<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. 000-22933
---------
WEEKS REALTY, L.P.
(Exact name of Registrant as specified in its Charter)
Georgia 58-2121388
- ------------------------ -----------------------------------
(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. ( ) YES (X) NO
1
<PAGE>
<TABLE>
<CAPTION>
INDEX PAGE
<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........................................... 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................ 31
SIGNATURES.......................................................................... 32
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
WEEKS REALTY, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
September 30, December 31,
(Unaudited; in thousands, except unit 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
- ---------------------------------------------------------------------------------------------------------------
Developments in progress 72,415 56,571
Land held for future development 9,833 9,035
- ---------------------------------------------------------------------------------------------------------------
Net real estate assets 702,610 551,372
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $763,130 $591,849
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
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
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 363,213 309,908
- ---------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Other limited partners' capital interests, (5,141,404 and 4,485,190
Common Units), at redemption value (Note 1) 168,381 149,133
Partners' capital (17,702,045 and 14,048,593 Common Units) -- (Note 1) 231,536 132,808
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $763,130 $591,849
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed balance sheets.
</TABLE>
3
<PAGE>
WEEKS REALTY, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
(Unaudited; in thousands, except per unit 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
- ------------------------------------------------------------------------------------------------------------------------------------
24,279 13,555 65,616 38,063
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
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 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 7,451 $ 3,731 $19,206 $11,350
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON UNIT $ 0.33 $ 0.27 $ 0.92 $ 0.83
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 22,834 13,742 20,816 13,729
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed
financial statements.
</TABLE>
4
<PAGE>
WEEKS REALTY, L.P.
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 $ 19,206 $ 11,350
Adjustments to reconcile net income to net cash
provided by operating activities:
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
Capital contributions from Company 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)
Distributions (25,280) (16,467)
- -------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 476 $ 48
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Operating Partnership'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 REALTY, L.P.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. THE OPERATING PARTNERSHIP
Weeks Realty, L.P., a Georgia limited partnership (the "Operating Partnership"),
and its subsidiaries own, operate, develop, construct, acquire and manage
industrial and suburban office buildings in the southeast United States. Weeks
Corporation, a Georgia corporation, through its wholly owned subsidiaries, Weeks
GP Holdings, Inc. and Weeks LP Holdings, Inc., referred to herein as the
"Company", is the sole general partner and a limited partner and owns a majority
interest in the Operating Partnership. The Operating Partnership, including the
operations of its subsidiaries, conducts substantially all of the on-going
operations of Weeks Corporation, a publicly traded company which operates as a
self-administered and self-managed real estate investment trust ("REIT") under
the Internal Revenue Code of 1986 (the "Code").
As of September 30, 1997, the Company owned 77.5% of the units of common limited
partnership interest ("Common Units") in the Operating Partnership. Common
Units held by persons other than the Company (the "Other Limited Partnership
Interests") represented a 22.5% partnership interest in the Operating
Partnership. 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 Operating Partnership 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
Operating Partnership 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 Operating Partnership to substantially all (99%) of
the economic benefits from the results of the Subsidiaries' operations.
Under provisions of the Second Amended and Restated Agreement of Limited
Partnership, as amended (the "Partnership Agreement"), the Operating Partnership
is obligated, upon request, to redeem each Common Unit represented by the Other
Limited Partnership Interests for shares of Weeks Corporation common stock on a
one-for-one basis, or for cash, at the Company's option. The Company currently
anticipates that it will elect to issue common stock for Common Units presented
for redemption by the Other Limited Partnership Interests in the Operating
Partnership. The Other Limited Partnership Interests' redemption rights are
reflected in the caption "other limited partners' capital interests" in the
accompanying consolidated balance sheets at the cash redemption price (computed
using the Weeks Corporation closing common stock price as quoted on the New York
Stock Exchange) at the balance sheet dates.
Additionally, the terms of the Partnership Agreement obligate the Company to
contribute the net proceeds from the issuance of additional equity securities,
including issuances under the Company's incentive stock plan, to the Operating
Partnership in exchange for units of partnership interest with similar terms and
conditions, if any.
6
<PAGE>
Operating Partnership net profits, net losses and cash flow are allocated to the
partners in proportion to their ownership interests. Cash distributions from
the Operating Partnership shall be, at a minimum, sufficient to enable the
Company to satisfy its annual dividend requirements to maintain its REIT status
under the Code.
As of September 30, 1997, the Operating Partnership owned 207 industrial
properties, 20 suburban office properties and three retail properties comprising
15.8 million square feet. The Operating Partnership's primary markets and the
concentration of the Operating Partnership'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.
2. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
consolidated condensed financial position of the Operating Partnership 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 Operating Partnership'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 Operating Partnership's audited financial
statements and the notes thereto included in the Operating Partnership's Form 10
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 Operating Partnership will be
required to present both basic and diluted earnings per unit 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 unit shall be computed by dividing net income by the weighted
average number of Common Units outstanding during the period. Diluted earnings
per unit shall be computed to present the dilutive impact of all instruments or
securities which are convertible into Common Units, as more specifically defined
in SFAS 128.
7
<PAGE>
The Operating Partnership will continue to present earnings per unit 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 unit amounts will be restated. The impact of
SFAS 128 on the Operating Partnership's consolidated earnings per unit 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 Operating Partnership was not subject to segment reporting under prior
accounting standards, but may be required to provide certain segment disclosures
under SFAS 131. The Operating Partnership is evaluating SFAS 131, but has not
yet determined the specific nature and magnitude of the disclosures required by
SFAS 131.
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 Operating Partnership, 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
Operating Partnership 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 Operating Partnership'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):
<TABLE>
<CAPTION>
----------------------------------------------
BORROWER AMOUNT
----------------------------------------------
<S> <C>
Operating Partnership $150,098
Weeks Realty Services, Inc. 5,280
Weeks Construction Services, Inc. 2,900
Weeks Development Partnership 7,342
---------------------------------------------
$165,620
---------------------------------------------
</TABLE>
8
<PAGE>
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 Operating Partnership 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%, 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 Operating Partnership 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 highly correlated a 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.
9
<PAGE>
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>
-----------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
-----------------------------------------------------------------------------------
<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
-----------------------------------------------------------------------------------
$190,687 $197,575
-----------------------------------------------------------------------------------
</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 Operating Partnership'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.
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.
10
<PAGE>
Scheduled maturities of mortgage notes payable at September 30, 1997, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
--------------------------------
YEAR AMOUNT
--------------------------------
<S> <C>
Remainder of 1997 $ 616
1998 8,660
1999 49,502
2000 35,315
2001 10,990
2002 and thereafter 85,604
--------------------------------
$190,687
--------------------------------
</TABLE>
4. INVESTMENTS IN AND NOTES RECEIVABLE
FROM UNCONSOLIDATED SUBSIDIARIES
The Operating Partnership 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 Operating Partnership 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 Operating Partnership 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>
----------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
Financial Position 1997 1996
----------------------------------------------------------------------------
<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
----------------------------------------------------------------------------
$31,435 $23,338
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Notes payable to the Operating Partnership $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
<PAGE>
At September 30, 1997, the Operating Partnership'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 Operating Partnership'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 - Operating Partnership 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 -
Operating Partnership -- -- 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 Operating Partnership $ (12) $ 47 $ 1,137 $ (67)
Interest expense - Operating Partnership 326 329 981 986
Gain on sale of property -
Operating Partnership -- -- (580) --
Equity in earnings of Subsidiaries $ 314 $ 376 $ 1,538 $ 919
Distributions and interest paid
to Operating Partnership $1,311 $1,313 $ 1,311 $ 1,313
----------------------------------------------------------------------------------------------------------------
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. PARTNERS' CAPITAL
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 contributed to the Operating Partnership in exchange for 8%
Series A preferred partnership units. The Operating Partnership used the
proceeds to reduce 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. The Series A preferred partnership units
have terms and provisions which are substantially identical to those of the
Series A Preferred Stock.
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 contributed to the Operating Partnership in
exchange for 3,584,000 Common Units and were used to reduce the Operating
Partnership's outstanding Credit Facility borrowings.
The Operating Partnership declared and paid quarterly distributions relating to
the second quarter of 1997 of $9,779,000 or $0.43 per Common Unit during the
three months ended September 30, 1997. In October 1997, the Operating
Partnership declared and paid quarterly distributions relating to the third
quarter of 1997 of $9,823,000 or $0.43 per Common Unit. Additionally, in
October 1997, the Operating Partnership declared and paid a partial quarterly
Series A Preferred unit distribution 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. The $1,150,000 value of the restricted shares is
included in partners' capital offset by the amount of the unamortized deferred
compensation expense ($934,000 at September 30, 1997). Compensation expense is
recognized ratably over the four year vesting period.
13
<PAGE>
6. EARNINGS PER UNIT
Under APB 15, earnings per unit is calculated using the weighted average number
of Common Units outstanding of 22,834,000 and 13,742,000 for the three months
ended, and 20,816,000 and 13,729,000 for the nine months ended September 30,
1997 and 1996, respectively. The impact of the Company's outstanding stock
options was not dilutive, as defined in APB 15, in 1997 or 1996. A comparison
of earnings per Common Unit as calculated under APB 15, to proforma earnings per
Common Unit, 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 Unit (APB 15) $0.33 $0.27 $0.92 $0.83
Basic earnings per Common
Unit (SFAS 128) $0.33 $0.27 $0.92 $0.83
Diluted earnings per Common
Unit (SFAS 128) $0.32 $0.27 $0.91 $0.82
</TABLE>
7. ACQUISITIONS
The Operating Partnership 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 Operating Partnership'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 Operating Partnership'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
Operating Partnership 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.
<TABLE>
<CAPTION>
Nine Months
Ended
(Unaudited, in thousands, except per unit amount) September 30, 1996
- -------------------------------------------------------------------------
<S> <C>
Revenues $51,377
Net income 7,320
Earnings per Common Unit $ 0.64
</TABLE>
14
<PAGE>
Effective July 1, 1997 and August 1, 1997, the Operating Partnership 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 milliion. 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 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership 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. Additionally, as part of these transactions, the Operating
Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership'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 Operating Partnership 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 and analysis should be read in conjunction with the
accompanying consolidated condensed financial statements of the Operating
Partnership and the notes thereto.
GENERAL
The Operating Partnership and its subsidiaries own, operate, develop, construct,
acquire and manage industrial and suburban office buildings in the southeast
United States. The Operating Partnership and its subsidiaries conduct
substantially all of the on-going operations of Weeks Corporation (the
"Company"), a publicly-traded company which operates as a self-administered and
self-managed REIT. The Operating Partnership was formed and capitalized with
the proceeds from the Company's Initial Public Offering in August 1994 and
succeeded to substantially all of the interests in certain land and industrial
and suburban office buildings under common ownership and the development,
landscape and property management businesses of the predecessors to the
Operating Partnership and the Company. For a further description of the
Operating Partnership, see Note 1 to the consolidated condensed financial
statements.
RESULTS OF OPERATIONS
Operating information relating to the Operating Partnership'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 Operating Partnership 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.
16
<PAGE>
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>
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 Operating
Partnership'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.
17
<PAGE>
Operating Partnership 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 Operating
Partnership's southeast expansion. The majority of the increase relates to the
additional general and administrative expenses associated with the Operating
Partnership'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 Operating Partnership 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
Operating Partnership's southeast expansion. As a percentage of the combined
revenues of the Operating Partnership and the Subsidiaries, the combined general
and administrative expenses of the Operating Partnership 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).
Equity in earnings of the Subsidiaries represents the Operating Partnership's
99% economic interest in the earnings of the Subsidiaries after the elimination
of interest expense and gains on property sales to the Operating Partnership
(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
18
<PAGE>
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 Operating
Partnership'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.
Operating Partnership 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 Operating
Partnership's southeast expansion. The majority of the increase relates to the
additional general and administrative expenses associated with the Operating
Partnership'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 Operating Partnership when combined with the general and
administrative expenses of the Subsidiaries increased $2,018,000 or 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 Operating Partnership's southeast expansion. As a
percentage of the combined revenues of the Operating Partnership and the
Subsidiaries, the combined general and administrative expenses of the Operating
Partnership 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 Operating Partnership's
99% economic interest in the earnings of the Subsidiaries after the elimination
of interest expense and gains on property sales to the Operating Partnership
(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.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership'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
Operating Partnership'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 Operating Partnership's
property portfolio growth.
The Operating Partnership's net cash flow from operations is currently
sufficient to meet the Operating Partnership's current operational needs and to
satisfy the Operating Partnership's current quarterly distributions on both its
common and preferred units (see below), which are structured to ensure that the
Company can satisfy the dividend requirements necessary to maintain its status
as a REIT. Management believes that operating cash flows will continue to be
adequate to fund these requirements in 1997 and 1998.
In addition to its operating cash flow, the Operating Partnership 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 to fund the
distributions necessary for the Company to meet its annual REIT dividend
requirements. The Operating Partnership currently intends to finance its
development, construction and acquisition activities primarily through
borrowings under the Credit Facility. As of September 30, 1997, the Operating
Partnership 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 contributed to the Operating Partnership in
exchange for preferred units and were used to reduce outstanding Credit Facility
borrowings, increasing the Operating Partnership's available capacity under the
Credit Facility.
The Operating Partnership 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 Operating Partnership 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 Operating Partnership recently obtained
20
<PAGE>
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 Operating Partnership 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
Operating Partnership 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 Operating Partnership may
adjust staffing levels to avoid a negative impact on the Operating Partnership'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 Operating Partnership'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 Operating Partnership has in place
interest rate swap agreements to fix the Operating Partnership's interest costs
on $50.0 million of the Operating Partnership'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
Operating Partnership's variable rate mortgage debt, fluctuated by 1%, interest
costs to the Operating Partnership, 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 Operating
Partnership decreased its outstanding Credit Facility borrowings in October 1997
from the proceeds of the preferred stock offering discussed above.
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 Operating Partnership's mortgage debt on its
consolidated properties was $190.7 million. Including Credit Facility
borrowings of $150.1 million for the Operating Partnership and $15.5 million for
the Subsidiaries, the total debt obligations of the Operating Partnership and
the Subsidiaries were $356.3 million or 32% of total market capitalization
(defined as total debt plus the market equity value of the Common Units as
calculated herein). At September 30, 1997 (based on the closing price of the
common stock of the Company of $32.75 on September 30, 1997, the last trading
day of the quarter), the 22,843,449 Common Units outstanding would have a total
market value of $748.1 million. As discussed above, the Operating Partnership
substantially reduced its Credit Facility borrowings from the net proceeds of
approximately $144.6 million from a Company preferred stock offering completed
on October 10, 1997. Adjusted for the application of these proceeds, the total
debt obligations of the Operating Partnership and its unconsolidated
subsidiaries would have been $211.7 million, or 19% of total market
capitalization (assuming the issuance of the 6,000,000 preferred units at $25.00
each), at September 30, 1997.
21
<PAGE>
CURRENT DEVELOPMENT ACTIVITY
The Operating Partnership'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 Operating Partnership'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 Operating Partnership'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.
22
<PAGE>
(5) Shell completed; interior tenant finish to be completed.
(6) The Operating Partnership 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 Operating
Partnership.
CURRENT ACQUISITION ACTIVITY
In conjunction with the NWI and Lichtin acquisition transactions (see Note 7 to
the consolidated condensed financial statements), the Operating Partnership 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 Operating Partnership 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 Common 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 Operating Partnership'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 Operating Partnership. 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 Operating Partnership believes that funds from operations ("FFO") provides
an additional indicator of the financial performance of the Operating
Partnership. 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 Operating Partnership. Accordingly, the Company expects that
FFO will be one of the factors considered by its Board of Directors in
determining the amount of cash distributions the Operating Partnership will pay
to its unitholders. 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 distributions to unitholders,
and should not be considered as an alternative to net income for purposes of
evaluating the Operating Partnership's operating performance or as an
alternative to cash flow, as defined by GAAP, as a measure of liquidity.
The Operating Partnership'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 Operating Partnership'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
23
<PAGE>
nine months ended September 30, 1997 and 1996, respectively. In accordance with
the NAREIT guidelines, the Operating Partnership 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 Operating Partnership'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 $6,594,000 or
92.1% to $13,751,000 compared to FFO of $7,157,000 for the three months ended
September 30, 1996. For the nine months ended September 30, 1997, FFO increased
by $15,479,000 or 74.4% to $36,275,000 compared to FFO of $20,796,000 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 $ 7,457 $ 3,731 $19,206 $11,350
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 $13,751 $ 7,157 $36,275 $20,796
- ------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 22,834 13,742 20,816 13,729
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES AND LEASING COSTS
The following table details the Operating Partnership'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.
25
<PAGE>
The following table summarizes by period the Operating Partnership'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>
26
<PAGE>
SUPPLEMENTAL DISCLOSURE OF TENANT AND LEASE EXPIRATION INFORMATION
TENANTS
As of September 30, 1997, the Operating Partnership's properties were leased to
705 tenants including local, regional, national and international companies.
The Operating Partnership'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 Realty, L.P. 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 Operating Partnership 223,219 1 875,019 1.0% GA
10 Tridom Realty, L.P. 117,403 4 806,423 0.9% GA
11 National Data Realty, L.P. 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 Realty, L.P. 137,100 1 685,500 0.8% GA
19 Sally Foster, Inc. 197,200 2 673,237 0.7% SC
20 Vanstar Realty, L.P. 86,880 4 668,124 0.7% GA
21 Yokohama Tire Realty, L.P. 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 Realty, L.P. 34,138 1 648,622 0.7% GA
25 Siemens Energy & Automation, Inc. 240,000 3 637,200 0.7% GA
26 The Bombay Operating Partnership, 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 unit
impact on the Operating Partnership's funds from operations and net income
in 1997.
27
<PAGE>
LEASE EXPIRATIONS
The following tables show scheduled lease expirations for the Operating
Partnership'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>
(Table continued on following page)
28
<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>
SURBURBAN
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 supercede 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 Operating Partnership will be
required to present both basic and diluted earnings per unit 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
Operating Partnership's consolidated earnings per unit amounts for the three and
nine months ended September 30, 1997 and 1996 are discussed in Note 6 to the
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 Operating Partnership is reporting under prior accounting standards, but may
be required to provide certain segment disclosures under SFAS 131. The
Operating Partnership is evaluating SFAS 131, but has not determined the
specific nature and magnitude of the disclosures required by SFAS 131.
29
<PAGE>
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on the
Operating Partnership because of the relatively low inflation rate.
Substantially all tenant leases do, however, contain provisions designed to
protect the Operating Partnership 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
Operating Partnership'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 Operating Partnership 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 Operating Partnership would be able to replace existing leases with new
leases at higher base rentals.
30
<PAGE>
PART II - OTHER INFORMATION
ITEM 2 - CHANGE IN SECURITIES
During the three months ended September 30, 1997, the Operating
Partnership issued a total of 83,568 Common Units, in full or partial
consideration for the acquisition of real estate properties from Lichtin.
The aggregate value of the properties acquired by the Operating
Partnership 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 Realty, L.P., 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.
31
<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 REALTY, L.P.
-----------------------------------------------
(Registrant)
By: Weeks GP Holdings, Inc., as General Partner
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
32
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- -------------------------------------------------------------------------------
10.1 First Amendement 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 Realty, L.P., Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and Weeks
Realty, L.P., as guarantors
11.1 Computation of earnings per common unit _
27.1 Financial data schedule _
33
<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 REALTY, L.P.
COMPUTATION OF EARNINGS PER COMMON UNIT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
(In thousands, except per unit data) Sept. 30,1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average number of common
units outstanding 22,834 13,742 20,816 13,729
Dilutive effect of outstanding stock options
(determined under the Treasury Stock Method) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Weighted average number of common
and common equivalent units outstanding 22,834 13,742 20,816 13,729
- -----------------------------------------------------------------------------------------------------------------
Net income $ 7,451 $ 3,731 $19,206 $11,350
- -----------------------------------------------------------------------------------------------------------------
Per share data:
Net income per common unit $ 0.33 $ 0.27 $ 0.92 $ 0.83
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
1
<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> 0
<OTHER-SE> 231,536
<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> 19,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,206
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
