<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission File No. 011-13254
---------
WEEKS CORPORATION
(Exact name of Registrant as specified in its Charter)
Georgia 58-1525322
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
4497 Park Drive, Norcross, Georgia 30093
(Address of principal executive offices, including zip code)
(770)923-4076
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
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 such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past ninety (90) days. (X) YES ( ) NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date (17,702,736 shares of
common stock outstanding as of November 10, 1997)
1
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<TABLE>
<CAPTION>
INDEX PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
- -----------------------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets
at September 30, 1997 and December 31, 1996............................. 3
Consolidated Condensed Statements of Operations
for the three and nine months ended September 30, 1997 and 1996......... 4
Consolidated Condensed Statements of Cash Flows
for the nine months ended September 30, 1997 and 1996................... 5
Notes to Consolidated Condensed Financial
Statements.............................................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................... 16
PART II. OTHER INFORMATION
- -----------------------------------------------------------------------------------------------
ITEM 2. CHANGES IN SECURITIES................................................... 32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................ 32
SIGNATURES............................................................................... 33
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</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
WEEKS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
September 30, December 31,
(Unaudited; in thousands, except share data) 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate assets
Land $ 98,279 $ 77,233
Buildings and improvements 578,722 450,002
Accumulated depreciation (56,639) (41,469)
- ------------------------------------------------------------------------------------------------------------------
Operating real estate assets 620,362 485,766
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Developments in progress 72,415 56,571
Land held for future development 9,833 9,035
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Net real estate assets 702,610 551,372
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Real estate loans 24,619 9,455
Cash and cash equivalents 476 260
Direct financing lease, net 5,032 5,136
Receivables 6,387 5,858
Deferred costs, net 12,530 10,286
Investments in and notes receivable
from unconsolidated entities 8,876 7,760
Other assets 2,600 1,722
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TOTAL ASSETS $763,130 $591,849
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LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $190,687 $197,575
Credit facility borrowings 150,098 99,400
Accounts payable and accrued expenses 18,301 9,970
Other liabilities 4,127 2,963
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Total liabilities 363,213 309,908
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Minority interests in Operating Partnership 89,981 68,230
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Commitments and contingencies
Shareholders' equity
Common Stock, $0.01 par value; 100,000,000 shares authorized;
17,702,045 and 14,048,593 shares issued and outstanding
at September 30, 1997 and December 31, 1996, respectively 177 140
Preferred Stock, $0.01 par value; 20,000,000 shares
authorized; none issued -- --
Additional paid-in capital 376,013 267,634
Deferred compensation (934) --
Accumulated deficit (65,320) (54,063)
- ------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 309,936 213,711
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $763,130 $591,849
- ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed balance sheets.
</TABLE>
3
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WEEKS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
(Unaudited; in thousands, except share data) Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Rental income $21,047 $12,193 $57,326 $34,136
Tenant reimbursements 2,903 1,057 7,319 3,064
Direct financing lease 189 192 565 576
Other 140 113 406 287
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24,279 13,555 65,616 38,063
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EXPENSES
Property operating and maintenance 3,098 1,589 7,720 4,276
Real estate taxes 1,927 1,135 5,394 3,288
Depreciation and amortization 6,300 3,416 17,344 9,416
Interest 4,787 3,202 14,341 8,157
Amortization of deferred financing costs 227 221 679 642
General and administrative 1,256 760 3,675 2,174
- -----------------------------------------------------------------------------------------------------------------------------------
17,595 10,323 49,153 27,953
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Income before equity in earnings of unconsolidated
subsidiaries, interest income and gain on sale
of real estate asset 6,684 3,232 16,463 10,110
Equity in earnings of unconsolidated
subsidiaries 314 376 1,538 919
Interest income 453 123 996 321
Gain on sale of real estate asset -- -- 209 --
- -----------------------------------------------------------------------------------------------------------------------------------
Income before minority interests 7,451 3,731 19,206 11,350
Minority interests (1,683) (698) (4,533) (2,124)
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NET INCOME $ 5,768 $ 3,033 $14,673 $ 9,226
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NET INCOME PER COMMON SHARE $0.33 $0.27 $0.92 $0.83
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 17,693 11,174 15,904 11,162
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed
financial statements.
</TABLE>
4
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WEEKS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Nine Months Nine Months
Ended Ended
(Unaudited; in thousands) Sept. 30, 1997 Sept. 30, 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 14,673 $ 9,226
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 4,533 2,124
Depreciation and amortization 17,344 9,416
Amortization of deferred financing costs 679 642
Amortization of deferred compensation 216 --
Income from direct financing lease (565) (576)
Straight-line rent revenue (500) (326)
Gain on sale of real estate asset (209) --
Net change in:
Receivables and other assets (2,235) (480)
Deferred costs (4,354) (1,502)
Accounts payable and accrued expenses 5,792 2,971
Other liabilities 1,164 919
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,538 22,414
- -----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property acquisition, development and construction (112,349) (79,369)
Real estate loans (18,038) (6,212)
Proceeds from sale of real estate asset 2,484 --
Payments received on direct financing lease 669 643
Notes receivable collections 21 18
- -----------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (127,213) (84,920)
- -----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from equity offering, stock option exercises
and dividend reinvestment plan 107,266 520
Line of credit proceeds, net 50,698 78,622
Payments of construction and mortgage notes payable (41,667) (360)
Deferred financing costs (126) (743)
Dividends to shareholders (19,709) (13,386)
Distributions to minority interests (5,571) (3,081)
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 90,891 61,572
- -----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 216 (934)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 260 982
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 476 $ 48
- -----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
</TABLE>
The Company's 1997 property acquisition and development activity was net of the
settlement of real estate loans of $2,874,000, the assumption of indebtedness of
$34,779,000 and the issuance of Common Units valued at $16,568,000.
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
WEEKS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. THE COMPANY
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 subsidiaries, is the
general partner of 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, including the requirement
to distribute 95% of its taxable income to its shareholders.
As of September 30, 1997, the Company had outstanding 17,702,045 shares of
common stock and owned the same number of units of common limited partnership
interest in the Operating Partnership ("Common Units"), and the Company's
ownership interest in the Operating Partnership was 77.5%. Common Units held by
persons other than the Company totaled 5,141,404 as of September 30, 1997, and
represented a 22.5% minority interest in the Operating Partnership. Common
Units representing the 22.5% minority interest in the Operating Partnership 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 77.5% and 81.3% for the three months
ended September 30, 1997 and 1996, respectively, and 76.4% and 81.3% for the
nine months ended September 30, 1997 and 1996, 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 the 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.
As of September 30, 1997, the Company owned 207 industrial properties, 20
suburban office properties and three retail properties comprising 15.8 million
square feet. The Company's primary markets and the concentration of the
Company's portfolio (based on square footage) are Atlanta, Georgia (72%),
Nashville, Tennessee (11%), Raleigh-Durham-Chapel Hill, North Carolina (11%),
Orlando, Florida (4%), and Spartanburg, South Carolina (2%). In addition, 33
industrial and suburban office properties and one property expansion were under
development or in lease-up and 10 industrial and suburban office properties were
under agreement to be acquired as of September 30, 1997, comprising an
additional 4.9 million square feet.
6
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2. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
consolidated condensed financial position of the Company and its subsidiaries at
September 30, 1997, and December 31, 1996, and their results of operations and
cash flows for the three and nine months ended September 30, 1997 and 1996. The
operating results of the Subsidiaries are reflected in the accompanying
financial statements on the equity method of accounting. All significant
intercompany balances and transactions have been eliminated in the consolidated
condensed financial statements. Certain prior year amounts have been
reclassified to conform to the 1997 presentation.
The accompanying interim unaudited financial statements have been prepared by
the Company's management in accordance with generally accepted accounting
principles for interim financial information and in conformity with the rules
and regulations of the Securities and Exchange Commission. In the opinion of
management, the interim financial statements presented herein reflect all
adjustments of a normal and recurring nature which are necessary to fairly state
the interim financial statements. The results of operations for the interim
periods are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997. These financial statements should be read in
conjunction with the Company's audited financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K/A-2 for the year
ended December 31, 1996.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards ("SFAS") 128,
"Earnings per Share" was issued prescribing a new method for computing earnings
per share. When implemented, SFAS 128 will supersede Accounting Principles
Board Opinion ("APB") 15, "Earnings per Share," the current accounting
literature utilized in computing earnings per share under generally accepted
accounting principles. Under SFAS 128, the Company will be required to present
both basic and diluted earnings per share in its interim and annual financial
statements for periods beginning with its financial statements for the quarter
and year ended December 31, 1997. As defined by SFAS 128, basic earnings per
share shall be computed by dividing net income by the weighted average number of
common shares outstanding during the period. Diluted earnings per share shall
be computed to present the dilutive impact of all instruments or securities
which are convertible into shares of the Company's common stock, as more
specifically defined in SFAS 128.
The Company will continue to present earnings per share under the provisions of
APB 15 for all interim periods of 1997 until the mandated SFAS 128
implementation date in the fourth quarter of 1997. Upon the adoption of SFAS
128, all prior period earnings per share amounts will be restated. The impact
of SFAS 128 on the Company's consolidated earnings per share amounts for the
three and nine months ended September 30, 1997 and 1996 is discussed in Note 6.
In June 1997, SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information" was issued prescribing new guidelines for the reporting of segment
data. SFAS 131 will apply to all public, for-profit companies and will be
effective for calendar year end companies in the year ended December 31, 1998.
The Company was not subject to segment reporting under prior accounting
standards, but may be required to provide certain segment disclosures under SFAS
131. The Company is evaluating SFAS 131, but has not yet determined the
specific nature and magnitude of the disclosures required by SFAS 131.
7
<PAGE>
3. BANK CREDIT FACILITY AND MORTGAGE NOTES PAYABLE
The Operating Partnership, the Subsidiaries and Weeks Development Partnership
(Note 4), as co-borrowers, have a $225 million (increased from $175 million
effective September 1, 1997) syndicated revolving credit facility (the "Credit
Facility") with four banks. At the election of the Company, prior to March 1,
1998, total borrowing capacity under the Credit Facility may be reduced to $175
million. 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 and the Operating Partnership. 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 the 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 renewal fee of 0.125%.
The Credit Facility provides for advances of up to $225 million, subject to
certain covenants, including those governing the Company's maximum unsecured
borrowings and total leverage. Maximum available advances currently total $225
million. As of September 30, 1997, Credit Facility borrowings are detailed as
follows (in thousands):
--------------------------------------------------------------
BORROWER AMOUNT
--------------------------------------------------------------
Operating Partnership $150,098
Weeks Realty Services, Inc. 5,280
Weeks Construction Services, Inc. 2,900
Weeks Development Partnership 7,342
--------------------------------------------------------------
$165,620
--------------------------------------------------------------
Interest under the Credit Facility is payable monthly at bank prime minus 0.25%
or at LIBOR plus 1.35% at the election of the co-borrowers. Effective for Credit
Facility borrowings subsequent to September 30, 1997, interest is payable
monthly at bank prime minus 0.25% or at LIBOR plus 1.05%. The weighted average
interest rate on Credit Facility borrowings, excluding the effect of the
interest rate swap agreements described below, was 6.99% at September 30, 1997.
Fees on the unused portion of the Credit Facility are 0.20% annually (decreased
to 0.15% annually effective October 1, 1997).
Interest paid, net of amounts capitalized, totaled $14,123,000 and $8,120,000
for the nine months ended September 30, 1997 and 1996, respectively. Interest
costs capitalized totaled $1,516,000 and $635,000 for the three months ended and
$3,738,000 and $1,563,000 for the nine months ended September 30, 1997 and 1996,
respectively.
The Company has in place 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, mature in July 1998, July 1999 and July 2001 with effective fixed
interest rates of 7.72%,
8
<PAGE>
7.89% and 8.14%, respectively (decreased to 7.42%, 7.59% and 7.84%,
respectively, effective October 1, 1997, as a result of the corresponding
decrease in the interest rate charged on the Company's Credit Facility
borrowings).
In September 1997, the Company entered into a treasury rate guarantee hedge
transaction ("Treasury Lock") to hedge its interest costs on an anticipated debt
financing transaction. The impact of the Treasury Lock is to effectively lock
in for the period through February 1998 a seven year treasury rate of
approximately 6.3% on an anticipated borrowing of approximately $100 million.
As the Treasury Lock is considered a highly correlated hedge of anticipated
borrowings, the costs paid or benefits received upon the settlement of the
transaction will be recognized as an adjustment to interest expense over the
term of the anticipated future borrowing.
Mortgage notes payable at September 30, 1997 and December 31, 1996, specifically
listed for notes with outstanding balances in excess of $10 million, consist of
the following (in thousands):
<TABLE>
<CAPTION>
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SEPTEMBER 30, DECEMBER 31,
1997 1996
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<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
Mortgage note, principal and interest at 9.24%,
due in 2005 15,855 16,028
Mortgage note, principal and interest at 9.625%,
due in 2000 12,945 --
Mortgage note, principal and interest at 8.10%,
due in 2006 12,083 12,278
Mortgage note, interest only at 7.625%,
due in 2000 10,300 10,300
Other mortgage notes (26 at September 30, 1997),
principal and interest at 6.00% to 9.80%,
due in 1998 to 2112 95,695 83,956
VARIABLE RATE
Industrial revenue bonds, interest at 4.15% to 6.65%
at September 30, 1997, due in 2004 and 2010 5,809 5,843
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$190,687 $197,575
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</TABLE>
At September 30, 1997, fixed rate mortgage notes payable included 31 notes with
a weighted average interest rate of 8.13%. The weighted average term to
maturity of fixed rate mortgage notes payable was 5.2 years at September 30,
1997. Fixed rate mortgage indebtedness decreased by $6,888,000 in 1997 due to
the prepayment, without penalty, of three mortgage notes totaling $31,170,000,
net of the assumption and issuance of mortgage notes totaling $26,009,000 in
conjunction with the Company's building and land acquisitions, and net of
principal repayments and retirements. Certain Company officers and Common
Unitholders guarantee a portion of fixed rate mortgage notes.
9
<PAGE>
Variable rate industrial revenue bonds include two separate arrangements. One
bond issue with an outstanding balance of $5,140,000 accrues 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. The weighted average
interest rate under these arrangements was 4.44% at September 30, 1997. The
bonds are supported by letters of credit totaling $5,345,000.
Exclusive of letters of credit supporting industrial revenue bond financings,
letters of credit totaling $1,958,000 at September 30, 1997, were issued to
third parties.
Scheduled maturities of mortgage notes payable at September 30, 1997, are
summarized as follows (in thousands):
-----------------------------------
YEAR AMOUNT
-----------------------------------
Remainder of 1997 $ 616
1998 8,660
1999 49,502
2000 35,315
2001 10,990
2002 and thereafter 85,604
-----------------------------------
$190,687
-----------------------------------
10
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4. INVESTMENTS IN AND NOTES RECEIVABLE
FROM UNCONSOLIDATED SUBSIDIARIES
The Company conducts its 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 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, the
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 (in thousands):
<TABLE>
<CAPTION>
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SEPTEMBER 30, DECEMBER 31,
FINANCIAL POSITION 1997 1996
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<S> <C> <C>
ASSETS
Real estate assets $ 5,020 $ 7,200
Investments in real estate partnerships
and joint ventures 2,859 3,025
Receivables and other assets 23,556 13,113
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$31,435 $23,338
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LIABILITIES AND EQUITY
Notes payable to the Company $10,900 $10,921
Credit facility borrowings 15,522 3,595
Other borrowings -- 1,261
Other liabilities 7,026 10,725
Total equity (2,013) (3,164)
- --------------------------------------------------------------------------------
$31,435 $23,338
- --------------------------------------------------------------------------------
</TABLE>
11
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At September 30, 1997, the Company's investment in and notes receivable from the
Subsidiaries totaling $8,876,000 includes notes receivable from the Subsidiaries
of $10,900,000 and the Company's investment in the Subsidiaries of ($2,024,000).
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
RESULTS OF OPERATIONS SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Construction and development fees $ 724 $ 810 $ 1,781 $ 1,638
Landscape 1,442 1,454 4,313 3,832
Property management fees 44 32 144 138
Commissions 150 96 612 174
Other 74 81 260 223
- ---------------------------------------------------------------------------------------------------------------------
2,434 2,473 7,110 6,005
- ---------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Direct costs 1,440 1,346 3,901 3,264
Interest expense - Company 326 329 981 986
Interest expense - other 14 62 178 277
General and administrative 642 403 1,681 1,164
Other 103 299 385 400
- ---------------------------------------------------------------------------------------------------------------------
2,525 2,439 7,126 6,091
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE GAINS ON SALE OF
PROPERTIES AND EQUITY IN EARNINGS
OF PARTNERSHIPS AND JOINT VENTURES (91) 34 (16) (86)
Gain on sale of properties - third parties 79 -- 313 --
Gain on sale of property - Company -- -- 580 --
Equity in earnings of partnerships
and joint ventures -- 13 271 18
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (12) $ 47 $ 1,148 $ (68)
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable
to Company $ (12) $ 47 $ 1,137 $ (67)
Interest expense - Company 326 329 981 986
Gain on sale of property - Company -- -- (580) --
- ---------------------------------------------------------------------------------------------------------------------
Equity in earnings of Subsidiaries $ 314 $ 376 $ 1,538 $ 919
- ---------------------------------------------------------------------------------------------------------------------
Distributions and interest paid
to Company $1,311 $1,313 $ 1,311 $ 1,313
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Nine Months
Ended Ended
CASH FLOWS Sept. 30, 1997 Sept. 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
Operating activities $(7,299) $ 4,654
Investing activities (5,206) (3,976)
Financing activities 10,593 1,018
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Third-party service revenues detailed above include development and construction
fees, landscaping revenues and lease commissions from affiliated partnerships
and joint ventures totaling $108,000, $87,000 and $14,000, respectively, for the
three months ended September 30, 1997, and $349,000, $67,000 and $22,000,
respectively, for the three months ended September 30, 1996. Development and
construction fees, landscaping revenues and lease commissions from affiliated
entities totaled $250,000, $247,000 and $384,000, respectively, for the nine
months ended September 30, 1997 and $484,000, $195,000 and $94,000,
respectively, for the nine months ended September 30, 1996.
5. SHAREHOLDERS' EQUITY
On October 10, 1997, the Company completed a public offering of 6,000,000 shares
of its 8% Series A Cumulative Redeemable Preferred Stock (the "Series A
Preferred Stock") and received net proceeds of approximately $144.6 million.
The proceeds were used to reduce the Company's outstanding Credit Facility
borrowings. The Series A Preferred Stock has a liquidation preference of $25.00
per share and is redeemable at the option of the Company on or after October 10,
2002 at a redemption price of $25.00 per share.
In the second quarter of 1997, the Company completed a public offering of
3,584,000 shares of common stock and received net proceeds of approximately
$106.6 million. The proceeds were used to reduce the Company's outstanding
Credit Facility borrowings.
The Company declared and paid quarterly common stock dividends relating to the
second quarter of 1997 of $7,604,000 or $0.43 per share during the three months
ended September 30, 1997. Additionally, the minority Unitholders in the
Operating Partnership received cash distributions totaling $2,175,000 or $0.43
per Common Unit during the three months ended September 30, 1997. In October
1997, the Company declared and paid quarterly common stock dividends and made
distributions relating to the third quarter of 1997 of $7,612,000 or $0.43 per
share and $2,211,000 or $0.43 per Common Unit, respectively. Additionally, in
October 1997, the Company declared and paid a partial quarterly Series A
Preferred Stock dividend of $720,000 or $0.12 per share.
In February 1997, restricted shares of common stock valued at $1,150,000 were
granted to certain Company officers and employees in recognition of successful
prior service and as an incentive for future service and continued financial
performance of the Company. These shares vest ratably over a four year period
provided the Company achieves 10% annual growth in per share funds from
operations, a REIT industry measure of operating performance, for each year of
the four year vesting period. Compensation expense is recognized ratably over
the four year vesting period.
13
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6. EARNINGS PER SHARE
Under APB 15, earnings per share is calculated using the weighted average number
of common shares outstanding of 17,693,000 and 11,174,000 for the three months
ended, and 15,904,000 and 11,162,000 for the nine months ended September 30,
1997 and 1996, respectively. The impact of outstanding stock options was not
dilutive, as defined in APB 15, in 1997 or 1996. An assumed conversion of
Common Units into common stock would not affect net income per common share. A
comparison of earnings per share as calculated under APB 15, to proforma
earnings per share, as calculated under the provisions of SFAS 128, is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings per common share (APB 15) $0.33 $0.27 $0.92 $0.83
Basic earnings per common
share (SFAS 128) $0.33 $0.27 $0.92 $0.83
Diluted earnings per common
share (SFAS 128) $0.32 $0.27 $0.91 $0.82
</TABLE>
7. ACQUISITIONS
The Company made initial acquisitions of property portfolios and the business
operations of NWI Warehouse Group, L.P. ("NWI") in Nashville, Tennessee, and
Lichtin Properties, Inc. and affiliates ("Lichtin") in the Raleigh-Durham-Chapel
Hill area of North Carolina, on November 1, 1996 and December 31, 1996,
respectively, in transactions accounted for under the purchase method. The
Company's consolidated condensed results of operations for the three and nine
months ended September 30, 1997, included the operating results of NWI and
Lichtin for the entire period. The unaudited pro forma information below
presents the Company's consolidated condensed results of operations as if the
initial phases of the NWI and Lichtin acquisitions had occurred as of January 1,
1996. The unaudited pro forma information is not necessarily indicative of the
results of operations of the Company had the acquisitions occurred as of January
1, 1996, nor is it necessarily indicative of future results. Additionally, the
unaudited pro forma information excludes the impact of the buildings and land
acquired or to be acquired from NWI and Lichtin subsequent to the initial
acquisition dates detailed above.
Nine Months
Ended
(Unaudited, in thousands, except per share amount) September 30, 1996
- ------------------------------------------------------------------------
Revenues $51,377
Net income 7,320
Earnings per common share $ 0.64
14
<PAGE>
Effective July 1, 1997 and August 1, 1997, the Company acquired eight industrial
buildings totaling approximately 512,000 square feet in the Raleigh-Durham-
Chapel Hill area of North Carolina from Lichtin for aggregate acquisition
consideration of approximately $31.7 million. The aggregate acquisition
consideration of $31.7 million was comprised of the assumption of mortgage
indebtedness of approximately $20.3 million, the issuance of approximately $2.2
million of Common Units in the Operating Partnership and $9.2 million of cash,
used to fund the assumption and repayment of other indebtedness, closing costs
and acquisition expenses, funded through Credit Facility borrowings.
In the second quarter of 1997, the Company acquired 17 industrial buildings
totaling approximately 546,000 square feet located in the Northwest submarket of
Atlanta, Georgia for approximately $29.2 million, including closing costs and
acquisition expenses. The acquisition was funded through Credit Facility
borrowings. On April 22, 1997, the Company acquired an industrial building
totaling approximately 61,000 square feet located in Orlando, Florida for $2.9
million, including closing costs and acquisition expenses. This acquisition was
also funded through Credit Facility borrowings.
In the first quarter of 1997, the Company acquired a total of five industrial
buildings totaling 447,528 square feet. Three buildings totaling 154,341 square
feet were acquired from Lichtin and two buildings totaling 293,187 square feet
were acquired from NWI. Total acquisition consideration of approximately $17.7
million was comprised of the assumption of approximately $4.4 million of
indebtedness and the issuance of approximately $13.3 million of Common Units in
the Operating Partnership. Additionally, as part of these transactions, the
Company acquired approximately five net usable acres of development land in
exchange for $1.0 million of Common Units.
8. PROPERTY SALE
On April 3, 1997, the Company sold a 96,000 square foot industrial building
located in Spartanburg, South Carolina to one of the building's tenants for
approximately $2.5 million, resulting in a gain of $209,000. For income tax
purposes, the Company completed a tax-deferred, like-kind exchange involving the
industrial building acquired in Orlando, Florida (see Note 7).
9. REAL ESTATE LOANS
On July 31, 1997, the Company loaned $8.3 million to a construction management
company under short-term loan agreements. The construction management company
is serving as the construction and development manager of two of the Company's
properties under development in Tampa, Florida. The loans bear interest at
LIBOR plus 2.00%, are secured by real estate properties and mature on April 1,
1998. Interest income earned under these loans and included in the accompanying
statements of operations totaled approximately $109,000 in the three and nine
months ended September 30, 1997.
As of September 30, 1997, the Company has advanced $4.5 million to NWI (see Note
7) under a $5.7 million demand loan agreement. The loan bears interest at LIBOR
plus 2.10% and is secured by real estate properties held by NWI. Interest
income earned under the agreement and included in the accompanying statements of
operations totaled approximately $69,000 and $106,000 in the three and nine
months ended September 30, 1997.
15
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
consolidated condensed financial statements and notes thereto, included
elsewhere herein. In addition to historical information, management's
discussion and analysis and other statements issued or made from time to time by
the Company or its representatives contain statements which may constitute
"Forward-looking Statements" within the meaning of the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended, each as amended
by the Private Securities Litigation Reform Act of 1995. 15 U.S.C.A. Sections
77z-2 And 78u-5 (Supp. 1996). Those statements include statements regarding the
intent, belief or current expectations of the Company and members of its
management team as well as the assumptions on which such statements are based.
Any such Forward-looking Statements are not guarantees of future performance and
the Company's actual results could differ materially from those set forth in
such Forward-looking Statements. Factors currently known to management that
could cause actual results to differ materially from those set forth in such
Forward-looking Statements include general economic conditions, local real
estate conditions, timely re-leasing of occupied square footage upon expiration,
interest rates, availability of equity and debt financing, current construction
schedules, the status of lease negotiations with potential tenants, the
satisfactory completion of due diligence procedures and other risks detailed
from time to time in the Company's filings with the Securities and Exchange
Commission, including Quarterly Reports on Form 10-Q, Current Reports on Form 8-
K and Annual Reports on Form 10-K. The Company undertakes no obligation to
update or revise Forward-looking Statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
GENERAL BACKGROUND
The Company was founded in 1965 and operated as a private real estate company
until August 1994, when it completed an initial public offering and elected to
be taxed as a 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 southeast United States. For a further
description of the Company, see Note 1 to the consolidated condensed financial
statements.
16
<PAGE>
RESULTS OF OPERATIONS
Operating information relating to the Company's properties for the three and
nine months ended September 30, 1997 and 1996, respectively, is summarized below
(in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED % ENDED ENDED %
SEPT. 30, 1997 SEPT. 30, 1996 CHANGE SEPT. 30, 1997 SEPT. 30, 1996 CHANGE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental revenues $21,047 $12,193 72.6% $57,326 $34,136 67.9%
Tenant reimbursements 2,903 1,057 174.6% 7,319 3,064 138.9%
- -------------------------------------------------------------------------------------------------------------------
Property operating revenues 23,950 13,250 80.8% 64,645 37,200 73.8%
- -------------------------------------------------------------------------------------------------------------------
Operating and maintenance
expenses 3,098 1,589 95.0% 7,720 4,276 80.5%
Real estate taxes 1,927 1,135 69.8% 5,394 3,288 64.1%
Depreciation and amortization 6,300 3,416 84.4% 17,344 9,416 84.2%
- -------------------------------------------------------------------------------------------------------------------
Property operating expenses 11,325 6,140 84.4% 30,458 16,980 79.4%
- -------------------------------------------------------------------------------------------------------------------
Property operating revenues less
property operating expenses $12,625 $ 7,110 77.6% $34,187 $20,220 69.1%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Period to period comparisons of property operating revenues and expenses for
1997 and 1996 are discussed herein using the categories "core properties,"
"development properties" and "acquisition properties." Core properties are
defined as properties which were stabilized and operating as of January 1, 1996.
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, 1996.
For the comparable three and nine month periods ended September 30, 1997 and
1996, operating results of the core properties, representing 134 properties
totaling approximately 8,861,000 square feet, are summarized below (in
thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED % ENDED ENDED %
SEPT. 30, 1997 SEPT. 30, 1996 CHANGE SEPT. 30, 1997 SEPT. 30, 1996 CHANGE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental revenues $10,819 $10,757 0.6% $32,316 $31,909 1.3%
Tenant reimbursements 1,004 961 4.5% 3,230 2,944 9.7%
- ------------------------------------------------------------------------------------------------------------------------
Property operating revenues 11,823 11,718 0.9% 35,546 34,853 2.0%
- ------------------------------------------------------------------------------------------------------------------------
Operating and maintenance
expenses 1,452 1,500 (3.2)% 4,219 4,154 1.6%
Real estate taxes 1,095 1,055 3.8% 3,306 3,145 5.1%
Depreciation and amortization 3,066 2,966 3.4% 9,188 8,808 4.3%
- ------------------------------------------------------------------------------------------------------------------------
Property operating expenses 5,613 5,521 1.7% 16,713 16,107 3.8%
- ------------------------------------------------------------------------------------------------------------------------
Property operating revenues less
property operating expenses $ 6,210 $ 6,197 0.2% 18,833 18,746 0.5%
- ------------------------------------------------------------------------------------------------------------------------
Average occupancy 95.0% 96.4% 95.2% 96.2%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THREE MONTHS ENDED SEPTEMBER 30, 1997, TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1996
Property operating revenues (rental revenue plus tenant reimbursements)
increased $10,700,000 or 80.8% between periods. Of this increase, $8,774,000,
$1,821,000 and $105,000 were attributable to acquisition, development and core
properties, respectively. The increases relating to acquisition and development
properties were due to the acquisition of 77 properties (46 in 1996 and 31 in
1997) totaling approximately 4,840,000 square feet and the stabilization of 22
development properties (8 in 1996 and 14 in 1997) and two property expansions
(one each year) totaling approximately 2,499,000 square feet. Property
operating expenses increased $5,185,000 or 84.4% between periods due primarily
to the growth in the property portfolio resulting from the acquisition and
development properties discussed above.
Property operating revenues from core properties increased 0.9% despite the
impact of lost property operating revenues of approximately $75,000 from the
sale of a 96,000 square foot building in April 1997 (see Note 8 to the
consolidated condensed financial statements) and a decrease in overall average
occupancy. Adjusted for the building sale discussed above, property operating
revenues from core properties increased approximately 1.6%. This increase was
due to both rental rate and reimbursement increases between periods. Property
operating expenses increased 1.7% due primarily to increased real estate taxes
in 1997. Property operating revenues less property operating expenses from core
properties increased 1.9%, exclusive of depreciation and amortization expense
and after adjusting for the building sale discussed herein.
Interest expense increased by $1,585,000 or 49.5% from $3,202,000 for the three
months ended September 30, 1996, to $4,787,000 for the three months ended
September 30, 1997, as a result of increased mortgage interest of $1,740,000 due
to mortgage debt assumed in conjunction with certain of the Company's 1996 and
1997 property acquisitions, offset by reduced Credit Facility interest of
$155,000. Interest expense of $4,787,000 for the three months ended September
30, 1997, consisted of mortgage interest of $3,823,000 and Credit Facility
interest of $964,000.
Company general and administrative expenses increased by $496,000 or 65.3% from
$760,000 for the three months ended September 30, 1996, to $1,256,000 for the
three months ended September 30, 1997, due primarily to increased personnel and
related costs associated with the Company's southeast expansion. The majority
of the increase relates to the additional general and administrative expenses
associated with the Company's Nashville, Tennessee and Raleigh, North Carolina
operations, both of which were acquired in the fourth quarter of 1996, and to a
lesser extent expenses related to the establishment of an office in Orlando,
Florida, which also occurred in the fourth quarter of 1996. As a percentage of
total revenue, general and administrative expenses decreased from 5.6% in the
third quarter of 1996 to 5.2% in the third quarter of 1997. General and
administrative expenses of the Company when combined with the general and
administrative expenses of the Subsidiaries increased $735,000 or 63.2% from
$1,163,000 in 1996 to $1,898,000 in 1997 for the same reasons discussed above
having to do with the Company's southeast expansion. 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 7.3%
in the third quarter of 1996 to 7.1% in the third quarter of 1997.
Interest income increased $330,000 or 268.3% from $123,000 for the three months
ended September 30, 1996 to $453,000 for the three months ended September 30,
1997, due primarily to increased real estate loan balances between periods (see
Note 9 to the consolidated condensed financial statements).
18
<PAGE>
Equity in earnings of the Subsidiaries represents the Company's 99% economic
interest in the earnings of the Subsidiaries after the elimination of interest
expense and gains on property sales to the Company (see Note 4 to the
consolidated condensed financial statements). Equity in earnings of the
Subsidiaries decreased by $62,000 or 16.5% from $376,000 for the three months
ended September 30, 1996 to $314,000 for the three months ended September 30,
1997 due to somewhat lower profits from the Subsidiaries' third-party
construction and real estate brokerage businesses and increased general and
administrative expenses offset somewhat by gains from land sales in 1997.
COMPARISON OF OPERATING RESULTS FOR NINE MONTHS ENDED SEPTEMBER 30, 1997, TO THE
NINE MONTHS ENDED SEPTEMBER 30, 1996
Property operating revenues (rental revenue plus tenant reimbursements)
increased $27,445,000 or 73.8% between periods. Of this increase, $22,197,000,
$4,555,000 and $693,000 were attributable to acquisition, development and core
properties, respectively. The increases relating to acquisition and development
properties were due to the acquisition of 77 properties (46 in 1996 and 31 in
1997) totaling approximately 4,840,000 square feet and the stabilization of 22
development properties (8 in 1996 and 14 in 1997) and two property expansions
(one each year) totaling approximately 2,499,000 square feet. Property
operating expenses increased $13,478,000 or 79.4% between periods due primarily
to the growth in the property portfolio resulting from the acquisition and
development properties discussed above.
Property operating revenues from core properties increased 2.0% despite the
impact of lost property operating revenues of approximately $240,000 resulting
from the sale of a 96,000 square foot building in April 1997 (see Note 8 to the
consolidated condensed financial statements) and a decrease in overall average
occupancy. Adjusted for the building sale discussed above, property operating
revenues from core properties increased approximately 2.5%. This increase was
due to both rental rate and reimbursement increases between periods. Property
operating expenses increased 3.8% due primarily to increased utilities, repairs
and maintenance and real estate tax expenses in 1997. Property operating
revenues less property operating expenses from core properties increased 2.2%,
exclusive of depreciation and amortization expense and after adjusting for the
building sale discussed herein.
Interest expense increased by $6,184,000 or 75.8% from $8,157,000 for the nine
months ended September 30, 1996, to $14,341,000 for the nine months ended
September 30, 1997, as a result of increased mortgage interest of $5,262,000 due
to mortgage debt assumed in conjunction with certain of the Company's 1996 and
1997 property acquisitions, and increased Credit Facility interest of $922,000
in the first nine months of 1997. Interest expense of $14,341,000 in the first
nine months of 1997 consisted of mortgage interest of $11,530,000 and Credit
Facility interest of $2,811,000.
Company general and administrative expenses increased by $1,501,000 or 69.0%
from $2,174,000 for the nine months ended September 30, 1996, to $3,675,000 for
the nine months ended September 30, 1997, due primarily to increased personnel
and related costs associated with the Company's southeast expansion. The
majority of the increase relates to the additional general and administrative
expenses associated with the Company's Nashville, Tennessee and Raleigh, North
Carolina operations, both of which were acquired in the fourth quarter of 1996,
and to a lesser extent expenses related to the establishment of an office in
Orlando, Florida, which also occurred in the fourth quarter of 1996. As a
percentage of total revenue, general and administrative expenses decreased from
5.7% in the first nine months of 1996 to 5.6% in the first nine months of 1997.
General and administrative expenses of the Company when combined with the
general and administrative expenses of the Subsidiaries increased $2,018,000 or
19
<PAGE>
60.5% from $3,338,000 in 1996 to $5,356,000 in 1997 for the same reasons
discussed above having to do with the Company's southeast expansion. 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 7.6% in the first nine months of 1996 to 7.4% in the first nine
months of 1997.
Interest income increased $675,000 or 210.3% from $321,000 for the nine months
ended September 30, 1996 to $996,000 for the nine months ended September 30,
1997, due primarily to increased real estate loan balances between periods (see
Note 9 to the consolidated condensed financial statements).
Equity in earnings of the Subsidiaries represents the Company's 99% economic
interest in the earnings of the Subsidiaries after the elimination of interest
expense and gains on property sales to the Company (see Note 4 to the
consolidated condensed financial statements). Equity in earnings of the
Subsidiaries increased by $619,000 or 67.4% from $919,000 for the nine months
ended September 30, 1996 to $1,538,000 for the nine months ended September 30,
1997 due primarily to gains on land sales and on the sale of an operating
building of $313,000 in 1997 and increased earnings from partnership and joint
venture investments of $253,000 between years due to higher profits from
underlying partnership and joint venture land sales activity.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities increased from
$22,414,000 for the nine months ended September 30, 1996, to $36,538,000 for the
nine months ended September 30, 1997, due primarily to the growth in the
Company's operating income resulting from 22 development properties (8 in 1996
and 14 in 1997) and two property expansions (one each year) stabilized and from
77 buildings acquired (46 in 1996 and 31 in 1997).
Net cash used in investing activities increased from $84,920,000 for the nine
months ended September 30, 1996, to $127,213,000 for the nine months ended
September 30, 1997, due primarily to higher property development and land and
building acquisition volumes in the first nine months of 1997 compared to 1996.
Net cash provided by financing activities increased from $61,572,000 for the
nine months ended September 30, 1996, to $90,891,000 for the nine months ended
September 30, 1997. This net increase between periods reflects primarily the
net proceeds of approximately $107 million from a common equity offering in
1997, net of debt retirements, used to finance the Company's property portfolio
growth.
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 on both its common and preferred stock (see below).
Management believes that operating cash flows will continue to be adequate to
fund these requirements in 1997 and 1998. The Company operates as and intends
to maintain its qualification as a REIT under 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.
In addition to its operating cash flow, the Company has a $225 million unsecured
revolving Credit Facility with a syndicated bank group (see Note 3 to the
consolidated condensed financial statements), which may be used, among other
things, to meet its operational obligations and annual REIT dividend
20
<PAGE>
requirements. The Company currently intends to finance its development,
construction and acquisition activities primarily through borrowings under the
Credit Facility. As of September 30, 1997, the Company had available capacity
under the Credit Facility of approximately $59.4 million (see Note 3 to the
consolidated condensed financial statements).
In October 1997, the Company completed a public offering of 6,000,000 shares of
Series A Preferred Stock and received net proceeds of approximately $144.6
million. The net proceeds were applied to outstanding Credit Facility
borrowings, increasing the Company's available capacity under the Credit
Facility.
The Company believes it has adequate liquidity, borrowing capacity and sources
of capital, including available capacity under its existing Credit Facility and
remaining capacity of approximately $450 million under a universal shelf
registration statement, to meet its current operational requirements, to fund
annual principal repayments 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 mature. These resources include the
expansion of the available borrowing capacity under the Credit Facility and
other forms of debt and equity financing, in both public and private markets.
The Company recently obtained unsecured investment grade corporate debt ratings
which may assist it in accessing the corporate debt market in future periods.
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 an appropriate return on investment has been internally approved.
The Company maintains staffing levels sufficient to meet its existing
construction and leasing activities and capitalizes a portion of the costs
relating to these activities to development projects and leasing transactions,
respectively. 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 $340.8 million at September 30, 1997,
including borrowings under the Credit Facility of $150.1 million and mortgage
notes payable of $190.7 million. Of the $190.7 million of mortgage
indebtedness, $184.9 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
8.13% and on its variable rate mortgage debt was 4.44% at September 30, 1997.
The weighted average interest rate under the Credit Facility at September 30,
1997, (excluding the effect of the interest rate swap agreements described
below) was 6.99%. The Company has in place interest rate swap agreements to
fix the Company's interest costs on $50.0 million of the Company's Credit
Facility borrowings. The weighted average effective interest rate under the
fixed swap arrangements is approximately 8.0% (approximately 7.70% effective
October 1, 1997, as a result of the corresponding decrease in the interest rate
charged on the Company's Credit Facility borrowings). If interest rates under
the Credit Facility, in excess of the $50.0 million discussed herein, and under
the Company's variable rate mortgage debt, fluctuated by 1%, interest costs to
the Company, before capitalization of interest, if any, based on outstanding
borrowings at September 30, 1997, would increase or decrease by approximately
$1.2 million on an annualized basis. The Company decreased its outstanding
Credit Facility borrowings in October 1997 from the proceeds of the preferred
stock offering discussed above.
21
<PAGE>
Based on the outstanding balance of mortgage notes payable at September 30,
1997, the weighted average interest rates on the mortgage notes with a final
maturity in each of the next five years were 8.55% in 1998, 7.36% in 1999, 8.86%
in 2000 and 7.41% in 2001. None of the mortgage notes mature in 1997.
At September 30, 1997, the Company's mortgage debt on its consolidated
properties was $190.7 million. Including Credit Facility borrowings of $150.1
million for the Company and $15.5 million for the Subsidiaries, the total debt
obligations of the Company and the Subsidiaries were $356.3 million or 32% of
total market capitalization (assuming the exchange of all Common Units for
shares of common stock). At September 30, 1997 (based on the closing price of
the common stock of $32.75 on September 30, 1997, the last trading day of the
quarter, and assuming the exchange of all Common Units for shares of common
stock), there would be 22,843,449 shares of common stock outstanding with a
total market value of $748.1 million. As discussed above, the Company
substantially reduced its Credit Facility borrowings from the net proceeds of
approximately $144.6 million from the preferred stock offering discussed above.
Adjusted for the application of these proceeds, the total debt obligations of
the Company and its unconsolidated subsidiaries would have been $211.7 million,
or 19% of total market capitalization (assuming the issuance of the 6,000,000
shares of preferred stock at $25.00 each and the exchange of all Common Units
for shares of common stock), at September 30, 1997.
22
<PAGE>
CURRENT DEVELOPMENT ACTIVITY
The Company's current development activity as of November 5, 1997, 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
5195 Southridge Pkwy. 60,000 $ 2,758,000 3Q95/(5)/ 4Q97/(6)/
5149 Southridge Pkwy. (expansion) 46,800 2,497,000 1Q96/(5)/ 4Q97/(6)/
250 Hembree Park Dr. 94,500 4,942,000 4Q96/(5)/ 4Q97/(6)/
1335 Northmeadow Pkwy. 88,783 6,950,000 4Q96/(5)/ 4Q97/(6)/
1629 Prime Ct. (Orlando, FL) 43,200 2,416,000 1Q97/(5)/ 4Q97
1750 Beaver Ruin Rd. 67,600 4,860,000 2Q97/(5)/ 4Q97
2490 Principal Row (Orlando, FL) 101,800 3,491,000 2Q97/(5)/ 4Q97
2885 Breckinridge Blvd. 80,450 5,866,000 4Q97/(5)/ 4Q97
120 Declaration Dr. 301,200 7,841,000 1Q97/(5)/ 1Q98
11390 Old Roswell Rd. 47,600 3,527,000 4Q97 2Q98/(6)/
250 Horizon Dr. 267,619 7,661,000 3Q97/(5)/ 3Q98
736 Melrose Ave. (Nashville, TN) 103,473 5,454,000 4Q97 4Q98
2755 Premiere Pkwy. 79,588 3,500,000 4Q97 4Q98
3300 Briley Park Blvd. (Nashville, TN) 194,750 6,374,000 4Q97 4Q98
130 Declaration Dr. 210,000 5,373,000 4Q97 4Q98
3270 Summit Ridge Pkwy. 152,000 4,198,000 4Q97 4Q98
1120 Celebration Blvd. (Orlando, FL) 58,702 4,879,000 1Q98 1Q99
2550 Northwinds Pkwy. 149,797 16,169,000 1Q98 1Q99
3885 Crestwood Pkwy. 105,295 11,109,000 1Q98 1Q99
1700 Perimeter Park Dr. (Raleigh, NC) 81,000 7,947,000 1Q98 1Q99
5400 McCrimmon Pkwy. (Raleigh, NC) 146,250 9,166,000 1Q98 1Q99
660 Hembree Pkwy. 94,500 4,226,000 1Q98 1Q99
255 Technology Pkwy. (Orlando, FL) 52,777 3,257,000 1Q98 1Q99
2491 Park South (Orlando, FL) 118,250 4,005,000 1Q98 1Q99
525 Technology Pkwy. (Orlando, FL) 65,042 4,360,000 1Q98 1Q99
Metro Center I (Nashville, TN) 165,000 6,552,000 2Q98 2Q99
Fairfield I (Tampa, FL) 68,480 2,854,000 2Q98 2Q99
Fairfield II (Tampa, FL) 173,514 4,935,000 2Q98 2Q99
Northpoint I (Orlando, FL) 108,000 10,278,000 4Q98 4Q99
- -------------------------------------------------------------------------------------------------
3,325,970 167,445,000
- -------------------------------------------------------------------------------------------------
BUILD-TO-SUIT
2850 Premiere Pkwy. 86,000 2,938,000 4Q97 4Q97
Paramount Pkwy. (Raleigh, NC) 99,684 9,708,000 2Q98 1Q99
3925 Brookside Pkwy. 106,356 10,000,000 3Q98 3Q98
- -------------------------------------------------------------------------------------------------
292,040 22,646,000
- -------------------------------------------------------------------------------------------------
3,618,010 $190,091,000
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual leasable square feet may vary upon completion.
(2) Estimated cost information includes the Company's estimated future
capitalized costs through the development stabilization date (defined as the
earlier of 95% occupancy or one year from shell completion), including costs
incurred to acquire certain properties after completion. There can be no
assurance that the actual capitalized cost of a building will not exceed the
estimated capitalized costs.
(3) For multi-tenant buildings, 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 for financial reporting purposes. Properties are
considered stabilized for financial reporting purposes 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 for financial
reporting purposes by the estimated stabilization date.
23
<PAGE>
(5) Shell completed; interior tenant finish to be completed.
(6) The Company is the developer of and has an option to acquire these
properties from affiliated joint ventures upon stabilization, as defined in
the applicable joint venture agreement. The date above reflects the
estimated stabilization and resulting acquisition date by the Company.
CURRENT ACQUISITION ACTIVITY
In conjunction with the NWI and Lichtin acquisition transactions (see Note 7 to
the consolidated condensed financial statements), the Company has agreed,
subject to certain closing conditions, including updating its due diligence
procedures, to the future acquisition from NWI and Lichtin of approximately 164
net usable acres of undeveloped land and eight buildings under development. The
aggregate acquisition consideration is estimated to total approximately $72.7
million, subject to adjustment for the actual operating results of certain
properties to be acquired as more fully discussed in the acquisition agreements.
In addition, the Company has agreed, subject to certain closing conditions,
including updating its due diligence procedures, to the acquisition of two
industrial buildings in Jacksonville, Florida for total acquisition
consideration of approximately $5.5 million. It is expected that these future
acquisitions will be consummated primarily through a combination of the issuance
of Units and the assumption of indebtedness, some of which will be repaid
through borrowings under the Credit Facility.
The information provided above relating to the Company's current development and
acquisition activities includes forward-looking data based on current
construction schedules, the status of lease negotiations with potential tenants,
the satisfactory completion of due diligence procedures 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 information.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATION
The Company believes that funds from operations ("FFO") provides an additional
indicator of the financial performance of the Company. FFO 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 of real property, and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect FFO on the same basis. FFO is influenced not only by the
operations of the properties, but also by the capital structure of the Company.
Accordingly, the Company expects that FFO will be one of the factors considered
by its Board of Directors in determining the amount of cash dividends the
Company will pay to its shareholders. FFO does not represent cash flow from
operating, investing and financing activities as defined by GAAP, which are
discussed under "Liquidity and Capital Resources" in this section.
Additionally, FFO 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.
The Company's calculation of FFO follows the guidelines issued by NAREIT,
including the recognition of rental income on the "straight-line" basis
consistent with its treatment in the Company's statement of operations under
GAAP. The "straight-line" rental adjustment increased rental revenues by
$176,000 and $135,000 for the three months ended and $500,000 and $326,000 for
the nine months ended September 30, 1997 and 1996, respectively. In accordance
with the NAREIT guidelines, the Company
24
<PAGE>
excludes gains or losses on sales of operating (previously depreciated) real
estate assets in calculating FFO, but includes gains or losses on sales of
undepreciated assets (land) that are of a recurring nature. Pre-tax gains on
land sales are included in FFO in the amount of $79,000 and $27,000,
respectively, for the three months ended, and $527,000 and $67,000,
respectively, for the nine months ended September 30, 1997 and 1996.
FFO presented herein under NAREIT guidelines is not necessarily comparable to
FFO presented by other real estate companies due to the fact that not all real
estate companies use the same definition. However, the Company's FFO is
comparable to the FFO of real estate companies that use the current NAREIT
definition.
For the three months ended September 30, 1997, FFO increased by $4,830,000 or
83.0% to $10,649,000 compared to FFO of $5,819,000 for the three months ended
September 30, 1996. For the nine months ended September 30, 1997, FFO increased
by $10,807,000 or 63.9% to $27,714,000 compared to FFO of $16,907,000 for the
nine months ended September 30, 1996. FFO calculated under the current NAREIT
guidelines for the three and nine months ended September 30, 1997 and 1996,
respectively, are detailed below (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 5,768 $ 3,033 $14,673 $ 9,226
Minority interests 1,683 698 4,533 2,124
Depreciation & amortization 6,300 3,416 17,344 9,416
Depreciation and amortization -- subsidiaries -- 10 10 30
Gain on sale of operating real estate asset -- -- (209) --
Gain on sale of operating real estate asset --
subsidiaries -- -- (76) --
- --------------------------------------------------------------------------------------------------------------------
Funds from operations (Operating
Partnership Units fully converted) 13,751 7,157 36,275 20,796
Ownership of Operating Partnership/(1)/ 77.48% 81.30% 76.40% 81.30%
- --------------------------------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS ATTRIBUTABLE TO
THE COMPANY'S SHAREHOLDERS $10,649 $ 5,819 $27,714 $16,907
- --------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 17,693 11,174 15,904 11,162
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the Company's weighted average ownership of the Operating
Partnership for the period.
25
<PAGE>
SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES AND LEASING COSTS
The following table details the Company's capital expenditures and leasing costs
for the three and six months ended September 30, 1997 and 1996, respectively (in
thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Building acquisitions $31,594 $30,955 $ 81,352 $ 40,366
Development and land acquisition activity/(1)/ 40,297 17,982 88,124 36,572
Non-revenue-producing building
improvements 249 106 611 390
Tenant improvement and leasing costs
on second-generation leases/(2)/ 1,140 625 3,234 2,070
Tenant improvement expenditures to be
reimbursed by tenants -- 40 -- 40
- --------------------------------------------------------------------------------------------------------------------
$73,280 $49,708 $173,321/(3)/ $79,438/(4)/
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes first-generation leasing costs on stabilized development properties
totaling $1,470,000 and $91,000 in the three months ended and $2,816,000 and
$645,000 in the nine months ended September 30, 1997 and 1996, respectively.
(2) Includes second-generation leasing costs totaling $471,000 and $393,000 in
the three months ended and $1,538,000 and $857,000 in the nine months ended
September 30, 1997 and 1996, respectively.
(3) Reflects aggregate capital expenditures and leasing costs net of the
settlement of real estate loans of $2,874,000 and including the assumption
of indebtedness of $34,779,000, the issuance of $16,568,000 of Common Units
and other changes in construction and acquisition related payables, net of
receivables, of $2,397,000 for the nine months ended September 30, 1997.
(4) Reflects aggregate capital expenditures and leasing costs, exclusive of the
decrease in construction accounts payable of $1,433,000 for the nine months
ended September 30, 1996.
26
<PAGE>
The following table summarizes by period the Company's capitalized tenant
improvement and leasing costs incurred in the renewal or re-leasing of
previously occupied space for the nine months ended September 30, 1997, and the
year ended December 31, 1996, respectively. The information detailed below is
presented based on the date the tenants occupy the leased space.
<TABLE>
<CAPTION>
CAPITALIZED TENANT IMPROVEMENTS AND LEASING COSTS
- -----------------------------------------------------------------------------------------------
NINE MONTHS YEAR
ENDED ENDED
(In thousands, except per square foot information) SEPT. 30, 1997 DEC. 31, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL PROPERTIES
RE-LEASING
Square feet re-leased 886 678
Capitalized tenant improvements and leasing commissions $1,574 $1,395
Capitalized tenant improvements and leasing commissions
per square foot $ 1.78 $ 2.06
RENEWAL
Square feet renewed 1,730 1,027
Capitalized tenant improvements and leasing commissions $1,112 $1,055
Capitalized tenant improvements and leasing commissions
per square foot $ 0.64 $ 1.03
TOTAL
Square feet 2,616 1,705
Capitalized tenant improvements and leasing commissions $2,686 $2,450
Capitalized tenant improvements and leasing commissions
per square foot $ 1.03 $ 1.44
- -----------------------------------------------------------------------------------------------
SUBURBAN OFFICE PROPERTIES
RE-LEASING
Square feet re-leased 52 16
Capitalized tenant improvements and leasing commissions $ 270 $ 45
Capitalized tenant improvements and leasing commissions
per square foot $ 5.20 $ 2.80
RENEWAL
Square feet renewed 133 106
Capitalized tenant improvements and leasing commissions $ 217 $ 290
Capitalized tenant improvements and leasing commissions
per square foot $ 1.63 $ 2.74
TOTAL
Square feet 185 122
Capitalized tenant improvements and leasing commissions $ 487 $ 335
Capitalized tenant improvements and leasing commissions
per square foot $ 2.64 $ 2.75
- -----------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
SUPPLEMENTAL DISCLOSURE OF TENANT AND LEASE EXPIRATION INFORMATION
TENANTS
As of September 30, 1997, the Company's properties were leased to 705 tenants
including local, regional, national and international companies. The Company's
30 largest tenants (measured by annualized base rent for leases in place in
stabilized properties and in properties under development or in lease-up where
tenants were paying rent at September 30, 1997) occupy a total of approximately
27.6 million square feet and represent 30.4% of the annualized base rent as
shown in the table below.
<TABLE>
<CAPTION>
30 LARGEST TENANTS MEASURED BY ANNUALIZED BASE RENT
- -------------------------------------------------------------------------------------------------------------
% OF TOTAL
SQUARE NUMBER ANNUALIZED ANNUALIZED
RANK TENANT FEET OF LEASES BASE RENT/(1)/ BASE RENT/(1)/ STATE
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
1 Northern Telecom 416,271 9 $ 3,085,968 3.4% NC,TN
2 Scientific Atlanta, Inc./(2)/ 600,413 11 2,668,779 2.9% GA
3 IKON Office Solutions, Inc. 170,000 3 1,422,900 1.6% GA
4 GTE Mobilnet Service Corporation 126,124 3 1,320,976 1.5% GA,NC
5 Radian International LLC 90,159 2 1,170,275 1.3% NC
6 Honeywell, Inc. 70,016 3 963,953 1.1% GA
7 DeVry, inc. 64,981 1 959,120 1.1% GA
8 The Athlete's Foot Group, Inc. 162,651 1 897,155 1.0% GA
9 Fisher Scientific Company 223,219 1 875,019 1.0% GA
10 Tridom Corporation 117,403 4 806,423 0.9% GA
11 National Data Corporation 50,283 4 786,777 0.9% GA
12 AT&T Corp. 67,551 5 752,082 0.8% GA,NC,TN
13 Saab Cars U.S.A., Inc. 63,625 3 749,509 0.8% GA
14 PPD Pharmaco, Inc. 72,416 4 747,368 0.8% NC
15 360 Degree Communications 58,008 6 710,582 0.8% NC
16 Best Buy Stores, L.P. 222,643 1 703,552 0.8% GA
17 United Healthcare 72,991 2 699,856 0.8% GA,SC
18 Intelligent Systems Corporation 137,100 1 685,500 0.8% GA
19 Sally Foster, Inc. 197,200 2 673,237 0.7% SC
20 Vanstar Corporation 86,880 4 668,124 0.7% GA
21 Yokohama Tire Corporation 252,092 1 665,383 0.7% GA
22 Auto-Lok, Inc. 222,900 2 658,879 0.7% GA
23 Ahlstrom Recovery, Inc. 62,893 2 649,493 0.7% GA
24 Astronet Corporation 34,138 1 648,622 0.7% GA
25 Siemens Energy & Automation, Inc. 240,000 3 637,200 0.7% GA
26 The Bombay Company, Inc. 253,890 2 631,344 0.7% GA
27 Southern Multimedia
Communications, inc. 117,647 3 604,692 0.7% GA
28 United Parcel Service, Inc. 128,275 3 594,201 0.6% TN,FL
29 Appleton Papers Inc. 210,600 1 593,892 0.6% GA
30 Tekelec, Inc. 68,236 2 579,324 0.6% NC
- --------------------------------------------------------------------------------------------------------------
4,660,605 90 $27,610,185 30.4%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized cash base rent net of rental concessions, if any, based on leases
in place for stabilized properties and in properties under development or in
lease-up where tenants were paying rent as of September 30, 1997.
(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, there would be less than a $0.01 per share
impact on the Company's funds from operations and net income in 1997.
28
<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 suburban
office portfolio, respectively, based on leases under which tenants were paying
rent in both stabilized and pre-stabilized properties as of September 30, 1997,
assuming no exercise of renewal options or termination rights, if any:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SQUARE ANNUALIZED % OF TOTAL
YEAR OF FEET % OF TOTAL BASE RENT/(1)/ ANNUALIZED
EXPIRATION (IN THOUSANDS) SQUARE FEET (IN THOUSANDS) BASE RENT/(1)/
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL PORTFOLIO
1997 821 5.1% $ 4,614 4.8%
1998 2,752 17.2% 14,501 15.1%
1999 1,891 11.9% 11,333 11.8%
2000 2,773 17.4% 17,028 17.8%
2001 1,308 8.2% 7,553 7.9%
2002 1,549 9.7% 11,762 12.3%
2003 611 3.8% 5,411 5.6%
2004 1,283 8.0% 6,218 6.5%
2005 876 5.5% 5,389 5.6%
2006 603 3.8% 3,011 3.1%
2007 868 5.4% 4,923 5.1%
2008 223 1.4% 783 0.8%
2011 294 1.8% 1,704 1.8%
2012 136 0.8% 1,653 1.8%
- ---------------------------------------------------------------------------------------------------
15,988/(2)/ 100.0% $95,883 100.0%
- ---------------------------------------------------------------------------------------------------
INDUSTRIAL PROPERTIES
1997 801 5.4% $ 4,304 5.6%
1998 2,637 17.9% 12,838 16.6%
1999 1,800 12.2% 10,206 13.2%
2000 2,520 17.1% 13,669 17.6%
2001 1,238 8.4% 6,517 8.4%
2002 1,297 8.8% 7,617 9.8%
2003 439 3.0% 2,857 3.7%
2004 1,179 8.0% 4,518 5.8%
2005 847 5.8% 4,950 6.4%
2006 582 3.9% 2,642 3.4%
2007 818 5.5% 4,463 5.8%
2008 223 1.5% 783 1.0%
2011 294 2.0% 1,704 2.2%
2012 68 0.5% 451 0.5%
- ---------------------------------------------------------------------------------------------------
14,743 100.0% $77,519 100.0%
- ---------------------------------------------------------------------------------------------------
(Table continued on following page)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SQUARE ANNUALIZED % OF TOTAL
YEAR OF FEET % OF TOTAL BASE RENT/(1)/ ANNUALIZED
EXPIRATION (IN THOUSANDS) SQUARE FEET (IN THOUSANDS) BASE RENT/(1)/
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUBURBAN
OFFICE PROPERTIES
1997 21 1.7% $ 310 1.7%
1998 114 9.5% 1,651 9.2%
1999 90 7.5% 1,105 6.2%
2000 216 18.0% 3,050 17.0%
2001 70 5.9% 1,036 5.8%
2002 252 21.1% 4,146 23.2%
2003 172 14.4% 2,554 14.3%
2004 104 8.7% 1,700 9.5%
2005 26 2.1% 382 2.1%
2006 17 1.5% 309 1.7%
2007 50 4.2% 460 2.6%
2008 0 0.0% 0 0.0%
2011 0 0.0% 0 0.0%
2012 65 5.4% 1,203 6.7%
- ---------------------------------------------------------------------------------------------------
1,197 100.0% $17,906 100.0%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized base rent represents the annualized monthly base rental at
the time of lease expiration.
(2) The total square footage as of September 30, 1997, is comprised of
approximately 15,152,920 square feet of leases in stabilized properties,
and approximately 835,304 square feet of leases in properties under
development or in lease-up where tenants are paying rent as of September
30, 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards ("SFAS") 128,
"Earnings per Share" was issued prescribing a new method for computing earnings
per share. When implemented, SFAS 128 will supersede Accounting Principles
Board Opinion ("APB") 15, "Earnings per Share," the current accounting
literature utilized in computing earnings per share under generally accepted
accounting principles. Under SFAS 128, the Company will be required to present
both basic and diluted earnings per share in its interim and annual financial
statements for periods beginning with its financial statements for the quarter
and year ended December 31, 1997. The impact of SFAS 128 on the Company's
consolidated earnings per share amounts for the three and nine months ended
September 30, 1997 and 1996 are discussed in Note 6 to consolidated condensed
financial statements.
In June 1997, SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information" was issued prescribing new guidelines for the reporting of segment
data. SFAS 131 will apply to all public, for-profit companies and will be
effective for calendar year end companies in the year ended December 31, 1998.
The Company is reporting under prior accounting standards, but may be required
to provide certain segment disclosures under SFAS 131. The Company is
evaluating SFAS 131, but has not determined the specific nature and magnitude of
the disclosures required by SFAS 131.
30
<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 leases require tenants to pay their 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.
31
<PAGE>
PART II - OTHER INFORMATION
ITEM 2 - CHANGE IN SECURITIES
During the three months ended September 30, 1997, the Company caused the
Operating Partnership to issue a total of 83,568 Common Units in the
Operating Partnership, in full or partial consideration for the
acquisition of real estate properties from Lichtin. The aggregate value
of the properties acquired by the Company in exchange for such Common
Units was approximately $2.2 million. Common 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 Lichtin acquisition agreements. These Common Units are subject to a
registration rights and lock-up agreement which generally restricts the
disposition of the Common Units until December 31, 1999.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - First Amendment to Credit Agreement dated September 1, 1997 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, as lenders, Weeks
Realty, L.P., Weeks Construction Services, Inc., Weeks Realty
Services, Inc., Weeks Development Partnership and Weeks
Financing Limited Partnership, as borrowers, and Weeks
Corporation, Weeks GP Holdings, Inc., Weeks LP Holdings, Inc.,
and Weeks Realty, L.P., as guarantors.
11.1 - Computation of earnings per common share.
27.1 - Financial data schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 1997.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEEKS CORPORATION
------------------------------
(Registrant)
November 12, 1997 /s/ A. R. Weeks, Jr.
------------------------------
A. R. Weeks, Jr.
Chairman of the Board and
Chief Executive Officer
November 12, 1997 /s/ David P. Stockert
------------------------------
David P. Stockert
Senior Vice President and
Chief Financial Officer
33
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
10.1 First Amendment to Credit Agreement dated _
September 1, 1997 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, as lenders,
Weeks Realty, L.P., Weeks Construction Services, Inc.,
Weeks Realty Services, Inc., Weeks Development
Partnership and Weeks Financing Limited Partnership,
as borrowers, and Weeks Corporation, Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and Weeks
Realty, L.P., as guarantors
11.1 Computation of earnings per share of common stock _
27.1 Financial data schedule _
34
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is made and
entered into as of September 1, 1997, by and among WEEKS REALTY, L.P., a Georgia
limited partnership ("Operating Partnership"), WEEKS CONSTRUCTION SERVICES,
INC., a Georgia corporation ("Construction"), WEEKS REALTY SERVICES, INC., a
Georgia corporation ("Realty"), WEEKS DEVELOPMENT PARTNERSHIP, a Georgia general
partnership ("Development"), WEEKS FINANCING LIMITED PARTNERSHIP, a Georgia
limited partnership ("Financing") (Operating Partnership, Construction, Realty,
Development and Financing, collectively, "Borrowers," and each, individually, a
"Borrower"); WEEKS REALTY, L.P., a Georgia limited partnership, in its capacity
as Borrowers' Agent ("Borrowers' Agent"); WEEKS CORPORATION, a Georgia
corporation ("Weeks Corporation"), WEEKS GP HOLDINGS, INC., a Georgia
corporation ("GP"), and WEEKS LP HOLDINGS, INC., a Georgia Corporation
("LP")(Weeks Corporation, Operating Partnership, GP and LP, collectively,
"Guarantors," and each, individually, a "Guarantor"); each Bank that is or
becomes a signatory hereto (collectively, "Banks," and each, individually, a
"Bank"); WACHOVIA BANK, N.A. (successor by merger to Wachovia Bank of Georgia,
N.A.), a national banking association ("Wachovia"), in its capacity as Swing
Lender hereunder ("Swing Lender") and in its capacity as Banks' Agent hereunder
(including any successor, "Banks' Agent").
W I T N E S S E T H:
WHEREAS, Borrowers, Weeks Corporation, Operating Partnership (in its
capacity as Borrowers' Agent), Banks, Swing Lender and Banks' Agent executed and
delivered that certain Credit Agreement, dated September 25, 1996 (the
"Agreement"), and GP and LP each thereafter became a party to the Agreement as a
Guarantor; and
WHEREAS, Borrowers have requested that the Facility Amount be increased
from $175,000,000 to $225,000,000, in accordance with the terms and conditions
hereof; and
WHEREAS, Borrowers have requested that the maximum amount of the Available
Swing Credit be increased from $5,000,000 to $10,000,000, in accordance with the
terms and conditions hereof; and
1
<PAGE>
WHEREAS, Banks and Swing Lender have agreed to such requests, subject to
the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), the above premises and other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged by the parties
hereto, Borrowers, Weeks Corporation, Guarantors, Operating Partnership (in
its capacity as Borrowers' Agent), Banks, Swing Lender and Banks' Agent hereby
covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Agreement shall have the meaning assigned to
such term in the Agreement. Each reference to "hereof," "hereunder," "herein"
and "hereby" and each other similar reference and each reference to "this
Agreement" and each other similar reference contained in the Agreement shall
from and after the date hereof refer to the Agreement as amended hereby.
2. Amendments to Article I. The following definitions set forth in
Article I of the Agreement are hereby amended by deleting each of them in its
entirety and substituting in lieu thereof the following:
"Available Swing Credit" shall mean the lesser of (a) $10,000,000 or (b)
the Available Credit.
"Commitment Share" shall mean, with respect to each Bank, the Commitment
Share set forth opposite such Bank's name on the signature pages hereof or,
in the event of any amendment of this Agreement, the Commitment Share set
forth opposite such Bank's name on the signature pages of such amendment.
"Facility Amount" shall mean (a) for the period commencing on the date of
this Agreement and ending on August 31, 1997, $175,000,000, (b) for the
period commencing on September 1, 1997, and ending on March 1, 1998,
$225,000,000, and (c) for the period commencing on March 2, 1997, and
ending on the Expiration Date, if Borrowers' Agent shall have given written
notice to Banks' Agent on or before March 1, 1998, of Borrowers' election
permanently to increase the Facility Amount to a stated dollar amount
greater than $175,000,000 but less than or equal to $225,000,000, the
dollar amount so
2
<PAGE>
stated in the written notice, or, if Borrowers' Agent shall not have given
such a written notice to Banks' Agent on or before March 1, 1998,
$175,000,000; or, during any of the foregoing periods, such reduced amount
as shall be elected by Borrowers in accordance with Section 2.03.
"Swing Loan Note" shall mean Borrowers' Swing Loan Note, made payable to
the order of Swing Lender and in the form of Exhibit D, which is attached
hereto and incorporated herein by reference, evidencing the Swing Loans,
and any renewal, modification, or restatement thereof made by Borrowers to
the order of Swing Lender and evidencing the Swing Loans.
"Syndicated Master Note" shall mean each of Borrowers' Syndicated Master
Notes, made payable to the order of a Bank and in the form of Exhibit E,
which is attached hereto and incorporated herein by reference, evidencing
the Syndicated Loans made by such Bank, and any renewal, modification, or
restatement thereof made by Borrowers to the order of a Bank and evidencing
the Syndicated Loans made by such Bank.
3. Amendments to Section 2.13. Section 2.13 of the Agreement is hereby
amended as follows:
(a) By deleting subsection (a) thereof in its entirety and by substituting
in lieu thereof the following:
(a) The Syndicated Loans made by each Bank shall be evidenced by a
Syndicated Master Note made by Borrowers payable to the order to such Bank
in an amount equal to the principal amount of such Bank's Commitment.
(b) By deleting subsection (b) thereof in its entirety and by substituting
in lieu thereof the following:
(b) The Swing Loan shall be evidenced by a Swing Loan Note made by
Borrowers payable to the order of Swing Lender in an amount equal to the
maximum amount of the Available Swing Credit. In the event that the maximum
amount of the Available Swing Credit shall at any time or from time to time
increase to a dollar amount greater than the principal amount of the latest
Swing Loan Note delivered by Borrowers to Swing Lender pursuant to the
provisions of this Agreement, Borrowers
3
<PAGE>
shall duly execute and deliver to Swing Lender a restatement of such Swing
Loan Note, in form and substance satisfactory to Swing Lender, made payable
to Swing Lender and in a principal amount equal to the maximum amount of
the Available Swing Credit.
(c) By adding after subsection (e) thereof the following new
subsection (f):
(f) Upon receipt of each Bank's Syndicated Master Note pursuant to
Section 5.11, Bank's Agent shall deliver such Note to such Bank. In the
event that a Bank's Commitment shall at any time or from time to time
increase to a dollar amount greater than the principal amount of the latest
Syndicated Master Note delivered by Borrowers to Banks' Agent pursuant to
the provisions of this Agreement, Borrowers shall duly execute and deliver
to Banks' Agent a restatement of such Syndicated Master Note, in form and
substance satisfactory to Banks' Agent, made payable to such Bank and in a
principal amount equal to such Bank's Commitment. Upon receipt of each such
restatement of a Syndicated Master Note payable to the order of a Bank,
Banks' Agent shall deliver such Note to such Bank, in exchange for the
latest Syndicated Master Note payable to the order of such Bank delivered
by Borrowers to Banks' Agent, shall mark such latest Note "REPLACED BY
RESTATED SYNDICATED MASTER NOTE, DATED _______," and hold such latest Note
as additional evidence of the Loans made prior to such restatement.
4. Amendments to Section 2.20. Section 2.20 of the Agreement is hereby
amended by deleting subsections (a) and (b) thereof in their entirety and
substituting in lieu thereof the following:
(a) Origination Fees. (i) An initial origination fee equal to 0.25% of
the original Facility Amount of $175,000,000, payment of which has been
made on the date of this Agreement;
(ii) An additional origination fee equal to 0.05% of the $50,000,000
increase in the Facility Amount which becomes effective on September 1,
1997, which
4
<PAGE>
shall be due and payable at the request of Banks' Agent, but not later than
September 1, 1997;
(iii) In the event that Borrowers shall elect, by written notice by
Borrowers' Agent to Banks' Agent on or before March 1, 1998, permanently to
increase the Facility Amount to a stated dollar amount greater than
$175,000,000 but less than or equal to $225,000,000, an additional
origination fee equal to 0.15% of the amount by which the dollar amount so
stated in the written notice exceeds $175,000,000, which shall be due and
payable on the date on which the written notice of such permanent increase
shall be given; and
(iv) In the event that Borrowers shall elect, by written request
delivered to Banks' Agent at least sixty (60) days prior to December 31,
1997, pursuant to the provisions of Section 2.04, to extend the Expiration
Date to December 31, 2000, and Borrowers shall elect, by written notice by
Borrowers' Agent to Banks' Agent on or before March 1, 1998, permanently to
increase the Facility Amount to a stated dollar amount greater than
$175,000,000 but less than or equal to $225,000,000, an additional
origination fee equal to 0.05% of the amount by which the dollar amount so
stated in the written notice exceeds $175,000,000, which shall be due and
payable on the date on which the written notice of such permanent increase
shall be given.
(b) Extension Fees. An extension fee equal to a percentage of the Facility
Amount in effect as of each Extension Date, if any, on which an extension
becomes effective pursuant to the provisions of Section 2.04, which
percentage shall be determined by reference to the Debt Rating Table and
based on the Debt Rating, if any, as determined by Banks' Agent, in effect
as of such day if such day is a Performance Pricing Determination Date, or
otherwise as of the Performance Pricing Determination Date immediately
preceding such day; provided that if there is no Debt Rating in effect on
the applicable Performance Pricing Determination Date, the annual extension
fee shall be the same as that set forth in the applicable Level V of the
Debt Rating Table, which fee shall be due and payable on
5
<PAGE>
such Extension Date; and provided further that should an extension of the
Expiration Date to December 31, 2000, become effective pursuant to the
provisions of Section 2.04 on December 31, 1997, the Facility Amount shall
be deemed to be, for purposes of calculating the Extension Fee that becomes
due and payable on December 31, 1997, $175,000,000.
5. Conditions to this Amendment. This Amendment shall not become
effective unless, on or before September 1, 1997, each of the following
conditions shall have been satisfied:
(a) Representations and Warranties. The representations and warranties of
Borrowers and Guarantors set forth in the Agreement, this Amendment, and in
all agreements, documents and instruments executed and delivered pursuant
to the Agreement or this Amendment shall be true and correct in all
material respects when made or deemed made under the Agreement or this
Amendment, except as otherwise disclosed in writing pursuant to the
Agreement to each Bank and Swing Lender.
(b) Payment of Fees. Banks' Agent shall have received payment in full of
all fees, charges and expenses as required by or otherwise due in
connection with the Agreement or this Amendment, including all attorneys'
fees and expenses of Banks' Agent's counsel related to this Amendment, the
additional origination fee required in accordance with Section 2.20(a)(ii),
and the amendment fee required in accordance with Section 15.03 of the
Agreement.
(c) Restated Syndicated Master Notes. Banks' Agent shall have received
original Restated Syndicated Master Notes, duly executed and delivered by
Borrowers, each made payable to the order of a Bank and in the principal
amount of such Bank's Commitment.
(d) Restated Swing Loan Note. Swing Lender shall have received an
original Restated Swing Loan Note, duly executed and delivered by
Borrowers, made payable to the order of Swing Lender and in the principal
amount of $10,000,000.
(e) No Defaults. After giving effect to the terms of this Amendment,
there shall be no Default or event which, with notice or passage of time or
both, would constitute a Default under the Agreement.
6
<PAGE>
6. Effective Date. This Amendment shall be, subject to the satisfaction
of each of the conditions set forth in Section 5 hereof, effective as of
September 1, 1997.
7. Representations. As a material inducement to Banks' Agent, Banks and
Swing Lender to enter into this Amendment, Borrowers and Guarantors warrant and
represent to Banks' Agent, Banks and Swing Lender that (a) all warranties and
representations of Borrowers and Guarantors set forth in the Agreement were true
and correct in all material respects when made and remain true and correct in
all material respects as of the date hereof, except as otherwise disclosed in
writing pursuant to the Agreement to each Bank and Swing Lender; (b) they are
not aware of the occurrence of any material adverse change in their respective
businesses, properties, operations or conditions (financial or other), taken as
a whole (or, with respect to the Operating Partnership, standing alone), since
June 30, 1997; (c) as of the date hereof, and after giving effect to the terms
hereof, there are no Defaults or events which, with notice or passage of time or
both, would constitute Defaults under the Agreement; and (d) there exists no
right of offset, defense, counterclaim, claim or objection in favor of any
Borrower or any Guarantor arising out of or with respect to the Agreement or any
of the Notes.
8. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Agreement and the other Loan Documents shall be and remain in full
force and effect, and shall constitute the legal, valid, binding and enforceable
obligations of Borrowers. The amendments contained herein shall be deemed to
have prospective application only, unless otherwise specifically stated herein.
9. Ratification. Borrowers and Guarantors hereby restate, ratify and
reaffirm each and every term, covenant and condition set forth in the Agreement,
as amended hereby, and the other Loan Documents effective as of the date hereof.
10. Reaffirmation of Guaranties. By execution hereof, each Guarantor
hereby re-affirms its obligations under the Unconditional Guaranty of Payment
and Performance executed by such Guarantor in favor of Banks' Agent, for the
ratable benefit of Banks and Swing Lender, dated September 25, 1996, in the
case of Weeks Corporation and Operating Partnership, and dated
7
<PAGE>
March 12, 1997, in the case of GP and LP, and acknowledges that such Guaranty
continues to guaranty, in accordance with its terms, the payment of the Notes
(as defined in the Agreement, as amended hereby) and the performance by
Borrowers of their obligations under the Agreement, as amended hereby.
11. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
12. Headings. Section titles and references used in this Amendment shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreements among the parties hereto evidenced hereby.
13. Further Assurances. Borrowers agree to take such further actions as
Banks' Agent may reasonably request in connection herewith to evidence the
amendments herein contained.
8
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and
delivered in their names and on their behalf, and their seals to be affixed and
attested, all as of the day and year first above written.
BORROWERS:
WEEKS REALTY, L.P.
ATTEST: BY: WEEKS GP HOLDINGS, INC., its
sole General Partner
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- -----------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
ATTEST: WEEKS CONSTRUCTION SERVICES, INC.
/s/ Elizabeth C. Belden By: /s/ Forrest W. Robinson
- ------------------------- ------------------------
Secretary Its: Vice President
--------------------
[CORPORATE SEAL]
ATTEST: WEEKS REALTY SERVICES, INC.
/s/ Elizabeth C. Belden By: /s/ Forrest W. Robinson
- ------------------------- ------------------------
Secretary Its: Vice President
--------------------
[CORPORATE SEAL]
WEEKS DEVELOPMENT PARTNERSHIP
ATTEST: BY: WEEKS REALTY SERVICES, INC., as
its Managing Partner
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- ------------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
9
<PAGE>
WEEKS FINANCING LIMITED PARTNERSHIP
BY: WEEKS REALTY, L.P., its sole
General Partner
ATTEST: BY: WEEKS GP HOLDINGS, INC., its
sole General Partner
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- ---------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
GUARANTORS:
ATTEST: WEEKS CORPORATION
/s/ Elizabeth C. Belden By: /s/ Forrest W. Robinson
- ------------------------- ------------------------
Secretary Its: President/Chief Operating Officer
---------------------------------
[CORPORATE SEAL]
WEEKS REALTY, L.P.
ATTEST: BY: WEEKS GP HOLDINGS, INC., its sole
General Partner
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- ------------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
ATTEST: WEEKS GP HOLDINGS, INC.
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- ------------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
10
<PAGE>
ATTEST: WEEKS LP HOLDINGS, INC.
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- ------------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
BORROWERS' AGENT:
WEEKS REALTY, L.P.
ATTEST: BY: WEEKS GP HOLDINGS, INC., its sole
General Partner
/s/ Elizabeth C. Belden By: /s/ David P. Stockert
- ------------------------- ---------------------
Secretary Its: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
[CORPORATE SEAL]
BANKS' AGENT:
WACHOVIA BANK, N.A. (successor by
merger to Wachovia Bank of Georgia,
N.A.), as Agent
By: /s/ Steven B. Wood
------------------------
Its: Vice President
--------------------
[BANK SEAL]
BANKS:
Commitment Share: WACHOVIA BANK, N.A. (successor
54.22222% by merger to Wachovia Bank of
Georgia, N.A.)
Address: By: /s/ Steven B. Wood
191 Peachtree Street, N.E. ---------------------------
Atlanta, Georgia 30303 Its: Vice President
-----------------------
Date: September 3, 1997
[BANK SEAL]
11
<PAGE>
Commitment Share: FIRST UNION NATIONAL BANK
28.44444% (successor by merger to First
Union National Bank of Georgia)
Address: By: /s/ Susan T. Miller
999 Peachtree Street, N.E. ---------------------------
Suite 610 Its: Senior Vice President
Atlanta, Georgia 30309 -----------------------
Date: September 1, 1997
[BANK SEAL]
Commitment Share: COMMERZBANK A.G. -
10.00000% ATLANTA AGENCY
Address: By: /s/ Harry Yergey
1230 Peachtree Street, N.E. ---------------------------
Suite 3500 Its: Vice President
Atlanta, Georgia 30309 -----------------------
By: /s/ Mark Wortman
---------------------------
Its: Assistant Vice President
------------------------
Date: September 3, 1997
[BANK SEAL]
Commitment Share: MELLON BANK, N.A.
7.33333%
Address: By: /s/ B. H. Henderson, III
1735 Market Street, 4th Floor ---------------------------
Philadelphia, PA 19103 Its: Vice President
-----------------------
Date: September 3, 1997
[BANK SEAL]
12
<PAGE>
EXHIBIT 11.1
WEEKS CORPORATION
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
(In thousands, except per share data) Sept. 30,1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 17,693 11,174 15,904 11,162
Dilutive effect of outstanding stock options
(determined under the Treasury Stock Method) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Weighted average number of common
and common equivalent shares outstanding 17,693 11,174 15,904 11,162
- ----------------------------------------------------------------------------------------------------------------
Net income $ 5,768 $ 3,033 $14,673 $ 9,226
- ----------------------------------------------------------------------------------------------------------------
Per share data:
Net income per common share $ 0.33 $ 0.27 $ 0.92 $ 0.83
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 476
<SECURITIES> 0
<RECEIVABLES> 6,387
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 702,610
<DEPRECIATION> 56,639
<TOTAL-ASSETS> 763,130
<CURRENT-LIABILITIES> 0
<BONDS> 340,785
0
0
<COMMON> 177
<OTHER-SE> 309,759
<TOTAL-LIABILITY-AND-EQUITY> 763,130
<SALES> 0
<TOTAL-REVENUES> 65,616
<CGS> 0
<TOTAL-COSTS> 49,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,341
<INCOME-PRETAX> 14,673
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,673
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,673
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
