsidiaries within the meaning of
Section 856(i)(2) of the Code and their existence will be disregarded for
federal income tax purposes.
The Company conducts its third-party service business through two subsidiaries
(the "Subsidiaries"): Weeks Realty Services, Inc., conducts third-party
landscape, property management and leasing services, and Weeks Construction
Services, Inc., conducts third-party construction services. The Company holds
100% of the nonvoting and 1% of the voting common stock of these Subsidiaries.
The remaining voting common stock is held by three executive officers of the
Company. The ownership of the common stock of the Subsidiaries entitles the
Company to substantially all (99%) of the economic benefits from the results of
the Subsidiaries' operations (see Notes 2 and 7 to the consolidated and combined
financial statements).
On August 24, 1994, the Company completed a business combination and an initial
public offering ("IPO") of common stock resulting in the organizational and
operating structure discussed above. The Company and its subsidiaries succeeded
to substantially all of the interests in certain land and industrial and
suburban office buildings under common ownership and to the development,
construction, landscape and management businesses of the predecessors to the
Company referred to herein as the "Weeks Group."
The Operating Partnership owns five of its industrial buildings in Atlanta,
Georgia through its 99% ownership of Weeks Financing Limited Partnership (the
"Financing Partnership"). The Financing Partnership buildings are encumbered by
mortgage indebtedness assumed in connection with the IPO. The remaining 1%
ownership interest in the Financing Partnership is held by Weeks Realty
Services.
The Operating Partnership will terminate on the earlier of a sale of all or
substantially all of the assets of the Operating Partnership, the election of
the general partner (with the consent of the limited partners) to dissolve the
Operating Partnership, or December 31, 2093.
Based on shares of common stock outstanding on December 31, 1996, executive
officers and directors of the Company own approximately 14.6% of the common
stock of the Company, assuming an exchange for common stock of all of the Units
which are not currently held by the Company. Such ownership excludes 2,774
shares of common stock and 320,124 Units beneficially owned by A. Ray Weeks,
Jr., as trustee of two trusts for the benefit of certain members of the Weeks
family, 763,090 Units beneficially owned by John W. Nelley, Jr. and Albert W.
Buckley, Jr., as general partners of NWI Warehouse Group, L.P., and 753,000
shares of common stock issuable upon the exercise of options outstanding on
December 31, 1996, granted to executive officers and directors of the Company.
COMPANY HISTORY
The Company was founded in 1965 by A.R. Weeks, Sr., the father of A. Ray Weeks,
Jr., the Company's Chairman of the Board and Chief Executive Officer. Under the
leadership of A. Ray Weeks, Jr. and Forrest W. Robinson, the Company's President
and Chief Operating Officer, the Company operated as a private real estate
Company until August 1994, when it completed the IPO and elected to be taxed as
a REIT. Thomas D. Senkbeil joined the Company as Vice Chairman of the Board and
Chief Investment Officer in October 1992. Prior to joining the
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Company, Mr. Senkbeil had been a principal in another real estate development
and management firm in Atlanta, Georgia.
In November 1996, the Company completed the initial phase of the acquisition of
the properties and related operations of NWI Warehouse Group, L.P. ("NWI") and
Buckley & Company Real Estate, Inc. ("Buckley"), each of Nashville, Tennessee
(see Note 8 to the consolidated and combined financial statements). Through
that transaction, the Company established a presence in Nashville, Tennessee,
and both of the principals of NWI and Buckley, John W. Nelley, Jr., and Albert
W. Buckley, Jr., joined the Company as Managing Directors with responsibility
for the Company's activities in Nashville, Tennessee. In December 1996, the
Company completed the initial phase of its acquisition of the properties and
related operations of Lichtin Properties, Inc. ("Lichtin"), of the Raleigh-
Durham-Chapel Hill area of North Carolina (the "Research Triangle") (see Note 8
to the consolidated and combined financial statements). Through that
transaction, the Company established a presence in the Research Triangle, and
Harold S. Lichtin, the President of Lichtin, joined the Company as a Managing
Director with responsibility for the Company's activities in North Carolina.
John W. Nelley, Jr., and Harold S. Lichtin also joined the Company's Board of
Directors.
The Company was incorporated in Georgia as A. R. Weeks & Associates Inc. in
1983. The Company changed its name to Weeks Corporation in June 1994. The
Company's executive offices are located at 4497 Park Drive, Norcross, Georgia,
30093; its telephone number is (770)923-4076. The Company, the Operating
Partnership and the Subsidiaries currently employ approximately 335 full-time
employees.
COMPETITION
Numerous properties compete with the Company's properties in attracting tenants
and corporate users. Some of these competing properties may be newer or better
located than the Company's properties. The number of competitive industrial or
suburban office properties and the availability of land suitable for industrial
or suburban office development in a particular area could have a material effect
on the Company's ability to lease or develop space. The Company may be
competing with other developers that have greater resources than the Company.
In addition, in order to maintain its qualification as a REIT, the Company will
be required under the Code to distribute annually significant amounts of cash
from operations, while some of its competitors may be able to retain more of
their working capital to finance projects.
The Company competes for tenants based on its high level of client service, the
quality of its properties and business parks, and its ability to successfully
develop a wide range of industrial and suburban office properties. Leases at
the Company's properties are priced competitively based on market conditions,
supply and demand characteristics, and the quality of the Company's properties
and services. The Company does not seek to compete solely on the basis of
providing the low-cost solution for all tenants.
REAL ESTATE INVESTMENTS
The Company's real estate investments are subject to varying degrees of risk.
Income from the Company's properties and the demand for new development
properties may be adversely affected by the general economic climate; local
conditions such as oversupply of industrial or office properties or a reduction
in demand for industrial or office properties in the markets where the Company
owns properties; the attractiveness of the Company's properties; the
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ability of the Company to provide adequate maintenance and insurance; and
increased operating costs (including real estate taxes). In addition, income
from the Company's properties and the value of its real estate are also affected
by such factors as the cost of regulatory compliance, interest rate levels and
the availability of financing. The Company's income and operations would be
adversely affected if a significant number of tenants were unable to pay rent or
the Company's properties could not be rented on favorable terms. Certain
significant expenditures associated with the Company's investments in real
estate (such as mortgage payments, if any, real estate taxes and maintenance
costs) are generally not reduced when circumstances cause a reduction in income
from the property.
ENVIRONMENTAL LIABILITIES
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be held liable for the costs of removal or
remediation of hazardous or toxic substances located on or in the property.
These laws often impose such liability without regard to whether the owner knows
of, or was responsible for, the presence of such hazardous or toxic substances.
The costs of any required remediation or removal of such substances may be
substantial. In addition, the owner's liability as to any property is generally
not limited under such laws and regulations and could exceed the value of the
property and/or the aggregate assets of the owner. The presence of such
substances, or the failure to remediate such substances properly, may also
adversely affect the owner's ability to sell or lease the property or to borrow
using the property as collateral. Under such laws and regulations, an owner or
entity who arranges for the disposal or treatment of hazardous or toxic
substances at a disposal or treatment facility may also be liable for the costs
of removal or remediation of all such substances at such facility, whether or
not such facility is owned or operated by such person. Certain tenants of the
Company handle and store hazardous substances at the Company's properties. As a
result, in connection with the ownership of the Company's properties or land
held for development and a tenant's improper handling, storage, disposal or
treatment of such hazardous or toxic substances, the Company may be liable for
such costs, including the removal or remediation of all such substances from
such properties. Some laws and regulations impose liability for the release of
certain materials into the air or water from a property, including asbestos, and
such release can form the basis for liability to third parties for personal
injury or other damages. Other laws and regulations can limit the development of
and impose liability for the disturbance of wetlands or the habitats of
threatened or endangered species.
The Company regularly makes capital expenditures and reviews the conditions of
its properties and its land held for development in order to maintain compliance
with applicable environmental laws. Based on facts currently known to it, the
Company does not believe it will be required under existing environmental laws
to expend amounts that would have a material adverse effect on its results of
operations, financial condition or liquidity. However, no assurance can be
given that material environmental liabilities do not exist, that any prior owner
or operator of a property or land held for development did not create any
material environmental condition not known to the Company, that a material
environmental condition does not otherwise exist as to any one or more of the
properties or land held for development, or that future uses and conditions
(including changes in applicable environmental laws and regulations and the uses
and conditions of properties in the vicinity, such as leaking underground
storage tanks and the activities of the tenants) will not result in the
imposition of environmental liability. No material expenditures have been made
by the Company in 1996 or in 1995 relating to environmental matters.
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INVESTMENT OBJECTIVES AND OPERATING STRATEGIES
The Company's primary investment objectives are to increase shareholder value
and to increase per share cash available for distribution by (1) developing
institutional-quality, functional multi-tenant and build-to-suit industrial and
suburban office properties, (2) acquiring industrial and suburban office
properties in strategic locations where the Company can establish or enhance its
market presence, (3) maximizing cash flow through active leasing and management
of its properties, and (4) expanding strategically into new geographic markets.
The Company has structured its operations, as discussed in more detail below, to
meet these investment objectives.
FULLY INTEGRATED REAL ESTATE COMPANY
The Company is a fully integrated real estate company with resources dedicated
to:
. marketing . landscaping
. development . property management
. construction . civil engineering
. investment analysis . legal
. asset management . design
. financing . information systems
The Company believes that by providing a full range of services it can control
quality and provide greater client service, improve timely delivery of its
industrial and suburban office developments and promote cost savings.
DEVELOPMENT OF BUSINESS PARK ENVIRONMENTS
The Company develops and owns its properties primarily in business park
environments (see discussion under "Properties"). Alone or with its joint
venture partners, the Company controls all aspects of the development process in
a majority of the business parks in which it operates, including site selection
and project concept, master planning and zoning, design and construction,
leasing and property management. Each business park is in proximity to an
interstate highway interchange and retail and residential amenities.
The Company's business parks emphasize flexible land plans, extensive
landscaping and protective covenants which restrict the uses and control the
architecture and signage. In addition to its properties, the Company provides
landscaping services for other corporate users in its controlled business parks.
The Company will continue to emphasize business park development in future
years.
PRODUCT FOCUS
The Company develops or acquires industrial and suburban office properties,
primarily in suburban locations (see related discussion of product types under
"Properties"). The Company's properties can include both single-tenant (build-
to-suit) buildings and multi-tenant buildings. The Company designs properties
that can be modified economically to meet the needs of various clients and that
can often function as either multi-tenant or single-tenant buildings.
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The Company develops institutional-quality, general purpose properties that are
designed to be architecturally attractive and to serve the needs of a variety of
tenants in a particular submarket. The Company attempts to limit tenant
improvement expenditures to those which are in demand by, and adaptable with
moderate modification to, a high number of users in a market. The Company
controls tenant improvement expenditures by utilizing its in-house interior
finish department to supervise the construction process and by compensating its
marketing representatives based on a formula which takes into account the cost
of tenant finish requirements. The Company uses standard finish materials for
most of its tenants. The Company's annual purchase programs allow it to procure
these materials on a volume discount basis.
SOUTHEAST MARKET FOCUS
The Company focuses its activities in what it believes are some of the fastest
growing markets in the Southeast. As detailed below, since 1990, the Company's
markets within the Southeast have experienced greater percentage growth in
employment and population than the United States as a whole.
EMPLOYMENT AND POPULATION GROWTH
(PERCENTAGE CHANGE)
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CUMULATIVE
EMPLOYMENT GROWTH POPULATION GROWTH NO. OF PROPERTY
1990-1996/(A)/ 1990-1995/(B)/ PROPERTIES(C) SQUARE FT. (C)
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Atlanta, GA 26.4% 15.3% 166 12,080,453
Nashville, TN 23.0% 10.6% 25 2,522,746
Research Triangle, NC 21.2% 15.2% 29 2,108,661
Orlando, FL 22.4% 12.2% 9 551,822
Spartanburg, SC 12.2% 6.1% 4 481,600
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U.S. Total 10.7% 5.4% 233 17,745,282
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(a) Source: Bureau of Labor Statistics.
(b) Source: U.S. Census Bureau.
(c) Includes properties under agreement to acquire in Nashville, Tennessee and
the Research Triangle area of North Carolina as well as properties under
development or in lease-up.
Metropolitan Atlanta, Georgia. The Company was founded and is currently
headquartered in metropolitan Atlanta, and is one of metropolitan Atlanta's two
largest industrial property owners. Metropolitan Atlanta's rapid growth in both
employment and population is due in part to its role as a business and
distribution center for the entire Southeast. The Company believes that
metropolitan Atlanta has been successful attracting business relocations and
expansions because of its educated workforce, and well-developed transportation
infrastructure. The area attracts many of its employees from nearby
universities, including the Georgia Institute of Technology, the University of
Georgia, Emory University and Georgia State University.
According to Jamison Research, Inc. ("Jamison"), who publishes data on
metropolitan Atlanta's industrial and office real estate markets, the
metropolitan area in 1996 recorded its third straight year of industrial net
absorption in excess of 10 million square feet. Over the past five years,
metropolitan Atlanta's industrial net absorption has totaled more than 50
million square feet. Increased new supply of multi-tenant industrial buildings,
however, has recently resulted in a decrease in industrial occupancy in
metropolitan Atlanta from 94.5% at December 31, 1995, to 93.7% at December 31,
1996.
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Also according to Jamison, metropolitan Atlanta'a office market, exclusive of
the downtown submarket, recorded net absorption of approximately 2.8 million
square feet during 1996, with occupancy increasing from 90.9% at December 31,
1995, to 92.9% at December 31, 1996. Development of new suburban office
buildings has also increased recently. The Company believes that this new
development activity has occurred in response to strong levels of demand.
The Company's completed and in-service properties located in metropolitan
Atlanta were comprised of approximately 94% industrial properties and
approximately 6% suburban office properties at December 31, 1996, and had an
average occupancy rate on such date of 96.5%. The Company believes that one of
the reasons that the occupancy rate of its metropolitan Atlanta properties is
higher than the overall market is that it generally focuses its activities on
the submarkets that are among the metropolitan area's strongest. According to
Jamison, the major submarkets where the Company generally focuses its activities
accounted for less than 50% of metropolitan Atlanta's approximately 400 million
square feet of industrial and office space at December 31, 1996, but recorded
more than 70% of the metropolitan area's net absorption in 1996. The Company
allocates its development activity in metropolitan Atlanta among all four of its
primary industrial and suburban office property types and among a number of
distinct submarkets, based on its determination of supply and demand conditions.
Nashville, Tennessee. The Company entered the Nashville market in November
1996, with its acquisition of NWI (see Note 8 to the consolidated and combined
financial statements). The Company's decision to expand into Nashville was
based in part on Nashville's economic diversity, with major industries including
publishing, health care, automobile production and tourism and rapid growth in
both employment and population. In addition, like Atlanta, Nashville is the
state capitol and has a well-developed transportation infrastructure. Nashville
is also well located as a point of distribution. According to the Nashville Area
Chamber of Commerce, Nashville lies within a 600 mile radius of 50% of the
United States population.
According to CB Commercial/Torto Wheaton, who publish data on several industrial
and office real estate markets, Nashville's industrial real estate market totals
approximately 112 million square feet; net absorption was approximately 1.6
million square feet in 1996; and the market occupancy rate was 93.3% as of
December 31, 1996.
Also according to CB Commercial/Torto Wheaton, Nashville's office market totals
approximately 17 million square feet; net absorption was approximately 552,000
square feet in 1996; and the market occupancy rate was approximately 92.0% as of
December 31, 1996.
Because of NWI's established presence in the Nashville industrial real estate
market, the Company is initially operating in Nashville under the name
"Weeks/NWI."
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Research Triangle, North Carolina. The Company entered the Research Triangle
area of North Carolina in December 1996, with its acquisition of Lichtin (see
Note 8 to the consolidated and combined financial statements). The Company's
decision to expand into the Research Triangle was based in part on the area's
success as a center for high technology, communications, research and
development and health care, as well as its rapid employment and population
growth and educated workforce. The area attracts many of its employees from its
three universities: Duke University, The University of North Carolina and North
Carolina State University.
Research Triangle Park, which is located adjacent to most of the Company's
portfolio, is one of the nation's largest planned research parks, with more than
70 national and international research organizations employing over 35,000
people. Research Triangle Park generally consists of corporate-owned facilities
devoted to research and development. Many of the Company's properties house
administrative, technology and service functions which complement the activities
of businesses with facilities located within Research Triangle Park.
Because the Research Triangle's economy is based more on services, government
and trade than on manufacturing, the industrial real estate market is smaller
than it is in comparable other southeastern cities. According to Karnes
Research Company, who publishes data on the Research Triangle industrial and
office real estate markets, the Research Triangle's combined industrial and
office real estate markets total approximately 37 million square feet; net
absorption was approximately 1.1 million square feet in the last half of 1996;
and the occupancy rate of the Research Triangle's combined industrial and office
market was approximately 92.7% as of December 31, 1996.
Because of Lichtin's established presence in the Research Triangle industrial
and suburban office real estate markets, the Company is initially conducting its
operations there under the name "Weeks/Lichtin."
Orlando, Florida. The Company entered the Orlando market in April, 1995 with
the purchase of an approximately 190,000 square foot portfolio of industrial
properties. The Company's decision to expand into Orlando was based in part on
the city's geographic location as a point of distribution for the state of
Florida, the most highly populated state in the Southeast, as well as Orlando's
well-developed transportation infrastructure and its rapid employment and
population growth. The Company decided to pursue its own expansion into
Orlando, without acquiring an established local industrial or suburban office
real estate company, because it perceived a relative lack of competition and an
opportunity to build a presence in the market. Since entering Orlando in 1995,
the Company has increased its portfolio of properties to approximately 407,000
square feet as of December 31, 1996, and has opened a local office, staffed by a
recently hired Vice President of the Company who has approximately ten years
experience in the market.
According to CB Commercial/Torto Wheaton, Orlando's industrial real estate
market totals approximately 74 million square feet; net absorption was
approximately 1.1 million square feet in 1996; and the market occupancy rate was
approximately 94.3% as of December 31, 1996.
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Also according to CB Commercial/Torto Wheaton, Orlando's office real estate
market totals approximately 19 million square feet; net absorption was
approximately 354,000 square feet in 1996; and the market occupancy rate was
approximately 90.7% as of December 31, 1996. Spartanburg, South Carolina.
Spartanburg is the Company's smallest market and is served out of the Company's
Atlanta headquarters. The Company's activities in Spartanburg consist of
properties owned and developed at Hillside business park. Hillside is located
one exit north on I-85 from BMW's automobile production facility that opened in
1995. The occupancy rate of the Company's approximately 389,000 square feet of
completed and in-service properties in Spartanburg was 100% as of December 31,
1996.
The Company did not pay to have the foregoing market data prepared by Jamison,
CB Commercial/Torto Wheaton and Karnes Research Company. However, the Operating
Partnership pays to subscribe for certain market data prepared by those
entities.
BUSINESS GROWTH STRATEGY
DEVELOPMENT
As one of the largest industrial real estate companies in metropolitan Atlanta
and the Southeastern United States based on square footage owned and managed,
the Company has substantial experience in all phases of the development process,
including market analysis, site selection, zoning, design, civil engineering,
construction and landscaping. The Company currently has adequate sources for raw
materials needed to construct its new properties, including access to qualified
labor and subcontractors. The Company has completed and stabilized 22
development properties and two property expansions totaling approximately 2.7
million square feet since its IPO. All of these properties are currently 100%
leased.
ACQUISITIONS
The Company balances its development activity by making opportunistic
acquisitions in strategic locations that establish or enhance the Company's
market position, or where the Company's skills and market knowledge can enhance
value through additional development, property management or physical upgrades.
Since its IPO (including the 17 properties acquired in connection therewith) the
Company has acquired 112 properties totaling approximately 6.6 million square
feet.
RISKS OF DEVELOPMENT AND ACQUISITIONS
New project development is subject to a number of risks, including risks of
construction delays or cost overruns that may increase project costs, risks that
the project will not achieve anticipated occupancy levels or sustain anticipated
rent levels, and new project commencement risks such as the failure to obtain
zoning, occupancy and other required government permits and authorizations, and
the incurrence of development costs in connection with projects that are not
pursued to completion.
Acquisitions entail risks that (i) existing agreements to acquire properties may
fail to close, (ii) acquired properties may not perform in accordance with
management's expectations, including projected occupancy and rental rates, (iii)
the senior executives and employees of an acquired business will not be
successfully integrated into the Company, or (iv) the Company may have
underestimated the cost of improvements required to bring an acquired property
up to standards established for the market position intended for that property.
Although the Company has successfully acquired properties and effectively
integrated their operations in the past, there can be no assurance that the
Company will be able to continue to make successful acquisitions in the future
or that any such acquisitions will be successfully integrated into the
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Company's operations. Furthermore, there can be no assurance that an acquisition
will not have an adverse effect upon the Company's operating results,
particularly in the fiscal quarters immediately following the consummation of
such acquisition. There can be no assurance that the Company will be able to
continue to operate an acquired business in a profitable manner.
Both development and acquisitions also involve risks that the Company will fail
to obtain adequate sources of financing (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources").
LAND CONTROL
An important part of the Company's development strategy is to own or control
land sufficient to allow it to develop exclusive business park environments and
to accommodate the expansion and relocation needs of its tenants. The Company
employs a number of ownership and control arrangements in its land strategy,
including outright purchases, joint ventures, staged acquisitions, options and
exclusive marketing and development agreements. By doing so, the Company
believes that it can control sufficient land acreage, while mitigating the
negative impact of land carrying costs.
The Company also owns or controls (through agreements to purchase, options and
marketing and development agreements) approximately 1,891 net usable acres of
undeveloped land, located primarily in existing business parks with zoning and
infrastructure in place. The Company believes the development potential of this
land may ultimately total approximately 20.1 million square feet (see
"Properties").
INTERNAL GROWTH
The Company maximizes its available cash flow by increasing the occupancy rate
of those properties that are not fully leased, maintaining high occupancy rates,
raising effective rental rates and controlling operating expenses and capital
expenditures. The occupancy rate of the Company's stabilized properties (i.e.,
those having reached substantial lease-up) was 96.2% as of December 31, 1996.
The Company believes that its emphasis on providing quality facilities and
client service has resulted in a high retention of its tenants and low turnover.
Of the leases that expired in 1996 (representing approximately 1.7 million
square feet), tenants occupying approximately 67% of such space renewed their
leases with the Company. The Company believes that this high retention of its
tenants results in lower re-leasing costs and decreased potential loss due to
vacancy. In addition, in 1996, 40 tenant expansions were completed for existing
tenants, totaling approximately 490,000 square feet.
The leases for the Company's properties have terms ranging from one to fifteen
years, with terms for multi-tenant properties typically between three and five
years and for build-to-suit properties typically between seven and ten years.
Typically, the tenant in a multi-tenant property pays for increases in taxes,
operating costs and insurance above a base year level. For build-to-suit
properties, the tenant typically pays for all taxes, insurance and operating
costs. Approximately 64% of the Company's leases (based on leased square
footage as of December 31, 1996) contain contractual rent escalations.
The high average occupancy of the Company's properties reflects the generally
strong supply and demand conditions in its markets. As a result, the Company
continues to be able to increase average rents and generally to avoid offering
tenant concessions. During 1996, the
12
<PAGE>
Company renewed or re-leased approximately 2.0 million square feet of second-
generation space in its properties. Cash-basis rental rates on this space
increased by an average of 4.2%, calculated by comparing the initial cash-basis
rent to be paid by the tenant under the new or renewed lease with the ending
cash-basis rent paid by the tenant under the previous lease on the same space.
As shown in the table provided under "Properties -- Tenants," excluding
Scientific Atlanta, which accounted for approximately 3.8% of annualized base
rent, no single tenant accounted for more than 1.8% of annualized base rent from
leases under which tenants were paying rent as of December 31, 1996.
GEOGRAPHIC EXPANSION
While Metropolitan Atlanta, Georgia will remain the Company's primary focus, the
Company intends to continue expanding carefully into new southeastern markets.
The Company intends to expand into other markets only when it believes it can
achieve over time a significant market presence. The Company's activities to
date have included the 1990 expansion into Spartanburg, South Carolina, the 1995
expansion into Orlando, Florida, and the 1996 expansions into Nashville,
Tennessee and the Research Triangle area of North Carolina. As a result of its
geographic expansion, the Company has reduced its concentration of properties in
metropolitan Atlanta, Georgia, to 74% at December 31, 1996 (based on square
footage and excluding properties under development and/or under agreement to
acquire), from 95% at December 31, 1995 (calculated on the same basis).
13
<PAGE>
ITEM 2. PROPERTIES
As of December 31, 1996, the Company owned or had agreements to acquire 233
properties, including 24 properties and two property expansions which were under
development or in lease-up and 21 properties which were under agreements to be
acquired. Of the 233 properties, 208 were industrial buildings, 22 were office
buildings and three were retail buildings. The Company's 188 completed and in-
service properties (i.e. excluding properties under development or in lease-up
or under agreement to acquire) were 96.2% occupied at December 31, 1996.
The Company also owns or holds joint venture interests in approximately 919
acres of land held for development, has agreements to acquire an additional 200
acres, has the potential to acquire 177 acres under option arrangements and has
exclusive marketing or development rights on an additional 595 acres of land.
The majority of the properties and land held for development, which are under
agreements to acquire, are located in Nashville, Tennessee and the Research
Triangle area of North Carolina and are part of the NWI and Lichtin acquisition
transactions in 1996. The information appearing on pages 15 to 22 reflects
information regarding the Company's properties as of December 31, 1996,
including properties under development or in lease-up, or under agreement to
acquire.
INDUSTRIAL PROPERTIES
The Company owned and had agreements to acquire 208 industrial buildings as of
December 31, 1996, of which 150 are located in Atlanta Georgia, 25 are located
in Nashville, Tennessee, 20 are located in the Research Triangle area of North
Carolina, nine are located in Orlando, Florida and four are located in
Spartanburg, South Carolina. These buildings can be characterized by their use:
business distribution, bulk warehouse or business service. The Company owned or
had agreements to acquire 136 business distribution buildings, 34 bulk warehouse
buildings, and 38 business service buildings at year-end.
Business distribution buildings are generally 20,000 to 100,000 square feet in
size, have warehouse clear ceiling heights of 18' to 24', building depths of
120' to 200', office finish of 10% to 50%, dock-high truck doors (which are
designed to accommodate tractor-trailers) and typically cost $35 to $45 per
square foot to construct. These buildings may function as national
headquarters, sales and administration, research and development and light
manufacturing facilities in addition to distribution facilities.
Bulk warehouse buildings are generally 75,000 to 250,000 square feet in size,
have clear ceiling heights of 24' to 30', building depths of 200' to 300',
office finish of 2% to 15%, dock-high truck doors and typically cost $22 to $30
per square foot to construct. These buildings generally function as regional or
local storage and distribution facilities.
Business service buildings are generally 20,000 to 80,000 square feet in size,
have clear ceiling heights of 14' to 16', building depths of 80' to 130', office
finish of 60% to 100%, drive-in truck doors (which are designed to accommodate
delivery vans) and typically cost $65 to $75 per square foot to construct. These
buildings are used by tenants primarily for clerical, administrative and
executive offices.
14
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company Occupancy
Market/Business Park/Property Type/(1)/ Feet Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
METROPOLITAN ATLANTA, GEORGIA
NORTHEAST/I-85 SUBMARKET
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gwinett Park
1 1750 Beaver Ruin Rd. (6) S 67,600 100% 16 1996 100.0% -
2 4258 Communications Dr. D 57,000 14% 22 1981 100.0% 0.0%
3 4261 Communications Dr. D 56,600 33% 22 1981 1994 100.0% 100.0%
4 4291 Communications Dr. D 31,500 29% 20 1981 100.0% 100.0%
5 1826 Doan Way D 57,200 36% 20 1984 100.0% 100.0%
6 1857 Doan Way D 16,000 13% 18 1970 100.0% 100.0%
7 1650 International Blvd. D 52,461 33% 22 1984 100.0% 100.0%
8 4245 International Blvd. D 249,200 10% 24 1985 100.0% 100.0%
9 4250 International Blvd. D 47,030 80% 20 1986 100.0% 100.0%
10 4295 International Blvd. D 49,896 31% 20 1984 100.0% 100.0%
11 4320 International Blvd. D 32,000 20% 20 1984 100.0% 100.0%
12 4350 International Blvd. D 64,152 38% 20 1982 100.0% 100.0%
13 4355 International Blvd. D 60,760 59% 14 1983 1994 100.0% 100.0%
14 4405-A International Blvd. S 50,000 94% 14 1984 100.0% 100.0%
15 4405-B International Blvd. S 61,176 88% 14 1984 100.0% 81.4%
16 4405-C International Blvd. S 10,644 98% 14 1984 100.0% 87.2%
17 1828 Meca Way D 63,000 32% 22 1975 100.0% 100.0%
18 1858 Meca Way D 58,600 49% 22 1975 100.0% 100.0%
19 4317 Park Dr. D 47,243 56% 20 1985 100.0% 100.0%
20 4357 Park Dr. D 65,800 31% 20 1979 100.0% 100.0%
21 4366 Park Dr. O 9,471 100% 9 1981 100.0% 51.1%
22 4386 Park Dr. D 67,118 30% 22 1973 100.0% 100.0%
23 4436 Park Dr. D 66,232 12% 18 1968 100.0% 100.0%
24 4437 Park Dr. D 73,456 16% 20 1978 100.0% 49.9%
25 4467 Park Dr. D 66,203 16% 20 1978 100.0% 100.0%
26 4476 Park Dr. D 42,200 17% 22 1977 100.0% 100.0%
27 4487 Park Dr. D 89,204 49% 20 1978 100.0% 100.0%
28 1835 Shackleford Ct. O 56,576 100% 9 1990 100.0% 97.4%
29 1854 Shackleford Ct. O 94,677 100% 9 1985 100.0% 90.5%
30 4274 Shackleford Rd. D 80,822 27% 24 1974 100.0% 100.0%
31 4275 Shackleford Rd. O 32,280 100% 9 1985 100.0% 97.8%
32 4344 Shackleford Rd. D 52,924 11% 20 1975 1994 100.0% 100.0%
33 4355 Shackleford Rd. D 137,100 60% 20 1972 100.0% 100.0%
34 4364 Shackleford Rd. D 31,040 16% 22 1973 100.0% 100.0%
35 4366 Shackleford Rd. D 56,709 23% 22 1981 100.0% 100.0%
36 4388 Shackleford Rd. D 89,612 17% 22 1981 100.0% 100.0%
37 4400 Shackleford Rd. D 39,004 15% 20 1981 100.0% 100.0%
38 4444 Shackleford Rd. D 15,000 18% 22 1979 100.0% 100.0%
--------------------------------------------------------------------------------------------------
2,367,690 40% 94.7%
--------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Heights Year Year Company Occupancy
Market/Business Park/Property Type/(1)/ Feet Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HORIZON
39 90 Horizon Dr. D 13,400 42% 20 1992 100.0% 100.0%
40 225 Horizon Dr. B 96,000 15% 24 1990 100.0% 100.0%
41 250 Horizon Dr. (6) B 267,619 5% 30 1997 100.0%
42 300 Horizon Dr. B 256,000 4% 30 1994 100.0% 100.0%
43 2775 Horizon Ridge Ct. B 223,219 5% 26 1996 100.0% 100.0%
44 2780 Horizon Ridge Ct. (6) B 222,643 7% 30 1997 100.0%
45 2800 Vista Ridge Dr. B 252,092 7% 26 1995 100.0% 100.0%
-------------------------------------------------------------------------------------------------
1,330,973 7% 100.0%
-------------------------------------------------------------------------------------------------
NORTHWOODS
46 2915 Courtyards Circle D 40,058 45% 18 1986 1995 100.0% 97.8%
47 2925 Courtyards Dr. D 71,763 25% 22 1986 1995 100.0% 100.0%
48 2975 Courtyards Circle D 27,342 75% 20 1986 1995 100.0% 100.0%
49 2995 Courtyards Circle D 18,542 65% 18 1986 1995 100.0% 100.0%
50 2725 Northwoods Pkwy. D 76,686 14% 22 1984 1996 100.0% 100.0%
51 2755 Northwoods Pkwy. D 48,270 21% 20 1986 1996 100.0% 100.0%
52 2775 Northwoods Pkwy. D 32,192 72% 20 1986 1996 100.0% 100.0%
53 2850 Northwoods Pkwy. D 102,128 19% 22 1988 1995 100.0% 100.0%
54 3040 Northwoods Pkwy. D 50,480 22% 22 1984 1996 100.0% 100.0%
55 3044 Northwoods Circle D 24,367 32% 22 1984 1995 100.0% 100.0%
56 3055 Northwoods Pkwy. D 31,946 33% 18 1985 1996 100.0% 100.0%
57 3075 Northwoods Pkwy. S 41,420 69% 14 1985 1996 100.0% 100.0%
58 3080 Northwoods Circle O 30,768 100% 9 1952 1996 100.0% 100.0%
59 3100 Northwoods Pkwy. S 39,728 73% 14 1985 1996 100.0% 100.0%
60 3155 Northwoods Pkwy. S 40,530 35% 14 1985 1996 100.0% 100.0%
61 3175 Northwoods Pkwy. S 33,405 100% 14 1985 1996 100.0% 100.0%
-------------------------------------------------------------------------------------------------
709,625 42% 99.9%
-------------------------------------------------------------------------------------------------
GWINETT PAVILION
62 1480 Beaver Ruin Rd. R 14,992 0% 9 1989 100.0% 87.2%
63 1505 Pavilion Place D 78,400 93% 20 1988 100.0% 100.0%
64 3883 Steve Reynolds Blvd. D 137,061 26% 22 1990 100.0% 100.0%
65 3890 Steve Reynolds Blvd. D 48,800 80% 20 1991 100.0% 100.0%
66 3905 Steve Reynolds Blvd. D 64,800 17% 25 1995 100.0% 100.0%
67 3950 Steve Reynolds Blvd. B 80,000 11% 20 1992 100.0% 100.0%
68 4020 Steve Reynolds Blvd. (6) D 44,260 36% 22 1997 100.0%
69 4025 Steve Reynolds Blvd. D 70,400 38% 22 1994 100.0% 100.0%
-------------------------------------------------------------------------------------------------
538,713 39% 99.6%
-------------------------------------------------------------------------------------------------
BERKELEY LAKE DISTRIBUTION CENTER
70 3130 North Berkeley Lake Rd. (6)B 240,000 3% 26 1996 100.0% -
71 3280 Summit Ridge Pkwy. (6) B 173,360 4% 28 1997 100.0% -
72 3290 Summit Ridge Pkwy. (6) B 100,800 4% 28 1997 100.0% -
-------------------------------------------------------------------------------------------------
514,160 3% -
-------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company Occupancy
Markert/Business Park/Property Type/(1)/ Feet Finish/(2)/ (Feet) Developed/(3)/ Acquired/(3)/ Ownership Rate/(3)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PEACHTREE CORNERS DISTRIBUTION
73 5401 Buford Hwy. B 74,360 12% 24 1987 1995 100.0% 55.5%
74 5403 Buford Hwy. B 108,140 12% 24 1987 1995 100.0% 100.0%
75 5405 Buford Hwy. B 61,982 10% 24 1989 1995 100.0% 100.0%
76 5409 Buford Hwy. B 111,873 7% 24 1989 1995 100.0% 100.0%
------------------------------------------------------------------------------------------------
356,355 10% 90.7%
------------------------------------------------------------------------------------------------
PINEBROOK
77 2625 Pinemeadow Ct. B 139,540 21% 24 1994 100.0% 100.0%
78 2660 Pinemeadow Ct. B 104,000 1% 24 1996 100.0% 100.0%
79 2450 Satellite Blvd. B 102,862 17% 30 1994 1994 100.0% 100.0%
------------------------------------------------------------------------------------------------
346,402 14% 100.0%
------------------------------------------------------------------------------------------------
NORTHBROOK
80 1000 Northbrook Pkwy. B 131,660 9% 25 1986 100.0% 84.8%
81 675 Old Peachtree Rd. B 176,820 3% 25 1988 100.0% 100.0%
------------------------------------------------------------------------------------------------
308,480 6% 93.5%
------------------------------------------------------------------------------------------------
DRUID CHASE
82 2801 Buford Hwy. O 115,712 100% 9 1977 1989 100.0% 84.9%
83 1190 West Druid Hills Dr. O 79,868 100% 9 1980 1989 100.0% 93.9%
84 2071 North Druid Hills Rd. R 4,115 0% 12 1968 100.0% 100.0%
85 6 West Druid Hills Dr. O 81,503 100% 9 1968 1989 100.0% 75.7%
------------------------------------------------------------------------------------------------
281,198 99% 85.0%
------------------------------------------------------------------------------------------------
MEADOWBROOK
86 2450 Meadowbrook Pkwy. D 68,400 17% 20 1989 1994 100.0% 100.0%
87 2475 Meadowbrook Pkwy. D 59,086 80% 20 1986 100.0% 100.0%
88 2500 Meadowbrook Pkwy. D 68,800 13% 20 1987 100.0% 62.5%
89 2505 Meadowbrook Pkwy. D 53,481 14% 20 1990 100.0% 100.0%
------------------------------------------------------------------------------------------------
249,767 30% 89.7%
------------------------------------------------------------------------------------------------
CRESTWOOD POINTE
90 3805 Crestwood Pkwy. (6) O 105,295 100% 9 1997 100.0% -
------------------------------------------------------------------------------------------------
105,295 100% -
------------------------------------------------------------------------------------------------
PARK CREEK
91 2825 Breckinridge Blvd. S 45,559 100% 14 1986 1996 100.0% 100.0%
92 2875 Breckinridge Blvd. S 57,918 11% 14 1986 1996 100.0% 100.0%
------------------------------------------------------------------------------------------------
103,477 50% 100.0%
------------------------------------------------------------------------------------------------
RIVER GREEN
93 3450 River Green Ct. D 33,600 80% 18 1989 1995 100.0% 100.0%
94 4800 River Green Pkwy. D 25,538 80% 18 1989 1995 100.0% 100.0%
------------------------------------------------------------------------------------------------
59,138 80% 100.0%
------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
WEEKS CORPORATION PROPETIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company Occupancy
Market/Business Park/Property Type/(1)/ Feet Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER NORTHEAST/I-85
95 1705 Belle Meade Ct. D 31,624 43% 18 1988 1994 100.0% 100.0%
96 4125 Buford Hwy. B 210,000 3% 28 1995 100.0% 100.0%
97 6525-27 Jimmy Carter Blvd. D 92,735 54% 22 1983 1996 100.0% 100.0%
98 3171 McCall Dr. D 16,075 13% 22 1967 1994 100.0% 100.0%
99 7250 McGinnis Ferry Rd. D 70,600 19% 48 1996 100.0% 100.0%
100 5300 Peachtree Industrial Blvd. R 29,870 0% 25 1966 1994 100.0% 100.0%
101 5755 Peachtree Industrial Blvd. (6) O 50,000 100% 9 1997 100.0% -
102 5765 Peachtree Industrial Blvd. (6) D 60,000 100% 22 1997 100.0% -
103 5775 Peachtree Industrial Blvd. (6) D 60,000 37% 22 1997 100.0% -
104 4280 Northeast Expressway B 56,530 10% 30 1962 1994 100.0% 100.0%
--------------------------------------------------------------------------------------------
677,434 33% 100.0%
--------------------------------------------------------------------------------------------
NORTH CENTRAL SUBMARKET
NORTHMEADOW
105 11835 Alpharetta Hwy. O 15,000 100% 9 1994 100.0% 100.0%
106 250 Hembree Pkwy. (6)(10) D 94,500 25% 22 1996 0.0% -
107 1100 Northmeadow Pkwy. S 50,891 80% 16 1989 1995 100.0% 100.0%
108 1125 Northmeadow Pkwy. D 67,104 49% 22 1987 1995 100.0% 100.0%
109 1150 Northmeadow Pkwy. D 52,050 65% 22 1988 1995 100.0% 100.0%
110 1175 Northmeadow Pkwy. D 71,264 58% 22 1987 1995 100.0% 100.0%
111 1225 Northmeadow Pkwy. S 37,520 79% 14 1989 1995 100.0% 100.0%
112 1250 Northmeadow Pkwy. D 52,224 90% 18 1989 1995 100.0% 100.0%
113 1325 Northmeadow Pkwy. S 70,700 77% 14 1990 1995 100.0% 96.6%
114 1335 Northmeadow Pkwy. (6)(10) S 89,150 100% 14 1996 0.0% -
115 1350 Northmeadow Pkwy. D 64,500 89% 22 1994 100.0% 100.0%
116 11390 Old Roswell Road (6)(10) S 47,600 50% 14 1997 0.0% -
--------------------------------------------------------------------------------------------
712,503 69% 99.5%
--------------------------------------------------------------------------------------------
HEMBREE CREST
117 11415 Old Roswell Rd. B 80,000 6% 24 1991 1995 100.0% 100.0%
118 11800 Wills Rd. D 42,691 32% 22 1987 1995 100.0% 100.0%
119 11810 Wills Rd. D 59,334 23% 22 1987 1995 100.0% 100.0%
120 11820 Wills Rd. D 103,222 14% 24 1987 1995 100.0% 100.0%
--------------------------------------------------------------------------------------------
285,247 16% 100.0%
--------------------------------------------------------------------------------------------
MANSELL COMMONS
121 993 Mansell Rd. D 21,600 64% 20 1987 1995 100.0% 100.0%
122 995 Mansell Rd. D 16,800 42% 20 1987 1995 100.0% 100.0%
123 997 Mansell Rd. D 14,400 27% 20 1987 1995 100.0% 100.0%
124 999 Mansell Rd. D 19,200 12% 20 1987 1995 100.0% 100.0%
125 1003 Mansell Rd. D 20,800 80% 20 1990 1995 100.0% 100.0%
126 1005 Mansell Rd. D 16,800 55% 20 1990 1995 100.0% 75.0%
127 1007 Mansell Rd. D 37,450 41% 20 1990 1995 100.0% 100.0%
128 1009 Mansell Rd. S 38,082 59% 14 1986 1995 100.0% 100.0%
129 1011 Mansell Rd. S 38,630 89% 14 1984 1995 100.0% 100.0%
--------------------------------------------------------------------------------------------
223,762 56% 98.1%
--------------------------------------------------------------------------------------------
HEMBREE PARK
130 105 Hembree Park Dr. D 45,490 39% 20 1988 1995 100.0% 67.8%
131 150 Hembree Park Dr. D 44,343 100% 24 1985 1995 100.0% 100.0%
132 200 Hembree Park Dr. D 43,559 38% 24 1985 1995 100.0% 100.0%
133 645 Hembree Pkwy. D 43,956 76% 24 1986 1995 100.0% 100.0%
134 655 Hembree Pkwy. D 43,956 73% 24 1986 1995 100.0% 100.0%
--------------------------------------------------------------------------------------------
221,304 65% 93.4%
--------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company Occupancy
Market/Business Park/Property Type/(2)/ (Feet) Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTHWINDS
135 2555 Northwinds Pkwy. (6) O 64,981 100% 9 1997 100.0% -
--------------------------------------------------------------------------------------------
64,981 100%
--------------------------------------------------------------------------------------------
OTHER NORTH CENTRAL PROPERTIES
136 10745 Westside Pkwy. O 58,093 100% 9 1995 100.0% 100.0%
--------------------------------------------------------------------------------------------
58,093 100% 100.0%
--------------------------------------------------------------------------------------------
AIRPORT/SOUTH ATLANTA SUBMARKET
SOUTHRIDGE
137 5025 Derrick Jones Rd. (6)(10) D 89,600 15% 22 1996 0.0% -
138 5099 Southridge Pkwy. (8) D 32,449 38% 18 1990 1994 100.0% 60.3%
139 5136 Southridge Pkwy. (8) D 47,125 27% 22 1990 1994 100.0% 100.0%
140 5139 Southridge Pkwy. (8) D 48,767 40% 18 1991 1994 100.0% 100.0%
141 5149 Southridge Pkwy. (8) D 41,400 29% 20 1990 1994 100.0% 100.0%
5149 Southridge Pkwy - Exp #1 (6)(9) D 46,800 19% 21 1996 2.5% -
142 5156 Southridge Pkwy. (8) D 76,500 8% 22 1992 1994 100.0% 100.0%
143 5169 Southridge Pkwy. D 69,600 20% 24 1994 100.0% 100.0%
144 5195 Southridge Pkwy. (6)(9) D 60,000 25% 24 1995 2.5% -
--------------------------------------------------------------------------------------------
512,241 22% 95.9%
--------------------------------------------------------------------------------------------
LIBERTY DISTRIBUTION CENTER
145 120 Declaration Dr. (6) B 301,200 2% 28 1997 100.0% -
--------------------------------------------------------------------------------------------
301,200 2%
--------------------------------------------------------------------------------------------
SULLIVAN INTERNATIONAL
146 703 Sullivan Rd. D 19,936 32% 18 1990 1994 100.0% 100.0%
147 721 Sullivan Rd. D 18,232 100% 18 1991 1994 100.0% 100.0%
148 727 Sullivan Rd. D 20,000 41% 18 1988 1994 100.0% 100.0%
149 739 Sullivan Rd. D 20,000 38% 18 1989 1994 100.0% 25.0%
--------------------------------------------------------------------------------------------
78,168 52% 80.8%
--------------------------------------------------------------------------------------------
OTHER AIRPORT/SOUTH ATLANTA PROPERTIES
150 105 Kings Mill Rd. B 153,000 2% 24 1994 100.0% 100.0%
105 Kings Mill Rd. Expansion #1 B 100,890 0% 28 1995 100.0% 100.0%
--------------------------------------------------------------------------------------------
253,890 1% 100.0%
--------------------------------------------------------------------------------------------
NORTHWEST/I-75 SUBMARKET
TOWNPOINT
151 3240 Town Point Dr. (6) D 140,400 33% 24 1996 100.0% -
152 3330 West Town Point Dr. D 88,000 10% 24 1994 100.0% 100.0%
153 3350 West Town Point Dr. D 76,800 19% 24 1995 100.0% 100.0%
--------------------------------------------------------------------------------------------
305,200 23% 100.0%
--------------------------------------------------------------------------------------------
NORTHWEST BUSINESS CENTER
154 1331-37-41-51 Capital Circle S 79,661 81% 15 1985 1996 100.0% 97.3%
155 1335 Capital Circle S 59,468 32% 17 1985 1996 100.0% 100.0%
--------------------------------------------------------------------------------------------
139,129 60% 98.4%
--------------------------------------------------------------------------------------------
OTHER NORTHWEST/ I-75 PROPERTIES
156 240 Northpoint Pkwy. B 127,800 7% 24 1995 100.0% 100.0%
240 Northpoint Pkwy. - Exp. #1 (6) B 95,100 2% 24 1997 100.0% -
157 1950 Vaughn Rd. D 162,651 29% 30 1992 100.0% 100.0%
--------------------------------------------------------------------------------------------
385,551 15% 100.0%
--------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company Occupancy
Market/Business Park/Property Type/(2)/ (Feet) Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STONE MOUNTAIN SUBMARKET
PARKNORTH
158 675 Parknorth Blvd. D 96,500 49% 24 1990 1995 100.0% 100.0%
159 696 Parknorth Blvd. D 97,800 12% 22 1986 1995 100.0% 100.0%
160 715 Parknorth Blvd. D 75,600 36% 22 1989 1995 100.0% 80.3%
161 735 Parknorth Blvd. D 112,320 38% 22 1989 1995 100.0% 87.8%
162 736 Parknorth Blvd. S 36,450 74% 14 1992 1995 100.0% 100.0%
163 780 Parknorth Blvd. D 67,200 92% 18 1988 1995 100.0% 100.0%
164 808 Parknorth Blvd. S 21,600 100% 14 1986 1995 100.0% 40.0%
165 815 Parknorth Blvd. S 35,000 77% 16 1989 1995 100.0% 100.0%
-------------------------------------------------------------------------------------------
542,470 49% 92.3%
-------------------------------------------------------------------------------------------
CHATTAHOOCHEE SUBMARKET
CHATTAHOOCHEE
166 1670 DeFoors Ave. D 48,007 26% 14 1960 1989 100.0% 100.0%
-------------------------------------------------------------------------------------------
48,007 26% 100.0%
------------------------------------------------------------------------------------------
NASHVILLE, TENNESSEE
AIRPARK BUSINESS CENTER
167 400 Airpark Center Dr. S 52,748 7% 16 1989 1996 100.0% 62.1%
168 500 Airpark Center Dr. D 90,185 23% 18 1988 1996 100.0% 97.6%
169 600 Airpark Center Dr. D 78,800 15% 18 1990 1996 100.0% 95.6%
170 700 Airpark Center Dr. D 77,500 32% 17 1992 1996 100.0% 95.2%
171 800 Airpark Center Dr. D 93,928 35% 19 1995 1996 100.0% 90.1%
172 900 Airpark Center Dr. D 84,307 12% 26 1985 1996 100.0% 100.0%
173 1400 Donelson Pike S 102,727 84% 16 1986 1996 100.0% 99.9%
174 1410 Donelson Pike S 108,300 55% 16 1986 1996 100.0% 83.7%
175 1413 Donelson Pike B 66,737 9% 26 1996 1996 100.0% 100.0%
176 1420 Donelson Pike S 90,000 52% 16 1995 1996 100.0% 87.5%
177 5270 Harding Place B 51,960 10% 26 1996 1996 100.0% 100.0%
178 Airpark Center X (7) B 106,122 0% 17 1996 0.0% -
179 Airpark Center XII (7) D 156,830 0% 19 1996 0.0% -
------------------------------------------------------------------------------------------
1,160,144 26% 92.4%
------------------------------------------------------------------------------------------
BRENTWOOD SOUTH BUSINESS CENTER
180 7104 Crossroad Blvd. D 103,200 26% 18 1987 1996 100.0% 100.0%
181 7106 Crossroad Blvd. D 103,200 26% 18 1987 1996 100.0% 100.0%
182 7108 Crossroad Blvd. D 99,000 9% 18 1989 1996 100.0% 93.4%
183 119 Seaboard Lane D 90,024 7% 23 1990 1996 100.0% 100.0%
184 121 Seaboard Lane D 45,480 33% 24 1990 1996 100.0% 99.4%
185 123 Seaboard Lane D 63,360 6% 24 1990 1996 100.0% 100.0%
------------------------------------------------------------------------------------------
504,264 17% 98.7%
------------------------------------------------------------------------------------------
ASPEN GROVE BUSINESS CENTER
186 277 Mallory Station Road (7) D 127,205 0% 17 1995 0.0% -
187 320 Premier Court (7) D 106,358 0% 19 1996 0.0% -
188 Bldg V (7) D 160,848 0% 25 1996 0.0% -
------------------------------------------------------------------------------------------
394,411 0% -
------------------------------------------------------------------------------------------
NASHVILLE BUSINESS CENTER
189 3300 Briley Park Blvd.
South (6) B 194,750 10% 26 1997 100.0% -
------------------------------------------------------------------------------------------
194,750 10% -
------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Comany Occupancy
Market/Business Park/Property Type/(1)/ Feet Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOUR-FORTY BUSINESS CENTER
190 35 Melrose Ave (7) B 165,777 0% 25 1997 0.0% -
191 700 Melrose Ave. (6) D 103,400 25% 18 1997 100.00% -
---------------------------------------------------------------------------------------------------
269,177 10%
---------------------------------------------------------------------------------------------------
RESEARCH TRIANGLE, NORTH CAROLINA
PERIMETER PARK
192 100 Perimeter Park (7) S 55,664 0% 14 1987 0.0% -
193 200 Perimeter Park (7) S 55,664 0% 14 1987 0.0% -
194 300 Perimeter Park (7) S 55,664 0% 14 1986 0.0% -
195 400 Perimeter Park (7) S 74,088 0% 14 1983 0.0% -
196 500 Perimeter Park (7) S 74,017 0% 14 1985 0.0% -
197 800 Perimeter Park (7) S 55,637 0% 14 1984 0.0% -
198 900 Perimeter Park S 50,231 96% 16 1982 1996 100.0% 95.7%
199 1000 Perimeter Park (7) S 56,436 0% 14 1982 0.0% -
-------------------------------------------------------------------------------------------------
477,401 10% 95.7%
-------------------------------------------------------------------------------------------------
PERIMETER PARK WEST
200 2000 Perimeter Park West (7) O 55,636 100% 12 1997 0.0% -
201 1100 Perimeter Park West (7) S 84,950 0% 14 1990 0.0% -
202 1400 Perimeter Park West O 44,916 100% 12 1991 1996 100.0% 100.0%
203 1500 Perimeter Park West O 81,196 100% 12 1996 1996 100.0% 88.9%
204 1600 Perimeter Park West O 94,897 100% 12 1994 1996 100.0% 100.0%
205 1800 Perimeter Park West O 55,636 100% 12 1994 1996 100.0% 96.5%
-------------------------------------------------------------------------------------------------
417,231 80% 96.0%
-------------------------------------------------------------------------------------------------
METRO CENTER
206 2800 Perimeter Park Dr. D 137,500 86% 24 1992 1996 100.0% 98.5%
207 2900 Perimeter Park Dr. D 59,927 4% 24 1990 1996 100.0% 100.0%
208 3000 Perimeter Park Dr. D 75,000 43% 24 1989 1996 100.0% 100.0%
-------------------------------------------------------------------------------------------------
272,427 56% 99.3%
-------------------------------------------------------------------------------------------------
ENTERPRISE CENTER
209 507 Airport Blvd. S 106,583 100% 14 1993 1996 100.0% 100.0%
210 5151 McCrimmon Pkwy. S 104,158 8% 14 1995 1996 100.0% 59.8%
211 Enterprise Center III (7) S 70,848 0% 14 1997 0.0% -
-------------------------------------------------------------------------------------------------
281,589 41% 80.1%
-------------------------------------------------------------------------------------------------
WOODLAKE CENTER
212 1000 Innovation Ave. D 108,000 100% 24 1994 1996 100.0% 100.0%
213 Woodlake Center (7) D 97,200 0% 24 1997 0.0% -
-------------------------------------------------------------------------------------------------
205,200 53% 100.0%
-------------------------------------------------------------------------------------------------
INTERCHANGE PLAZA
214 5520 Capital Center Dr. O 37,630 100% 12 1993 1996 100.0% 100.0%
215 801 Jones Franklin Rd. O 69,491 21% 12 1995 1996 100.0% 99.6%
-------------------------------------------------------------------------------------------------
107,121 49% 99.7%
-------------------------------------------------------------------------------------------------
RESEARCH TRIANGLE INDUSTRIAL CENTER
216 409 Airport Blvd - 1 (7) D 85,414 12% 20 1982 0.0% -
217 409 Airport Blvd - 2 (7) D 42,712 20% 20 1983 0.0% -
218 409 Airport Blvd - 3 (7) D 26,215 5% 20 1986 0.0% -
-------------------------------------------------------------------------------------------------
154,341 13% -
-------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
WEEKS CORPORATION PROPERTIES
(As of December 31, 1996)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Heignt Year Year Company Occupancy
Market/Business Park/Property Type/(1)/ Feet Finish/(2)/ (Feet) Developed/(3)/ Acquired/(4)/ Ownership Rate/(5)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER RALEIGH PROPERTIES
219 6501 Weston Pkwy. O 93,351 91% 12 1996 1996 100.0% 91.3%
220 Regency Forest (7) O 100,000 100% 12 1997 0.0% -
---------------------------------------------------------------------------------------------------
193,351 96% 91.3%
---------------------------------------------------------------------------------------------------
ORLANDO, FLORIDA
PARKSOUTH DISTRIBUTION
221 2490 Principal Row (6) B 10,180 10% 26 1997 100.0% -
222 2500 Principal Row B 140,015 14% 26 1996 100.0% 100.0%
---------------------------------------------------------------------------------------------------
241,815 12% 100.0%
---------------------------------------------------------------------------------------------------
AIRPORT COMMERCE CENTER
223 8249 Parkline Blvd. D 33,600 33% 20 1996 100.0% 100.0%
224 8351 Parkline Blvd. D 33,600 65% 20 1994 1995 100.0% 100.0%
225 8500 Parkline Blvd. D 102,400 31% 23 1986 1995 100.0% 84.4%
226 8501 Parkline Blvd. D 27,000 22% 20 1991 1995 100.0% 100.0%
227 8549 Parkline Blvd. D 27,007 47% 20 1992 1995 100.0% 100.0%
228 1629 Prime Court (6) D 43,200 25% 22 1997 100.0% -
229 1630 Prime Court D 43,200 10% 22 1996 100.0% 100.0%
---------------------------------------------------------------------------------------------------
310,007 32% 94.0%
---------------------------------------------------------------------------------------------------
GREENVILLE/SPARTANBURG, SOUTH CAROLINA
HILLSIDE
230 170 Parkway West B 96,000 18% 24 1995 100.0% 100.0%
231 190 Parkway West (6) D 92,400 5% 22 1996 100.0% _
232 260 Parkway East D 96,000 17% 22 1987 1994 100.0% 100.0%
233 285 Parkway East B 139,600 7% 24 1994 100.0% 100.0%
285 Parkway East Expansion B 57,600 0% 24 1996 100.0% 100.0%
---------------------------------------------------------------------------------------------------
481,600 10% 100.0%
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
PROPERTY TOTALS 17,745,282 32% 96.2%
---------------------------------------------------------------------------------------------------
</TABLE>
(1) D = business distribution; B = bulk warehouse; S = business service; O =
office; R = retail.
(2) Represents the percentage of rentable square feet that is built out as
office space rather than as warehouse or distribution space. For properties
under development represents current pro forma.
(3) The year of development means the year in which shell construction was
completed.
(4) For properties acquired by the Company, including properties previously
developed and sold by the Company, the year of acquisition means the year
in which an ownership interest in the property was acquired unless
otherwise noted.
(5) Occupancy rate includes occupancy for completed and in service properties
at December 31, 1996. It excludes pre-leasing for properties under
development or in lease up and the occupancy rate for properties under
agreement to acquire.
(6) Property currently under development or in lease up. Twenty four properties
and two expansions under development or in lease-up.
(7) Property under agreement to acquire (see note 8 to the consolidated and
combined financial statments). Twenty one properties under agreement to
acquire.
(8) Property owned by Weeks Financing Limited Partnership, which is 99% owned
by the Operating Partnership and 1% owned by Weeks Realty Services.
(9) The Company is the developer for a joint venture which owns this property
and in which the Company currently has a 2.5% interest. The Company has an
option to purchase this property upon stabilization, as defined in the
joint venture agreements.
(10) The Company is the developer of this property and has an option to purchase
property upon stabilization and can be required by the owner to purchase
the property after completion.
22
<PAGE>
OFFICE PROPERTIES
At December 31, 1996, the Company owned or had agreements to acquire 22 suburban
office buildings, of which 13 are located in Atlanta, Georgia and nine are
located in the Research Triangle area of North Carolina. The Company's typical
suburban office building ranges in size from approximately 30,000 to 150,000
square feet, with an average of 4.5 parking spaces per 1,000 square feet of
leasable space and a typical replacement cost of $85 to $110 per square foot.
BUSINESS PARKS
A key to the Company's success has been the development of properties within
business parks where the Company controls all aspects of the development
process, including site selection and project concept, master planning and
zoning, design and construction, leasing and property management. For
developments of the land held in joint ventures, the Company must obtain certain
approvals from its joint venture partners.
Each of the Company's business parks is in proximity to an interstate highway
interchange and is close to retail and residential amenities. The business
parks are generally master planned to accommodate a variety of uses. The
business parks are generally well landscaped with protective covenants which
restrict the uses and control the architecture and signage.
The majority of the Company's properties and land held for development are
located in business parks. The Company's ability to develop both multi-tenant
buildings for lease and build-to-suit buildings for lease or sale results in
more rapid development of the business parks, as well as generating revenues
from various sources including land sales, building construction, landscape
installation and maintenance, lease commissions and property management fees.
The buildings within business parks typically have a mix of uses ranging from
distribution and service to office and light manufacturing. The Company
facilitates the coexistence of these diverse functions within business parks
through controlled signage and architecture, landscaping and placement of
buildings relative to natural terrain and raised earthen berms.
DEVELOPMENT LAND
The following schedule details the Company's undeveloped land interests at
December 31, 1996. The land detailed below is located primarily in existing
business parks with zoning and infrastructure in place. The Company estimates
that the total development potential of the development land could ultimately
total approximately 20.1 million square feet.
23
<PAGE>
DEVELOPMENT LAND
(in net usable acres)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Estimated
Development
Research Potential
Atlanta, GA Nashville, TN Triangle, NC Orlando, FL Spartanburg, SC Total (square feet)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Company owned 172.3 16.4 36.6 21.6 -- 246.9 3,466,000
Owned in joint
ventures /(1)/ 230.3 -- -- -- 442.3 672.6 5,939,000/(7)/
Under agreement
to acquire 14.2/(2)/ 96.8/(3)/ 64.0/(4)/ 24.6/(5)/ -- 199.6 2,945,000
Optioned -- -- 177.0 -- -- 177.0 1,700,000
Marketing/
development
agreements 594.8/(6)/ -- -- -- -- 594.8 6,093,520
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,011.6 113.2 277.6 46.2 442.3 1,890.9
- -----------------------------------------------------------------------------------------------------------------------------------
Estimated
development
potential
(square feet) 11,749,500 1,445,000 3,115,000 834,000 3,000,000/(7)/ 20,143,500
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company's interests in its undeveloped land held in joint ventures
range from 0% to 30%.
(2) The Company has agreed to acquire this land in three stages to occur prior
to April 1998. The second stage was closed in December 1996.
(3) The Company has agreed to purchase this land from NWI over a period of up to
six years (see Note 8 to the consolidated and combined financial
statements).
(4) The Company has agreed to purchase this land from Lichtin over a period of
up to four years, subject to a one year extension (see Note 8 to the
consolidated and combined financial statements).
(5) The Company has agreed to acquire 24.6 acres at Orlando Central Park in two
stages to occur by December 1998.
(6) Under the terms of the Company's development agreements, the Company will
generally either develop properties for a fee, or have certain rights to
acquire land for development or to acquire developed properties upon their
completion. The Company's marketing agreements generally provide for the
Company to be paid marketing or management fees in conjunction with services
it provides. Both the development and marketing agreements generally
contain certain non-competition provisions.
(7) The Company estimates it will eventually develop approximately one-half the
acreage in Spartanburg it owns in joint ventures and that the remainder will
be sold to third parties. Estimated development potential reflects only
that land which is not currently expected to be sold.
TENANTS
The Company believes that its emphasis on developing quality properties and
providing a high level of client service has resulted in increased tenant
retention. As of December 31, 1996, the Company's properties were leased to 560
tenants including local, regional, national and international companies. The
Company's 30 largest tenants (measured by annualized base rent at December 31,
1996) occupy a total of approximately 4.1 million square feet and represent
31.0% of the annualized base rent as shown in the table below.
24
<PAGE>
30 LARGEST TENANTS MEASURED BY ANNUALIZED BASE RENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
% of Total
Square Number Annualized Annualized
Tenant Feet of Leases Base Rent/(1)/ Base Rent/(1)/ Location
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Scientific Atlanta/(2)/ 600,413 11 $ 2,669,856 3.8% GA
2 GTE Mobilnet Service
Corporation 126,124 3 1,281,004 1.8% GA,NC
3 Radian International LLC 90,159 2 1,170,485 1.7% NC
4 Honeywell, Inc. 70,016 3 934,962 1.3% GA
5 Fisher Scientific Company 223,219 1 875,019 1.2% GA
6 The Athlete's Foot Group, Inc. 162,651 1 871,024 1.2% GA
7 AT&T Corp. 67,551 5 747,646 1.1% GA,TN,NC
8 Intelligent Systems Corporation 137,100 1 685,500 1.0% GA
9 Sally Foster, Inc. 197,200 2 673,237 1.0% SC
10 Yokohama Tire Corporation 252,092 1 665,383 0.9% GA
11 National Data Corporation 42,770 2 662,812 0.9% GA
12 PPD Pharmaco, Inc. 64,916 4 647,035 0.9% NC
13 Vanstar Corporation 86,880 4 642,438 0.9% GA
14 Ahlstrom Recovery, Inc. 62,893 2 633,352 0.9% GA
15 360 Degree Communications 42,557 6 631,522 0.9% NC
16 The Bombay Company, Inc. 253,890 2 631,344 0.9% GA
17 Liberty Mutual Insurance
Company 41,900 1 581,572 0.9% GA
18 Southern Multimedia
Communications, Inc. 117,647 3 581,172 0.8% GA
19 Deutz Corporation 137,061 1 561,950 0.8% GA
20 Intersolv, Inc. 39,280 1 559,740 0.8% NC
21 Reckitt & Colman, Inc. 256,000 1 547,840 0.8% GA
22 BOC Health Care, Inc. 102,128 1 530,040 0.8% GA
23 Metrahealth Insurance Company 32,991 1 527,856 0.8% GA
24 Innotrac Corporation 116,481 2 525,705 0.7% GA
25 Komatsu America Corporation 176,820 1 518,024 0.7% GA
26 Siemens Energy &
Automation, Inc. 204,000 2 510,480 0.7% GA
27 General Medical Corporation 140,015 1 505,472 0.7% FL
28 Saab Cars U.S.A., Inc. 50,000 2 486,851 0.7% GA
29 Burlington Air Express, Inc. 78,529 3 473,371 0.7% GA,TN
30 Hussmann Corporation 85,200 1 440,484 0.6% GA
- --------------------------------------------------------------------------------------------------------------------
4,058,483 71 $21,773,176 31.0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized cash base rent net of rental concessions, if any, based on leases
in place for stabilized properties and properties in lease-up where tenants
were paying rent as of December 31, 1996.
(2) Scientific Atlanta announced plans during the second quarter of 1996 to
relocate over a period of several years certain facilities to a new, owned
corporate campus. Based on scheduled lease termination dates and assuming
the spaces were not re-leased, the impact on the Company's funds from
operations and net income in 1997 would be less than a $0.01 per share.
25
<PAGE>
LEASE EXPIRATIONS
The following tables show scheduled lease expirations for the Company's total
property portfolio, for its industrial property portfolio and for its office
property portfolio based on leases under which tenants were paying rent as of
December 31, 1996, assuming no exercise of renewal options or termination
rights, if any:
<TABLE>
<CAPTION>
% of Total
Year of Square % of Total Annualized Annualized
Expiration Feet Square Feet Base Rent/(1)/ Base Rent
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL PORTFOLIO
1997 2,267,846 17.6% $12,880,508 17.4%
1998 2,100,644 16.3% 10,474,264 14.1%
1999 1,632,547 12.7% 9,868,813 13.3%
2000 1,918,357 14.9% 11,602,182 15.6%
2001 1,160,833 9.0% 6,581,030 8.9%
2002 407,281 3.2% 4,056,152 5.5%
2003 541,534 4.2% 4,694,088 6.3%
2004 1,170,203 9.1% 5,413,542 7.3%
2005 523,268 4.1% 2,605,983 3.5%
2006 562,851 4.4% 2,838,499 3.8%
2007 162,651 1.3% 1,050,409 1.4%
2008 127,800 1.0% 392,474 0.5%
2011 293,819 2.2% 1,703,541 2.4%
-------------------------------------------------------------------------------------------
12,869,634/2/ 100.0% $74,161,485 100.0%
-------------------------------------------------------------------------------------------
INDUSTRIAL PROPERTIES
1997 2,142,953 18.1% $11,219,763 18.8%
1998 2,007,516 16.9% 9,138,775 15.3%
1999 1,553,280 13.1% 8,793,401 14.7%
2000 1,712,923 14.5% 8,980,651 15.0%
2001 1,090,462 9.2% 5,545,373 9.3%
2002 261,234 2.2% 1,922,965 3.2%
2003 377,215 3.2% 2,339,454 3.9%
2004 1,084,105 9.1% 4,112,091 6.9%
2005 493,400 4.2% 2,166,952 3.6%
2006 541,477 4.6% 2,469,304 4.1%
2007 162,651 1.4% 1,050,409 1.8%
2008 127,800 1.1% 392,474 0.7%
2011 293,819 2.4% 1,703,541 2.7%
-------------------------------------------------------------------------------------------
11,848,835 100.0% $59,835,153 100.0%
-------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
% of Total
Year of Square % of Total Annualized Annualized
Expiration Feet Square Feet Base Rent/(1)/ Base Rent
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBURBAN OFFICE
PROPERTIES
1997 122,733 12.6% 1,631,945 11.8%
1998 93,128 9.6% 1,335,490 9.6%
1999 77,623 8.0% 1,054,040 7.6%
2000 170,211 17.5% 2,337,985 16.8%
2001 70,371 7.2% 1,035,657 7.5%
2002 146,047 15.0% 2,133,187 15.4%
2003 164,319 16.9% 2,354,634 17.0%
2004 86,098 8.8% 1,301,450 9.4%
2005 25,753 2.6% 382,244 2.8%
2006 17,459 1.8% 309,487 2.1%
2007 0 0.0% 0 0.0%
2008 0 0.0% 0 0.0%
2011 0 0.0% 0 0.0%
-------------------------------------------------------------------------------------------
973,742 100.0% $13,876,119 100.0%
-------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized base rent represents the annualized monthly base rental at the
time of lease expiration.
(2) The total square footage expiring as of December 31, 1996 is comprised of
12,484,067 square feet of leases in stabilized properties, and 385,567
square feet of leases in development properties where tenants are paying
rent as of December 31, 1996.
RE-LEASING COSTS
Although re-leasing costs may vary from year-to-year depending on conditions in
the Company's real estate markets and the mix of leasing between property types,
the Company endeavors to control re-leasing costs by:
. agreeing to provide specific tenant improvements based on a detailed
space plan rather than committing to a fixed dollar amount;
. acting as general contractor with respect to construction of tenant
improvements, thereby saving the fees paid to outside contractors and
enabling the Company to control the quality and timely completion of the
work;
. constructing general purpose improvements that can be adapted to
different tenants' requirements at relatively low cost;
. paying leasing commissions to its in-house marketing representatives
that take into account the cost of tenant improvements thereby providing
an incentive to minimize cost; and
. using its in-house marketing representatives to negotiate directly with
tenants when possible, thereby saving the cost of commissions to outside
brokers.
27
<PAGE>
The following table summarizes by year the Company's capitalized tenant
improvement and leasing costs incurred in the renewal or re-leasing of
previously occupied space.
CAPITALIZED TENANT IMPROVEMENTS AND LEASING COSTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(In thousands, except per square foot information) 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL PROPERTIES
RE-LEASING
Square feet leased 678 317 360
Capitalized tenant improvements and
leasing commissions $1,395 $ 462 $ 171
Capitalized tenant improvements and
leasing commissions per square foot $ 2.06 $ 1.46 $0.47
RENEWAL
Square feet renewed 1,027 814 472
Capitalized tenant improvements and
leasing commissions $1,055 $ 469 $ 191
Capitalized tenant improvements and
leasing commissions per square foot $ 1.03 $ 0.58 $0.40
TOTAL
Square feet 1,705 1,131 832
Capitalized tenant improvements and
leasing commissions $2,450 $ 931 $ 362
Capitalized tenant improvements and
leasing commissions per square foot $ 1.44 $ 0.82 $0.43
SUBURBAN OFFICE PROPERTIES
RE-LEASING
Square feet leased 16 111/(1)/ 29
Capitalized tenant improvements and
leasing commissions $ 45 $ 1,578/(1)/ $ 217
Capitalized tenant improvements and
leasing commissions per square foot $ 2.80 $ 14.25/(1)/ $ 7.43
RENEWAL
Square feet renewed 106 47 86
Capitalized tenant improvements and
leasing commissions $ 290 $ 50 $ 187
Capitalized tenant improvements and
leasing commissions per square foot $ 2.74 $ 1.06 $ 2.17
TOTAL
Square feet 122 158/(1)/ 115
Capitalized tenant improvements and
leasing commissions $ 335 $ 1,628/(1)/ $ 404
Capitalized tenant improvements and
leasing commissions per square foot $ 2.75 $ 10.27/(1)(2)/ $ 3.50
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $1,377,000 or $15.68 per square foot to re-tenant 87,845 square
feet of the Company's 94,677 square foot suburban office property which was
vacated by Matsushita Electric Corp. and which was converted from a single
tenant to a multi-tenant property.
(2) Excluding amounts incurred to re-lease the office property discussed in (1)
above, capitalized tenant improvements and leasing commissions would have
been $3.55 per square foot for released and renewed space during 1995.
28
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any material litigation other than
litigation which is expected to be covered by liability insurance or which is
not expected to have a material adverse effect on the Company's results of
operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for a vote during the fourth
quarter of 1996.
29
<PAGE>
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Company and their positions are as follows:
<TABLE>
<CAPTION>
Name Age Title
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. Ray Weeks, Jr 44 Chairman of the Board and Chief Executive Officer
Thomas D. Senkbeil 47 Vice Chairman of the Board and Chief Investment Officer
Forrest W. Robinson 45 President, Chief Operating Officer
Harold S. Lichtin 48 Managing Director in charge of the Company's
activities in North Carolina
John W. Nelley, Jr 48 Managing Director in charge of the Company's
activities in Tennessee
Albert W. Buckley, Jr 53 Managing Director, Nashville, Tennessee
David P. Stockert 34 Senior Vice President and Chief Financial Officer
Robert G. Cutlip 47 Senior Vice President, Development
Clyde H. Duckett 54 Senior Vice President, Construction
Mark W. Flowers 39 Senior Vice President, Landscape
Klay W. Simpson 41 Senior Vice President, Marketing
David L. Barker 41 Vice President, Property Management
Elizabeth C. Belden 42 Vice President, Corporate Counsel
Patricia P. Clayton 44 Vice President, Property Management
Phillip W. Cobb 47 Vice President, Building Construction
Arthur J. Quirk 39 Vice President and Controller
Moses L. Salcido 37 Vice President, Orlando
Robert K. Sanders, Jr 37 Vice President, Construction Estimating
Mark L. Scott 37 Vice President, Interior Construction
Thomas W. Trocheck 42 Vice President, Development-Engineering
Robert T. Weeks 36 Vice President, Information Technology
Cynthia F. Wright 41 Vice President, Investor Relations
---------------------------------------------------------------------------------------------------------
</TABLE>
The following is a biographical summary of the experience of the executive
officers of the Company:
A. Ray Weeks, Jr. Chairman of the Board and Chief Executive Officer of the
Company since 1983. President of the Company from January 1982 through March
1991. Chairman of the Board of the Georgia Department of Industry, Trade and
Tourism. Chairman, Metro Business Forum. Co-Chairman, Regional Leadership
Institute. Juris Doctor from Mercer University, Master of Social Science in
Urban Studies from Georgia State University and Bachelor of Arts from Furman
University.
Thomas D. Senkbeil. Vice Chairman of the Board and Chief Investment Officer of
the Company since 1992. Executive Vice President and Managing Partner of
Senkbeil & Associates Inc. and Anderson & Senkbeil Inc., each a real estate
development firm, from September 1984 to October 1992. Immediate Past
President, National Executive Committee of the National Association of
Industrial and Office Properties. Master of Business Administration from the
University of North Carolina and Bachelor of Science in industrial engineering
from Auburn University.
30
<PAGE>
Forrest W. Robinson. Board member, President of the Company since April 1991
and Chief Operating Officer since May 1988. Senior Development Officer from
March 1986 to April 1988. Executive Vice President, Marketing from February
1984 to February 1986. Joined the Company in 1977. Bachelor of Business
Management from Jacksonville State University.
Harold S. Lichtin. Board member, Managing Director of the Company, with
responsibilities for the Company's activities in North Carolina, since December
1996. From 1977 to December 1996, founded and was President of Lichtin
Properties, Inc., a commercial development and property management company in
the Raleigh-Durham-Chapel Hill area of North Carolina that was acquired by the
Company in December 1996. Bachelor of Science in Economics from North Carolina
State University.
John W. Nelley, Jr. Board member, Managing Director of the Company, with
responsibilities for the Company's activities in Nashville, Tennessee, since
November 1996. Since 1982, General Partner and Chief Financial Officer of NWI
Warehouse Group, L.P., an industrial warehouse development company in Nashville,
Tennessee whose assets and business have been acquired, or are under agreement
to be acquired, by the Company. Also since 1973, a practicing Attorney and CPA
specializing in real estate and estate planning. Juris Doctor from the
University of Notre Dame and Bachelor of Science in Accounting from Western
Kentucky University.
Albert W. Buckley, Jr. Managing Director of the Company since November 1996.
General Partner and Chief Executive Officer of NWI Warehouse Group, L.P., an
industrial warehouse development company in Nashville, Tennessee from 1982 to
1996. Also since 1976, President of Buckley & Company Real Estate, Inc., a real
estate brokerage firm specializing in industrial property management and
development. Master of Business Administration and Bachelor of Science in
Business Administration from Middle Tennessee State University.
David P. Stockert. Senior Vice President and Chief Financial Officer of the
Company since June 1995. Vice President and Associate in the Real Estate
Investment Banking Group of Dean Witter Reynolds Inc. from July 1990 to June
1995. Master of Business Administration from Columbia University Business
School and Bachelor of Science in Accounting from the University of Colorado.
Robert G. Cutlip. Senior Vice President, Development, of the Company since
April 1993. Vice President and Principal-in-Charge of Dallas Industrial and
Phoenix/Colorado Operations from January 1992 to April 1993, Paragon Group, a
real estate development firm, Vice President and Principal of Dallas Industrial
from January 1990 to December 1991 and Vice President, Operations from January
1988 to January 1990. Master of Business Administration from University of
Southern California, Master of Science in Civil Engineering from Vanderbilt
University and Bachelor of Science in Civil Engineering from U.S. Air Force
Academy.
Clyde H. Duckett. Senior Vice President, Construction, of the Company since
January 1989. Professional Engineer registered in Georgia, South Carolina and
Tennessee. Bachelor of Science in Mechanical Engineering from Tennessee
Technological University.
Mark W. Flowers. Senior Vice President, Landscape, of the Company since October
1993. Vice President, Landscape of the Company from October 1987 through
September 1993. Bachelor of Science in Horticulture from the University of
Georgia.
31
<PAGE>
Klay W. Simpson. Senior Vice President, Marketing, of the Company since October
1992. Vice President of Marketing of Senkbeil & Associates Inc. and Anderson &
Senkbeil Inc., each a real estate development firm, from 1986 to September 1992.
Bachelor of Business Administration from Stephen F. Austin State University.
David L. Barker. Vice President, Property Management, of the Company since
October 1989. Real Property Administrator designation from Building Owners and
Managers Institute.
Elizabeth C. Belden. Vice President, Corporate Counsel, of the Company since
October 1985. Juris Doctor from Emory University and Bachelor of Social
Sciences from Colorado State University.
Phillip W. Cobb. Vice President, Building Construction, of the Company since
April 1996. Senior Project Manager of the Company's Construction division from
January 1993 to April 1996. President of CMC Builders, Inc., a general
construction firm from 1982 to 1993. Bachelor of Science in Industry from
Georgia Southern University.
Patricia P. Clayton. Vice President, Property Management, of the Company since
October 1992. Director of Property Management for Senkbeil & Associates Inc.
and Anderson & Senkbeil Inc., each a real estate development firm, from February
1986 to September 1992. Bachelor of Business Administration from the University
of California - Northridge.
Arthur J. Quirk. Vice President and Controller of the Company since December
1994. Vice President-Controller and Chief Accounting Officer for Allegiant
Physician Services, Inc., a physician management services company, from August
1993 to November 1994. Chief Financial Officer/Controller for TransTel Group
Inc., a start-up telecommunications company, from November 1991 to July 1993.
From June 1980 to October 1991 served in various capacities including Senior
Audit Manager at Arthur Andersen LLP. Bachelor of Science in Accounting from
Auburn University.
Moses L. Salcido. Vice President, Orlando, of the Company since October 1996.
Vice President and director of marketing for ComTech Properties, Inc., a real
estate development firm in Central Florida from 1988 to October 1996. Bachelor
of Science in Business Administration from San Diego State University.
Robert K. Sanders, Jr. Vice President, Construction Estimating, of the Company
since March 1996. Chief Estimator from September 1993 to February 1996. Bid
Group Manager and Senior Estimator for Choate Construction, a construction
contracting company, from August 1990 to August 1993. Bachelor of Architectural
Engineering with a Construction Option from Southern College of Technology.
Mark L. Scott. Vice President, Interior Construction of the Company since March
1996. Project Manager from March 1994 to March 1996. Senior Project Manager of
Choate Construction, a construction contracting company, from 1990 to March
1994. Studied Civil Engineering at Southern Institute of Technology.
32
<PAGE>
Thomas W. Trocheck. Vice President, Development-Engineering, of the Company
since May 1989. Professional Engineer registered in Georgia, Florida and South
Carolina. Bachelor of Science in civil engineering from the Georgia Institute
of Technology and Bachelor of Arts in Government and Business Administration
from Florida State University.
Robert T. Weeks. Vice President, Information Technology, of the Company since
January 1992. Director of Information Systems of the Company from March 1989
through December 1991. Master of Business Administration from Georgia State
University and Bachelor of Business Administration from the University of
Georgia. Ray Weeks and Robert Weeks are first cousins.
Cynthia F. Wright. Vice President, Investor Relations, of the Company since
September 1994. Vice President, Development of the Company from December 1987
through August 1994. Master of Business Administration from the University of
North Carolina, Master of Arts in Urban Studies and Planning from the University
of Alabama-Birmingham and Bachelor of Arts in Urban Studies from the University
of Virginia.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
The common stock of the Company trades on the New York Stock Exchange ("NYSE")
under the symbol "WKS." The following table reflects the quarterly high and low
closing prices per share of the common stock and its per share quarterly cash
dividends for 1995 and 1996, respectively:
<TABLE>
<CAPTION>
Quarter Ended High Low Dividend
-------------------------------------------------------------
<S> <C> <C> <C>
1995
March 31, 1995 $22.875 $ 20.75 $ 0.375
June 30, 1995 $ 25.00 $ 21.50 $ 0.375
September 30, 1995 $25.875 $23.125 $ 0.375
December 31, 1995 $25.125 $22.375 $ 0.40
1996
March 31, 1996 $ 26.75 $ 25.00 $ 0.40
June 30, 1996 $ 26.00 $23.625 $ 0.40
September 30, 1996 $29.250 $25.625 $ 0.40
December 31, 1996 $33.250 $27.875 $ 0.43
</TABLE>
As of March 20, 1997, the Company had 130 shareholders of record and the last
reported sale price of its common stock was $34.50.
33
<PAGE>
The Company currently anticipates paying regular quarterly dividends of $0.43
per share, which is equivalent to an annual dividend rate of $1.72 per share.
The dividends for each quarterly period are declared and paid one quarter in
arrears. Future dividends are dependent upon many factors including the
Company's earnings, capital requirements, its financial condition and its
available cash flow and are governed by the discretion of the Board of
Directors. The dividends paid in 1996 are estimated to be 95% taxable to the
Company's shareholders as ordinary income with the remaining 5% representing a
return of capital. The dividends paid in 1995 were 100% taxable to the
Company's shareholders as ordinary income. In future periods, some portion of
the dividends paid to shareholders may represent a return of capital.
In the first quarter of 1996, the Company registered 300,000 shares of its
common stock and implemented a dividend reinvestment plan under which current
shareholders may elect to automatically reinvest their dividends in additional
shares of common stock. In 1996, 1,514 shares of common stock were issued
through the dividend reinvestment plan.
On November 1, 1996, November 26, 1996 and December 30, 1996, the Company issued
a total of 1,352,261 Units in the Operating Partnership, in partial or full
consideration for the acquisition of real estate properties and the business
operations of NWI. The aggregate value of the properties acquired by the
Company in exchange for such Units was approximately $33.8 million. Units are
convertible by their holders into shares of common stock on a one-for-one basis,
or into cash, at the Company's option. The Units were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act in
reliance, in part, upon the representations and warranties set forth in the NWI
acquisition agreements. These Units are subject to a registration rights and
lock-up agreement which restricts the disposition of the Units for a period of
one year from the date of issuance with respect to all Units and further
restricts the disposition of Units beneficially owned by the Company's principal
executive officers in Nashville, Tennessee (approximately 43% of the total Units
issued) until November 1, 1999.
On December 31, 1996, the Company issued 565,459 Units and 282,178 shares of
common stock in partial or full consideration for the acquisition of real estate
properties and the business operations of Lichtin. The aggregate value of the
properties acquired by the Company in exchange for such Units and shares was
approximately $21.4. The Units and shares of common stock were issued pursuant
to an exemption from registration under Section 4(2) of the Securities Act in
reliance, in part, upon the representations and warranties set forth in the
Lichtin acquisition agreements. The shares of common stock and Units are
subject to a registration rights and lock-up agreement which restricts the
disposition of the Units and shares of common stock until December 31, 1999.
34
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Weeks Corporation Weeks Group (1)
----------------------------------------------- ----------------------------
(In thousands, except per share amount) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA, AT YEAR END
Investment in real estate before
accumulated depreciation $ 592,841 $ 319,763 $ 162,709 $ 95,831 $ 94,095
Net investment in real estate 551,372 289,874 139,750 76,944 77,903
Total assets 591,849 320,441 176,674 101,366 98,596
Total indebtedness 296,975 147,305 71,961 117,280 118,293
Shareholders' equity (deficit) 213,711 132,949 73,470 (24,197) (25,287)
</TABLE>
<TABLE>
<CAPTION>
Weeks Corporation Weeks Group(1)
---------------------------------------------------- ------------------------------------------
Year Ended Year Ended Aug. 24 to Jan. 1 to Year ended Year ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994 Dec. 31, 1993 Dec. 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Rental and reimbursement
revenues $ 52,679 $ 34,015 $ 8,877 $ 11,914 $ 18,023 $ 16,865
Total revenues 53,883 35,271 9,312 16,538 24,817 20,940
Operating, maintenance and
real estate tax expense 10,750 6,896 1,714 2,721 3,928 3,832
Depreciation and amortization 13,474 8,177 2,098 2,920 4,456 4,021
Interest expense 11,779 8,106 1,958 6,682 10,254 10,635
Amortization of deferred
financing costs 864 691 252 322 372 363
General and administrative
expenses 3,039 1,848 472 1,514 2,191 1,545
Income (loss) before
minority interests
and extraordinary loss 15,809 11,107 3,734 516 998 (1,394)
Income (loss) before
extraordinary loss 12,745 8,426 2,791 516 998 (1,394)
Net income (loss) 12,745 8,426 798 516 998 (1,394)
PER SHARE DATA
Income before
extraordinary loss $1.11 $1.03 $0.36
Net income 1.11 1.03 0.10
Dividends 1.63/(2)/ 1.525/(3)/ 0.525/(4)/
OTHER DATA
Cash flow provided by
(used in):
Operating activities $ 28,031 $ 18,678 $ 3,954 $ 2,769 $ 3,569 $ (1,947)
Investing activities (120,323) (117,127) (38,148) (14,953) (1,974) (4,509)
Financing activities 91,570 93,097 40,352 12,229 (1,541) 6,393
Funds from
operations/(5)(6)(7)/ 23,640 14,662 4,359 -- -- --
</TABLE>
(1) Represents the historical combined operations and combined financial
position of Weeks Group, the predecessor entity. On August 24, 1994, Weeks
Corporation (the "Company") completed an initial public offering and related
formation transactions.
(2) Includes dividends for the fourth quarter of 1996 ($0.43) which were
declared and paid in January 1997.
(3) Includes dividends for the fourth quarter of 1995 ($0.40) which were
declared and paid in January 1996.
(4) Includes dividends for a partial third quarter of 1994 ($0.15) after the
Company's August 1994 initial public offering and dividends for the fourth
quarter of 1994 ($0.375) which were declared and paid in January 1995.
(5) The Company believes that funds from operations provides an additional
indicator of the financial performance of the Company. Funds from operations
is defined by the National Association of Real Estate Investment Trusts
("NAREIT") to mean net income (loss) determined in accordance with generally
accepted accounting principles ("GAAP"), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same
basis. Funds from operations should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indicator of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it necessarily indicative of sufficient cash flow to fund
all of the Company's needs.
(6) Effective for the year ended December 31, 1996, the Company implemented the
new NAREIT recommended guidelines for calculating funds from operations. The
primary difference between the Company's funds from operations under the new
guidelines and those used in prior years is that the Company now reduces
reported funds from operations for the amortization of deferred financing
costs and recognizes rental income on a "straight-line" basis. Previously
reported funds from operations were $15,201,000 and $4,571,000 for the year
ended December 31, 1995 and the period from August 24, 1994 to December 31,
1994, respectively.
(7) Represents the Company's share of funds from operations.
35
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and the accompanying Consolidated Financial Statements
of the Company and the Combined Financial Statements of "Weeks Group," the
predecessor to the Company, and notes thereto.
GENERAL
The Company was founded in 1965 and operated as a private real estate company
until August 1994, when it completed an initial public offering ("IPO") and
elected to be taxed as a real estate investment trust ("REIT"). As a self-
administered and self-managed REIT, the Company owns, develops, acquires and
manages primarily high quality industrial and suburban office properties in the
southeastern United States. For a further description of the Company, see Note
1 to the consolidated and combined financial statements.
RESULTS OF OPERATIONS
The results of operations as discussed herein include the historical results of
the Company for the years ended December 31, 1996 and 1995, and for the period
from August 24, 1994 to December 31, 1994, respectively; and of Weeks Group for
the period from January 1, 1994 to August 23, 1994. For the purpose of
comparison to 1995 operating results, the results for the periods from January
1, 1994 to August 23, 1994 and August 24, 1994 to December 31, 1994 have been
aggregated.
Subsequent to the Company's IPO, all third-party service businesses conducted
through the Company's subsidiaries (the "Subsidiaries"), Weeks Realty Services,
Inc. (fee landscape and property management services) and Weeks Construction
Services, Inc. (fee construction) have been deconsolidated and accounted for on
the equity method of accounting. Therefore, certain of the revenue and expense
captions relating to the third-party service business operations in 1994 are
discussed after aggregating the portion of these items reported as part of the
Weeks Group combined financial statements with those of the Subsidiaries (see
Notes 2 and 7 to the consolidated and combined financial statements).
On November 1, 1996 and December 31, 1996, the Company completed the initial
closings of the acquisitions of properties and the related operations of two
privately-owned real estate companies -- NWI Warehouse Group, L.P. and
affiliates ("NWI") whose properties and operations are located in Nashville,
Tennessee, and Lichtin Properties, Inc. and affiliates ("Lichtin") whose
properties and operations are located in the Raleigh-Durham-Chapel Hill area of
North Carolina (see Note 8 to the consolidated and combined financial
statements). While these transactions did not have a material impact on 1996
reported results of operations, they were significant transactions as they
provided for the Company's continued expansion in the southeast United States.
36
<PAGE>
Operating information relating to the Company's properties is summarized below
(in thousands):
<TABLE>
<CAPTION>
Year ended Year ended Aug. 24 to Jan. 1 to % Change % Change
Dec. 31, Dec. 31 Dec. 31 Aug. 23 1996 vs. 1995 vs.
1996 1995 1994 1994 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental revenues $48,162 $31,217 $8,144 $10,937 54.3% 63.6%
Tenant reimbursements 4,517 2,798 733 977 61.4% 63.6%
- -------------------------------------------------------------------------------------------------------
Property operating revenues $52,679 $34,015 $8,877 $11,914 54.9% 63.6%
- -------------------------------------------------------------------------------------------------------
Operating and maintenance
expenses $ 6,025 $ 3,899 $ 979 $ 1,747 54.5% 43.0%
Real estate taxes 4,725 2,997 735 974 57.7% 75.4%
Depreciation and amortization 13,474 8,177 2,098 2,920 64.8% 63.0%
- -------------------------------------------------------------------------------------------------------
Property operating expenses $24,224 $15,073 $3,812 $ 5,641 60.7% 59.5%
- -------------------------------------------------------------------------------------------------------
Property operating revenues
less property operating
expenses $28,455 $18,942 $5,065 $ 6,273 50.2% 67.1%
- -------------------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Year to year comparisons of property operating revenues and expenses for 1996
and 1995 are discussed herein using the categories "core properties,"
"development properties" and "acquisition properties." Core properties are
defined as properties which were stabilized and operating for comparable full
year periods. The Company defines a property as stabilized upon the earlier of
substantial lease-up or one year from building shell completion. Development
properties reflect properties completed and stabilized, and acquisition
properties are properties acquired, subsequent to January 1, 1995.
Property operating revenues (rental revenues plus tenant reimbursements)
increased $18,664,000 or 54.9% in 1996. Of this increase, $13,733,000,
$3,750,000 and $1,181,000 was attributable to acquisition, development and core
properties, respectively. The increases from acquisition and development
properties were due to the acquisition of 81 properties (49 in 1995 and 32 in
1996) totaling 4,727,000 square feet, excluding 14 properties totaling 1,109,000
square feet acquired on December 31, 1996, and the stabilization of 15
development properties (seven in 1995 and eight in 1996) and two property
expansions (one each year) totaling 1,799,000 square feet. Property operating
expenses increased $9,151,000 or 60.7% between years, due primarily to the
growth in the property portfolio resulting from the acquisition and development
properties discussed above.
The impact on 1997 rental revenues of the acquisition properties acquired and
the development properties stabilized in 1996 when combined with the core
properties should increase rental revenues to approximately $65 million based on
noncancelable operating leases in place at December 31, 1996 (as reflected in
Note 10 to the consolidated and combined financial statements). In addition, as
discussed under the subheading "Current Development Activity" detailed below and
in Note 8 to the consolidated and combined financial statements, the Company
estimates the stabilization of certain properties currently under development
and the acquisition of additional properties associated with the NWI and Lichtin
acquisition transactions which will also increase rental revenues in 1997. (The
information provided in this paragraph includes forward-looking statements based
upon noncancelable operating leases in
37
<PAGE>
place at December 31, 1996, the status of negotiations with potential tenants,
current construction schedules and other relevant factors currently available to
the Company. There can be no assurance that any of these factors will not change
or that any change will not affect the accuracy of such forward-looking
statements.)
For the comparable years of 1996 and 1995, operating results of the core
properties, representing 78 properties totaling 5,331,000 square feet, are
summarized below (in thousands):
<TABLE>
<CAPTION>
Year ended Year ended
Dec. 31, 1996 Dec. 31, 1995 % Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental revenues $25,157 $24,045 4.6%
Tenant reimbursements 2,000 1,931 3.6%
- --------------------------------------------------------------------------------
Property operating revenues $27,157 $25,976 4.5%
- --------------------------------------------------------------------------------
Operating and maintenance
expenses $ 3,685 $ 3,210 14.8%
Real estate taxes 2,299 2,300 --
Depreciation and amortization 7,178 6,310 13.8%
- --------------------------------------------------------------------------------
Property operating expenses $13,162 $11,820 11.4%
- --------------------------------------------------------------------------------
Property operating revenues less
property operating expenses $13,995 $14,156 (1.1%)
- --------------------------------------------------------------------------------
Average occupancy 95.1% 95.9%
- --------------------------------------------------------------------------------
</TABLE>
Property operating revenues from core properties increased 4.5% despite a slight
decrease in overall average occupancy, due in part to the re-leasing in 1995 of
two buildings totaling 344,000 square feet vacated in early 1995 by Matsushita
Electric Corporation (Panasonic). Re-leasing these two buildings produced an
operating revenue increase of $912,000 in 1996. The positive impact of re-
leasing these buildings was offset by decreased average occupancy in six other
buildings totaling 336,000 square feet which resulted in decreased operating
revenues of $691,000. Exclusive of these occupancy related impacts, core
properties operating revenues increased 4.2% between years due primarily to
rental rate increases.
Property operating expenses increased 11.4% due to both increased operating and
maintenance expenses and depreciation and amortization in 1996. Net of the
impact of the eight buildings affected by occupancy changes, property operating
expenses increased by 8.6% (6.1% excluding depreciation and amortization
expense). The 6.1% increase in property operating expenses, excluding
depreciation and amortization, reflects increased property maintenance and
security expenses between years. Also excluding the impact of the eight
buildings affected by occupancy changes, property operating revenues less
property operating expenses from core properties, increased 0.4% (3.7% exclusive
of depreciation and amortization) between years.
Interest expense increased $3,673,000 or 45.3% from $8,106,000 in 1995 to
$11,779,000 in 1996, due to higher interest on the Company's revolving line of
credit ( the "Credit Facility") and higher mortgage interest in 1996. Higher
weighted average Credit Facility borrowings in 1996 compared to 1995, due to the
Company's acquisitions and increased development activity, resulted in higher
Credit Facility interest costs in 1996 of $1,410,000. Mortgage interest
increased $2,263,000 due to interest costs associated with mortgage debt assumed
in connection with the Company's 1995 and 1996 acquisitions.
38
<PAGE>
Amortization of deferred financing costs increased by $173,000 or 25.0% from
$691,000 in 1995 to $864,000 in 1996, due primarily to the amortization of the
deferred financing costs associated with a $5.1 million industrial revenue bond
refinancing in the first quarter of 1996 and costs associated with increasing
the availability under and restructuring the Credit Facility.
Company general and administrative expenses increased by $1,191,000 or 64.4%
from $1,848,000 in 1995 to $3,039,000 in 1996, due primarily to increased
personnel and related administrative costs attributable to the Company's growth
and to a lesser extent by a shift in certain expenses relating to properties
which were fee-managed by the Subsidiaries in 1995, but which were subsequently
acquired and were owned by the Company in 1996. A portion of the increased
expenses in 1996 also relates to the establishment of an office in Orlando,
Florida and the general and administrative expenses associated with the
Company's acquired Nashville, Tennessee operations, both of which occurred in
the fourth quarter of 1996. As a percentage of total revenue, general and
administrative expenses increased from 5.2% in 1995 to 5.6% in 1996. General
and administrative expenses of the Company, when combined with the general and
administrative expenses of the Subsidiaries increased by $1,367,000 or 40.6%
from $3,366,000 in 1995 to $4,733,000 in 1996 for the reasons discussed above.
As a percentage of the combined revenues of the Company and the Subsidiaries,
the combined general and administrative expenses of the Company and the
Subsidiaries decreased from 8.0% in 1995 to 7.6% in 1996.
Interest income for the year ended December 31, 1996, consists primarily of
interest earned under the development loan arrangements discussed more fully in
Note 6 to the consolidated and combined financial statements. For the year
ended December 31, 1995, interest income represented $213,000 earned under a
short-term note arrangement, made in conjunction with a 1995 property
acquisition, $60,000 earned under the development loan arrangements discussed
above with the remainder earned on short-term cash investments.
Equity in earnings of the Subsidiaries of $1,340,000 in 1996 and $1,220,000 in
1995 represents the Company's 99% economic interest in the earnings of the
Subsidiaries after the elimination of interest expense to the Company (see Note
7 to the consolidated and combined financial statements). As discussed below,
in 1995 the Company acquired 37 properties which the Subsidiaries previously
managed. Additionally, the Subsidiaries provided other third-party services,
such as landscape maintenance, leasing and tenant interior work for these
managed properties. Due to the acquisition of these properties by the Company,
the Company's third-party service revenues associated with these properties
ceased at their acquisition dates (generally in the second half of 1995). The
impact, if any, on the comparative results for 1996 and 1995 is included in the
discussion below.
Construction and development fees increased by $750,000 or 50.6% from $1,483,000
in 1995 to $2,233,000 in 1996. The increase resulted primarily from higher
general contracting fees earned from a higher volume of general contracting work
in process in 1996 compared to 1995.
Landscape revenue increased $1,181,000 or 30.6% from $3,854,000 in 1995 to
$5,035,000 in 1996 due to increases in landscape installation revenue of
$847,000 resulting from more installation jobs in process in 1996, with the
remaining increase due primarily to net growth in the number of maintenance
contracts.
39
<PAGE>
Property management fees decreased $305,000 or 61.2% from $498,000 in 1995 to
$193,000 in 1996, due primarily to the reduction in the size of the third-party
property management portfolio discussed above.
Commission income decreased $134,000 or 23.0% from $582,000 in 1995 to $448,000
in 1996, due to lower third-party building lease commissions associated with the
reduction of the third-party property management portfolio discussed above,
offset somewhat by increased land sales commissions in 1996 on land managed and
marketed by the Subsidiaries.
Direct costs increased by $823,000 or 23.5% from $3,504,000 in 1995 to
$4,327,000 in 1996, due primarily to costs associated with a higher volume of
landscape installation and maintenance contracts in 1996.
Equity in earnings of partnerships and joint ventures decreased from earnings of
$101,000 in 1995 to a loss of $1,000 in 1996, due primarily to lower profits
from underlying partnership and joint venture land sales activities between
years.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO THE COMBINED RESULTS FOR YEAR
ENDED DECEMBER 31, 1994
For the 1995 and 1994 comparison of property operating results, core properties
were defined as properties which were stabilized and operating for comparable
full-year periods. Development properties reflected properties completed and
stabilized subsequent to the IPO and acquisition properties were properties
acquired in conjunction with the IPO and acquired from third parties subsequent
to the IPO.
Property operating revenues (rental revenues plus tenant reimbursements)
increased $13,224,000 or 63.6% in 1995. Of this increase, $7,781,000 and
$5,612,000 related to acquisition and development properties, respectively,
offset by a $169,000 decrease from core properties. The increases from
acquisition and development properties were due to the acquisition of 66
properties (17 in August 1994 and 49 in 1995) totaling 3,351,000 square feet and
the stabilization of 14 development properties (seven in 1994 and seven in 1995)
totaling 1,821,000 square feet. Operating revenues from core properties, which
totaled 3,690,000 square feet, decreased due to reduced average occupancies
during 1995 at the Company's core office properties, primarily caused by the
February 1995 lease termination of Matsushita Electric Corporation (Panasonic)
in the Company's 94,677 square foot office building in Gwinnett Park
(representing net lost property operating revenues of $372,000). This decrease
was offset by property operating revenue increases due to rental rate growth for
all other core properties. The office property discussed above was re-leased
during 1995 and was 92.8% occupied at December 31, 1995. Average occupancy
levels for industrial core properties were generally consistent year-to-year.
Property operating expenses increased $5,620,000 or 59.5% between years due
primarily to the growth in the property portfolio resulting from the acquisition
and development properties discussed above.
40
<PAGE>
Interest expense decreased by $534,000 or 6.2% from $8,640,000 in 1994 to
$8,106,000 in 1995 primarily as a result of the refinancing and paydown of debt
in August 1994 in conjunction with the Company's IPO, offset by borrowings
incurred in 1995 to fund certain of the Company's acquisition and development
activities. Interest expense of $8,106,000 in 1995 consisted of mortgage
interest of $6,670,000 and Credit Facility interest of $1,436,000.
Amortization of deferred financing costs increased by $117,000 or 20.4% from
$574,000 in 1994 to $691,000 in 1995 due primarily to the amortization of the
deferred financing costs associated with mortgage debt refinanced in August 1994
in conjunction with the Company's IPO, and as a result of the amortization of
fees associated with the Credit Facility.
Company general and administrative expenses decreased by $138,000 or 6.9% from
$1,986,000 in 1994 to $1,848,000 in 1995 due primarily to the deconsolidation of
$987,000 of net general and administrative expenses between years associated
with the Subsidiaries discussed below, offset by approximately $616,000 of
increased expenses of being a public entity for all of 1995 compared to four
months in 1994, as well as increased personnel costs between years. General and
administrative expenses of the Company when combined with the general and
administrative expenses of the Subsidiaries increased by $825,000 or 32.5% from
$2,541,000 in 1994 to $3,366,000 in 1995 for the reasons discussed above. As a
percentage of the combined revenues of the Company and the Subsidiaries, the
combined general and administrative expenses of the Company and the Subsidiaries
decreased from 9.1% in 1994 to 8.0% in 1995.
Interest income increased by $110,000 or 49.1% from $224,000 in 1994 to $334,000
in 1995. The increase was due mainly to interest income totaling $213,000
earned under a short-term note arrangement in 1995 associated with the Company's
acquisition activity, offset by lower interest earnings from short-term cash
investments in 1995. Interest income in 1994 represents short-term interest
earned on the excess proceeds of the Company's IPO.
Equity in earnings of the Subsidiaries of $1,220,000 in 1995 and $692,000 for
the period from August 24, 1994 to December 31, 1994 represents the Company's
99% economic interest in the earnings of the Subsidiaries after the elimination
of interest expense to the Company (see Note 7 to the consolidated and combined
financial statements). As discussed below, in 1995 the Company acquired 37
properties which the Subsidiaries previously managed. Additionally, the
Subsidiaries provided other third-party services, such as landscape maintenance,
leasing and tenant interior work for these managed properties. Due to the
acquisition of these properties by the Company, the Company's third-party
service revenues associated with these properties ceased. The impact, if any,
on 1995 is included in the discussion below.
Construction and development fees decreased by $143,000 or 8.8% from $1,626,000
in 1994 to $1,483,000 in 1995. The decrease resulted primarily from somewhat
lower tenant interior work fees due to the reduction in the size of the third-
party property management portfolio discussed above.
Landscape revenue increased $631,000 or 19.6% from $3,223,000 in 1994 to
$3,854,000 in 1995 due to increased landscape installation revenue of
approximately $177,000 resulting from one large job completed in the last half
of 1995 and due to net growth in the number of maintenance contracts between
periods.
41
<PAGE>
Property management fees decreased $123,000 or 19.8% from $621,000 in 1994 to
$498,000 in 1995 due primarily to the reduction in the size of the third-party
property management portfolio discussed above.
Commission income decreased $163,000 or 21.9% from $745,000 in 1994 to $582,000
in 1995 due to fewer commissioned land sales transactions and lower third-party
lease commissions associated with the reduction of the third-party property
management portfolio discussed above.
Direct costs increased by $516,000 or 17.3% from $2,988,000 in 1994 to
$3,504,000 in 1995 due primarily to costs associated with a higher volume of
landscape installation and maintenance contracts in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to generate increasing cash flows from operations. Cash
provided by operating activities increased 50.1% or $9,353,000 to $28,031,000 in
1996. The increase results primarily from a full year of operating income in
1996 from 49 buildings acquired and seven development properties and one
property expansion stabilized in 1995, and from the partial year operating
income from 32 buildings acquired and eight development properties and one
property expansion stabilized in 1996.
In 1996, the Company invested $121,202,000 in property acquisition, development,
construction and development loan activities. This compares to $115,179,000 in
1995. The Company's aggregate acquisition, development, construction and
development loan activity, including non-cash investing activities, totaled
$281,039,000 and $158,230,000 in 1996 and 1995, respectively. This increased
activity reflects the impact of the 1996 NWI and Lichtin acquisitions (see Note
8 to the consolidated and combined financial statements).
Financing for the Company's property investment activities consisted primarily
of $45,042,000 of additional net borrowings and $68,532,000 from an equity
offering in 1996 compared to $35,833,000 of net borrowings and $72,800,000 from
an equity offering in 1995. The debt and equity components of the Company's on-
going financing strategy may differ based upon future market conditions.
The Company's net cash flow from operations is currently sufficient to meet the
Company's current operational needs and to satisfy the Company's current
quarterly dividends. Company management believes that operating cash flows will
continue to be adequate to fund these requirements in 1997. The Company
operates as and intends to maintain its qualification as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company
will generally not be subject to corporate federal income taxes as long as it
satisfies certain technical requirements of the Code, including the requirement
to distribute 95% of its taxable income to its shareholders.
42
<PAGE>
In 1996, the Company increased its available borrowing capacity under its line
of credit arrangements from $100 million to $175 million and lowered its
borrowing costs from LIBOR plus 1.50% to LIBOR plus 1.35%, and replaced its
single-bank revolving line of credit with the $175 million syndicated, unsecured
Credit Facility. The Credit Facility may be used to, among other things, meet
the Company's operational obligations and annual REIT dividend requirements.
The Company currently intends to finance its development, construction and
acquisition activities primarily through borrowings under the Credit Facility.
At December 31, 1996, the Company had available capacity under the Credit
Facility of approximately $72 million (see Note 5 to the consolidated and
combined financial statements). The Credit Facility has an initial term through
December 31, 1999, and provides for annual extensions through December 31, 2002.
On November 1, 1996, the Company closed the initial phase of its announced
acquisition transaction with NWI (see Note 8 to the consolidated and combined
financial statements). Other than cash closing costs and acquisition expenses
totaling approximately $1.6 million, the transaction was consummated through the
issuance of units of partnership interest ("Units") in Weeks Realty, L.P., the
partnership subsidiary through which, along with its Subsidiaries, the Company
conducts substantially all of its operations (the "Operating Partnership") and
the assumption of mortgage indebtedness. As a result, the initial closing
transaction did not have a significant impact on the Company's liquidity and
capital resources. Additionally, on December 31, 1996, the Company closed the
initial phase of its announced acquisition transaction with Lichtin (see Note 8
to the consolidated and combined financial statements). The initial closing of
the Lichtin transaction was consummated primarily through the issuance of
Operating Partnership Units, the issuance of shares of Company common stock and
the assumption of indebtedness. The Company also utilized Credit Facility
borrowings to retire approximately $15.0 million of assumed debt, to provide
$8.6 million of cash at closing and to fund approximately $1.2 million of
closing costs and acquisition expenses.
As part of these acquisition transactions, the Company has agreed, subject to
updating its due diligence procedures, to the future acquisition of land,
buildings and buildings under development not acquired at the initial closing
dates (see Note 14 to consolidated financial statements). It is expected that
these future acquisitions will be consummated primarily through a combination of
the issuance of Operating Partnership Units and the assumption of indebtedness,
some of which, in amounts up to approximately $44.0 million, will be repaid
through borrowings under the Credit Facility.
On November 13, 1996, the Company completed a public offering of 2,573,333
shares of common stock and received net proceeds of approximately $68.5 million.
The net proceeds were applied to outstanding Credit Facility borrowings. This
equity offering fully utilized the Company's available capacity under its $150
million equity shelf registration originated in 1995. In January 1997, the
Company completed a $300 million equity shelf registration which can be
utilized, upon the successful completion of public offerings, for equity
financings in future periods.
43
<PAGE>
The Company believes it currently has adequate liquidity and sources of capital,
including available borrowing capacity under its existing Credit Facility and
capacity under its $300 million equity shelf registration, to meet its current
operational requirements, to fund annual principal requirements under existing
mortgage notes payable and to fund its current development and acquisition
activity. It is management's expectation that the Company will continue to have
access to the additional capital resources necessary to further expand and
develop its business and to refinance mortgage notes payable as they begin to
mature in 1998. These resources include long-term mortgage debt and other forms
of debt and equity financing, in both public and private markets, including the
use of the Company's available capacity under its current shelf registration.
Future development and acquisition activities will be undertaken by the Company
only as suitable opportunities arise. Such activities are not expected to be
undertaken unless adequate sources of financing are available and a satisfactory
budget with targeted returns on investment has been internally approved. The
Company maintains staffing levels sufficient to meet its existing construction
and leasing activities. If market conditions warrant, the Company may adjust
staffing levels to avoid a negative impact on the Company's results of
operations.
Total consolidated debt amounted to $297.0 million at December 31, 1996,
including Credit Facility borrowings of $99.4 million and mortgage notes payable
of $197.6 million. Of the $197.6 million of mortgage indebtedness, $191.8
million is fixed rate and $5.8 million is variable rate. The weighted average
interest rate on the Company's fixed rate mortgage debt was 7.98% and on its
variable rate mortgage debt was 4.43% at December 31, 1996. The weighted
average interest rate under the Credit Facility, exclusive of the impact of the
interest rate swaps discussed below, at December 31, 1996, was 6.94%. Based on
the outstanding balance of mortgage notes payable at December 31, 1996, the
weighted average interest rate on the mortgage notes with a final maturity in
each of the next five years were 7.92% in 1998, 7.31% in 1999, 8.55% in 2000 and
6.96% in 2001. None of the mortgage notes mature in 1997.
As discussed in Note 5 to the consolidated and combined financial statements, in
July 1996, the Company entered into interest rate swap agreements to effectively
fix the Company's interest costs on $50.0 million of the Company's Credit
Facility borrowings. The weighted average interest rate under the fixed swap
arrangements is approximately 8.0%. If interest rates under the Credit
Facility, in excess of the $50.0 million discussed above, and under the
Company's variable rate mortgage debt fluctuated by 1.0%, interest costs to the
Company, based on outstanding borrowings at December 31, 1996, would increase or
decrease by approximately $550,000 on an annualized basis.
At December 31, 1996, the Company's mortgage debt on its consolidated properties
of $197.6 million plus its pro rata share of mortgage debt on unconsolidated
properties of $1.4 million totaled $199.0 million. Including Credit Facility
borrowings of $99.4 million for the Company and $3.6 million for its
unconsolidated Subsidiaries, the total debt obligations of the Company and its
unconsolidated Subsidiaries was $302.0 million or 33% of total market
capitalization at December 31, 1996 (assuming the exchange of all of the Units
in the Operating Partnership for shares of common stock). Based on the closing
price of the common stock of $33.25 on December 31, 1996, and assuming the
exchange of all of the Units in the Operating Partnership for shares of common
stock, there would be 18,533,783 shares of common stock outstanding with a total
market value of $616.2 million.
44
<PAGE>
CURRENT DEVELOPMENT ACTIVITY
The Company's development activity as of December 31, 1996 is summarized below.
The properties are located in metropolitan Atlanta, Georgia, unless otherwise
indicated.
<TABLE>
<CAPTION>
Estimated Estimated
Square Estimated Completion Stabilization
Feet/(1)/ Cost/(2)/ Date/(3)/ Date/(4)/
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MULTI-TENANT
3130 N. Berkeley Lake Rd. 240,000 $ 5,640,000 1Q96/(6)/ 1Q97
2780 Crestridge Ct. 222,643 6,104,000 4Q96/(6)/ 1Q97
5149 Southridge Pkwy. (expansion) 46,800 2,497,000 1Q96/(6)/ 1Q97
5195 Southridge Pkwy. 60,000 2,758,000 3Q95/(6)/ 2Q97/(5)/
5025 Derrick Jones Rd. 89,600 4,458,000 2Q96/(6)/ 2Q97
3240 Town Point Dr. 140,400 5,585,000 3Q96/(6)/ 3Q97
250 Hembree Park Dr. 94,500 4,942,000 4Q96/(6)/ 3Q97
1335 Northmeadow Pkwy. 89,150 6,675,000 4Q96/(6)/ 3Q97
120 Declaration Dr. 301,200 7,841,000 3Q97 3Q97
190 Parkway West (Spartanburg, SC) 92,400 2,799,000 1Q97 1Q98
3280 Summit Ridge Pkwy. 173,360 4,999,000 1Q97 1Q98
3805 Crestwood Pkwy. 105,295 10,646,000 1Q97 1Q98
1629 Prime Ct. (Orlando, FL) 43,200 2,416,000 1Q97 1Q98
1750 Beaver Ruin Rd. 67,600 4,245,000 2Q97 1Q98
11390 Old Roswell Rd. 47,600 3,527,000 2Q97 2Q98
2490 Principal Row (Orlando, FL) 101,800 3,491,000 2Q97 2Q98
250 Horizon Dr. 267,619 7,661,000 2Q97 2Q98
3300 Briley Park Blvd. South
(Nashville, TN) 194,750 6,374,000 3Q97 3Q98
736 Melrose Avenue (Nashville, TN) 103,400 5,454,000 3Q97 3Q98
- ---------------------------------------------------------------------------------------------------
2,481,317 $ 98,112,000
- ---------------------------------------------------------------------------------------------------
BUILD-TO-SUIT
3290 Summit Ridge Prkwy. 100,800 $ 2,804,000 1Q97 1Q97
4020 Steve Reynolds Blvd. 44,260 2,174,000 1Q97 1Q97
240 Northpoint Pkwy. (expansion) 95,100 2,796,000 1Q97 1Q97
2555 Northwinds Pkwy. 64,981 8,561,000 2Q97 2Q97
5755 Peachtree Ind. Blvd. 50,000 4,615,000 3Q97 3Q97
5765 Peachtree Ind. Blvd. 60,000 3,913,000 3Q97 3Q97
5775 Peachtree Ind. Blvd. 60,000 3,194,000 3Q97 3Q97
- ---------------------------------------------------------------------------------------------------
475,141 $ 28,057,000
- ---------------------------------------------------------------------------------------------------
2,956,458 $126,169,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual leasable square feet may vary upon completion.
(2) Estimated cost information includes the Company's estimate of future
capitalized costs through the stabilization date, including costs incurred
to acquire certain properties after completion (see Note 6 to the
consolidated and combined financial statements). There can be no assurance
that the actual capitalized cost of a building will not exceed the
estimated capitalized costs.
(3) Represents building shell completion. There can be no assurance that a
property will be completed by the estimated completion date.
(4) Represents the Company's current estimate of the date the property will
reach stabilization. Properties are considered stabilized upon the earlier
of substantial lease-up or one year from building shell completion. There
can be no assurance that the property will reach stabilization by the
estimated stabilization date.
(5) The Company is the developer of and has an option to acquire this property
from an affiliated joint venture upon stabilization, as defined in the
joint venture agreement. The date above reflects the estimated
stabilization and resulting acquisition date by the Company.
(6) Shell completed; interior tenant finish to be completed.
45
<PAGE>
The information provided above includes forward-looking data based on current
construction schedules, the status of lease negotiations with potential tenants
and other relevant factors currently available to the Company. There can be no
assurance that any of these factors will not change or that any change will not
affect the accuracy of such forward-looking data.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS
The Company believes that funds from operations provides an additional indicator
of the financial performance of the Company. Funds from operations is defined
by the National Association of Real Estate Investment Trusts ("NAREIT") to mean
net income (loss) determined in accordance with generally accepted accounting
principles ("GAAP") excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect funds from
operations on the same basis. Funds from operations is influenced not only by
the operations of the properties, but also by the capital structure of the
Company. Accordingly, management expects that funds from operations will be one
of the factors considered by the Board of Directors in determining the amount of
cash dividends the Company will pay to its shareholders. Funds from operations
does not represent cash flow from operating, investing and financing activities
as defined by GAAP, which are discussed under "Liquidity and Capital Resources"
above. Additionally, funds from operations does not measure whether cash flow
is sufficient to fund all cash flow needs, including principal amortization,
capital expenditures and dividends to shareholders, and should not be considered
as an alternative to net income for purposes of evaluating the Company's
operating performance or as an alternative to cash flow, as defined by GAAP, as
a measure of liquidity.
Effective for the year ended December 31, 1996, the Company implemented the new
guidelines issued by NAREIT for calculating funds from operations. The primary
difference between the Company's funds from operations under the new guidelines
and prior years is that the Company now reduces reported funds from operations
for the amortization of deferred financing costs and recognizes rental income
for the purposes of computing funds from operations on a "straight-line" basis.
The amortization of deferred financing costs totaled $864,000 and $691,000 for
the years ended December 31, 1996 and 1995, respectively. The "straight-line"
rental adjustment increased rental revenues by $475,000 for the year ended
December 31, 1996 and decreased rental revenue by $19,000 for the year ended
December 31, 1995. All funds from operations information detailed and discussed
below relating to the year ended December 31, 1995 has been restated to reflect
these differences.
Funds from operations presented herein under the new NAREIT guidelines is not
necessarily comparable to funds from operations presented by other real estate
companies due to the fact that not all real estate companies calculate funds
from operations in the same manner. However, the Company's funds from
operations is comparable to the funds from operations of real estate companies
that use the current NAREIT definition.
46
<PAGE>
For the year ended December 31, 1996, funds from operations increased $8,978,000
or 61.2% to $23,640,000 compared to funds from operations of $14,662,000 for the
year ended December 31, 1995. Funds from operations calculated under the
current guidelines for the years ended December 31, 1996 and 1995, respectively,
are detailed below (in thousands):
<TABLE>
<CAPTION>
Year ended Year ended
Dec. 31, 1996 Dec. 31, 1995/(1)/
---------------------------------------------------------------------------------
<S> <C> <C>
Income before minority interests $15,809 $11,107
Depreciation & amortization 13,474 8,177
Real estate depreciation at Subsidiaries 40 23
---------------------------------------------------------------------------------
Funds from operations --
Operating Partnership Units fully
converted $29,323 $19,307
Ownership percentage/(2)/ 80.62% 75.94%
---------------------------------------------------------------------------------
Funds from operations attributable to the
Company's shareholders $23,640 $14,662
---------------------------------------------------------------------------------
Weighted average shares outstanding 11,512 8,171
---------------------------------------------------------------------------------
</TABLE>
(1) The calculation of funds from operations has been revised from the
prior year presentation as discussed above. Previously reported funds
from operations attributable to the Company's shareholders were
$15,201,000 in 1995.
(2) Represents the Company's weighted average ownership of the Operating
Partnership for the year.
47
<PAGE>
SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES AND LEASING COSTS
The following table details the Company's capital expenditures for the year
ended December 31, 1996 and 1995, respectively (in thousands):
<TABLE>
<CAPTION>
Year ended Year ended
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------------------------
<S> <C> <C>
Building acquisitions/(1)/ $201,660 $110,141
Development and land acquisition activity/(2)(3)/ 70,476 42,290
Non-revenue-producing building improvements 543 331
Revenue-producing building improvements/(4)/ -- 3,520
Tenant improvement and leasing costs on
second-generation leases/(5)(6)/ 2,995 2,597
Tenant improvement expenditures to be
reimbursed by tenants -- 545
----------------------------------------------------------------------------------
$275,674 $159,424
----------------------------------------------------------------------------------
</TABLE>
(1) Reflects aggregate acquisition costs including the assumption of
mortgage notes payable of $104,628,000, the issuance of $48,085,000 of
Units, the issuance of $7,124,000 of common stock and other
acquisition related payables, net of receivables, of $906,000 in 1996,
and aggregate acquisition costs including the assumption of mortgage
notes payable of $39,511,000 and the application of notes receivable
and deposits of $3,540,000 in 1995 (see Note 15 to the consolidated
and combined financial statements).
(2) Includes first-generation leasing costs on development properties
totaling $1,287,000 and $1,292,000 in 1996 and 1995, respectively.
(3) Reflects aggregate development and leasing costs, exclusive of the
decrease in construction payables of $743,000 in 1996 and the increase
in construction payables of $52,000 in 1995.
(4) In 1995, revenue-producing building improvements included $520,000 in
building improvements to convert a 94,677 square foot single-tenant
office building to a multi-tenant facility. By dividing the space for
lease to a number of tenants, rather than leasing the entire building
to a single tenant, the Company believes it has achieved higher rents
and has substantially reduced its rollover risk and potential loss due
to vacancy. Also in 1995, the Company invested approximately $3.0
million in building improvements to convert a 249,200 square foot bulk
warehouse building to a manufacturing facility. The new tenant also
invested a similar amount in improvements to the building. Management
believes that this combined investment has enhanced the value of the
building and that the Company has achieved higher rent as a result of
the renovation and conversion of this building.
(5) The 1995 amount includes $1,377,000 of tenant improvement and leasing
costs to re-tenant the Company's 94,677 square foot office building
discussed in footnote (4) above which was vacated in February 1995 by
Matsushita Electric Corporation (Panasonic).
(6) Includes second-generation leasing costs totaling $1,331,000 and
$1,159,000 in 1996 and 1995, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1995, Statement of Financial Accounting Standards ("SFAS") 123, "Accounting
for Stock-Based Compensation" was issued prescribing new fair value-based
accounting for stock-based compensation. SFAS 123 required the Company, in
1996, to elect to utilize the fair value method under SFAS 123 or continue its
current generally accepted accounting under the intrinsic value method
prescribed by Accounting Principles Board Opinion ("APB") No. 25. The Company
elected to continue to account for stock-based compensation under APB No. 25 and
implemented the additional disclosure requirements of SFAS 123, including pro
forma net income and earnings per share amounts, in its 1996 financial
statements (see Note 12 to the consolidated and combined financial statements).
48
<PAGE>
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on the
Company because of the relatively low inflation rate. Substantially all tenant
leases do, however, contain provisions designed to protect the Company from the
impact of inflation. Most of the Company's leases require the tenants to pay a
share of operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing the Company's exposure to increases in
costs and operating expenses resulting from inflation. In addition, many of the
leases are for terms of less than seven years which may enable the Company to
replace existing leases with new leases at higher base rentals if rents under
the existing leases are below the then-existing market rate. However, there can
be no assurance that the Company would be able to replace existing leases with
new leases at higher base rentals.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant and the combined
financial statements of Weeks Group, predecessor to the Registrant, and
supplementary data are detailed under Item 14(a) and filed as part of this
report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections under the heading "Election of Directors" entitled "Nominees for
Election -- Terms Expiring in 2000," "Nominees for Election -- Terms Expiring in
1999," "Nominees for Election -- Terms Expiring in 1998," "Incumbent Directors -
- - Terms Expiring in 1999," and "Incumbent Directors -- Terms Expiring in 1998"
and the section under the heading "Other Matters" entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" of the Registrant's Proxy Statement
for the 1997 Annual Meeting of Shareholders to be held May 21, 1997 (the "Proxy
Statement") are incorporated herein by reference for information regarding
Directors of the Registrant. See Item X in Part I hereof for information
regarding executive officers of the Registrant.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled "Compensation of
Directors" of the Proxy Statement and the sections under the heading titled
"Executive Compensation" of the Proxy Statement are incorporated herein by
reference.
49
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership
of shares of Common Stock of the Company as of February 28, 1997 for (i)
directors of the Company, (ii) the Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers"), (iii) the directors and executive officers of
the Company as a group and (iv) each person known to the Company who is, or may
be deemed to be, the beneficial owner of more than 5% of the Company's common
stock. The number of shares represents the number of shares of common stock the
person holds plus the number of shares into which Units in the Operating
Partnership held by the person are exchangeable (if the Company elects to issue
shares rather than pay cash upon such exchange). Units are exchangeable for
common stock or cash, at the option of the Company. The right to exchange Units
for shares of common stock or cash (the "Exchange Rights") may be exercised by
the holders of Units (other than A. Ray Weeks, Jr., Thomas D. Senkbeil, Forrest
W. Robinson, John W. Nelley, Jr. and Harold S. Lichtin and certain entities
controlled by them) from time to time, in whole or in part.
The Exchange Rights may be exercised by A. Ray Weeks, Jr., Thomas D. Senkbeil
and Forrest W. Robinson and certain entities controlled by them from time to
time, in whole or in part, subject to the limitation that the Exchange Rights
may not be exercised prior to the later of August 24, 1997, or the date on which
a registration statement under the Securities Act of 1933, as amended, (the
"Securities Act"), relating to the shares of common stock issuable upon exercise
of such Exchange Rights becomes effective. The Exchange Rights may be exercised
by John W. Nelley, Jr., and certain entities controlled by him, with respect to
Units beneficially owned by him through such entities, from time to time, in
whole or in part, subject to the limitation that the Exchange Rights may not be
exercised prior to the later of one year from their date of issuance or the date
on which either a registration statement under the Securities Act relating to
the shares of Common Stock issuable upon exercise of such Exchange Rights
becomes effective or, in the opinion of counsel, such shares of Common Stock may
by issued without registration; provided that in no event may such Exchange
Rights be exercised prior to November 1, 1999. The Exchange Rights may be
exercised by Harold S. Lichtin and certain entities that he controls from time
to time, in whole or in part, subject to the limitation that the Exchange Rights
may not be exercised prior to the later of one year from the date of issuance,
as defined, or the date on which either a registration statement under the
Securities Act relating to the shares of Common Stock issuable upon exercise of
such Exchange Rights becomes effective or, in the opinion of counsel, such
shares of Common Stock may be issued without registration; provided that in no
event may such Exchange Rights be exercised prior to December 31, 1999.
50
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Beneficial Ownership Assuming Beneficial Ownership Assuming
No Exchange of Units Exchange of Units
for Common Stock for Common Stock
---------------------------------- ----------------------------------------
Number of % of Shares of Number of % of Shares of
Name and Shares of Common Stock Shares of Common Stock
Address of Beneficial Owner Common Stock/(1)/ Outstanding Common Stock/(1)/ Outstanding
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cohen & Steers Capital 1,960,100/(2)/ 13.91% 1,960,100 10.51%
Management Inc./(2)/
757 Third Avenue
New York, NY 10017
FMR Corp./(3)/ 1,556,400/(3)/ 11.04% 1,556,400 8.35%
82 Devonshire Street
Boston, MA 02109
LaSalle Advisors Limited 1,435,350/(4)/ 10.18% 1,435,350 7.70%
Partnership/ABKB/LaSalle
Securities Limited Partnership/(4)/
11 S. LaSalle Street
Chicago, IL 60603
The Annenberg Foundation/(5)/ 940,000/(5)/ 6.67% 940,000 5.04%
St. Davids Center, Suite A-200
150 Radnor-Chester Road
St. Davids, PA 19087
A. Ray Weeks, Jr./(6)/ 346,801/(7)(8)/ 2.45% 1,779,706/(7)(8)/ 9.50%
Chairman, Chief Executive Officer
and Director
Thomas D. Senkbeil/(6)/ 110,740/(8)/ * 206,807/(8)(9)(10)/ 1.11%
Vice Chairman , Chief
Investment Officer and Director
Forrest W. Robinson/(6)/ 80,793/(8)/ * 152,920/(8)(9)(10)/ *
President, Chief Operating Officer
and Director
David P. Stockert/(6)/ 13,289/(8)/ * 13,289/(8)/ *
Senior Vice President and
Chief Financial Officer
Klay W. Simpson/(6)/ 16,131/(8)/ * 20,241/(8)/ *
Senior Vice President, Marketing
John W. Nelley, Jr./(6)/ 45,000/(8)/ * 1,377,261/(8)(11)/ 7.37%
Managing Director and Director
Harold S. Lichtin/(6)/ 322,178/(8)(12)/ 2.28% 701,296/(8)(12)/ 3.75%
Managing Director and Director
Barrington H. Branch/(6)/ 10,750/(13)/ * 10,750/(13)/ *
Director
George D. Busbee/(6)/ 15,000/(13)/ * 15,000/(13)/ *
Director
Charles R. Eitel/(6)/ 10,000/(13)/ * 10,000/(13)/ *
Director
William O. McCoy/(6)/ 12,000/(13)/ * 12,000/(13)/ *
Director
All executives officers and directors 1,160,501/(14)/ 7.96% 4,422,895/(14)/ 23.12%
as a group (25 persons)
</TABLE>
* Represents less than 1% of the Company's outstanding common stock.
(1) Except as otherwise indicated, each of the parties listed has sole voting
and investment power over the shares owned.
(2) According to a Schedule 13G, dated February 11, 1997, filed on behalf of
Cohen & Steers Capital Management Inc., a registered investment advisory
company, Robert H. Steers, by virtue of his position as Chairman may also
be deemed a beneficial owner of said shares. These parties disclaim the
power to vote 298,000 shares of Common Stock.
51
<PAGE>
(3) According to a Schedule 13G, dated February 14, 1997, filed on behalf of
FMR Corp., a parent holding company, Edward C. Johnson 3d, as Chairman and
a significant shareholder of FMR Corp., and Abigail P. Johnson, as
significant shareholder of FMR Corp., may also be deemed beneficial owners
of said shares by virtue of their relationships to these companies. FMR
Corp. through a wholly owned investment advisory company, Fidelity
Management & Research Company ("Fidelity"), has sole power to dispose of
1,271,700 shares owned by Fidelity funds ("Funds") for which it serves as
an advisor. Neither FMR Corp. nor Mr. Johnson has the sole power to vote or
direct the voting of these 1,271,700 shares as such power resides with each
Funds' Board of Trustees. FMR Corp., through a wholly owned subsidiary
bank, Fidelity Management Trust Company, has sole power to dispose or
direct the disposition of 284,700 shares, the sole power to vote or direct
the vote of 276,300 shares and disclaims the power to vote or to direct the
vote of 8,400 shares in its capacity as investment manager of the bank's
institutional accounts.
(4) According to a Schedule 13G, dated February 11, 1997, filed on behalf of
LaSalle Advisors Limited Partnership ("LaSalle") and ABKB/LaSalle
Securities Limited Partnership ("ABKB"), registered investment advisory
companies, William K. Morrill, Jr., and Keith R. Pauley by virtue of their
employment positions may also be deemed beneficial owners of said shares.
LaSalle claims beneficial ownership of 787,750 shares or 5.58% of the
Company's common stock, the sole power to vote or to direct the vote and
sole power to dispose or to direct the disposition of 370,950 shares,
shared power to vote or to direct the vote of 143,800 shares, shared power
to dispose or to direct the disposition of 416,800 shares and disclaims
sole or shared voting power of 273,000 shares of common stock. ABKB claims
beneficial ownership of 647,600 shares or 4.60% of the Company's common
stock, the sole power to vote or to direct the vote and sole power to
dispose or to direct the disposition of 150,400 shares, shared power to
vote or to direct the vote of 404,255 shares, shared power to dispose or to
direct the disposition of 497,200 shares and disclaims sole or shared
voting power of 92,945 shares of common stock. Mr. Morrill and Mr. Pauley
may be deemed to be the beneficial owners of the shares included in the
table above, including the sole power to vote or to direct the vote and
sole power to dispose or to direct the disposition of 521,350 shares,
shared power to vote or to direct the vote of 548,055 shares, shared power
to dispose or to direct the disposition of 914,000 shares and disclaim sole
or shared voting power of 365,945 shares of common stock. Mr. Morrill and
Mr. Pauley disclaim beneficial ownership of any of said shares.
(5) According to Schedule 13D, dated November 13, 1996, filed on behalf of The
Annenberg Foundation (the "Foundation"), Mr. Walter H. Annenberg may also
be deemed a beneficial owner of the shares held by the Foundation by virtue
of his position as Chairman, President, sole director and sole stockholder
of the Foundation..
(6) Beneficial owner's address is 4497 Park Drive, Norcross, GA 30093.
(7) Includes 3,467 shares of common stock and 400,155 Units held by trusts of
which A. Ray Weeks, Jr. is co-trustee and a 20% beneficiary, and 255,623
Units held by corporations that A. Ray Weeks, Jr. controls, including Units
held by those corporations discussed in notes (9) and (10) below, and 2,442
Units held by Mr. Weeks' spouse.
(8) Includes 80,000, 55,000, 55,000, 15,000, 40,000 and 40,000 shares issuable
to Mr. Weeks, Mr. Senkbeil, Mr. Robinson, Mr. Simpson, Mr. Nelley and Mr.
Lichtin, respectively, upon exercise of stock options which are currently
exercisable or exercisable within 60 days, but does not include 35,000,
20,000, 20,000, 67,500 and 8,000 shares issuable to Mr. Weeks, Mr.
Senkbeil, Mr. Robinson, Mr. Stockert and Mr. Simpson, respectively, upon
exercise of stock options which are not exercisable within 60 days.
(9) Includes 42,993 Units held by a corporation which is owned 60%, 30% and
10%, respectively, by Mr. Weeks, Mr. Senkbeil and Mr. Robinson.
(10) Includes 257 Units held by a corporation which is owned 75%, 20% and 5%,
respectively, by Mr. Weeks, Mr. Senkbeil and Mr. Robinson.
(11) Includes 1,332,261 Units held by a partnership of which Mr. Nelley is a
general partner. Mr. Nelley disclaims beneficial ownership of 1,044,983 of
such Units.
(12) Includes 282,178 shares of Common Stock and 134,673 Units held by entities
which Harold S. Lichtin controls and 1,228 Units held by Mr. Lichtin's
spouse.
(13) Includes 10,000 shares issuable upon the exercise of stock options which
are currently exercisable or exercisable within 60 days.
(14) Includes 477,000 shares issuable upon the exercise of stock options which
are currently exercisable or exercisable within 60 days, but does not
include 187,000 shares issuable upon exercise of stock options which are
not exercisable within 60 days.
52
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections under the heading titled "Certain Transactions" of the Proxy
Statement, are incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
The following Consolidated Financial Statements of the Registrant and
Combined Financial Statements of Weeks Group (Predecessor to the
Registrant), together with the applicable Report of Independent Public
Accountants, are listed below:
<TABLE>
<CAPTION>
WEEKS CORPORATION AND SUBSIDIARIES AND WEEKS GROUP PAGE NUMBER
<S> <C>
Report of Independent Public Accountants on Financial
Statements and Schedule..................................................... F-1
Consolidated Balance Sheets of Registrant at December 31, 1996 and 1995....... F-2
Consolidated Statements of Operations of Registrant for the years ended
December 31, 1996 and 1995 and for the period from August 24, 1994 to
December 31, 1994 and the Combined Statement of Operations of
Weeks Group for the period from January 1, 1994 to August 23, 1994.......... F-3
Consolidated Statements of Shareholders' Equity of Registrant for the years
ended December 31, 1996 and 1995 and for the period from
August 24, 1994 to December 31, 1994 and the Combined Statement
of Owners' Deficit of Weeks Group for the period from
January 1, 1994 to August 23, 1994.......................................... F-4
Consolidated Statements of Cash Flows of Registrant for the years ended
December 31, 1996 and 1995 and for the period from August 24, 1994 to
December 31, 1994 and the Combined Statement of Cash Flows for
Weeks Group for the period from January 1, 1994 to August 23, 1994.......... F-5
Notes to Consolidated and Combined Financial Statements....................... F-6
2. Financial Statement Schedule PAGE IN
FORM 10-K
Schedule III - Real Estate Assets and Accumulated Depreciation S-1 to S-10
3. Exhibits
</TABLE>
Certain of the exhibits required by item 601 of Regulation S-K have been
filed with previous reports by the Registrant and are herein incorporated
by reference thereto.
53
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
--------------------------------------------------------------------------------
<S> <C>
2.1** Agreement of Merger by and between NWI Warehouse Group, LLC and
Weeks Realty, L.P., dated November 1, 1996.
2.2** Contribution Agreement for Development Properties between Weeks
Realty, L.P., and NWI Warehouse Group, L.P., dated November 1,
1996.
2.3** Contribution Agreement for Aspen Grove Land between Weeks Realty,
L.P., and NWI Warehouse Group, L.P., dated November 1, 1996.
2.4** Contribution Agreement for I-440 Land between Weeks Realty, L.P.,
and NWI Warehouse Group, L.P., dated November 1, 1996.
2.5** Contribution Agreement for NWI Operating Business by and between
Weeks Realty, L.P. and NWI Warehouse Group, L.P., dated November
1, 1996.
2.6** Contribution Agreement for Buckley Operating Business by and
between Weeks Realty, L.P. and Buckley & Company Real Estate,
Inc., dated November 1, 1996.
2.7** Contribution Agreement for Briley Land between Weeks Realty, L.P.
and NWI Warehouse Group, L.P., dated November 1, 1996.
2.8*** Contribution Agreement by and between Harold S. Lichtin and Weeks
Realty, L.P., dated December 31, 1996.
2.9*** Agreement and Plan of Merger by and among Lichtin Properties,
Inc., Harold S. Lichtin and Weeks Corporation, dated December 31,
1996.
2.10*** Contribution Agreement for Northern Telecom Properties, among the
Contributors identified therein (the "Contributors") and Weeks
Realty, L.P. doing business as Weeks Realty Limited Partnership,
dated December 31, 1996.
2.11*** Contribution Agreement (Perimeter Park West Land) among Harold S.
Lichtin, Marie Antoinette Robertson, and Perimeter Park West
Associates, and Weeks Realty, L.P. doing business as Weeks Realty
Limited Partnership, dated December 31, 1996.
2.12*** Contribution Agreement for Completed Properties Lichtin Portfolio
among the Contributors and Weeks Realty, L.P. doing business as
Weeks Realty Limited Partnership, dated December 31, 1996.
2.13*** Contribution Agreement for Development Properties and Regency
Forrest Land among the Contributors and Weeks Realty, L.P. doing
business as Weeks Realty Limited Partnership, dated December 31,
1996.
3.1**** Amended and Restated Articles of Incorporation of the Company
3.2*** Third Amended and Restated Bylaws of Weeks Corporation.
4.1* Specimen certificate of Common Stock
10.1**** First Amended and Restated Agreement of Limited Partnership dated
August 24, 1994 of Weeks Realty L.P.
10.2**** Registration Rights and Lock-Up Agreement dated August 24, 1994
among the Company and the persons named therein
10.3**** Incentive Stock Plan
10.4**** Employment Agreements between the Company and A. Ray Weeks, Jr.,
Thomas D. Senkbeil and Forrest W. Robinson, respectively
</TABLE>
54
<PAGE>
<TABLE>
<S> <C>
10.5**** Employment Agreements between Weeks Realty L.P. and A. Ray Weeks,
Jr., Thomas D. Senkbeil and Forrest W. Robinson, respectively
10.6**** Employment Agreements between Weeks Realty Services Inc. and A.
Ray Weeks, Jr., Thomas D. Senkbeil and Forrest W. Robinson,
respectively
10.7**** Employment Agreements between Weeks Construction Services Inc. and
A. Ray Weeks, Jr. and Forrest W. Robinson, respectively
10.8**** Noncompetition Agreements among the Company, Weeks Realty L.P.,
Weeks Realty Services Inc., Weeks Construction Services Inc. and
each of A. Ray Weeks, Jr., Thomas D. Senkbeil and Forrest W.
Robinson
10.9* Form of Officers and directors Indemnification Agreement
10.10+ Credit Agreement dated September 25, 1996, by and among Wachovia
Bank of Georgia, N.A., as agent bank for Wachovia Bank of Georgia,
N.A., First Union National Bank of Georgia, Commerzbank A.G. and
Mellon Bank, N.A. as lenders, Weeks Realty, L.P., Weeks
Construction Services, Inc., Weeks Realty Serivces, Inc., Weeks
Development Partnership and Weeks Financing Limited Partnership,
as borrowers, and Weeks Corporation and Weeks Realty, L.P., as
guarantors.
10.11++ Park North Purchase and Sale Agreement between Copley Properties
Inc., Parknorth Associates, Parknorth Associates II, Parknorth
Associates III and Weeks Realty L.P., dated March 28, 1995
10.12# Purchase and Sale Agreement by and among North Meadow Associates
Joint Venture, ASC North Fulton Associates Joint Venture and Weeks
Realty L.P., dated July 7, 1995.
10.13## Employment Agreement between Weeks Corporation and David P.
Stockert
10.14## Noncompetition Agreement between Weeks Corporation, Weeks Realty
L.P., Weeks Realty Services Inc. and Weeks Construction Services
Inc. and David P. Stockert, dated June 26, 1995.
10.15## Agreement of Purchase and Sale between Premprop-Northwoods 6
Partnership, Premprop-Northwoods 18-22 Partnership, and Premprop-
Northwoods 23 Partnership and Weeks Realty L.P. dated November 6,
1995. The Exhibits and Schedules to this Agreement are listed in,
but not filed with, this exhibit. Such Exhibits and Schedules have
been omitted for purposes of this filing, but will be furnished to
the Commission supplementary upon request.
10.16### Real Estate Purchase and Sale Agreement by and between Principal
Mutual Life Insurance Company and Weeks Realty, L.P., dated May
28, 1996.
10.17### Amendment to Weeks Corporation Incentive Stock Plan, dated May 21,
1996.
10.18** Employment Agreement by and between John W. Nelley, Jr. and Weeks
Corporation, dated November 1, 1996.
10.19** Employment Agreement by and between Albert W. Buckley, Jr. and
Weeks Corporation, dated November 1, 1996.
10.20** Noncompetition Agreement by and among NWI Warehouse Group, L.P.,
Weeks Corporation, Weeks Realty, L.P., Weeks Realty, Services,
Inc., Weeks Construction Services, Inc., Weeks GP Holdings, Inc.,
Weeks LP Holdings, Inc., and their respective successors, dated
November 1, 1996.
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
10.21** Noncompetition Agreement by and among John W. Nelley, Jr., Weeks
Corporation, Weeks Realty, L.P., Weeks Realty Services, Inc.,
Weeks Construction Services, Inc., Weeks GP Holdings, Inc., Weeks
LP Holdings, Inc., and any other entity under the common control
of Weeks Corporation, and their respective successors, dated
November 1, 1996.
10.22** Noncompetition Agreement by and among Albert W. Buckley, Jr.,
Weeks Corporation, Weeks Realty, L.P., Weeks Realty, Services,
Inc., Weeks Construction Services, Inc., Weeks GP Holdings, Inc.,
Weeks LP Holdings, Inc., and any other entity under the common
control of Weeks Corporation, and their respective successors,
dated November 1, 1996.
10.23** Indemnification Agreement by and between Weeks Corporation and
John W. Nelley, Jr., dated November 1, 1996.
10.24** Registration Rights and Lock-Up Agreement by and among Weeks
Corporation, NWI Warehouse Group, L.P., Buckley & Company Real
Estate, Inc., John W. Nelley, Jr., and Albert W. Buckley, Jr.,
dated November 1, 1996.
10.25** Registration Rights Agreement for Post-March 31, 1998 Shares and
Units, by and among Weeks Corporation, NWI Warehouse Group, L.P.,
and Buckley & Company Real Estate, Inc., dated November 1, 1996.
10.26** Second Amended and Restated Agreement of Limited Partnership of
Weeks Realty, L.P., dated October 30, 1996.
10.27** First Amendment to the Second Amended and Restated Agreement of
Limited Partnership of Weeks Realty, L.P. by and among NWI
Warehouse Group, L.P., Buckley & Company Real Estate, Inc. and
Weeks GP Holdings, Inc., dated November 1, 1996.
10.28*** Registration Rights and Lock-Up Agreement by and among Weeks
Corporation and Harold S. Lichtin, Noel A. Lichtin, Marie A.
Robertson, Amy R. Ehrman, Roland G. Robertson and Perimeter Park
West Associates Limited Partnership, dated December 31, 1996.
10.29*** Registration Rights and Lock-Up Agreement for Post-June 30, 1998
Units by and among Weeks Corporation and Harold S. Lichtin, Noel
A. Lichtin, Marie A. Robertson, Amy R. Ehrman, Roland G. Robertson
and Perimeter Park West Associates Limited Partnership, dated
December 31, 1996.
10.30*** Employment Agreement by and between Harold S. Lichtin and Weeks
Corporation, dated December 31, 1996.
10.31*** Noncompetition Agreement by and between Harold S. Lichtin, Weeks
Corporation, Weeks Realty, L.P., Weeks Realty Services, Inc.,
Weeks Construction Services, Inc., Weeks GP Holdings, Inc., Weeks
LP Holdings, Inc., and any other entity under the common control
of Weeks Corporation, and their respective successors, dated
December 31, 1996.
10.32*** Indemnification Agreement by and between Weeks Corporation and
Harold S. Lichtin, dated December 31, 1996.
10.33*** Second Amendment to the Second Amended and Restated Agreement of
Limited Partnership of Weeks Realty, L.P. by and among Harold S.
Lichtin, Noel A. Lichtin, Marie Antoinette Robertson, Amy R.
Ehrman, Roland G. Robertson and Perimeter Park West Associates
Limited Partnership, Weeks GP Holdings, Inc. and Weeks
Corporation, dated December 31, 1996.
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
11.1 Computation of earnings per share
21.1 List of subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP regarding the Company's Form S-3,
file No. 33-96534, Form S-3, file No. 333-1106, Form S-8, file No.
333-1108, Form S-3, file No. 333-18307, and Form S-8, file No.
333-18305
27.1 Financial Data Schedule
</TABLE>
* Filed as an exhibit to the Registration Statement on Form S-11 (SEC
File No. 33-80314) of the Registrant.
** Filed as an exhibit to the Company's Current Report on Form 8-K dated
November 1, 1996.
*** Filed as an exhibit to the Company's Current Report on Form 8-K dated
December 31, 1996.
**** Filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
# Filed as an exhibit to the Company's Current Report on Form 8-K dated
August 31, 1995.
## Filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
### Filed as an exhibit to the Company's Current Report on Form 8-K dated
August 9, 1996.
#### Filed as an exhibit to the Registration Statement on Form S-8 (SEC
File No. 333-18305).
+ Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended
September 30, 1996.
++ Filed as an exhibit to the Company's Current Report on Form 8-K dated
July 12, 1995.
(B) 1. Reports on Form 8-K
Form 8-K/A dated August 9, 1996, and filed on October 18, 1996,
amending the Company's Form 8-K dated August 9, 1996 and filed on
August 22, 1996, reporting the acquisition of the Principal Properties
on August 9, 1996.
Form 8-K dated November 1, 1996, and filed on November 6, 1996, as
amended by Form 8-K/A dated November 1, 1996, and filed on November 8,
1996, reporting the acquisition of certain properties and business
operations of NWI on November 1, 1996.
Form 8-K dated November 5, 1996, and filed on November 6, 1996,
reporting the proposed acquisition of certain properties and business
operations of Lichtin.
Form 8-K dated November 7, 1996, and filed on November 12, 1996, as
amended by Form 8-K/A dated November 7, 1996, and filed on November
13, 1996.
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
WEEKS CORPORATION
(Registrant)
September 15, 1997 /s/ David P. Stockert
---------------------
David P. Stockert
Senior Vice President and
Chief Financial Officer
58
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Weeks Corporation:
We have audited the accompanying consolidated balance sheets of Weeks
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1996 and 1995, and for the period from August 24,
1994 to December 31, 1994. We have also audited the combined statements of
operations, owners' deficit and cash flows of Weeks Group for the period from
January 1, 1994 to August 23, 1994. These financial statements and schedule are
the responsibility of the management of Weeks Corporation. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Weeks Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended December 31, 1996 and 1995
and for the period from August 24, 1994 to December 31, 1994, and the results of
operations and the cash flows of Weeks Group for the period from January 1, 1994
to August 23, 1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-1
<PAGE>
WEEKS CORPORATION CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share data) Dec. 31, 1996 Dec. 31, 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate assets
Land $ 77,233 $ 40,100
Buildings and improvements 450,002 253,414
Accumulated depreciation (41,469) (29,889)
- ------------------------------------------------------------------------------------------------------------
Operating real estate assets 485,766 263,625
Developments in progress 56,571 21,448
Land held for future development 9,035 4,801
- ------------------------------------------------------------------------------------------------------------
Net real estate assets 551,372 289,874
Real estate development loans 9,455 1,309
Direct financing lease, net 5,136 5,229
Cash and cash equivalents 260 982
Receivables, net 5,858 4,544
Deferred costs, net 10,286 9,457
Investments in and notes receivable from
unconsolidated subsidiaries 7,760 7,751
Other assets 1,722 1,295
- ------------------------------------------------------------------------------------------------------------
$ 591,849 $ 320,441
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 197,575 $ 113,022
Bank credit facility borrowings 99,400 34,283
Accounts payable and accrued expenses 9,970 7,783
Other liabilities 2,963 1,741
- ------------------------------------------------------------------------------------------------------------
Total liabilities 309,908 156,829
- ------------------------------------------------------------------------------------------------------------
Minority interests in Operating Partnership 68,230 30,663
- ------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 14)
Shareholders' equity
Common stock, $0.01 par value; 100,000,000 shares
authorized; 14,048,593 and 11,155,704 shares issued
and outstanding at December 31, 1996 and 1995, respectively 140 112
Preferred stock, $0.01 par value; 20,000,000 shares
authorized; none issued -- --
Additional paid-in capital 267,634 191,259
Accumulated deficit (54,063) (58,422)
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 213,711 132,949
- ------------------------------------------------------------------------------------------------------------
$ 591,849 $ 320,441
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-2
<PAGE>
WEEKS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
AND WEEKS GROUP COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Weeks Corporation Weeks Group
----------------------------------------------- -------------
Year Ended Year Ended Aug. 24 to Jan. 1 to
(In thousands, except per share data) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Rental $48,162 $31,217 $ 8,144 $10,937
Tenant reimbursements 4,517 2,798 733 977
Direct financing lease 768 776 277 504
Other 436 480 158 107
Development and construction fees -- -- -- 990
Landscape -- -- -- 2,169
Property management fees -- -- -- 425
Commissions -- -- -- 429
- -------------------------------------------------------------------------------------------------------------------
53,883 35,271 9,312 16,538
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating and maintenance 6,025 3,899 979 1,747
Real estate taxes 4,725 2,997 735 974
Depreciation and amortization 13,474 8,177 2,098 2,920
Interest 11,779 8,106 1,958 6,682
Amortization of deferred financing costs 864 691 252 322
General and administrative 3,039 1,848 472 1,514
Labor and materials -- -- -- 1,954
- -------------------------------------------------------------------------------------------------------------------
39,906 25,718 6,494 16,113
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EQUITY IN EARNINGS OF UNCONSOLIDATED
ENTITIES AND INTEREST INCOME 13,977 9,553 2,818 425
Equity in earnings of unconsolidated entities 1,340 1,220 692 91
Interest income 492 334 224 --
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTERESTS
AND EXTRAORDINARY LOSS 15,809 11,107 3,734 516
Minority interests (3,064) (2,681) (943) --
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS 12,745 8,426 2,791 516
Extraordinary loss, net of minority interests -- -- (1,993) --
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $12,745 $ 8,426 $ 798 $ 516
===================================================================================================================
PER SHARE DATA
Income before extraordinary loss $1.11 $1.03 $0.36
Extraordinary loss -- -- (0.26)
- -------------------------------------------------------------------------------------------------------------------
Net income $1.11 $1.03 $0.10
===================================================================================================================
Weighted average shares outstanding 11,512 8,171 7,675
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
WEEKS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND WEEKS GROUP COMBINED STATEMENT OF OWNERS' DEFICIT
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
(In thousands, except per share amounts) Stock Capital Deficit Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OWNERS' DEFICIT, DECEMBER 31, 1993 $ -- $ -- $(24,197) $(24,197)
Capital distributions, net -- -- (1,571) (1,571)
Net income -- -- 516 516
- ------------------------------------------------------------------------------------------------------------------------
OWNERS' DEFICIT, AUGUST 23, 1994 -- -- (25,252) (25,252)
Initial public offering of common stock, net of
underwriting discount and offering costs
of $14,543 77 118,205 -- 118,282
Private placement of shares -- 289 -- 289
Acquisition of property interests of non-controlled
entities for Units in Operating Partnership -- -- 8,053 8,053
Distributions to controlling interests -- -- (2,547) (2,547)
Adjustment for minority interest of Unitholders
in Operating Partnership at initial offering date -- -- (25,002) (25,002)
Dividends ($0.15 per share) -- -- (1,151) (1,151)
Net income -- -- 798 798
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1994 77 118,494 (45,101) 73,470
Public offering of common stock, net of
underwriting discount and offering costs
of $4,825 35 72,765 -- 72,800
Adjustments primarily for minority interest of
Unitholders in Operating Partnership upon
public offering and upon conversions of Units
into shares -- -- (10,234) (10,234)
Dividends ($1.50 per share) -- -- (11,513) (11,513)
Net income -- -- 8,426 8,426
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1995 112 191,259 (58,422) 132,949
Public offering of common stock, net of
underwriting discount and offering costs
of $3,843 26 68,506 -- 68,532
Acquisition consideration 2 7,122 -- 7,124
Exercise of stock options -- 706 -- 706
Dividend reinvestment plan -- 41 -- 41
Adjustments for minority interest of Unitholders
in Operating Partnership upon public offering
and upon issuance of additional shares and Units -- -- 9,474 9,474
Dividends ($1.60 per share) -- -- (17,860) (17,860)
Net income -- -- 12,745 12,745
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1996 $140 $267,634 $(54,063) $213,711
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
WEEKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
AND WEEKS GROUP COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Weeks Corporation Weeks Group
----------------------------------------------- --------------
Year Ended Year Ended Aug. 24 to Jan. 1 to
(In thousands) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,745 $ 8,426 $ 798 $ 516
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 3,064 2,681 943 --
Depreciation and amortization 13,474 8,177 2,098 2,920
Amortization of deferred financing costs 864 691 252 322
Income from direct financing lease (768) (776) (277) (504)
Straight-line rent revenue (475) 19 31 216
Equity in earnings of partnerships
and joint ventures -- -- -- (91)
Extraordinary loss, net of minority interests -- -- 1,993 --
Net change in:
Receivables (184) (734) (846) (815)
Other assets (659) (239) 2,643 (4,213)
Deferred costs (2,618) (2,451) (1,186) (706)
Accounts payable and accrued expenses 1,366 2,078 (1,411) 1,732
Other liabilities 1,222 806 531 3,053
Construction receivables -- -- -- (109)
Costs in excess of billings -- -- -- 1,559
Cash overdraft payable -- -- (1,615) (829)
Billings in excess of costs -- -- -- (282)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 28,031 18,678 3,954 2,769
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property acquisition, development and construction (113,056) (113,870) (34,599) (15,593)
Real estate development loans (8,146) (1,309) -- --
Payments received on direct financing lease 861 835 291 520
Notes receivable collections 18 1,467 -- --
Notes receivable and deposits -- (4,540) -- --
Distributions from (investments in)
unconsolidated entities -- 290 (3,840) 120
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (120,323) (117,127) (38,148) (14,953)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Public offering proceeds 72,375 77,625 132,825 --
Underwriting discount and offering costs (3,843) (4,825) (14,543) --
Proceeds from stock option exercises and
dividend reinvestment plan 747 -- -- --
Line of credit proceeds (repayments), net 65,117 34,283 (9,477) 669
Proceeds from mortgage notes payable -- 5,200 39,000 15,763
Payments of construction and mortgage notes payable (20,075) (3,650) (98,180) (2,162)
Deferred financing costs (783) (133) (3,444) (470)
Dividends to shareholders (17,860) (11,513) (1,151) --
Distributions to minority interests (4,108) (3,890) (388) --
Debt prepayment penalties -- -- (2,180) --
Private placement proceeds -- -- 289 --
Distributions to Weeks Group owners, net -- -- (2,399) (1,571)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 91,570 93,097 40,352 12,229
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (722) (5,352) 6,158 45
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 982 6,334 176 131
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 260 $ 982 $ 6,334 $ 176
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WEEKS CORPORATION AND WEEKS GROUP
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Weeks Corporation and its subsidiaries own, operate, develop, construct,
acquire and manage industrial and suburban office buildings in the
southeast United States. As used herein, the term "Company" includes Weeks
Corporation and its subsidiaries, including Weeks Realty, L.P. (the
"Operating Partnership"), unless the context indicates otherwise. The
Company, through its wholly owned subsidiaries, is the general partner and
owns a majority interest in the Operating Partnership which, including the
operations of its subsidiaries, conducts substantially all of the on-going
operations of the Company. The Company has elected to qualify and operate
as a self-administered and self-managed real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
As a REIT, the Company will not generally be subject to corporate federal
income taxes as long as it satisfies certain technical requirements of the
Code relating to the composition of its income and assets, and the
requirement to distribute 95% of its taxable income to its shareholders.
As of December 31, 1996, the Company had outstanding 14,048,593 shares of
common stock and owned the same number of units of partnership interest
("Units") in the Operating Partnership representing a 75.8% ownership
interest in the Operating Partnership. Units held by persons other than the
Company totaled 4,485,190 as of December 31, 1996, and represented a 24.2%
minority interest in the Operating Partnership. Units are convertible by
their holders into shares of common stock on a one-for-one basis, or into
cash, at the Company's option. The Company's weighted average ownership
interest in the Operating Partnership was 80.6% and 75.9% for the years
ended December 31, 1996 and 1995, respectively.
The Company conducts its third-party service businesses through two
subsidiaries (the "Subsidiaries"): Weeks Realty Services, Inc. conducts
third-party landscape, property management and leasing services, and Weeks
Construction Services, Inc. conducts third-party construction services. The
Company holds 100% of the nonvoting and 1% of the voting common stock of
these Subsidiaries. The remaining voting common stock is held by three
executive officers of the Company. The ownership of the common stock of the
Subsidiaries entitles the Company to substantially all (99%) of the
economic benefits from the results of the Subsidiaries' operations.
On August 24, 1994, the Company completed a business combination and an
initial public offering ("IPO") of common stock resulting in the
organizational and operating structure discussed above. The Company and its
subsidiaries succeeded to substantially all of the interests in certain
land and industrial and suburban office buildings under common ownership
and to the development, construction, landscape and management businesses
of the predecessors to the Company referred to herein as the "Weeks Group."
F-6
<PAGE>
As of December 31, 1996, the Company owned 168 industrial properties, 17
suburban office properties and three retail properties comprising 13.0
million square feet. The Company's primary markets and the concentration of
the Company's portfolio (based on square footage) are Atlanta, Georgia
(74%), Nashville, Tennessee (11%), Raleigh-Durham-Chapel Hill, North
Carolina (9%), Orlando, Florida (3%), and Spartanburg, South Carolina (3%).
In addition, 24 industrial and suburban office properties and two property
expansions were under development or in lease-up at December 31, 1996,
comprising an additional 3.0 million square feet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
financial position of the Company and its subsidiaries at December 31, 1996
and 1995, and their results of operations for the years ended December 31,
1996 and 1995 and for the period from August 24, 1994 to December 31, 1994.
Subsequent to the IPO, the Subsidiaries are reflected in the accompanying
consolidated financial statements on the equity method of accounting as
discussed below. The accompanying historical results of operations of Weeks
Group for the period from January 1, 1994 to August 23, 1994, represent the
operations of certain industrial and suburban office properties controlled
by the predecessors to the Company through real estate partnerships and
affiliated entities which provided development, construction, landscape,
and property management services for the partnerships and third parties.
The historical results of operations of Weeks Group are presented on a
combined basis because these entities were under common ownership and
control and were the subject of a business combination in connection with
the IPO. All significant intercompany balances and transactions have been
eliminated in the consolidated and combined financial statements.
REAL ESTATE ASSETS
Real estate assets are stated at depreciated cost. Major improvements and
replacements are capitalized and depreciated over their estimated useful
lives when they extend the useful life, increase capacity or improve
efficiency of the related asset. All other repairs and maintenance are
expensed as incurred. Costs related to the acquisition, planning,
development and construction of buildings and improvements, including
interest, property taxes and insurance and allocated overhead costs
incurred during the construction period, are capitalized.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" in the fourth quarter of 1995. SFAS 121
established new standards on how impairment losses on long-lived assets,
including real estate assets, should be measured. The implementation of
SFAS 121 had no impact on the Company's 1996 and 1995 consolidated
financial statements.
Depreciation is calculated using the straight-line method, generally over
35 years, for buildings and improvements. Tenant improvements are
capitalized and depreciated using the straight-line method over the term of
the related lease.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments,
consisting primarily of money market accounts, with original maturities of
three months or less.
F-7
<PAGE>
REVENUE RECOGNITION
All leases, other than the lease discussed in Note 3, are classified as
operating leases and the related rental income is recognized on a straight-
line basis over the terms of the respective leases. Straight-line rent
receivables totaled $3,023,000 and $2,548,000 at December 31, 1996 and
1995, respectively. Tenant reimbursements for property taxes and other
recoverable expenses are recognized as revenues in the period the
applicable expenses are incurred.
Revenues for development, construction, landscape, property management and
leasing services provided by the Subsidiaries, and Weeks Group prior to the
IPO, are recognized over the period during which the related services were
rendered.
DEFERRED COSTS
Costs incurred to procure operating leases and in conjunction with
financing arrangements are capitalized and amortized on a straight-line
basis over the terms of the related lease or loan arrangements. Unamortized
lease and financing costs are written off upon the early termination of the
related lease or loan agreement.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
Effective for years ended December 31, 1995 and thereafter, the Company
changed its method of accounting for the Subsidiaries to the equity method
in accordance with Emerging Issues Task Force Issue No. 95-6, "Accounting
by a Real Estate Investment Trust for an Invesment in a Service
Corporation." For the period from August 24, 1994 to December 31, 1994, the
Subsidiaries were accounted for on the cost method. The consolidated
financial statements of the Company were not restated for periods prior to
January 1, 1995 as the impact of this change was not material.
INTEREST RATE SWAP AGREEMENTS
The Company uses interest rate swap arrangements to manage its exposure to
interest rate changes. Such arrangements are considered hedges of specific
borrowings, and differences paid and received under the swap arrangements
are recognized as adjustments to interest expense.
INCOME TAXES
The Company has elected to be taxed as a REIT under the Code for all
periods subsequent to August 24, 1994. As a REIT, the Company will not
generally be subject to corporate level federal income taxes as long as it
satisfies certain technical requirements of the Code relating to the
composition of its income and assets, and the requirement that it
distribute 95% of its taxable income to its shareholders. In any event, the
Company may be subject to certain state and local taxes and to federal
income and excise taxes on its undistributed income. If the Company fails
to qualify as a REIT under the Code, it will be subject to federal income
taxes at regular corporate tax rates in such year of disqualification.
The Subsidiaries of the Company, which conduct the related construction,
landscape, property management and leasing service businesses, are taxed as
regular taxable corporations. The impact of income taxes, if any, reduces
the amount of Subsidiary earnings otherwise recognized by the Company under
the equity method. For the years ended December 31, 1996 and 1995 and for
the period August 24, 1994 to December 31, 1994, the impact of the
Subsidiaries' income taxes and their related tax attributes were not
material to the accompanying consolidated financial statements.
F-8
<PAGE>
Weeks Group is a combination of legal entities, primarily partnerships and
subchapter S corporations, not subject to federal and state income taxes.
Accordingly, no income taxes have been provided for in the accompanying
combined financial statements of Weeks Group. The individual partners and
subchapter S corporation shareholders included their respective share of
profits and losses from these entities in their individual income tax
returns. There could be significant differences between each individual
owner's tax basis and their proportionate share of the net assets reported
in the financial statements. SFAS No. 109, "Accounting for Income Taxes,"
requires a public enterprise to disclose the aggregate difference in the
basis of its net assets for financial and tax reporting purposes. However,
Weeks Group does not have access to information about each individual
owner's tax attributes in Weeks Group, and the aggregate tax bases cannot
be readily determined. In any event, management does not believe that, with
respect to Weeks Group, the aggregate difference would be meaningful
information.
DIVIDENDS
The Company declared and paid dividends of $17,860,000 or $1.60 per share,
$11,513,000 or $1.50 per share and $1,151,000 or $0.15 per share in 1996,
1995 and 1994, respectively. The Company's 1996 dividends are estimated to
be 95% taxable to the Company's shareholders as ordinary income with the
remaining 5% representing a return of capital. The 1995 and 1994 dividends
were 100% taxable to the Company's shareholders as ordinary income.
Additionally, Unitholders of the minority interests in the Operating
Partnership received cash distributions totaling $4,108,000 or $1.60 per
Unit, $3,890,000 or $1.50 per Unit and $388,000 or $0.15 per Unit in 1996,
1995 and 1994, respectively. In January 1997, the Company declared and paid
dividends and made distributions of $6,043,000 or $0.43 per share and
$1,446,000 or $0.43 per Unit relating to fourth quarter 1996 operating
results.
PER SHARE DATA
Net income per share is calculated using the weighted average number of
common shares outstanding of 11,512,000 in 1996, 8,171,000 in 1995 and
7,675,000 for the period from August 24, 1994 to December 31, 1994. The
impact of outstanding stock options was not dilutive in any period. An
assumed conversion of Units into common stock would not affect net income
per share.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and footnotes thereto. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
F-9
<PAGE>
3. DIRECT FINANCING LEASE
The Company holds an investment in a 15-year direct financing lease with
the tenant of a build-to-suit facility in Atlanta, Georgia. The lease
agreement, which commenced in June 1992, provides the tenant the option to
acquire the facility and associated land on the tenth anniversary of lease
commencement for $3,766,000 plus any prepayment penalty due on the mortgage
note encumbering the property. The lease also provides for the transfer of
the property to the tenant upon lease termination if the early buyout
option is not exercised. The components of the investment in the direct
financing lease are as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------
<S> <C> <C>
Future minimum rentals $10,378 $11,239
Less unearned income (5,242) (6,010)
-----------------------------------------------------------------
Direct financing lease, net $ 5,136 $ 5,229
-----------------------------------------------------------------
</TABLE>
Future minimum rentals receivable under the lease as of December 31, 1996,
assuming the lessee exercises its buyout option after year ten are $886,000
in 1997, $913,000 in 1998, $940,000 in 1999, $968,000 in 2000, $998,000 in
2001 and $4,188,000 through June 2002. Minimum annual rentals will be
$1,050,000 during the remaining five years of the lease, if the tenant does
not exercise the buyout option.
4 DEFERRED COSTS
Deferred costs consist of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------
<S> <C> <C>
Deferred lease costs $12,781 $11,246
Deferred financing costs 3,870 3,576
-----------------------------------------------------------------
16,651 14,822
Less accumulated amortization (6,365) (5,365)
-----------------------------------------------------------------
$10,286 $ 9,457
-----------------------------------------------------------------
</TABLE>
F-10
<PAGE>
5. BORROWINGS
The Operating Partnership, the Subsidiaries and Weeks Development
Partnership (Note 7), as co-borrowers, entered into a new $175 million
syndicated revolving credit facility (the "Credit Facility") with four
banks in 1996. The Credit Facility is unsecured and can be used for
development and construction, acquisitions and general corporate purposes.
Each co-borrower is liable for its own borrowing; however, the entire
Credit Facility is guaranteed by the Company. Additionally, the Company and
the co-borrowers are required to meet certain financial and non-financial
covenants including limitations on secured borrowings and a restriction on
the amount of dividends and distributions to not more than 95% of funds
from operations, a REIT industry measure of operating performance, unless
additional amounts are necessary to maintain the Company's REIT status
under the Code. The Credit Facility matures on December 31, 1999 and may be
extended annually through December 31, 2002, subject to an annual extention
fee of 0.125%. The Credit Facility replaced the Company's previous single-
bank revolving line of credit.
The Credit Facility provides for advances of up to $175 million, subject to
certain covenants, including those governing the Company's maximum
unsecured borrowings and total leverage. Maximum available advances,
governed by the existing covenants, currently total $175 million. Credit
Facility borrowings are detailed as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
---------------------------------------------------------------------
<S> <C> <C>
Operating Partnership $ 99,400 $34,283
Weeks Construction Services, Inc. -- 3,210
Weeks Development Partnership 2,085 927
Weeks Realty Services, Inc. 1,510 100
---------------------------------------------------------------------
$102,995 $38,520
---------------------------------------------------------------------
</TABLE>
Interest under the Credit Facility accrues at bank prime minus 0.25% or at
LIBOR plus 1.35% at the election of the co-borrowers. The weighted average
interest rate on Credit Facility borrowings, exclusive of the impact of the
interest rate swaps discussed below, was 6.94% and 7.32% at December 31,
1996 and 1995, respectively. Fees on the unused portion of the Credit
Facility are 0.20%.
In July 1996, the Company entered into three interest rate swap agreements
with a commercial bank to effectively change the interest costs on
$50,000,000 of Credit Facility borrowings from the variable rates discussed
above to fixed rates. The agreements, with notional principal amounts of
$10,000,000, $10,000,000 and $30,000,000, terminate in July 1998, July
1999, and July 2001 with effective fixed interest rates of 7.72%, 7.89% and
8.14%, respectively.
F-11
<PAGE>
Mortgage notes payable at December 31, 1996 and 1995, specifically listed
for notes with outstanding balances in excess of $10 million, consist of
the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED RATE
Mortgage note, interest only at 7.13%,
due in 1999 $ 38,000 $ 38,000
Three mortgage notes, interest only at 7.75%,
due in 1998 31,170 31,170
Mortgage note, principal and interest at 9.24%,
due in 2005 16,028 --
Mortgage note, principal and interest at 8.10%,
due in 2006 12,278 --
Mortgage note, interest only at 7.625%, due in 2000 10,300 10,300
Other mortgage notes (20 at December 31, 1996),
principal and interest at 6.71% to 9.80%,
due in 1998 to 2006 83,956 27,663
VARIABLE RATE
Industrial revenue bonds, interest at 4.15% to 6.45%
at December 31, 1996, due in 2004 and 2010 5,843 5,889
------------------------------------------------------------------------------------------
$197,575 $113,022
------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1996 and 1995, fixed rate mortgage notes payable included
27 notes with a weighted average interest rate of 7.98% and 12 notes with a
weighted average interest rate of 7.58%, respectively. The weighted average
term to maturity of fixed rate mortgage notes payable was 5.1 years at
December 31, 1996. Fixed rate mortgage indebtedness increased by
$84,553,000 in 1996 due to the assumption of 16 notes totaling $89,535,000
in conjunction with the NWI and Lichtin acquisition transactions (Note 8),
net of principal repayments. The weighted average interest rate on the
assumed fixed rate indebtedness was approximately 8.50%. Certain Company
officers and Unitholders guarantee a portion of fixed rate mortgage notes.
Variable rate industrial revenue bonds include two separate arrangements.
One bond issue with an outstanding balance of $5,140,000 was refunded in
1996 through the issuance of tax-exempt adjustable-rate bonds with interest
at rates equivalent to short-term tax-exempt Aa2 rated securities. The
second bond issue accrues interest at 78% of the prime lending rate.
Weighted average interest rates under these arrangements were 4.43% and
7.63% at December 31, 1996 and 1995, respectively. The bonds are supported
by letters of credit totaling $5,345,000.
F-12
<PAGE>
Scheduled maturities of mortgage notes payable, at December 31, 1996, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
----------------------------------
<S> <C>
1997 $ 2,035
1998 39,196
1999 48,440
2000 21,329
2001 10,682
2002 and thereafter 75,893
----------------------------------
$197,575
----------------------------------
</TABLE>
Net real estate assets totaling $265,235,000 and $127,228,000 at December
31, 1996 and 1995, respectively, are pledged as collateral under mortgage
notes payable. Interest capitalized for the years ended December 31,1996
and 1995, and for the period from January 1, 1994 to August 23, 1994,
totaled $2,358,000, $1,198,000, and $89,000, respectively.
The extraordinary loss of $2,667,000 ($1,993,000 net of minority interests)
during the period from August 24, 1994 to December 31, 1994 resulted from
mortgage loan prepayment penalties of $2,180,000 and the write-off of
deferred financing costs of $487,000 related to the early retirement of
debt from the proceeds of the IPO.
6. REAL ESTATE DEVELOPMENT LOANS
As part of certain joint development agreements entered into with third
parties, and upon the approval of joint development projects, the Company
lends funds on a secured basis to develop and construct certain properties
and can be required by its development partners to acquire the properties
upon their completion based on the terms specified in the development
agreements, generally at prices equal to the greater of capitalized costs
or the property's net operating income capitalized at specified
capitalization rates, as defined. Additionally, the Company has options to
acquire the properties upon substantial lease-up of the buldings. At
December 31, 1996, the Company had funded $7,645,000 under development loan
agreements relating to three industrial buildings under development in
Atlanta, Georgia. Total loan commitments from the Company for the three
approved projects are approximately $11,741,000. Loans under these
agreements are secured by the industrial buildings under development, bear
interest at rates ranging from LIBOR plus 2.35% to LIBOR plus 2.50%, and
mature from August 1998 to March 1999.
Additionally, at December 31, 1996, the Company had a real estate
development loan to an affiliated joint venture with an outstanding balance
of $1,810,000 ($1,309,000 at December 31, 1995). The total loan commitment
is $2,360,000 and the loan is secured by an industrial building. Interest
accrues at 9% and the loan matures in March 1998. The Company has an option
to acquire the property upon substantial lease-up of the building.
F-13
<PAGE>
7. INVESTMENTS IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED ENTITIES
The Company conducts third-party construction, landscape, property
management and leasing service businesses through the Subsidiaries. Through
Weeks Development Partnership ("Weeks Development"), wholly owned by the
Subsidiaries, the Subsidiaries also own land in various business parks,
either directly or through ownership interests in real estate partnerships
and joint ventures. The Company and Weeks Group developed and own operating
properties in these business parks. The Company intends, based on market
conditions, to acquire land from Weeks Development and its affiliated
partnerships and joint ventures for the development of future operating
properties. As discussed in Note 2, these Subsidiaries are accounted for on
the equity method of accounting. Under the equity method, the Company
recognizes, in its consolidated statements of operations, its economic
share (99%) of the Subsidiaries' earnings and losses.
The following information summarizes the financial position, results of
operations and cash flows of the Subsidiaries and Weeks Development on a
combined basis for the years ending December 31, 1996 and 1995, and for the
period from August 24, 1994 to December 31, 1994, and selected operating
data of Weeks Group for the period from January 1, 1994 to August 23, 1994.
The operating data of Weeks Group is included in the combined financial
statements of Weeks Group (Note 2) but is also reflected below for
comparison purposes (in thousands):
<TABLE>
<CAPTION>
FINANCIAL POSITION Dec. 31, 1996 Dec. 31,1995
------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate assets, principally land $ 7,200 $ 7,012
Investments in real estate partnerships
and joint ventures 3,025 3,417
Receivables and other assets 13,113 10,892
-------------------------------------------------------------------------
$23,338 $21,321
-------------------------------------------------------------------------
LIABILITIES AND EQUITY
Notes payable to Company $10,921 $10,939
Credit facility borrowings 3,595 4,237
Other borrowings 1,261 1,828
Other liabilities 10,725 7,505
Total equity (3,164) (3,188)
-------------------------------------------------------------------------
$23,338 $21,321
-------------------------------------------------------------------------
</TABLE>
The notes payable to the Company accrue interest at 12%, payable annually,
and mature in 2004. The notes are secured by land and by Weeks
Development's interests in real estate partnerships and joint ventures. The
operations of the Subsidiaries and Weeks Development are financed, as
necessary, through direct borrowings under the Credit Facility.
F-14
<PAGE>
At December 31, 1996, the Company's investment in and notes receivable from
the Subsidiaries totaling $7,760,000 includes notes receivable from the
Subsidiaries of $10,921,000 and the Company's investment in the Susidiaries
of ($3,161,000).
<TABLE>
<CAPTION>
Subsidiaries Weeks Group
--------------------------------------------- -------------
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23,1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
REVENUE
Construction and development
fees $ 2,233 $ 1,483 $ 636 $ 990
Landscape 5,035 3,854 1,054 2,169
Property management fees 193 498 196 425
Commissions 448 582 316 429
Other 316 191 25 --
---------------------------------------------------------------------------------------------------
8,225 6,608 2,227
---------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Direct costs 4,327 3,504 1,034 1,954
Interest expense - Company 1,314 1,326 468 --
Interest expense - third parties 365 295 -- --
General and administrative 1,694 1,518 555 802
Other 498 173 16 --
---------------------------------------------------------------------------------------------------
8,198 6,816 2,073
---------------------------------------------------------------------------------------------------
Equity in earnings of partnerships
and joint ventures (1) 101 72
---------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 26 $ (107) $ 226
---------------------------------------------------------------------------------------------------
Net income (loss) attributable
to Company $ 26 $ (106) $ 224
Interest expense - Company 1,314 1,326 468
---------------------------------------------------------------------------------------------------
Equity in earnings of Subsidiaries $ 1,340 $ 1,220 $ 692
---------------------------------------------------------------------------------------------------
Distributions and interest
paid to the Company $ 1,313 $ 1,510 $ 692
---------------------------------------------------------------------------------------------------
CASH FLOWS:
---------------------------------------------------------------------------------------------------
Operating activities $ 4,460 $ 1,529 $(2,401)
Investing activities (2,540) (2,786) (553)
Financing activities (487) 1,190 3,121
</TABLE>
F-15
<PAGE>
8. ACQUISITIONS
On November 1, 1996, the Company completed the first phase of an acquistion
of a 2.2 million square foot, 23 building industrial portfolio located in
Nashville, Tennessee, owned and managed by NWI Warehouse Group, L.P. and
its affiliates ("NWI"). The first phase of the transaction was comprised of
the acquisition of 17 industrial buildings and the combination of NWI's
business operations, management and employees with those of the Company,
for aggregate acquisition consideration of approximately $71.1 million
including closing costs and acquisition expenses. Acquisition consideration
was comprised of the assumption of approximately $42.0 million of mortgage
debt, the issuance of approximately $27.5 million of Units in the Operating
Partnership (at a price of $25.00 per Unit), and the funding of closing
costs and acquisition expenses of approximately $1.6 million through Credit
Facility borrowings. In 1996, subsequent to the initial closing, the
Company acquired 45 net usable acres of undeveloped land for aggregate
consideration, consisting solely of Units in the Operating Partnership, of
approximately $6.3 million, including reimbursement for certain
infrastructure costs. The Company has agreed, subject to updating its due
diligence procedures and the completion of properties under development, to
acquire six development properties over a 17-month period and to acquire
105 net usable acres of undeveloped land over a period of up to six years.
The estimated aggregate acquisition consideration for the remaining assets
to be acquired is expected to be comprised primarily of Units in the
Operating Partnership and assumed indebtedness that total approximately
$47.9 million (subject to adjustment for inflation and actual operating
results for certain development properties to be acquired).
On December 31, 1996, the Company completed the first phase of a separate
acquisition of a 2.1 million square foot, 29 building industrial and
suburban office portfolio in the Raleigh-Durham-Chapel Hill area of North
Carolina, owned and managed by Lichtin Properties, Inc. and its affiliates
("Lichtin"). The first phase of the transaction was comprised of the
acquisition of 14 industrial and suburban office buildings and the
combination of Lichtin's business operations, management and employees with
those of the Company for aggregate acquisition consideration of
approximately $90.5 million (including closing costs and acquisition
expenses), and approximately 37 net usable acres of undeveloped land and
options to acquire an additional 177 net usable acres of undeveloped land
for total acquisition consideration of approximately $3.3 million.
Acquisition consideration consisted of shares of Company common stock and
Units in the Operating Partnership having an aggregate value of
approximately $7.1 million and $14.3 million, respectively, (at a price of
$25.25 per share and Unit), approximately $8.6 million of cash, the
assumption of approximately $47.6 million of mortgage indebtedness, the
assumption and repayment of other indebtedness through borrowings under the
Company's Credit Facility of approximatley $15.0 million and the funding of
closing costs and acquisition expenses of approximately $1.2 million
through Credit Facility borrowings. The Company has agreed, subject to due
diligence procedures and the completion of properties under development, to
acquire 15 completed and under development properties over the ensuing 18-
month period and to acquire 64 net usable acres of undeveloped land over
the next four years. The estimated aggregate acquisition consideration for
the remaining assets to be acquired is expected to be comprised primarily
of Units in the Operating Partnership and assumed indebtedness that total
approximately $71.7 million (subject to adjustment for the actual operating
results for certain completed and development properties to be acquired).
F-16
<PAGE>
The NWI and Lichtin acquisitions have been accounted for as purchases and
the related acquisition costs have been allocated to the assets acquired
and liabilities assumed based on estimates of their fair values.
The Company's consolidated results of operations for the year ended
December 31, 1996, included the operating results of NWI beginning on
November 1, 1996, the acquisition date. The unaudited pro forma information
below presents the consolidated results of operations as if the initial
phases of the NWI and Lichtin acquisitions had occurred at the beginning of
the respective periods presented. The unaudited pro forma information is
not necessarily indicative of the results of operations of the Company had
the acquisitions occurred at the beginning of the periods presented, nor is
it necessarily indicative of future results. Additionally, the unaudited
pro forma information excludes the impact of the buildings and land to be
acquired in future periods from NWI and Lichtin.
<TABLE>
<CAPTION>
(Unaudited, in thousands, except per share amounts) Dec. 31, 1996 Dec. 31, 1995
------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $70,954 $49,478
Net income 10,555 6,226
Earnings per share $ 0.89 $ 0.74
</TABLE>
Additionally in 1996, the Company acquired 15 industrial and suburban
office buildings totaling approximately 761,000 square feet located
primarily in the northeast submarket of Atlanta, Georgia for an aggregate
price of $40,102,000, including closing costs and acquisition expenses. The
acquisitions were funded through Credit Facility borrowings.
In 1995, the Company acquired 49 industrial buildings totaling 2,564,000
square feet for an aggregate price of $110,141,000, including closing costs
and acquisition expenses. These acquisitions were funded through Credit
Facility borrowings and through the assumption of existing mortgage
indebtedness of $39,511,000. Four of the acquired buildings totaling
190,000 square feet are located in Orlando, Florida, and the other
buildings are located in metropolitan Atlanta, Georgia. In conjunction with
two of the property acquisitions, the Company entered into agreements with
the sellers to jointly develop additional industrial buildings, as market
conditions warrant, on adjacent land controlled by the sellers (Note 6).
9. SHAREHOLDERS' EQUITY
In November 1996, the Company completed a public offering of 2,573,333
shares of common stock and received net proceeds of $68,532,000. The
proceeds of the offering were used to reduce Credit Facility borrowings.
This equity offering was the final drawdown under a $150 million equity
shelf registration filed in 1995. In January 1997, the Company completed a
new $300 million equity shelf registration. Additionally in 1996, the
Company implemented a dividend reinvestment plan and registered 300,000
shares of common stock for future issuance thereunder. In 1996, a total of
1,514 shares of common stock were issued through the dividend reinvestment
plan.
F-17
<PAGE>
In November 1995, the Company completed a public offering of 3,450,000
shares of common stock and received net proceeds of $72,800,000. The
proceeds were used to reduce Credit Facility borrowings. The equity
offering was a partial drawdown under the Company's $150 million equity
shelf registration filed in 1995. Additionally, in November 1995, Operating
Partnership Units totaling 25,602 were converted into 25,602 shares of
common stock. The conversion was reflected in the accompanying consolidated
financial statements at book value.
10. LEASING ACTIVITY
Future minimum rents due under noncancelable operating leases with tenants
at December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
--------------------------------
<S> <C>
1997 $ 65,003
1998 54,685
1999 44,004
2000 32,808
2001 24,779
2002 and thereafter 62,518
--------------------------------
$283,797
--------------------------------
</TABLE>
11. RELATED-PARTY TRANSACTIONS
At December 31, 1996 and 1995, receivables included $465,000, due from the
Subsidiaries, relating to accrued interest (payable annually) on the
Subsidiaries' notes. At December 31, 1996 and 1995, accounts payable and
accrued expenses included $154,000 and $1,395,000, respectively, due to the
Subsidiaries.
In periods subsequent to the IPO, the Subsidiaries have provided
development, construction, landscape, property management and leasing
services to affiliated partnerships and joint ventures. Prior to the IPO,
those services were provided by Weeks Group. Total revenues for such
services to related parties of the Subsidiaries and Weeks Group were (in
thousands):
<TABLE>
<CAPTION>
Subsidiaries Weeks Group
------------------------------------------- -------------
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Construction and development fees $ 678 $ 418 $142 $658
Landscape 271 423 81 183
Commissions 94 169 156 148
---------------------------------------------------------------------------------------------------
$1,043 $1,010 $379 $989
---------------------------------------------------------------------------------------------------
</TABLE>
The controlling partners of Weeks Group historically utilized their capital
accounts in the various Weeks Group entities similar to a clearing account
whereby they regularly made contributions and received distributions. Since
the contributions and distributions did not necessarily reflect the
economic cash flows or cash needs of Weeks Group, management believes that,
in Weeks Group's circumstances, the separation of contributions or
distributions made in periods prior to the IPO would not provide meaningful
information. Therefore, such amounts are reported net in the accompanying
Weeks Group financial statements.
F-18
<PAGE>
12. INCENTIVE STOCK PLAN
The Company has an Incentive Stock Plan (the "Plan") under which shares of
Company common stock have been reserved for the issuance of options and
restricted stock. Total shares reserved for issuance under the Plan were
increased by 390,000 shares in 1996, to a total of 1,000,000 shares, as
approved by the shareholders in May 1996. Participants in the Plan may be
officers and employees of the Company, its Subsidiaries or designated
affiliates, as well as Company directors. The exercise price of all options
under the Plan is not less than the fair market value of the Company's
common stock on the date of grant and such options may be exercised for
periods up to ten years.
In 1995, SFAS 123, "Accounting for Stock-Based Compensation" was issued
requiring the Company either to continue its current accounting for stock-
based compensation under Accounting Principles Board Opinion ("APB") No. 25
or elect the fair value-based method of accounting prescribed by SFAS 123.
The Company elected to continue to account for stock-based compensation
under APB No. 25 and has implemented the additional disclosure requirements
prescribed by SFAS 123 and such disclosures are included below.
Under SFAS 123, the fair value of stock options granted in 1996 and 1995
has been estimated using a binomial option pricing model with the following
weighted average assumptions for grants in 1996 and 1995, respectively:
risk free interest rates of 5.7% and 5.8%, expected option lives of five
years for options granted in both years, expected volatility of 16.5% for
both years and expected dividend yields of 5.7% and 6.2%. Using these
assumptions, the estimated fair value of options granted in 1996 and 1995
was $945,220 and $174,850, respectively, and such amounts would be included
in compensation expense over the vesting period of the options. Pro forma
net income and earnings per share for the years ended December 31, 1996 and
1995, assuming the Company had accounted for the Plan under SFAS 123 are as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------
<S> <C> <C>
Net income:
As reported $12,745 $8,426
Pro forma 12,264 8,381
Net income per share:
As reported $ 1.11 $ 1.03
Pro forma 1.07 1.03
</TABLE>
As the provisions of SFAS 123 have not been applied to options granted
prior to January 1, 1995, the resulting pro forma annual compensation cost
may not be representative of that expected in future years.
F-19
<PAGE>
A summary of stock option activity under the Plan is presented in the table and
narrative below (share amounts in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 503 $19.90 443 $19.28 -- $ --
Granted 283 28.22 65 24.11 443 19.28
Exercised (33) 19.25 -- -- -- --
Forfeited -- -- (5) 19.25 -- --
---------------------------------------------------------------------------------------------------
Options outstanding,
end of year 753 $23.06 503 $19.90 443 $19.28
---------------------------------------------------------------------------------------------------
Options exercisable,
end of year 552 52 16
---------------------------------------------------------------------------------------------------
Weighted average per
share fair value
of options granted $3.34 $2.69
</TABLE>
At December 31, 1996, options for 606,000 shares are outstanding having
exercise prices ranging from $19.25 to $26.00, with a weighted average
exercise price of $21.31 and a weighted average contractual life of 7.70
years, of which 420,000 options are exercisable with a weighted average
exercise price of $19.48. Options for 147,000 shares are also outstanding
having exercise prices ranging from $28.63 to $33.25, with a weighted
average exercise price of $30.27 and a weighted average contractual life of
9.9 years, of which 132,000 options are exercisable with a weighted average
exercise price of $30.45.
13. EMPLOYEE BENEFIT PLAN
The Company and the Subsidiaries ("Plan Sponsors") sponsor a 401(k)
retirement savings plan covering substantially all employees meeting
certain age and service requirements. Employees may contribute up to the
lesser of 20% of their annual compensation or the annual statutory limit
($9,500 in 1996) to the plan. Plan Sponsors' contributions are made on a
discretionary basis up to a maximum of 100% of the employees' contributions
(currently 50% of the employee's contribution up to 3.2% of an employee's
annual compensation). Total Plan Sponsor contributions were $88,000,
$76,000, and $63,000 in 1996, 1995 and 1994, respectively.
14. COMMITMENTS AND CONTINGENCIES
As reflected in Note 8, the Company has entered into agreements for the
future acquisition of land and buildings from NWI and Lichtin totaling
approximately $119.6 million at December 31, 1996. In addition, the Company
has agreed, subject to updating its due diligence procedures, to acquire
development land totaling approximately $2.2 million. Letters of credit
totaling approximately $7.2 million were issued on behalf of the Company in
support of certain development, land acquisition and financing arrangements
at December 31, 1996.
F-20
<PAGE>
The Company is subject to various legal proceedings and claims that arise
in the ordinary course of business. While the resolution of these matters
cannot be predicted with certainty, management believes that the final
outcome of such matters will not have a material adverse effect on the
Company's financial position or results of operations.
15. SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of amounts capitalized (Note 5), totaled $11,265,000 in
1996, $7,892,000 in 1995, $1,809,000 for the period from August 24, 1994 to
December 31, 1994 and $6,568,000 for the period from January 1, 1994 to
August 23, 1994.
Significant noncash investing and financing activities were as follows:
a. The Company's 1996 acquisitions of NWI and Lichtin included the
assumption of mortgage notes payable of $104,628,000, the issuance of
Units valued at $48,085,000 and the issuance of common stock valued at
$7,124,000.
b. The Company's 1995 property acquisitions included the assumption of
mortgage notes payable of $39,511,000 and the application of notes
receivable and deposits of $3,540,000.
c. In conjunction with the Company's IPO in 1994, the Company acquired
certain property interests subject to mortgage notes payable of
$9,072,000 and in exchange for Units totaling $8,053,000.
16. FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to the
Company at December 31, 1996, the Company estimates that the carrying
values of cash and cash equivalents, the notes receivable from the
Subsidiaries, the real estate development loans, the direct financing lease
receivable, other receivables, mortgage notes payable, other liabilities
and Credit Facility borrowings approximate their fair values when compared
to instruments of similar type, terms and maturity.
The estimated fair value of the Company's interest rate swap arrangements
(Note 5), determined based on quoted market prices for similar financial
instruments, was approximately $955,000 less than the Company's carrying
value at December 31, 1996. The Company uses interest rate swaps to manage
its exposure to interest rate changes on Credit Facility borrowings. Under
current accounting principles and as long as the Company maintains
outstanding Credit Facility borrowings at least equal to the $50,000,000
notional amounts of the interest rate swaps, the difference between the
fair value and carrying amount of the arrangements are not recognized in
the Company's consolidated financial statements. The Company monitors the
credit quality of the financial institution which is the counterparty to
its interest rate swap arrangements and does not anticipate nonperformance
from the financial institution.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1996. Although
management is not aware of any factors that would significantly affect the
fair value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date.
F-21
<PAGE>
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information for 1996 and 1995 was as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Revenue $12,129 $12,379 $13,555 $15,820
Income before minority interests 3,814 3,805 3,731 4,459
Net income 3,101 3,092 3,033 3,519
Net income per share $ 0.28 $ 0.28 $ 0.27 $ 0.28
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------
1995
Revenue $ 6,994 $ 7,535 $ 9,186 $11,556
Income before minority interests 2,765 2,824 2,543 2,975
Net income 2,067 2,111 1,901 2,347
Net income per share $ 0.27 $ 0.28 $ 0.25 $ 0.24
</TABLE>
F-22
<PAGE>
SCHEDULE III PAGE 1 OF 10
WEEKS CORPORATION
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Gross Amount at which
Initial Costs Cost Capitalized Carried at Close of Period
---------------------- --------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
ATLANTA, GEORGIA
Northeast/I-85 Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gwinnett Park
4258 Communications Dr. D (a) $ 8 $ 725 $ 314 $ 29 $ 1,018 $1,047
4261 Communications Dr. D 254 1,446 16 254 1462 1,716
4291 Communications Dr. D (a) 4 327 118 16 433 449
1826 Doan Way D (c) 18 1,167 226 18 1,393 1,411
1857 Doan Way D 23 6 0 23 6 29
1650 International Blvd. D (a) 69 994 94 69 1,088 1,157
4245 International Blvd. D (a) 192 2,913 3,053 192 5,966 6,158
4250 International Blvd. D 193 1,542 281 216 1,800 2,016
4295 International Blvd. D (a) 58 1,058 101 58 1,159 1,217
4320 International Blvd. D (a) 44 710 211 44 921 965
4350 International Blvd. D (a) 78 938 525 78 1,463 1,541
4355 International Blvd. D (g) 233 811 260 233 1,071 1,304
4405-A International Blvd. S 97 957 846 97 1,803 1,900
4405-B International Blvd. S 118 1,152 1,199 118 2,351 2,469
4405-C International Blvd. S 21 422 172 21 594 615
1828 Meca Way D (c) 16 487 489 16 976 99
1858 Meca Way D (a) 20 931 8 27 932 959
4317 Park Dr. D 671 1,414 234 671 1,648 2,319
4357 Park Dr. D (g) 12 865 268 12 1,133 1,145
4366 Park Dr. O 6 406 286 22 676 698
4386 Park Dr. D 17 758 74 17 832 849
4436 Park Dr. D 18 195 275 18 470 488
4437 Park Dr. D (a) 21 659 259 21 918 939
4467 Park Dr. D (c) 6 537 327 6 864 870
4476 Park Dr. D (c) 14 372 86 14 458 472
4487 Park Dr. D (c) 6 1,048 1,563 6 2,611 2,617
1835 Shackleford Ct. O (a) 29 2,780 319 29 3,099 3,128
1854 Shackleford Ct. O 52 4,085 1,418 52 5,503 5,555
4274 Shackleford Rd. D (a) 27 614 902 27 1,516 1,543
4275 Shackleford Rd. O (y) 8 1,173 465 12 1,634 1,646
4344 Shackleford Rd. D 286 984 30 286 1,014 1,300
4355 Shackleford Rd. D (a) 7 886 408 7 1,294 1,301
4364 Shackleford Rd. D (a) 9 40 40 9 80 89
4366 Shackleford Rd. D 20 420 811 26 1,225 1,251
4388 Shackleford Rd. D (a) 33 1,181 697 43 1,868 1,911
4400 Shackleford Rd. D 14 315 341 18 652 670
4444 Shackleford Rd. D (a) 31 731 1,121 31 1,852 1,883
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,733 $ 36,049 $ 17,837 $ 2,836 $ 53,783 56,619
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed(2) Acquired(3)
- ---------------------------------------------------------------------------------
ATLANTA, GEORGIA
Northeast/I-85 Submarket
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Gwinnett Park
4258 Communications Dr. $ 556 1981
4261 Communications Dr. 124 1981 1994
4291 Communications Dr. 200 1981
1826 Doan Way 486 1984
1857 Doan Way 2 1970
1650 International Blvd. 388 1984
4245 International Blvd. 1,136 1985
4250 International Blvd. 579 1986
4295 International Blvd. 384 1984
4320 International Blvd. 339 1984
4350 International Blvd. 681 1982
4355 International Blvd. 117 1983 1994
4405-A International Blvd. 799 1984
4405-B International Blvd. 1,393 1984
4405-C International Blvd. 244 1984
1828 Meca Way 539 1975
1858 Meca Way 341 1975
4317 Park Dr. 555 1985
4357 Park Dr. 516 1979
4366 Park Dr. 362 1981
4386 Park Dr. 357 1973
4436 Park Dr. 163 1968
4437 Park Dr. 478 1978
4467 Park Dr. 372 1978
4476 Park Dr. 193 1977
4487 Park Dr. 1,387 1978
1835 Shackleford Ct. 643 1990
1854 Shackleford Ct. 1,665 1985
4274 Shackleford Rd. 1,031 1974
4275 Shackleford Rd. 599 1985
4344 Shackleford Rd. 107 1975 1994
4355 Shackleford Rd. 687 1972
4364 Shackleford Rd. 43 1973
4366 Shackleford Rd. 672 1981
4388 Shackleford Rd. 670 1981
4400 Shackleford Rd. 399 1981
4444 Shackleford Rd. 1,142 1979
- ---------------------------------------------------------------------------------
Total 20,349
- ---------------------------------------------------------------------------------
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III PAGE 2 OF 10
Gross Amount at which
Initial Costs Cost Capitalized Carried at Close of Period
---------------------- ------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Horizon
90 Horizon Dr. D (c) $ 20 $ 659 $ 170 $ 120 $ 729 $ 849
225 Horizon Dr. B (c) 121 1,423 782 121 2,205 2,326
300 Horizon Dr. B 798 4,455 53 798 4,508 5,306
2775 Horizon Ridge Ct. B 732 5,718 - 732 5,718 6,450
2800 Vista Ridge Dr. B 443 5,463 73 443 5,536 5,979
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,114 $ 17,718 $ 1,078 $2,214 $ 18,696 $ 20,910
- ------------------------------------------------------------------------------------------------------------------------------------
Northwoods
2915 Courtyards Circle D $ 268 $ 1,793 $ 87 $ 268 $ 1,880 $ 2,148
2925 Courtyards Dr. D 333 2,618 5 333 2,623 2,956
2975 Courtyards Circle D 144 997 9 144 1,006 1,150
2995 Courtyards Circle D 109 677 8 109 685 794
2725 Northwoods Pkwy. D 440 2,231 - 440 2,231 2,671
2755 Northwoods Pkwy. D 249 2,201 - 249 2,201 2,450
2775 Northwoods Pkwy. D 322 1,976 - 322 1,976 2,298
2850 Northwoods Pkwy. D 562 3,961 46 562 4,007 4,569
3040 Northwoods Pkwy. D 298 1,511 - 298 1,511 1,809
3044 Northwoods Circle D 167 730 23 167 753 920
3055 Northwoods Pkwy. D 213 916 - 213 916 1,129
3075 Northwoods Pkwy. S 374 2,750 - 374 2,750 3,124
3080 Northwoods Circle O 387 2,215 - 387 2,215 2,602
3100 Northwoods Pkwy. S 393 2,177 - 393 2,177 2,570
3155 Northwoods Pkwy. S 331 1,808 - 331 1,808 2,139
3175 Northwoods Pkwy. S 250 1,645 - 250 1,645 1,895
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,840 $ 30,206 $ 178 $4,840 $ 30,384 $ 35,224
- ------------------------------------------------------------------------------------------------------------------------------------
Gwinnett Pavilion
1480 Beaver Ruin Rd. R $ 248 $ 982 $ 469 $ 248 $ 1,451 $ 1,699
1505 Pavilion Place D (a) 448 1,149 1,187 448 2,336 2,784
3883 Steve Reynolds Blvd. D (c) 612 3,101 91 612 3,192 3,804
3890 Steve Reynolds Blvd. D (c) 519 1,746 14 519 1,760 2,279
3905 Steve Reynolds Blvd. D 697 2,108 - 697 2,108 2,805
3950 Steve Reynolds Blvd. B (a) 684 1,701 14 684 1,715 2,399
4025 Steve Reynolds Blvd. D 461 2,252 5 461 2,257 2,718
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 3,669 $ 13,039 $ 1,780 $3,669 $ 14,819 $ 18,488
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Depreciation Developed (2) Acquired (3)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Horizon
90 Horizon Dr. $ 117 1992
225 Horizon Dr. 712 1990
300 Horizon Dr. 309 1994
2775 Horizon Ridge Ct. 88 1996
2800 Vista Ridge Dr. 223 1995
- -----------------------------------------------------------------------------------------
Total $ 1,449
- -----------------------------------------------------------------------------------------
Northwoods
2915 Courtyards Circle $ 80 1986 1995
2925 Courtyards Dr. 99 1986 1995
2975 Courtyards Circle 38 1986 1995
2995 Courtyards Circle 26 1986 1995
2725 Northwoods Pkwy. 36 1984 1996
2755 Northwoods Pkwy. 36 1986 1996
2775 Northwoods Pkwy. 32 1986 1996
2850 Northwoods Pkwy. 152 1988 1995
3040 Northwoods Pkwy. 25 1984 1996
3044 Northwoods Circle 28 1984 1995
3055 Northwoods Pkwy. 15 1985 1996
3075 Northwoods Pkwy. 45 1985 1996
3080 Northwoods Circle 62 1952 1996
3100 Northwoods Pkwy. 35 1985 1996
3155 Northwoods Pkwy. 29 1985 1996
3175 Northwoods Pkwy. 27 1985 1996
- -----------------------------------------------------------------------------------------------
Total $ 765
- -----------------------------------------------------------------------------------------------
Gwinnett Pavilion
1480 Beaver Ruin Rd. 420 1989
1505 Pavilion Place 984 1988
3883 Steve Reynolds Blvd. 597 1990
3890 Steve Reynolds Blvd. 301 1991
3905 Steve Reynolds Blvd. $ 60 1995
3950 Steve Reynolds Blvd. 244 1992
4025 Steve Reynolds Blvd. 133 1994
- ------------------------------------------------------------------------------------------------
Total $ 2,739
- ------------------------------------------------------------------------------------------------
</TABLE>
S-2
<PAGE>
Schedule III Page 3 of 10
<TABLE>
<CAPTION>
Gross Amount at which
Initial Costs Cost Capitalized Carried at Close of Period
----------------------- ------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peachtree Corners Distribution
5401 Buford Hwy. B $ 294 $ 1,865 $ 26 $ 294 $ 1,891 $ 2,185
5403 Buford Hwy. B 420 2,737 7 420 2,744 3,164
5405 Buford Hwy. B 217 1,546 15 217 1,561 1,778
5409 Buford Hwy. B 364 2,675 7 364 2,682 3,046
- -----------------------------------------------------------------------------------------------------------------------------------
Total $1,295 $ 8,823 $ 55 $1,295 $ 8,878 $10,173
- -----------------------------------------------------------------------------------------------------------------------------------
Pinebrook
2625 Pinemeadow Ct. B $ 813 $ 3,216 $ - $ 813 $ 3,216 $ 4,029
2660 Pinemeadow Ct. B 450 2,587 - 450 2,587 3,037
2450 Satellite Blvd. B 866 3,461 - 866 3,461 4,327
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,129 $ 9,264 $ - $2,129 $ 9,264 $11,393
- -----------------------------------------------------------------------------------------------------------------------------------
Northbrook
1000 Northbrook Pkwy. B (a) $ 363 $ 1,980 $ 832 $ 363 $ 2,812 $ 3,175
675 Old Peachtree Rd. B (g) 434 2,385 19 434 2,404 2,838
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 797 $ 4,365 $ 851 $ 797 $ 5,216 $ 6,013
- -----------------------------------------------------------------------------------------------------------------------------------
Druid Chase
2801 Buford Hwy. O $ 794 $ 3,505 $ 1,612 $ 794 $ 5,117 $ 5,911
1190 West Druid Hills Dr. O 689 2,722 891 689 3,613 4,302
2071 North Druid Hills Rd. R 98 65 21 98 86 184
6 West Druid Hills Dr. O 473 2,980 466 473 3,446 3,919
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,054 $ 9,272 $ 2,990 $2,054 $ 12,262 $14,316
- -----------------------------------------------------------------------------------------------------------------------------------
Meadowbrook
2450 Meadowbrook Pkwy. D $ 716 $ 2,419 $ 18 $ 716 $ 2,437 $ 3,153
2475 Meadowbrook Pkwy. D 529 1,567 548 529 2,115 2,644
2500 Meadowbrook Pkwy. D (a) 411 1,103 778 411 1,881 2,292
2505 Meadowbrook Pkwy. D 307 1,228 300 307 1,528 1,835
- -----------------------------------------------------------------------------------------------------------------------------------
Total $1,963 $ 6,317 $ 1,644 $1,963 $ 7,961 $ 9,924
- -----------------------------------------------------------------------------------------------------------------------------------
Park Creek
2825 Breckinridge Blvd. S $ 317 $ 2,366 $ - $ 317 $ 2,366 $ 2,683
2875 Breckinridge Blvd. S 476 3,496 - 476 3,496 3,972
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 793 $ 5,862 $ - $ 793 $ 5,862 $ 6,655
- -----------------------------------------------------------------------------------------------------------------------------------
River Green
3450 River Green Ct. D $ 194 $ 892 $ 12 $ 194 $ 904 $ 1,098
4800 River Green Pkwy. D 152 1,150 14 152 1,164 1,316
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 346 $ 2,042 $ 26 $ 346 $ 2,068 $ 2,414
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed(2) Acquired(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Peachtree Corners Distribution
5401 Buford Hwy. $ 71 1987 1995
5403 Buford Hwy. 106 1987 1995
5405 Buford Hwy. 62 1989 1995
5409 Buford Hwy. 102 1989 1995
- -------------------------------------------------------------------------------
Total $ 341
- -------------------------------------------------------------------------------
Pinebrook
2625 Pinemeadow Ct. $ 252 1994
2660 Pinemeadow Ct. 25 1996
2450 Satellite Blvd. 283 1994 1994
- -----------------------------------------------------------------------------
Total $ 560
- -----------------------------------------------------------------------------
Northbrook
1000 Northbrook Pkwy. $ 1,107 1986
675 Old Peachtree Rd. 614 1988
- -----------------------------------------------------------------------------
Total $ 1,721
- -----------------------------------------------------------------------------
Druid Chase
2801 Buford Hwy. $ 1,407 1977 1989
1190 West Druid Hills Dr. 919 1980 1989
2071 North Druid Hills Rd. 31 1968
6 West Druid Hills Dr. 741 1968 1989
- -----------------------------------------------------------------------------
Total $ 3,098
- -----------------------------------------------------------------------------
Meadowbrook
2450 Meadowbrook Pkwy. $ 206 1989 1994
2475 Meadowbrook Pkwy. 693 1986
2500 Meadowbrook Pkwy. 773 1987
2505 Meadowbrook Pkwy. 287 1990
- -----------------------------------------------------------------------------
Total $ 1,959
- -----------------------------------------------------------------------------
Park Creek
2825 Breckinridge Blvd. 46 1986 1996
2875 Breckinridge Blvd. 68 1986 1996
- -----------------------------------------------------------------------------
Total $ 114
- -----------------------------------------------------------------------------
River Green
3450 River Green Ct. $ 32 1989 1995
4800 River Green Pkwy. 41 1989 1995
- -----------------------------------------------------------------------------
Total $ 73
- -----------------------------------------------------------------------------
</TABLE>
S-3
<PAGE>
SCHEDULE III PAGE 4 OF 10
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which
Initial Costs Cost Capital Carried at Close of Period
--------------------- ----------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type/(1)/ Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER NORTHEAST/I-85
1705 Belle Meade Ct. D $ 277 $ 953 $ 1 $ 277 $ 954 $ 1,231
4125 Buford Hwy. B 778 3,823 12 778 3,835 4,613
6525-27 Jimmy Carter Blvd. D 509 3,131 - 509 3,131 3,640
3171 McCall Dr. D 112 385 3 112 388 500
7250 McGinnis Ferry Rd. D 498 3,712 - 498 3,712 4,210
5300 Peachtree Industrial Blvd. R 434 1,493 - 434 1,493 1,927
4280 Northeast Expressway B 534 1,838 - 534 1,838 2,372
- ------------------------------------------------------------------------------------------------------------------------------------
Total $3,142 $ 15,335 $ 16 $ 3,142 $15,351 $18,493
- ------------------------------------------------------------------------------------------------------------------------------------
NORTH CENTRAL SUBMARKET
- ------------------------------------------------------------------------------------------------------------------------------------
NORTHMEADOW
11835 Alpharetta Hwy. O $ 524 $ 1,396 $ 142 $ 524 $ 1,538 $ 2,062
1100 Northmeadow Pkwy. S (b) 552 3,178 26 552 3,204 3,756
1125 Northmeadow Pkwy. D (b) 320 2,222 5 320 2,227 2,547
1150 Northmeadow Pkwy. D (b) 464 2,963 - 464 2,963 3,427
1175 Northmeadow Pkwy. D (b) 328 3,068 52 328 3,120 3,448
1225 Northmeadow Pkwy. S (b) 336 3,286 0 336 3,286 3,622
1250 Northmeadow Pkwy. D (b) 312 2,328 4 312 2,332 2,644
1325 Northmeadow Pkwy. S 472 4,491 36 472 4,527 4,999
1350 Northmeadow Pkwy. D 672 2,556 9 672 2,565 3,237
- ------------------------------------------------------------------------------------------------------------------------------------
Total $3,980 $ 25,488 $ 274 $ 3,980 $25,762 $29,742
- ------------------------------------------------------------------------------------------------------------------------------------
HEMBREE CREST
11415 Old Roswell Rd. B $ 648 $ 1,947 $ 26 $ 648 $ 1,973 $ 2,621
11800 Wills Rd. D (b) 304 1,570 68 304 1,638 1,942
11810 Wills Rd. D (b) 296 2,180 - 296 2,180 2,476
11820 Wills Rd. D (b) 488 3,793 - 488 3,793 4,281
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,736 $ 9,490 $ 94 $ 1,736 $ 9,584 $11,320
- ------------------------------------------------------------------------------------------------------------------------------------
MANSELL COMMONS
993 Mansell Rd. D (b) $ 136 $ 919 $ 39 $ 136 $ 958 $ 1,094
995 Mansell Rd. D (b) 80 714 9 80 723 803
997 Mansell Rd. D (b) 72 612 7 72 619 691
999 Mansell Rd. D (b) 104 816 1 104 817 921
1003 Mansell Rd. D (b) 136 881 1 136 882 1,018
1005 Mansell Rd. D (b) 72 714 5 72 719 791
1007 Mansell Rd. D (b) 168 1,592 16 168 1,608 1,776
1009 Mansell Rd. S (b) 264 1,620 1 264 1,621 1,885
1011 Mansell Rd. S (b) 256 1,647 - 256 1,647 1,903
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,288 $ 9,515 $ 79 $ 1,288 $ 9,594 $10,882
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed/(2)/ Acquired/(3)/
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER NORTHEAST/I-85
1705 Belle Meade Ct. $ 80 1988 1994
4125 Buford Hwy. 173 1995
6525-27 Jimmy Carter Blvd. 51 1983 1996
3171 McCall Dr. 32 1967 1994
7250 McGinnis Ferry Rd. 97 1996
5300 Peachtree Industrial Blvd. 126 1966 1994
4280 Northeast Expressway 155 1962 1994
- -------------------------------------------------------------------------------------------------
Total $ 714
- -------------------------------------------------------------------------------------------------
NORTH CENTRAL SUBMARKET
- -------------------------------------------------------------------------------------------------
NORTHMEADOW
11835 Alpharetta Hwy. $ 92 1994
1100 Northmeadow Pkwy. 149 1989 1995
1125 Northmeadow Pkwy. 104 1987 1995
1150 Northmeadow Pkwy. 138 1988 1995
1175 Northmeadow Pkwy. 154 1987 1995
1225 Northmeadow Pkwy. 153 1989 1995
1250 Northmeadow Pkwy. 110 1989 1995
1325 Northmeadow Pkwy. 223 1990 1995
1350 Northmeadow Pkwy. 154 1994
- -------------------------------------------------------------------------------------------------
Total $1,277
- -------------------------------------------------------------------------------------------------
HEMBREE CREST
11415 Old Roswell Rd. $ 117 1991 1995
11800 Wills Rd. 77 1987 1995
11810 Wills Rd. 102 1987 1995
11820 Wills Rd. 177 1987 1995
- -------------------------------------------------------------------------------------------------
Total $ 473
- -------------------------------------------------------------------------------------------------
MANSELL COMMONS
993 Mansell Rd. $ 47 1987 1995
995 Mansell Rd. 37 1987 1995
997 Mansell Rd. 30 1987 1995
999 Mansell Rd. 38 1987 1995
1003 Mansell Rd. 41 1990 1995
1005 Mansell Rd. 35 1990 1995
1007 Mansell Rd. 80 1990 1995
1009 Mansell Rd. 76 1986 1995
1011 Mansell Rd. 77 1984 1995
- -------------------------------------------------------------------------------------------------
Total $ 461
- -------------------------------------------------------------------------------------------------
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
Initial Costs Costs Capitalized
------------------------------
Property Related Building and Subsequent
Marker/Business Park/Property Type(1) Encumberances Land Improvements to Acquisstion Land
- ------------------------------------------------------------------------------------------------------------------------
Hembree Park
<S> <C> <C> <C> <C> <C> <C>
105 Hembree Park Dr. D (b) $ 288 $ 2,067 $ 1 $ 288
150 Hembree Park Dr. D (b) 641 2,015 21 641
200 Hembree Park Dr. D (b) 160 1,978 - 160
645 Hembree Pkwy. D (b) 248 1,997 35 248
655 Hembree Pkwy. D (b) 248 1,997 41 248
- ------------------------------------------------------------------------------------------------------------------------
Total $ 1,585 $10,054 $ 98 $ 1,585
- ------------------------------------------------------------------------------------------------------------------------
Other North Central Properties
10745 Westside Pkwy. O 925 3,513 52 925
- ------------------------------------------------------------------------------------------------------------------------
Total $ 925 $ 3,513 $ 52 $ 925
- ------------------------------------------------------------------------------------------------------------------------
Airport/South Atlanta Submarket
- ------------------------------------------------------------------------------------------------------------------------
Southridge
5099 Southridge Pkwy. D (d) $ 306 $ 1,053 $ 32 $ 306
5136 Southridge Pkwy. D (d) 480 1,653 67 480
5139 Southridge Pkwy. D (d) 465 1,601 2 465
5149 Southridge Pkwy. D (d) 534 1,838 - 534
5156 Southridge Pkwy. D (d) 676 2,330 - 676
5169 Southridge Pkwy. D 431 2,468 11 431
- ------------------------------------------------------------------------------------------------------------------------
Total $ 2,892 $10,943 $112 $ 2,892
- ------------------------------------------------------------------------------------------------------------------------
Sullivan International
703 Sullivan Rd. D $ 225 $ 781 $ 7 $ 225
721 Sullivan Rd. D 242 834 - 242
727 Sullivan Rd. D 260 898 10 260
739 Sullivan Rd. D 226 778 - 226
- ------------------------------------------------------------------------------------------------------------------------
Total $ 953 $ 3,291 $ 17 $ 953
- ------------------------------------------------------------------------------------------------------------------------
Other Airport/South Atlanta Properties
105 Kings Mill Rd. B (a) $ 457 $ 4,951 $ - $ 457
- ------------------------------------------------------------------------------------------------------------------------
Total $ 457 $ 4,951 - $ 457
- ------------------------------------------------------------------------------------------------------------------------
Northwest/I-75 Submarket
- ------------------------------------------------------------------------------------------------------------------------
Townpoint
3330 West Town Point Dr. D $ 551 $ 1,551 $375 $ 551
3350 West Town Point Dr. D 434 2,214 - 434
- ------------------------------------------------------------------------------------------------------------------------
Total $ 985 $ 3,765 $375 $ 985
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Gross Amount at which
Carried at Close of Period
-----------------------------------------
Building and Accumulated Year Year
Improvements Total Depreciation Developed(2) Acquired(3)
- ------------------------------------------------------------------------------------------------------------------------
Hermes Park
<S> <C> <C> <C> <C> <C>
105 Hembree Park Dr. $ 2,068 $ 2,356 $ 96 1988 1995
150 Hembree Park Dr. 2,036 2,677 102 1985 1995
200 Hembree Park Dr. 1,978 2,138 92 1985 1995
645 Hembree Pkwy. 2,032 2,280 98 1986 1995
655 Hembree Pkwy. 2,038 2,286 110 1986 1995
- ------------------------------------------------------------------------------------------------------------------------
Total $ 10,152 $11,737 $ 498
- ------------------------------------------------------------------------------------------------------------------------
Other North Central Properties
10745 Westside Pkwy. $ 3,565 $ 4,490 $ 193 1995
- ------------------------------------------------------------------------------------------------------------------------
Total 3,565 4,490 193
- ------------------------------------------------------------------------------------------------------------------------
Airport/South Atlanta Submarket
- ------------------------------------------------------------------------------------------------------------------------
Southridge
5099 Southridge Pkwy. $ 1,085 $ 1,391 $ 101 1990 1994
5136 Southridge Pkwy. 1,720 2,200 $ 143 1990 1994
5139 Southridge Pkwy. 1,603 2,068 136 1991 1994
5149 Southridge Pkwy. 1,838 2,372 155 1990 1994
5156 Southridge Pkwy. 2,330 3,006 196 1992 1994
5169 Southridge Pkwy. 2,479 2,910 107 1994
- ------------------------------------------------------------------------------------------------------------------------
Total $ 11,055 $13,947 $838
- ------------------------------------------------------------------------------------------------------------------------
Sullivan International
703 Sullivan Rd. $ 788 $ 1,013 $ 68 1990 1994
721 Sullivan Rd. 834 1,076 70 1991 1994
727 Sullivan Rd. 908 1,168 78 1988 1994
739 Sullivan Rd. 778 1,004 65 1989 1994
- ------------------------------------------------------------------------------------------------------------------------
Total $ 3,308 $ 4,261 $ 281
- ------------------------------------------------------------------------------------------------------------------------
Other Airport/South Atlanta
Properties105 Kings
Mill Rd. $ 4,951 $ 5,408 $ 272 1994
- ------------------------------------------------------------------------------------------------------------------------
Total $ 4,951 $ 5,408 $ 272
- ------------------------------------------------------------------------------------------------------------------------
Northwest/I-75 Submarket
- ------------------------------------------------------------------------------------------------------------------------
Townpoint
3330 West Town Point Dr. $ 1,926 2,477 144 1994
3350 West Town Point Dr. 2,214 2,648 74 1995
- ------------------------------------------------------------------------------------------------------------------------
Total $ 4,140 $5,125 $ 218
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
Schedule III Page 6 of 10
Gross Amount at which
Initial Costs Carried at Close of Period
---------------------- Cost Capitalized ------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest Business Center
1331-37-41-51 Capital Circle S $ 558 $ 4,443 $ - $ 558 $ 4,443 $ 5,001
1335 Capital Circle S 416 1,704 - 416 1,704 2,120
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 974 $ 6,147 $ - $ 974 $ 6,147 $ 7,121
- ------------------------------------------------------------------------------------------------------------------------------------
Other Northwest/ I-75 Properties
240 Northpoint Pkwy. B $ 495 $ 2,732 $ - $ 495 $ 2,732 $ 3,227
- ------------------------------------------------------------------------------------------------------------------------------------
Total B $ 495 $ 2,732 $ - $ 495 $ 2,732 $ 3,227
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Mountain Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Parknorth
675 Parknorth Blvd. D $ 611 $ 2,743 $ 5 $ 611 $ 2,748 $ 3,359
696 Parknorth Blvd. D (f) 532 2,748 - 532 2,748 3,280
715 Parknorth Blvd. D 375 2,118 - 375 2,118 2,493
735 Parknorth Blvd. D (f) 709 3,155 35 709 3,190 3,899
736 Parknorth Blvd. S 627 1,023 - 627 1,023 1,650
780 Parknorth Blvd. D (f) 328 1,847 64 328 1,911 2,239
808 Parknorth Blvd. S 162 608 - 162 608 770
815 Parknorth Blvd. S 249 983 2 249 985 1,234
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 3,593 $15,225 $ 106 $ 3,593 $ 15,331 $18,924
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee
670 DeFoors Ave. D $ 82 $ 660 $ 941 $ 82 $ 1,601 $ 1,683
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 82 $ 660 $ 941 $ 82 $ 1,601 $ 1,683
- ------------------------------------------------------------------------------------------------------------------------------------
NASHVILLE, TENNESSEE
- ------------------------------------------------------------------------------------------------------------------------------------
Airpark Business Center
400 Airpark Center Dr. S (m)(n) $ 419 $ 1,679 $ - $ 419 $ 1,679 $ 2,098
500 Airpark Center Dr. D (m)(n) 923 3,697 - 923 3,697 4,620
600 Airpark Center Dr. D (m)(n) 729 2,918 - 729 2,918 3,647
700 Airpark Center Dr. D (m)(n) 801 3,287 - 801 3,287 4,088
800 Airpark Center Dr. D (o) 924 3,700 - 924 3,700 4,624
900 Airpark Center Dr. D (o) 798 3,194 - 798 3,194 3,992
1400 Donelson Pike S (m)(n) 1,276 5,108 - 1,276 5,108 6,384
1410 Donelson Pike S (m)(n) 1,411 5,696 - 1,411 5,696 7,107
1413 Donelson Pike B (p) 549 2,197 - 549 2,197 2,746
1420 Donelson Pike S (m)(n) 1,331 5,346 - 1,331 5,346 6,677
5270 Harding Place B (p) 535 2,143 - 535 2,143 2,678
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 9,696 $38,965 $ - $ 9,696 $ 38,965 $48,661
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed(2) Acquired(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Northwest Business Center
1331-37-41-51 Capital Circle $ 71 1985 1996
1335 Capital Circle 28 1985 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 99
- ------------------------------------------------------------------------------------------------------------------------------------
Other Northwest/ I-75 Properties
240 Northpoint Pkwy. $ 137 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 137
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Mountain Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Parknorth
675 Parknorth Blvd. $ 160 1990 1995
696 Parknorth Blvd. 144 1986 1995
715 Parknorth Blvd. 111 1989 1995
735 Parknorth Blvd. 172 1989 1995
736 Parknorth Blvd. 54 1992 1995
780 Parknorth Blvd. 110 1988 1995
808 Parknorth Blvd. 32 1986 1995
815 Parknorth Blvd. 52 1989 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 835
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee
670 DeFoors Ave. $ 700 1960 1989
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 700
- ------------------------------------------------------------------------------------------------------------------------------------
NASHVILLE, TENNESSEE
- ------------------------------------------------------------------------------------------------------------------------------------
Airpark Business Center
400 Airpark Center Dr. $ 11 1989 1996
500 Airpark Center Dr. 25 1988 1996
600 Airpark Center Dr. 19 1990 1996
700 Airpark Center Dr. 22 1992 1996
800 Airpark Center Dr. 25 1995 1996
900 Airpark Center Dr. 21 1995 1996
1400 Donelson Pike 34 1986 1996
1410 Donelson Pike 38 1996 1996
1413 Donelson Pike 15 1996 1996
1420 Donelson Pike 36 1985 1996
5270 Harding Place 14 1996 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 260
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which
Initial Cost Cost Capitalized Carried at Close of Period
-------------------- ---------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type (1) Encumbrances Land Improvements Acquisition Land Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brentwood South Business Center
7104 Crossroad Blvd. D (j) $ 1,065 $ 4,272 $ - $ 1,065 $ 4,272
7106 Crossroad Blvd. D (j) 1,065 4,266 - 1,065 4,266
7108 Crossroad Blvd. D (j) 848 3,396 - 848 3,396
119 Seaboard Lane D (k) 569 2,280 - 569 2,280
121 Seaboard Lane D (l) 445 1,784 - 445 1,784
123 Seaboard Lane D (l) 489 1,956 - 489 1,956
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,481 $ 17,954 $ - $ 4,481 $ 17,954
- ------------------------------------------------------------------------------------------------------------------------------------
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
900 Perimeter Park S (q) $ 629 $ 3,568 $ - $ 629 $ 3,568
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 629 $ 3,568 $ - $ 629 $ 3,568
- ------------------------------------------------------------------------------------------------------------------------------------
Perimeter Park West
1400 Perimeter Park West O (r) $ 666 $ 3,777 $ - $ 666 $ 3,777
1500 Perimeter Park West O 1,148 6,511 - 1,148 6,511
1600 Perimeter Park West O (v) 1,463 8,297 - 1,463 8,297
1800 Perimeter Park West O (v) 907 5,140 - 907 5,140
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,184 $ 23,725 $ - $ 4,184 $ 23,725
- ------------------------------------------------------------------------------------------------------------------------------------
Metro Center
2800 Perimeter Park Dr. D (u) $ 482 $ 2,733 $ - $ 482 $ 2,733
2900 Perimeter Park Dr. D (u) 235 1,330 - 235 1,330
3000 Perimeter Park Dr. D (u) 777 4,405 - 777 4,405
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,494 $ 8,468 $ - $ 1,494 $ 8,468
- ------------------------------------------------------------------------------------------------------------------------------------
Enterprise Center
507 Airport Blvd. S (v) $ 1,336 $ 7,578 $ - $ 1,336 $ 7,578
5151 McCrimmon Pkwy. S 1,318 7,474 - 1,318 7,474
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,654 $ 15,052 $ - $ 2,654 $ 15,052
- ------------------------------------------------------------------------------------------------------------------------------------
Woodlake Center
1000 Innovation Ave. D (t) $ 633 $ 3,590 $ - $ 633 $ 3,590
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 633 $ 3,590 $ - $ 633 $ 3,590
- ------------------------------------------------------------------------------------------------------------------------------------
Interchange Plaza
5520 Capital Center Dr. O (s) $ 842 $ 4,772 $ - $ 842 $ 4,772
801 Jones Franklin Rd. O (x) 1,351 7,660 - 1,351 7,660
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,193 $ 12,432 $ - $ 2,193 $ 12,432
- ------------------------------------------------------------------------------------------------------------------------------------
Other Raleigh Properties
6501 Weston Pkwy. O (w) $ 1,775 $ 10,064 $ - $ 1,775 $ 10,064
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,775 $ 10,064 $ - $ 1,775 $ 10,064
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Total Depreciation Developed(2) (Acquired(3)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brentwood South Business Center
7104 Crossroad Blvd. $ 5,337 $ 28 1987 1996
7106 Crossroad Blvd. 5,331 28 1987 1996
7108 Crossroad Blvd. 4,244 23 1989 1996
119 Seaboard Lane 2,849 15 1990 1996
121 Seaboard Lane 2,229 12 1990 1996
123 Seaboard Lane 2,445 13 1990 1996
- --------------------------------------------------------------------------------------------
Total $ 22,435 $ 119
- --------------------------------------------------------------------------------------------
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
900 Perimeter Park $ 4,197 1982 1996
- --------------------------------------------------------------------------------------------
Total $ 4,197 $ -
- --------------------------------------------------------------------------------------------
Perimeter Park West
1400 Perimeter Park West $ 4,443 1991 1996
1500 Perimeter Park West 7,659 1996 1996
1600 Perimeter Park West 9,760 1994 1996
1800 Perimeter Park West 6,047 1994 1996
- --------------------------------------------------------------------------------------------
Total $ 27,909 $ -
- --------------------------------------------------------------------------------------------
Metro Center
2800 Perimeter Park Dr. $ 3,215 1992 1996
2900 Perimeter Park Dr. 1,565 1990 1996
3000 Perimeter Park Dr. 5,182 1900 1996
- --------------------------------------------------------------------------------------------
Total $ 9,962 $ -
- --------------------------------------------------------------------------------------------
Enterprise Center
507 Airport Blvd. $ 8,914 1993 1996
5151 McCrimmon Pkwy. 8,792 1995 1996
- --------------------------------------------------------------------------------------------
Total $ 17,706 $ -
- --------------------------------------------------------------------------------------------
Woodlake Center
1000 Innovation Ave. $ 4,223 1994 1996
- --------------------------------------------------------------------------------------------
Total $ 4,223 $ -
- --------------------------------------------------------------------------------------------
Interchange Plaza
5520 Capital Center Dr. $ 5,614 1993 1996
801 Jones Franklin Rd. 9,011 1995 1996
- --------------------------------------------------------------------------------------------
Total $ 14,625 $ -
- --------------------------------------------------------------------------------------------
Other Raleigh Properties
6501 Weston Pkwy. $ 11,839 1996 1996
- --------------------------------------------------------------------------------------------
Total $ 11,839 $ -
- --------------------------------------------------------------------------------------------
</TABLE>
S-7
<PAGE>
SCHEDULE III PAGE 8 OF 10
<TABLE>
<CAPTION>
Initial Costs Cost Capitalized
------------------------
Property Related Building and Subsequent
Market/Business Park/Property Type (1) Encumbrances Land Improvements to Acquisition
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
2500 Principal Row B $ 565 $ 3,915 $ -
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 565 $ 3,915 $ -
- -------------------------------------------------------------------------------------------------------------
Airport Commerce Center
8249 Parkline Blvd. D $ 214 $ 1,661 $ -
8351 Parkline Blvd. D (e) 212 1,786 -
8500 Parkline Blvd. D (e) 691 3,200 120
8501 Parkline Blvd. D (e) 169 1,212 4
8549 Parkline Blvd. D (e) 149 1,232 -
1630 Prime Court D 319 1,654 -
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 1,754 $ 10,745 $ 124
- -------------------------------------------------------------------------------------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
170 Parkway West B $ 141 $ 2,763 $ -
260 Parkway East D 533 1,924 -
285 Parkway East B 478 4,247 -
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 1,152 $ 8,934 $ -
- -------------------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT $ 8,751 $ - $ 284
-------------------------------------------------------------
PROPERTY TOTALS 193,403 (z) $85,781 $421,478 $ 29,011
-------------------------------------------------------------
<CAPTION>
Gross Amount at which
Carried at Close of Period
-----------------------------------
Building and Accumulated Year Year
Market/Business Park Property Land Improvements Total Depreciation Developed (2) Acquired (3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
2500 Principal Row $ 565 $ 3,915 $ 4,480 $ 28 1996
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 565 $ 3,915 $ 4,480 $ 28
- ------------------------------------------------------------------------------------------------------------------------------
Airport Commerce Center
8249 Parkline Blvd. $ 214 $ 1,661 $ 1,875 $ 29 1996
8351 Parkline Blvd. 212 1,786 1,998 106 1994 1995
8500 Parkline Blvd. 691 3,320 4,011 205 1986 1995
8501 Parkline Blvd. 169 1,216 1,385 72 1991 1995
8549 Parkline Blvd. 149 1,232 1,381 73 1992 1995
1630 Prime Court 319 1,654 1,973 16 1996
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,754 $ 10,869 $ 12,623 $ 501
- ------------------------------------------------------------------------------------------------------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
170 Parkway West $ 141 $ 2,763 $ 2,904 $ 26 1995
260 Parkway East 533 1,924 2,457 159 1987 1994
285 Parkway East 478 4,247 4,725 212 1994
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,152 $ 8,934 $ 10,086 $ 397
- ------------------------------------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT $ 9,035 $ 9,035
-------------------------------------------------------------
PROPERTY TOTALS $86,268 $450,002 $536,270 (aa)(bb) $41,469
-------------------------------------------------------------
</TABLE>
(1) D = business distribution; B = bulk warehouse; S = business service; O =
office; R = retail.
(2) The year of development means the year in which shell construction was
completed.
(3) For properties acquired by the Company, including properties previously
developed and sold by the Company, the year of acquisition means the year
in which an ownership interest in the property was acquired or is expected
to be acquired, unless otherwise noted.
(a) These properties are collectively encumbered by a mortgage of $38,000.
(b) These properties are collectively encumbered by a mortgage of $31,170.
(c) These properties are collectively encumbered by a mortgage of $10,300.
(d) These properties are collectively encumbered by a mortgage of $ 6,952.
(e) These properties are collectively encumbered by a mortgage of $ 5,200.
(f) These properties are collectively encumbered by a mortgage of $ 5,140.
(g) These properties are collectively encumbered by a mortgage of $ 3,425.
(h) These properties are collectively encumbered by a mortgage of $ 1,813.
(i) These properties are collectively encumbered by a mortgage of $ 1,262.
(j) These properties are collectively encumbered by a mortgage of $ 7,076.
(k) These properties are collectively encumbered by a mortgage of $ 2,174.
(l) These properties are collectively encumbered by a mortgage of $ 2,633.
(m) These properties are collectively encumbered by a mortgage of $12,278.
(n) These properties are collectively encumbered by a mortgage of $ 1,957.
(o) These properties are collectively encumbered by a mortgage of $ 8,841.
(p) These properties are collectively encumbered by a mortgage of $ 6,924.
(q) These properties are collectively encumbered by a mortgage of $ 2,901.
S-8
<PAGE>
SCHEDULE III PAGE 9 OF 10
(r) These properties are collectively encumbered by a mortgage of $ 2,707.
(s) These properties are collectively encumbered by a mortgage of $ 2,922.
(t) These properties are collectively encumbered by a mortgage of $ 2,590.
(u) These properties are collectively encumbered by a mortgage of $ 6,851.
(v) These properties are collectively encumbered by a mortgage of $16,028.
(w) These properties are collectively encumbered by a mortgage of $ 7,683.
(x) These properties are collectively encumbered by a mortgage of $ 5,873.
(y) These properties are collectively encumbered by a mortgage of $ 703.
(z) Total related encumbrances include all mortgage notes payable in the
accompanying financial statements, except a mortgage of $4,172 which is
secured by the property at 1950 Vaughn Road which underlies a direct
financing lease discussed in note 3 to the consolidated and combined
financial statements.
(aa) The aggregate cost for federal income tax purposes was approximately $456
million.
(bb) Excludes developments in progress of $56,571.
S-9
<PAGE>
SCHEDULE III PAGE 10 OF 10
WEEKS CORPORATION
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Depreciation of the Company's real estate assets is calculated over the
following estimated useful lives on a straight-line basis:
. Buildings -- 35 Years
. Tenant Improvements -- life of the lease
A summary of activity for real estate assets and accumulated depreciation for
the years ended December 31, 1996 and 1995, for the period from August 24, 1994
to December 31, 1994 and for the period from January 1, 1994 to August 23, 1994
were as follows
(in thousands):
<TABLE>
<CAPTION>
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REAL ESTATE ASSETS
Balance, beginning of period $ 319,763 $ 162,709 $ 111,424 $ 95,831
Additions 71,418 46,913 16,486 9,077
Acquisitions of property/(a)/ 201,660 110,141 38,320 6,516
Deconsolidation of build-to-suit land -- -- (3,521) --
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Balance, end of period $ 592,841 $ 319,763 $ 162,709 $ 111,424
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ACCUMULATED DEPRECIATION
Balance, beginning of period $ 29,889 $ 22,959 $ 21,220 $ 18,887
Depreciation 11,580 6,930 1,739 2,333
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Balance, end of period $ 41,469 $ 29,889 $ 22,959 $ 21,220
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</TABLE>
(a) See Note 15 to the Company's consolidated and combined financial
statements, included herein on page F-21, for a summary of certain noncash
consideration utilized in the Company's property acquisitions.
