<PAGE>
As filed with the Securities and Exchange Commission on August 1, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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WEEKS REALTY, L.P.
(Exact name of registrant as specified in its charter)
Georgia 58-2121388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4497 Park Drive
Norcross, Georgia 30093
(Address of principal executive offices)
(770) 923-4076
(Registrant's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
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to be so registered each class is to be registered
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Not applicable Not applicable
Securities Registered pursuant to Section 12(g) of the Act:
Title of Class
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Units of Limited Partnership Interest ("Units")
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Item 1. Business
Weeks Realty, L.P. (the "Operating Partnership") is one of the largest
developers, owners and operators of institutional-quality industrial and
suburban office properties in metropolitan Atlanta, Georgia and the Southeastern
United States. As of June 30, 1997, the Operating Partnership's portfolio was
comprised of 264 properties totaling approximately 19.8 million square feet (the
"Properties"), including 48 Properties (38 Properties excluding 10 Properties
acquired effective July 1, 1997) and one Property expansion (totaling
approximately 4.3 million square feet) under development and/or under agreement
to acquire. The Operating Partnership also owns or controls approximately 1,768
net usable acres of undeveloped land that the Operating Partnership believes may
ultimately support the development of up to 19.0 million square feet of
industrial and suburban office properties. The Operating Partnership recently
completed acquisitions of Properties and the related operations of industrial
and suburban office real estate companies in Nashville, Tennessee and the
Raleigh-Durham-Chapel Hill area of North Carolina (the "Research Triangle"), and
opened and staffed its office in Orlando, Florida. The Operating Partnership
currently manages, or expects to manage upon completion or acquisition, all of
the Properties. Industrial Properties represent approximately 90% of the square
footage of all of the Properties, and suburban office Properties represent
approximately 10%. The average Occupancy Rate of the Operating Partnership's In-
Service Properties was 96.2% at December 31, 1996, and was 96.5% at June 30,
1997. As used in this Form 10, "In-Service Properties" excludes those Properties
under development which are not yet stabilized and Properties under agreement to
acquire. "Occupancy Rate" means the rate of occupancy calculated based on
leases under which tenants are paying rent. The Operating Partnership is a fully
integrated organization with industrial and suburban office real estate
development, acquisition, operation and asset management expertise and has
approximately 417 employees, none of whom is a party to a collective bargaining
agreement.
INVESTMENT OBJECTIVES AND OPERATING STRATEGIES
The Operating Partnership's primary investment objectives are to increase
Unitholder value and to increase per share cash available for distribution by
(1) developing institutional-quality, functional multi-tenant and build-to-suit
industrial and suburban office properties, (2) acquiring industrial and suburban
office properties in strategic locations where the Operating Partnership can
establish or enhance its market presence, (3) maximizing cash flow through
active leasing and management of its properties, and (4) expanding strategically
into new geographic markets. The Operating Partnership has structured its
operations, as discussed in more detail below, to meet these investment
objectives.
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Fully Integrated Real Estate Company
The Operating Partnership is a fully integrated real estate company with
resources dedicated to:
. marketing . landscaping
. development . property management
. construction . civil engineering
. investment analysis . legal
. asset management . design
. financing . information systems
The Operating Partnership believes that by providing a full range of services it
can control quality and provide greater client service, improve timely delivery
of its industrial and suburban office developments and promote cost savings.
Development of Business Park Environments
The Operating Partnership develops and owns its properties primarily in business
park environments (see discussion under "Properties"). Alone or with its joint
venture partners, the Operating Partnership controls all aspects of the
development process in a majority of the business parks in which it operates,
including site selection and project concept, master planning and zoning, design
and construction, leasing and property management. Each business park is in
proximity to an interstate highway interchange and retail and residential
amenities.
The Operating Partnership's business parks emphasize flexible land plans,
extensive landscaping and protective covenants which restrict the uses and
control the architecture and signage. In addition to its properties, the
Operating Partnership provides landscaping services for other corporate users in
its controlled business parks. The Operating Partnership will continue to
emphasize business park development in future years.
Product Focus
The Operating Partnership develops or acquires industrial and suburban office
properties, primarily in suburban locations (see related discussion of product
types under "Properties"). The Operating Partnership's properties can include
both single-tenant (build-to-suit) buildings and multi-tenant buildings. The
Operating Partnership designs properties that can be modified economically to
meet the needs of various clients and that can often function as either multi-
tenant or single-tenant buildings.
The Operating Partnership develops institutional-quality, general purpose
properties that are designed to be architecturally attractive and to serve the
needs of a variety of tenants
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in a particular submarket. The Operating Partnership attempts to limit tenant
improvement expenditures to those which are in demand by, and adaptable with
moderate modification to, a high number of users in a market. The Operating
Partnership controls tenant improvement expenditures by utilizing its in-house
interior finish department to supervise the construction process and by
compensating its marketing representatives based on a formula which takes into
account the cost of tenant finish requirements. The Operating Partnership uses
standard finish materials for most of its tenants. The Operating Partnership's
annual purchase programs allow it to procure these materials on a volume
discount basis.
Southeast Market Focus
The Operating Partnership focuses its activities in what it believes are some of
the fastest growing markets in the Southeast. As detailed below, since 1990,
the Operating Partnership's markets within the Southeast have experienced
greater percentage growth in employment and population than the United States as
a whole.
Employment and Population Growth
(percentage change)
<TABLE>
<CAPTION>
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Cumulative Cumulative
Employment Growth Population Growth
1990-1996/(a)/ 1990-1995/(b)/
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<S> <C> <C>
Atlanta, GA 26.4% 15.3%
Nashville, TN 23.0% 10.6%
Research Triangle, NC 21.2% 15.2%
Orlando, FL 22.4% 12.2%
Spartanburg, SC 12.2% 6.1%
U.S. Total 10.7% 5.4%
</TABLE>
(a) Source: Bureau of Labor Statistics.
(b) Source: U.S. Census Bureau.
Metropolitan Atlanta, Georgia. The Operating Partnership was founded and is
currently headquartered in metropolitan Atlanta, and is one of metropolitan
Atlanta's two largest industrial property owners. Metropolitan Atlanta's rapid
growth in both employment and population is due in part to its role as a
business and distribution center for the entire Southeast. The Operating
Partnership believes that metropolitan Atlanta has been successful attracting
business relocations and expansions because of its educated workforce, high-
quality of life and well-developed transportation infrastructure.
According to Jamison Research, Inc. ("Jamison"), which publishes data on
metropolitan Atlanta's industrial and office real estate markets, the
metropolitan area in 1996 recorded its third straight year of industrial net
absorption in excess of 10 million square feet. Over
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the past five years, metropolitan Atlanta's industrial net absorption has
totaled more than 50 million square feet. Increased new supply of multi-tenant
industrial buildings, however, has recently resulted in a decrease in industrial
occupancy in metropolitan Atlanta from 94.5% at December 31, 1995, to 93.7% at
December 31, 1996.
Also according to Jamison, metropolitan Atlanta's office market, exclusive of
the downtown submarket, recorded net absorption of approximately 2.8 million
square feet during 1996, with occupancy increasing from 90.9% at December 31,
1995, to 92.9% at December 31, 1996. Development of new suburban office
buildings has also increased recently. The Operating Partnership believes that
this new development activity has occurred in response to strong levels of
demand.
The Operating Partnership's completed and In-Service Properties located in
metropolitan Atlanta were comprised of approximately 94% industrial properties
and approximately 6% suburban office properties at December 31, 1996 and 92%
industrial Properties and 8% suburban office Properties at June 30, 1997, and
had an average occupancy rate of 96.5% at December 31, 1996 and 96.3% at June
30, 1997. The Operating Partnership believes that one of the reasons that the
occupancy rate of its metropolitan Atlanta properties is higher than the overall
market is that it generally focuses its activities on the submarkets that are
among the metropolitan area's strongest. According to Jamison, the major
submarkets where the Operating Partnership generally focuses its activities
accounted for less than 50% of metropolitan Atlanta's approximately 400 million
square feet of industrial and office space at December 31, 1996, but recorded
more than 70% of the metropolitan area's net absorption in 1996. The Operating
Partnership allocates its development activity in metropolitan Atlanta among all
four of its primary industrial and suburban office property types and among a
number of distinct submarkets, based on its determination of supply and demand
conditions.
Nashville, Tennessee. The Operating Partnership entered the Nashville market in
November 1996, with its acquisition of NWI (as defined herein) (see Note 8 to
the consolidated and combined financial statements of the Operating Partnership
included elsewhere herein). The Operating Partnership's decision to expand into
Nashville was based in part on Nashville's economic diversity, with major
industries including publishing, health care, automobile production and tourism,
high quality of life and rapid growth in both employment and population. In
addition, like Atlanta, Nashville is the state capitol and has a well-developed
transportation infrastructure. Nashville is also well located as a point of
distribution. According to the Nashville Area Chamber of Commerce, Nashville
lies within a 600 mile radius of 50% of the United States population.
According to CB Commercial/Torto Wheaton, which publishes data on several
industrial and office real estate markets, Nashville's industrial real estate
market totals approximately 112 million square feet; net absorption was
approximately 1.6 million square feet in 1996; and the market occupancy rate was
93.3% as of December 31, 1996.
Also according to CB Commercial/Torto Wheaton, Nashville's office market totals
approximately 17 million square feet; net absorption was approximately 552,000
square
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feet in 1996; and the market occupancy rate was approximately 92.0% as of
December 31, 1996.
Because of NWI's established presence in the Nashville industrial real estate
market, the Operating Partnership is initially operating in Nashville under the
name "Weeks/NWI."
Research Triangle, North Carolina. The Operating Partnership entered the
Research Triangle area of North Carolina in December 1996, with its acquisition
of Lichtin (as defined herein) (see Note 8 to the consolidated and combined
financial statements). The Operating Partnership's decision to expand into the
Research Triangle was based in part on the area's success as a center for high
technology, communications, research and development and health care, as well as
its high quality of life, rapid employment and population growth and educated
workforce. The area attracts many of its employees from its three universities:
Duke University, The University of North Carolina and North Carolina State
University.
Research Triangle Park, which is located adjacent to most of the Operating
Partnership's portfolio, is one of the nation's largest planned research parks,
with more than 70 national and international research organizations employing
over 35,000 people. Research Triangle Park generally consists of corporate-
owned facilities devoted to research and development. Many of the Operating
Partnership's properties house administrative, technology and service functions
which complement the activities of businesses with facilities located within
Research Triangle Park.
Because the Research Triangle's economy is based more on services, government
and trade than on manufacturing, the industrial real estate market is smaller
than it is in comparable other southeastern cities. According to Karnes Research
Company, which publishes data on the Research Triangle industrial and office
real estate markets, the Research Triangle's combined industrial and office real
estate markets total approximately 37 million square feet; net absorption was
approximately 1.1 million square feet in the last half of 1996; and the
occupancy rate of the Research Triangle's combined industrial and office market
was approximately 92.7% as of December 31, 1996.
Because of Lichtin's established presence in the Research Triangle industrial
and suburban office real estate markets, the Operating Partnership is initially
conducting its operations there under the name "Weeks/Lichtin."
Orlando, Florida. The Operating Partnership entered the Orlando market in
April, 1995 with the purchase of an approximately 190,000 square foot portfolio
of industrial properties. The Operating Partnership's decision to expand into
Orlando was based in part on the city's geographic location as a point of
distribution for the state of Florida, the most highly populated state in the
Southeast, as well as Orlando's well-developed transportation infrastructure and
its rapid employment and population growth. The Operating Partnership decided
to pursue its own expansion into Orlando, without acquiring an established local
industrial or suburban office real estate company, because it
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perceived a relative lack of competition and an opportunity to build a presence
in the market. Since entering Orlando in 1995, the Operating Partnership has
increased its portfolio of properties to approximately 407,000 square feet as of
December 31, 1996, and has opened a local office, staffed by a recently hired
Vice President of the Operating Partnership who has approximately ten years
experience in the market.
According to CB Commercial/Torto Wheaton, Orlando's industrial real estate
market totals approximately 74 million square feet; net absorption was
approximately 1.1 million square feet in 1996; and the market occupancy rate was
approximately 94.3% as of December 31, 1996.
Also according to CB Commercial/Torto Wheaton, Orlando's office real estate
market totals approximately 19 million square feet; net absorption was
approximately 354,000 square feet in 1996; and the market occupancy rate was
approximately 90.7% as of December 31, 1996.
Spartanburg, South Carolina. Spartanburg is the Operating Partnership's
smallest market and is served out of the Operating Partnership's Atlanta
headquarters. The Operating Partnership's activities in Spartanburg consist of
properties owned and developed at Hillside business park. Hillside is located
one exit north on I-85 from BMW's automobile production facility that opened in
1995. The occupancy rate of the Operating Partnership's approximately 386,000
square feet of completed and In-Service Properties in Spartanburg was 100% as of
December 31, 1996 and June 30, 1997.
BUSINESS GROWTH STRATEGY
Development
The Operating Partnership is a leading developer of institutional-quality,
general purpose industrial multi-tenant and build-to-suit properties, and has
substantial experience in all phases of the development process, including
market analysis, site selection, zoning, design, civil engineering, construction
and landscaping. The Operating Partnership currently has adequate sources for
raw materials needed to construct its new Properties, including access to
qualified labor and subcontractors. The Operating Partnership has completed and
stabilized 28 development Properties and 3 Property expansions totaling
approximately 3.5 million square feet since the Initial Offering (as hereinafter
defined). All of these Properties are currently 100% leased.
Acquisitions
The Operating Partnership balances its development activity by making
opportunistic acquisitions in strategic locations that establish or enhance the
Operating Partnership's market position, or where the Operating Partnership's
skills and market knowledge can
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enhance value through additional development, property management or physical
upgrades. Since the Initial Offering, the Operating Partnership has acquired 118
Properties totaling approximately 6.9 million square feet.
Land Control
An important part of the Operating Partnership's development strategy is to own
or control land sufficient to allow it to develop exclusive business park
environments and to accommodate the expansion and relocation needs of its
tenants. The Operating Partnership employs a number of ownership and control
arrangements in its land strategy, including outright purchases, joint ventures,
staged acquisitions, options and exclusive marketing and development agreements.
By doing so, the Operating Partnership believes that it can control sufficient
land acreage, while mitigating the negative impact of land carrying costs.
The Operating Partnership owns or controls (through agreements to purchase,
options and marketing and development agreements) approximately 1,768 net usable
acres of undeveloped land, located primarily in existing business parks with
zoning and infrastructure in place. The Operating Partnership believes the
development potential of this land may ultimately total approximately 19.0
million square feet.
Internal Growth
The Operating Partnership maximizes its available cash flow by increasing the
occupancy rate of those Properties that are not fully leased, maintaining high
occupancy rates, raising effective rental rates and controlling operating
expenses and capital expenditures. The occupancy rate of the Operating
Partnership's stabilized Properties (i.e., those having reached substantial
lease-up) was 96.5% as of June 30, 1997. The Operating Partnership believes that
its emphasis on providing quality facilities and client service has resulted in
a high retention of its tenants and low turnover. Of the leases that expired in
1996 (representing approximately 1.7 million square feet), tenants occupying
approximately 67% of such space renewed their leases with the Operating
Partnership. The Operating Partnership believes that this high retention of its
tenants results in lower re-leasing costs and decreased potential loss due to
vacancy. In addition, in 1996, 40 tenant expansions were completed for existing
tenants, totaling approximately 490,000 square feet.
The leases for the Operating Partnership's Properties have terms ranging from
one to fifteen years, with terms for multi-tenant Properties typically between
three and five years and for build-to-suit Properties typically between seven
and ten years. Typically, the tenant in a multi-tenant Property pays for
increases in taxes, operating costs and insurance above a base year level. For
build-to-suit Properties, the tenant typically pays for all taxes, insurance and
operating costs. Approximately 65% of the Operating
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Partnership's leases (based on leased square footage as of June 30, 1997)
contain contractual rent escalations.
The high average occupancy of the Operating Partnership's Properties reflects
the generally strong supply and demand conditions in its markets. As a result,
the Operating Partnership continues to be able to increase average rents and
generally to avoid offering tenant concessions. During 1996, the Operating
Partnership renewed or re-leased approximately 2.0 million square feet of
second-generation space in its Properties. Cash-basis rental rates on this
space increased by an average of 4.2%, calculated by comparing the initial cash-
basis rent to be paid by the tenant under the new or renewed lease with the
ending cash-basis rent paid by the tenant under the previous lease on the same
space.
As shown in the table provided under "Properties -- Tenants" of this Form 10,
excluding Scientific Atlanta, which accounted for approximately 3.1% of
annualized base rent (as defined therein), no single tenant accounted for more
than 1.6% of annualized base rent from leases under which tenants were paying
rent as of June 30, 1997.
Geographic Expansion
While metropolitan Atlanta, Georgia will remain the Operating Partnership's
primary focus, the Operating Partnership intends to continue expanding carefully
into new Southeastern markets. The Operating Partnership intends to expand into
other markets only when it believes it can achieve over time a significant
market presence. The Operating Partnership's activities to date have included
the 1990 expansion into Spartanburg, South Carolina, the 1995 expansion into
Orlando, Florida, and the 1996 expansions into Nashville, Tennessee and the
Research Triangle area of North Carolina. As a result of its geographic
expansion, the Operating Partnership has reduced its concentration of Properties
in metropolitan Atlanta, Georgia, to 74% at June 30, 1997 (based on square
footage and excluding Properties under development and/or under agreement to
acquire), from 95% at December 31, 1995 (calculated on the same basis).
Organization Structure
The Operating Partnership's general partner, Weeks GP Holdings, Inc. ("Weeks GP"
or the "General Partner"), is a wholly owned subsidiary of Weeks Corporation
("Weeks" or the "Company"), a self-administered, self-managed, geographically
focused real estate investment trust ("REIT"). On August 24, 1994, Weeks
completed an initial public offering of its common stock (the "Initial
Offering") and a business combination involving entities under varying common
ownership (the "Formation"). The entities included in the Formation are
collectively referred to as Weeks Group. On each of November 10, 1995, November
13, 1996, and May 13, 1997, Weeks completed additional public offerings of its
common stock (the "Additional Offerings"). Proceeds from the Initial Offering
were (i) used by Weeks to acquire a controlling interest in the Operating
Partnership, Weeks'
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principal operating subsidiary, which was formed to succeed to substantially all
of the ownership interests in certain land and industrial, suburban office and
retail buildings held under common ownership prior to its formation and to the
development, construction, acquisition, and landscape and management businesses
of Weeks' predecessors and certain other affiliates; (ii) contributed to the
Operating Partnership to pay down indebtedness and to purchase certain
Properties and interests in certain property partnerships and joint ventures;
and (iii) contributed to the Operating Partnership for certain construction and
development expenditures made subsequent to the Initial Offering. Proceeds from
the Additional Offerings were used to reduce the Operating Partnership's
outstanding revolving line of credit (the "Credit Facility") borrowings, which
had been incurred primarily to fund the Operating Partnership's acquisition and
development activity. Weeks conducts all its business through the Operating
Partnership and its subsidiaries.
The Operating Partnership's principal executive offices are located at 4497 Park
Drive, Norcross, Georgia 30093 and its telephone number is (770) 923-4076. Weeks
was incorporated in Georgia as A. R. Weeks & Associates, Inc. in 1983, and
changed its name to Weeks Corporation in June, 1994. Weeks GP, a Georgia
corporation, was incorporated in October, 1996. Weeks LP Holdings, Inc., a
Georgia corporation and a wholly owned subsidiary of Weeks ("Weeks LP"), was
incorporated in October, 1996. The Operating Partnership is a Georgia limited
partnership that was formed in June, 1994 for the purpose of consolidating the
operating and development businesses of Weeks and a portfolio of certain of the
Properties described herein.
The Operating Partnership, including the operating subsidiaries described below,
is the entity through which all of Weeks' operations are conducted. At June 30,
1997, Weeks controlled the Operating Partnership as the holder of a 77.8%
ownership interest in the Operating Partnership. At June 30, 1997, Weeks owned
the sole 1.1% general partnership interest in the Operating Partnership through
Weeks GP and a 76.7% limited partnership interest through Weeks LP. The other
limited partners of the Operating Partnership are those individuals and entities
(including certain officers and directors of Weeks) (i) who, at the time of the
Initial Offering, elected to hold all or a portion of their respective interests
in Weeks in the form of Units rather than receiving shares of Weeks' common
stock and (ii) who have contributed, directly or indirectly, certain assets,
Properties and businesses to the capital of the Operating Partnership
(collectively, the "Limited Partners"). Each Unit may be redeemed by the holder
thereof for either one share of Weeks' common stock or cash equal to the fair
market value thereof at the time of such redemption, at the option of Weeks. As
of June 30, 1997, Weeks had issued common stock in connection with all
redemptions. With each redemption of outstanding Units for Weeks' common stock,
Weeks' percentage ownership in the Operating Partnership will increase. In
addition, whenever Weeks issues shares of its equity securities, Weeks will
contribute any net proceeds therefrom to the Operating Partnership and the
Operating Partnership will issue an equivalent number of Units to either the
General Partner or Weeks LP, as appropriate.
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As sole general partner, Weeks (through Weeks GP), has the exclusive power under
the agreement of limited partnership of the Operating Partnership to manage and
conduct the business of the Operating Partnership, subject to the consent of a
majority in interest of the Limited Partners (other than Weeks LP) in connection
with (i) the sale of all or substantially all of the assets of the Operating
Partnership, (ii) the merger of the Operating Partnership into another entity if
the Operating Partnership is not the surviving entity, (iii) the dissolution of
the Operating Partnership or (iv) the acquisition of any personal or real
property other than in the name of the Operating Partnership or of certain other
entities in which the Operating Partnership has an interest. The board of
directors of Weeks manages the affairs of Weeks, which directs the affairs of
the Operating Partnership through Weeks GP. The Operating Partnership cannot be
terminated, except in connection with a sale of all or substantially all of the
assets of the General Partner or a decree of judicial dissolution of the
Operating Partnership pursuant to the provisions of Georgia law, prior to
December 31, 2093, without a vote of the Limited Partners. Weeks' limited and
general partnership interests in the Operating Partnership entitle it to share
in cash distributions from, and in profits and losses of, the Operating
Partnership in proportion to Weeks' percentage interest therein (through Weeks
GP and Weeks LP) and entitle Weeks to vote (through Weeks LP) on all matters
requiring a vote of the Limited Partners (other than the matters set forth in
subsections (i) through (iv) of this paragraph).
As part of the formation of the Operating Partnership, two new companies, Weeks
Realty Services, Inc. ("Weeks Realty Services") and Weeks Construction Services,
Inc. ("Weeks Construction Services"), were organized as separate operating
subsidiaries of the Operating Partnership. Certain officers and directors of
Weeks received 99%, collectively, of the voting common stock of each of Weeks
Realty Services and Weeks Construction Services, and the Operating Partnership
received 1% of the voting common stock and 100% of the nonvoting common stock of
each of Weeks Realty Services and Weeks Construction Services. The voting and
nonvoting common stock of each of Weeks Realty Services and Weeks Construction
Services held by the Operating Partnership represents approximately 99% of the
equity interests therein. As of June 30, 1997, the board of directors of each of
Weeks Realty Services and Weeks Construction Services was comprised of A. Ray
Weeks, Jr., Thomas D. Senkbeil and Forrest W. Robinson.
Operating Subsidiaries
The operating subsidiaries of the Operating Partnership include:
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Weeks Realty Services
Weeks Realty Services generally provides property management, leasing and
landscaping services to third parties. Its agreements are generally cancelable
by either party upon 30 days' written notice. Weeks Realty Services' management
contracts generally provide for it to receive a management fee in the range of
3.0% to 3.5% of qualifying revenue, as defined in such agreements. For leasing
services, Weeks Realty Services generally receives leasing commissions in the
range of 2.5% to 4.0% of rental revenue. Weeks Realty Services also provides
fee development services for clients on land owned by third parties.
Weeks Construction Services
Weeks Construction Services generally provides general contracting services to
third parties.
Weeks Development Partnership
Weeks Development Partnership ("Weeks Development") is a Georgia general
partnership owned 25% by Weeks Realty Services and 75% by Weeks Construction
Services. Weeks Development holds certain development land that is or may be
used for build-to-suit for sale projects, and interests in certain joint
ventures that own interests in certain development land. The Operating
Partnership may purchase sites for development from Weeks Development.
Weeks Financing Limited Partnership
The Operating Partnership owns five of its Industrial Properties through its 99%
ownership of Weeks Financing Limited Partnership (the "Financing Partnership").
The Financing Partnership Properties are encumbered by mortgage indebtedness
assumed in connection with the Initial Offering. The remaining 1% ownership
interest in the Financing Partnership is held by Weeks Realty Services.
Current Acquisition Activity
The Operating Partnership has agreed to acquire, subject to the completion of
due diligence procedures and other closing considerations, 6 industrial and
suburban office Properties totaling approximately 715,000 square feet and with a
total cost, including acquisition-related costs and expenses, of approximately
$42.6 million. The following table contains information regarding the Operating
Partnership's Properties currently under agreement to acquire.
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Acquisitions -- Under Agreement to Acquire
<TABLE>
<CAPTION>
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Number Total Estimated Estimated
Market/ Property of Square Acquisition Occupancy Cost
Property or Business Park Type(1) Buildings Feet Date(2) Rate(3) (000s)(4) Major Lessees
- ------------------------- ------- --------- ------ ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nashville--NWI Acquisition
Airpark Business Center
Bldg. XII(5)(6) B 1 156,830 3Q97 66% $ 7,610 Molecular Systems Labs,
Harman Int'l Industries
Bldg. X(5)(6) D 1 106,122 1Q98 5 6,439 N/A
Bldg. II(5)(6) D 1 106,358 3Q97 13 5,366 BellSouth Mobility
Bldg. V(5)(6) D 1 160,848 1Q98 34 6,829 N/A
Research Triangle --
Lichtin Acquisition
1100 Perimeter Park
West(7) S 1 84,950 Aug-97 100 5,200 Coram Healthcare
Regency
Forest(6)(7) O 1 100,000 2Q98 50 11,120 Sprint
- ------- -- -------
6 715,108 44% $42,564
= ======= == =======
</TABLE>
_____________
(1) B=bulk warehouse; D=business distribution; S=business service; and
O=suburban office.
(2) Estimated acquisition date represents the estimated closing date of the
acquisition of such Property under the terms of the applicable agreements.
(3) As of July 31, 1997.
(4) Estimated cost is based upon a number of factors. There can be no
assurance that the total cost of any of these Properties will not exceed
the relevant estimate.
(5) Cost includes a portion of total estimated transaction costs of the NWI
acquisition of approximately $1.6 million.
(6) Property under development or in lease-up.
(7) Cost includes a portion of total estimated transaction costs of the Lichtin
acquisition of approximately $1.2 million.
NWI Acquisition. On November 1, 1996, the Operating Partnership acquired 17
Properties totaling approximately 1.4 million square feet located in Nashville,
Tennessee for aggregate acquisition consideration of approximately $71.1
million, comprised of the issuance of 1,100,752 Units, the assumption of
approximately $42.0 million of mortgage indebtedness, and cash transaction costs
of approximately $1.6 million. The acquisition was consummated pursuant to
certain acquisition agreements by and among the Operating Partnership and NWI
Warehouse Group, L.P., a Tennessee limited partnership, and its affiliates
("NWI"). Since the initial closing, the Operating Partnership has also acquired
approximately 45 net usable acres of undeveloped land for aggregate acquisition
consideration of approximately $6.3 million, including reimbursement of certain
infrastructure improvements, comprised of 251,509 Units. The Operating
Partnership also has acquired two recently completed and leased industrial
Properties totaling approximately 293,000 square feet, for aggregate acquisition
consideration of approximately $12.5 million, comprised primarily of 501,488
Units.
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As part of the NWI acquisition, the Operating Partnership also has agreed to
acquire 4 additional industrial Properties totaling approximately 530,000 square
feet currently under development. The acquisition of each of these 4 Properties
is expected to be completed upon the earlier of (i) the substantial lease-up of
the Property or (ii) March 31, 1998, for a combination of Units and the
assumption of construction indebtedness. In addition, the Operating Partnership
has agreed to acquire, in staged acquisitions through the year 2003,
approximately 105 net usable acres of undeveloped land for Units, the assumption
of indebtedness or cash, or a combination thereof.
Based upon currently available information, the Operating Partnership estimates
the aggregate acquisition consideration for the 4 Properties under development
will total approximately $26.2 million and for the undeveloped land will total
approximately $8.6 million. The aggregate acquisition consideration for the 4
Properties under development and the undeveloped land will be based upon a
number of factors, including the outstanding balance of assumed indebtedness and
the projected property operating income (as defined in the applicable
acquisition agreements) of the applicable Property under development or, in
certain instances, the buildings that are developed in the future on certain
portions of the undeveloped land. One or more of these factors may vary from
the Operating Partnership's current expectations prior to consummation of these
acquisitions. The Operating Partnership has assumed development management
responsibilities for tenant finish improvements for each of the 4 Properties
under development. Closing of the acquisitions of the 4 Properties under
development and the undeveloped land is subject to certain closing conditions,
including updating the Operating Partnership's due diligence procedures, and
there is no assurance that these acquisitions will be consummated.
Lichtin Acquisition. On December 31, 1996, the Operating Partnership acquired
14 Properties totaling approximately 1.1 million square feet located in the
Research Triangle area of North Carolina for aggregate acquisition consideration
of approximately $90.5 million and also acquired approximately 37 net usable
acres of undeveloped land and options to acquire an additional 177 acres for
aggregate acquisition consideration of approximately $3.3 million. The
aggregate acquisition consideration of approximately $93.8 million consisted of
282,178 shares of Weeks common stock, 565,459 Units, approximately $47.6 million
of assumed mortgage indebtedness, the assumption and immediate repayment through
borrowings under the Credit Facility of approximately $15.0 million of
indebtedness, approximately $8.6 million of cash, and cash transaction costs of
approximately $1.2 million. The acquisition was consummated pursuant to certain
acquisition agreements by and among the Operating Partnership, Lichtin
Properties, Inc., a North Carolina corporation, and certain partnerships and
other entities owned or controlled by Lichtin ("Lichtin"). Effective January
31, 1997, the Operating Partnership acquired 3 additional Properties from
Lichtin totaling approximately 154,000 square feet for aggregate acquisition
consideration of approximately $5.2 million, consisting of 55,778 Units and
approximately $3.8 million of assumed mortgage indebtedness. The Operating
Partnership also acquired an additional approximately 5 net usable acres of
undeveloped
-13-
<PAGE>
land for aggregate acquisition consideration of approximately $1.0 million,
consisting of 15,380 Units and the assumption and immediate repayment through
borrowings under the Credit Facility of approximately $610,000.
Effective July 1, 1997, the Operating Partnership acquired 10 industrial and
suburban office buildings totaling approximately 651,000 square feet from
Lichtin for aggregate acquisition consideration of approximately $42.9 million,
comprised of the issuance of Units valued at approximately $5.5 million, the
assumption of mortgage indebtedness of approximately $20.2 million and the
assumption and immediate repayment of certain indebtedness of approximately
$17.2 million.
In addition, the Operating Partnership has agreed to acquire from Lichtin one
completed property totaling approximately 85,000 square feet and one property
totaling approximately 100,000 square feet currently under development. The
Operating Partnership expects to complete the acquisition of the property under
development upon the earlier of (i) the substantial lease-up of the Property or
(ii) June 30, 1998, for a combination of cash, Units and the assumption of
construction indebtedness. The acquisition of the completed property is expected
to occur in August 1997. The Operating Partnership has also agreed to acquire
from Lichtin approximately 59 net usable acres of undeveloped land in a staged
acquisition over a period of approximately four years. Consideration for this
undeveloped land is expected to consist of Units.
Based upon currently available information, the Operating Partnership estimates
that the aggregate acquisition consideration for the remaining completed
property and the remaining property under development to be acquired in future
phases of the Lichtin acquisition is expected to be approximately $16.3 million.
Consideration for the 59 net usable acres of undeveloped land will be
approximately $7.4 million. The actual amount of the acquisition consideration
relating to the remaining property under development will be based upon a number
of factors, including the outstanding balance of assumed indebtedness at the
time of acquisition and the projected net operating income (as defined in the
applicable acquisition agreements) of the remaining property. The Operating
Partnership has assumed development management responsibilities for the
remaining property under development and management and leasing responsibilities
for the completed property. Closing of the acquisitions of the remaining
completed and development properties and the undeveloped land is subject to
certain closing conditions, including updating the Operating Partnership's due
diligence procedures, and there is no assurance that these acquisitions will be
consummated.
Northwest Business Center/Franklin Forest Acquisition. On May 30, 1997, the
Operating Partnership acquired for cash 8 business distribution Properties
totaling approximately 350,000 square feet and 9 business service Properties
totaling approximately 196,000 square feet in two business parks--Northwest
Business Center and Franklin Forest--located in the northwest submarket of
metropolitan Atlanta. These Properties, which were constructed in 1982 and 1983,
had an average Occupancy Rate at June 30, 1997 of 93%. The Properties are leased
to 73 tenants, among the largest of which are Tridom Corporation (a subsidiary
of AT&T), Riverwood International Corporation and
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<PAGE>
American Home Care. The total cost of the Properties was approximately $29.3
million. This acquisition increased the Operating Partnership's portfolio of
Properties in the northwest submarket of metropolitan Atlanta from approximately
830,000 square feet to approximately 1.4 million square feet. This submarket was
one of the four most active, in terms of net absorption, in metropolitan Atlanta
in 1996. In August 1996, the Operating Partnership purchased 2 Properties in
Northwest Business Center as part of a separate transaction.
Current Development Activity
The Operating Partnership currently has 32 industrial and suburban office
Properties and one industrial Property expansion under development totaling
approximately 3.6 million square feet, with a total estimated cost of
approximately $188.1 million. As of July 31, 1997, these Properties under
development are leased or pre-leased an average of approximately 48%. The
following table contains information regarding the Operating Partnership's
Properties currently under development or in lease-up.
-15-
<PAGE>
Properties Under Development or in Lease-up (1)
<TABLE>
<CAPTION>
Percent Estimated
Market/Property or Business Park Estimated Estimated Estimated Leased or Total
- -------------------------------- Property Square Completion Stabilization Pre- Cost Major
Type(2) Feet(3) Date(4) Date(5) Leased(6) (000s)(7) Lessees
------- ------- ------- ------------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-Tenant
Atlanta
5195 Southridge Pkwy.(8)(9) D 60,000 Sep-95 Nov-97 0% $2,758 N/A
Southridge
5149 Southridge Pkwy.(8)(9) D 46,800 Feb-96 Nov-97 64 2,497 Burlington Air
Southridge Express
(expansion)
5025 Derrick Jones Rd.(9)(10) D 89,600 Apr-96 Jul-97 100 4,458 Professional
Southridge Sales Group,
Dedicated
Transportation,
AIT Freight
Systems
3240 Town Point Dr.(9) D 140,400 Sep-96 Sep-97 77 5,585 The Barco Group,
Town Point Commodore
Separation Tech.
1335 Northmeadow D 88,783 Nov-96 Aug-97 100 6,950 Evans
Pkwy.(9)(10) Technology,
Northmeadow UPS, Visiting
Nurse Health
Systems,
Pioneer,
Checkmate
Electronics,
American Honda
250 Hembree Park Dr.(9)(10) D 94,500 Nov-96 Nov-97 71 4,942 Paul Davis
Northmeadow Systems,
Roadtrac, Sprint,
National Energy
3280 Summit Ridge Pkwy.(9) B 173,360 Feb-97 Feb-98 83 4,999 Professional
Berkeley Lake Book Dist.,
Public Storage
120 Declaration Dr.(9) B 301,200 Mar-97 Oct-97 70 7,841 Appleton Papers
Liberty Distribution Center
3805 Crestwood Pkwy.(9) O 105,295 Mar-97 Mar-98 88 10,646 Del Norske
Crestwood Pointe Veritas Optres,
Summit Group,
Paccar
Financial,
Astronet
1750 Beaver Ruin Rd.(9) S 67,600 Apr-97 Feb-98 86 4,860 Liberty Mutual
Gwinnett Park Insurance, Saab
11390 Old Roswell Rd.(10) S 47,600 Jun-97 Oct-97 31 3,527 N/A
Northmeadow
250 Horizon Drive B 267,619 Aug-97 Aug-98 23 7,661 Crate & Barrel
Horizon
2775 Eastside Parkway D 79,588 Oct-97 Oct-98 46 3,500 Innovative
The Business Park at Products
Sugarloaf
3885 Crestwood Pkwy. O 105,295 Mar-98 Mar-99 0 11,109 N/A
Crestwood Point
2550 Northwinds Parkway O 149,797 Feb-98 Feb-99 0 16,169 N/A
Northwinds
2885 Breckenridge Blvd. S 82,349 Oct-97 Oct-98 84 5,866 Equifax,
Park Creek General
Instruments
</TABLE>
-16-
<PAGE>
Properties Under Development or in Lease-up (continued)(1)
<TABLE>
<CAPTION>
Percent Estimated
Estimated Estimated Estimated Leased or Total
Market/Property or Business Park Property Square Completion Stabilization Pre- Cost Major
- -------------------------------- Type(2) Feet(3) Date(4) Date(5) Leased(6) (000s)(7) Lessees
------- ------- ------- ------------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-Tenant (continued)
660 Hembree Parkway D 94,500 Jan-98 Jan-99 53% $ 4,226 BellSouth
Northmeadow
130 Declaration Drive B 210,000 Dec-97 Dec-98 0 5,373 N/A
Liberty Distribution Center
3270 Summit Ridge Parkway B 152,000 Oct-97 Oct-98 0 4,198 N/A
Berkeley Lake
Orlando
1629 Prime Ct. D 43,200 Jan-97 Jan-98 89 2,416 JD Group,
Airport Commerce Center Rocap
2490 Principal Row B 101,800 Apr-97 Nov-97 100 3,491 Greenmount
Orlando Central Park Storage,
Universal
Studios
Celebration Blvd. S 58,702 Oct-97 Oct-98 0 4,879 N/A
Celebration
Technology Parkway S 52,777 Jan-98 Jan-99 0 3,257 N/A
Technology Park
Nashville
736 Melrose Avenue D 103,400 Feb-98 Feb-99 0 5,454 N/A
Four-Forty Business Center
3300 Briley Park Blvd. South B 194,750 Oct-97 Oct-98 0 6,374 N/A
Nashville Business Center
Research Triangle
Enterprise IV S 146,250 Jan-98 Jan-99 0 9,166 N/A
Enterprise Center
1700 Perimeter Park Drive O 81,000 Jan-98 Jan-99 0 7,947 N/A
Perimeter Park West
----------- -------------------
Subtotal Multi-Tenant 3,138,165 40 160,149
----------- -------------------
Build-To-Suit
Atlanta
5755 Peachtree Ind. Blvd. O 50,000 Sep-97 Sep-97 100 4,615 IKON Office
IKON Campus Solutions
5765 Peachtree Ind. Blvd. D 60,000 Sep-97 Sep-97 100 3,913 IKON Office
IKON Campus Solutions
5775 Peachtree Ind. Blvd. D 60,000 Sep-97 Sep-97 100 3,194 IKON Office
IKON Campus Solutions
2850 Eastside Parkway (11) D 86,000 Dec-97 Dec-97 100 2,938 Data General
The Business Park at
Sugarloaf
Orlando
2435 Principal Row B 126,818 Sep-97 Sep-97 100 4,464 U.S. Office
Orlando Central Park Products
Research Triangle
Paramount Parkway O 99,684 Apr-98 Apr-98 100 9,164 PPD Pharmaco
Perimeter Park West
----------- -------------------
Subtotal Build-to-Suit 482,502 100 28,288
----------- -------------------
3,620,667 48% $188,437
=========== ===================
</TABLE>
-17-
<PAGE>
- --------------------
Footnotes to Development Table:
(1) Does not include development Properties under agreement to be acquired from
NWI or Lichtin.
(2) B=bulk warehouse; D=business distribution; S=business service; and
O=suburban office.
(3) Actual leasable square feet may vary upon completion.
(4) Represents actual or estimated shell completion of the Property. There can
be no assurance that the Property will be completed by the estimated
completion date.
(5) Represents the actual or estimated stabilization date of the Property.
Properties are considered stabilized for financial reporting purposes upon
the earlier of substantial lease-up or one year after shell completion.
There can be no assurance that the Property will reach stabilization by
the estimated stabilization date.
(6) As of July 31, 1997.
(7) The total actual or estimated cost information presented includes the
Operating Partnership's estimate of the fair market value of any
development land used in the development and capitalized costs through the
development stabilization date. There can be no assurance that the actual
cost of a building will not exceed the estimate.
(8) The Operating Partnership is the developer for the joint ventures that own
these Properties and in which the Operating Partnership currently has
interests ranging from 2.5% to 5.0%. The Operating Partnership has options
to purchase these Properties upon stabilization, as defined in the joint
venture agreements.
(9) Shell completed; interior finish to be completed.
(10) The Operating Partnership is the developer of this Property, has an option
to purchase the Property upon stabilization and can be required by the
owner to purchase the Property after completion.
(11) Sugarloaf Properties Inc., an unrelated third party, has exercised its
option to participate in 50% of the development and operations of this
Property. Figures are based on 50% of the estimated cost. Upon
stabilization, the Operating Partnership will account for this Property
under the equity method.
Competition
Numerous properties compete with the Operating Partnership's Properties in
attracting tenants and corporate users. Some of these competing properties may
be newer or better located than the Operating Partnership's Properties. The
number of competitive industrial or suburban office properties and the
availability of land suitable for industrial or suburban office development in a
particular area could have a material effect on the Operating Partnership's
ability to lease or develop space. The Operating Partnership may be competing
with other developers that have greater resources than the Operating
Partnership. In addition, in order for Weeks to maintain its qualification as a
REIT, the Operating Partnership is required under the Internal Revenue Code of
1986, as amended (the "Code"), to distribute annually significant amounts of
cash from operations to its partners (including Weeks GP and Weeks LP), while
some of its competitors may be able to retain more of their working capital to
finance projects.
The Operating Partnership competes for tenants based on its high level of client
service, the quality of its Properties and business parks, and its ability to
successfully develop a wide range of industrial and suburban office Properties.
Leases at the Operating Partnership's Properties are priced competitively based
on market conditions, supply and demand characteristics, and the quality of the
Operating Partnership's Properties and
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<PAGE>
services. The Operating Partnership does not seek to compete solely on the basis
of providing the low-cost solution for all tenants.
Americans with Disabilities Act
The Properties and any newly acquired Properties must comply with Title III of
the Americans with Disabilities Act (the "ADA") to the extent that such
properties are "public accommodations" and/or "commercial facilities" as defined
by the ADA. Compliance with the ADA requirements could require removal of
structural barriers to handicapped access in certain public areas of the
Operating Partnership's Properties where such removal is readily achievable. The
Operating Partnership believes that the Properties comply with all present
requirements under the ADA and applicable state laws. Noncompliance could result
in imposition of fines or an award of damages to private litigants. If required
to make material additional changes, the Operating Partnership's results of
operations could be adversely affected.
Environmental Regulations
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be held liable for the costs of removal or
remediation of hazardous or toxic substances located on or in the property.
These laws often impose such liability without regard to whether the owner knows
of, or was responsible for, the presence of such hazardous or toxic substances.
The cost of any required remediation or removal of such substances may be
substantial. In addition, the owner's liability as to any property is generally
not limited under such laws and regulations and could exceed the value of the
property and/or the aggregate assets of the owner. The presence of such
substances, or the failure to remediate such substances properly, may also
adversely affect the owner's ability to sell or lease the property or to borrow
using the property as collateral. Under such laws and regulations, an owner or
entity who arranges for the disposal or treatment of hazardous or toxic
substances at a disposal or treatment facility may also be liable for the costs
of removal or remediation of all such substances at such facility, whether or
not such facility is owned or operated by such person. Certain tenants of the
Operating Partnership handle and store hazardous substances at the Operating
Partnership's Properties. As a result, in connection with the ownership of the
Operating Partnership's Properties or land held for development and a tenant's
improper handling, storage, disposal or treatment of such hazardous or toxic
substances, the Operating Partnership may be liable for such costs, including
the removal or remediation of all such substances from such Properties. Some
laws and regulations impose liability for the release of certain materials into
the air or water from a property, including asbestos, and such release can form
the basis for liability to third parties for personal injury or other damages.
Other laws and regulations can limit the development of and impose liability for
the disturbance of wetlands or the habitats of threatened or endangered species.
-19-
<PAGE>
The Operating Partnership regularly makes capital expenditures and reviews the
conditions of its Properties and its land held for development in order to
maintain compliance with applicable environmental laws. Based on facts currently
known to it, the Operating Partnership does not believe it will be required
under existing environmental laws to expend amounts that would have a material
adverse effect on its results of operations, financial condition or liquidity.
However, no assurance can be given that material environmental liabilities do
not exist, that any prior owner or operator of a Property or land held for
development did not create any material environmental condition not known to the
Operating Partnership, that a material environmental condition does not
otherwise exist as to any one or more of the Properties or land held for
development, or that future uses and conditions (including changes in applicable
environmental laws and regulations and the uses and conditions of properties in
the vicinity, such as leaking underground storage tanks and the activities of
the tenants) will not result in the imposition of environmental liability. No
material expenditures have been made by the Operating Partnership in 1996 or in
1995 relating to environmental matters.
-20-
<PAGE>
Item 2. Financial Information
Selected Financial Data
The following table sets forth selected financial data on a historical basis for
the Operating Partnership and on a combined historical basis for the Operating
Partnership's predecessors. The following information should be read in
conjunction with all of the financial statements and notes thereto included
elsewhere herein. The consolidated Selected Financial Data for the three months
ended March 31, 1997 and 1996 has been derived from the unaudited consolidated
financial statements of the Operating Partnership. In the opinion of management,
the operating information for the three months ended March 31, 1997 and 1996
includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein. The results of
operations for the interim period ended March 31, 1997 are not necessarily
indicative of the results to be obtained for the year ended December 31, 1997.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Weeks Realty, L.P.
--------------------------------------------------------------------
(In thousands, except per unit amounts) Mar. 31, 1997 Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994
- ------------------------------------------------ ------------------ ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
(Unaudited)
Balance Sheet Data,
at period end
Investment in real estate before
accumulated depreciation $ 630,403 $ 592,841 $ 319,763 $ 162,709
Net investment in real estate 584,246 551,372 289,874 139,750
Total assets 630,092 591,849 320,441 176,674
Total indebtedness 320,883 296,975 147,305 71,961
Other limited partners' capital interests
at redemption value 173,863 149,133 64,508 56,723
Partners' capital (owners' deficit) 120,355 132,808 99,104 41,630
</TABLE>
<TABLE>
<CAPTION>
Weeks Group (1)
------------------------------
(In thousands, except per unit amounts) Dec. 31, Dec. 31,
1993 1992
- -------------------------------------------- ---------------- ------------
<S> <C> <C>
Balance Sheet Data,
at period end
Investment in real estate before
accumulated depreciation $ 95,831 $ 94,095
Net investment in real estate 76,944 77,903
Total assets 101,366 98,596
Total indebtedness 117,280 118,293
Other limited partners' capital interests
at redemption value -- --
Partners' capital (owners' deficit) (24,197) (25,287)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Weeks Realty, L.P.
--------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended Year Ended Year Ended Aug. 24 to
Mar. 31, 1997 Mar. 31, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
- --------------- ----------------- ----------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Operating Data
Rental and reimbursement
revenues $19,557 $11,828 $52,679 $34,015 $8,877
Total revenues 19,899 12,129 53,883 35,271 9,312
Operating, maintenance and
real estate tax expenses 3,922 2,362 10,750 6,896 1,714
Depreciation and amortization 5,344 2,951 13,474 8,177 2,098
Interest expense 5,066 2,435 11,779 8,106 1,958
Amortization of deferred
financing costs 226 200 864 691 252
General and administrative
expenses 1,169 716 3,039 1,848 472
Income (loss) before
extraordinary loss 5,058 3,814 15,809 11,107 3,734
Net income (loss) 5,058 3,814 15,809 11,107 1,067
Per Unit Data
Income before
extraordinary loss $ 0.27 $ 0.28 $ 1.11 $ 1.03 $ 0.36
Net income 0.27 0.28 1.11 1.03 0.10
Distributions 0.43 0.40 1.63/(2)/ 1.525/(3)/ 0.525/(4)/
Other Data
Cash flow provided by (used in)
Operating activities $9,562 $6,525 $28,031 $18,678 $ 3,954
Investing activities (21,814) (11,598) (120,323) (117,127) (38,148)
Financing activities 12,291 4,398 91,570 93,097 40,352
Funds from operations\(5)\ 10,412 6,775 29,323 19,307 5,832
</TABLE>
<TABLE>
<CAPTION>
Weeks Group (1)
--------------------------------------------------
Jan. 1 to Year ended Year ended
Aug. 23, 1994 Dec. 31, 1993 Dec. 31, 1992
- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Operating Data
Rental and reimbursement
revenues $11,914 $18,023 $16,865
Total revenues 16,538 24,817 20,940
Operating, maintenance and
real estate tax expenses 2,721 3,928 3,832
Depreciation and amortization 2,920 4,456 4,021
Interest expense 6,682 10,254 10,635
Amortization of deferred
financing costs 322 372 363
General and administrative
expenses 1,514 2,191 1,545
Income (loss) before
extraordinary loss 516 998 (1,394)
Net income (loss) 516 998 (1,394)
Per Unit Data
Income before
extraordinary loss
Net income
Distributions
Other Data
Cash flow provided by (used in)
Operating activities $2,769 $3,569 $(1,947)
Investing activities (14,953) (1,974) (4,509)
Financing activities 12,229 (1,541) 6,393
Funds from operations\(5)\ -- -- --
</TABLE>
(1) Represents the historical combined operations and combined financial
position of Weeks Group, the predecessor entity. On August 24, 1994, Weeks
Corporation (the "Company") and Weeks Realty, L.P. (the "Operating
Partnership") completed an initial public offering and related formation
transactions. (See Note 1 to the consolidated and combined financial
statements.)
(2) Includes distributions for the fourth quarter of 1996 ($0.43) which were
paid in January 1997.
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<PAGE>
(3) Includes distributions for the fourth quarter of 1995 ($0.40) which were
paid in January 1996.
(4) Includes distributions for a partial third quarter of 1994 ($0.15) after
the Operating Partnership's formation and distributions for the fourth
quarter of 1994 ($0.375) which were paid in January 1995.
(5) The Operating Partnership believes that funds from operations provides an
additional indicator of the financial performance of the Operating
Partnership. The Operating Partnership computes funds from operations in
accordance with standards established by the National Association of Real
Estate Investment Trusts ("NAREIT"). Funds from operations is defined by
NAREIT to mean net income (loss) determined in accordance with generally
accepted accounting principles ("GAAP"), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same
basis. Funds from operations presented herein is not necessarily comparable
to funds from operations presented by other real estate companies due to
the fact that not all real estate companies calculate funds from operations
in the same manner. However, the Company's funds from operations is
comparable to the funds from operations of real estate companies that use
the NAREIT definition. Funds from operations should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indicator of the Company's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it necessarily indicative of sufficient
cash flow to fund all of the Company's needs. Funds from operations does
not represent cash flow from operating, investing and financing activities
as defined by GAAP, which are discussed under "Liquidity and Capital
Resources" below. Additionally, funds from operations does not measure
whether cash flow is sufficient to fund all cash flow needs, including
principal amortization, capital expenditures and distributions to
unitholders. The Operating Partnership's computation of funds from
operations is detailed under "Liquidity and Capital Resources" below.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data and the accompanying Consolidated Financial Statements of the
Operating Partnership and the Combined Financial Statements of Weeks Group, the
predecessor to Weeks, and notes thereto, included elsewhere herein. This
Registration Statement on Form 10 and other statements issued or made from time
to time by the Operating Partnership or its representatives contain statements
which may constitute "Forward-looking Statements" within the meaning of the
Securities Act and the Exchange Act, as amended by the Private Securities
Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77z-2 And 78u-5 (Supp.
1996). Those statements include statements regarding the intent, belief or
current expectations of the Operating Partnership and members of its management
team as well as the assumptions on which such statements are based. Any such
Forward-looking Statements are not guarantees of future performance and the
Operating Partnership's actual results could differ materially from those set
forth in such Forward-looking Statements. Factors currently known to management
that could cause actual results to differ materially from those set forth in
such Forward-looking Statements include general economic conditions, local real
estate conditions, timely releasing of occupied square footage upon expiration,
interest rates, availability of equity and debt financing and other risks
detailed from time to time in the Operating Partnership's and Weeks' filings
with the Securities and Exchange Commission, including quarterly reports on Form
10-Q, current reports on Form 8-K and annual reports on Form 10-K. The Operating
Partnership undertakes no obligation to update or revise Forward-looking
Statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time.
-22-
<PAGE>
General
The Operating Partnership and its subsidiaries own, operate, develop, construct,
acquire and manage industrial and suburban office buildings in the southeastern
United States. The Operating Partnership and its subsidiaries conduct
substantially all of the on-going operations of Weeks, a publicly-traded company
which operates as a self-ministered and self-managed REIT. The Operating
Partnership was formed and capitalized with the proceeds from the Company's
Initial 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 to the development, landscape and property management
businesses of the predecessors to the Operating Partnership and Company. For a
further description of the Company, see Note 1 to the consolidated and combined
financial statements.
Results of Operations
The results of operations as discussed herein include the historical results of
the Operating Partnership for the three months ended March 31, 1997 and 1996,
for the years ended December 31, 1996 and 1995, and for the period from August
24, 1994 to December 31, 1994, respectively; and of Weeks Group for the period
from January 1, 1994 to August 23, 1994. For the purpose of comparison to 1995
operating results, the results for the periods from January 1, 1994 to August
23, 1994 and August 24, 1994 to December 31, 1994 have been aggregated.
Subsequent to the Initial Offering, all third-party service businesses conducted
through the Operating Partnership's subsidiaries (the "Subsidiaries"), Weeks
Realty Services (fee landscape and property management services) and Weeks
Construction Services (fee construction) have been deconsolidated and accounted
for on the equity method of accounting. Therefore, certain of the revenue and
expense captions relating to the third-party service business operations in 1994
are discussed after aggregating the portion of these items reported as part of
the Weeks Group combined financial statements with those of the Subsidiaries
(see Notes 2 and 7 to the consolidated and combined financial statements).
On November 1, 1996 and December 31, 1996, the Operating Partnership completed
the initial closings of the acquisitions of properties and the related
operations of two privately-owned real estate companies -- NWI, whose properties
and operations are located in Nashville, Tennessee, and Lichtin, whose
properties and operations are located in the Research Triangle (see Note 8 to
the consolidated and combined financial statements). While these transactions
did not have a material impact on 1996 reported results of operations, they were
significant transactions as they provided for the Operating Partnership's
continued expansion in the southeastern United States. The impact of these
acquisitions on reported operating results for the three months ended March 31,
1997 is discussed herein. As discussed below, the operations of the NWI and
Lichtin acquisition
-23-
<PAGE>
properties are included with all of the Operating Partnership's acquisition
properties in the following comparisons of operating results.
Comparison of Operating Results for the Three Months Ended March 31, 1997 to
the Three Months Ended March 31, 1996
Operating information relating to the Operating Partnership's properties for the
three months ended March 31, 1997 and 1996, respectively, is summarized below
(in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended %
March 31, 1997 March 31, 1996 Change
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental revenues $17,400 $10,780 61.4%
Tenant reimbursements 2,157 1,048 105.8%
- ----------------------------------------------------------------------------------------------------
Property operating revenues 19,557 11,828 65.3%
- ----------------------------------------------------------------------------------------------------
Operating and maintenance expenses 2,223 1,294 71.8%
Real estate taxes 1,699 1,068 59.1%
Depreciation and amortization 5,344 2,951 81.1%
- ----------------------------------------------------------------------------------------------------
Property operating expenses 9,266 5,313 74.4%
- ----------------------------------------------------------------------------------------------------
Property operating revenues less
property operating expenses $10,291 $6,515 58.0%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Period to period comparisons of property operating revenues and expenses for the
three months ended March 31, 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.
Property operating revenues (rental revenue plus tenant reimbursements)
increased $7,729,000 or 65.3% between periods. Of this increase, $6,240,000,
$1,219,000 and $270,000 were attributable to acquisition, development and core
properties, respectively. The increases relating to acquisition and development
properties were due to the acquisition of 51 properties (46 in 1996 and 5 in
1997) totaling approximately 3,721,000 square feet and the stabilization of 13
development properties (8 in 1996 and 5 in 1997) and two property expansions
(one each year) totaling approximately 1,629,000 square
-24-
<PAGE>
feet. Property operating expenses increased $3,953,000 or 74.4% between periods
due primarily to the growth in the property portfolio resulting from the
acquisition and development properties discussed above. For the comparable
periods ended March 31, 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
Ended Ended %
March 31, 1997 March 31, 1996 Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental revenues $10,714 $10,570 1.4%
Tenant reimbursements 1,163 1,037 12.2%
- ---------------------------------------------------------------------------------------------------
Property operating revenues 11,877 11,607 2.3%
- ---------------------------------------------------------------------------------------------------
Operating and maintenance
expenses 1,361 1,287 5.7%
Real estate taxes 1,111 1,039 6.9%
Depreciation and amortization 3,007 2,911 3.3%
- ---------------------------------------------------------------------------------------------------
Property operating expenses 5,479 5,237 4.6%
- ---------------------------------------------------------------------------------------------------
Property operating revenues
less property operating
expenses $ 6,398 $ 6,370 0.4%
- ---------------------------------------------------------------------------------------------------
Average occupancy 95.9% 96.1%
- ---------------------------------------------------------------------------------------------------
</TABLE>
Property operating revenues from core properties increased 2.3% despite a slight
decrease in overall average occupancy. Adjusted for the decrease in weighted
average occupancy between periods, property operating revenues from core
properties increased approximately 3%. Property operating expenses increased
4.6% due primarily to both increased repairs and maintenance and real estate tax
expenses in 1997. Property operating revenues less property operating expenses
from core properties increased 1.3%, exclusive of depreciation and amortization
expense, and increased approximately 2% after adjusting for the decrease in
weighted average occupancy between periods.
Interest expense increased by $2,631,000 or 108.0% from $2,435,000 for the three
months ended March 31, 1996, to $5,066,000 for the three months ended March 31,
1997, as a result of increased mortgage interest of $1,846,000 due primarily to
mortgage debt assumed in conjunction with the Operating Partnership's 1996
property acquisitions, and increased Credit Facility interest of $785,000.
Interest expense of $5,066,000 for the three months ended March 31, 1997,
consisted of mortgage interest of $3,939,000 and Credit Facility interest of
$1,127,000.
Amortization of deferred financing costs increased $26,000 or 13.0% from
$200,000 for the three months ended March 31, 1996, to $226,000 for the three
months ended March 31, 1997, due primarily to the amortization of deferred
financing costs associated with increasing the availability under and
restructuring the Credit Facility in 1996.
Operating Partnership general and administrative expenses increased by $453,000
or 63.3% from $716,000 for the three months ended March 31, 1996, to $1,169,000
for the three months ended March 31, 1997, due primarily to increased personnel
and related
-25-
<PAGE>
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 were
5.9% in both 1997 and 1996. General and administrative expenses of the Operating
Partnership when combined with the general and administrative expenses of the
Subsidiaries increased $526,000 or 48.6% from $1,083,000 in 1996 to $1,609,000
in 1997 for the same reasons discussed above having to do with the Operating
Partnership's growth. 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 7.9%
in 1996 to 7.3% in 1997.
Interest income increased $155,000 or 186.7% from $83,000 for the three months
ended March 31, 1996 to $238,000 for the three months ended March 31, 1997, due
primarily to increased real estate development loan balances between periods.
Real estate development loans are loans to affiliated joint ventures and other
parties, under joint development arrangements, for the development of industrial
buildings. The Operating Partnership has options to acquire the developed
buildings upon their completion.
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.
Equity in earnings of the Subsidiaries increased by $382,000 or 143.6% from
$266,000 for the three months ended March 31, 1996 to $648,000 for the three
months ended March 31, 1997 due primarily to the increased activity and
profitability of the Subsidiaries' third-party construction and landscape
business and due to increased earnings from land sales and land brokerage
transactions in 1997.
-26-
<PAGE>
Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995
Operating information relating to the Operating Partnership's properties for the
years ended December 31, 1996 and 1995 and for the periods from August 24, 1994
to December 31, 1994 and January 1, 1994 to August 23, 1994 is summarized below
(in thousands):
<TABLE>
<CAPTION>
%
Year ended Year ended Aug. 24 to Jan. 1 to % Change Change
Dec. 31, Dec. 31, Dec. 31, Aug. 23, 1996 vs. 1995 vs.
1996 1995 1994 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental revenues $48,162 $31,217 $ 8,144 $10,937 54.3% 63.6%
Tenant reimbursements 4,517 2,798 733 977 61.4% 63.6%
- --------------------------------------------------------------------------------------------------------------------------------
Property operating revenues $52,679 $34,015 $ 8,877 $11,914 54.9% 63.6%
- --------------------------------------------------------------------------------------------------------------------------------
Operating and maintenance
expenses $ 6,025 $ 3,899 $ 979 $ 1,747 54.5% 43.0%
Real estate taxes 4,725 2,997 735 974 57.7% 75.4%
Depreciation and amortization 13,474 8,177 2,098 2,920 64.8% 63.0%
- --------------------------------------------------------------------------------------------------------------------------------
Property operating expenses $24,224 $15,073 $ 3,812 $ 5,641 60.7% 59.5%
- --------------------------------------------------------------------------------------------------------------------------------
Property operating revenues
less property operating
expenses $28,455 $18,942 $ 5,065 $ 6,273 50.2% 67.1%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Year to year comparisons of property operating revenues and expenses for the
years ended December 31, 1996 and 1995 are discussed herein using the categories
"core properties," "development properties" and "acquisition properties." Core
properties are defined as properties which were stabilized and operating for
comparable full year periods. The Company defines a property as stabilized upon
the earlier of substantial lease-up or one year from building shell completion.
Development properties reflect properties completed and stabilized, and
acquisition properties are properties acquired, subsequent to January 1, 1995.
Property operating revenues (rental revenues plus tenant reimbursements)
increased $18,664,000 or 54.9% in 1996. Of this increase, $13,733,000,
$3,750,000 and $1,181,000 was attributable to acquisition, development and core
properties, respectively. The increases from acquisition and development
properties were due to the acquisition of 81 properties (49 in 1995 and 32 in
1996) totaling 4,727,000 square feet, excluding 14 properties totaling 1,109,000
square feet acquired on December 31, 1996, and the stabilization of 15
development properties (seven in 1995 and eight in 1996) and two property
expansions (one each year) totaling 1,799,000 square feet. Property operating
expenses increased $9,151,000 or 60.7% between years, due primarily to the
growth in the property portfolio resulting from the acquisition and development
properties discussed
-27-
<PAGE>
above. For the comparable years of 1996 and 1995, operating results of the core
properties, representing 78 properties totaling 5,331,000 square feet, are
summarized below (in thousands):
<TABLE>
<CAPTION>
Year ended Year ended
Dec. 31, Dec. 31,
1996 1995 % Change
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental revenues $25,157 $24,045 4.6%
Tenant reimbursements 2,000 1,931 3.6%
- -------------------------------------------------------------------------------------------------------
Property operating revenues 27,157 25,976 4.5%
- -------------------------------------------------------------------------------------------------------
Operating and maintenance expenses 3,685 3,210 14.8%
Real estate taxes 2,299 2,300 ---
Depreciation and amortization 7,178 6,310 13.8%
- -------------------------------------------------------------------------------------------------------
Property operating expenses $13,162 $11,820 11.4%
- -------------------------------------------------------------------------------------------------------
Property operating revenues less
property operating expenses $13,995 $14,156 (1.1)%
- -------------------------------------------------------------------------------------------------------
Average occupancy 95.1% 95.9%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Property operating revenues from core properties increased 4.5% despite a slight
decrease in overall average occupancy, due in part to the re-leasing in 1995 of
two buildings totaling 344,000 square feet vacated in early 1995 by Matsushita
Electric Corporation (Panasonic). Re-leasing these two buildings produced an
operating revenue increase of $912,000 in 1996. The positive impact of
re-leasing these buildings was offset by decreased average occupancy in six
other buildings totaling 336,000 square feet which resulted in decreased
operating revenues of $691,000. Exclusive of these occupancy related impacts,
core properties operating revenues increased 4.2% between years due primarily to
rental rate increases.
Property operating expenses increased 11.4% due to both increased operating and
maintenance expenses and depreciation and amortization in 1996. Net of the
impact of the eight buildings affected by occupancy changes, property operating
expenses increased by 8.6% (6.1% excluding depreciation and amortization
expense). The 6.1% increase in property operating expenses, excluding
depreciation and amortization, reflects increased property maintenance and
security expenses between years. Also excluding the impact of the eight
buildings affected by occupancy changes, property operating revenues less
property operating expenses from core properties, increased 0.4% (3.7% exclusive
of depreciation and amortization) between years.
Interest expense increased $3,673,000 or 45.3% from $8,106,000 in 1995 to
$11,779,000 in 1996, due to higher interest on the Operating Partnership's
credit facility and higher mortgage interest in 1996. Higher weighted average
Credit Facility borrowings in 1996 compared to 1995, due to the Operating
Partnership's acquisitions and increased development activity, resulted in
higher Credit Facility interest costs in 1996 of $1,410,000. Mortgage interest
increased $2,263,000 due to interest costs associated with mortgage debt assumed
in connection with the Operating Partnership's 1995 and 1996 acquisitions.
-28-
<PAGE>
Amortization of deferred financing costs increased by $173,000 or 25.0% from
$691,000 in 1995 to $864,000 in 1996, due primarily to the amortization of the
deferred financing costs associated with a $5.1 million industrial revenue bond
refinancing in the first quarter of 1996 and costs associated with increasing
the availability under and restructuring the Credit Facility.
Operating Partnership general and administrative expenses increased by
$1,191,000 or 64.4% from $1,848,000 in 1995 to $3,039,000 in 1996, due primarily
to increased personnel and related administrative costs attributable to the
Operating Partnership's growth and to a lesser extent by a shift in certain
expenses relating to properties which were fee-managed by the Subsidiaries in
1995, but which were subsequently acquired and were owned by the Operating
Partnership in 1996. A portion of the increased expenses in 1996 also relates to
the establishment of an office in Orlando, Florida and the general and
administrative expenses associated with the Operating Partnership's acquired
Nashville, Tennessee operations, both of which occurred in the fourth quarter of
1996. As a percentage of total revenue, general and administrative expenses
increased from 5.2% in 1995 to 5.6% in 1996. General and administrative expenses
of the Operating Partnership, when combined with the general and administrative
expenses of the Subsidiaries increased by $1,367,000 or 40.6% from $3,366,000 in
1995 to $4,733,000 in 1996 for the reasons discussed above. As a percentage of
the combined revenues of the Operating Partnership and the Subsidiaries, the
combined general and administrative expenses of the Operating Partnership and
the Subsidiaries decreased from 8.0% in 1995 to 7.6% in 1996.
Interest income for the year ended December 31, 1996, consists primarily of
interest earned under the development loan arrangements discussed more fully in
Note 6 to the consolidated and combined financial statements. For the year ended
December 31, 1995, interest income represented $213,000 earned under a
short-term note arrangement, made in conjunction with a 1995 property
acquisition, $60,000 earned under the development loan arrangements discussed
above with the remainder earned on short-term cash investments.
Equity in earnings of the Subsidiaries of $1,340,000 in 1996 and $1,220,000 in
1995 represents the Operating Partnership's 99% economic interest in the
earnings of the Subsidiaries after the elimination of interest expense to the
Operating Partnership (see Note 7 to the consolidated and combined financial
statements). As discussed below, in 1995 the Operating Partnership acquired 37
properties which the Subsidiaries previously managed. Additionally, the
Subsidiaries provided other third-party services, such as landscape maintenance,
leasing and tenant interior work for these managed properties. Due to the
acquisition of these properties by the Operating Partnership, the Operating
Partnership's third-party service revenues associated with these properties
ceased at their acquisition dates (generally in the second half of 1995). The
impact, if any, on the comparative results for 1996 and 1995 is included in the
discussion below.
-29-
<PAGE>
Construction and development fees increased by $750,000 or 50.6% from $1,483,000
in 1995 to $2,233,000 in 1996. The increase resulted primarily from higher
general contracting fees earned from a higher volume of general contracting work
in process in 1996 compared to 1995.
Landscape revenue increased $1,181,000 or 30.6% from $3,854,000 in 1995 to
$5,035,000 in 1996 due to increases in landscape installation revenue of
$847,000 resulting from more installation jobs in process in 1996, with the
remaining increase due primarily to net growth in the number of maintenance
contracts.
Property management fees decreased $305,000 or 61.2% from $498,000 in 1995 to
$193,000 in 1996, due primarily to the reduction in the size of the third-party
property management portfolio discussed above.
Commission income decreased $134,000 or 23.0% from $582,000 in 1995 to $448,000
in 1996, due to lower third-party building lease commissions associated with the
reduction of the third-party property management portfolio discussed above,
offset somewhat by increased land sales commissions in 1996 on land managed and
marketed by the Subsidiaries.
Direct costs increased by $823,000 or 23.5% from $3,504,000 in 1995 to
$4,327,000 in 1996, due primarily to costs associated with a higher volume of
landscape installation and maintenance contracts in 1996.
Equity in earnings of partnerships and joint ventures decreased from earnings of
$101,000 in 1995 to a loss of $1,000 in 1996, due primarily to lower profits
from underlying partnership and joint venture land sales activities between
years.
Comparison of Year Ended December 31, 1995 to the Combined Results for Year
Ended December 31, 1994
For the 1995 and 1994 comparison of property operating results, core properties
were defined as properties which were stabilized and operating for comparable
full-year periods. Development properties reflected properties completed and
stabilized subsequent to the IPO and acquisition properties were properties
acquired in conjunction with the Initial Offering and acquired from third
parties subsequent to the Initial Offering.
Property operating revenues (rental revenues plus tenant reimbursements)
increased $13,224,000 or 63.6% in 1995. Of this increase, $7,781,000 and
$5,612,000 related to acquisition and development properties, respectively,
offset by a $169,000 decrease from core properties. The increases from
acquisition and development properties were due to the acquisition of 66
properties (17 in August 1994 and 49 in 1995) totaling 3,351,000 square feet and
the stabilization of 14 development properties (seven in 1994 and seven in 1995)
totaling 1,821,000 square feet. Operating revenues from core properties, which
-30-
<PAGE>
totaled 3,690,000 square feet, decreased due to reduced average occupancies
during 1995 at the Operating Partnership's core office properties, primarily
caused by the February 1995 lease termination of Matsushita Electric Corporation
(Panasonic) in the Operating Partnership's 94,677 square foot office building in
Gwinnett Park (representing net lost property operating revenues of $372,000).
This decrease was offset by property operating revenue increases due to rental
rate growth for all other core properties. The office property discussed above
was re-leased during 1995 and was 92.8% occupied at December 31, 1995. Average
occupancy levels for industrial core properties were generally consistent
year-to-year.
Property operating expenses increased $5,620,000 or 59.5% between years due
primarily to the growth in the property portfolio resulting from the acquisition
and development properties discussed above.
Interest expense decreased by $534,000 or 6.2% from $8,640,000 in 1994 to
$8,106,000 in 1995 primarily as a result of the refinancing and paydown of debt
in August 1994 in conjunction with the capitalization of the Operating
Partnership from the proceeds of the Company's Initial Offering, offset by
borrowings incurred in 1995 to fund certain of the Operating Partnership's
acquisition and development activities. Interest expense of $8,106,000 in 1995
consisted of mortgage interest of $6,670,000 and Credit Facility interest of
$1,436,000.
Amortization of deferred financing costs increased by $117,000 or 20.4% from
$574,000 in 1994 to $691,000 in 1995 due primarily to the amortization of the
deferred financing costs associated with mortgage debt refinanced in August 1994
in conjunction with the formation of the Operating Partnership, and as a result
of the amortization of fees associated with the Credit Facility.
Operating Partnership general and administrative expenses decreased by $138,000
or 6.9% from $1,986,000 in 1994 to $1,848,000 in 1995 due primarily to the
deconsolidation of $987,000 of net general and administrative expenses between
years associated with the Subsidiaries discussed below, offset by approximately
$616,000 of increased expenses of being a public entity for all of 1995 compared
to four months in 1994, as well as increased personnel costs between years.
General and administrative expenses of the Operating Partnership when combined
with the general and administrative expenses of the Subsidiaries increased by
$825,000 or 32.5% from $2,541,000 in 1994 to $3,366,000 in 1995 for the reasons
discussed above. As a percentage of the combined revenues of the Operating
Partnership and the Subsidiaries, the combined general and administrative
expenses of the Operating Partnership and the Subsidiaries decreased from 9.1%
in 1994 to 8.0% in 1995.
Interest income increased by $110,000 or 49.1% from $224,000 in 1994 to $334,000
in 1995. The increase was due mainly to interest income totaling $213,000 earned
under a short-term note arrangement in 1995 associated with the Operating
Partnership's
-31-
<PAGE>
acquisition activity, offset by lower interest earnings from short-term cash
investments in 1995. Interest income in 1994 represents short-term interest
earned on excess funds resulting from the formation of the Operating
Partnership.
Equity in earnings of the Subsidiaries of $1,220,000 in 1995 and $692,000 for
the period from August 24, 1994 to December 31, 1994 represents the Operating
Partnership's 99% economic interest in the earnings of the Subsidiaries after
the elimination of interest expense to the Operating Partnership (see Note 7 to
the consolidated and combined financial statements). As discussed below, in 1995
the Operating Partnership acquired 37 properties which the Subsidiaries
previously managed. Additionally, the Subsidiaries provided other third-party
services, such as landscape maintenance, leasing and tenant interior work for
these managed properties. Due to the acquisition of these properties by the
Operating Partnership, the Operating Partnership's third-party service revenues
associated with these properties ceased. The impact, if any, on 1995 is included
in the discussion below.
Construction and development fees decreased by $143,000 or 8.8% from $1,626,000
in 1994 to $1,483,000 in 1995. The decrease resulted primarily from somewhat
lower tenant interior work fees due to the reduction in the size of the
third-party property management portfolio discussed above.
Landscape revenue increased $631,000 or 19.6% from $3,223,000 in 1994 to
$3,854,000 in 1995 due to increased landscape installation revenue of
approximately $177,000 resulting from one large job completed in the last half
of 1995 and due to net growth in the number of maintenance contracts between
periods.
Property management fees decreased $123,000 or 19.8% from $621,000 in 1994 to
$498,000 in 1995 due primarily to the reduction in the size of the third-party
property management portfolio discussed above.
Commission income decreased $163,000 or 21.9% from $745,000 in 1994 to $582,000
in 1995 due to fewer commissioned land sales transactions and lower third-party
lease commissions associated with the reduction of the third-party property
management portfolio discussed above.
Direct costs increased by $516,000 or 17.3% from $2,988,000 in 1994 to
$3,504,000 in 1995 due primarily to costs associated with a higher volume of
landscape installation and maintenance contracts in 1995.
Liquidity and Capital Resources
The Operating Partnership's net cash provided by operating activities increased
from $6,525,000 for the three months ended March 31, 1996, to $9,562,000 for the
three months ended March 31, 1997, due primarily to the growth in the Company's
operating
-32-
<PAGE>
income resulting from 13 development properties (8 in 1996 and 5 in 1997) and
two property expansions stabilized (one each year) and from 51 buildings
acquired (46 in 1996 and 5 in 1997).
Net cash used in investing activities increased from $11,598,000 for the three
months ended March 31, 1996, to $21,814,000 for the three months ended March 31,
1997, due primarily to higher property development and land acquisition volumes
in the first three months of 1997 compared to 1996.
Net cash provided by financing activities increased from $4,398,000 for the
three months ended March 31, 1996, to $12,291,000 for the three months ended
March 31, 1997. This net increase between periods reflects higher net borrowings
to finance the Operating Partnership's property portfolio growth.
Cash provided by operating activities increased 50.1% or $9,353,000 from
$18,678,000 in 1995 to $28,031,000 in 1996. The increase results primarily from
a full year of operating income in 1996 from 49 buildings acquired and seven
development properties and one property expansion stabilized in 1995, and from
the partial year operating income from 32 buildings acquired and eight
development properties and one property expansion stabilized in 1996.
In 1996, the Operating Partnership invested $121,202,000 in property
acquisition, development, construction and development loan activities. This
compares to $115,179,000 in 1995. The Operating Partnership's aggregate
acquisition, development, construction and development loan activity, including
non-cash investing activities, totaled $281,039,000 and $158,230,000 in 1996 and
1995, respectively. This increased activity reflects the impact of the 1996 NWI
and Lichtin acquisitions (see Note 8 to the consolidated and combined financial
statements).
Financing for the Operating Partnership's property investment activities
consisted primarily of $45,042,000 of additional net borrowings and $68,532,000
from a Company equity offering in 1996 compared to $35,833,000 of net borrowings
and $72,800,000 from a Company equity offering in 1995. The debt and equity
components of the Operating Partnership's on-going financing strategy may differ
based upon future market conditions.
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 distribution requirements,
which are structured to ensure that the Company can satisfy the dividend
requirements necessary to maintain its status as a REIT. Operating Partnership
management believes that operating cash flows will continue to be adequate to
fund these requirements in the short and the long term.
In addition to its operating cash flow, the Operating Partnership has a $175
million unsecured revolving Credit Facility with a syndicated bank group (see
Note 5 to the
-33-
<PAGE>
consolidated and combined 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 March 31, 1997, the Company had available capacity under the
Credit Facility of approximately $51.2 million.
On May 13, 1997, the Company completed a public offering of 3,200,000 shares of
common stock and received net proceeds of approximately $95.1 million. On June
11, 1997, the Company sold an additional 384,200 shares of common stock to cover
over-allotments from the common stock offering discussed above and received net
proceeds of approximately $11.5 million. These proceeds were contributed to the
Operating Partnership in exchange for Units. The proceeds were used to reduce
the Operating Partnership's outstanding Credit Facility borrowings, increasing
the Operating Partnership's available capacity under the Credit Facility by
$106.6 million. In June 1997, the Operating Partnership used the additional
Credit Facility borrowing capacity to prepay, without penalty, three mortgage
notes, totaling $31,170,000 which were scheduled to mature in 1998.
The Operating Partnership believes it currently has adequate liquidity and
sources of capital, including available borrowing capacity under its existing
Credit Facility and remaining capacity of approximately $187 million under the
Company's equity shelf registration, to meet its current operational
requirements, to fund annual principal requirements under existing mortgage
notes payable and to fund its current development and acquisition activity. It
is management's expectation that the 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 begin to
mature in 1998. These resources include long-term mortgage debt and other forms
of debt and equity financing, in both public and private markets, including the
use of the Company's available capacity under its current shelf registration.
Future development and acquisition activities will be undertaken by the
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 targeted returns on investment has been
internally approved. The Operating Partnership maintains staffing levels
sufficient to meet its existing construction and leasing activities. 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 $320.9 million at March 31, 1997, including
borrowings under the Credit Facility of $120.1 million and mortgage notes
payable of $200.8 million. Of the $200.8 million of mortgage indebtedness,
$195.0 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 7.99% and on its variable rate mortgage debt was 3.87% at March 31, 1997.
The weighted average interest rate under the Credit
-34-
<PAGE>
Facility at March 31, 1997, (excluding the effect of the interest rate swap
agreements described below) was 6.98%. 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 interest rate under the fixed swap arrangements is
approximately 8.0%. If interest rates under the Credit Facility, in excess of
the $50.0 million discussed 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 March 31, 1997, would increase or decrease by approximately
$800,000 on an annualized basis.
As discussed above, the Operating Partnership substantially reduced its variable
rate Credit Facility borrowings from the proceeds of the Company's public equity
offering on May 13, 1997. Based on the outstanding balance of mortgage notes
payable at March 31, 1997, the weighted average interest rate on the mortgage
notes with a final maturity in each of the next five years were 7.92% in 1998,
7.30% in 1999, 8.54% in 2000 and 6.96% in 2001. None of the mortgage notes
mature in 1997.
At March 31, 1997, the Operating Partnership's mortgage debt on its consolidated
properties of $200.8 million plus its pro rata share of mortgage debt of its
unconsolidated subsidiaries of $1.4 million, totaled $202.2 million. Including
Credit Facility borrowings of $120.1 million for the Operating Partnership and
$3.7 million for the Subsidiaries, the total debt obligations of the Operating
Partnership and the Subsidiaries were $326.0 million or 33% of the Operating
Partnership's total market capitalization (defined as total debt plus the market
equity value of the Units as calculated herein). At March 31, 1997 (based on the
closing price of the common stock of the Company of $34.375 on March 31, 1997,
the last trading day of the quarter) the 19,155,453 Units outstanding would have
a total market value of $658.5 million.
-35-
<PAGE>
Current Development Activity
The Operating Partnership's current development activity as of July 31, 1997, is
summarized below. All of 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)/
5025 Derrick Jones Rd. 89,600 4,458,000 2Q96/(5)/ 3Q97/(6)/
3240 Town Point Dr. 140,400 5,585,000 3Q96/(5)/ 3Q97
1335 Northmeadow Pkwy. 88,783 6,950,000 4Q96/(5)/ 3Q97/(6)/
250 Hembree Park Dr. 94,500 4,942,000 4Q96/(5)/ 4Q97/(6)/
120 Declaration Dr. 301,200 7,841,000 1Q97/(5)/ 4Q97
3805 Crestwood Pkwy. 105,295 10,646,000 1Q97/(5)/ 1Q98
3280 Summit Ridge Pkwy. 173,360 4,999,000 1Q97/(5)/ 1Q98
1629 Prime Ct. (Orlando, FL) 43,200 2,416,000 1Q97/(5)/ 1Q98
1750 Beaver Ruin Rd. 67,600 4,860,000 2Q97/(5)/ 1Q98
2490 Principal Row (Orlando, FL) 101,800 3,491,000 2Q97/(5)/ 4Q97
11390 Old Roswell Rd. 47,600 3,527,000 2Q97/(5)/ 4Q97/(6)/
736 Melrose Ave. (Nashville, TN) 103,400 5,454,000 3Q97 3Q98
250 Horizon Dr. 267,619 7,661,000 3Q97 3Q98
2755 Eastside Pkwy. 79,588 3,500,000 4Q97 4Q98
Celebration Blvd. (Orlando, FL) 58,702 4,879,000 1Q98 1Q98
3300 Briley Park Blvd. (Nashville, TN) 194,750 6,374,000 4Q97 4Q98
2550 Northwinds Pkwy. 149,797 16,169,000 1Q98 1Q99
Crestwood Pkwy. 105,295 11,109,000 1Q98 1Q99
1700 Perimeter Park Dr. (Raleigh, NC) 81,000 7,947,000 1Q98 1Q99
Perimeter Park Dr. (Raleigh, NC) 146,250 9,166,000 1Q98 1Q99
2885 Breckenridge Blvd. 82,349 5,866,000 4Q97 4Q98
660 Hembree Pkwy. 94,500 4,226,000 1Q98 1Q99
130 Declaration Dr. 210,000 5,373,000 4Q97 4Q98
3270 Summit Ridge Pkwy. 152,000 4,198,000 4Q97 4Q98
Technology Pkwy. (Orlando, FL) 52,777 3,257,000 1Q98 1Q99
- -------------------------------------------------------------------------------------------------------------------
3,138,165 $ 160,149,000
- -------------------------------------------------------------------------------------------------------------------
Build-to-Suit
5755 Peachtree Industrial Blvd. 50,000 4,615,000 3Q97 3Q97
5765 Peachtree Industrial Blvd. 60,000 3,913,000 3Q97 3Q97
5775 Peachtree Industrial Blvd. 60,000 3,194,000 3Q97 3Q97
2435 Principal Row (Orlando, FL) 126,818 4,464,000 3Q97 3Q98
2850 Eastside Pkwy. 86,000 2,938,000 4Q97 4Q98
Paramount Pkwy. 99,684 9,164,000 2Q98 2Q98
- -------------------------------------------------------------------------------------------------------------------
482,502 28,288,000
- -------------------------------------------------------------------------------------------------------------------
3,620,667 $ 188,437,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Actual leasable square feet may vary upon completion.
(2) Estimated cost information includes the Company's estimated future
capitalized costs through the development stabilization date (defined as
the earlier of 95% occupancy or one year from shell completion), including
costs incurred to acquire certain properties after completion. There can be
no assurance that the actual capitalized cost of a building will not exceed
the estimated capitalized costs.
(3) For multi-tenant buildings, represents building shell completion. There
can be no assurance that a property will be completed by the estimated
completion date.
(4) Represents the Company's current estimate of the date the property will
reach stabilization for financial reporting purposes. Properties are
considered stabilized for financial reporting purposes upon the earlier of
substantial lease-up or one year from building shell completion. There can
be no assurance that the property will reach stabilization for financial
reporting purposes by the estimated stabilization date.
-36-
<PAGE>
(5) Shell completed; interior tenant finish to be completed.
(6) The Company is the developer of and has an option to acquire and can be
required to purchase these properties from affiliated joint ventures and
third parties upon stabilization, as defined in the applicable joint
venture and development agreements. The date above reflects the estimated
stabilization and resulting acquisition date by the Company.
Current Acquisition Activity
Subsequent to July 1, 1997 and in conjunction with the NWI and Lichtin
acquisition transactions (see Note 8 to the consolidated and combined financial
statements), the Operating Partnership has agreed, subject to certain closing
conditions, including updating its due diligence procedures, to the future
acquisition of approximately 164 net usable acres of undeveloped land, one
completed building and five buildings under development from NWI and Lichtin.
The estimated aggregate acquisition consideration is estimated to total
approximately $58.6 million, subject to adjustment for the actual operating
results of certain properties to be acquired as more fully discussed in the
acquisition agreements. It is expected that these future acquisitions will be
consummated primarily through a combination of the issuance of Operating
Partnership Units and the assumption of indebtedness, some of which will be
repaid through borrowings under the Credit Facility.
On May 30, 1997, the Operating Partnership acquired 17 industrial buildings in
Atlanta, Georgia for approximately $29.3 million. The acquisition was funded
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 provides an
additional indicator of the financial performance of the Operating Partnership.
Funds from operations is defined by NAREIT to mean net income (loss) determined
in accordance with 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 Funds from operations on the same basis. Funds from
operations is influenced not only by the operations of the properties, but also
by the capital structure of the Operating Partnership. Accordingly, management
expects that funds from operations will be one of the factors considered by the
Board of Directors in determining the amount of cash dividends the Company will
pay
-37-
<PAGE>
to its shareholders. Funds from operations does not represent cash flow from
operating, investing and financing activities as defined by GAAP, which are
discussed under "Liquidity and Capital Resources" in this section. Additionally,
funds from operations does not measure whether cash flow is sufficient to fund
all cash flow needs, including principal amortization, capital expenditures and
dividends to shareholders, and should not be considered as an alternative to net
income for purposes of evaluating the 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 funds from operations 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 $150,000 and $71,000 for the three
months ended March 31, 1997 and 1996, respectively, increased rental revenue
by $475,000 for the year ended December 31, 1996 and decreased rental revenue by
$19,000 for the year ended December 31, 1995.
Funds from operations presented herein under NAREIT guidelines is not
necessarily comparable to funds from operations presented by other real estate
companies due to the fact that not all real estate companies use the same
definition. However, the Operating Partnership's funds from operations is
comparable to the funds from operations of real estate companies that use the
current NAREIT definition.
For the three months ended March 31, 1997, funds from operations increased by
$3,637,000 or 53.7% to $10,412,000 as compared to funds from operations of
$6,775,000 for the three months ended March 31, 1996.
For the year ended December 31, 1996, funds from operations increased
$10,016,000 or 51.9% to $29,323,000 compared to funds from operations of
$19,307,000 for the year ended December 31, 1995. The Operating Partnership's
calculation of funds from operations for the three months ended March 31, 1997
and 1996 and for the years ended December 31, 1996 and 1995, is detailed below
(in thousands):
<TABLE>
<CAPTION>
Three Months Three Months Year Year
Ended Ended Ended Ended
Mar. 31, 1997 Mar. 31, 1996 Dec. 31, 1996 Dec. 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 5,058 $ 3,814 $ 15,809 $ 11,107
Depreciation & amortization 5,344 2,951 13,474 8,177
Real estate depreciation at Subsidiaries 10 10 40 23
- -------------------------------------------------------------------------------------------------------------------
Funds from operations $ 10,412 $ 6,775 $ 29,323 $ 19,307
- -------------------------------------------------------------------------------------------------------------------
Weighted average Units outstanding 18,605 13,723 14,280 10,760
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-38-
<PAGE>
Supplemental Information on Capital Expenditures and Leasing Costs
The following table details the Operating Partnership's capital expenditures for
the three months ended March 31, 1997 and for the years ended December 31, 1996
and 1995 (in thousands):
<TABLE>
<CAPTION>
Three months Year Year
Ended Ended Ended
Mar. 31, 1997 Dec. 31, 1996 Dec. 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Building acquisitions/(1)/ $ 17,698 $ 201,660 $ 110,141
Development and land acquisition activity/(2)(3)/ 20,591 70,476 42,290
Non-revenue-producing building improvements 96 543 331
Revenue-producing building improvements/(4)/ - - 3,520
Tenant improvement and leasing costs on
second-generation leases/(5)(6)/ 933 2,995 2,597
Tenant improvement expenditures to be
reimbursed by tenants - - 545
- ------------------------------------------------------------------------------------------------------------------
$ 39,318 $ 275,674 $ 159,424
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects aggregate acquisition costs including the assumption of
indebtedness of $4,360,000, the issuance of $14,334,000 of Units and other
changes in acquisition related payables, net of receivables, of $1,171,000
in the three months ended March 31, 1997, acquisition costs including the
assumption of mortgage notes payable of $104,628,000, the issuance of
$55,209,000 of Units and other acquisition related payables, net of
receivables, of $906,000 in 1996, and aggregate acquisition costs including
the assumption of mortgage notes payable of $39,511,000 and the application
of notes receivable and deposits of $3,540,000 in 1995 (see Note 14 to the
consolidated and combined financial statements).
(2) Includes first-generation leasing costs on development properties totaling
$1,097,000, $1,287,000 and $1,292,000 in the three months ended March 31,
1997 and in 1996 and 1995, respectively.
(3) Reflects aggregate development and leasing costs, exclusive of the decrease
in construction payables of $743,000 in 1996 and the increase in
construction payables of $576,000 in the three months ended March 31, 1997
and $52,000 in 1995.
(4) In 1995, revenue-producing building improvements included $520,000 in
building improvements to convert a 94,677 square foot single-tenant office
building to a multi-tenant facility. By dividing the space for lease to a
number of tenants, rather than leasing the entire building to a single
tenant, the Company believes it has achieved higher rents and has
substantially reduced its rollover risk and potential loss due to vacancy.
Also in 1995, the Company invested approximately $3.0 million in building
improvements to convert a 249,200 square foot bulk warehouse building to a
manufacturing facility. The new tenant also invested a similar amount in
improvements to the building. Management believes that this combined
investment has enhanced the value of the building and that the Company has
achieved higher rent as a result of the renovation and conversion of this
building.
(5) The 1995 amount includes $1,377,000 of tenant improvement and leasing costs
to re-tenant the Company's 94,677 square foot office building discussed in
footnote (4) above which was vacated in February 1995 by Matsushita
Electric Corporation (Panasonic).
(6) Includes second-generation leasing costs totaling $557,000, $1,331,000
and $1,159,000 in the three months ended March 31, 1997 and in 1996 and
1995, respectively.
Recent Accounting Pronouncements
In 1995, Statement of Financial Accounting Standards ("SFAS") 123, "Accounting
for Stock-Based Compensation" was issued prescribing new fair value-based
accounting for stock-based compensation. SFAS 123 required the Operating
Partnership, in 1996, to elect to utilize the fair value method under SFAS 123
or continue its current generally accepted accounting under the intrinsic value
method prescribed by Accounting Principles Board Opinion ("APB") No. 25. The
Operating Partnership elected to continue to account for stock-based
compensation under APB No. 25 and implemented the additional disclosure
requirements
-39-
<PAGE>
of SFAS 123, including pro forma net income and earnings per share amounts, in
its 1996 financial statements (see Note 11 to the consolidated and combined
financial statements).
In February 1997, SFAS 128, "Earnings per Share" was issued prescribing a new
method of computing earnings per share. When implemented, SFAS 128 will
supersede APB No. 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 earnings per Unit data for the three months ended March
31, 1997 and 1996 for the years ended December 31, 1996 and 1995 and for the
period from August 24, 1994 to December 31, 1994, is not material (see Note 2 to
the consolidated and combined financial statements).
In June 1997, SFAS 131, "Disclosures About Segments on 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 entities 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 will 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.
Impact of Inflation
In the last three years, inflation has not had a significant impact on the
Company because of the relatively low inflation rate. Substantially all tenant
leases do, however, contain provisions designed to protect the Company from the
impact of inflation. Most of the Company's leases require the tenants to pay a
share of operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing the Company's exposure to increases in
costs and operating expenses resulting from inflation. In addition, many of the
leases are for terms of less than seven years which may enable the Company to
replace existing leases with new leases at higher base rentals if rents under
the existing leases are below the then-existing market rate. However, there can
be no assurance that the Company would be able to replace existing leases with
new leases at higher base rentals.
Item 3. Properties
As of June 30, 1997 the Company owned or had agreements to acquire 264
properties, including 32 properties and one property expansion which were under
development or in lease-up and 16 properties which were under agreements to be
acquired. Of the 264 properties 235 were industrial buildings, 26 were office
buildings and three were retail buildings. The Company's 216 completed and
in-service properties (i.e. excluding properties under development or in
lease-up or under agreement to acquire) were 96.5% occupied at June 30, 1997.
The Company also owns or holds joint venture interest in approximately 822 acres
of land held for development, has agreements to acquire and additional 227
acres, has the potential to acquire 167 acres under option arrangements and has
exclusive marketing or development rights on an additional 553 acres of land.
The majority of the properties and land held for development, which are under
agreements to acquire, are located in Nashville, Tennessee and the Research
Triangle area of North Carolina and are part of the NWI and Lichtin acquisition
transactions in 1996. The information appearing on pages 43 to 53 reflects
information regarding the Company's properties as of June 30, 1997, including
properties under development or in lease-up, or under agreement to acquire.
-40-
<PAGE>
Industrial Properties
The Company owned or had agreements to acquire 235 industrial buildings as of
June 30, 1997, of which 173 are located in Atlanta Georgia, 25 are located in
Nashville, Tennessee, 21 are located in the Research Triangle area of North
Carolina, 13 are located in Orlando, Florida and three are located in
Spartanburg, South Carolina. These buildings can be characterized by their use:
business distribution, bulk warehouse or business service. The Company owned or
had agreements to acquire 147 business distribution buildings, 37 bulk warehouse
buildings, and 52 business service buildings at year-end.
Business distribution buildings are generally 20,000 to 100,000 square feet in
size, have warehouse clear ceilings heights of 18' to 24', depths of 120' to
200', office finish of 10% to 50%, dock-high truck doors (which are designed to
accommodate tractor-trailers) and typically cost $35 to $45 per square foot to
construct. These buildings may function as national headquarters, sales and
administration, research and development and light manufacturing facilities in
addition to distribution facilities.
Bulk warehouse buildings are generally 75,000 to 250,000 square feet in size,
have clear ceiling heights of 24' to 30', building depths of 200' to 300',
office finish of 2% to 15%, dock-high truck doors and typically cost $22 to $30
per square foot to construct. These buildings generally function as regional or
local storage and distribution facilities.
Business service buildings are generally 20,000 to 80,000 square feet in size,
have clear ceiling heights of 14' to 16', building depths of 80' to 130', office
finish of 60% to 100%, drive-in truck doors (which are designed to accommodate
delivery vans) and typically cost $65 to $75 per square foot to construct. These
buildings are used by tenants primarily for clerical administrative and
executive offices.
Office Properties
At June 30, 1997 the Company owned or had agreements to acquire 26 suburban
office buildings, of which 15 are located in Atlanta, Georgia and 11 are located
in the Research Triangle area of North Carolina. The Company's typical suburban
office building ranges in size from approximately 30,000 to 150,000 square feet,
with an average of 4.5 parking spaces per 1,000 square feet of leaseable space
and a typical replacement cost of $85 to $110 per square foot.
Business Parks
A key to the Company's success has been the development of properties within
business parks where the Company controls all aspects of the development
process, including site selection and project concept, master planning and
zoning, design and construction, leasing and property management. For
developments of the land held in joint ventures, the Company must obtain certain
approvals from its joint venture partners.
Each of the Company's business parks is in proximity to an interstate highway
interchange and is close to retail and residential amenities. The business parks
are generally master planned to accommodate a variety of uses. The business
parks are generally well landscaped with protective covenants which restrict the
uses and control the architecture and signage.
The majority of the Company's properties and land held for development are
located in business parks. The Company's ability to develop both multi-tenant
buildings for lease and build-to-suit buildings for lease or sale results in
more rapid development of the business parks, as well as generating revenues
from various sources including land sales, building construction, landscape
installation and maintenance, lease commissions and property management fees.
-41-
<PAGE>
The buildings within business parks typically have a mix of uses ranging from
distribution and service to office and light manufacturing. The Company
facilitates the coexistence of these diverse functions within business parks
through controlled signage and architecture, landscaping and placement of
buildings relative to natural terrain and raised earthen berms.
Development Land
The following schedule details the Company's undeveloped land interests at June
30, 1997. The land detailed below is located primarily in existing business
parks with zoning and infrastructure in place. The Company estimates that the
total development potential of the development land could ultimately total
approximately 19.0 million square feet.
Development Land
(in net usable acres)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Estimated
Development
Research Potential
Atlanta, GA Nashville, TN Triangle, NC Orlando, FL Spartanburg, SC Total (square feet)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Company owned 138.3 40.8 34.3 22.3 -- 235.7 3,284,000
Owned in joint
ventures/(1)/ 213.2 -- -- -- 372.7 585.9 5,396,500 /(7)/
Under agreement
to acquire 14.2 /(2)/ 125.9 /(3)/ 53.0 /(4)/ 34.3 /(5)/ -- 227.4 3,140,000
Optioned -- -- 166.9 -- -- 166.9 1,550,000
Marketing/
development
agreements 552.5 /(6)/ -- -- -- -- 552.5 5,587,500
- ------------------------------------------------------------------------------------------------------------------------------------
Total 918.2 166.7 254.2 56.6 372.7 1,768.4
====================================================================================================================================
Estimated
development
potential
(square feet) 10,612,500 2,064,000 2,790,000 874,000 2,617,500 /(7)/ 18,958,000
====================================================================================================================================
</TABLE>
(1) The Company's interests in its undeveloped land held in joint ventures
range from 0% to 30%.
(2) The Company has agreed to acquire this land in three stages to occur prior
to April 1998. The second stage was closed in December 1996.
(3) The Company has agreed to purchase this land from NWI over a period of up
to six years (see Note 8 to the consolidated and combined financial
statements).
(4) The Company has agreed to purchase this land from Lichtin over a period of
up to four years (see Note 8 to the consolidated and combined financial
statements).
(5) The Company has agreed to acquire 24.6 acres at Orlando Central Park in two
stages to occur by December 1998.
(6) Under the terms of the Company's development agreements, the Company will
generally either develop properties for a fee, or have certain rights to
acquire land for development or to acquire developed properties upon their
completion. The Company's marketing agreements generally provide for the
Company to be paid marketing or management fees in conjunction with
services it provides. Both the development and marketing agreements
generally contain non-competition provisions.
(7) The Company estimates it will eventually develop approximately one-half the
acreage in Spartanburg it owns in joint ventures and that the remainder
will be sold to third parties. Estimated development potential reflects
only that land which is not currently expected to be sold.
-42-
<PAGE>
Tenants
The Company believes that its emphasis on developing quality properties and
providing a high level of client service has resulted in increased tenant
retention. As of June 30, 1997, the Company's properties were leased to 695
tenants including local, regional, national and international companies.
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
METROPOLITAN ATLANTA, GEORGIA
NORTHEAST/I-85 SUBMARKET
Gwinnett Park
1 4258 Communications Dr. D 57,000 0.0% 14% 22 1981 100.0%
2 4261 Communications Dr. D 56,600 100.0% 33% 22 1981 1994 100.0%
3 4291 Communications Dr. D 31,500 100.0% 29% 20 1981 100.0%
4 1826 Doan Way D 57,200 100.0% 36% 20 1984 100.0%
5 1857 Doan Way D 16,000 100.0% 13% 18 1970 100.0%
6 1650 International Blvd. D 52,461 100.0% 33% 22 1984 100.0%
7 4245 International Blvd. D 249,200 100.0% 10% 24 1985 100.0%
8 4250 International Blvd. D 47,030 100.0% 80% 20 1986 100.0%
9 4295 International Blvd. D 49,896 100.0% 31% 20 1984 100.0%
10 4320 International Blvd. D 32,000 100.0% 20% 20 1984 100.0%
11 4350 International Blvd. D 64,152 100.0% 38% 20 1982 100.0%
12 4355 International Blvd. D 60,760 100.0% 59% 14 1983 1994 100.0%
13 4405-A International Blvd. S 50,000 100.0% 94% 14 1984 100.0%
14 4405-B International Blvd. S 61,176 94.9% 88% 14 1984 100.0%
15 4405-C International Blvd. S 10,644 100.0% 98% 14 1984 100.0%
16 1828 Meca Way D 63,000 100.0% 32% 22 1975 100.0%
17 1858 Meca Way D 58,600 100.0% 49% 22 1975 100.0%
18 4317 Park Dr. D 47,243 100.0% 56% 20 1985 100.0%
19 4357 Park Dr. D 65,800 100.0% 31% 20 1979 100.0%
20 4366 Park Dr. O 9,471 51.1% 100% 9 1981 100.0%
21 4386 Park Dr. D 67,118 100.0% 30% 22 1973 100.0%
22 4436 Park Dr. D 66,232 100.0% 12% 18 1968 100.0%
23 4437 Park Dr. D 73,456 43.1% 16% 20 1978 100.0%
24 4467 Park Dr. D 66,203 100.0% 16% 20 1978 100.0%
25 4476 Park Dr. D 42,200 100.0% 17% 22 1977 100.0%
26 4487 Park Dr. D 89,204 100.0% 49% 20 1978 100.0%
27 1835 Shackleford Ct. O 56,576 41.8% 100% 9 1990 100.0%
28 1854 Shackleford Ct. O 94,677 98.4% 100% 9 1985 100.0%
29 4274 Shackleford Rd. D 80,822 80.2% 27% 24 1974 100.0%
30 4275 Shackleford Rd. O 32,280 74.2% 100% 9 1985 100.0%
31 4344 Shackleford Rd. D 52,924 100.0% 11% 20 1975 1994 100.0%
32 4355 Shackleford Rd. D 137,100 100.0% 60% 20 1972 100.0%
33 4364 Shackleford Rd. D 31,040 100.0% 16% 22 1973 100.0%
34 4366 Shackleford Rd. D 56,709 100.0% 23% 22 1981 100.0%
35 4388 Shackleford Rd. D 89,612 100.0% 17% 22 1981 100.0%
36 4400 Shackleford Rd. D 39,004 0.0% 15% 20 1981 100.0%
37 4444 Shackleford Rd. D 85,200 100.0% 18% 22 1979 100.0%
-----------------------------------------------------------------------------------------------
2,300,090 91.1% 39%
-----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Horizon
38 90 Horizon Dr. D 13,400 100.0% 42% 20 1992 100.0%
39 225 Horizon Dr. B 96,000 100.0% 15% 24 1990 100.0%
40 300 Horizon Dr. B 256,000 100.0% 4% 30 1994 100.0%
41 2775 Horizon Ridge Ct. B 223,219 100.0% 5% 26 1996 100.0%
42 2780 Horizon Ridge Ct. B 222,643 100.0% 7% 30 1997 100.0%
43 2800 Vista Ridge Dr. B 252,092 100.0% 7% 26 1995 100.0%
-----------------------------------------------------------------------------------------------
1,063,354 100.0% 7%
-----------------------------------------------------------------------------------------------
Northwoods
44 2915 Courtyards Circle D 40,058 97.8% 45% 18 1986 1995 100.0%
45 2925 Courtyards Dr. D 71,763 100.0% 25% 22 1986 1995 100.0%
46 2975 Courtyards Circle D 27,342 100.0% 75% 20 1986 1995 100.0%
47 2995 Courtyards Circle D 18,542 100.0% 65% 18 1986 1995 100.0%
48 2725 Northwoods Pkwy. D 76,686 100.0% 14% 22 1984 1996 100.0%
49 2755 Northwoods Pkwy. D 48,270 100.0% 21% 20 1986 1996 100.0%
50 2775 Northwoods Pkwy. D 32,192 100.0% 72% 20 1986 1996 100.0%
51 2850 Northwoods Pkwy. D 102,128 100.0% 19% 22 1988 1995 100.0%
52 3040 Northwoods Pkwy. D 50,480 100.0% 22% 22 1984 1996 100.0%
53 3044 Northwoods Circle D 24,367 100.0% 32% 22 1984 1995 100.0%
54 3055 Northwoods Pkwy. D 31,946 100.0% 33% 18 1985 1996 100.0%
55 3075 Northwoods Pkwy. S 41,420 100.0% 69% 14 1985 1996 100.0%
56 3080 Northwoods Circle O 30,768 100.0% 100% 9 1952 1996 100.0%
57 3100 Northwoods Pkwy. S 39,728 100.0% 73% 14 1985 1996 100.0%
58 3155 Northwoods Pkwy. S 40,530 100.0% 35% 14 1985 1996 100.0%
59 3175 Northwoods Pkwy. S 33,405 100.0% 100% 14 1985 1996 100.0%
--------------------------------------------------------------------------------------------
709,625 99.9% 42%
--------------------------------------------------------------------------------------------
Gwinnett Pavilion
60 1480 Beaver Ruin Rd. R 14,992 100.0% 0% 9 1989 100.0%
61 1505 Pavilion Place D 78,400 100.0% 93% 20 1988 100.0%
62 3883 Steve Reynolds Blvd. D 137,061 100.0% 26% 22 1990 100.0%
63 3890 Steve Reynolds Blvd. D 48,800 100.0% 80% 20 1991 100.0%
64 3905 Steve Reynolds Blvd. D 64,800 100.0% 17% 25 1995 100.0%
65 3950 Steve Reynolds Blvd. B 80,000 100.0% 11% 20 1992 100.0%
66 4020 Steve Reynolds Blvd. D 44,260 100.0% 36% 22 1997 100.0%
67 4025 Steve Reynolds Blvd. D 70,400 100.0% 38% 22 1994 100.0%
--------------------------------------------------------------------------------------------
538,713 100.0% 39%
--------------------------------------------------------------------------------------------
Berkeley Lake Distribution Center
68 3290 Summit Ridge Pkwy. B 100,800 100.0% 4% 28 1997 100.0%
69 3130 North Berkeley Lake Rd. B 240,000 100.0% 3% 26 1996 100.0%
--------------------------------------------------------------------------------------------
340,800 100.0% 3%
--------------------------------------------------------------------------------------------
Peachtree Corners Distribution
70 5401 Buford Hwy. B 74,360 100.0% 12% 24 1987 1995 100.0%
71 5403 Buford Hwy. B 108,140 100.0% 12% 24 1987 1995 100.0%
72 5405 Buford Hwy. B 61,982 100.0% 10% 24 1989 1995 100.0%
73 5409 Buford Hwy. B 111,873 100.0% 7% 24 1989 1995 100.0%
--------------------------------------------------------------------------------------------
356,355 100.0% 10%
--------------------------------------------------------------------------------------------
</TABLE>
-44-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pinebrook
74 2625 Pinemeadow Ct. B 139,540 100.0% 21% 24 1994 100.0%
75 2660 Pinemeadow Ct. B 104,000 100.0% 1% 24 1996 100.0%
76 2450 Satellite Blvd. B 102,862 100.0% 17% 30 1994 1994 100.0%
--------------------------------------------------------------------------------------------
346,402 100.0% 14%
--------------------------------------------------------------------------------------------
Northbrook
77 1000 Northbrook Pkwy. B 131,660 100.0% 9% 25 1986 100.0%
78 675 Old Peachtree Rd. B 176,820 100.0% 3% 25 1988 100.0%
--------------------------------------------------------------------------------------------
308,480 100.0% 6%
--------------------------------------------------------------------------------------------
Druid Chase
79 2801 Buford Hwy. O 115,712 96.5% 100% 9 1977 1989 100.0%
80 1190 West Druid Hills Dr. O 79,868 93.9% 100% 9 1980 1989 100.0%
81 2071 North Druid Hills Rd. R 4,115 100.0% 0% 12 1968 100.0%
82 6 West Druid Hills Dr. O 81,503 96.7% 100% 9 1968 1989 100.0%
----------------------------------------------------------------------------------------------
281,198 95.9% 99%
----------------------------------------------------------------------------------------------
Meadowbrook
83 2450 Meadowbrook Pkwy. D 68,400 100.0% 17% 20 1989 1994 100.0%
84 2475 Meadowbrook Pkwy. D 59,086 100.0% 80% 20 1986 100.0%
85 2500 Meadowbrook Pkwy. D 68,800 100.0% 13% 20 1987 100.0%
86 2505 Meadowbrook Pkwy. D 53,481 100.0% 14% 20 1990 100.0%
----------------------------------------------------------------------------------------------
249,767 100.0% 30%
----------------------------------------------------------------------------------------------
Park Creek
87 2825 Breckinridge Blvd. S 45,559 100.0% 100% 14 1986 1996 100.0%
88 2875 Breckinridge Blvd. S 57,918 100.0% 11% 14 1986 1996 100.0%
----------------------------------------------------------------------------------------------
103,477 100.0% 50%
----------------------------------------------------------------------------------------------
River Green
89 3450 River Green Ct. D 33,600 100.0% 80% 18 1989 1995 100.0%
90 4800 River Green Pkwy. D 25,538 100.0% 80% 18 1989 1995 100.0%
----------------------------------------------------------------------------------------------
59,138 100.0% 80%
----------------------------------------------------------------------------------------------
Other Northeast/I-85
91 1705 Belle Meade Ct. D 31,624 100.0% 43% 18 1988 1994 100.0%
92 4125 Buford Hwy. B 210,000 100.0% 3% 28 1995 100.0%
93 6525-27 Jimmy Carter Blvd. D 92,735 100.0% 54% 22 1983 1996 100.0%
94 3171 McCall Dr. D 16,075 100.0% 13% 22 1967 1994 100.0%
95 7250 McGinnis Ferry Rd. D 70,600 100.0% 19% 48 1996 100.0%
96 5300 Peachtree Industrial Blvd. R 29,870 100.0% 0% 25 1966 1994 100.0%
97 4280 Northeast Expressway B 56,530 100.0% 10% 30 1962 1994 100.0%
----------------------------------------------------------------------------------------------
507,434 100.0% 18%
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL NORTHEAST/I-85 7,164,833 97.0% 30%
----------------------------------------------------------------------------------------------
</TABLE>
-45-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH CENTRAL SUBMARKET
Northmeadow
98 11835 Alpharetta Hwy. O 15,000 100.0% 100% 9 1994 100.0%
99 1100 Northmeadow Pkwy. S 50,891 100.0% 80% 16 1989 1995 100.0%
100 1125 Northmeadow Pkwy. D 67,104 100.0% 49% 22 1987 1995 100.0%
101 1150 Northmeadow Pkwy. D 52,050 100.0% 65% 22 1988 1995 100.0%
102 1175 Northmeadow Pkwy. D 71,264 100.0% 58% 22 1987 1995 100.0%
103 1225 Northmeadow Pkwy. S 37,520 100.0% 79% 14 1989 1995 100.0%
104 1250 Northmeadow Pkwy. D 52,224 100.0% 90% 18 1989 1995 100.0%
105 1325 Northmeadow Pkwy. S 70,700 100.0% 77% 14 1990 1995 100.0%
106 1350 Northmeadow Pkwy. D 64,500 100.0% 89% 22 1994 100.0%
----------------------------------------------------------------------------------------------
481,253 100.0% 73%
----------------------------------------------------------------------------------------------
Hembree Crest
107 11415 Old Roswell Rd. B 80,000 100.0% 6% 24 1991 1995 100.0%
108 11800 Wills Rd. D 42,691 100.0% 32% 22 1987 1995 100.0%
109 11810 Wills Rd. D 59,334 100.0% 23% 22 1987 1995 100.0%
110 11820 Wills Rd. D 103,222 100.0% 14% 24 1987 1995 100.0%
----------------------------------------------------------------------------------------------
285,247 100.0% 16%
----------------------------------------------------------------------------------------------
Mansell Commons
111 993 Mansell Rd. D 21,600 100.0% 64% 20 1987 1995 100.0%
112 995 Mansell Rd. D 16,800 100.0% 42% 20 1987 1995 100.0%
113 997 Mansell Rd. D 14,400 100.0% 27% 20 1987 1995 100.0%
114 999 Mansell Rd. D 19,200 100.0% 12% 20 1987 1995 100.0%
115 1003 Mansell Rd. D 20,800 100.0% 80% 20 1990 1995 100.0%
116 1005 Mansell Rd. D 16,800 100.0% 55% 20 1990 1995 100.0%
117 1007 Mansell Rd. D 37,450 100.0% 41% 20 1990 1995 100.0%
118 1009 Mansell Rd. S 38,082 100.0% 59% 14 1986 1995 100.0%
119 1011 Mansell Rd. S 38,630 100.0% 89% 14 1984 1995 100.0%
--------------------------------------------------------------------------------------------
223,762 100.0% 56%
--------------------------------------------------------------------------------------------
Hembree Park
120 105 Hembree Park Dr. D 45,490 77.8% 39% 20 1988 1995 100.0%
121 150 Hembree Park Dr. D 44,343 100.0% 100% 24 1985 1995 100.0%
122 200 Hembree Park Dr. D 43,559 100.0% 38% 24 1985 1995 100.0%
123 645 Hembree Pkwy. D 43,956 100.0% 76% 24 1986 1995 100.0%
124 655 Hembree Pkwy. D 43,956 100.0% 73% 24 1986 1995 100.0%
--------------------------------------------------------------------------------------------
221,304 95.4% 65%
--------------------------------------------------------------------------------------------
Other North Central Properties
125 10745 Westside Pkwy. O 58,093 100.0% 100% 9 1995 100.0%
--------------------------------------------------------------------------------------------
58,093 100.0% 100%
--------------------------------------------------------------------------------------------
Northwinds Business Park
126 2555 Northwinds Pkwy. O 64,981 100.0% 100% 9 1997 100.0%
--------------------------------------------------------------------------------------------
64,981 100.0% 100%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
TOTAL NORTH CENTRAL 1,334,640 99.2% 59%
--------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRPORT/SOUTH ATLANTA SUBMARKET
Southridge
127 5099 Southridge Pkwy. (5) D 32,449 60.3% 38% 18 1990 1994 100.0%
128 5136 Southridge Pkwy. (5) D 47,125 100.0% 27% 22 1990 1994 100.0%
129 5139 Southridge Pkwy. (5) D 48,767 100.0% 40% 18 1991 1994 100.0%
130 5149 Southridge Pkwy. (5) D 41,400 100.0% 29% 20 1990 1994 100.0%
131 5156 Southridge Pkwy. (5) D 76,500 29.4% 8% 22 1992 1994 100.0%
132 5169 Southridge Pkwy. D 69,600 100.0% 20% 24 1994 100.0%
--------------------------------------------------------------------------------------------
315,841 78.8% 24%
--------------------------------------------------------------------------------------------
Sullivan International
133 703 Sullivan Rd. D 19,936 0.0% 32% 18 1990 1994 100.0%
134 721 Sullivan Rd. D 18,232 100.0% 100% 18 1991 1994 100.0%
135 727 Sullivan Rd. D 20,000 100.0% 41% 18 1988 1994 100.0%
136 739 Sullivan Rd. D 20,000 100.0% 38% 18 1989 1994 100.0%
--------------------------------------------------------------------------------------------
78,168 74.5% 52%
--------------------------------------------------------------------------------------------
Other Airport/South Atlanta Properties
137 105 Kings Mill Rd. B 153,000 100.0% 2% 24 1994 100.0%
105 Kings Mill Rd. Expansion #1 B 100,890 100.0% 0% 28 1995 100.0%
-------------------------------------------------------------------------------------------
253,890 100.0% 1%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL AIRPORT/SOUTH ATLANTA 647,899 86.6% 19%
-------------------------------------------------------------------------------------------
NORTHWEST/I-75 SUBMARKET
Townpoint
138 3330 West Town Point Dr. D 88,000 100.0% 10% 24 1994 100.0%
139 3350 West Town Point Dr. D 76,800 100.0% 19% 24 1995 100.0%
-------------------------------------------------------------------------------------------
164,800 100.0% 14%
-------------------------------------------------------------------------------------------
Northwest Business Center
140 1331-37-41-51 Capital Circle S 79,661 100.0% 81% 15 1985 1996 100.0%
141 1335 Capital Circle S 59,468 100.0% 32% 17 1985 1996 100.0%
142 2250 Northwest Pkwy D 50,220 100.0% 54% 18 1982 1997 100.0%
143 2252 Northwest Pkwy S 14,435 100.0% 71% 16 1982 1997 100.0%
144 2254 Northwest Pkwy S 27,437 73.7% 61% 16 1982 1997 100.0%
145 2256 Northwest Pkwy S 13,265 86.4% 64% 16 1982 1997 100.0%
146 2258 Northwest Pkwy S 7,384 100.0% 69% 16 1982 1997 100.0%
147 2260 Northwest Pkwy S 46,214 100.0% 76% 16 1982 1997 100.0%
148 2262 Northwest Pkwy S 25,317 100.0% 65% 16 1982 1997 100.0%
149 2264 Northwest Pkwy D 55,400 100.0% 59% 18 1982 1997 100.0%
-------------------------------------------------------------------------------------------
378,801 97.6% 62%
-------------------------------------------------------------------------------------------
</TABLE>
-47-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Forest Business Center
150 805 Franklin Court D 40,410 74.6% 46% 18 1983 1997 100.0%
151 810 Franklin Court S 27,386 84.3% 74% 14 1983 1997 100.0%
154 825 Franklin Court D 55,259 82.2% 36% 18 1983 1997 100.0%
155 830 Franklin Court S 14,340 100.0% 83% 14 1983 1997 100.0%
156 835 Franklin Court D 60,772 100.0% 85% 18 1983 1997 100.0%
157 840 Franklin Court D 35,908 100.0% 100% 18 1983 1997 100.0%
152 811 Livingston Court S 20,780 88.9% 94% 14 1983 1997 100.0%
153 821 Livingston Court S 15,558 100.0% 89% 14 1983 1997 100.0%
158 841 Livingston Court D 35,908 100.0% 78% 18 1983 1997 100.0%
-------------------------------------------------------------------------------------------
306,321 91.3% 72%
-------------------------------------------------------------------------------------------
Other Northwest/ I-75 Properties
159 240 Northpoint Pkwy. B 127,800 100.0% 7% 24 1995 100.0%
240 Northpoint Pkwy. - Exp. #1 B 95,100 100.0% 2% 24 1997 100.0%
160 1950 Vaughn Rd. D 162,651 100.0% 29% 30 1992 100.0%
-------------------------------------------------------------------------------------------
385,551 100.0% 15%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL NORTHWEST 1,235,473 97.1% 43%
-------------------------------------------------------------------------------------------
STONE MOUNTAIN SUBMARKET
Parknorth
161 675 Parknorth Blvd. D 96,500 83.1% 49% 24 1990 1995 100.0%
162 696 Parknorth Blvd. D 97,800 100.0% 12% 22 1986 1995 100.0%
163 715 Parknorth Blvd. D 75,600 80.3% 36% 22 1989 1995 100.0%
164 735 Parknorth Blvd. D 112,320 86.3% 38% 22 1989 1995 100.0%
165 736 Parknorth Blvd. S 36,450 100.0% 74% 14 1992 1995 100.0%
166 780 Parknorth Blvd. D 67,200 100.0% 92% 18 1988 1995 100.0%
167 808 Parknorth Blvd. S 21,600 40.0% 100% 14 1986 1995 100.0%
168 815 Parknorth Blvd. S 35,000 100.0% 77% 16 1989 1995 100.0%
-------------------------------------------------------------------------------------------
542,470 89.0% 49%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL STONE MOUNTAIN 542,470 89.0% 49%
-------------------------------------------------------------------------------------------
CHATTAHOOCHEE SUBMARKET
Chattahoochee
169 1670 DeFoors Ave. D 48,007 100.0% 26% 14 1960 1989 100.0%
---------------------------------------------------------------------------------------------
48,007 100.0% 26%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL CHATTAHOOCHEE 48,007 100.0% 26%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL ATLANTA, GEORGIA 10,973,322 96.3% 35%
---------------------------------------------------------------------------------------------
</TABLE>
-48-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASHVILLE, TENNESSEE
Airpark Business Center
170 400 Airpark Center Dr. S 52,748 62.1% 7% 16 1989 1996 100.0%
171 500 Airpark Center Dr. D 90,150 100.0% 23% 18 1988 1996 100.0%
172 600 Airpark Center Dr. D 78,800 99.8% 15% 18 1990 1996 100.0%
173 700 Airpark Center Dr. D 77,500 100.0% 32% 17 1992 1996 100.0%
174 800 Airpark Center Dr. D 93,928 90.1% 35% 19 1995 1996 100.0%
175 900 Airpark Center Dr. D 84,307 91.9% 12% 26 1995 1996 100.0%
176 1400 Donelson Pike S 102,727 100.0% 84% 16 1986 1996 100.0%
177 1410 Donelson Pike S 108,300 100.0% 55% 16 1986 1996 100.0%
178 1413 Donelson Pike B 66,737 100.0% 9% 26 1996 1996 100.0%
179 1420 Donelson Pike S 90,000 92.9% 52% 16 1985 1996 100.0%
180 5270 Harding Place B 51,960 100.0% 10% 26 1996 1996 100.0%
--------------------------------------------------------------------------------------------
897,157 95.2% 34%
--------------------------------------------------------------------------------------------
Brentwood South Business Center
181 7104 Crossroad Blvd. D 103,200 100.0% 26% 18 1987 1996 100.0%
182 7106 Crossroad Blvd. D 103,200 100.0% 26% 18 1987 1996 100.0%
183 7108 Crossroad Blvd. D 99,000 100.0% 9% 18 1989 1996 100.0%
184 119 Seaboard Lane D 90,024 100.0% 7% 23 1990 1996 100.0%
185 121 Seaboard Lane D 45,480 100.0% 33% 24 1990 1996 100.0%
186 123 Seaboard Lane D 63,360 100.0% 6% 24 1990 1996 100.0%
--------------------------------------------------------------------------------------------
504,264 100.0% 17%
--------------------------------------------------------------------------------------------
Aspen Grove Business Center
187 277 Mallory Station Road D 127,285 93.6% 31% 17 1996 100.0%
--------------------------------------------------------------------------------------------
127,285 93.6% 31%
--------------------------------------------------------------------------------------------
Four-Forty Business Center
188 735 Melrose Ave B 165,902 90.0% 6% 18 1997 100.0%
--------------------------------------------------------------------------------------------
165,902 90.0% 6%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
TOTAL NASHVILLE, TENNESSEE 1,694,608 96.0% 26%
--------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
189 900 Perimeter Park S 47,642 93.5% 100% 16 1982 1996 100.0%
--------------------------------------------------------------------------------------------
47,642 93.5% 100%
--------------------------------------------------------------------------------------------
Perimeter Park West
190 1400 Perimeter Park West O 44,916 100.0% 100% 12 1991 1996 100.0%
191 1500 Perimeter Park West O 79,712 100.0% 100% 12 1996 1996 100.0%
192 1600 Perimeter Park West O 94,897 100.0% 100% 12 1994 1996 100.0%
193 1800 Perimeter Park West O 54,434 100.0% 100% 12 1994 1996 100.0%
--------------------------------------------------------------------------------------------
273,959 100.0% 100%
--------------------------------------------------------------------------------------------
Metro Center
194 2800 Perimeter Park Dr. D 135,492 100.0% 87% 24 1992 1996 100.0%
195 2900 Perimeter Park Dr. D 59,927 100.0% 4% 24 1990 1996 100.0%
196 3000 Perimeter Park Dr. D 74,922 100.0% 43% 24 1989 1996 100.0%
--------------------------------------------------------------------------------------------
270,341 100.0% 57%
--------------------------------------------------------------------------------------------
Enterprise Center
197 507 Airport Blvd. S 106,583 100.0% 100% 14 1993 1996 100.0%
198 5151 McCrimmon Pkwy. S 104,066 100.0% 8% 14 1995 1996 100.0%
--------------------------------------------------------------------------------------------
210,649 100.0% 54%
--------------------------------------------------------------------------------------------
Woodlake Center
199 1000 Innovation Ave. D 108,000 100.0% 100% 24 1994 1996 100.0%
--------------------------------------------------------------------------------------------
108,000 100.0% 100%
--------------------------------------------------------------------------------------------
Interchange Plaza
200 5520 Capital Center Dr. O 37,630 100.0% 100% 12 1993 1996 100.0%
201 801 Jones Franklin Rd. O 69,151 100.0% 21% 12 1995 1996 100.0%
--------------------------------------------------------------------------------------------
106,781 100.0% 49%
--------------------------------------------------------------------------------------------
Research Triangle Industrial Center
202 409 Airport Blvd - 1 D 85,129 100.0% 12% 20 1982 1997 0.0%
203 409 Airport Blvd - 2 D 42,712 100.0% 20% 20 1983 1997 0.0%
204 409 Airport Blvd - 3 D 26,215 100.0% 5% 20 1986 1997 0.0%
--------------------------------------------------------------------------------------------
154,056 100.0% 13%
--------------------------------------------------------------------------------------------
Other Raleigh Properties
205 6501 Weston Pkwy. O 93,990 100.0% 91% 12 1996 1996 100.0%
--------------------------------------------------------------------------------------------
93,990 100.0% 91%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
TOTAL RESEARCH TRIANGLE, NC 1,265,418 99.8% 68%
--------------------------------------------------------------------------------------------
</TABLE>
-50-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
206 2500 Principal Row B 140,015 100.0% 14% 26 1996 100.0%
--------------------------------------------------------------------------------------------
140,015 100.0% 14%
--------------------------------------------------------------------------------------------
Airport Commerce Center
207 8249 Parkline Blvd. D 33,600 100.0% 33% 20 1996 100.0%
208 8351 Parkline Blvd. D 33,600 100.0% 65% 20 1994 1995 100.0%
209 8500 Parkline Blvd. D 102,400 100.0% 31% 23 1986 1995 100.0%
210 8501 Parkline Blvd. D 27,000 100.0% 22% 20 1991 1995 100.0%
211 8549 Parkline Blvd. D 27,007 78.3% 47% 20 1992 1995 100.0%
212 1630 Prime Court D 43,200 100.0% 10% 22 1996 100.0%
--------------------------------------------------------------------------------------------
266,807 97.8% 33%
--------------------------------------------------------------------------------------------
Technology Park
213 100 Technology Park S 60,711 61.3% 82% 1997 100.0%
--------------------------------------------------------------------------------------------
60,711 61.3% 82%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
TOTAL ORLANDO, FLORIDA 467,533 93.7% 33%
--------------------------------------------------------------------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
214 170 Parkway West B 96,000 100.0% 18% 24 1995 100.0%
215 190 Parkway West D 92,400 100.0% 5% 22 1996 100.0%
216 285 Parkway East B 139,600 100.0% 7% 24 1994 100.0%
285 Parkway East Expansion B 57,600 100.0% 0% 24 1996 100.0%
--------------------------------------------------------------------------------------------
385,600 100.0% 8%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
TOTAL SPARTANBURG, SOUTH CAROLINA 385,600 100.0% 8%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
TOTAL PROPERTIES IN-SERVICE 14,786,481 96.5% 36%
--------------------------------------------------------------------------------------------
</TABLE>
-51-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTIES UNDER DEVELOPMENT
Metropolitan Atlanta, Georgia
217 1750 Beaver Ruin Rd. S 67,600 85.9% 100% 16 1996 100.0%
218 250 Horizon Dr. B 267,619 23.1% 5% 30 1997 100.0%
219 3280 Summit Ridge Pkwy. B 173,360 83.4% 4% 28 1997 100.0%
220 3805 Crestwood Pkwy. O 105,295 87.5% 100% 9 1997 100.0%
221 3885 Crestwood Pkwy O 105,295 0.0% 43% 9 1997 100.0%
222 2775 Eastside Parkway D 79,588 45.8% 20% 24 1997 100.0%
223 2850 Eastside Parkway/(8)/ D 86,000 100.0% 100% 24 1997 50.0%
224 5755 Peachtree Industrial Blvd. O 50,000 100.0% 100% 9 1997 100.0%
225 5765 Peachtree Industrial Blvd. D 60,000 100.0% 100% 22 1997 100.0%
226 5775 Peachtree Industrial Blvd. D 60,000 100.0% 37% 22 1997 100.0%
227 250 Hembree Pkwy./(7)/ D 94,500 71.5% 25% 22 1996 0.0%
228 1335 Northmeadow Pkwy./(7)/ S 88,783 100.0% 100% 14 1996 0.0%
229 11390 Old Roswell Road/(7)/ S 47,600 30.8% 50% 14 1997 0.0%
230 2550 Northwinds Pkwy O 149,797 0.0% 100% 9 1997 100.0%
231 5025 Derrick Jones Rd./(7)/ D 89,600 100.0% 15% 22 1996 0.0%
5149 Southridge Pkwy - Exp #1/(6)/D 46,800 64.1% 19% 21 1996 2.5%
232 5195 Southridge Pkwy. D 60,000 0.0% 25% 24 1995 2.5%
233 120 Declaration Dr. B 301,200 69.9% 2% 28 1997 0.0%
234 3240 Town Point Dr. D 140,400 77.2% 33% 24 1996 100.0%
235 2885 Breckinridge Blvd S 82,349 83.8% 0% 14 1997 100.0%
236 130 Declaration Drive B 210,000 0.0% 0% 28 1997 100.0%
237 3270 Summit Ridge Parkway B 152,000 0.0% 0% 28 1997 100.0%
238 660 Hembree Parkway/(7)/ D 94,500 53.0% 0% 22 1998 100.0%
-------------------------------------------------------------------------------------------
TOTAL ATLANTA, GEORGIA 2,612,286 52.7%
-------------------------------------------------------------------------------------------
Nashville, Tennessee
239 736 Melrose Ave. D 103,400 0.0% 25% 18 1997 100.0%
240 3300 Briley Park Blvd. South B 194,750 0.0% 10% 26 1997 100.0%
-------------------------------------------------------------------------------------------
TOTAL NASHVILLE, TENNESSEE 298,150 0.0%
-------------------------------------------------------------------------------------------
Research Triangle, North Carolina
241 1700 Perimeter Park O 81,000 0.0% 100% 12 1997 100.0%
242 5400 McCrimmon Pkwy S 146,250 0.0% 50% 14 1997 100.0%
243 Paramount Parkway O 99,684 100.0% 0% 12 1999 100.0%
-------------------------------------------------------------------------------------------
TOTAL RESERACH TRIANGLE, NC 326,934 30.5%
-------------------------------------------------------------------------------------------
Orlando, Florida
244 2490 Principal Row B 101,800 100.0% 10% 26 1997 100.0%
245 2435 Principal Row B 126,818 100.0% 10% 26 1997 100.0%
246 Celebration Blvd S 58,702 0.0% 50% 14 1997 100.0%
247 1629 Prime Court D 43,200 88.9% 25% 22 1997 100.0%
248 Technology Park S 52,777 0.0% 0% 14 1998 100.0%
-------------------------------------------------------------------------------------------
TOTAL ORLANDO, FLORIDA 383,297 69.7%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL PROPERTIES UNDER DEVELOPMENT 3,620,667 48.2%
-------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Office Height Year Year Company
Market/Business Park/Property Type/(1)/ Feet Occup./(2)/ Finish/(3)/ (Feet) Dev./(4)/ Acq. Ownership
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTIES TO BE ACQUIRED
Nashville, Tennessee
249 Airpark Center X B 106,122 5.0% 75% 17 1996 0.0%
250 Airpark Center XII D 156,830 66.1% 25% 19 1996 0.0%
251 320 Premier Court D 106,358 13.1% 40% 19 1996 0.0%
252 Bldg V D 160,848 34.3% 15% 25 1996 0.0%
-------------------------------------------------------------------------------------------
TOTAL NASHVILLE, TENNESSEE 530,158 33.6%
-------------------------------------------------------------------------------------------
Research Triangle, North Carolina
253 100 Perimeter Park (9) S 55,664 100.0% 100% 14 1987 0.0%
254 200 Perimeter Park (9) S 55,664 100.0% 100% 14 1987 0.0%
255 300 Perimeter Park (9) S 55,664 100.0% 100% 14 1986 0.0%
256 400 Perimeter Park (9) S 74,088 100.0% 100% 14 1983 0.0%
257 500 Perimeter Park (9) S 74,017 100.0% 100% 14 1985 0.0%
258 800 Perimeter Park (9) S 55,637 100.0% 100% 14 1984 0.0%
259 1000 Perimeter Park (9) S 56,436 91.7% 0% 14 1982 0.0%
260 2000 Perimeter Park West (9) O 55,636 69.3% 100% 12 1997 0.0%
261 1100 Perimeter Park West S 84,950 100.0% 0% 14 1990 0.0%
262 2600 Perimeter Park Dr (9) S 70,848 76.4% 0% 14 1997 0.0%
263 101 Innovation Ave (9) D 97,200 100.0% 0% 24 1997 0.0%
264 Regency Forest O 100,000 50.0% 100% 12 1997 1900 0.0%
-------------------------------------------------------------------------------------------
TOTAL RESEARCH TRIANGLE, NC 835,804 89.4% 63%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL PROPERTIES TO BE ACQUIRED 1,365,962 67.8% 52%
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
TOTAL PORTFOLIO 19,773,110 85.7% 36%
-------------------------------------------------------------------------------------------
</TABLE>
(1) D = business distribution; B = bulk warehouse; S = business service; O =
office; R = retail.
(2) For in service properties represents occupancy as of 6/30/97. For
properties under development or to be acquired, represents occupancy as of
7/31/97.
(3) Represents the percentage of rentable square feet that is built out as
office space rather than as warehouse or distribution space. For properties
under development represents current pro forma.
(4) The year of development means the year in which shell construction was
completed.
(5) Property owned by Weeks Financing Limited Partnership, which is 99% owned
by the Operating Partnership and 1% owned by Weeks Realty Services.
(6) The Company is developer for a joint venture which owns this property and
in which the Company currently has a 2.5% interest. In addition, the
Operating Partnership has an option to purchase this property upon
stabilization or 12 months after completion.
(7) The Operating Partnership is developer of this property and it has a option
to purchase building upon stabilization and can be required by owner to
purchase the property after completion.
(8) The Operating Partnership owns 50% of the property through joint venture
agreement.
(9) Effective July 1, 1997, the Operating Partnership acquired the property.
-53-
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information concerning the beneficial ownership
of Units of the Operating Partnership as of June 30, 1997 for (i) directors of
Weeks, (ii) the Chief Executive Officer and each of the four most highly
compensated executive officers of the Operating Partnership (collectively, the
"Named Executive Officers"), (iii) the directors of Weeks and executive officers
of the Operating Partnership as a group and (iv) each person known to the
Operating Partnership who is, or may be deemed to be, a Unitholder of the
Operating Partnership holding more than a 5% interest in the Operating
Partnership. Unless otherwise indicated in the footnotes, all of such interests
are owned directly, and the indicated person or entity has sole voting and
disposition power.
-54-
<PAGE>
<TABLE>
<CAPTION>
Number
of Units
Name and Address Beneficially Percent of
of Beneficial Owner Owned Class
------------------- ------------ ----------
<S> <C> <C>
A. Ray Weeks, Jr.(1) 1,432,905/(2)/ 6.30%
Chairman, Chief Executive Officer
and Director
Thomas D. Senkbeil(1) 96,067/(3)(4)/ *
Vice Chairman, Chief Investment
Officer and Director
Forrest W. Robinson(1) 72,127/(3)(4)/ *
President, Chief Operating Officer
and Director
David P. Stockert(1) -- *
Senior Vice President and
Chief Financial Officer
Klay W. Simpson(1) 4,110 *
Senior Vice President, Marketing
John W. Nelley, Jr.(1) 1,833,749/(5)/ 8.06%
Managing Director and Director
Harold S. Lichtin(1) 379,118/(6)/ 1.67%
Managing Director and Director
Barrington H. Branch(1) -- *
Director
George D. Busbee(1) -- *
Director
Charles R. Eitel(1) -- *
Director
William O. McCoy(1) -- *
Director
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
Number
of Units
Name and Address Beneficially Percent of
of Beneficial Owner Owned Class
------------------- ------------ ----------
<S> <C> <C>
William Cavanaugh III(1) -- *
Director
Weeks GP Holdings, Inc.(1) 237,503 1.04%
Weeks LP Holdings, Inc.(1) 17,445,285 76.71%
All executive officers and
directors as a group (27 persons) 3,763,882 16.55%
- ----------------
</TABLE>
* Represents less than 1% of the Company's outstanding Units
(1) Beneficial owner's address is 4497 Park Drive, Norcross, Georgia 30093.
(2) Includes 400,155 Units held by trusts of which A. Ray Weeks, Jr. is
co-trustee and a 20% beneficiary, and 255,623 Units that A. Ray Weeks,
Jr. controls, including Units held by those corporations discussed in
notes (3) and (4) below, and 2,442 Units held by Mr. Weeks' spouse.
(3) Includes 42,993 Units held by a corporation which is owned 60%, 30% and
10%, respectively, by Messrs. Weeks, Senkbeil and Robinson.
(4) Includes 257 Units held by a corporation which is owned 75%, 20% and 5%,
respectively, by Messrs. Weeks, Senkbeil and Robinson.
(5) Includes 1,833,749 Units held by a partnership of which Mr. Nelley is a
general partner. Mr. Nelley disclaims beneficial ownership of 1,438,334
of such Units.
(6) Includes 134,673 Units held by entities which Harold S. Lichtin controls
and 1,228 Units held by Mr. Lichtin's spouse.
Item 5. Directors and Executive Officers
The information under the heading "Item X. Executive Officers of the Registrant"
on pages 30 through 33 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 is hereby incorporated by reference.
The Board of Directors of Weeks currently consists of eleven persons, with one
presently unfilled vacancy. Directors of Weeks are divided into three classes
serving staggered three year terms, with directors serving until the election
and qualification of their successors. Certain information regarding the
nominees and the continuing directors is set forth below. This information has
been furnished by the respective individuals.
-56-
<PAGE>
Directors With Terms Expiring In 2000
A. Ray Weeks, Jr. has been the Chairman of the Board of Directors and Chief
Executive Officer of Weeks since its incorporation in 1983. He was also the
President of Weeks from 1983 through March 1991. Mr. Weeks is 44 years old.
George D. Busbee has served as a director of Weeks since August 1994. He has
been of counsel to the law firm of King & Spalding since January 1993 and was a
partner of King & Spalding from January 1983 to December 1993. Mr. Busbee is the
former Governor of the State of Georgia. He is currently a director of Union
Camp Corporation and Delta Air Lines, Inc. Mr. Busbee is 69 years old.
William O. McCoy has served as a director of Weeks since August 1994. Since
February 1995, Mr. McCoy has been Vice-President--Finance, The University of
North Carolina. Mr. McCoy was President of BellSouth Enterprises and the Vice
Chairman of the Board of BellSouth Corporation, a regional telecommunications
company, from 1983 until January 1995. He is currently a director of The Liberty
Corporation, Carolina Power & Light Company, Fidelity Investments and Kenan
Transport Co. Mr. McCoy is 63 years old.
Directors With Terms Expiring In 1999
Barrington H. Branch has served as a director of Weeks since August 1994. From
1991 to February 1997, Mr. Branch was President and Chief Executive Officer of
DIHC Management Corporation, the wholly owned U.S. real estate investment
subsidiary of Pensionenfonds PGGM, the second largest private pension fund in
The Netherlands. Since February 1997, Mr. Branch has been an independent advisor
and consultant to institutional investors in U.S. real estate, including DIHC
Management Corporation. Mr. Branch is 56 years old.
John W. Nelley, Jr. has served as a director of Weeks since November 1996. In
addition, Mr. Nelley has been a Managing Director of Weeks, with
responsibilities for Weeks' activities in Nashville, Tennessee, since November
1996. Since 1982, Mr. Nelley has been a General Partner of NWI Warehouse Group,
L.P., an industrial warehouse development company in Nashville, Tennessee whose
assets and business have been acquired, or are under agreement to be acquired,
by Weeks. Mr. Nelley is an attorney and a CPA. Mr. Nelley is 48 years old.
William Cavanaugh III was elected by the shareholders at Weeks' Annual Meeting
held on May 21, 1997 to fill one of the current vacancies on the Board of
Directors for a term commencing June 1, 1997. Mr. Cavanaugh has been President
and Chief Executive Officer of Carolina Power & Light Company ("CP&L") since
October 1996. He joined CP&L in September 1992 and served as the Company's
President and Chief Operating Officer until October 1996, when he became Chief
Executive Officer. Prior to joining CP&L, he was Chairman, Chief Executive
Officer and Director of Energy Operations, Incorporated,
-57-
<PAGE>
and Group President--Energy Supply for Energy Corporation. He is currently a
director of the Nuclear Energy Institute, the Association of Edison Illuminating
Companies, Wachovia Bank of North Carolina, North Carolina Citizens for Business
and Industry, and the Southeastern Electric Exchange, and is on the Governing
Board of the World Association of Nuclear Operators ("WANO") and is Chairman of
the WANO--Atlanta Board of Governors. Mr. Cavanaugh is 58 years old.
Thomas D. Senkbeil has served as a director of Weeks since October 1992. Mr.
Senkbeil has been the Vice Chairman of the Board and Chief Investment Officer of
Weeks since October 1992. From September 1984 to October 1992, Mr. Senkbeil
served as Executive Vice President and Managing Partner of Senkbeil &
Associates, Inc. and Anderson & Senkbeil, Inc., each a real estate development
firm. Mr. Senkbeil is 47 years old.
Directors With Terms Expiring In 1998
Forrest W. Robinson has served as a director and President of Weeks since April
1991 and as the Chief Operating Officer since May 1988. Mr. Robinson is 46 years
old.
Harold S. Lichtin has served as a director of Weeks since December 1996. In
addition, Mr. Lichtin has been a Managing Director of Weeks, with
responsibilities for Weeks' activities in North Carolina, since December 1996.
From 1977 to December 1996, Mr. Lichtin was President of Lichtin Properties,
Inc., a commercial development and property management company in the
Raleigh-Durham-Chapel Hill area of North Carolina that was acquired by Weeks in
December 1996. Mr. Lichtin is 48 years old.
Charles R. Eitel has served as a director of Weeks since August 1994. Since
February 1997, Mr. Eitel has been President and Chief Operating Officer of
Interface, Inc., a worldwide manufacturer of commercial interior products, with
over 75% of its sales in commercial carpet. He was President and Chief Executive
Officer, Floorcoverings Group, Interface, Inc. and served as Executive Vice
President of Interface, Inc. from October 1994 until February 1997. Mr. Eitel
was President and Chief Executive Officer of Interface Flooring Systems from
November 1993 to October 1994, and was President of the Floor Coverings Division
of Collins & Aikman from July 1987 to November 1993. He is currently a director
of Interface, Inc. Mr. Eitel is 47 years old.
Vacancy On Weeks' Board Of Directors
One seat on Weeks' Board of Directors is currently vacant. The term of the
director who is elected by the Board of Directors to fill the remaining vacancy
will expire in 1998.
-58-
<PAGE>
Item 6. Executive Compensation
The Section under the heading "Election of Directors" entitled "Compensation of
Directors" of Weeks' Proxy Statement for the 1997 Annual Meeting of Shareholders
held May 21, 1997 (the "Proxy Statement") and the sections under the heading
entitled "Executive Compensation" of the Proxy Statement are incorporated herein
by reference.
Item 7. Certain Relationships and Related Transactions
The Sections under the heading entitled "Certain Transactions" of the Proxy
Statement are incorporated herein by reference.
Item 8. Legal Proceedings
The Operating Partnership is not currently involved in any material litigation
other than litigation which is expected to be covered by liability insurance or
which is not expected to have a material adverse effect on the Operating
Partnership's results of operations or financial condition.
Item 9. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters
There is no established public trading market for the Units. As of June 30,
1997, there were 39 holders of record of Units in the Operating Partnership.
The following table sets forth the quarterly per Unit distributions paid by the
Operating Partnership to holders of its Units with respect to each such period.
<TABLE>
Quarter Ended Distributions
------------- -------------
<S> <C>
March 31, 1995 $ 0.375
June 30, 1995 0.375
September 30, 1995 0.375
December 31, 1995 0.40
March 31, 1996 0.40
June 30, 1996 0.40
September 30, 1996 0.40
December 31, 1996 0.43
March 31, 1997 0.43
</TABLE>
-59-
<PAGE>
June 30, 1997 0.43
The Operating Partnership currently anticipates making regular quarterly
distributions to holders of the units. The distributions for each quarterly
period are declared and paid one quarter in arrears. Future distributions are
dependent upon many factors including the Operating Partnership's earnings,
capital requirements, its financial condition and its available cash flow and
are governed by the discretion of the Board of Directors of Weeks.
Item 10. Recent Sales of Unregistered Securities
On March 31, 1997, the Operating Partnership issued a total of 501,488 Units in
full consideration for the acquisition of real estate properties from NWI. The
aggregate value of the properties acquired by the Operating Partnership in
exchange for such Units was approximately $12.5 million. The Units were issued
pursuant to an exemption from registration under Section 4(2) of the Securities
Act in reliance, in part, upon the representations and warranties set forth in
the NWI acquisition agreements. These Units are subject to a registration rights
and lock-up agreement which restricts the disposition of the Units for a period
of one year from the date of issuance with respect to all Units and further
restricts the disposition of Units beneficially owned by Weeks' principal
executive officers in Nashville, Tennessee (approximately 43% of the total Units
issued) until November 1, 1999.
On January 31, 1997, the Operating Partnership issued 71,158 Units in 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 Units was approximately $1.8 million. 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. The Units are subject to a registration
rights and lock-up agreement which restricts the disposition of the Units until
December 31, 1999.
On December 31, 1996, the Operating Partnership issued 565,459 Units in partial
consideration for the acquisition of real estate properties and the business
operations of Lichtin. The aggregate value of the properties acquired by the
Operating Partnership in exchange for such Units and other consideration was
approximately $21.4 million. 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. The Units are subject to a registration rights and lock-up agreement
which restricts the disposition of the Units until December 31, 1999.
On November 1, 1996, November 26, 1996, and December 30, 1996 the Operating
Partnership issued a total of 1,352,261 Units in partial or full consideration
for the acquisition of real estate properties and the business operations of
NWI. The aggregate value of the properties acquired by the Operating Partnership
in exchange for such Units was approximately $33.8 million. The Units were
issued pursuant to an exemption from
-60-
<PAGE>
registration under Section 4(2) of the Securities Act in reliance, in part, upon
the representations and warranties set forth in the NWI acquisition agreements.
These Units are subject to a registration rights and lock-up agreement which
restricts the disposition of the Units for a period of one year from the date of
issuance with respect to all Units and further restricts the disposition of
Units beneficially owned by Weeks' principal executive officers in Nashville,
Tennessee (approximately 43% of the total Units issued) until November 1, 1999.
On August 24, 1994, the Operating Partnership issued an aggregate of 7,675,360
Units to Weeks in exchange for approximately $147.8 million in cash. In
addition, on August 24, 1994, the Operating Partnership issued an aggregate of
2,593,072 Units to certain of the Limited Partners in exchange for certain
property and assets valued at an aggregate of approximately $49.9 million. The
issuance of the Units was effected in reliance on the exemption from
registration under Section 4(2) of the Securities Act.
The Operating Partnership has issued additional Units to the General Partner in
exchange for the contribution of funds received pursuant to sales of Weeks'
common stock in connection with the Additional Offerings. Such issuances of
Units were effected in reliance on the exemption from registration under Section
4(2) of the Securities Act.
Item 11. Description of Registrant's Securities to be Registered
All of Weeks' assets are held by or through, and all of its operations are
conducted by or through, the Operating Partnership. At June 30, 1997, Weeks
indirectly controlled the Operating Partnership as the sole general partner and
as the holder of a 77.8% interest in the Operating Partnership. The remaining
Units are held by the Limited Partners. The material terms of the Units,
including a summary of certain provisions of the Second Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, as amended (the
"Partnership Agreement"), are set forth below. The following description of the
terms and provision of the Units and the Partnership Agreement does not purport
to be complete and is subject to and qualified in its entirety by reference to
applicable provisions of Georgia law and the terms of the Partnership Agreement.
General
Holders of Units (other than the General Partner) hold limited partnership
interests in the Operating Partnership, and all holders of Units (including the
General Partner) are entitled to share in cash distributions from, and in the
profits and losses of, the Operating Partnership. The Units are exchangeable for
shares of Weeks' common stock on a one-for-one basis, or cash, at the Company's
option. The Units are not registered pursuant to Federal or state securities
laws, and they are not listed on the New York Stock Exchange ("NYSE") or any
other exchange or quoted on any national market system. Upon effectiveness of
this Form 10, the Units will
-61-
<PAGE>
be registered under the Exchange Act, which registration will not affect their
restricted nature.
The Operating Partnership was formed as a limited partnership under the Georgia
Revised Uniform Limited Partnership Act ("GRULPA"). Holders of Units have the
rights to which limited partners are entitled under GRULPA. The Units cannot be
sold, assigned, pledged or otherwise disposed of by a holder unless they are so
registered or an exemption from such registration is available. In addition, the
Partnership Agreement imposes restrictions on the transfer of Units, some of
which are described herein.
Purposes, Business and Management
The purpose of the Operating Partnership includes the conduct of any business
that may lawfully be conducted by a limited partnership formed under GRULPA,
except that the Partnership Agreement requires the business of the Operating
Partnership to be conducted in such a manner that will permit Weeks to be
classified as a REIT under Section 856 of the Code, unless Weeks elects not to
qualify as a REIT, or ceases to qualify as a REIT for reasons other than the
conduct of the business of the Operating Partnership. The Operating Partnership
may, subject to the foregoing limitation, enter into partnerships, joint
ventures or similar arrangements and may own interests in any other entity.
The General Partner, as sole general partner, has the exclusive power and
authority to conduct the business of the Operating Partnership, subject to the
consent of the Limited Partners in certain limited circumstances discussed
below. No Limited Partner, in his capacity as such, may take part in the
operation, management or control of the business of the Operating Partnership.
In particular, the Limited Partners expressly acknowledge in the Partnership
Agreement that the General Partner is acting on behalf of the Operating
Partnership and Weeks' shareholders collectively, and is under no obligation to
consider the tax consequences to individual Limited Partners of any action taken
by it in exercising its authority under the Partnership Agreement. The General
Partner intends to make decisions in its capacity as general partner of the
Operating Partnership so as to maximize the profitability of the Operating
Partnership as a whole, independent of the tax effects on the Limited Partners.
Neither the General Partner, nor the Operating Partnership nor Weeks will have
liability to a Limited Partner under any circumstances as a result of an income
tax liability incurred by such Limited Partner as a result of an action (or
inaction) by the General Partner pursuant to its authority under the Partnership
Agreement.
Ability to Engage in Other Businesses; Conflicts of Interest
The General Partner may not conduct any business other than the business of the
Operating Partnership. In furtherance of the business and purposes of the
Operating
-62-
<PAGE>
Partnership and for the benefit of the Operating Partnership as a whole, the
General Partner may conduct business activities other than through the Operating
Partnership, conduct businesses not connected with the ownership, acquisition
and disposition of partnership interests and the management of the business of
the Operating Partnership, and own assets other than the partnership interests.
See the Section entitled "Policies With Respect To Certain Activities --
Conflict Of Interest Policies" included herein.
Distributions; Allocations of Income and Loss
The Partnership Agreement provides for the distribution of Net Operating Cash
Flow (as defined below), as determined in the manner provided in the Partnership
Agreement, to the General Partner and the Limited Partners in proportion to
their percentage interests in the Operating Partnership. "Net Operating Cash
Flow" is generally defined as all cash receipts of the Operating Partnership
from all sources, excluding capital contributions, minus all cash costs and
expenses of the Operating Partnership, reserves, principal payments or debt and
capital expenditures and other adjustments. In addition, the Partnership
Agreement generally provides for the allocation to the General Partner and the
Limited Partners of items of the Operating Partnership's income and losses in
accordance with their percentage interests in the Operating Partnership.
Borrowing by the Operating Partnership
The General Partner is authorized to cause the Operating Partnership to borrow
money and to issue and guarantee debt as it deems necessary for the conduct of
the activities of the Operating Partnership. Such debt may be secured by deeds
to secure debt, mortgages, deeds of trust, liens or encumbrances on Properties
of the Operating Partnership. The General Partner may also cause the Operating
Partnership to borrow money to enable the Operating Partnership to make
distributions in an amount sufficient to permit Weeks, so long as it qualifies
as a REIT, to avoid the payment of any federal income tax.
Reimbursement of the General Partner
The General Partner will not receive any compensation for its services as
general partner of the Operating Partnership. The General Partner, however, as a
partner in the Operating Partnership, has the same right to allocations and
distributions as other partners of the Operating Partnership. In addition, the
Operating Partnership has agreed to reimburse the General Partner for all
expenses it incurs relating to the ownership and operation of, or for the
benefit of, the Operating Partnership, and any offering of shares of Weeks'
common stock, including expenses in connection with the registration of Weeks'
common stock.
-63-
<PAGE>
Liability of the General Partner and the Limited Partners
The General Partner is liable for all general obligations of the Operating
Partnership to the extent Operating Partnership funds are reasonably available
to the General Partner. Neither Weeks nor the General Partner is obligated to
expend its individual funds for payments to third parties on behalf of the
Partnership or to undertake any individual liability or obligation on behalf of
the Operating Partnership. The General Partner is not liable for the nonrecourse
obligations of the Operating Partnership.
The Limited Partners are not required to make additional contributions to the
Operating Partnership. Assuming that a Limited Partner acts in conformity with
the provisions of the Partnership Agreement, the liability of the Limited
Partner for obligations of the Operating Partnership under GRULPA is limited,
subject to certain possible exceptions, generally to the loss of the Limited
Partner's investment in the Operating Partnership represented by his Units.
The Operating Partnership is qualified to conduct business in Georgia, North
Carolina, South Carolina, Tennessee and Florida. Maintenance of limited
liability may require compliance with certain legal requirements of those
jurisdictions and certain other jurisdictions. Limitations on the liability of a
Limited Partner for the obligations of a limited partnership have not clearly
been established in many states; accordingly, if it were determined that the
right, or exercise of the right by the Limited Partners, to make certain
amendments to the Partnership Agreement or to take other action pursuant to the
Partnership Agreement constituted "control" of the Operating Partnership's
business for the purposes of the statutes of any relevant state, the Limited
Partners might be held personally liable for the Operating Partnership's
obligations. The Operating Partnership operates in a manner the General Partner
deems reasonable, necessary and appropriate to preserve the limited liability of
the Limited Partners.
Exculpation and Indemnification of the General Partner
The Partnership Agreement generally provides that the General Partner will incur
no liability to the Operating Partnership or any Limited Partner for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith. In addition, the
General Partner is not responsible for any misconduct or negligence on the part
of its agents provided the General Partner appointed such agents in good faith.
The General Partner may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers and other consultants and advisors
and any action it takes or omits to take in reliance upon the opinion of such
persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
-64-
<PAGE>
The Partnership Agreement also provides for indemnification of the General
Partner, the directors, officers and Affiliates (as defined in the Partnership
Agreement) of the General Partner, Weeks and the Operating Partnership and such
other persons as the General Partner may from time to time designate, against
any and all losses, claims, damages, liabilities, expenses, judgments, fines,
settlements (including, but not limited to, reasonable attorneys' fees and
expenses), and other amounts arising from any and all claims, demands, actions,
suits or proceedings that relate to the operations of the Operating Partnership
in which such person may be involved, or is threatened to be involved, provided
that the Operating Partnership shall not indemnify any such person (i) for
intentional misconduct or a knowing violation of the law, or (ii) for any
transaction for which such person received a personal benefit in violation or
breach of any provision of the Partnership Agreement.
Sales of Assets
Under the Partnership Agreement, the General Partner generally has the exclusive
authority to determine whether, when and on what terms the assets of the
Operating Partnership (including the Properties) will be sold. A sale of all or
substantially all of the assets of the Operating Partnership to Weeks, the
General Partner or an Affiliate of either (or a merger of the Operating
Partnership with another entity if the Operating Partnership is not the
surviving entity), however, requires the affirmative vote of a majority in
interest of the Limited Partners (other than Weeks LP).
Removal of the General Partner; Transfer of General Partner's Interest
The Partnership Agreement provides that the General Partner may not be removed
by the Limited Partners. The General Partner may not transfer any of its
interests except in connection with a merger or sale of all or substantially all
its assets.
Transferability of Interests
The Partnership Agreement provides that the General Partner may not voluntarily
withdraw from, or transfer any portion of its interest in, the Operating
Partnership, without the consent of a majority in interest of the Limited
Partners (other than Weeks LP). In addition to certain other prohibitions on
transfer, in no event may a Limited Partner transfer his interest in the
Operating Partnership if such transfer would cause the termination of the
Operating Partnership for federal income tax purposes or would cause, or in the
judgment of the General Partner might cause, Weeks to cease to comply with the
requirements under the Code for classification as a REIT. The Limited Partners
are permitted at any time under the Partnership Agreement to transfer the
economic attributes of their interests in the Operating Partnership to their
Affiliates, upon notice to the General Partner and upon providing the General
Partner an opinion of counsel reasonably acceptable to the General Partner to
the effect that such transfer may be effected without violation of any
-65-
<PAGE>
federal or state securities laws. Such transferees, however, will not be
admitted as substitute limited partners unless the transferor so directs and the
General Partner consents and the transferees agree to assume the obligations of
the transferor under the Partnership Agreement.
No Withdrawal by Limited Partners
No Limited Partner has the right to withdraw from or reduce his capital
contribution to the Operating Partnership, except as a result of the redemption
or transfer of his Units pursuant to the terms of the Partnership Agreement.
Issuance of Additional Limited Partnership Interests
The General Partner is authorized, without the consent of the Limited Partners,
to cause the Operating Partnership to issue additional Units to the partners or
to other persons for such consideration and on such terms and conditions as the
General Partner deems appropriate. In addition, the General Partner may cause
the Operating Partnership to issue to the General Partner and/or Weeks LP (as
applicable) additional Units, or other additional partnership interests in
different series or classes which may be senior to the Units, in conjunction
with an offering of securities of Weeks having substantially similar rights, in
which the proceeds thereof are contributed to the Operating Partnership by the
General Partner or Weeks LP (as determined by the General Partner in its sole
discretion). Consideration for additional partnership interests may be cash or
any property or other assets permitted by GRULPA.
Meetings; Voting
Meetings of the Limited Partners may be called only by the General Partner.
Limited Partners may vote either in person or by proxy at meetings. Any action
that is required or permitted to be taken by the Limited Partners of the
Operating Partnership may be taken at a meeting of the Limited Partners. On
matters in which Limited Partners are entitled to vote, each Limited Partner
(other than Weeks LP) will have a vote equal to the number of Units he holds in
the Operating Partnership, in connection with (i) the sale of all or
substantially all of the assets of the Operating Partnership, (ii) the merger of
the Operating Partnership into another entity if the Operating Partnership is
not the surviving entity, (iii) the dissolution of the Operating Partnership or
(iv) the acquisition of any personal or real property other than in the name of
the Operating Partnership or of certain other entities in which the Operating
Partnership has an interest. A transferee of Units who has not been admitted as
a Limited Partner of record with respect to such Units will have no voting
rights with respect to such Units, even if such transferee holds other Units as
to which it has been admitted as Limited Partner. The Partnership Agreement does
not provide for annual meetings of the Limited Partners.
-66-
<PAGE>
Amendment of Partnership Agreement
Amendments to the Partnership Agreement may be proposed by the General Partner.
Generally, the Partnership Agreement may be amended with the approval of the
General Partner and a majority in interest of the Limited Partners. Certain
amendments that would, among other things, convert a Limited Partner's interest
into a general partner's interest; modify the limited liability of a Limited
Partner; or alter or modify the redemption rights of a Limited Partner must be
approved by the General Partner and each Limited Partner that would be adversely
affected by such amendment. Notwithstanding the foregoing, the General Partner
shall have the power, without the consent of the Limited Partners, to amend the
Partnership Agreement as may be required to (i) with the approval of the
Independent Directors (as defined in the Partnership Agreement) of Weeks, add to
the obligations of the General Partner or Weeks or surrender any rights or power
granted to the General Partner or Weeks, or any Affiliate (as defined in the
Partnership Agreement) of the General Partner or Weeks, for the benefit of the
Limited Partners, (ii) reflect the admission, substitution, termination, or
withdrawal of partners in accordance with the terms of the Partnership
Agreement, (iii) establish the designations, rights, powers, duties and
preferences of any additional partnership interests issued in accordance with
the terms of the Partnership Agreement, (iv) reflect a change that is of an
inconsequential nature and does not materially adversely affect the Limited
Partners, or cure any ambiguity, correct or supplement any provisions of the
Partnership Agreement not inconsistent with law or with other provisions of the
Partnership Agreement, or make other changes concerning matters under the
Partnership Agreement that are not otherwise inconsistent with the Partnership
Agreement or law, (v) satisfy any requirements of federal or state law or
regulatory or judicial order, (vi) change the name of the Operating Partnership,
or (vii) maintain Weeks' status as a REIT.
Books and Reports
The General Partner is required to keep the Operating Partnership's books and
records at the principal office of the Operating Partnership. The books of the
Operating Partnership are required to be maintained for financial and tax
reporting purposes in accordance with generally accepted accounting principles.
The Limited Partners have the right, subject to certain limitations, to receive
copies of Securities and Exchange Commission filings by Weeks, the Operating
Partnership's tax return, a list of partners, the Partnership Agreement, the
partnership certificate and all amendments thereto, and information about the
capital contributions of the partners.
The General Partner will furnish to each Limited Partner, as soon as practicable
after the close of each fiscal year, an annual report containing financial
statements of the Operating Partnership (or Weeks, if consolidated financial
statements including the Operating Partnership are prepared) for each fiscal
year. The financial statements will be audited by a firm of independent public
accountants selected by the General Partner.
-67-
<PAGE>
Dissolution, Winding Up and Termination
The Operating Partnership will continue in full force and effect until the
earlier of (i) the bankruptcy, incapacity or other event that causes the last
general partner of the Operating Partnership to cease to be a general partner
unless, within 90 days after such event, a majority in interest of the Limited
Partners agrees in writing to continue the business of the Operating Partnership
and to the appointment of a successor general partner, (ii) the election to
dissolve the Operating Partnership made in writing by the General Partner with
the consent of a majority in interest of the Limited Partners (other than Weeks
LP), (iii) the sale or other disposition of all or substantially all of the
assets of the Operating Partnership, (iv) the entry of a decree of judicial
dissolution of the Operating Partnership pursuant to Georgia law or (v) December
31, 2093, unless the General Partner, in its sole and absolute discretion,
extends such date by written notice to the Limited Partners given prior to such
date. Upon dissolution, the General Partner or any liquidator will proceed to
liquidate the assets of the Operating Partnership and apply the proceeds
therefrom in the order of priority set forth in the Partnership Agreement.
Item 12. Indemnification of Directors and Officers
The Partnership Agreement generally provides that the General Partner will incur
no liability to the Operating Partnership or any Limited Partner for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission, if the General Partner acted in good faith. In addition, the
General Partner is not responsible for any misconduct or negligence on the part
of its agents, provided the General Partner appointed such agents in good faith.
The General Partner may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers and other consultants and advisors
and any action it takes or omits to take in reliance upon the opinion of such
persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
The Partnership Agreement also provides for indemnification of (i) the General
Partner, (ii) the directors, officers and Affiliates of the Operating
Partnership, the General Partner and Weeks, (iii) certain persons who have
executed guaranties and other instruments on behalf of the Operating
Partnership, (iv) Messrs. Weeks, Senkbeil and Robinson, (v) Weeks, and (vi) such
other persons as the General Partner may from time to time designate, against
any and all losses, damages, claims, liabilities, expenses, judgments, fines and
settlements (including, but not limited to reasonable attorneys' fees and
expenses) incurred by reason of any act performed in good faith or in enforcing
the provisions of the Partnership Agreement relating to indemnification;
provided, however, that the Operating Partnership shall not indemnify any such
person (i) for intentional misconduct or a knowing violation of the law, or (ii)
for any transaction for which such person received a personal benefit in
violation or breach of any provision of the Partnership Agreement.
-68-
<PAGE>
As permitted by the Georgia Business Corporation Code (the "GBCC"), the General
Partner's Amended and Restated Articles of Incorporation (the "Articles")
provide that a director shall not be personally liable to the General Partner or
its shareholders for monetary damages for breach of duty of care or any other
duty owed to the General Partner as a director, except that such provision shall
not eliminate or limit the liability of a director (a) for any appropriation, in
violation of his duties, of any business opportunity of the General Partner, (b)
for acts or omissions that involve intentional misconduct or a knowing violation
of law, (c) for unlawful corporate distributions or (d) for any transaction from
which the director received an improper personal benefit. The Articles further
provide that if the GBCC is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the General Partner shall be eliminated or limited to the
fullest extent permitted by the GBCC, as amended.
Under Article VI of the General Partner's Amended and Restated Bylaws (the
"Bylaws"), the General Partner is required to indemnify to the fullest extent
permitted by the GBCC, any individual made a party to a proceeding (as defined
in the GBCC) because he is or was a director or officer against liability (as
defined in the GBCC), incurred in the proceeding, if he acted in a manner he
believed in good faith to be in or not opposed to the best interests of the
General Partner and, in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. The General Partner is
required to pay for or reimburse the reasonable expense incurred by a director
or officer who is a party to a proceeding in advance of final disposition of the
proceeding if:
(a) Such person furnishes the General Partner a written
affirmation of his good faith belief that he has met the standard of
conduct set forth above; and
(b) Such person furnishes the General Partner a written
undertaking, executed personally or on his behalf, to repay any
advances if it is ultimately determined that he is not entitled to
indemnification.
The written undertaking required by paragraph (b) above must be an unlimited
general obligation of such person but need not be secured and may be accepted
without reference to financial ability to make repayment.
The right to indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in Article VI of the
General Partner's Bylaws are not exclusive of any other right which any person
may have under any statute, provision of the General Partner's Articles,
provision of the General Partner's Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
The Amended and Restated Articles of Incorporation and the Amended and Restated
Bylaws of Weeks contain identical provisions to those described above.
-69-
<PAGE>
Item 13. Financial Statements and Supplementary Data
See Index to Financial Statements on page F-1 of this Form 10.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
Item 15. Financial Statements and Exhibits
(a) Financial Statements
--------------------
See Index to Financial Statements on page F-1 of this Form 10.
(b) Exhibits
--------
Certain of the exhibits required by Item 601 of Regulation S-K
have been filed with previous reports by Weeks and are herein
incorporated by reference thereto.
The Registrant agrees to furnish a copy of all agreements relating
to long-term debt upon request of the Commission.
<TABLE>
<S> <C>
2.1** Agreement of Merger by and between NWI
Warehouse Group, LLC and Weeks Realty, L.P.,
dated November 1, 1996.
2.2** Contribution Agreement for Development
Properties between Weeks Realty, L.P., and
NWI Warehouse Group, L.P., dated November 1,
1996.
2.3** Contribution Agreement for Aspen Grove Land
between Weeks Realty, L.P., and NWI
Warehouse Group, L.P., dated November 1,
1996.
2.4** Contribution Agreement for I-440 Land
between Weeks Realty, L.P., and NWI
Warehouse Group, L.P., dated November 1,
1996.
2.5** Contribution Agreement for NWI Operating
Business by and between Weeks Realty, L.P.
and NWI Warehouse Group, L.P., dated
November 1, 1996.
</TABLE>
-70-
<PAGE>
<TABLE>
<S> <C>
2.6** Contribution Agreement for Buckley Operating
Business by and between Weeks Realty, L.P.
and Buckley & Company Real Estate, Inc.,
dated November 1, 1996.
2.7** Contribution Agreement for Briley Land
between Weeks Realty, L.P. and NWI Warehouse
Group, L.P., dated November 1, 1996.
2.8*** Contribution Agreement by and between Harold
S. Lichtin and Weeks Realty, L.P., dated
December 31, 1996.
2.9*** Contribution Agreement for Northern Telecom
Properties, among the contributors
identified therein (the "Contributors") and
Weeks Realty, L.P. doing business as Weeks
Realty Limited Partnership, dated December
31, 1996.
2.10*** Contribution Agreement (Perimeter Park West
Land) among Harold S. Lichtin, Marie
Antoinette Robertson, and Perimeter Park
West Associates, and Weeks Realty L.P. doing
business as Weeks Realty Limited
Partnership, dated December 31, 1996.
2.11*** Contribution Agreement for Completed
Properties Lichtin Portfolio among the
Contributors and Weeks Realty, L.P. doing
business as Weeks Realty Limited
Partnership, dated December 31, 1996.
2.12*** Contribution Agreement for Development
Properties and Regency Forrest Land among
the Contributors and Weeks Realty, L.P.
doing business as Weeks Realty Limited
Partnership, dated December 31, 1996.
4.1** Second Amended and Restated Agreement of
Limited Partnership of Weeks Realty, L.P.,
dated October 30, 1996.
4.2** First Amendment to the Second Amended and
Restated Agreement of Limited Partnership of
Weeks Realty, L.P. by and among NWI
Warehouse Group, L.P., Buckley & Company
Real Estate, Inc. and Weeks GP Holdings,
Inc., dated November 1, 1996.
4.3+++ Second Amendment to the Second Amended and
Restated Agreement of Limited Partnership of
Weeks Realty, L.P. by and among Harold S.
Lichtin, Noel A. Lichtin, Marie Antoinette
</TABLE>
-71-
<PAGE>
<TABLE>
<S> <C>
Robertson, Amy R. Ehrman, Roland G.
Robertson and Perimeter Park West Associates
Limited Partnership, Weeks GP Holdings, Inc.
and Weeks Corporation, dated December 31,
1996.
4.4+++ Third Amendment to the Second Amended and
Restated Agreement of Limited Partnership of
Weeks Realty, L.P. by and among Roderick M.
Duncan, Anne B. Broaddus, F. Timothy
Nichols, James F. McCabe, Regency Forest,
LLC, Weeks GP Holdings, Inc. and Weeks
Corporation, dated January 31, 1997.
10.1**** Employment Agreements between Weeks Realty
L.P. and A. Ray Weeks, Jr., Thomas D.
Senkbeil and Forrest W. Robinson,
respectively.
10.2**** Employment Agreements between Weeks Realty
Services Inc. and A. Ray Weeks, Jr., Thomas
D. Senkbeil and Forrest W. Robinson,
respectively.
10.3**** Employment Agreements between Weeks
Construction Services Inc. and A. Ray Weeks,
Jr. and Forrest W. Robinson, respectively.
10.4**** Noncompetition Agreements among the Company,
Weeks Realty L.P., Weeks Realty Services
Inc., Weeks Construction Services Inc. and
each of A. Ray Weeks, Jr., Thomas D.
Senkbeil and Forrest W. Robinson.
10.5+ Credit Agreement dated September 25, 1996,
by and among Wachovia Bank of Georgia, N.A.,
as agent bank for Wachovia Bank of Georgia,
N.A., First Union National Bank of Georgia,
Commerzbank A.G. and Mellon Bank, as
lenders, Weeks Realty, L.P., Weeks
Construction Services, Inc., Weeks Realty
Services, Inc., Weeks Development
Partnership and Weeks Financing Limited
Partnership, as borrowers, and Weeks
Corporation and Weeks Realty, L.P., as
guarantors.
10.6++ Park North Purchase and Sale Agreement
between Copley Properties Inc., Parknorth
Associates, Parknorth Associates II,
Parknorth Associates III and Weeks Realty,
L.P., dated March 28, 1995.
</TABLE>
-72-
<PAGE>
<TABLE>
<S> <C>
10.7# Purchase and Sale Agreement by and among
North Meadow Associates Joint Venture, ASC
North Fulton Associates Joint Venture and
Weeks Realty, L.P., dated July 7, 1995.
10.8## Noncompetition Agreement between Weeks
Corporation, Weeks Realty L.P., Weeks Realty
Services Inc. and Weeks Construction
Services Inc. and David P. Stockert, dated
June 26, 1995.
10.9## Agreement of Purchase and Sale between
Premprop-Northwoods 6 Partnership, Premprop-
Northwoods 18-22 Partnership, and Premprop-
Northwoods 23 Partnership and Weeks Realty
L.P. dated November 6, 1995. The Exhibits
and Schedules to this Agreement are listed
in, but not filed with, this exhibit. Such
Exhibits and Schedules have been omitted for
purposes of this filing, but will be
furnished to the Commission supplementary
upon request.
10.10### Real Estate Purchase and Sale Agreement by
and between Principal Mutual Life Insurance
Company and Weeks Realty, L.P., dated May
28, 1996.
10.11** Noncompetition Agreement by and among NWI
Warehouse Group, L.P., Weeks Corporation,
Weeks Realty, L.P., Weeks Realty Services,
Inc., Weeks Construction Services, Inc.,
Weeks GP Holdings, Inc., Weeks LP Holdings,
Inc., and their respective successors, dated
November 1, 1996.
10.12** Noncompetition Agreement by and among John
W. Nelley, Jr., Weeks Corporation, Weeks
Realty, L.P., Weeks Realty Services, Inc.,
Weeks Construction Services, Inc., Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and
any other entity under the common control of
Weeks Corporation, and their respective
successors, dated November 1, 1996.
10.13** Noncompetition Agreement by and among Albert
W. Buckley, Jr., Weeks Corporation, Weeks
Realty, L.P., Weeks Realty Services, Inc.,
Weeks Construction Services, Inc., Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and
any other entity under the common control of
Weeks Corporation, and their respective
successors, dated November 1, 1996.
10.14*** Noncompetition Agreement by and between
Harold S. Lichtin, Weeks Corporation, Weeks
Realty, L.P., Weeks Realty
</TABLE>
-73-
<PAGE>
<TABLE>
<S> <C>
Services, Inc., Weeks Construction Services,
Inc., Week GP Holdings, Inc., Weeks LP
Holdings, Inc., and any other entity under
the common control of Weeks Corporation, and
their respective successors, dated December
31, 1996.
12.1 Computation of Earnings Per Partnership Unit
21.1 List of subsidiaries of the Registrant.
27.1 Financial Data Schedule
99.1 Executive Officers of the Registrant
99.2 Executive Compensation
99.3 Certain Relationships and Related
Transactions
* Filed as an exhibit to the Registration
Statement on Form S-11 (SEC File No. 33-
80314) of Weeks.
** Filed as an exhibit to Weeks' Current Report
on Form 8-K dated November 1, 1996.
*** Filed as an exhibit to Weeks' Current Report
on Form 8-K dated December 31, 1996.
**** Filed as an exhibit to Weeks' Annual Report
on Form 10-K for the year ended December 31,
1994.
# Filed as an exhibit to Weeks' Current Report
on Form 8-K dated August 31, 1995.
## Filed as an exhibit to Weeks' Current Report
on Form 10-K for the year ended December 31,
1995.
### Filed as an exhibit to Weeks' Current Report
on Form 8-K dated August 9, 1996.
#### Filed as an exhibit to the Registration
Statement on Form S-8 (SEC File No. 333-
18305) of Weeks.
. + Filed as an exhibit to Weeks' Quarterly
Report on Form 10-Q for the quarterly period
ended September 30, 1996.
++ Filed as an exhibit to Weeks' Current Report
on Form 8-K dated July 12, 1995.
+++ Filed as exhibit to Weeks' Current Report on
Form 8-K dated May 7, 1997.
</TABLE>
-74-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Norcross, State of Georgia on the 1st day of August, 1997.
WEEKS REALTY, L.P.
By: Weeks GP Holdings, Inc., as General Partner
By: /s/ A. Ray Weeks, Jr.
-------------------------------------------
A. Ray Weeks, Jr.
Chairman and Chief Executive Officer
75
<PAGE>
WEEKS REALTY, L.P.
INDEX TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Description Page
- ----------- ----
<S> <C>
Report of Independent Public Accountants on Financial
Statements and Schedule F-2
Consolidated Balance Sheets of Weeks Realty, L.P. at December 31, 1996
and 1995 and March 31, 1997 (unaudited) F-3
Consolidated Statements of Operations of Weeks Realty, L.P. for the years ended
December 31, 1996 and 1995, for the period from August 24, 1994 to
December 31, 1994 and for the three months ended March 31, 1997 and
1996 (unaudited) and the Combined Statement of Operations of Weeks
Group for the period from January 1, 1994 to August 23, 1994 F-4
Consolidated Statements of Partners' Capital of Weeks Realty, L.P. for the years
ended December 31, 1996 and 1995, for the period from August 24, 1994
to December 31, 1994 and for the three months ended March 31, 1997
(unaudited) and the Combined Statement of Owners' Deficit of Weeks
Group for the period from January 1, 1994 to August 23, 1994 F-5
Consolidated Statements of Cash Flows of Weeks Realty, L.P. for the years ended
December 31, 1996 and 1995, for the period from August 24, 1994 to
December 31, 1994 and for the three months ended March 31, 1997 and
1996 (unaudited) and the Combined Statement of Cash Flows for Weeks
Group for the period from January 1, 1994 to August 23, 1994 F-6
Notes to Consolidated and Combined Financial Statements F-8
Schedule III - Real Estate Assets and Accumulated Depreciation at
December 31, 1996 S-1
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Weeks Realty, L.P.:
We have audited the accompanying consolidated balance sheets of Weeks Realty,
L.P. (a Georgia limited partnership) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, partners'
capital and cash flows for the years ended December 31, 1996 and 1995, and for
the period from August 24, 1994 to December 31, 1994. We have also audited the
combined statement of operations, owners' deficit and cash flows of Weeks Group
for the period from January 1, 1994 to August 23, 1994. These financial
statements and schedule are the responsibility of the management of Weeks
Realty, L.P.. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Weeks Realty, L.P. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended December 31, 1996 and 1995
and for the period from August 24, 1994 to December 31, 1994, and the results of
operations and the cash flows of Weeks Group for the period from January 1, 1994
to August 23, 1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-2
<PAGE>
WEEKS REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31, December 31,
(In thousands, except per unit data) 1997 1996 1995
- ------------------------------------ --------- ------------ ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C> <C>
Real estate assets
Land $ 82,857 $ 77,233 $ 40,100
Buildings and improvements 482,744 450,002 253,414
Accumulated depreciation (46,157) (41,469) (29,889)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating real estate assets 519,444 485,766 263,625
Developments in progress 52,495 56,571 21,448
Land held for future development 12,307 9,035 4,801
- ------------------------------------------------------------------------------------------------------------------------------------
Net real estate assets 584,246 551,372 289,874
Real estate development loans 11,521 9,455 1,309
Cash and cash equivalents 299 260 982
Direct financing lease, net 5,107 5,136 5,229
Receivables 6,300 5,858 4,544
Deferred costs, net 11,356 10,286 9,457
Investments in and notes receivable
from unconsolidated entities 8,661 7,760 7,751
Other assets 2,602 1,722 1,295
- ------------------------------------------------------------------------------------------------------------------------------------
$ 630,092 $ 591,849 $ 320,441
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Partners' Capital
Mortgage notes payable $ 200,768 $ 197,575 $ 113,022
Bank credit facility borrowings 120,115 99,400 34,283
Accounts payable and accrued expenses 11,505 9,970 7,783
Other liabilities 3,486 2,963 1,741
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 335,874 309,908 156,829
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 13)
Other limited partners' capital interests
(5,057,836, 4,485,190 and 2,567,470 Units),
at redemption value (Note 1) 173,863 149,133 64,508
Partners' capital (14,097,617, 14,048,593
and 11,155,704 Units) (Note 1) 120,355 132,808 99,104
- ------------------------------------------------------------------------------------------------------------------------------------
$ 630,092 $ 591,849 $ 320,441
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WEEKS REALTY, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS
AND WEEKS GROUP COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Weeks Realty, L.P. Weeks Group
---------------------------------------------------------------------------- ------------
Three Months Three Months Aug. 24, 1994 Jan. 1, 1994
Ended Ended Year Ended Year Ended to to
(In thousands, except per unit data) Mar. 31, 1997 Mar. 31, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 17,400 $ 10,780 $ 48,162 $ 31,217 $ 8,144 $ 10,937
Tenant reimbursements 2,157 1,048 4,517 2,798 733 977
Direct financing lease 188 192 768 776 277 504
Other 154 109 436 480 158 107
Development and
construction fees --- --- --- --- --- 990
Landscape fees --- --- --- --- --- 2,169
Property management fees --- --- --- --- --- 425
Commissions --- --- --- --- --- 429
- ---------------------------------------------------------------------------------------------------------------------------------
19,899 12,129 53,883 35,271 9,312 16,538
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and
maintenance 2,223 1,294 6,025 3,899 979 1,747
Real estate taxes 1,699 1,068 4,725 2,997 735 974
Depreciation and
amortization 5,344 2,951 13,474 8,177 2,098 2,920
Interest 5,066 2,435 11,779 8,106 1,958 6,682
Amortization of deferred
financing costs 226 200 864 691 252 322
General and administrative 1,169 716 3,039 1,848 472 1,514
Labor and materials --- --- --- --- --- 1,954
- ---------------------------------------------------------------------------------------------------------------------------------
15,727 8,664 39,906 25,718 6,494 16,113
- ---------------------------------------------------------------------------------------------------------------------------------
Income before Equity in Earnings
of Unconsolidated Entities and
Interest Income 4,172 3,465 13,977 9,553 2,818 425
Equity in income of
unconsolidated entities 648 266 1,340 1,220 692 91
Interest income 238 83 492 334 224 --
- ---------------------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Loss 5,058 3,814 15,809 11,107 3,734 516
Extraordinary loss --- --- --- --- (2,667) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income $ 5,058 $ 3,814 $ 15,809 $ 11,107 $ 1,067 $ 516
- ---------------------------------------------------------------------------------------------------------------------------------
Per Unit Data
Income before
extraordinary loss $ 0.27 $ 0.28 $ 1.11 $ 1.03 $ 0.36
Extraordinary loss --- --- --- --- (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.27 $ 0.28 $ 1.11 $ 1.03 $ 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average
units outstanding 18,605 13,723 14,280 10,760 10,268
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
WEEKS REALTY, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
AND WEEKS GROUP COMBINED STATEMENT OF OWNERS' DEFICIT
<TABLE>
<CAPTION>
Weeks Corp. Other
and Subsidiaries Limited Partners'
(In thousands, except per unit data) Partners' Capital Capital Interests
- -----------------------------------------------------------------------------------------------------------------------------------
(Note 1) (Note 1)
<S> <C> <C>
Owners' Deficit, December 31, 1993 $ --- $ (24,197)
Capital distributions, net --- (1,571)
Net income --- 516
- -----------------------------------------------------------------------------------------------------------------------------------
Owners' Deficit, August 23, 1994 --- (25,252)
Capital distributions --- (2,547)
Cash contributions from Company 118,571 ---
Units issued in exchange for property --- 8,053
Net income 798 269
Distributions ($0.15 per Unit) (1,151) (388)
Adjustment to reflect other limited partners'
capital at redemption value (76,588) 76,588
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 41,630 56,723
Cash contributions from Company 72,800 ---
Conversion of redeemable Units into shares 234 (234)
Net income 8,426 2,681
Distributions ($1.50 per Unit) (11,513) (3,890)
Adjustment primarily to reflect other limited partners'
capital at redemption value (12,473) 9,228
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 99,104 64,508
Cash contributions from Company 69,279 --
Units issued in exchange for property 7,124 48,085
Net income 12,745 3,064
Distributions ($1.60 per Unit) (17,860) (4,108)
Adjustment to reflect other limited partners'
capital at redemption value (37,584) 37,584
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 132,808 149,133
Cash contributions from Company 302 ---
Units issued in exchange for property --- 14,334
Net income 3,826 1,232
Distributions ($0.43 per Unit) (6,043) (1,446)
Restricted share grants, net of deferred compensation (Note 16) 72 ---
Adjustment to reflect other limited partners'
capital at redemption value (10,610) 10,610
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1997 (Unaudited) $ 120,355 $ 173,863
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WEEKS REALTY, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS
AND WEEKS GROUP COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Weeks Realty, L.P. Weeks Group
---------------------------------------------------------------------------- ------------
Three Months Three Months Aug. 24, 1994 Jan. 1, 1994
Ended Ended Year Ended Year Ended to to
(In thousands) Mar. 31, 1997 Mar. 31, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities
Net income $ 5,058 $ 3,814 $ 15,809 $ 11,107 $ 1,067 $ 516
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization 5,344 2,951 13,474 8,177 2,098 2,920
Amortization of deferred
financing costs 226 200 864 691 252 322
Amortization of deferred
compensation 72 --- --- --- --- ---
Income from direct financing lease (188) (192) (768) (776) (277) (504)
Straight-line rent revenue (150) (71) (475) 19 31 216
Equity in earnings of
partnership joint ventures --- --- --- --- --- (91)
Extraordinary loss --- --- --- --- 2,667 ---
Net change in:
Receivables (409) (419) (184) (734) (846) (815)
Other assets (1,177) (501) (659) (239) 2,643 (4,213)
Deferred costs (1,654) (290) (2,618) (2,451) (1,186) (706)
Accounts payable and accrued
expenses 1,917 589 1,366 2,078 (1,411) 1,732
Other liabilities 523 444 1,222 806 531 3,053
Construction receivables --- --- --- --- --- (109)
Costs in excess of billings --- --- --- --- --- 1,559
Cash overdraft payable --- --- --- --- (1,615) (829)
Billings in excess of costs --- --- --- --- --- (282)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating
activities 9,562 6,525 28,031 18,678 3,954 2,769
- ---------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Property acquisition, development
and construction (19,565) (9,962) (113,056) (113,870) (34,599) (15,593)
Real estate development loans (2,066) (1,648) (8,146) (1,309) --- ---
Payments received on direct
financing lease 217 212 861 835 291 520
Notes receivable collections --- --- 18 1,467 --- ---
Notes receivable and deposits (400) (200) --- (4,540) --- ---
Distributions from (investments
in) unconsolidated entities --- --- --- 290 (3,840) 120
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (21,814) (11,598) (120,323) (117,127) (38,148) (14,953)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
continued
F-6
<PAGE>
WEEKS REALTY, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS
AND WEEKS GROUP COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Weeks Realty, L.P. Weeks Group
---------------------------------------------------------------------------- -------------
Three Months Three Months Aug. 24, 1994 Jan. 1, 1994
Ended Ended Year Ended Year Ended to to
(In thousands) Mar. 31, 1997 Mar. 31, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Financing Activities
Capital contributions from Company 302 --- 69,279 72,800 118,571 ---
Line of credit proceeds
(repayments), net 20,715 10,169 65,117 34,283 (9,477) 669
Proceeds from mortgage notes
payable --- --- --- 5,200 39,000 15,763
Payments of mortgage notes payable (1,167) (117) (20,075) (3,650) (98,180) (2,162)
Deferred financing costs (70) (165) (783) (133) (3,444) (470)
Distributions (7,489) (5,489) (21,968) (15,403) (1,539) ---
Debt prepayment penalties --- --- --- --- (2,180) ---
Distributions to predecessor
interests, net --- --- --- --- (2,399) (1,571)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing
activities 12,291 4,398 91,570 93,097 40,352 12,229
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash
and Cash Equivalents 39 (675) (722) (5,352) 6,158 45
Cash and Cash Equivalents,
beginning of period 260 982 982 6,334 176 131
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents,
end of period $ 299 $ 307 $ 260 $ 982 $ 6,334 $ 176
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
WEEKS REALTY, L.P. AND WEEKS GROUP
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
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 December 31,1996, the Company owned 75.8% of the units of partnership
interest ("Units") in the Operating Partnership. Units held by persons other
than the Company (the "Other Limited Partnership Interests") represented a 24.2%
partnership interest in the Operating Partnership. The Company's weighted
average ownership interest in the Operating Partnership was 80.6% and 78.9% for
the years ended December 31,1996 and 1995, 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 Operating Partnership. 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 the provisions of the limited partnership agreement, as amended, the
Operating Partnership is obligated, upon request, to redeem each Unit held by
the Other Limited Partnership Interests for shares of Weeks Corporation common
stock on a one-for-one basis, or cash, at the Company's option. The Company
currently anticipates that it will elect to issue common stock for 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 stock price as quoted on the New York Stock
Exchange) at the balance sheet dates.
Additionally, the terms of the limited 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 (Note
11), to the Operating Partnership in exchange for Units. In 1996 and 1995, the
Company contributed net proceeds, primarily resulting from the issuance of
additional Company common stock in the public equity markets, of $69,279,000 and
$72,800,000, respectively.
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
F-8
<PAGE>
be, at a minimum, sufficient to enable the Company to satisfy its annual
dividends requirements to maintain its REIT status under the Code.
On August 24, 1994, the Company completed a business combination and an initial
public offering of common stock resulting in the organizational and operating
structure discussed above. As part of the transaction, the Operating Partnership
was capitalized with the proceeds from the Company's IPO ($118,571,000) and
succeeded to substantially all of the interests in certain land and industrial
and suburban office buildings under common ownership and to the development,
construction, landscape and property management businesses of the predecessors
to the Operating Partnership and Company referred to herein as the "Weeks
Group."
As of December 31, 1996, the Operating Partnership owned 168 industrial
properties, 17 suburban office properties and three retail properties comprising
13.0 million square feet. The Company's primary markets and the concentration of
the Company's portfolio (based on square footage) are Atlanta, Georgia (74%),
Nashville, Tennessee (11%), Raleigh-Durham-Chapel Hill, North Carolina (9%),
Orlando, Florida (3%), and Spartanburg, South Carolina (3%). In addition, 24
industrial and suburban office properties and two property expansions were under
development or in lease-up at December 31,1996, comprising an additional 3.0
million square feet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the consolidated
accounts of the Operating Partnership and its subsidiaries. Subsequent to August
24, 1994, the Subsidiaries are reflected in the accompanying consolidated
financial statements using the equity method of accounting as discussed below.
The accompanying historical results of operations of Weeks Group for the period
from January 1, 1994 to August 23, 1994, represent the operations of certain
industrial and suburban office properties controlled by the predecessors to the
Operating Partnership and Company through real estate partnerships and
affiliated entities which provided development, construction, landscape, and
property management services for the partnerships and third parties. The
historical results of operations of Weeks Group are presented on a combined
basis because these entities were under common ownership and control and were
the subject of a business combination in connection with the Company's IPO.
Purchase accounting was applied to the acquisitions of all non-controlled
interests in conjunction with the August 24, 1994 business combination. The
acquisition of all other interests was accounted for as a reorganization of
entities under common control similar to the accounting used for a pooling of
interests. All significant intercompany balances and transactions have been
eliminated in the consolidated and combined financial statements.
Real Estate Assets
Real estate assets are stated at depreciated cost. Major improvements and
replacements are capitalized and depreciated over their estimated useful lives
when they extend the useful life, increase capacity or improve efficiency of the
related asset. All other repairs and maintenance are expensed as incurred. Costs
related to the acquisition, planning, development and construction of buildings
and improvements, including interest, property taxes and insurance and allocated
overhead costs incurred during the construction period, are capitalized.
F-9
<PAGE>
The Operating Partnership adopted Statement of Financial Accounting Standards
("SFAS") 121, "Accounting for the Impairment of Long-lived Assets and for Long-
lived Assets to be Disposed of" in the fourth quarter of 1995. SFAS 121
established new standards on how impairment losses on long-lived assets,
including real estate assets, should be measured. The implementation of SFAS 121
had no impact on the Company's 1996 and 1995 consolidated financial statements.
Depreciation is calculated using the straight-line method, generally over 35
years, for buildings and improvements. Tenant improvements are capitalized and
depreciated using the straight-line method over the term of the related lease.
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid investments, consisting
primarily of money market accounts, with original maturities of three months or
less.
Revenue Recognition
All leases, other than the lease discussed in Note 3, are classified as
operating leases and the related rental income is recognized on a straight-line
basis over the terms of the respective leases. Straight-line rent receivables
totaled $3,023,000 and $2,548,000 at December 31, 1996 and 1995, respectively.
Tenant reimbursements for property taxes and other recoverable expenses are
recognized as revenues in the period the applicable expenses are incurred.
Revenues for development, construction, landscape, property management and
leasing services provided by the Subsidiaries, and Weeks Group prior to August
24, 1994, are recognized over the period during which the related services were
rendered.
Deferred Costs
Costs incurred to procure operating leases and in conjunction with financing
arrangements are capitalized and amortized on a straight-line basis over the
terms of the related leases or loan arrangements. Unamortized lease and
financing costs are written off upon the early termination of the related lease
or loan agreement.
Investments in Unconsolidated Entities
Effective for years ended December 31, 1995 and thereafter, the Operating
Partnership changed its method of accounting for the Subsidiaries to the equity
method in accordance with Emerging Issues Task Force Issue No. 95-6, "Accounting
by a Real Estate Investment Trust for an Investment in a Service Corporation."
For the period from August 24, 1994 to December 31, 1994, the Subsidiaries were
accounted for using the cost method. The consolidated financial statements of
the Operating Partnership were not restated for periods prior to January 1, 1995
as the impact of this change was not material.
Interest Rate Swap Agreements
The Operating Partnership uses interest rate swap arrangements to manage its
exposure to interest rate changes. Such arrangements are considered hedges of
specific borrowings, and differences paid and received under the swap
arrangements are recognized as adjustments to interest expense. Payments or
receipts on terminated interest rate swap arrangements, if any,
F-10
<PAGE>
are deferred and amortized over the remaining period of the swap,
provided the hedged borrowings remain outstanding.
Income Taxes
The Operating Partnership is a limited partnership and, therefore, is
not subject to federal and state income taxes. The respective share of
taxable income or loss of the Operating Partnership is required to be
included in the individual partners' income tax returns. Accordingly,
no income taxes have been provided for in the accompanying consolidated
financial statements.
The Subsidiaries of the Operating Partnership, which conduct the
related construction, landscape, property management and leasing
service businesses, are taxed as regular taxable corporations. The
impact of income taxes, if any, reduces the amount of Subsidiary
earnings otherwise recognized by the Company using the equity method.
For the years ended December 31, 1996 and 1995 and for the period
August 24, 1994 to December 31, 1994, the impact of the Subsidiaries'
income taxes and their related tax attributes were not material to the
accompanying consolidated financial statements.
Weeks Group is a combination of legal entities, primarily partnerships
and subchapter S corporations, not subject to federal and state income
taxes. Accordingly, no income taxes have been provided for in the
accompanying combined financial statements of Weeks Group. The
individual partners and subchapter S corporation shareholders included
their respective share of profits and losses from these entities in
their individual income tax returns. There could be significant
differences between each individual owner's tax basis and their
proportionate share of the net assets reported in the financial
statements. SFAS No. 109, "Accounting for Income Taxes," requires a
public enterprise to disclose the aggregate difference in the basis of
its net assets for financial and tax reporting purposes. However, Weeks
Group does not have access to information about each individual owner's
tax attributes in Weeks Group, and the aggregate tax bases cannot be
readily determined. In any event, management does not believe that,
with respect to Weeks Group, the aggregate difference would be
meaningful information.
Per Unit Data
Net income per Unit is calculated using the weighted average number of
Units outstanding of 14,280,000 in 1996, 10,760,000 in 1995 and
10,268,000 for the period from August 24, 1994 to December 31, 1994.
In February 1997, 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") No. 15,
"Earnings per Share," the current accounting literature utilized in
computing earnings per share under generally accepted accounting
principles. Under SFAS 128, entities will be required to present both
basic and diluted earnings per share in their interim and annual
financial statements for periods beginning with their financial
statements for the quarter and year ended December 31, 1997.
The Operating Partnership has and will continue to present earnings per
Unit under the provisions of APB No. 15 for all interim periods of 1996
until the mandated SFAS 128 implementation date in the fourth quarter
of 1997. Upon the adoption of SFAS 128, all prior earnings per Unit
amounts will be restated. The impact of SFAS 128 on the Operating
Partnership's earnings per Unit data in the accompanying financial
statements is not material.
F-11
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and footnotes thereto. Actual results could differ from
those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
1996 presentation.
Interim Unaudited Financial Statements
The unaudited consolidated financial statements as of March 31, 1997
and for the three months ended March 31, 1997 and 1996 have been
prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation of the consolidated
financial statements for these interim periods have been included. The
results for the interim period ended March 31, 1997 are not necessarily
indicative of the results to be obtained for the year ending December
31, 1997.
3. DIRECT FINANCING LEASE
The Operating Partnership holds an investment in a 15-year direct
financing lease with the tenant of a build-to-suit facility in Atlanta,
Georgia. The lease agreement, which commenced in June 1992, provides
the tenant the option to acquire the facility and associated land on
the tenth anniversary of lease commencement for $3,766,000, plus any
prepayment penalty due on the mortgage note encumbering the property.
The lease also provides for the transfer of the property to the tenant
upon lease termination, if the early buyout option is not exercised.
The components of the investment in the direct financing lease are as
follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
----------------------------------------------------------------------------------------------
<S> <C> <C>
Future minimum rentals $10,378 $11,239
Less unearned income (5,242) (6,010)
----------------------------------------------------------------------------------------------
Direct financing lease, net $5,136 $5,229
==============================================================================================
</TABLE>
Future minimum rentals receivable under the lease as of December 31,
1996, assuming the lessee exercises its buyout option after year ten,
are $886,000 in 1997, $913,000 in 1998, $940,000 in 1999, $968,000 in
2000, $998,000 in 2001 and $4,188,000 through June 2002. Minimum annual
rentals will be $1,050,000 during the remaining five years of the
lease, if the tenant does not exercise the buyout option.
4. DEFERRED COSTS
Deferred costs consist of the following (in thousands):
F-12
<PAGE>
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------------------------
<S> <C> <C>
Deferred lease costs $12,781 $11,246
Deferred financing costs 3,870 3,576
-----------------------------------------------------------------------------------
16,651 14,822
Less accumulated amortization (6,365) (5,365)
-----------------------------------------------------------------------------------
$10,286 $9,457
===================================================================================
</TABLE>
5. BORROWINGS
The Operating Partnership, the Subsidiaries and Weeks Development
Partnership (Note 7), as co-borrowers, entered into a new $175 million
syndicated revolving credit facility (the "Credit Facility") with four
banks in 1996. The Credit Facility is unsecured and can be used for
development and construction, acquisitions and general corporate
purposes. Each co-borrower is liable for its own borrowing; however,
the entire Credit Facility is guaranteed by the Company. Additionally,
the 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 distributions to
not more than 95% of funds from operations, a REIT industry measure of
operating performance, unless additional amounts are necessary to
maintain the Company's REIT status under the Code. The Credit Facility
matures on December 31, 1999 and may be extended annually through
December 31, 2002, subject to an annual extension fee of 0.125%. The
Credit Facility replaced the Operating Partnership's previous
single-bank revolving line of credit.
The Credit Facility provides for advances of up to $175 million,
subject to certain covenants, including those governing the Operating
Partnership's maximum unsecured borrowings and total leverage. Maximum
available advances, governed by the existing covenants, currently total
$175 million. Credit Facility borrowings are detailed as follows (in
thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
---------------------------------------------------------------------------------
<S> <C> <C>
Operating Partnership $ 99,400 $34,283
Weeks Construction Services, Inc. -- 3,210
Weeks Development Partnership 2,085 927
Weeks Realty Services, Inc. 1,510 100
---------------------------------------------------------------------------------
$102,995 $38,520
=================================================================================
</TABLE>
Interest under the Credit Facility accrues at bank prime minus 0.25% or
at LIBOR plus 1.35% at the election of the co-borrowers. The weighted
average interest rate on Credit Facility borrowings, exclusive of the
impact of the interest rate swaps discussed below, was 6.94% and 7.32%
at December 31, 1996 and 1995, respectively. Fees on the unused portion
of the Credit Facility are 0.20%.
In July 1996, the Operating Partnership entered into three interest
rate swap agreements with a commercial bank to effectively change the
interest costs on $50,000,000 of Credit Facility borrowings from the
variable rates discussed above to fixed rates. The agreements, with
notional principal amounts of $10,000,000, $10,000,000 and $30,000,000,
terminate in July 1998, July 1999 and July 2001, respectively, with
effective fixed interest rates of 7.72%, 7.89% and 8.14%, respectively.
Mortgage notes payable at December 31, 1996 and 1995, specifically
listed for notes with outstanding balances in excess of $10 million,
consist of the following (in thousands):
F-13
<PAGE>
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Rate
Mortgage note, interest only at 7.13%, due in 1999 $ 38,000 $ 38,000
Three mortgage notes, interest only at 7.75%, due in 31,170 31,170
1998
Mortgage note, principal and interest at 9.24%, due in 16,028 --
2005
Mortgage note, principal and interest at 8.10%, due in 12,278 --
2006
Mortgage note, interest only at 7.625%, due in 2000 10,300 10,300
Other mortgage notes (20 at December 31, 1996), 83,956 27,663
principal and interest at 6.71% to 9.80%, due in 1998 to
2006
Variable Rate
Industrial revenue bonds, interest at 4.15% to 6.45% at 5,843 5,889
December 31, 1996, due in 2004 and 2010
--------------------------------------------------------------------------------------------------
$197,575 $113,022
==================================================================================================
</TABLE>
At December 31, 1996 and 1995, fixed rate mortgage notes payable
included 27 notes with a weighted average interest rate of 7.98% and 12
notes with a weighted average interest rate of 7.58%, respectively. The
weighted average term to maturity of fixed rate mortgage notes payable
was 5.1 years at December 31, 1996. Fixed rate mortgage indebtedness
increased by $84,553,000 in 1996 due to the assumption of 16 notes
totaling $89,535,000 in conjunction with the NWI and Lichtin
acquisition transactions (Note 8), net of principal repayments. The
weighted average interest rate on the assumed fixed rate indebtedness
was approximately 8.50%. Certain officers and partners guarantee a
portion of the fixed rate mortgage notes.
Variable rate industrial revenue bonds include two separate
arrangements. One bond issue with an outstanding balance of $5,140,000
was refunded in 1996 through the issuance of tax-exempt adjustable rate
bonds with interest at rates equivalent to short-term tax-exempt Aa2
rated securities. The second bond issue accrues interest at 78% of the
prime lending rate. Weighted average interest rates under these
arrangements were 4.43% and 7.63% at December 31, 1996 and 1995,
respectively. The bonds are supported by letters of credit totaling
$5,345,000.
Scheduled maturities of mortgage notes payable at December 31, 1996 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
------------------------------------------
<S> <C>
1997 $ 2,035
1998 39,196
1999 48,440
2000 21,329
2001 10,682
2002 and thereafter 75,893
------------------------------------------
$197,575
==========================================
</TABLE>
Net real estate assets totaling $265,235,000 and $127,228,000 at
December 31, 1996 and 1995, respectively, are pledged as collateral
under mortgage notes payable. Interest capitalized for the years ended
December 31, 1996 and 1995, and for the period from January 1, 1994 to
August 23, 1994, totaled $2,358,000, $1,198,000, and $89,000,
respectively. Interest capitalized
F-14
<PAGE>
for the three months ended March 31, 1997 and 1996, totaled $939,000
and $415,000, respectively (unaudited).
The extraordinary loss of $2,667,000 during the period from August 24,
1994 to December 31, 1994 resulted from mortgage loan prepayment
penalties of $2,180,000 and the write-off of deferred financing costs
of $487,000 related to the early retirement of debt from the IPO
proceeds contributed to the Operating Partnership.
6. REAL ESTATE DEVELOPMENT LOANS
As part of certain joint development agreements entered into with third
parties and upon the approval of joint development projects, the
Operating Partnership lends funds on a secured basis to develop and
construct certain properties and can be required by its development
partners to acquire the properties upon their completion based on the
terms specified in the development agreements, generally at prices
equal to the greater of capitalized costs or the property's net
operating income capitalized at specified capitalization rates, as
defined. Additionally, the Operating Partnership has options to acquire
the properties upon substantial lease-up of the buildings. At December
31, 1996, the Operating Partnership had funded $7,645,000 under
development loan agreements relating to three industrial buildings
under development in Atlanta, Georgia. Total loan commitments from the
Operating Partnership for the three approved projects are approximately
$11,741,000. Loans under these agreements are secured by the industrial
buildings under development, bear interest at rates ranging from LIBOR
plus 2.35% to LIBOR plus 2.50% and mature from August 1998 to March
1999.
Additionally, at December 31, 1996, the Operating Partnership had a
real estate development loan to an affiliated joint venture with an
outstanding balance of $1,810,000 ($1,309,000 at December 31, 1995).
The total loan commitment is $2,360,000, and the loan is secured by an
industrial building. Interest accrues at 9%, and the loan matures in
March 1998. The Operating Partnership has an option to acquire the
property upon substantial lease-up of the building.
7. INVESTMENTS IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED ENTITIES
The Operating Partnership conducts third-party construction, landscape,
property management and leasing service businesses through the
Subsidiaries. Through Weeks Development Partnership ("Weeks
Development"), wholly owned by the Subsidiaries, the Subsidiaries also
own land in various business parks, either directly or through
ownership interests in real estate partnerships and joint ventures. The
Operating Partnership and Weeks Group developed and own operating
properties in these business parks. 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, these Subsidiaries
are accounted for using the equity method of accounting. Under the
equity method, the Company recognizes, in its consolidated statements
of operations, its economic share (99%) of the Subsidiaries' earnings
and losses.
The following information summarizes the financial position, results of
operations and cash flows of the Subsidiaries and Weeks Development on
a combined basis for the years ending December 31, 1996 and 1995, and
for the period from August 24, 1994 to December 31, 1994, and selected
operating data of Weeks Group for the period from January 1, 1994 to
August 23, 1994. The operating data of Weeks Group is included in the
combined financial statements of Weeks Group (Note 2) but is also
reflected below for comparison purposes (in thousands):
F-15
<PAGE>
<TABLE>
<CAPTION>
Financial Position Dec. 31, 1996 Dec. 31, 1995
--------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real estate assets, principally land $ 7,200 $ 7,012
Investments in real estate partnerships and joint 3,025 3,417
ventures
Receivables and other assets 13,113 10,892
--------------------------------------------------------------------------------------------
$23,338 $21,321
============================================================================================
Liabilities and Equity
Notes payable to Company $10,921 $10,939
Credit facility borrowings 3,595 4,237
Other borrowings 1,261 1,828
Other liabilities 10,725 7,505
Total equity (3,164) (3,188)
--------------------------------------------------------------------------------------------
$23,338 $21,321
============================================================================================
</TABLE>
The notes payable to the Operating Partnership accrue interest at 12%,
payable annually, and mature in 2004. The notes are secured by land and
by Weeks Development's interests in real estate partnerships and joint
ventures. The operations of the Subsidiaries and Weeks Development are
financed, as necessary, through direct borrowings under the Credit
Facility.
At December 31, 1996, the Operating Partnership's investment in and
notes receivable from the Subsidiaries totaling $7,760,000 include
notes receivable from the Subsidiaries of $10,921,000 and the Operating
Partnership's investment in Subsidiaries of ($3,161,000).
F-16
<PAGE>
<TABLE>
<CAPTION>
Subsidiaries Weeks Group
---------------------------------------------- -----------------------------
Year ended Year ended Aug. 24 to Jan. 1 to
Results of Operations Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ---------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Revenue
Construction and development
fees $ 2,233 $ 1,483 $ 636 $ 990
Landscape 5,035 3,854 1,054 2,169
Property management fees 193 498 196 425
Commissions 448 582 316 429
Other 316 191 25 --
- -------------------------------------------------------------------------------------------------------------------
8,225 6,608 2,227
- -------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Direct costs 4,327 3,504 1,034 1,954
Interest expense - Operating
Partnership 1,314 1,326 468 --
Interest expense - third parties 365 295 -- --
General and administrative 1,694 1,518 555 802
Other 498 173 16 --
- -------------------------------------------------------------------------------------------------------------------
8,198 6,816 2,073
- -------------------------------------------------------------------------------------------------------------------
Equity in earnings of partnerships
and joint ventures (1) 101 72
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 26 $ (107) $ 226
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable
to Company $ 26 $ (106) $ 224
Interest expense - Operating
Partnership $ 1,314 1,326 468
- -------------------------------------------------------------------------------------------------------------------
Equity in earnings of Subsidiaries $ 1,340 $ 1,220 $ 692
- -------------------------------------------------------------------------------------------------------------------
Distributions and interest paid
to the Operating Partnership $ 1,313 $ 1,510 $ 692
- -------------------------------------------------------------------------------------------------------------------
Cash Flows
- -------------------------------------------------------------------------------------------------------------------
Operating activities $ 4,460 $ 1,529 $ (2,401)
Investing activities (2,540) (2,786) (553)
Financing activities (487) 1,190 3,121
</TABLE>
F-17
<PAGE>
8. ACQUISITIONS
On November 1, 1996, the Operating Partnership completed the first phase
of an acquisition of a 2.2 million square foot, 23 building industrial
portfolio located in Nashville, Tennessee, owned and managed by NWI
Warehouse Group, L. P. and its affiliates ("NWI"). The first phase of the
transaction was comprised of the acquisition of 17 industrial buildings
and the combination of NWI's business operations, management and
employees with those of the Operating Partnership, for aggregate
acquisition consideration of approximately $71.1 million including
closing costs and acquisition expenses. Acquisition consideration was
comprised of the assumption of approximately $42.0 million of mortgage
debt, the issuance of approximately $27.5 million of Units in the
Operating Partnership (at a price of $25.00 per Unit), and the funding of
closing costs and acquisition expenses of approximately $1.6 million
through Credit Facility borrowings. In 1996, subsequent to the initial
closing, the Operating Partnership acquired 45 net usable acres of
undeveloped land for aggregate consideration, consisting solely of Units
in the Operating Partnership, of approximately $6.3 million, including
reimbursement for certain infrastructure costs. The Operating Partnership
has agreed, subject to updating its due diligence procedures and the
completion of properties under development, to acquire six development
properties over a 17-month period and to acquire 105 net usable acres of
undeveloped land over a period of up to six years. The estimated
aggregate acquisition consideration for the remaining assets to be
acquired is expected to be comprised primarily of Units in the Operating
Partnership and assumed indebtedness that total approximately $47.9
million (subject to adjustment for inflation and actual operating results
for certain development properties to be acquired).
On December 31, 1996, the Operating Partnership completed the first phase
of a separate acquisition of a 2.1 million square foot, 29 building
industrial and suburban office portfolio in the Raleigh-Durham- Chapel
Hill area of North Carolina, owned and managed by Lichtin Properties,
Inc. and its affiliates ("Lichtin"). The first phase of the transaction
was comprised of the acquisition of 14 industrial and suburban office
buildings and the combination of Lichtin's business operations,
management and employees with those of the Operating Partnership for
aggregate acquisition consideration of approximately $90.5 million
(including closing costs and acquisition expenses), and approximately 37
net usable acres of undeveloped land and options to acquire an additional
177 net usable acres of undeveloped land for total acquisition
consideration of approximately $3.3 million. Acquisition consideration
consisted of shares of Company common stock and Units in the Operating
Partnership having an aggregate value of approximately $7.1 million and
$14.3 million, respectively, (at a price of $25.25 per share and Unit),
approximately $8.6 million of cash, the assumption of approximately $47.6
million of mortgage indebtedness, the assumption and repayment of other
indebtedness through borrowings under the Operating Partnership's Credit
Facility of approximately $15.0 million and the funding of closing costs
and acquisition expenses of approximately $1.2 million through Credit
Facility borrowings. The Operating Partnership has agreed, subject to due
diligence procedures and the completion of properties under development,
to acquire 15 completed and under development properties over the ensuing
18-month period and to acquire 64 net usable acres of undeveloped land
over the next four years. The estimated aggregate acquisition
consideration for the remaining assets to be acquired is expected to be
comprised primarily of Units in the Operating Partnership and assumed
indebtedness that total approximately $71.7 million (subject to
adjustment for the actual operating results for certain completed and
development properties to be acquired).
The NWI and Lichtin acquisitions have been accounted for as purchases and
the related acquisition costs have been allocated to the assets acquired
and liabilities assumed based on estimates of their fair values.
The Operating Partnership's consolidated results of operations for the
year ended December 31, 1996, included the operating results of NWI
beginning on November 1, 1996, the acquisition date. The
F-18
<PAGE>
unaudited pro forma information below presents the consolidated results
of operations as if the initial phases of the NWI and Lichtin
acquisitions had occurred at the beginning of the respective periods
presented. The unaudited pro forma information is not necessarily
indicative of the results of operations of the Operating Partnership had
the acquisitions occurred at the beginning of the periods presented, nor
is it necessarily indicative of future results. Additionally, the
unaudited pro forma information excludes the impact of the buildings and
land to be acquired in future periods from NWI and Lichtin.
<TABLE>
<CAPTION>
(Unaudited, in thousands, except per unit amounts) Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $70,954 $49,478
Net income 14,360 9,362
Earnings per Unit $0.89 $0.74
</TABLE>
Additionally in 1996, the Operating Partnership acquired 15 industrial
and suburban office buildings totaling approximately 761,000 square
feet located primarily in the northeast submarket of Atlanta, Georgia,
for an aggregate price of $40,102,000, including closing costs and
acquisition expenses. The acquisitions were funded through Credit
Facility borrowings.
In 1995, the Operating Partnership acquired 49 industrial buildings
totaling 2,564,000 square feet for an aggregate price of $110,141,000,
including closing costs and acquisition expenses. These acquisitions
were funded through Credit Facility borrowings and through the
assumption of existing mortgage indebtedness of $39,511,000. Four of
the acquired buildings totaling 190,000 square feet are located in
Orlando, Florida, and the other buildings are located in metropolitan
Atlanta, Georgia. In conjunction with two of the property acquisitions,
the Company entered into agreements with the sellers to jointly develop
additional industrial buildings, as market conditions warrant, on
adjacent land controlled by the sellers (Note 6).
F-19
<PAGE>
9. LEASING ACTIVITY
Future minimum rents due under noncancelable operating leases with
tenants at December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
---------------------------------------------
<S> <C>
1997 $ 65,003
1998 54,685
1999 44,004
2000 32,808
2001 24,779
2002 and thereafter 62,518
---------------------------------------------
$283,797
=============================================
</TABLE>
10. RELATED-PARTY TRANSACTIONS
At December 31, 1996 and 1995, receivables included $465,000, due from
the Subsidiaries, relating to accrued interest (payable annually) on the
Subsidiaries' notes. At December 31, 1996 and 1995, accounts payable and
accrued expenses included $154,000 and $1,395,000, respectively, due to
the Subsidiaries.
In periods subsequent to the IPO, the Subsidiaries have provided
development, construction, landscape, property management and leasing
services to affiliated partnerships and joint ventures. Prior to the IPO,
those services were provided by Weeks Group. Total revenues for such
services to related parties of the Subsidiaries and Weeks Group were (in
thousands):
<TABLE>
<CAPTION>
Subsidiaries Weeks Group
----------------------------------------------------------- --------------
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Construction and $ 678 $ 418 $142 $658
development fees
Landscape 271 423 81 183
Commissions 94 169 156 148
-------------------------------------------------------------------------------------------------------------
$1,043 $1,010 $379 $989
=============================================================================================================
</TABLE>
The controlling partners of Weeks Group historically utilized their
capital accounts in the various Weeks Group entities similar to a
clearing account whereby they regularly made contributions and received
distributions. Since the contributions and distributions did not
necessarily reflect the economic cash flows or cash needs of Weeks
Group, management believes that, in Weeks Group's circumstances, the
separation of contributions or distributions made in periods prior to
the IPO would not provide meaningful information. Therefore, such
amounts are reported net in the accompanying Weeks Group financial
statements.
11. INCENTIVE STOCK PLAN
The Company has an Incentive Stock Plan (the "Plan") under which shares
of Company common stock have been reserved for the issuance of options
and restricted stock. Total shares reserved for issuance under the Plan
were increased by 390,000 shares in 1996, to a total of 1,000,000
shares, as approved by the shareholders in May 1996. Participants in
the Plan may be officers and employees of the Company and its
subsidiaries or designated affiliates, as well as Company directors.
The exercise price of all options under the Plan is not less than the
fair market value of
F-20
<PAGE>
the Company's common stock on the date of grant and such options may be
exercised for periods up to ten years. Upon the exercise of stock
options issued under the Plan, the Company contributes the net proceeds
realized to the Operating Partnership in exchange for Units (see Note
1).
In 1995, SFAS 123, "Accounting for Stock-Based Compensation" was issued
requiring the Company either to continue its current accounting for
stock-based compensation under APB No. 25 or elect the fair value-based
method of accounting prescribed by SFAS 123. The Company elected to
continue to account for stock-based compensation under APB No. 25 and
has implemented the additional disclosure requirements prescribed by
SFAS 123 and such disclosures are included below.
Under SFAS 123, the fair value of stock options granted in 1996 and
1995 has been estimated using a binomial option pricing model with the
following weighted average assumptions for grants in 1996 and 1995,
respectively: risk free interest rates of 5.7% and 5.8%, expected
option lives of five years for options granted in both years, expected
volatility of 16.5% for both years and expected dividend yields of 5.7%
and 6.2%. Using these assumptions, the estimated fair value of options
granted in 1996 and 1995 was $945,220 and $174,850, respectively, and
such amounts would be included in compensation expense over the vesting
period of the options. Pro forma net income and earnings per unit for
the years ended December 31, 1996 and 1995, assuming the Company had
accounted for the Plan under SFAS 123 are as follows (in thousands,
except per Unit amounts):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------------------
<S> <C> <C>
Net income:
As reported $ 15,809 $ 11,107
Pro forma 15,216 11,042
Net income per Unit:
As reported $ 1.11 $ 1.03
Pro forma 1.07 1.03
</TABLE>
As the provisions of SFAS 123 have not been applied to options granted
prior to January 1, 1995, the resulting pro forma annual compensation
cost may not be representative of that expected in future years.
A summary of stock option activity under the Plan is presented in the
table and narrative below (share amounts in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
year 503 $19.90 443 $19.28 -- $ --
Granted 283 28.22 65 24.11 443 19.28
Exercised (33) 19.25 -- -- -- --
Forfeited -- -- (5) 19.25 -- --
------------------------------------------------------------------------------------------------------------------
Options outstanding, end of year
753 $23.06 503 $19.90 443 $19.28
------------------------------------------------------------------------------------------------------------------
Options exercisable, end of year
552 52 16
------------------------------------------------------------------------------------------------------------------
1996 1995
---- ----
Weighted average per share fair
value of options granted $ 3.34 $ 2.69
</TABLE>
F-21
<PAGE>
At December 31, 1996, options for 606,000 shares are outstanding having
exercise prices ranging from $19.25 to $26.00, with a weighted average
exercise price of $21.31 and a weighted average contractual life of 7.70
years, of which 420,000 options are exercisable with a weighted average
exercise price of $19.48. Options for 147,000 shares are also outstanding
having exercise prices ranging from $28.63 to $33.25, with a weighted
average exercise price of $30.27 and a weighted average contractual life
of 9.9 years, of which 132,000 options are exercisable with a weighted
average exercise price of $30.45.
12. EMPLOYEE BENEFIT PLAN
The Operating Partnership and the Subsidiaries (collectively the "Plan
Sponsors") sponsor a 401(k) retirement savings plan covering
substantially all employees meeting certain age and service requirements.
Employees may contribute up to the lesser of 20% of their annual
compensation or the annual statutory limit ($9,500 in 1996) to the plan.
The Plan Sponsors' contributions are made on a discretionary basis up to
a maximum of 100% of the employees' contributions (currently 50% of the
employee's contribution up to 3.2% of an employee's annual compensation).
Total Plan Sponsors' contributions were $88,000, $76,000, and $63,000 in
1996, 1995 and 1994, respectively.
13. COMMITMENTS AND CONTINGENCIES
As reflected in Note 8, the Operating Partnership has entered into
agreements for the future acquisition of land and buildings from NWI and
Lichtin totaling approximately $119.6 million at December 31, 1996. In
addition, the Operating Partnership has agreed, subject to updating its
due diligence procedures, to acquire development land totaling
approximately $2.2 million.
Letters of credit totaling approximately $7.2 million were issued on
behalf of the Operating Partnership in support of certain development,
land acquisition and financing arrangements at December 31, 1996.
The Operating Partnership is subject to various legal proceedings and
claims that arise in the ordinary course of business. While the
resolution of these matters cannot be predicted with certainty,
management believes that the final outcome of such matters will not have
a material adverse effect on the Company's financial position or results
of operations.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of amounts capitalized (Note 5), totaled $11,265,000
in 1996, $7,892,000 in 1995, $1,809,000 for the period from August 24,
1994 to December 31, 1994 and $6,568,000 for the period from January 1,
1994 to August 23, 1994. Interest paid, net of amounts capitalized,
totaled $5,150,000 and $2,250,000 for the three months ended March 31,
1997 and 1996, respectively (unaudited).
Significant noncash investing and financing activities were as follows:
a. The Operating Partnership's 1997 acquisitions included the
assumption of indebtedness of $4,360,000 and the issuance of
Units valued at $14,334,000 (unaudited).
F-22
<PAGE>
b. The Operating Partnership's 1996 acquisitions of NWI and
Lichtin included the assumption of mortgage notes payable of
$104,628,000 and the issuance of Units valued at $55,209,000.
c. The Operating Partnership's 1995 property acquisitions
included the assumption of mortgage notes payable of
$39,511,000 and the application of notes receivable and
deposits of $3,540,000.
d. In conjunction with the August 24, 1994, business combination
(Note 1), the Operating Partnership acquired certain property
interests subject to mortgage notes payable of $9,072,000 and
in exchange for Units totaling $8,053,000.
15. FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to
the Operating Partnership at December 31, 1996 and 1995, the Operating
Partnership estimates that the carrying values of cash and cash
equivalents, the notes receivable from the Subsidiaries, the real
estate development loans, the direct financing lease receivable, other
receivables, mortgage notes payable, other liabilities and Credit
Facility borrowings approximate their fair values when compared to
instruments of similar types, terms and maturities.
The estimated fair value of the Operating Partnership's interest rate
swap arrangements (Note 5), determined based on quoted market prices
for similar financial instruments, was approximately $955,000 less than
the Operating Partnership's carrying value at December 31, 1996. The
Operating Partnership uses interest rate swaps to manage its exposure
to interest rate changes on Credit Facility borrowings. Under current
accounting principles and as long as the Company maintains outstanding
Credit Facility borrowings at least equal to the $50,000,000 notional
amounts of the interest rate swaps, the difference between the fair
value and carrying amount of the arrangements is not recognized in the
Operating Partnership's consolidated financial statements. The
Operating Partnership monitors the credit quality of the financial
institution which is the counterparty to its interest rate swap
arrangements and does not anticipate nonperformance from the financial
institution.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1996
and 1995. Although management is not aware of any factors that would
significantly affect the fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements
since December 31, 1996.
16. SUBSEQUENT EVENTS (UNAUDITED)
On January 31, 1997 and March 31, 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 (see Note 8). 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 Units in the Operating Partnership. 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 Units.
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 ($1,078,000 at March 31, 1997).
Compensation expense is recognized ratably over the four year vesting
period.
On May 13, 1997, the Company completed a public offering of 3,200,000
shares of common stock and received net proceeds of approximately $95.1
million. On June 11, 1997, the Company sold an additional 384,200
shares of common stock to cover over-allotments from the common stock
offering discussed above and received net proceeds of approximately
$11.5 million. These proceeds were contributed to the Operating
Partnership in exchange for Units. The proceeds were used to reduce the
Operating Partnership's outstanding Credit Facility borrowings.
Additionally, the Operating
F-23
<PAGE>
Partnership intends to use the additional Credit Facility borrowing
capacity to prepay, without penalty, three mortgage notes, totaling
$31,170,000 scheduled to mature in 1998.
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information for 1996 and 1995 was as
follows (in thousands, except per unit amounts):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Revenue $ 12,129 $ 12,379 $ 13,555 $ 15,820
Net income 3,814 3,805 3,731 4,459
Net income per Unit $ 0.28 $ 0.28 $ 0.27 $ 0.28
---------------------------------------------------------------------------------------------------------
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Revenue $ 6,994 $ 7,535 $ 9,186 $ 11,556
Net income 2,765 2,824 2,543 2,975
Net income per Unit $ 0.27 $ 0.28 $ 0.25 $ 0.24
</TABLE>
F-24
<PAGE>
SCHEDULE III PAGE 1 OF 10
WEEKS REALTY, L.P.
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Gross Amount at which
Initial Costs Cost Capitalized Carried at Close of Period
---------------------- --------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
ATLANTA, GEORGIA
Northeast/I-85 Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gwinnett Park
4258 Communications Dr. D (a) $ 8 $ 725 $ 314 $ 29 $ 1,018 $1,047
4261 Communications Dr. D 254 1,446 16 254 1462 1,716
4291 Communications Dr. D (a) 4 327 118 16 433 449
1826 Doan Way D (c) 18 1,167 226 18 1,393 1,411
1857 Doan Way D 23 6 0 23 6 29
1650 International Blvd. D (a) 69 994 94 69 1,088 1,157
4245 International Blvd. D (a) 192 2,913 3,053 192 5,966 6,158
4250 International Blvd. D 193 1,542 281 216 1,800 2,016
4295 International Blvd. D (a) 58 1,058 101 58 1,159 1,217
4320 International Blvd. D (a) 44 710 211 44 921 965
4350 International Blvd. D (a) 78 938 525 78 1,463 1,541
4355 International Blvd. D (g) 233 811 260 233 1,071 1,304
4405-A International Blvd. S 97 957 846 97 1,803 1,900
4405-B International Blvd. S 118 1,152 1,199 118 2,351 2,469
4405-C International Blvd. S 21 422 172 21 594 615
1828 Meca Way D (c) 16 487 489 16 976 992
1858 Meca Way D (a) 20 931 8 27 932 959
4317 Park Dr. D 671 1,414 234 671 1,648 2,319
4357 Park Dr. D (g) 12 865 268 12 1,133 1,145
4366 Park Dr. O 6 406 286 22 676 698
4386 Park Dr. D 17 758 74 17 832 849
4436 Park Dr. D 18 195 275 18 470 488
4437 Park Dr. D (a) 21 659 259 21 918 939
4467 Park Dr. D (c) 6 537 327 6 864 870
4476 Park Dr. D (c) 14 372 86 14 458 472
4487 Park Dr. D (c) 6 1,048 1,563 6 2,611 2,617
1835 Shackleford Ct. O (a) 29 2,780 319 29 3,099 3,128
1854 Shackleford Ct. O 52 4,085 1,418 52 5,503 5,555
4274 Shackleford Rd. D (a) 27 614 902 27 1,516 1,543
4275 Shackleford Rd. O (y) 8 1,173 465 12 1,634 1,646
4344 Shackleford Rd. D 286 984 30 286 1,014 1,300
4355 Shackleford Rd. D (a) 7 886 408 7 1,294 1,301
4364 Shackleford Rd. D (a) 9 40 40 9 80 89
4366 Shackleford Rd. D 20 420 811 26 1,225 1,251
4388 Shackleford Rd. D (a) 33 1,181 697 43 1,868 1,911
4400 Shackleford Rd. D 14 315 341 18 652 670
4444 Shackleford Rd. D (a) 31 731 1,121 31 1,852 1,883
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,733 $ 36,049 $ 17,837 $ 2,836 $ 53,783 56,619
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed(2) Acquired(3)
- ---------------------------------------------------------------------------------
ATLANTA, GEORGIA
Northeast/I-85 Submarket
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Gwinnett Park
4258 Communications Dr. $ 556 1981
4261 Communications Dr. 124 1981 1994
4291 Communications Dr. 200 1981
1826 Doan Way 486 1984
1857 Doan Way 2 1970
1650 International Blvd. 388 1984
4245 International Blvd. 1,136 1985
4250 International Blvd. 579 1986
4295 International Blvd. 384 1984
4320 International Blvd. 339 1984
4350 International Blvd. 681 1982
4355 International Blvd. 117 1983 1994
4405-A International Blvd. 799 1984
4405-B International Blvd. 1,393 1984
4405-C International Blvd. 244 1984
1828 Meca Way 539 1975
1858 Meca Way 341 1975
4317 Park Dr. 555 1985
4357 Park Dr. 516 1979
4366 Park Dr. 362 1981
4386 Park Dr. 357 1973
4436 Park Dr. 163 1968
4437 Park Dr. 478 1978
4467 Park Dr. 372 1978
4476 Park Dr. 193 1977
4487 Park Dr. 1,387 1978
1835 Shackleford Ct. 643 1990
1854 Shackleford Ct. 1,665 1985
4274 Shackleford Rd. 1,031 1974
4275 Shackleford Rd. 599 1985
4344 Shackleford Rd. 107 1975 1994
4355 Shackleford Rd. 687 1972
4364 Shackleford Rd. 43 1973
4366 Shackleford Rd. 672 1981
4388 Shackleford Rd. 670 1981
4400 Shackleford Rd. 399 1981
4444 Shackleford Rd. 1,142 1979
- ---------------------------------------------------------------------------------
Total 20,349
- ---------------------------------------------------------------------------------
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III PAGE 2 OF 10
Gross Amount at which
Initial Costs Cost Capitalized Carried at Close of Period
---------------------- ------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Horizon
90 Horizon Dr. D (c) $ 20 $ 659 $ 170 $ 120 $ 729 $ 849
225 Horizon Dr. B (c) 121 1,423 782 121 2,205 2,326
300 Horizon Dr. B 798 4,455 53 798 4,508 5,306
2775 Horizon Ridge Ct. B 732 5,718 - 732 5,718 6,450
2800 Vista Ridge Dr. B 443 5,463 73 443 5,536 5,979
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,114 $ 17,718 $ 1,078 $2,214 $ 18,696 $ 20,910
- ------------------------------------------------------------------------------------------------------------------------------------
Northwoods
2915 Courtyards Circle D $ 268 $ 1,793 $ 87 $ 268 $ 1,880 $ 2,148
2925 Courtyards Dr. D 333 2,618 5 333 2,623 2,956
2975 Courtyards Circle D 144 997 9 144 1,006 1,150
2995 Courtyards Circle D 109 677 8 109 685 794
2725 Northwoods Pkwy. D 440 2,231 - 440 2,231 2,671
2755 Northwoods Pkwy. D 249 2,201 - 249 2,201 2,450
2775 Northwoods Pkwy. D 322 1,976 - 322 1,976 2,298
2850 Northwoods Pkwy. D 562 3,961 46 562 4,007 4,569
3040 Northwoods Pkwy. D 298 1,511 - 298 1,511 1,809
3044 Northwoods Circle D 167 730 23 167 753 920
3055 Northwoods Pkwy. D 213 916 - 213 916 1,129
3075 Northwoods Pkwy. S 374 2,750 - 374 2,750 3,124
3080 Northwoods Circle O 387 2,215 - 387 2,215 2,602
3100 Northwoods Pkwy. S 393 2,177 - 393 2,177 2,570
3155 Northwoods Pkwy. S 331 1,808 - 331 1,808 2,139
3175 Northwoods Pkwy. S 250 1,645 - 250 1,645 1,895
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,840 $ 30,206 $ 178 $4,840 $ 30,384 $ 35,224
- ------------------------------------------------------------------------------------------------------------------------------------
Gwinnett Pavilion
1480 Beaver Ruin Rd. R $ 248 $ 982 $ 469 $ 248 $ 1,451 $ 1,699
1505 Pavilion Place D (a) 448 1,149 1,187 448 2,336 2,784
3883 Steve Reynolds Blvd. D (c) 612 3,101 91 612 3,192 3,804
3890 Steve Reynolds Blvd. D (c) 519 1,746 14 519 1,760 2,279
3905 Steve Reynolds Blvd. D 697 2,108 - 697 2,108 2,805
3950 Steve Reynolds Blvd. B (a) 684 1,701 14 684 1,715 2,399
4025 Steve Reynolds Blvd. D 461 2,252 5 461 2,257 2,718
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 3,669 $ 13,039 $ 1,780 $3,669 $ 14,819 $ 18,488
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Depreciation Developed (2) Acquired (3)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Horizon
90 Horizon Dr. $ 117 1992
225 Horizon Dr. 712 1990
300 Horizon Dr. 309 1994
2775 Horizon Ridge Ct. 88 1996
2800 Vista Ridge Dr. 223 1995
- -----------------------------------------------------------------------------------------
Total $ 1,449
- -----------------------------------------------------------------------------------------
Northwoods
2915 Courtyards Circle $ 80 1986 1995
2925 Courtyards Dr. 99 1986 1995
2975 Courtyards Circle 38 1986 1995
2995 Courtyards Circle 26 1986 1995
2725 Northwoods Pkwy. 36 1984 1996
2755 Northwoods Pkwy. 36 1986 1996
2775 Northwoods Pkwy. 32 1986 1996
2850 Northwoods Pkwy. 152 1988 1995
3040 Northwoods Pkwy. 25 1984 1996
3044 Northwoods Circle 28 1984 1995
3055 Northwoods Pkwy. 15 1985 1996
3075 Northwoods Pkwy. 45 1985 1996
3080 Northwoods Circle 62 1952 1996
3100 Northwoods Pkwy. 35 1985 1996
3155 Northwoods Pkwy. 29 1985 1996
3175 Northwoods Pkwy. 27 1985 1996
- -----------------------------------------------------------------------------------------------
Total $ 765
- -----------------------------------------------------------------------------------------------
Gwinnett Pavilion
1480 Beaver Ruin Rd. 420 1989
1505 Pavilion Place 984 1988
3883 Steve Reynolds Blvd. 597 1990
3890 Steve Reynolds Blvd. 301 1991
3905 Steve Reynolds Blvd. $ 60 1995
3950 Steve Reynolds Blvd. 244 1992
4025 Steve Reynolds Blvd. 133 1994
- ------------------------------------------------------------------------------------------------
Total $ 2,739
- ------------------------------------------------------------------------------------------------
</TABLE>
S-2
<PAGE>
Schedule III Page 3 of 10
<TABLE>
<CAPTION>
Gross Amount at which
Initial Costs Cost Capitalized Carried at Close of Period
----------------------- ------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peachtree Corners Distribution
5401 Buford Hwy. B $ 294 $ 1,865 $ 26 $ 294 $ 1,891 $ 2,185
5403 Buford Hwy. B 420 2,737 7 420 2,744 3,164
5405 Buford Hwy. B 217 1,546 15 217 1,561 1,778
5409 Buford Hwy. B 364 2,675 7 364 2,682 3,046
- -----------------------------------------------------------------------------------------------------------------------------------
Total $1,295 $ 8,823 $ 55 $1,295 $ 8,878 $10,173
- -----------------------------------------------------------------------------------------------------------------------------------
Pinebrook
2625 Pinemeadow Ct. B $ 813 $ 3,216 $ - $ 813 $ 3,216 $ 4,029
2660 Pinemeadow Ct. B 450 2,587 - 450 2,587 3,037
2450 Satellite Blvd. B 866 3,461 - 866 3,461 4,327
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,129 $ 9,264 $ - $2,129 $ 9,264 $11,393
- -----------------------------------------------------------------------------------------------------------------------------------
Northbrook
1000 Northbrook Pkwy. B (a) $ 363 $ 1,980 $ 832 $ 363 $ 2,812 $ 3,175
675 Old Peachtree Rd. B (g) 434 2,385 19 434 2,404 2,838
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 797 $ 4,365 $ 851 $ 797 $ 5,216 $ 6,013
- -----------------------------------------------------------------------------------------------------------------------------------
Druid Chase
2801 Buford Hwy. O $ 794 $ 3,505 $ 1,612 $ 794 $ 5,117 $ 5,911
1190 West Druid Hills Dr. O 689 2,722 891 689 3,613 4,302
2071 North Druid Hills Rd. R 98 65 21 98 86 184
6 West Druid Hills Dr. O 473 2,980 466 473 3,446 3,919
- -----------------------------------------------------------------------------------------------------------------------------------
Total $2,054 $ 9,272 $ 2,990 $2,054 $ 12,262 $14,316
- -----------------------------------------------------------------------------------------------------------------------------------
Meadowbrook
2450 Meadowbrook Pkwy. D $ 716 $ 2,419 $ 18 $ 716 $ 2,437 $ 3,153
2475 Meadowbrook Pkwy. D 529 1,567 548 529 2,115 2,644
2500 Meadowbrook Pkwy. D (a) 411 1,103 778 411 1,881 2,292
2505 Meadowbrook Pkwy. D 307 1,228 300 307 1,528 1,835
- -----------------------------------------------------------------------------------------------------------------------------------
Total $1,963 $ 6,317 $ 1,644 $1,963 $ 7,961 $ 9,924
- -----------------------------------------------------------------------------------------------------------------------------------
Park Creek
2825 Breckinridge Blvd. S $ 317 $ 2,366 $ - $ 317 $ 2,366 $ 2,683
2875 Breckinridge Blvd. S 476 3,496 - 476 3,496 3,972
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 793 $ 5,862 $ - $ 793 $ 5,862 $ 6,655
- -----------------------------------------------------------------------------------------------------------------------------------
River Green
3450 River Green Ct. D $ 194 $ 892 $ 12 $ 194 $ 904 $ 1,098
4800 River Green Pkwy. D 152 1,150 14 152 1,164 1,316
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 346 $ 2,042 $ 26 $ 346 $ 2,068 $ 2,414
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed(2) Acquired(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Peachtree Corners Distribution
5401 Buford Hwy. $ 71 1987 1995
5403 Buford Hwy. 106 1987 1995
5405 Buford Hwy. 62 1989 1995
5409 Buford Hwy. 102 1989 1995
- -------------------------------------------------------------------------------
Total $ 341
- -------------------------------------------------------------------------------
Pinebrook
2625 Pinemeadow Ct. $ 252 1994
2660 Pinemeadow Ct. 25 1996
2450 Satellite Blvd. 283 1994 1994
- -----------------------------------------------------------------------------
Total $ 560
- -----------------------------------------------------------------------------
Northbrook
1000 Northbrook Pkwy. $ 1,107 1986
675 Old Peachtree Rd. 614 1988
- -----------------------------------------------------------------------------
Total $ 1,721
- -----------------------------------------------------------------------------
Druid Chase
2801 Buford Hwy. $ 1,407 1977 1989
1190 West Druid Hills Dr. 919 1980 1989
2071 North Druid Hills Rd. 31 1968
6 West Druid Hills Dr. 741 1968 1989
- -----------------------------------------------------------------------------
Total $ 3,098
- -----------------------------------------------------------------------------
Meadowbrook
2450 Meadowbrook Pkwy. $ 206 1989 1994
2475 Meadowbrook Pkwy. 693 1986
2500 Meadowbrook Pkwy. 773 1987
2505 Meadowbrook Pkwy. 287 1990
- -----------------------------------------------------------------------------
Total $ 1,959
- -----------------------------------------------------------------------------
Park Creek
2825 Breckinridge Blvd. 46 1986 1996
2875 Breckinridge Blvd. 68 1986 1996
- -----------------------------------------------------------------------------
Total $ 114
- -----------------------------------------------------------------------------
River Green
3450 River Green Ct. $ 32 1989 1995
4800 River Green Pkwy. 41 1989 1995
- -----------------------------------------------------------------------------
Total $ 73
- -----------------------------------------------------------------------------
</TABLE>
S-3
<PAGE>
SCHEDULE III PAGE 4 OF 10
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which
Initial Costs Cost Capital Carried at Close of Period
--------------------- ----------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type/(1)/ Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER NORTHEAST/I-85
1705 Belle Meade Ct. D $ 277 $ 953 $ 1 $ 277 $ 954 $ 1,231
4125 Buford Hwy. B 778 3,823 12 778 3,835 4,613
6525-27 Jimmy Carter Blvd. D 509 3,131 - 509 3,131 3,640
3171 McCall Dr. D 112 385 3 112 388 500
7250 McGinnis Ferry Rd. D 498 3,712 - 498 3,712 4,210
5300 Peachtree Industrial Blvd. R 434 1,493 - 434 1,493 1,927
4280 Northeast Expressway B 534 1,838 - 534 1,838 2,372
- ------------------------------------------------------------------------------------------------------------------------------------
Total $3,142 $ 15,335 $ 16 $ 3,142 $15,351 $18,493
- ------------------------------------------------------------------------------------------------------------------------------------
NORTH CENTRAL SUBMARKET
- ------------------------------------------------------------------------------------------------------------------------------------
NORTHMEADOW
11835 Alpharetta Hwy. O $ 524 $ 1,396 $ 142 $ 524 $ 1,538 $ 2,062
1100 Northmeadow Pkwy. S (b) 552 3,178 26 552 3,204 3,756
1125 Northmeadow Pkwy. D (b) 320 2,222 5 320 2,227 2,547
1150 Northmeadow Pkwy. D (b) 464 2,963 - 464 2,963 3,427
1175 Northmeadow Pkwy. D (b) 328 3,068 52 328 3,120 3,448
1225 Northmeadow Pkwy. S (b) 336 3,286 0 336 3,286 3,622
1250 Northmeadow Pkwy. D (b) 312 2,328 4 312 2,332 2,644
1325 Northmeadow Pkwy. S 472 4,491 36 472 4,527 4,999
1350 Northmeadow Pkwy. D 672 2,556 9 672 2,565 3,237
- ------------------------------------------------------------------------------------------------------------------------------------
Total $3,980 $ 25,488 $ 274 $ 3,980 $25,762 $29,742
- ------------------------------------------------------------------------------------------------------------------------------------
HEMBREE CREST
11415 Old Roswell Rd. B $ 648 $ 1,947 $ 26 $ 648 $ 1,973 $ 2,621
11800 Wills Rd. D (b) 304 1,570 68 304 1,638 1,942
11810 Wills Rd. D (b) 296 2,180 - 296 2,180 2,476
11820 Wills Rd. D (b) 488 3,793 - 488 3,793 4,281
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,736 $ 9,490 $ 94 $ 1,736 $ 9,584 $11,320
- ------------------------------------------------------------------------------------------------------------------------------------
MANSELL COMMONS
993 Mansell Rd. D (b) $ 136 $ 919 $ 39 $ 136 $ 958 $ 1,094
995 Mansell Rd. D (b) 80 714 9 80 723 803
997 Mansell Rd. D (b) 72 612 7 72 619 691
999 Mansell Rd. D (b) 104 816 1 104 817 921
1003 Mansell Rd. D (b) 136 881 1 136 882 1,018
1005 Mansell Rd. D (b) 72 714 5 72 719 791
1007 Mansell Rd. D (b) 168 1,592 16 168 1,608 1,776
1009 Mansell Rd. S (b) 264 1,620 1 264 1,621 1,885
1011 Mansell Rd. S (b) 256 1,647 - 256 1,647 1,903
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,288 $ 9,515 $ 79 $ 1,288 $ 9,594 $10,882
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed/(2)/ Acquired/(3)/
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER NORTHEAST/I-85
1705 Belle Meade Ct. $ 80 1988 1994
4125 Buford Hwy. 173 1995
6525-27 Jimmy Carter Blvd. 51 1983 1996
3171 McCall Dr. 32 1967 1994
7250 McGinnis Ferry Rd. 97 1996
5300 Peachtree Industrial Blvd. 126 1966 1994
4280 Northeast Expressway 155 1962 1994
- -------------------------------------------------------------------------------------------------
Total $ 714
- -------------------------------------------------------------------------------------------------
NORTH CENTRAL SUBMARKET
- -------------------------------------------------------------------------------------------------
NORTHMEADOW
11835 Alpharetta Hwy. $ 92 1994
1100 Northmeadow Pkwy. 149 1989 1995
1125 Northmeadow Pkwy. 104 1987 1995
1150 Northmeadow Pkwy. 138 1988 1995
1175 Northmeadow Pkwy. 154 1987 1995
1225 Northmeadow Pkwy. 153 1989 1995
1250 Northmeadow Pkwy. 110 1989 1995
1325 Northmeadow Pkwy. 223 1990 1995
1350 Northmeadow Pkwy. 154 1994
- -------------------------------------------------------------------------------------------------
Total $1,277
- -------------------------------------------------------------------------------------------------
HEMBREE CREST
11415 Old Roswell Rd. $ 117 1991 1995
11800 Wills Rd. 77 1987 1995
11810 Wills Rd. 102 1987 1995
11820 Wills Rd. 177 1987 1995
- -------------------------------------------------------------------------------------------------
Total $ 473
- -------------------------------------------------------------------------------------------------
MANSELL COMMONS
993 Mansell Rd. $ 47 1987 1995
995 Mansell Rd. 37 1987 1995
997 Mansell Rd. 30 1987 1995
999 Mansell Rd. 38 1987 1995
1003 Mansell Rd. 41 1990 1995
1005 Mansell Rd. 35 1990 1995
1007 Mansell Rd. 80 1990 1995
1009 Mansell Rd. 76 1986 1995
1011 Mansell Rd. 77 1984 1995
- -------------------------------------------------------------------------------------------------
Total $ 461
- -------------------------------------------------------------------------------------------------
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
Initial Costs Costs Capitalized
------------------------------
Property Related Building and Subsequent
Marker/Business Park/Property Type(1) Encumberances Land Improvements to Acquisstion Land
- ------------------------------------------------------------------------------------------------------------------------
Hembree Park
<S> <C> <C> <C> <C> <C> <C>
105 Hembree Park Dr. D (b) $ 288 $ 2,067 $ 1 $ 288
150 Hembree Park Dr. D (b) 641 2,015 21 641
200 Hembree Park Dr. D (b) 160 1,978 - 160
645 Hembree Pkwy. D (b) 248 1,997 35 248
655 Hembree Pkwy. D (b) 248 1,997 41 248
- ------------------------------------------------------------------------------------------------------------------------
Total $ 1,585 $10,054 $ 98 $ 1,585
- ------------------------------------------------------------------------------------------------------------------------
Other North Central Properties
10745 Westside Pkwy. O 925 3,513 52 925
- ------------------------------------------------------------------------------------------------------------------------
Total $ 925 $ 3,513 $ 52 $ 925
- ------------------------------------------------------------------------------------------------------------------------
Airport/South Atlanta Submarket
- ------------------------------------------------------------------------------------------------------------------------
Southridge
5099 Southridge Pkwy. D (d) $ 306 $ 1,053 $ 32 $ 306
5136 Southridge Pkwy. D (d) 480 1,653 67 480
5139 Southridge Pkwy. D (d) 465 1,601 2 465
5149 Southridge Pkwy. D (d) 534 1,838 - 534
5156 Southridge Pkwy. D (d) 676 2,330 - 676
5169 Southridge Pkwy. D 431 2,468 11 431
- ------------------------------------------------------------------------------------------------------------------------
Total $ 2,892 $10,943 $112 $ 2,892
- ------------------------------------------------------------------------------------------------------------------------
Sullivan International
703 Sullivan Rd. D $ 225 $ 781 $ 7 $ 225
721 Sullivan Rd. D 242 834 - 242
727 Sullivan Rd. D 260 898 10 260
739 Sullivan Rd. D 226 778 - 226
- ------------------------------------------------------------------------------------------------------------------------
Total $ 953 $ 3,291 $ 17 $ 953
- ------------------------------------------------------------------------------------------------------------------------
Other Airport/South Atlanta Properties
105 Kings Mill Rd. B (a) $ 457 $ 4,951 $ - $ 457
- ------------------------------------------------------------------------------------------------------------------------
Total $ 457 $ 4,951 - $ 457
- ------------------------------------------------------------------------------------------------------------------------
Northwest/I-75 Submarket
- ------------------------------------------------------------------------------------------------------------------------
Townpoint
3330 West Town Point Dr. D $ 551 $ 1,551 $375 $ 551
3350 West Town Point Dr. D 434 2,214 - 434
- ------------------------------------------------------------------------------------------------------------------------
Total $ 985 $ 3,765 $375 $ 985
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Gross Amount at which
Carried at Close of Period
-----------------------------------------
Building and Accumulated Year Year
Improvements Total Depreciation Developed(2) Acquired(3)
- ------------------------------------------------------------------------------------------------------------------------
Hermes Park
<S> <C> <C> <C> <C> <C>
105 Hembree Park Dr. $ 2,068 $ 2,356 $ 96 1988 1995
150 Hembree Park Dr. 2,036 2,677 102 1985 1995
200 Hembree Park Dr. 1,978 2,138 92 1985 1995
645 Hembree Pkwy. 2,032 2,280 98 1986 1995
655 Hembree Pkwy. 2,038 2,286 110 1986 1995
- ------------------------------------------------------------------------------------------------------------------------
Total $ 10,152 $11,737 $ 498
- ------------------------------------------------------------------------------------------------------------------------
Other North Central Properties
10745 Westside Pkwy. $ 3,565 $ 4,490 $ 193 1995
- ------------------------------------------------------------------------------------------------------------------------
Total 3,565 4,490 193
- ------------------------------------------------------------------------------------------------------------------------
Airport/South Atlanta Submarket
- ------------------------------------------------------------------------------------------------------------------------
Southridge
5099 Southridge Pkwy. $ 1,085 $ 1,391 $ 101 1990 1994
5136 Southridge Pkwy. 1,720 2,200 $ 143 1990 1994
5139 Southridge Pkwy. 1,603 2,068 136 1991 1994
5149 Southridge Pkwy. 1,838 2,372 155 1990 1994
5156 Southridge Pkwy. 2,330 3,006 196 1992 1994
5169 Southridge Pkwy. 2,479 2,910 107 1994
- ------------------------------------------------------------------------------------------------------------------------
Total $ 11,055 $13,947 $838
- ------------------------------------------------------------------------------------------------------------------------
Sullivan International
703 Sullivan Rd. $ 788 $ 1,013 $ 68 1990 1994
721 Sullivan Rd. 834 1,076 70 1991 1994
727 Sullivan Rd. 908 1,168 78 1988 1994
739 Sullivan Rd. 778 1,004 65 1989 1994
- ------------------------------------------------------------------------------------------------------------------------
Total $ 3,308 $ 4,261 $ 281
- ------------------------------------------------------------------------------------------------------------------------
Other Airport/South Atlanta
Properties105 Kings
Mill Rd. $ 4,951 $ 5,408 $ 272 1994
- ------------------------------------------------------------------------------------------------------------------------
Total $ 4,951 $ 5,408 $ 272
- ------------------------------------------------------------------------------------------------------------------------
Northwest/I-75 Submarket
- ------------------------------------------------------------------------------------------------------------------------
Townpoint
3330 West Town Point Dr. $ 1,926 2,477 144 1994
3350 West Town Point Dr. 2,214 2,648 74 1995
- ------------------------------------------------------------------------------------------------------------------------
Total $ 4,140 $5,125 $ 218
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
Schedule III Page 6 of 10
Gross Amount at which
Initial Costs Carried at Close of Period
---------------------- Cost Capitalized ------------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type(1) Encumbrances Land Improvements to Acquisition Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest Business Center
1331-37-41-51 Capital Circle S $ 558 $ 4,443 $ - $ 558 $ 4,443 $ 5,001
1335 Capital Circle S 416 1,704 - 416 1,704 2,120
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 974 $ 6,147 $ - $ 974 $ 6,147 $ 7,121
- ------------------------------------------------------------------------------------------------------------------------------------
Other Northwest/ I-75 Properties
240 Northpoint Pkwy. B $ 495 $ 2,732 $ - $ 495 $ 2,732 $ 3,227
- ------------------------------------------------------------------------------------------------------------------------------------
Total B $ 495 $ 2,732 $ - $ 495 $ 2,732 $ 3,227
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Mountain Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Parknorth
675 Parknorth Blvd. D $ 611 $ 2,743 $ 5 $ 611 $ 2,748 $ 3,359
696 Parknorth Blvd. D (f) 532 2,748 - 532 2,748 3,280
715 Parknorth Blvd. D 375 2,118 - 375 2,118 2,493
735 Parknorth Blvd. D (f) 709 3,155 35 709 3,190 3,899
736 Parknorth Blvd. S 627 1,023 - 627 1,023 1,650
780 Parknorth Blvd. D (f) 328 1,847 64 328 1,911 2,239
808 Parknorth Blvd. S 162 608 - 162 608 770
815 Parknorth Blvd. S 249 983 2 249 985 1,234
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 3,593 $15,225 $ 106 $ 3,593 $ 15,331 $18,924
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee
670 DeFoors Ave. D $ 82 $ 660 $ 941 $ 82 $ 1,601 $ 1,683
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 82 $ 660 $ 941 $ 82 $ 1,601 $ 1,683
- ------------------------------------------------------------------------------------------------------------------------------------
NASHVILLE, TENNESSEE
- ------------------------------------------------------------------------------------------------------------------------------------
Airpark Business Center
400 Airpark Center Dr. S (m)(n) $ 419 $ 1,679 $ - $ 419 $ 1,679 $ 2,098
500 Airpark Center Dr. D (m)(n) 923 3,697 - 923 3,697 4,620
600 Airpark Center Dr. D (m)(n) 729 2,918 - 729 2,918 3,647
700 Airpark Center Dr. D (m)(n) 801 3,287 - 801 3,287 4,088
800 Airpark Center Dr. D (o) 924 3,700 - 924 3,700 4,624
900 Airpark Center Dr. D (o) 798 3,194 - 798 3,194 3,992
1400 Donelson Pike S (m)(n) 1,276 5,108 - 1,276 5,108 6,384
1410 Donelson Pike S (m)(n) 1,411 5,696 - 1,411 5,696 7,107
1413 Donelson Pike B (p) 549 2,197 - 549 2,197 2,746
1420 Donelson Pike S (m)(n) 1,331 5,346 - 1,331 5,346 6,677
5270 Harding Place B (p) 535 2,143 - 535 2,143 2,678
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 9,696 $38,965 $ - $ 9,696 $ 38,965 $48,661
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Depreciation Developed(2) Acquired(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Northwest Business Center
1331-37-41-51 Capital Circle $ 71 1985 1996
1335 Capital Circle 28 1985 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 99
- ------------------------------------------------------------------------------------------------------------------------------------
Other Northwest/ I-75 Properties
240 Northpoint Pkwy. $ 137 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 137
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Mountain Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Parknorth
675 Parknorth Blvd. $ 160 1990 1995
696 Parknorth Blvd. 144 1986 1995
715 Parknorth Blvd. 111 1989 1995
735 Parknorth Blvd. 172 1989 1995
736 Parknorth Blvd. 54 1992 1995
780 Parknorth Blvd. 110 1988 1995
808 Parknorth Blvd. 32 1986 1995
815 Parknorth Blvd. 52 1989 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 835
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee Submarket
- ------------------------------------------------------------------------------------------------------------------------------------
Chattahoochee
670 DeFoors Ave. $ 700 1960 1989
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 700
- ------------------------------------------------------------------------------------------------------------------------------------
NASHVILLE, TENNESSEE
- ------------------------------------------------------------------------------------------------------------------------------------
Airpark Business Center
400 Airpark Center Dr. $ 11 1989 1996
500 Airpark Center Dr. 25 1988 1996
600 Airpark Center Dr. 19 1990 1996
700 Airpark Center Dr. 22 1992 1996
800 Airpark Center Dr. 25 1995 1996
900 Airpark Center Dr. 21 1995 1996
1400 Donelson Pike 34 1986 1996
1410 Donelson Pike 38 1986 1996
1413 Donelson Pike 15 1996 1996
1420 Donelson Pike 36 1985 1996
5270 Harding Place 14 1996 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 260
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at which
Initial Cost Cost Capitalized Carried at Close of Period
-------------------- ---------------------------
Property Related Building and Subsequent Building and
Market/Business Park/Property Type (1) Encumbrances Land Improvements Acquisition Land Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brentwood South Business Center
7104 Crossroad Blvd. D (j) $ 1,065 $ 4,272 $ - $ 1,065 $ 4,272
7106 Crossroad Blvd. D (j) 1,065 4,266 - 1,065 4,266
7108 Crossroad Blvd. D (j) 848 3,396 - 848 3,396
119 Seaboard Lane D (k) 569 2,280 - 569 2,280
121 Seaboard Lane D (l) 445 1,784 - 445 1,784
123 Seaboard Lane D (l) 489 1,956 - 489 1,956
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,481 $ 17,954 $ - $ 4,481 $ 17,954
- ------------------------------------------------------------------------------------------------------------------------------------
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
900 Perimeter Park S (q) $ 629 $ 3,568 $ - $ 629 $ 3,568
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 629 $ 3,568 $ - $ 629 $ 3,568
- ------------------------------------------------------------------------------------------------------------------------------------
Perimeter Park West
1400 Perimeter Park West O (r) $ 666 $ 3,777 $ - $ 666 $ 3,777
1500 Perimeter Park West O 1,148 6,511 - 1,148 6,511
1600 Perimeter Park West O (v) 1,463 8,297 - 1,463 8,297
1800 Perimeter Park West O (v) 907 5,140 - 907 5,140
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 4,184 $ 23,725 $ - $ 4,184 $ 23,725
- ------------------------------------------------------------------------------------------------------------------------------------
Metro Center
2800 Perimeter Park Dr. D (u) $ 482 $ 2,733 $ - $ 482 $ 2,733
2900 Perimeter Park Dr. D (u) 235 1,330 - 235 1,330
3000 Perimeter Park Dr. D (u) 777 4,405 - 777 4,405
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,494 $ 8,468 $ - $ 1,494 $ 8,468
- ------------------------------------------------------------------------------------------------------------------------------------
Enterprise Center
507 Airport Blvd. S (v) $ 1,336 $ 7,578 $ - $ 1,336 $ 7,578
5151 McCrimmon Pkwy. S 1,318 7,474 - 1,318 7,474
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,654 $ 15,052 $ - $ 2,654 $ 15,052
- ------------------------------------------------------------------------------------------------------------------------------------
Woodlake Center
1000 Innovation Ave. D (t) $ 633 $ 3,590 $ - $ 633 $ 3,590
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 633 $ 3,590 $ - $ 633 $ 3,590
- ------------------------------------------------------------------------------------------------------------------------------------
Interchange Plaza
5520 Capital Center Dr. O (s) $ 842 $ 4,772 $ - $ 842 $ 4,772
801 Jones Franklin Rd. O (x) 1,351 7,660 - 1,351 7,660
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,193 $ 12,432 $ - $ 2,193 $ 12,432
- ------------------------------------------------------------------------------------------------------------------------------------
Other Raleigh Properties
6501 Weston Pkwy. O (w) $ 1,775 $ 10,064 $ - $ 1,775 $ 10,064
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,775 $ 10,064 $ - $ 1,775 $ 10,064
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated Year Year
Market/Business Park/Property Total Depreciation Developed(2) (Acquired(3)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brentwood South Business Center
7104 Crossroad Blvd. $ 5,337 $ 28 1987 1996
7106 Crossroad Blvd. 5,331 28 1987 1996
7108 Crossroad Blvd. 4,244 23 1989 1996
119 Seaboard Lane 2,849 15 1990 1996
121 Seaboard Lane 2,229 12 1990 1996
123 Seaboard Lane 2,445 13 1990 1996
- --------------------------------------------------------------------------------------------
Total $ 22,435 $ 119
- --------------------------------------------------------------------------------------------
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
900 Perimeter Park $ 4,197 1982 1996
- --------------------------------------------------------------------------------------------
Total $ 4,197 $ -
- --------------------------------------------------------------------------------------------
Perimeter Park West
1400 Perimeter Park West $ 4,443 1991 1996
1500 Perimeter Park West 7,659 1996 1996
1600 Perimeter Park West 9,760 1994 1996
1800 Perimeter Park West 6,047 1994 1996
- --------------------------------------------------------------------------------------------
Total $ 27,909 $ -
- --------------------------------------------------------------------------------------------
Metro Center
2800 Perimeter Park Dr. $ 3,215 1992 1996
2900 Perimeter Park Dr. 1,565 1990 1996
3000 Perimeter Park Dr. 5,182 1989 1996
- --------------------------------------------------------------------------------------------
Total $ 9,962 $ -
- --------------------------------------------------------------------------------------------
Enterprise Center
507 Airport Blvd. $ 8,914 1993 1996
5151 McCrimmon Pkwy. 8,792 1995 1996
- --------------------------------------------------------------------------------------------
Total $ 17,706 $ -
- --------------------------------------------------------------------------------------------
Woodlake Center
1000 Innovation Ave. $ 4,223 1994 1996
- --------------------------------------------------------------------------------------------
Total $ 4,223 $ -
- --------------------------------------------------------------------------------------------
Interchange Plaza
5520 Capital Center Dr. $ 5,614 1993 1996
801 Jones Franklin Rd. 9,011 1995 1996
- --------------------------------------------------------------------------------------------
Total $ 14,625 $ -
- --------------------------------------------------------------------------------------------
Other Raleigh Properties
6501 Weston Pkwy. $ 11,839 1996 1996
- --------------------------------------------------------------------------------------------
Total $ 11,839 $ -
- --------------------------------------------------------------------------------------------
</TABLE>
S-7
<PAGE>
SCHEDULE III PAGE 8 OF 10
<TABLE>
<CAPTION>
Initial Costs Cost Capitalized
------------------------
Property Related Building and Subsequent
Market/Business Park/Property Type (1) Encumbrances Land Improvements to Acquisition
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
2500 Principal Row B $ 565 $ 3,915 $ -
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 565 $ 3,915 $ -
- -------------------------------------------------------------------------------------------------------------
Airport Commerce Center
8249 Parkline Blvd. D $ 214 $ 1,661 $ -
8351 Parkline Blvd. D (e) 212 1,786 -
8500 Parkline Blvd. D (e) 691 3,200 120
8501 Parkline Blvd. D (e) 169 1,212 4
8549 Parkline Blvd. D (e) 149 1,232 -
1630 Prime Court D 319 1,654 -
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 1,754 $ 10,745 $ 124
- -------------------------------------------------------------------------------------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
170 Parkway West B $ 141 $ 2,763 $ -
260 Parkway East D 533 1,924 -
285 Parkway East B 478 4,247 -
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 1,152 $ 8,934 $ -
- -------------------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT $ 8,751 $ - $ 284
-------------------------------------------------------------
PROPERTY TOTALS 193,403 (z) $85,781 $421,478 $ 29,011
-------------------------------------------------------------
<CAPTION>
Gross Amount at which
Carried at Close of Period
-----------------------------------
Building and Accumulated Year Year
Market/Business Park Property Land Improvements Total Depreciation Developed (2) Acquired (3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
2500 Principal Row $ 565 $ 3,915 $ 4,480 $ 28 1996
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 565 $ 3,915 $ 4,480 $ 28
- ------------------------------------------------------------------------------------------------------------------------------
Airport Commerce Center
8249 Parkline Blvd. $ 214 $ 1,661 $ 1,875 $ 29 1996
8351 Parkline Blvd. 212 1,786 1,998 106 1994 1995
8500 Parkline Blvd. 691 3,320 4,011 205 1986 1995
8501 Parkline Blvd. 169 1,216 1,385 72 1991 1995
8549 Parkline Blvd. 149 1,232 1,381 73 1992 1995
1630 Prime Court 319 1,654 1,973 16 1996
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,754 $ 10,869 $ 12,623 $ 501
- ------------------------------------------------------------------------------------------------------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
170 Parkway West $ 141 $ 2,763 $ 2,904 $ 26 1995
260 Parkway East 533 1,924 2,457 159 1987 1994
285 Parkway East 478 4,247 4,725 212 1994
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,152 $ 8,934 $ 10,086 $ 397
- ------------------------------------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT $ 9,035 $ 9,035
-------------------------------------------------------------
PROPERTY TOTALS $86,268 $450,002 $536,270 (aa)(bb) $41,469
-------------------------------------------------------------
</TABLE>
(1) D = business distribution; B = bulk warehouse; S = business service; O =
office; R = retail.
(2) The year of development means the year in which shell construction was
completed.
(3) For properties acquired by the Operating Partnership, including properties
previously developed and sold by the Operating Partnership, the year of
acquisition means the year in which an ownership interest in the property
was acquired or is expected to be acquired, unless otherwise noted.
(a) These properties are collectively encumbered by a mortgage of $38,000.
(b) These properties are collectively encumbered by a mortgage of $31,170.
(c) These properties are collectively encumbered by a mortgage of $10,300.
(d) These properties are collectively encumbered by a mortgage of $ 6,952.
(e) These properties are collectively encumbered by a mortgage of $ 5,200.
(f) These properties are collectively encumbered by a mortgage of $ 5,140.
(g) These properties are collectively encumbered by a mortgage of $ 3,425.
(h) These properties are collectively encumbered by a mortgage of $ 1,813.
(i) These properties are collectively encumbered by a mortgage of $ 1,262.
(j) These properties are collectively encumbered by a mortgage of $ 7,076.
(k) These properties are collectively encumbered by a mortgage of $ 2,174.
(l) These properties are collectively encumbered by a mortgage of $ 2,633.
(m) These properties are collectively encumbered by a mortgage of $12,278.
(n) These properties are collectively encumbered by a mortgage of $ 1,957.
(o) These properties are collectively encumbered by a mortgage of $ 8,841.
(p) These properties are collectively encumbered by a mortgage of $ 6,924.
(q) These properties are collectively encumbered by a mortgage of $ 2,901.
S-8
<PAGE>
SCHEDULE III PAGE 9 OF 10
(r) These properties are collectively encumbered by a mortgage of $ 2,707.
(s) These properties are collectively encumbered by a mortgage of $ 2,922.
(t) These properties are collectively encumbered by a mortgage of $ 2,590.
(u) These properties are collectively encumbered by a mortgage of $ 6,851.
(v) These properties are collectively encumbered by a mortgage of $16,028.
(w) These properties are collectively encumbered by a mortgage of $ 7,683.
(x) These properties are collectively encumbered by a mortgage of $ 5,873.
(y) These properties are collectively encumbered by a mortgage of $ 703.
(z) Total related encumbrances include all mortgage notes payable in the
accompanying financial statements, except a mortgage of $4,172 which is
secured by the property at 1950 Vaughn Road which underlies a direct
financing lease discussed in note 3 to the consolidated and combined
financial statements.
(aa) The aggregate cost for federal income tax purposes was approximately $456
million.
(bb) Excludes developments in progress of $56,571.
S-9
<PAGE>
SCHEDULE III PAGE 10 OF 10
WEEKS REALTY, L.P.
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Depreciation of the Operating Partnership's real estate assets is calculated
over the following estimated useful lives on a straight-line basis:
. Buildings -- 35 Years
. Tenant Improvements -- life of the lease
A summary of activity for real estate assets and accumulated depreciation for
the years ended December 31, 1996 and 1995, for the period from August 24, 1994
to December 31, 1994 and for the period from January 1, 1994 to August 23, 1994
were as follows
(in thousands):
<TABLE>
<CAPTION>
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REAL ESTATE ASSETS
Balance, beginning of period $ 319,763 $ 162,709 $ 111,424 $ 95,831
Additions 71,418 46,913 16,486 9,077
Acquisitions of property/(a)/ 201,660 110,141 38,320 6,516
Deconsolidation of build-to-suit land -- -- (3,521) --
- ------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 592,841 $ 319,763 $ 162,709 $ 111,424
- ------------------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION
Balance, beginning of period $ 29,889 $ 22,959 $ 21,220 $ 18,887
Depreciation 11,580 6,930 1,739 2,333
- ------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 41,469 $ 29,889 $ 22,959 $ 21,220
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) See Note 14 to the Operating Partnership's consolidated and combined
financial statements, included herein on pages F-22 - F-23, for a summary
of certain noncash consideration utilized in the Operating Partnership's
property acquisitions.
S-10
<PAGE>
EXHIBIT INDEX
Certain of the exhibits required by Item 601 of Regulation S-K have been filed
with previous reports by Weeks and are herein incorporated by reference thereto.
The Registrant agrees to furnish a copy of all agreements relating to long-term
debt upon request of the Commission.
<TABLE>
<CAPTION>
Subsequent
Exhibit No. Exhibit Numbered Page
---------- ------- -------------
<S> <C> <C>
2.1** Agreement of Merger by and between NWI Warehouse Group, LLC
and Weeks Realty, L.P., dated November 1, 1996.
2.2** Contribution Agreement for Development Properties between
Weeks Realty, L.P., and NWI Warehouse Group, L.P., dated
November 1, 1996.
2.3** Contribution Agreement for Aspen Grove Land between Weeks
Realty, L.P., and NWI Warehouse Group, L.P., dated November
1, 1996.
2.4** Contribution Agreement for I-440 Land between Weeks Realty,
L.P., and NWI Warehouse Group, L.P., dated November 1,
1996.
2.5** Contribution Agreement for NWI Operating Business by and
between Weeks Realty, L.P. and NWI Warehouse Group, L.P.,
dated November 1, 1996.
2.6** Contribution Agreement for Buckley Operating Business by and
between Weeks Realty, L.P. and Buckley & Company Real Estate,
Inc., dated November 1, 1996.
2.7** Contribution Agreement for Briley Land between Weeks Realty, L.P.
and NWI Warehouse Group, L.P., dated November 1, 1996.
2.8*** Contribution Agreement by and between Harold S. Lichtin and
Weeks Realty, L.P., dated December 31, 1996.
2.9*** Contribution Agreement for Northern Telecom Properties,
among the contributors identified therein (the
"Contributors") and Weeks Realty, L.P. doing business as
Weeks Realty Limited Partnership, dated December 31, 1996.
2.10*** Contribution Agreement (Perimeter Park West Land) among
Harold S. Lichtin, Marie Antoinette Robertson, and Perimeter Park
West Associates, and Weeks Realty L.P. doing business as Weeks
Realty Limited Partnership, dated December 31, 1996.
2.11*** Contribution Agreement for Completed Properties Lichtin Portfolio
among the Contributors and Weeks Realty, L.P. doing business as
Weeks Realty Limited Partnership, dated December 31, 1996.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
2.12*** Contribution Agreement for Development Properties and Regency
Forrest Land among the Contributors and Weeks Realty, L.P. doing
business as Weeks Realty Limited Partnership, dated December 31,
1996.
4.1** Second Amended and Restated Agreement of Limited
Partnership of Weeks Realty, L.P., dated October 30, 1996.
4.2** First Amendment to the Second Amended and Restated Agreement
of Limited Partnership of Weeks Realty, L.P. by and among NWI
Warehouse Group, L.P., Buckley & Company Real Estate, Inc. and
Weeks GP Holdings, Inc., dated November 1, 1996.
4.3+++ Second Amendment to the Second Amended and Restated
Agreement of Limited Partnership of Weeks Realty, L.P. by and
among Harold S. Lichtin, Noel A. Lichtin, Marie Antoinette
Robertson, Amy R. Ehrman, Roland G. Robertson and Perimeter
Park West Associates Limited Partnership, Weeks GP Holdings, Inc.
and Weeks Corporation, dated December 31, 1996.
4.4+++ Third Amendment to the Second Amended and Restated Agreement
of Limited Partnership of Weeks Realty, L.P. by and among Roderick
M. Duncan, Anne B. Broaddus, F. Timothy Nichols, James F.
McCabe, Regency Forest, LLC, Weeks GP Holdings, Inc. and
Weeks Corporation, dated January 31, 1997.
10.1**** Employment Agreements between Weeks Realty L.P. and A. Ray
Weeks, Jr., Thomas D. Senkbeil and Forrest W. Robinson,
respectively.
10.2**** Employment Agreements between Weeks Realty Services Inc. and
A. Ray Weeks, Jr., Thomas D. Senkbeil and Forrest W. Robinson,
respectively.
10.3**** Employment Agreements between Weeks Construction Services
Inc. and A. Ray Weeks, Jr. and Forrest W. Robinson, respectively.
10.4**** Noncompetition Agreements among the Company, Weeks Realty
L.P., Weeks Realty Services Inc., Weeks Construction Services Inc.
and each of A. Ray Weeks, Jr., Thomas D. Senkbeil and Forrest W.
Robinson.
10.5+ Credit Agreement dated September 25, 1996, by and among
Wachovia Bank of Georgia, N.A., as agent bank for Wachovia Bank
of Georgia, N.A., First Union National Bank of Georgia,
Commerzbank A.G. and Mellon Bank, as lenders, Weeks Realty,
L.P., Weeks Construction Services, Inc., Weeks Realty Services,
Inc., Weeks Development Partnership and Weeks Financing Limited
Partnership, as borrowers, and Weeks Corporation and Weeks
Realty, L.P., as guarantors.
10.6++ Park North Purchase and Sale Agreement between Copley
Properties Inc., Parknorth Associates, Parknorth Associates II,
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Parknorth Associates III and Weeks Realty, L.P., dated
March 28, 1995.
10.7# Purchase and Sale Agreement by and among North Meadow
Associates Joint Venture, ASC North Fulton Associates Joint
Venture and Weeks Realty, L.P., dated July 7, 1995.
10.8## Noncompetition Agreement between Weeks Corporation, Weeks
Realty L.P., Weeks Realty Services Inc. and Weeks Construction
Services Inc. and David P. Stockert, dated June 26, 1995.
10.9## Agreement of Purchase and Sale between Premprop-Northwoods
6 Partnership, Premprop-Northwoods 18-22 Partnership, and
Premprop-Northwoods 23 Partnership and Weeks Realty L.P.
dated November 6, 1995. The Exhibits and Schedules to this
Agreement are listed in, but not filed with, this exhibit.
Such Exhibits and Schedules have been omitted for purposes
of this filing, but will be furnished to the Commission
supplementary upon request.
10.10### Real Estate Purchase and Sale Agreement by and between Principal
Mutual Life Insurance Company and Weeks Realty, L.P., dated
May 28, 1996.
10.11** Noncompetition Agreement by and among NWI Warehouse Group,
L.P., Weeks Corporation, Weeks Realty, L.P., Weeks Realty
Services, Inc., Weeks Construction Services, Inc., Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and their
respective successors, dated November 1, 1996.
10.12** Noncompetition Agreement by and among John W. Nelley, Jr.,
Weeks Corporation, Weeks Realty, L.P., Weeks Realty
Services, Inc., Weeks Construction Services, Inc., Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and any other
entity under the common control of Weeks Corporation, and
their respective successors, dated November 1, 1996.
10.13** Noncompetition Agreement by and among Albert W. Buckley,
Jr., Weeks Corporation, Weeks Realty, L.P., Weeks Realty
Services, Inc., Weeks Construction Services, Inc., Weeks GP
Holdings, Inc., Weeks LP Holdings, Inc., and any other
entity under the common control of Weeks Corporation, and
their respective successors, dated November 1, 1996.
10.14*** Noncompetition Agreement by and between Harold S. Lichtin,
Weeks Corporation, Weeks Realty, L.P., Weeks Realty
Services, Inc., Weeks Construction Services, Inc., Week GP
Holdings, Inc., Weeks LP Holdings, Inc., and any other
entity under the common control of Weeks Corporation, and
their respective successors, dated December 31, 1996.
11.1 Computation of Earnings Per Partnership Unit
21.1 List of subsidiaries of the Registrant.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
27.1 Financial Data Schedule
99.1 Executive Officers of the Registrant
99.2 Executive Compensation
99.3 Certain Relationships and Related Transactions
* Filed as an exhibit to the Registration Statement on Form S-11 (SEC
File No. 33-80314) of Weeks.
** Filed as an exhibit to Weeks' Current Report on Form 8-K dated
November 1, 1996.
*** Filed as an exhibit to Weeks' Current Report on Form 8-K dated
December 31, 1996.
**** Filed as an exhibit to Weeks' Annual Report on Form 10-K for the
year ended December 31, 1994.
# Filed as an exhibit to Weeks' Current Report on Form 8-K dated
August 31, 1995.
## Filed as an exhibit to Weeks' Current Report on Form 10-K for the
year ended December 31, 1995.
### Filed as an exhibit to Weeks' Current Report on Form 8-K dated
August 9, 1996.
#### Filed as an exhibit to the Registration Statement on Form S-8 (SEC
File No. 333-18305) of Weeks.
+ Filed as an exhibit to Weeks' Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1996.
++ Filed as an exhibit to Weeks' Current Report on Form 8-K dated July
12, 1995.
+++ Filed as exhibit to Weeks' Current Report on Form 8-K dated May 7,
1997.
99.1 Executive Officers of the Registrant
99.2 Executive Compensation
99.3 Certain relationships and Related Transactions
</TABLE>
<PAGE>
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER OPERATING PARTNERSHIP UNIT
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996,
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995, AND
FOR THE PERIOD FROM AUGUST 24, 1994 TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended Year ended Year ended Aug. 24 to
(In thousands, except per share data) Mar. 31, 1997 Mar. 31, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Weighted average number of
Units outstanding 18,605 13,723 14,280 10,760 10,268
Dilutive effect of outstanding
stock options (determined under
the Treasury Stock Method) --- --- --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average number of Units
and Unit equivalents outstanding 18,605 13,723 14,280 10,760 10,268
- ---------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss $ 5,058 $ 3,814 $15,809 $11,107 $ 3,734
Extraordinary loss --- --- --- --- (2,667)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 5,058 $ 3,814 $15,809 $11,107 $ 1,067
- ---------------------------------------------------------------------------------------------------------------------------------
Per Unit data
Income before extraordinary loss $ 0.27 $ 0.28 $ 1.11 $ 1.03 $ 0.36
Extraordinary loss --- --- --- --- (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.27 $ 0.28 $ 1.11 $ 1.03 $ 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1996
The financial statements of the following entities were consolidated with those
of the Registrant in the consolidated financial statements of the Registrant
incorporated herein as of December 31, 1996:
. Weeks Financing Limited Partnership, a Georgia limited partnership.
The Registrant owns a 99% partnership interest and
Weeks Realty Services Inc. owns a 1% partnership interest.
Other subsidiaries of the Operating Partnership accounted for on the
equity method, at December 31, 1996, are as follows:
. Weeks Realty Services Inc., a Georgia corporation.
The Operating Partnership owns 100% of the non-voting common stock
and
1% of the voting common stock.
. Weeks Construction Services Inc., a Georgia corporation.
The Operating Partnership owns 100% of the non-voting common stock
and
1% of the voting common stock.
. Weeks Development Partnership, a Georgia partnership.
Weeks Construction Services Inc. and Weeks Realty Services Inc. own
100% of the partnership interests.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996
<CASH> 299 260
<SECURITIES> 0 0
<RECEIVABLES> 6,300 5,858
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 584,246 551,372
<DEPRECIATION> 46,157 41,469
<TOTAL-ASSETS> 630,092 591,849
<CURRENT-LIABILITIES> 0 0
<BONDS> 320,883 296,975
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 120,355 132,808
<TOTAL-LIABILITY-AND-EQUITY> 630,092 591,849
<SALES> 0 0
<TOTAL-REVENUES> 19,899 53,883
<CGS> 0 0
<TOTAL-COSTS> 15,727 39,906
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,066 11,779
<INCOME-PRETAX> 5,058 15,809
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 5,058 15,809
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,058 15,809
<EPS-PRIMARY> .27 1.11
<EPS-DILUTED> .27 1.11
</TABLE>
<PAGE>
EXHIBIT 99.1
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Company and their positions are as follows:
<TABLE>
<CAPTION>
Name Age Title
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. Ray Weeks, Jr 44 Chairman of the Board and Chief Executive Officer
Thomas D. Senkbeil 47 Vice Chairman of the Board and Chief Investment Officer
Forrest W. Robinson 45 President, Chief Operating Officer
Harold S. Lichtin 48 Managing Director in charge of the Company's
activities in North Carolina
John W. Nelley, Jr 48 Managing Director in charge of the Company's
activities in Tennessee
Albert W. Buckley, Jr 53 Managing Director, Nashville, Tennessee
David P. Stockert 34 Senior Vice President and Chief Financial Officer
Robert G. Cutlip 47 Senior Vice President, Development
Clyde H. Duckett 54 Senior Vice President, Construction
Mark W. Flowers 39 Senior Vice President, Landscape
Klay W. Simpson 41 Senior Vice President, Marketing
David L. Barker 41 Vice President, Property Management
Elizabeth C. Belden 42 Vice President, Corporate Counsel
Patricia P. Clayton 44 Vice President, Property Management
Phillip W. Cobb 47 Vice President, Building Construction
Arthur J. Quirk 39 Vice President and Controller
Moses L. Salcido 37 Vice President, Orlando
Robert K. Sanders, Jr 37 Vice President, Construction Estimating
Mark L. Scott 37 Vice President, Interior Construction
Thomas W. Trocheck 42 Vice President, Development-Engineering
Robert T. Weeks 36 Vice President, Information Technology
Cynthia F. Wright 41 Vice President, Investor Relations
---------------------------------------------------------------------------------------------------------
</TABLE>
The following is a biographical summary of the experience of the executive
officers of the Company:
A. Ray Weeks, Jr. Chairman of the Board and Chief Executive Officer of the
Company since 1983. President of the Company from January 1982 through March
1991. Chairman of the Board of the Georgia Department of Industry, Trade and
Tourism. Chairman, Metro Business Forum. Co-Chairman, Regional Leadership
Institute. Juris Doctor from Mercer University, Master of Social Science in
Urban Studies from Georgia State University and Bachelor of Arts from Furman
University.
Thomas D. Senkbeil. Vice Chairman of the Board and Chief Investment Officer of
the Company since 1992. Executive Vice President and Managing Partner of
Senkbeil & Associates Inc. and Anderson & Senkbeil Inc., each a real estate
development firm, from September 1984 to October 1992. Immediate Past
President, National Executive Committee of the National Association of
Industrial and Office Properties. Master of Business Administration from the
University of North Carolina and Bachelor of Science in industrial engineering
from Auburn University.
<PAGE>
Forrest W. Robinson. Board member, President of the Company since April 1991
and Chief Operating Officer since May 1988. Senior Development Officer from
March 1986 to April 1988. Executive Vice President, Marketing from February
1984 to February 1986. Joined the Company in 1977. Bachelor of Business
Management from Jacksonville State University.
Harold S. Lichtin. Board member, Managing Director of the Company, with
responsibilities for the Company's activities in North Carolina, since December
1996. From 1977 to December 1996, founded and was President of Lichtin
Properties, Inc., a commercial development and property management company in
the Raleigh-Durham-Chapel Hill area of North Carolina that was acquired by the
Company in December 1996. Bachelor of Science in Economics from North Carolina
State University.
John W. Nelley, Jr. Board member, Managing Director of the Company, with
responsibilities for the Company's activities in Nashville, Tennessee, since
November 1996. Since 1982, General Partner and Chief Financial Officer of NWI
Warehouse Group, L.P., an industrial warehouse development company in Nashville,
Tennessee whose assets and business have been acquired, or are under agreement
to be acquired, by the Company. Also since 1973, a practicing Attorney and CPA
specializing in real estate and estate planning. Juris Doctor from the
University of Notre Dame and Bachelor of Science in Accounting from Western
Kentucky University.
Albert W. Buckley, Jr. Managing Director of the Company since November 1996.
General Partner and Chief Executive Officer of NWI Warehouse Group, L.P., an
industrial warehouse development company in Nashville, Tennessee from 1982 to
1996. Also since 1976, President of Buckley & Company Real Estate, Inc., a real
estate brokerage firm specializing in industrial property management and
development. Master of Business Administration and Bachelor of Science in
Business Administration from Middle Tennessee State University.
David P. Stockert. Senior Vice President and Chief Financial Officer of the
Company since June 1995. Vice President and Associate in the Real Estate
Investment Banking Group of Dean Witter Reynolds Inc. from July 1990 to June
1995. Master of Business Administration from Columbia University Business
School and Bachelor of Science in Accounting from the University of Colorado.
Robert G. Cutlip. Senior Vice President, Development, of the Company since
April 1993. Vice President and Principal-in-Charge of Dallas Industrial and
Phoenix/Colorado Operations from January 1992 to April 1993, Paragon Group, a
real estate development firm, Vice President and Principal of Dallas Industrial
from January 1990 to December 1991 and Vice President, Operations from January
1988 to January 1990. Master of Business Administration from University of
Southern California, Master of Science in Civil Engineering from Vanderbilt
University and Bachelor of Science in Civil Engineering from U.S. Air Force
Academy.
Clyde H. Duckett. Senior Vice President, Construction, of the Company since
January 1989. Professional Engineer registered in Georgia, South Carolina and
Tennessee. Bachelor of Science in Mechanical Engineering from Tennessee
Technological University.
Mark W. Flowers. Senior Vice President, Landscape, of the Company since October
1993. Vice President, Landscape of the Company from October 1987 through
September 1993. Bachelor of Science in Horticulture from the University of
Georgia.
<PAGE>
Klay W. Simpson. Senior Vice President, Marketing, of the Company since October
1992. Vice President of Marketing of Senkbeil & Associates Inc. and Anderson &
Senkbeil Inc., each a real estate development firm, from 1986 to September 1992.
Bachelor of Business Administration from Stephen F. Austin State University.
David L. Barker. Vice President, Property Management, of the Company since
October 1989. Real Property Administrator designation from Building Owners and
Managers Institute.
Elizabeth C. Belden. Vice President, Corporate Counsel, of the Company since
October 1985. Juris Doctor from Emory University and Bachelor of Social
Sciences from Colorado State University.
Phillip W. Cobb. Vice President, Building Construction, of the Company since
April 1996. Senior Project Manager of the Company's Construction division from
January 1993 to April 1996. President of CMC Builders, Inc., a general
construction firm from 1982 to 1993. Bachelor of Science in Industry from
Georgia Southern University.
Patricia P. Clayton. Vice President, Property Management, of the Company since
October 1992. Director of Property Management for Senkbeil & Associates Inc.
and Anderson & Senkbeil Inc., each a real estate development firm, from February
1986 to September 1992. Bachelor of Business Administration from the University
of California - Northridge.
Arthur J. Quirk. Vice President and Controller of the Company since December
1994. Vice President-Controller and Chief Accounting Officer for Allegiant
Physician Services, Inc., a physician management services company, from August
1993 to November 1994. Chief Financial Officer/Controller for TransTel Group
Inc., a start-up telecommunications company, from November 1991 to July 1993.
From June 1980 to October 1991 served in various capacities including Senior
Audit Manager at Arthur Andersen LLP. Bachelor of Science in Accounting from
Auburn University.
Moses L. Salcido. Vice President, Orlando, of the Company since October 1996.
Vice President and director of marketing for ComTech Properties, Inc., a real
estate development firm in Central Florida from 1988 to October 1996. Bachelor
of Science in Business Administration from San Diego State University.
Robert K. Sanders, Jr. Vice President, Construction Estimating, of the Company
since March 1996. Chief Estimator from September 1993 to February 1996. Bid
Group Manager and Senior Estimator for Choate Construction, a construction
contracting company, from August 1990 to August 1993. Bachelor of Architectural
Engineering with a Construction Option from Southern College of Technology.
Mark L. Scott. Vice President, Interior Construction of the Company since March
1996. Project Manager from March 1994 to March 1996. Senior Project Manager of
Choate Construction, a construction contracting company, from 1990 to March
1994. Studied Civil Engineering at Southern Institute of Technology.
<PAGE>
Thomas W. Trocheck. Vice President, Development-Engineering, of the Company
since May 1989. Professional Engineer registered in Georgia, Florida and South
Carolina. Bachelor of Science in civil engineering from the Georgia Institute
of Technology and Bachelor of Arts in Government and Business Administration
from Florida State University.
Robert T. Weeks. Vice President, Information Technology, of the Company since
January 1992. Director of Information Systems of the Company from March 1989
through December 1991. Master of Business Administration from Georgia State
University and Bachelor of Business Administration from the University of
Georgia. Ray Weeks and Robert Weeks are first cousins.
Cynthia F. Wright. Vice President, Investor Relations, of the Company since
September 1994. Vice President, Development of the Company from December 1987
through August 1994. Master of Business Administration from the University of
North Carolina, Master of Arts in Urban Studies and Planning from the University
of Alabama-Birmingham and Bachelor of Arts in Urban Studies from the University
of Virginia.
<PAGE>
EXHIBIT 99.2
COMPENSATION OF DIRECTORS
The Company pays its directors who are not employees of the Company fees for
their services as directors. Non-employee directors receive annual
compensation of $15,000 plus a fee of $1,000 for attendance in person and $250
for attendance by telephone at each meeting of the Board of Directors.
Each non-employee director, upon joining the Board of Directors, receives an
initial grant of options to purchase 4,000 shares of Common Stock at an
exercise price equal to 100% of the fair market value of the Common Stock at
the date of the grant of such options. Thereafter, each such director who is
serving as such on December 31 of each calendar year and who has served as
such for more than one year will, on each December 31, automatically receive
an annual grant of options to purchase 3,000 shares of Common Stock at an
exercise price equal to 100% of the fair market value of the Common Stock at
the date of the grant of such options.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid to the Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL
NAME AND PRINCIPAL ----------------------------- STOCK UNDERLYING OTHER
POSITION YEAR SALARY BONUS (1)(2)(3) AWARDS OPTIONS (#) COMPENSATION(4)
------------------ ---- -------- --------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A. Ray Weeks, Jr. ............ 1996 $218,451 $ -- $ -- 25,000 $171,544
Chairman of the Board and 1995 191,764 115,290 -- -- 6,854
Chief Executive Officer 1994 144,997 37,310 -- 80,000 6,718
Thomas D. Senkbeil............ 1996 196,382 136,000 235,000(5) 20,000 7,231
Vice Chairman of the Board 1995 165,103 89,775 -- -- 6,662
and Chief Investment Officer 1994 141,105 31,568 -- 55,000 6,480
Forrest W. Robinson........... 1996 196,382 128,000 200,000(5) 20,000 7,231
President and Chief 1995 165,103 83,475 -- -- 6,662
Operating Officer 1994 141,105 30,485 -- 55,000 6,771
David P. Stockert(6).......... 1996 184,687 116,000 200,000(5) 17,500 5,077
Senior Vice President and 1995 78,966 38,950 165,000(6) 50,000 1,821
Chief Financial Officer 1994 -- -- -- -- --
Klay W. Simpson............... 1996 57,200 318,014(7) -- 8,000 2,828
Senior Vice President-- 1995 57,200 281,642(7) -- -- 2,982
Marketing 1994 57,200 187,127(7) -- 15,000 2,418
</TABLE>
- --------
(1) Bonus amounts for 1996 totaling $136,000 for Mr. Senkbeil, $128,000 for
Mr. Robinson and $116,000 for Mr. Stockert earned in 1996 were paid in
1997.
(2) Bonus amounts for 1995 totaling $115,290 for Mr. Weeks, $89,775 for Mr.
Senkbeil, $83,475 for Mr. Robinson and $38,950 for Mr. Stockert earned in
1995 were paid in 1996.
(3) Bonus amounts for 1994 totaling $27,950 for Mr. Weeks, $22,208 for Mr.
Senkbeil and $21,125 for Mr. Robinson earned in 1994 were paid in 1995.
All other bonus amounts were earned and paid in 1994.
(4) For 1996, amounts include the Company's matching contributions to its
401(k) retirement savings plan of $3,431 for Mr. Weeks, $3,118 for Mr.
Senkbeil, $3,118 for Mr. Robinson, $1,255 for Mr. Stockert and $999 for
Mr. Simpson. Amounts for 1996 also include health care and disability
premium payments of $4,113 for Mr. Weeks, $4,113 for Mr. Senkbeil, $4,113
for Mr. Robinson, $3,822 for Mr. Stockert and $1,829 for Mr. Simpson. For
1996, the amount for Mr. Weeks also includes a bonus totaling $164,000
earned in 1996 that the Compensation Committee of the Board of Directors
elected to defer for a period of five years, which period may be extended
at the election of Mr. Weeks. The terms of such bonus deferral also
provide for the payment of interest to Mr. Weeks on the amount of the
deferred bonus.
(5) Represents the value of 7,015, 5,970 and 5,970 restricted shares of Common
Stock granted on February 17, 1997, to Mr. Senkbeil, Mr. Robinson and Mr.
Stockert, respectively. These shares were granted in recognition of
successful prior service to the Company and will be earned through the
continued financial performance of the Company as stated below. These
shares vest ratably over the four year period ending
2
<PAGE>
February 17, 2000, provided the Company's growth in per share funds from
operations is at least equal to 10% on an annual basis for each of the four
vesting periods. Funds from operations is a real estate investment trust
("REIT") industry measurement that is one of the tools used by the Board of
Directors to assess the financial performance of the Company. At December
31, 1996, the restricted stock granted to Mr. Senkbeil, Mr. Robinson and
Mr. Stockert had a value of $235,000, $200,000 and $200,000, respectively
(assuming all shares will fully vest in accordance with the terms of the
arrangements). Dividends are paid on the restricted stock at the same rate
payable to common shareholders.
(6) Mr. Stockert was employed by the Company on June 29, 1995. In connection
with Mr. Stockert's employment, he received 6,804 shares of restricted
stock. Shares totaling 4,742 vest ratably over the four year period ending
June 26, 1999. Shares totaling 2,062 vest at varying percentages on June
30, 1998, provided that the average annual total return, as defined, on
the Company's common stock over the vesting period (i) is at least equal
to 12% (with 100% vesting at a 15% or more average annual total return),
and (ii) exceeds the average annual total return of stocks that make up
the Equity REIT Index published by the National Association of Real Estate
Investment Trusts ("NAREIT"). At December 31, 1996, the restricted stock
had a value of $226,233 (assuming all shares will fully vest in accordance
with the terms of the arrangements). Dividends are paid on the restricted
stock at the same rate payable to common shareholders.
(7) Amounts represent commissions earned on real estate transactions under the
terms of Mr. Simpson's employment arrangement with the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the individual grants of stock options made
during 1996 to each Named Executive Officer.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
POTENTIAL REALIZABLE VALUE
PERCENT OF TOTAL AT ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM (2)
UNDERLYING EMPLOYEES PRICE EXPIRATION ---------------------------
NAME OPTIONS GRANTED (1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------------------- ---------------- --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
A. Ray Weeks, Jr. ...... 25,000 8.83% $26.00 5/21/2006 $ 408,782 $ 1,035,933
Thomas D. Senkbeil...... 20,000 7.07% 26.00 5/21/2006 $ 327,025 $ 828,746
Forrest W. Robinson..... 20,000 7.07% 26.00 5/21/2006 $ 327,025 $ 828,746
David P. Stockert....... 17,500 6.18% 26.00 5/21/2006 $ 286,147 $ 725,153
Klay W. Simpson......... 8,000 2.83% 26.00 5/21/2006 $ 130,810 $ 331,498
</TABLE>
- --------
(1) All options listed become exercisable ratably on the first, second and
third anniversaries, respectively, following the date of grant.
(2) Amounts for the Named Executive Officers shown under the "Potential
Realizable Value" columns above have been calculated by multiplying the
exercise price by the annual appreciation rate shown (compounded for the
term of the options), subtracting the exercise price per share and
multiplying the gain per share by the number of shares covered by the
options. These amounts represent certain assumed rates of appreciation
only. Actual gains, if any, on stock option exercises are dependent on the
future performance of the Company's Common Stock and overall market
conditions. The amounts reflected in this table may not be achieved.
3
<PAGE>
FISCAL YEAR-END OPTION VALUES TABLE
The following table sets forth information with respect to the value of
unexercised in-the-money options held by the Named Executive Officers of the
Company at December 31, 1996. None of the Named Executive Officers of the
Company exercised options in 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($) (1)
----------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
A. Ray Weeks, Jr. ...... 80,000 25,000 $1,120,000 $181,250
Thomas D. Senkbeil...... 55,000 20,000 770,000 145,000
Forrest W. Robinson..... 55,000 20,000 770,000 145,000
David P. Stockert....... -- 67,500 -- 595,625
Klay W. Simpson......... 15,000 8,000 210,000 58,000
</TABLE>
- --------
(1) In accordance with the Securities and Exchange Commission's rules, values
are determined by subtracting the exercise price from the fair market
value of the underlying Common Stock. For purposes of this table, fair
market value is deemed to be $33.25, the price of the Common Stock as
reported on the New York Stock Exchange on December 31, 1996.
401(K) PLAN
The Company currently has a 401(k) retirement plan covering substantially
all officers and employees of the Company. The 401(k) plan permits
participants to defer up to a maximum of 20% of their compensation. The
Company makes contributions to the 401(k) plan at the discretion of the Board
of Directors.
NONCOMPETITION AND EMPLOYMENT AGREEMENTS
Certain of the Named Executive Officers and directors have employment and
noncompetition agreements with the Company, as set forth below.
Each of A. Ray Weeks, Jr., Thomas D. Senkbeil, Forrest W. Robinson, David P.
Stockert, John W. Nelley, Jr. and Harold S. Lichtin has entered into a
noncompetition agreement (the "Noncompete Agreements") with the Company, the
Operating Partnership, Weeks Realty Services, Inc. ("Weeks Realty Services")
and Weeks Construction Services, Inc. ("Weeks Construction Services"). The
Noncompete Agreements, with certain exceptions, prohibit each individual from
serving as an officer, director, or partner of, owning any interest in or
performing certain managerial functions on behalf of, any entity that engages
directly or indirectly in the development, operation, management, leasing,
construction or landscaping of any industrial or office properties during the
term of his employment with the Company and for a period of three years
thereafter, with respect to Messrs. Weeks, Senkbeil and Robinson, for a period
of two years thereafter, with respect to Mr. Stockert, and for a period of one
year thereafter, with respect to Messrs. Nelley and Lichtin.
In addition, A. Ray Weeks, Jr. and Forrest W. Robinson have each entered
into employment agreements with each of the Company, the Operating
Partnership, Weeks Realty Services and Weeks Construction Services; Thomas D.
Senkbeil has entered into an employment agreement with each of the Company,
the Operating Partnership and Weeks Realty Services; and David P. Stockert,
John W. Nelley, Jr. and Harold S. Lichtin have each entered into employment
agreements with the Company (collectively, the "Employment Agreements"). The
Employment Agreements provide for a three-year term of employment for each of
these individuals. Annual compensation (including bonus and stock option or
restricted stock awards) is set in accordance with criteria established by the
Compensation Committee of the Board of Directors. See "Board Compensation
Committee Report on Executive Compensation." The initial three-year terms of
the Employment Agreements for Messrs.
4
<PAGE>
Weeks, Senkbeil and Robinson will expire on August 24, 1997. The Company
anticipates that it will enter into new employment agreements with these
individuals, however, the terms and conditions of such agreements have not yet
been determined.
INCENTIVE STOCK PLAN
The Company has adopted an Incentive Stock Plan (the "Incentive Stock Plan")
to attract and provide incentives to officers, key employees and directors.
The Incentive Stock Plan provides for grants of options to purchase a
specified number of shares of Common Stock ("Options") or grants of restricted
shares of Common Stock ("Restricted Stock"). Under the Incentive Stock Plan
the total number of shares available for such grants is 1,000,000 shares of
Common Stock. The total number of Options and shares of Restricted Stock that
may be granted to any participant in any one year under the Incentive Stock
Plan may not exceed 100,000 shares. In the event of certain extraordinary
events, the Board of Directors or the Compensation Committee may make such
adjustments in the aggregate number and kind of shares reserved for issuance,
the number of shares and kind covered by outstanding awards and the exercise
prices specified therein as may be determined to be appropriate.
Participants in the Incentive Stock Plan, who may be officers or employees
of the Company, its subsidiaries or designated affiliates, will be selected by
the Compensation Committee. Directors of the Company are also eligible to
participate, but, in the case of directors who are not also employees,
participation will be only pursuant to automatic grants under a specified
formula set forth in the Incentive Stock Plan.
The Options can either be "incentive stock options" ("ISOs") that are
intended to satisfy the requirements of the Internal Revenue Code of 1986, as
amended (the "Code") or "non-qualified stock options" ("NQOs") that are not
intended to satisfy such requirements. Employees of the Operating Partnership
and directors who are not also employees shall be eligible only for the grant
of NQOs.
The Compensation Committee may amend any award theretofore granted,
prospectively or retroactively. No such amendment may impair the rights of any
participant under any award without the consent of such participant (except
for any amendment made to cause the plan to qualify for an exemption provided
by Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")).
The exercise price for both an ISO and a NQO will be no less than the fair
market value of the Common Stock on the date on which the Option in respect
thereof is granted. The exercise price is generally payable in cash, by check
or, in certain circumstances, by the surrender, at the fair market value on
the date on which the Option is exercised, of shares of Common Stock. The
vesting provisions, if any, of the Options and Restricted Stock will be
determined by the Compensation Committee. Upon a Change of Control (as defined
below) of the Company, the Board of Directors may take any action with respect
to unexercised Options or forfeitable Restricted Stock, including waiving any
vesting or forfeiture conditions, as the Board of Directors deems appropriate
under the circumstances to protect the interests of the Company in maintaining
the integrity of such grants under the Incentive Stock Plan. A "Change of
Control" means (i) the acquisition of the power to direct, or cause the
direction of, the management and policies of the Company by a person (not
previously possessing such power), acting alone or in conjunction with others,
whether through the ownership of Common Stock, by contract or otherwise, or
(ii) the acquisition, directly or indirectly, of the power to vote more than
20% of the outstanding Common Stock by any person or by two or more persons
acting together except an acquisition from the Company or by the Company, the
Company's management or a Company sponsored employee benefit plan, where (x)
the term "person" means natural person, corporation, partnership, joint
venture, trust, government or instrumentality of a government, and (y)
customary agreements with or between underwriters and selling group
5
<PAGE>
members with respect to a bona fide public or private offering of Common Stock
or other equity securities of the Company shall be disregarded for purposes of
this definition. An Option also may include a right to surrender the Option
for cash or for cash and Common Stock subject to the terms and conditions set
forth in the Incentive Stock Plan. The right of any participant to exercise an
Option may not be transferred in any way other than by will or the laws of
descent and distribution.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The Compensation Committee
is comprised of two independent, non-employee directors who are responsible
for developing, administering and monitoring the compensation policies
applicable to the Company's executive officers, and for administering the
Company's Incentive Stock Plan, under which grants may be made to executive
officers and other key employees. The Compensation Committee considers
recommendations from management, along with other factors, and reviews
independently prepared industry compensation information.
Executive Compensation Philosophy.
The Compensation Committee believes that a fundamental goal of the Company's
executive compensation program should be to foster a high performance culture
that motivates and retains high-performing executives, to promote teamwork, to
align compensation with business objectives and sustained performance and to
provide incentives to create value for the Company's shareholders. The
Compensation Committee believes that a significant portion of total executive
officer compensation should consist of variable, performance based components,
such as bonuses and Restricted Stock and Option awards, which can increase or
decrease to reflect changes in Company or individual performance.
The Compensation Committee uses as its primary market benchmark the
practices of a peer group of equity REITs similar in business focus, market
capitalization and/or performance to the Company. It believes that equity
REITs offer the most likely competition for executive talent. Comparative
compensation information for the peer group of equity REITs used by the
Compensation Committee was obtained from the SNL Executive Compensation Review
1996--REITs. The Compensation Committee believes that a peer group comparison
enables the Company to determine a fair level of compensation for executive
officers, while assuring shareholders that executive pay levels are
reasonable.
Components of Compensation.
Base Salary. Base salary levels are determined based on the executive's
performance, tenure and industry experience, as well as the Company's
financial performance. Base salaries are reviewed annually by the Compensation
Committee. Annual salary increases for executive officers take into account
(i) the actual and budgeted future financial performance of the Company, (ii)
individual performance, (iii) the functions performed by the executive
officer, and (iv) changes in the compensation practices of the peer group. The
weight given such factors by the Compensation Committee may vary from
individual to individual.
Short-Term Incentive Awards. During 1996, the Company had a discretionary
bonus program based on each executive officer's performance and the Company's
overall financial and operational performance. Some of the specific factors
taken into account in determining bonus awards for 1996 included (i) the
Company's growth in Funds from Operations (defined below) per share and
achievement of budgeted financial results; (ii) the total return to an
investor in the Company's Common Stock, assuming a holding period for the full
year and the reinvestment of dividends; (iii) the success of the Company's
acquisition, development and southeast market expansion activities; (iv) the
successful execution of the Company's debt and equity capital raising
activities;
6
<PAGE>
and (v) the achievement of other subjective individual performance goals.
Consideration of these factors is subjective, and no specific weightings were
applied. "Funds from operations" is defined by NAREIT as net income (computed
in accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and joint ventures
will be calculated to reflect funds from operations on the same basis. The
Compensation Committee believes that the Company's funds from operations is
one of the appropriate measures of its performance.
A. Ray Weeks, Jr., Thomas D. Senkbeil, Forrest W. Robinson, John W. Nelley,
Jr., Harold S. Lichtin and David P. Stockert are eligible under the terms of
their respective Employment Agreements to receive aggregate annual bonus
payments of up to 75% of their aggregate base salaries; however, the actual
amounts of such payments are based primarily upon the factors discussed above.
Long-Term Incentive Awards. The Company adopted the Incentive Stock Plan to
attract and provide incentives to officers, key employees and directors. The
Incentive Stock Plan provides for grants of Options or grants of Restricted
Stock. The Incentive Stock Plan is designed to motivate executive officers and
key employees to maximize shareholder value.
The Compensation Committee grants awards under the Incentive Stock Plan
based on a number of factors, including (i) the investment performance of the
Company's equity securities, (ii) the executive officer's or key employee's
position in the Company, (iii) his or her performance and responsibilities,
(iv) equity participation levels of comparable executives and key employees at
other companies in the compensation peer group and (v) individual contribution
to the Company's financial performance. However, the Incentive Stock Plan does
not provide any formulaic method for weighting these factors, and a decision
to grant an award is based primarily upon the Compensation Committee's
evaluation of the past as well as the future anticipated performance and
responsibilities of the individual in question.
Options to purchase 283,000 shares of Common Stock were granted to certain
officers and employees of the Company during 1996, including 90,500 options
granted to the Named Executive Officers. In February 1997, the Compensation
Committee approved an award of 34,331 shares of Restricted Stock to certain
officers and employees of the Company, including 18,955 shares granted to the
Named Executive Officers, for Company and individual performance in 1996, and
as an inducement to motivate and retain such officers in future years. An
important factor considered by the Compensation Committee in making the
Restricted Stock grants was the officers' and employees' roles in successfully
completing the Company's acquisitions in Nashville, Tennessee and the Raleigh-
Durham-Chapel Hill area of North Carolina. The shares of Restricted Stock
granted by the Compensation Committee in February 1997 will vest ratably on
each of the next four anniversaries of the grant date (each a "Vesting Date"),
provided that the annual growth in the Company's per share funds from
operations calculated for the two consecutive fiscal years prior to a Vesting
Date is at least 10%. Shares that are not vested on each Vesting Date will be
forfeited. Recipients of the Restricted Stock awards may vote such shares and
are entitled to dividends on the same basis as unrestricted shares of Common
Stock until such shares are forfeited, if applicable.
Chief Executive Officer Compensation.
The compensation of A. Ray Weeks, Jr. during 1996 was determined on the same
basis as discussed above for the Company's other executive officers. For 1996,
Mr. Weeks' compensation consisted of base salary and deferred bonus, and
Option awards under the Incentive Stock Plan, each as described under "--
Summary Compensation Table" above. In addition, the Compensation Committee has
approved an increase in Mr. Weeks' base salary to $275,000 in 1997. Mr. Weeks'
compensation for 1996 and salary increase for 1997 were based on
7
<PAGE>
his contribution to the Company's growth and financial performance during the
year, and the success of its southeast expansion strategy, and took into
account the compensation practices relating to the Chief Executive Officers of
the compensation peer group. Mr. Weeks' base salary, bonus and award levels
under the Incentive Stock Plan will continue to be reviewed annually by the
Compensation Committee.
Policy With Respect to the $1 Million Deduction Limit.
The Omnibus Budget Reconciliation Act of 1993 placed certain limits on the
deductibility of non-performance based executive compensation for a company's
employees, unless certain requirements are met.
Currently, the Compensation Committee does not believe that there is a risk
of losing deductions under this law. However, in the future, the Compensation
Committee intends to consider carefully any plan or compensation arrangement
that might result in the disallowance of compensation deductions. It will use
its best judgment, taking all factors into account, including the materiality
of any deductions that may be lost versus the broader interests of the Company
to be served by paying adequate compensation for services rendered, before
adopting any plan or compensation arrangement.
Compensation Committee
Barrington H. Branch, Chairman
George D. Busbee
The foregoing report should not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act or under the Exchange Act (together with the
Securities Act, the "Acts"), except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following stock price performance graph compares the Company's
performance to the S&P 500 and the index of equity REITs prepared by NAREIT.
Equity REITs are defined by NAREIT as those which derive more than 75% of
their income from equity investments in real estate assets. The NAREIT equity
REIT index includes all tax qualified REITs listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market. The
performance graph assumes $100 invested in the Company's Common Stock as of
August 18, 1994, the date on which the Company's Common Stock began trading on
the New York Stock Exchange, and assumes the investment of the same amount as
of August 31, 1994, in the S&P 500 and the NAREIT equity REIT index. The
difference in the initial start dates is due to the fact that the Company's
Common Stock did not start to trade publicly until August 18, 1994 and only
month-end data is available for the NAREIT equity REIT index. The Company
believes that the net effect of this difference in start dates does not have a
material effect on the performance graph. Total return includes reinvestment
of dividends. Stock price performance for the Company for the period from
August 18, 1994, through December 31, 1996, is not necessarily indicative of
future results.
WEEKS CORPORATION
COMPARATIVE PERFORMANCE SINCE THE COMPANY'S INITIAL PUBLIC OFFERING
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG WEEKS, S&P 500 INDEX AND NAREIT INDEX
<CAPTION>
Measurement period S&P 500 NAREIT
(Fiscal Year Covered) Weeks Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
08/94 $ 100 $ 100 $ 100
FYE 12/31/94 $ 109 $ 98 $ 98
FYE 12/31/95 $ 134 $ 134 $ 113
FYE 12/31/96 $ 189 $ 165 $ 153
</TABLE>
The foregoing stock price performance graph shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Acts except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
9
<PAGE>
EXHIBIT 99.3
CERTAIN TRANSACTIONS
GENERAL
In connection with the Company's August 1994 initial public offering (the
"IPO"), the Company incurred $38 million in new mortgage indebtedness with The
Prudential Insurance Company of America. A. Ray Weeks, Jr., certain members of
the family of A. Ray Weeks, Jr. (the "Weeks Family"), Forrest W. Robinson,
Louis Robinson (Forrest W. Robinson's father), a trust of which A. Ray Weeks,
Jr. is the trustee and of which A. Ray Weeks, Jr. and the Weeks Family are
beneficiaries, and a trust of which A. Ray Weeks, Jr., Harry T. Weeks (A. Ray
Weeks, Jr.'s uncle) and Martha Patterson Weeks (A. Ray Weeks, Jr.'s mother)
are trustees and of which A. Ray Weeks, Jr. and the Weeks Family are
beneficiaries, severally, but not jointly, guaranteed collection, not payment,
of a portion of this indebtedness. At December 31, 1996, such guarantees
extended to, in the aggregate, the first $20.7 million due on such
indebtedness.
TRANSACTIONS WITH EXECUTIVE OFFICERS
Helen Ballard Weeks, the wife of A. Ray Weeks, Jr., is a principal of
Ballard Designs, a national home furnishings mail order firm that leases an
aggregate of 97,639 square feet of space in two of the Operating Partnership's
properties. The aggregate base rent and tenant reimbursable expenses paid by
Ballard Designs with respect to such leases in 1996 was $385,415.
TRANSACTIONS WITH DIRECTORS
George D. Busbee, a director of the Company, is of counsel to the law firm
of King & Spalding. Mr. Busbee, formerly a partner of such firm, retired from
King & Spalding as of December 31, 1993. King & Spalding provided certain
legal services to the Company in 1996, including services in connection with
offerings of Common Stock by the Company and certain significant acquisitions
made by the Company.
On November 1, 1996, the Company and its affiliates acquired certain assets
and properties of NWI Warehouse Group, L.P. and its affiliates (collectively,
"NWI"). Mr. Nelley and Albert W. Buckley, Jr., a Managing Director of the
Company, are significant beneficial owners of NWI. Upon completion of the
acquisition, Mr. Nelley and Mr. Buckley were each employed as Managing
Directors of the Company, and Mr. Nelley was appointed as a director of the
Company. Mr. Nelley and Mr. Buckley each have entered into an Employment
Agreement and a Noncompetition Agreement with the Company. See "Executive
Compensation--Noncompetition and Employment Agreements." As part of the NWI
transaction, the Company has agreed, subject to updating its due diligence
procedures and completion of the applicable properties, to acquire 6
development properties over a 17 month period and to acquire approximately 150
net usable acres of undeveloped land over a period of up to 6 years. Pursuant
to such agreements, on November 27, 1996, the Company acquired approximately
31 net usable acres from NWI in exchange for consideration in the amount of
162,232 Units with a value of $4,055,800, including reimbursement for certain
infrastructure costs, and on December 30, 1996, the Company acquired
approximately 14 net usable acres from NWI in exchange for 89,277 Units with a
value of $2,231,925, including reimbursement for certain infrastructure costs.
Through their ownership in NWI, Mr. Nelley and Mr. Buckley beneficially
acquired 34,983 Units and 34,327 Units, respectively, on November 27, 1996,
and 19,251 Units and 18,891 Units, respectively, on December 30, 1996, in
connection with these acquisitions. The acquisition consideration for the
additional undeveloped land was determined through arms length negotiations
between the Company and NWI in connection with the initial closing of the NWI
transaction on November 1, 1996. The acquisition consideration for the
additional properties was also determined through arms length negotiations
between the Company and NWI in connection with the initial closing of the NWI
transaction on November 1, 1996, and generally will be based upon the
projected net operating income to be generated by the properties for the
twelve months following stabilization.
<PAGE>
On December 31, 1996, the Company and its affiliates acquired certain assets
and properties of Lichtin Properties, Inc. and its affiliates (collectively,
"Lichtin Properties"). Mr. Lichtin was a significant beneficial owner of
Lichtin Properties prior to the acquisition. Upon completion of the
acquisition, Mr. Lichtin was employed as a Managing Director of the Company
and was also appointed as a director of the Company. Mr. Lichtin has entered
into an Employment Agreement and a Noncompetition Agreement with the Company.
See "Executive Compensation--Noncompetition and Employment Agreements." As
part of the Lichtin Properties transaction, the Company has agreed, subject to
updating its due diligence procedures and completion of the applicable
properties, to acquire 15 completed and under development properties over an
approximately 18 month period and to acquire approximately 64 net usable acres
of undeveloped land over the next 4 years. The acquisition consideration for
such additional properties and undeveloped land was determined through arm's
length negotiations between the Company and Lichtin Properties in connection
with the initial closing of the Lichtin Properties transaction on December 31,
1996. The acquisition consideration for the additional properties generally
will be based upon an evaluation of the properties' physical conditions, lease
characteristics, operating expense rates and future capital improvement needs,
with respect to completed properties, and the projected net operating income
to be generated by such properties for the twelve months following
stabilization, with respect to properties under development. As part of the
Lichtin Properties transaction, the Operating Partnership assumed certain
mortgage indebtedness encumbering the properties acquired from Lichtin
Properties. Pursuant to pre-existing agreements that survived the closing of
the Lichtin Properties transaction, Mr. Lichtin has guaranteed payment of a
portion of the principal of such mortgage indebtedness. At December 31, 1996,
the maximum potential aggregate liability under such guarantees was
approximately $3.5 million. In addition such pre-existing agreements provide
that Mr. Lichtin will indemnify the holders of such mortgage indebtedness
against losses resulting from the Operating Partnership's failure to discharge
its mortgage covenants relating to environmental matters and to fund tenant
improvements and lease commission costs. The Operating Partnership has agreed
to indemnify Mr. Lichtin for any losses incurred by him as a consequence of
circumstances arising after the closing date of the Lichtin Properties
transaction under such guarantees and indemnities.
TRANSACTIONS WITH THE WEEKS FAMILY
The Company currently purchases and will continue to purchase plantings for
its landscaping business from Bold Springs Nursery, a company 100% owned by
John H. Barbour and his wife Patricia L. Weeks, a sister of A. Ray Weeks, Jr.
The aggregate amount paid by the Company to Bold Springs Nursery during 1996
was $149,015.
2
