<PAGE>
As filed with the Securities and Exchange Commission on September 15, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT
NO.1 TO
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
------------------- ------------------------------
Not applicable Not applicable
Securities Registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Units of Limited Partnership Interest ("Units")
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<PAGE>
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 (41 Properties excluding 7 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's In-Service Properties (as hereinafter
defined) portfolio was comprised of 216 Properties totalling approximately 14.8
million square feet at June 30, 1997. 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 No. of Property
1990-1996/(a)/ 1990-1995/(b)/ Properties/(c)/ Square Ft./(c)/
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<S> <C> <C> <C> <C>
Atlanta, GA 26.4% 15.3% 191 13,585,608
Nashville, TN 23.0% 10.6% 25 2,522,916
Research Triangle, NC 21.2% 15.2% 32 2,428,156
Orlando, FL 22.4% 12.2% 13 850,830
Spartanburg, SC 12.2% 6.1% 3 385,600
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U.S. Total 10.7% 5.4% 264 19,773,110
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</TABLE>
(a) Source: Bureau of Labor Statistics.
(b) Source: U.S. Census Bureau.
(c) Includes properties under agreement to acquire in Nashville, Tennessee and
the Research Triangle area of North Carolina as well as properties under
development or in lease-up.
Metropolitan Atlanta, Georgia. The 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 and well-
developed transportation infrastructure. The area attracts many of its employees
from nearby universities, including the Georgia Institute of Technology, the
University of Georgia, Emory University and Georgia State University.
According to Jamison Research, Inc. ("Jamison"), 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
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 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.
The Operating Partnership did not pay to have the foregoing market data prepared
by Jamison, CB Commercial/Torto Wheaton and Karnes Research Company. However,
the Operating Partnership pays to subscribe for certain market data prepared by
those entities.
BUSINESS GROWTH STRATEGY
Development
As one of the largest industrial real estate companies in metropolitan Atlanta
and the Southeastern United States based on square footage owned and managed,
the Operating Partnership 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 hereinafter defined), 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
As of July 31, 1997, the Operating Partnership had agreed to acquire, subject to
the completion of due diligence procedures and other closing considerations, 9
industrial and suburban office Properties totaling approximately 939,000 square
feet and with a total cost, including acquisition-related costs and expenses, of
approximately $57.7 million. The following table contains information regarding
the Operating Partnership's Properties under agreement to acquire as of July 31,
1997.
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Acquisitions -- Under Agreement to Acquire
<TABLE>
<CAPTION>
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Number Total Estimated Estimated
Market/ Property of Square Acquisition Percent Leased Cost
Property or Business Park Type(1) Buildings Feet Date(2) or Pre-Leased(3) (000s)(4) Major Lessees(5)
- ------------------------- ------- --------- ------ ----------- ----------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nashville--NWI Acquisition
Airpark Business Center
Bldg. XII(6)(7) B 1 156,830 3Q97 66% $ 7,610 Molecular Systems Labs,
Harman Int'l Industries
Bldg. X(6)(7) D 1 106,122 1Q98 5 6,439 N/A
Aspen Grove Business Center
Bldg. II(6)(7) D 1 106,358 3Q97 22 5,366 BellSouth Mobility
Bldg. V(6)(7) D 1 160,848 1Q98 34 6,829 N/A
Research Triangle --
Lichtin Acquisition
1100 Perimeter Park
West(8) S 1 84,950 Aug-97(9) 100 5,200 Coram Healthcare
2000 Perimeter Park
West(7)(8) O 1 55,636 4Q97 85 6,000 BE&K Engineering
2600 Perimeter Park
Dr.(7)(8) S 1 70,848 4Q97 100 5,560 Apria Healthcare
101 Innovation Ave.(7)(8) D 1 97,200 4Q97 100 3,540 Time Warner
Entertainment
Regency
Forest(7)(8) O 1 100,000 2Q98 66 11,120 Sprint
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9 938,792 59% $57,664
= ======= == =======
</TABLE>
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(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) Each of the major lessees is a party to a lease agreement with the
the respective current owner and, except as otherwise provided therein,
each lessee is obligated to continue its lease with the Operating
Partnership following the acquisition until the expiration of such lease
in accordance with its respective terms.
(6) Cost includes a portion of total estimated transaction costs of the NWI
acquisition of approximately $1.6 million.
(7) Property under development or in lease-up.
(8) Cost includes a portion of total estimated transaction costs of the Lichtin
acquisition of approximately $1.2 million.
(9) Effective August 1, 1997, the Operating Partnership acquired this Property.
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.
-12-
<PAGE>
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 7 industrial
buildings totaling approximately 427,000 square feet from Lichtin for aggregate
acquisition consideration of approximately $26.3 million, comprised of the
issuance of Units valued at approximately $2.2 million, the assumption of
mortgage indebtedness of approximately $20.3 million and the assumption and
immediate repayment of certain indebtedness of approximately $3.8 million.
In addition, the Operating Partnership has agreed to acquire from Lichtin one
completed property totaling approximately 85,000 square feet and four properties
totaling approximately 324,000 square feet currently under development. The
Operating Partnership expects to complete the acquisition of the properties
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 occurred 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 properties under development to be acquired in future
phases of the Lichtin acquisition is expected to be approximately $31.4 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
-14-
<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 Aug-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 Sep-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 72 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 Oct-97 Jun-98 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 Feb-98 Feb-99 0 4,879 N/A
Celebration
Technology Parkway S 52,777 Feb-98 Feb-99 0 3,257 N/A
Technology Park
Nashville
736 Melrose Avenue D 103,400 Dec-97 Dec-98 0 5,454 N/A
Four-Forty Business Center
3300 Briley Park Blvd. South B 194,750 Dec-97 Dec-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 Jan-99 100 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
-18-
<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 six months
ended June 30, 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 six months ended June 30, 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 June 30, 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) Jun. 30, 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 $ 687,909 $ 592,841 $ 319,763 $ 162,709
Net investment in real estate 636,878 551,372 289,874 139,750
Total assets 688,195 591,849 320,441 176,674
Total indebtedness 270,846 296,975 147,305 71,961
Other limited partners' capital interests
at redemption value 158,057 149,133 64,508 56,723
Partners' capital (owners' deficit) 241,509 132,808 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.
--------------------------------------------------------------------------------------
Six Months Six Months
Ended Ended Year Ended Year Ended Aug. 24 to
Jun. 30, 1997 Jun. 30, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
- --------------- ----------------- ----------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Operating Data
Rental and reimbursement
revenues $40,695 $23,950 $52,679 $34,015 $8,877
Total revenues 41,338 24,508 53,883 35,271 9,312
Operating, maintenance and
real estate tax expenses 8,089 4,840 10,750 6,896 1,714
Depreciation and amortization 11,044 6,000 13,474 8,177 2,098
Interest expense 9,554 4,955 11,779 8,106 1,958
Amortization of deferred
financing costs 452 421 864 691 252
General and administrative
expenses 2,419 1,414 3,039 1,848 472
Income (loss) before
extraordinary loss 11,756 7,619 15,809 11,107 3,734
Net income (loss) 11,756 7,619 15,809 11,107 1,067
Per Unit Data
Income before
extraordinary loss $ 0.59 $ 0.56 $ 1.11 $ 1.03 $ 0.36
Net income 0.59 0.56 1.11 1.03 0.10
Distributions 0.86 0.80 1.63/(2)/ 1.525/(3)/ 0.525/(4)/
Other Data
Cash flow provided by (used in)
Operating activities $23,416 $13,132 $28,031 $18,678 $ 3,954
Investing activities (84,383) (34,016) (120,323) (117,127) (38,148)
Financing activities 60,831 20,009 91,570 93,097 40,352
Funds from operations\(5)\ 22,525 13,639 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 six months ended June 30, 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 six months ended June 30, 1997 to
the six months ended June 30, 1996
Operating information relating to the Operating Partnership's properties for the
six months ended June 30, 1997 and 1996, respectively, is summarized below
(in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Six Months Six Months
Ended Ended %
June 30, 1997 June 30, 1996 Change
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental revenues $36,279 $21,943 65.3%
Tenant reimbursements 4,416 2,007 120.0%
- ----------------------------------------------------------------------------------------------------
Property operating revenues 40,695 23,950 69.9%
- ----------------------------------------------------------------------------------------------------
Operating and maintenance expenses 4,622 2,687 72.0%
Real estate taxes 3,467 2,153 61.0%
Depreciation and amortization 11,044 6,000 84.1%
- ----------------------------------------------------------------------------------------------------
Property operating expenses 19,133 10,840 76.5%
- ----------------------------------------------------------------------------------------------------
Property operating revenues less
property operating expenses $21,562 $13,110 64.5%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Period to period comparisons of property operating revenues and expenses for the
six months ended June 30, 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 $16,745,000 or 69.9% between periods. Of this increase, $13,424,000,
$2,734,000 and $587,000 were attributable to acquisition, development and core
properties, respectively. The increases relating to acquisition and development
properties were due to the acquisition of 69 properties (46 in 1996 and 23 in
1997) totaling approximately 4,328,000 square feet and the stabilization of 14
development properties (8 in 1996 and 6 in 1997) and two property expansions
(one each year) totaling approximately 1,693,000 square
-24-
<PAGE>
feet. Property operating expenses increased $8,293,000 or 76.5% between periods
due primarily to the growth in the property portfolio resulting from the
acquisition and development properties discussed above. For the comparable six
month periods ended June 30, 1997 and 1996, operating results of the core
properties, representing 134 properties totaling approximately 8,861,000 square
feet, are summarized below (in thousands):
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended %
June 30, 1997 June 30, 1996 Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental revenues $21,496 $21,153 1.6%
Tenant reimbursements 2,226 1,982 12.3%
- ---------------------------------------------------------------------------------------------------
Property operating revenues 23,722 23,135 2.5%
- ---------------------------------------------------------------------------------------------------
Operating and maintenance
expenses 2,776 2,654 4.6%
Real estate taxes 2,211 2,090 5.8%
Depreciation and amortization 6,122 5,842 4.8%
- ---------------------------------------------------------------------------------------------------
Property operating expenses 11,109 10,586 4.9%
- ---------------------------------------------------------------------------------------------------
Property operating revenues
less property operating
expenses $12,613 $12,549 0.5%
- ---------------------------------------------------------------------------------------------------
Average occupancy 95.4% 96.1%
- ---------------------------------------------------------------------------------------------------
</TABLE>
Property operating revenues from core properties increased 2.5% despite the
impact of lost property operating revenues of approximately $166,000 resulting
from the sale of a 96,000 square foot building in April 1997 and a slight
decrease in overall average occupancy. Adjusted for these factors between
periods, property operating revenues from core properties increased
approximately 3.6%. This increase was due primarily to rental rate increases
between periods. Property operating expenses increased 4.9% due primarily to
increased utilities, repairs and maintenance and real estate tax expenses in
1997. Property operating revenues less property operating expenses from core
properties increased 2.3%, exclusive of depreciation and amortization expense,
and increased approximately 3.2% after adjusting for the building sale discussed
herein and the decrease in weighted average occupancy between periods.
Interest expense increased by $4,599,000 or 92.8% from $4,955,000 for the six
months ended June 30, 1996, to $9,554,000 for the six months ended June 30,
1997, as a result of increased mortgage interest of $3,522,000 due to mortgage
debt assumed in conjunction with certain of the Operating Partnership's 1996
and 1997 property acquisitions, and increased Credit Facility interest of
$1,077,000 in the first half of 1997. Interest expense of $9,554,000 in the
first half of 1997 consisted of mortgage interest of $7,707,000 and Credit
Facility interest of $1,847,000.
Amortization of deferred financing costs increased $31,000 or 7.4% from $421,000
for the six months ended June 30, 1996, to $452,000 for the six months ended
June 30, 1997, due primarily to the amortization of deferred financing costs
associated with increasing the availability under and restructuring the Credit
Facility in 1996.
-25-
<PAGE>
Operating Partnership general and administrative expenses increased by
$1,005,000 or 71.1% from $1,414,000 for the six months ended June 30, 1996, to
$2,419,000 for the six months ended June 30, 1997, due primarily to increased
personnel and related costs associated with the Operating Partnership's
Southeast expansion. The majority of the increase relates to the additional
general and administrative expenses associated with the Operating Partnership's
Nashville, Tennessee and Raleigh, North Carolina operations, both of which were
acquired in the fourth quarter of 1996, and to a lesser extent expenses related
to the establishment of an office in Orlando, Florida, which also occurred in
the fourth quarter of 1996. As a percentage of total revenue, general and
administrative expenses increased from 5.8 % in the first half of 1996 to 5.9%
in the first half of 1997. General and administrative expenses of the Operating
Partnership when combined with the general and administrative expenses of the
Subsidiaries increased $1,283,000 or 59.0% from $2,175,000 in 1996 to $3,458,000
in 1997 for the same reasons discussed above having to do with the Operating
Partnership's Southeast expansion. As a percentage of the combined revenues of
the Operating Partnership and the Subsidiaries, the combined general and
administrative expenses of the Operating Partnership and the Subsidiaries
decreased from 7.8 % in the first half of 1996 to 7.5% in the first half of
1997.
Interest income increased $345,000 or 174.2% from $198,000 for the six months
ended June 30, 1996 to $543,000 for the six months ended June 30, 1997, due
primarily to increased real estate loan balances between periods. Real estate
loans consist primarily of loans to affiliated entities and other parties for
the development of industrial buildings. The Operating Partnership generally
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 $681,000 or 125.4% from
$543,000 for the six months ended June 30, 1996 to $1,224,000 for the six
months ended June 30, 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 Initial Offering 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 $13,132,000 for the six months ended June 30, 1996, to $23,416,000 for the
six months ended June 30, 1997, due primarily to the growth in the Operating
Partnership's operating income resulting from 14 development properties (8 in
1996 and 6 in 1997) and two property expansions (one each year) stabilized and
from 69 buildings acquired (46 in 1996 and 23 in 1997).
Net cash used in investing activities increased from $34,016,000 for the six
months ended June 30, 1996, to $84,383,000 for the six months ended June 30,
1997, due primarily to higher property development and land and building
acquisition volumes in the first six months of 1997 compared to 1996.
Net cash provided by financing activities increased from $20,009,000 for the six
months ended June 30, 1996, to $60,831,000 for the six months ended June 30,
1997. This net increase between periods reflects primarily the net proceeds of
approximately $107 million from an equity offering in 1997, net of debt
retirements, used to finance the Operating Partnership's property portfolio
growth.
-32-
<PAGE>
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 June 30, 1997, the Company had available capacity under the
Credit Facility of approximately $69.3 million.
In May and June 1997, the Company completed a public offering of 3,584,200
shares of common stock, including shares issued to cover over-allotments, and
received net proceeds of approximately $107 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. 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 and
approximately $32.1 million to acquire additional properties during the second
quarter of 1997.
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 $270.9 million at June 30, 1997, including
borrowings under the Credit Facility of $101.8 million and mortgage notes
payable of $169.1 million. Of the $169.1 million of mortgage indebtedness,
$163.3 million is fixed rate and $5.8 million is variable rate. The weighted
average interest rate on the Operating Partnership's fixed rate mortgage debt
was 8.05% and on its variable rate mortgage debt was 4.49% at June 30, 1997. The
weighted average interest rate under the Credit Facility at June 30, 1997,
(excluding the effect of the interest rate swap agreements described below) was
7.15%. The Operating Partnership has in place interest rate swap agreements to
fix the Operating Partnership's interest costs on $50.0 million of the Operating
Partnership's Credit Facility borrowings. The weighted average effective
interest rate under the fixed swap arrangements is approximately 8.0%. 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 June 30,
1997, would increase or decrease by approximately $600,000 on an annualized
basis.
-34-
<PAGE>
Based on the outstanding balance of mortgage notes payable at June 30, 1997,
the weighted average interest rate on the mortgage notes with a final maturity
in each of the next five years were 8.8% in 1998, 7.40% in 1999, 8.5% in 2000
and 7.0% in 2001. None of the mortgage notes mature in 1997.
At June 30, 1997, the Operating Partnership's mortgage debt on its consolidated
properties was $169.1 million. All mortgage debt at the Operating Partnership's
unconsolidated subsidiaries was retired or assumed by third parties during the
second quarter. Including Credit Facility borrowings of $101.8 million for the
Operating Partnership and $3.9 million for the Subsidiaries, the total debt
obligations of the Operating Partnership and the Subsidiaries were $274.8
million or 28% of total market capitalization (defined as total debt plus the
market equity value of the Units as calculated herein). At June 30, 1997 (based
on the closing price of the common stock of the Company of $31.25 on June 30,
1997, the last trading day of the quarter) the 22,740,624 Units outstanding
would have a total market value of $710.6 million.
-35-
<PAGE>
Current Development Activity
The Operating Partnership's current development activity as of August 1, 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 4Q97 2Q98/(6)/
736 Melrose Ave. (Nashville, TN) 103,400 5,454,000 4Q97 4Q98
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 1Q99
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
5400 McCrimmon Pkwy. (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 3Q97
2850 Eastside Pkwy. 86,000 2,938,000 4Q97 4Q97
Paramount Pkwy. 99,684 9,164,000 2Q98 2Q99
- -------------------------------------------------------------------------------------------------------------------
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 eight buildings under development from NWI and Lichtin.
The estimated aggregate acquisition consideration is estimated to total
approximately $73.6 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 $324,000 and $191,000 for the six months
ended June 30, 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 six months ended June 30, 1997, funds from operations increased by
$8,886,000 or 65.2% to $22,525,000 as compared to funds from operations of
$13,639,000 for the six months ended June 30, 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>
Six Months Six Months Year Year
Ended Ended Ended Ended
Jun. 30, 1997 Jun. 30, 1996 Dec. 31, 1996 Dec. 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 11,756 $ 7,619 $ 15,809 $ 11,107
Depreciation and amortization 11,044 6,000 13,474 8,177
Depreciation and amortization-Subsidiaries 10 20 40 23
Gain on sale of operating real estate asset (209) -- -- --
Gain on sale of operating real estate asset-
Subsidiaries (76) -- -- --
- -------------------------------------------------------------------------------------------------------------------
Funds from operations $ 22,525 $ 13,639 $ 29,323 $ 19,307
- -------------------------------------------------------------------------------------------------------------------
Weighted average Units outstanding 19,791 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 six months ended June 30, 1997 and for the years ended December 31, 1996 and
1995 (in thousands):
<TABLE>
<CAPTION>
Six months Year Year
Ended Ended Ended
Jun. 30, 1997 Dec. 31, 1996 Dec. 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Building acquisitions/(1)/ $ 49,758 $ 201,660 $ 110,141
Development and land acquisition activity/(2)(3)/ 47,827 70,476 42,290
Non-revenue-producing building improvements 362 543 331
Revenue-producing building improvements/(4)/ - - 3,520
Tenant improvement and leasing costs on
second-generation leases/(5)(6)/ 2,094 2,995 2,597
Tenant improvement expenditures to be
reimbursed by tenants - - 545
- ------------------------------------------------------------------------------------------------------------------
$ 100,041 $ 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 $382,000 in
the six months ended June 30, 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
$1,346,000, $1,287,000 and $1,292,000 in the six months ended June 30, 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 $1,332,000 in the six months ended June 30, 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 $1,067,000, $1,331,000
and $1,159,000 in the six months ended June 30, 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
Operating Partnership because of the relatively low inflation rate.
Substantially all tenant leases do, however, contain provisions designed to
protect the Operating Partnership from the impact of inflation. Most of the
Operating Partnership's leases require the tenants to pay a share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Operating Partnership's exposure to increases in costs and
operating expenses resulting from inflation. In addition, many of the leases are
for terms of less than seven years which may enable the Operating Partnership to
replace existing leases with new leases at higher base rentals if rents under
the existing leases are below the then-existing market rate. However, there can
be no assurance that the Operating Partnership would be able to replace existing
leases with new leases at higher base rentals.
Item 3. Properties
As of June 30, 1997, the Operating Partnership 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 Operating
Partnership'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 Operating Partnership also owns or holds joint venture interest in
approximately 822 acres of land held for development, has agreements to acquire
an 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 Operating Partnership'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 Operating Partnership 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 Operating
Partnership 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 Operating Partnership 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 Operating
Partnership'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 Operating Partnership's success has been the development of
properties within business parks where the Operating Partnership 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
Operating Partnership must obtain certain approvals from its joint venture
partners.
Each of the Operating Partnership'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 Operating Partnership's Properties and land held for
development are located in business parks. The Operating Partnership'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 Operating
Partnership 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 Operating Partnership'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 Operating
Partnership 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>
Operating
Partnership 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 Operating Partnership's interests in its undeveloped land held in joint
ventures range from 0% to 30%.
(2) The Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership's development agreements, the
Operating Partnership 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 Operating Partnership's
marketing agreements generally provide for the Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership's
properties were leased to 695 tenants including local, regional, national and
international companies. The Operating Partnership's 30 largest tenants
(measured by annualized base rent for leases in place in stabilized properties
and in properties under development or in lease-up where tenants were paying
rent at June 30, 1997) occupy a total of approximately 4.4 million square feet
and represent 28.1% of the annualized base rent as shown in the table below.
<TABLE>
<CAPTION>
30 Largest Tenants Measured By Annualized Base Rent
- ------------------------------------------------------------------------------------------------------------------------------
% or Total
Square Number Annualized Annualized
Rank Tenant Feet of Leases Base Rent/(1)/ Base Rent/(1)/ State
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Scientific Atlanta/(2)/ 600,413 11 $ 2,668,779 3.1% GA
2 GTE Mobilnet Service Corporation 126,124 3 1,320.976 1.6% GA,NC
3 Radian International LLC 90,159 2 1,170,275 1.4% NC
4 DeVry Inc. 64,981 1 959,120 1.1% GA
5 Honeywell, Inc. 70,016 3 947,995 1.1% GA
6 The Athlete's Foot Group, Inc. 162,651 1 897,155 1.1% GA
7 Fisher Scientific Company 223,219 1 875,019 1.0% GA
8 Tridom Corporation 120,989 5 820,952 1.0% GA
9 National Data Corporation 50,283 4 786,777 0.9% GA
10 AT&T Corp. 67,551 5 752,082 0.9% GA,NC,TN
11 PPD Pharmaco, Inc. 72,416 4 747,368 0.9% NC
12 Best Buy Stores, L.P. 222,643 1 703,552 0.8% GA
13 United Healthcare 72,991 2 699,856 0.8% GA,SC
14 Intelligent Systems Corporation 137,100 1 685,500 0.8% GA
15 Sally Foster, Inc. 197,200 2 673,237 0.8% GA
16 Vanstar Corporation 86,880 4 666,746 0.8% GA
17 Yokohama Tire Corporation 252,092 1 665,383 0.8% GA
18 Auto-Lok, Inc. 222,900 2 658,879 0.8% GA
19 360 Degree Communications 42,557 6 652,556 0.8% NC
20 Ahlstrom Recovery, Inc. 62,893 2 649,493 0.8% GA
21 Astronet Corporation 34,138 1 648,622 0.8% GA
22 Siemens Energy & Automation, Inc. 240,000 3 637,200 0.7% GA
23 The Bombay Company, Inc. 253,890 2 631,344 0.7% GA
24 United Parcel Service, Inc. 128,275 3 594,201 0.7% GA,FL,TN
25 Appleton Papers, Inc. 210,600 1 593,892 0.7% GA
26 Southern Multimedia
Communications, Inc. 117,647 3 581,172 0.7% GA
27 Tekelec, Inc. 68,236 2 579,322 0.7% NC
28 Intersolv, Inc. 39,280 1 571,701 0.6% NC
29 Deutz Corporation 137,061 1 561,950 0.6% GA
30 Reckitt & Colman, Inc. 256,000 1 547,840 0.6% GA
- ------------------------------------------------------------------------------------------------------------------------------
4,431,185 79 $ 23,948,944 28.1%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized cash base rent net of rental concessions, if any, based on
leases in place for stabilized properties and in properties under
development or in lease-up where tenants were paying rent as of
June 30, 1997.
(2) Scientific Atlanta announced plans during the second quarter of 1996 to
relocate over a period of several years certain facilities to a new, owned
corporate campus. Based on scheduled lease termination dates and assuming
the spaces were not re-leased, there would be less than a $0.01 per share
impact on the Company's funds from operations and net income in 1997.
The following table sets forth certain information regarding the Operating
Partnership's Properties as of June 30,1997.
Weeks Corporation Properties
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Total
Property Square Number of Office
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
METROPOLITAN ATLANTA, GEORGIA
NORTHEAST/I-85 SUBMARKET
Gwinnett Park
1 4258 Communications Dr. D 57,000 3.0 0 0.0% 14%
2 4261 Communications Dr. D 56,600 3.3 1 100.0% 33%
3 4291 Communications Dr. D 31,500 1.8 1 100.0% 29%
4 1826 Doan Way D 57,200 3.9 2 100.0% 36%
5 1857 Doan Way D 16,000 5.0 1 100.0% 13%
6 1650 International Blvd. D 52,461 3.8 1 100.0% 33%
7 4245 International Blvd. D 249,200 10.6 1 100.0% 10%
8 4250 International Blvd. D 47,030 5.0 2 100.0% 80%
9 4295 International Blvd. D 49,896 3.2 5 100.0% 31%
10 4320 International Blvd. D 32,000 2.4 1 100.0% 20%
11 4350 International Blvd. D 64,152 4.3 5 100.0% 38%
12 4355 International Blvd. D 60,760 4.5 4 100.0% 59%
13 4405-A International Blvd. S 50,000 4.3 1 100.0% 94%
14 4405-B International Blvd. S 61,176 4.3 9 94.9% 88%
15 4405-C International Blvd. S 10,644 4.3 5 100.0% 98%
16 1828 Meca Way D 63,000 3.9 1 100.0% 32%
17 1858 Meca Way D 58,600 3.4 1 100.0% 49%
18 4317 Park Dr. D 47,243 4.5 2 100.0% 56%
19 4357 Park Dr. D 65,800 4.9 6 100.0% 31%
20 4366 Park Dr. O 9,471 1.0 2 51.1% 100%
21 4386 Park Dr. D 67,118 3.7 1 100.0% 30%
22 4436 Park Dr. D 66,232 3.9 1 100.0% 12%
23 4437 Park Dr. D 73,456 4.4 4 43.1% 16%
24 4467 Park Dr. D 66,203 4.7 4 100.0% 16%
25 4476 Park Dr. D 42,200 2.9 1 100.0% 17%
26 4487 Park Dr. D 89,204 4.7 7 100.0% 49%
27 1835 Shackleford Ct. O 56,576 3.3 7 41.8% 100%
28 1854 Shackleford Ct. O 94,677 6.3 3 98.4% 100%
29 4274 Shackleford Rd. D 80,822 6.2 3 80.2% 27%
30 4275 Shackleford Rd. O 32,280 2.9 5 74.2% 100%
31 4344 Shackleford Rd. D 52,924 3.9 1 100.0% 11%
32 4355 Shackleford Rd. D 137,100 8.1 1 100.0% 60%
33 4364 Shackleford Rd. D 31,040 2.1 1 100.0% 16%
34 4366 Shackleford Rd. D 56,709 3.3 2 100.0% 23%
35 4388 Shackleford Rd. D 89,612 5.4 1 100.0% 17%
36 4400 Shackleford Rd. D 39,004 2.3 0 0.0% 15%
37 4444 Shackleford Rd. D 85,200 5.2 1 100.0% 18%
--------------------------------------------------------------------------------
2,300,090 154.6 94 91.1% 39%
--------------------------------------------------------------------------------
<CAPTION>
Ceiling
Height Year Year Company
(Feet) Dev./(4)/ Acq. Ownership Major Tenants
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
METROPOLITAN ATLANTA, GEORGIA
NORTHEAST/I-85 SUBMARKET
Gwinnett Park
1 4258 Communications Dr. 22 1981 100.0%
2 4261 Communications Dr. 22 1981 1994 100.0% Scientific Atlanta, Inc.
3 4291 Communications Dr. 20 1981 100.0% Scientific Atlanta
4 1826 Doan Way 20 1984 100.0% Komatsu Dresser Company
5 1857 Doan Way 18 1970 100.0% Aerial Platform
6 1650 International Blvd. 22 1984 100.0% Scientific Atlanta
7 4245 International Blvd. 24 1985 100.0% Scientific Atlanta
8 4250 International Blvd. 20 1986 100.0% Bailey Controls Corp.
9 4295 International Blvd. 20 1984 100.0% Tomen America, Inc.
10 4320 International Blvd. 20 1984 100.0% Isolyser Company, Inc.
11 4350 International Blvd. 20 1982 100.0% Novoste Corporation
12 4355 International Blvd. 14 1983 1994 100.0% Classic Computer System
13 4405-A International Blvd. 14 1984 100.0% SAAB Cars USA, Inc.
14 4405-B International Blvd. 14 1984 100.0% Bluebird Moving & Storage
15 4405-C International Blvd. 14 1984 100.0% Fleur de Lys Int'l Corporation
16 1828 Meca Way 22 1975 100.0% Innotrac Corporation
17 1858 Meca Way 22 1975 100.0% Silgan Plastics Corporation
18 4317 Park Dr. 20 1985 100.0% Scientific Atlanta, Inc.
19 4357 Park Dr. 20 1979 100.0% Scientific Atlanta, Inc.
20 4366 Park Dr. 9 1981 100.0% Dhabliwata Enterprises, Inc.
21 4386 Park Dr. 22 1973 100.0% Scientific Atlanta, Inc.
22 4436 Park Dr. 18 1968 100.0% Atlanta Cap Mfg. Inc.
23 4437 Park Dr. 20 1978 100.0% Euromarket Designs, Inc.
24 4467 Park Dr. 20 1978 100.0% Your Extra Attic.
25 4476 Park Dr. 22 1977 100.0% American Combustion, Inc.
26 4487 Park Dr. 20 1978 100.0% Weeks Corporation
27 1835 Shackleford Ct. 9 1990 100.0% Medic Computer System, Inc.
28 1854 Shackleford Ct. 9 1985 100.0% National Data Corporation
29 4274 Shackleford Rd. 24 1974 100.0% McBurney Corporation
30 4275 Shackleford Rd. 9 1985 100.0% Trust Joist MacMillan
31 4344 Shackleford Rd. 20 1975 1994 100.0% Scientific Atlanta, Inc.
32 4355 Shackleford Rd. 20 1972 100.0% Intelligent Systems Corp.
33 4364 Shackleford Rd. 22 1973 100.0% Letts Industries, Inc.
34 4366 Shackleford Rd. 22 1981 100.0% The Software Factory, Inc.
35 4388 Shackleford Rd. 22 1981 100.0% First Image Mgmt. Company
36 4400 Shackleford Rd. 20 1981 100.0%
37 4444 Shackleford Rd. 22 1979 100.0% Hussman Corporation
------------------------------------------
------------------------------------------
</TABLE>
-43-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Property Square Number of Office
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Horizon
38 90 Horizon Dr. D 13,400 2.0 1 100.0% 42%
39 225 Horizon Dr. B 96,000 5.1 3 100.0% 15%
40 300 Horizon Dr. B 256,000 16.0 1 100.0% 4%
41 2775 Horizon Ridge Ct. B 223,219 3.2 1 100.0% 5%
42 2780 Horizon Ridge Ct. B 222,643 12.7 1 100.0% 7%
43 2800 Vista Ridge Dr. B 252,092 17.3 1 100.0% 7%
-----------------------------------------------------------------------------------------------
1,063,354 56.3 8 100.0% 7%
-----------------------------------------------------------------------------------------------
Northwoods
44 2915 Courtyards Circle D 40,058 3.8 4 97.8% 45%
45 2925 Courtyards Dr. D 71,763 4.8 1 100.0% 25%
46 2975 Courtyards Circle D 27,342 2.1 1 100.0% 75%
47 2995 Courtyards Circle D 18,542 1.6 1 100.0% 65%
48 2725 Northwoods Pkwy. D 76,686 4.4 1 100.0% 14%
49 2755 Northwoods Pkwy. D 48,270 2.6 1 100.0% 21%
50 2775 Northwoods Pkwy. D 32,192 3.2 1 100.0% 72%
51 2850 Northwoods Pkwy. D 102,128 8.0 1 100.0% 19%
52 3040 Northwoods Pkwy. D 50,480 3.0 1 100.0% 22%
53 3044 Northwoods Circle D 24,367 2.4 1 100.0% 32%
54 3055 Northwoods Pkwy. D 31,946 2.1 1 100.0% 33%
55 3075 Northwoods Pkwy. S 41,420 3.7 1 100.0% 69%
56 3080 Northwoods Circle O 30,768 2.3 2 100.0% 100%
57 3100 Northwoods Pkwy. S 39,728 3.9 3 100.0% 73%
58 3155 Northwoods Pkwy. S 40,530 3.3 1 100.0% 35%
59 3175 Northwoods Pkwy. S 33,405 2.5 2 100.0% 100%
--------------------------------------------------------------------------------------------
709,625 63.6 23 99.9% 42%
--------------------------------------------------------------------------------------------
Gwinnett Pavilion
60 1480 Beaver Ruin Rd. R 14,992 2.1 6 100.0% 0%
61 1505 Pavilion Place D 78,400 5.1 2 100.0% 93%
62 3883 Steve Reynolds Blvd. D 137,061 7.0 1 100.0% 26%
63 3890 Steve Reynolds Blvd. D 48,800 4.7 1 100.0% 80%
64 3905 Steve Reynolds Blvd. D 64,800 4.6 3 100.0% 17%
65 3950 Steve Reynolds Blvd. B 80,000 5.7 1 100.0% 11%
66 4020 Steve Reynolds Blvd. D 44,260 3.1 1 100.0% 36%
67 4025 Steve Reynolds Blvd. D 70,400 4.5 5 100.0% 38%
--------------------------------------------------------------------------------------------
538,713 36.9 20 100.0% 39%
--------------------------------------------------------------------------------------------
Berkeley Lake Distribution Center
68 3290 Summit Ridge Pkwy. B 100,800 5.7 1 100.0% 4%
69 3130 North Berkeley Lake Rd. B 240,000 16.4 1 100.0% 3%
--------------------------------------------------------------------------------------------
340,800 22.1 2 100.0% 3%
--------------------------------------------------------------------------------------------
Peachtree Corners Distribution
70 5401 Buford Hwy. B 74,360 4.2 3 100.0% 12%
71 5403 Buford Hwy. B 108,140 6.0 5 100.0% 12%
72 5405 Buford Hwy. B 61,982 3.1 6 100.0% 10%
73 5409 Buford Hwy. B 111,873 5.2 4 100.0% 7%
--------------------------------------------------------------------------------------------
356,355 18.5 18 100.0% 10%
--------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Ceiling
Height Year Year Company
Market/Business Park/Property (Feet) Dev./(4)/ Acq. Ownership Major Tenants
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Horizon
38 90 Horizon Dr. 20 1992 100.0% ITT Flygt Corporation
39 225 Horizon Dr. 24 1990 100.0% Publix Super Market, Inc.
40 300 Horizon Dr. 30 1994 100.0% Reckitt & Colman, Inc.
41 2775 Horizon Ridge Ct. 26 1996 100.0% Fisher Scientific Company
42 2780 Horizon Ridge Ct. 30 1997 100.0% Best Buy Stores, LP
43 2800 Vista Ridge Dr. 26 1995 100.0% Yokohama Tile Corporation
------------------------------------------------
------------------------------------------------
Northwoods
44 2915 Courtyards Circle 18 1986 1995 100.0% Picker International, Inc.
45 2925 Courtyards Dr. 22 1986 1995 100.0% Southern Multimedia Comm.
46 2975 Courtyards Circle 20 1986 1995 100.0% Southern Multimedia Comm.
47 2995 Courtyards Circle 18 1986 1995 100.0% Southern Multimedia Comm.
48 2725 Northwoods Pkwy. 22 1984 1996 100.0% The Rugby Group, Inc.
49 2755 Northwoods Pkwy. 20 1986 1996 100.0% Advance Control Systems, Inc.
50 2775 Northwoods Pkwy. 20 1986 1996 100.0% Mediaone, Inc.
51 2850 Northwoods Pkwy. 22 1988 1995 100.0% BOC Health Care, Inc.
52 3040 Northwoods Pkwy. 22 1984 1996 100.0% Alcoa Brite Products, Inc.
53 3044 Northwoods Circle 22 1984 1995 100.0% Giben, Inc.
54 3055 Northwoods Pkwy. 18 1985 1996 100.0% Brightstar Services, Inc.
55 3075 Northwoods Pkwy. 14 1985 1996 100.0% Murex/Atherogenics
56 3080 Northwoods Circle 9 1952 1996 100.0% ISI Systems, Inc.
57 3100 Northwoods Pkwy. 14 1985 1996 100.0% Kraft General Foods, Inc.
58 3155 Northwoods Pkwy. 14 1985 1996 100.0% Schumberger Industries, Inc.
59 3175 Northwoods Pkwy. 14 1985 1996 100.0% Sony Electronics, Inc.
----------------------------------------------
----------------------------------------------
Gwinnett Pavilion
60 1480 Beaver Ruin Rd. 9 1989 100.0% EDS Nanston, Inc.
61 1505 Pavilion Place 20 1988 100.0% ADP, Inc.
62 3883 Steve Reynolds Blvd. 22 1990 100.0% Deutz Corporation
63 3890 Steve Reynolds Blvd. 20 1991 100.0% Hitachi Sales Corporation
64 3905 Steve Reynolds Blvd. 25 1995 100.0% Backstreet, Inc.
65 3950 Steve Reynolds Blvd. 20 1992 100.0% Hitachi Power Tools USA, Ltd.
66 4020 Steve Reynolds Blvd. 22 1997 100.0% Pike Nurseries, Inc.
67 4025 Steve Reynolds Blvd. 22 1994 100.0% Trans-Dyn Control, Inc.
----------------------------------------------
----------------------------------------------
Berkeley Lake Distribution Center
68 3290 Summit Ridge Pkwy. 28 1997 100.0% Central Garden & Pet
69 3130 North Berkeley Lake Rd. 26 1996 100.0% Slemens Energy & Automation
----------------------------------------------
----------------------------------------------
Peachtree Corners Distribution
70 5401 Buford Hwy. 24 1987 1995 100.0% Wayne Dalton Corporation
71 5403 Buford Hwy. 24 1987 1995 100.0% Access TCA, Inc.
72 5405 Buford Hwy. 24 1989 1995 100.0% Del City Wire Company, Inc.
73 5409 Buford Hwy. 24 1989 1995 100.0% Access TCA, Inc.
----------------------------------------------
----------------------------------------------
</TABLE>
-44-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Property Square Number of Office
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pinebrook
74 2625 Pinemeadow Ct. B 139,540 9.6 3 100.0% 21%
75 2660 Pinemeadow Ct. B 104,000 6.0 2 100.0% 1%
76 2450 Satellite Blvd. B 102,862 6.2 1 100.0% 17%
--------------------------------------------------------------------------------------------
346,402 21.8 6 100.0% 14%
--------------------------------------------------------------------------------------------
Northbrook
77 1000 Northbrook Pkwy. B 131,660 6.4 1 100.0% 9%
78 675 Old Peachtree Rd. B 176,820 10.1 1 100.0% 3%
--------------------------------------------------------------------------------------------
308,480 18.5 2 100.0% 6%
--------------------------------------------------------------------------------------------
Druid Chase
79 2801 Buford Hwy. O 115,712 5.8 33 96.5% 100%
80 1190 West Druid Hills Dr. O 79,868 5.6 2 93.9% 100%
81 2071 North Druid Hills Rd. R 4,115 0.6 1 100.0% 0%
82 6 West Druid Hills Dr. O 81,503 2.8 7 96.7% 100%
---------------------------------------------------------------------------------------------
281,198 14.8 43 95.9% 99%
---------------------------------------------------------------------------------------------
Meadowbrook
83 2450 Meadowbrook Pkwy. D 68,400 4.3 1 100.0% 17%
84 2475 Meadowbrook Pkwy. D 59,086 6.1 5 100.0% 80%
85 2500 Meadowbrook Pkwy. D 68,800 4.5 3 100.0% 13%
86 2505 Meadowbrook Pkwy. D 53,481 3.4 1 100.0% 14%
---------------------------------------------------------------------------------------------
249,767 18.2 10 100.0% 30%
---------------------------------------------------------------------------------------------
Park Creek
87 2825 Breckinridge Blvd. S 45,559 6.8 7 100.0% 100%
88 2875 Breckinridge Blvd. S 57,918 6.8 1 100.0% 11%
---------------------------------------------------------------------------------------------
103,477 15.6 8 100.0% 50%
---------------------------------------------------------------------------------------------
River Green
89 3450 River Green Ct. D 33,600 4.2 1 100.0% 80%
90 4800 River Green Pkwy. D 25,538 2.4 1 100.0% 80%
---------------------------------------------------------------------------------------------
59,138 6.5 2 100.0% 80%
---------------------------------------------------------------------------------------------
Other Northeast/I-85
91 1705 Belle Meade Ct. D 31,624 4.3 3 100.0% 43%
92 4125 Buford Hwy. B 210,000 10.9 3 100.0% 3%
93 6525-27 Jimmy Carter Blvd. D 92,735 5.6 4 100.0% 54%
94 3171 McCall Dr. D 16,075 1.4 1 100.0% 13%
95 7250 McGinnis Ferry Rd. D 70,600 6.2 1 100.0% 19%
96 5300 Peachtree Industrial Blvd. R 29,870 2.2 1 100.0% 0%
97 4280 Northeast Expressway B 56,530 4.1 1 100.0% 10%
---------------------------------------------------------------------------------------------
507,434 34.7 14 100.0% 18%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL NORTHEAST/I-85 7,164,833 472.0 250 97.0% 30%
---------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Ceiling
Height Year Year Company
Market/Business Park/Property (Feet) Dev./(4)/ Acq. Ownership Major Tenants
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pinebrook
74 2625 Pinemeadow Ct. 24 1994 100.0% Borden, Inc.
75 2660 Pinemeadow Ct. 24 1996 100.0% Atlanta Precision Molding
76 2450 Satellite Blvd. 30 1994 1994 100.0% Fuji Photo Film, USA, Inc.
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Northbrook
77 1000 Northbrook Pkwy. 25 1986 100.0% PPG Industries, Inc.
78 675 Old Peachtree Rd. 25 1988 100.0% Komatsu America Corporation
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Druid Chase
79 2801 Buford Hwy. 9 1977 1989 100.0% Erdas, Inc.
80 1190 West Druid Hills Dr. 9 1980 1989 100.0% Honeywell, Inc.
81 2071 North Druid Hills Rd. 12 1968 100.0% George Tselios
82 6 West Druid Hills Dr. 9 1968 1989 100.0% World Travel Partners, LP
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Meadowbrook
83 2450 Meadowbrook Pkwy. 20 1989 1994 100.0% Rusch, Inc.
84 2475 Meadowbrook Pkwy. 20 1986 100.0% ConAgra, Inc.
85 2500 Meadowbrook Pkwy. 20 1987 100.0% Atlantic Coast Fire Protection
86 2505 Meadowbrook Pkwy. 20 1990 100.0% Innotrac Corporation
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Park Creek
87 2825 Breckinridge Blvd. 14 1986 1996 100.0% Whirpool Corporation
88 2875 Breckinridge Blvd. 14 1986 1996 100.0% GTE Mobilnet Service Corp.
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
River Green
89 3450 River Green Ct. 18 1989 1995 100.0% ABB Industrial System, Inc.
90 4800 River Green Pkwy. 18 1989 1995 100.0% Xpoint Corporation
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Other Northeast/I-85
91 1705 Belle Meade Ct. 18 1988 1994 100.0% Abatement Technologies, Inc.
92 4125 Buford Hwy. 28 1995 100.0% Southland Bonded
93 6525-27 Jimmy Carter Blvd. 22 1983 1996 100.0% Computer Communications
94 3171 McCall Dr. 22 1967 1994 100.0% Atlanta Newspapers/Cox Ent.
95 7250 McGinnis Ferry Rd. 48 1996 100.0% GE Hitachi-HVB Inc.
96 5300 Peachtree Industrial Blvd. 25 1966 1994 100.0% Office Depot
97 4280 Northeast Expressway 30 1962 1994 100.0% Gimborn US, Inc.
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
TOTAL NORTHEAST/I-85
----------------------------------------------------------------------------------------
</TABLE>
-45-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Number of Office Height
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/ (Feet)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTH CENTRAL SUBMARKET
Northmeadow
98 11835 Alpharetta Hwy. O 15,000 2.3 1 100.0% 100% 9
99 1100 Northmeadow Pkwy. S 50,891 6.9 4 100.0% 80% 16
100 1125 Northmeadow Pkwy. D 67,104 5.8 5 100.0% 49% 22
101 1150 Northmeadow Pkwy. D 52,050 4.0 3 100.0% 65% 22
102 1175 Northmeadow Pkwy. D 71,264 4.1 3 100.0% 58% 22
103 1225 Northmeadow Pkwy. S 37,520 3.9 3 100.0% 79% 14
104 1250 Northmeadow Pkwy. D 52,224 4.2 3 100.0% 90% 18
105 1325 Northmeadow Pkwy. S 70,700 5.9 9 100.0% 77% 14
106 1350 Northmeadow Pkwy. D 64,500 6.4 3 100.0% 89% 22
---------------------------------------------------------------------------------------
481,253 43.4 34 100.0% 73%
---------------------------------------------------------------------------------------
Hembree Crest
107 11415 Old Roswell Rd. B 80,000 8.1 1 100.0% 6% 24
108 11800 Wills Rd. D 42,691 3.8 3 100.0% 32% 22
109 11810 Wills Rd. D 59,334 3.7 1 100.0% 23% 22
110 11820 Wills Rd. D 103,222 6.1 1 100.0% 14% 24
---------------------------------------------------------------------------------------
285,247 21.6 6 100.0% 16%
---------------------------------------------------------------------------------------
Mansell Commons
111 993 Mansell Rd. D 21,600 1.7 2 100.0% 64% 20
112 995 Mansell Rd. D 16,800 1.0 4 100.0% 42% 20
113 997 Mansell Rd. D 14,400 0.9 2 100.0% 27% 20
114 999 Mansell Rd. D 19,200 1.3 3 100.0% 12% 20
115 1003 Mansell Rd. D 20,800 1.7 3 100.0% 80% 20
116 1005 Mansell Rd. D 16,800 0.9 4 100.0% 55% 20
117 1007 Mansell Rd. D 37,450 2.1 1 100.0% 41% 20
118 1009 Mansell Rd. S 38,082 3.3 4 100.0% 59% 14
119 1011 Mansell Rd. S 38,630 3.2 3 100.0% 89% 14
--------------------------------------------------------------------------------------
223,762 16.0 26 100.0% 56%
--------------------------------------------------------------------------------------
Hembree Park
120 105 Hembree Park Dr. D 45,490 3.6 6 77.8% 39% 20
121 150 Hembree Park Dr. D 44,343 5.0 1 100.0% 100% 24
122 200 Hembree Park Dr. D 43,559 2.0 3 100.0% 38% 24
123 645 Hembree Pkwy. D 43,956 3.1 7 100.0% 76% 24
124 655 Hembree Pkwy. D 43,956 3.1 2 100.0% 73% 24
--------------------------------------------------------------------------------------
221,304 16.8 19 95.4% 65%
--------------------------------------------------------------------------------------
Other North Central Properties
125 10745 Westside Pkwy. O 58,093 5.0 1 100.0% 100% 9
--------------------------------------------------------------------------------------
58,093 5.0 1 100.0% 100%
--------------------------------------------------------------------------------------
Northwinds Business Park
126 2555 Northwinds Pkwy. O 64,981 14.5 1 100.0% 100% 9
--------------------------------------------------------------------------------------
64,981 14.5 1 100.0% 100%
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL NORTH CENTRAL 1,334,640 117.2 87 99.2% 59%
--------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year Year Company
Market/Business Park/Property Dev./(4)/ Acq. Ownership Major Tenants
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH CENTRAL SUBMARKET
Northmeadow
98 11835 Alpharetta Hwy. 1994 100.0% Eggleston Children's Hospital
99 1100 Northmeadow Pkwy. 1989 1995 100.0% Computone Corporation
100 1125 Northmeadow Pkwy. 1987 1995 100.0% Skyline South, Inc.
101 1150 Northmeadow Pkwy. 1988 1995 100.0% Benchmark Data Corporation
102 1175 Northmeadow Pkwy. 1987 1995 100.0% Dickens Data Systems, Inc.
103 1225 Northmeadow Pkwy. 1989 1995 100.0% Dow Corning Corporation
104 1250 Northmeadow Pkwy. 1989 1995 100.0% Sunguard Recovery Services
105 1325 Northmeadow Pkwy. 1990 1995 100.0% Campbell Sales Company
106 1350 Northmeadow Pkwy. 1994 100.0% GTE Mobile Communications
-----------------------------------------
-----------------------------------------
Hembree Crest
107 11415 Old Roswell Rd. 1991 1995 100.0% AIG Designs Holding, Inc.
108 11800 Wills Rd. 1987 1995 100.0% Northside Church of Atlanta
109 11810 Wills Rd. 1987 1995 100.0% Intersound, Inc.
110 11820 Wills Rd. 1987 1995 100.0% Coca-Cola USA
-----------------------------------------
-----------------------------------------
Mansell Commons
111 993 Mansell Rd. 1987 1995 100.0% Majure Data, Inc.
112 995 Mansell Rd. 1987 1995 100.0% Roswell Police Department
113 997 Mansell Rd. 1987 1995 100.0% DCM Enterprises, Inc.
114 999 Mansell Rd. 1987 1995 100.0% Apex Supply, Inc.
115 1003 Mansell Rd. 1990 1995 100.0% Checkmate Electronics, Inc.
116 1005 Mansell Rd. 1990 1995 100.0% Miller & Associates
117 1007 Mansell Rd. 1990 1995 100.0% Siemens Power Corporation
118 1009 Mansell Rd. 1986 1995 100.0% Checkmate Electronics, Inc.
119 1011 Mansell Rd. 1984 1995 100.0% Kimberly-Clark Corporation
---------------------------------------
---------------------------------------
Hembree Park
120 105 Hembree Park Dr. 1988 1995 100.0% Vanstar Corporation
121 150 Hembree Park Dr. 1985 1995 100.0% Vanstar Corporation
122 200 Hembree Park Dr. 1985 1995 100.0% Accu-Tech Corporation
123 645 Hembree Pkwy. 1986 1995 100.0% T.I.C. Enterprises, Inc.
124 655 Hembree Pkwy. 1986 1995 100.0% Vanstar Corporation
---------------------------------------
---------------------------------------
Other North Central Properties
125 10745 Westside Pkwy. 1995 100.0% Ahistrom Recovery, Inc.
---------------------------------------
---------------------------------------
Northwinds Business Park
126 2555 Northwinds Pkwy. 1997 100.0% Devry, Inc.
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL NORTH CENTRAL
---------------------------------------
</TABLE>
-46-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Number of Office Height
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/ (Feet)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AIRPORT/SOUTH ATLANTA SUBMARKET
Southridge
127 5099 Southridge Pkwy. (5) D 32,449 5.2 2 60.3% 38% 18
128 5136 Southridge Pkwy. (5) D 47,125 6.8 4 100.0% 27% 22
129 5139 Southridge Pkwy. (5) D 48,767 5.1 1 100.0% 40% 18
130 5149 Southridge Pkwy. (5) D 41,400 3.6 1 100.0% 29% 20
131 5156 Southridge Pkwy. (5) D 76,500 6.0 1 29.4% 8% 22
132 5169 Southridge Pkwy. D 69,600 5.6 3 100.0% 20% 24
----------------------------------------------------------------------------------------
315,841 31.2 12 78.8% 24%
----------------------------------------------------------------------------------------
Sullivan International
133 703 Sullivan Rd. D 19,936 2.0 1 0.0% 32% 18
134 721 Sullivan Rd. D 18,232 3.6 1 100.0% 100% 18
135 727 Sullivan Rd. D 20,000 1.6 3 100.0% 41% 18
136 739 Sullivan Rd. D 20,000 1.8 2 100.0% 38% 18
----------------------------------------------------------------------------------------
78,168 8.9 7 74.5% 52%
----------------------------------------------------------------------------------------
Other Airport/South Atlanta Properties
137 105 Kings Mill Rd. B 153,000 10.0 1 100.0% 2% 24
105 Kings Mill Rd. Expansion #1 B 100,890 4.5 0 100.0% 0% 28
--------------------------------------------------------------------------------------
253,890 14.5 1 100.0% 1%
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL AIRPORT/SOUTH ATLANTA 647,899 54.6 20 86.6% 19%
--------------------------------------------------------------------------------------
NORTHWEST/I-75 SUBMARKET
Townpoint
138 3330 West Town Point Dr. D 88,000 6.8 2 100.0% 10% 24
139 3350 West Town Point Dr. D 76,800 5.2 1 100.0% 19% 24
--------------------------------------------------------------------------------------
164,800 12.0 3 100.0% 14%
--------------------------------------------------------------------------------------
Northwest Business Center
140 1331-37-41-51 Capital Circle S 79,661 7.4 9 100.0% 81% 15
141 1335 Capital Circle S 59,468 4.0 5 100.0% 32% 17
142 2250 Northwest Pkwy D 50,220 0.000 6 100.0% 54% 18
143 2252 Northwest Pkwy S 14,435 0.000 4 100.0% 71% 16
144 2254 Northwest Pkwy S 27,437 0.000 5 73.7% 61% 16
145 2256 Northwest Pkwy S 13,265 0.000 5 86.4% 64% 16
146 2258 Northwest Pkwy S 7,384 0.000 4 100.0% 69% 16
147 2260 Northwest Pkwy S 46,214 0.000 13 100.0% 76% 16
148 2262 Northwest Pkwy S 25,317 0.000 9 100.0% 65% 16
149 2264 Northwest Pkwy D 55,400 0.000 6 100.0% 59% 18
--------------------------------------------------------------------------------------
378,801 11.3 66 97.6% 62%
--------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Year Year Company
Market/Business Park/Property Dev./(4)/ Acq. Ownership Major Tenants
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIRPORT/SOUTH ATLANTA SUBMARKET
Southridge
127 5099 Southridge Pkwy. (5) 1990 1994 100.0% Sky Courier
128 5136 Southridge Pkwy. (5) 1990 1994 100.0% Computer Maintenance Corp.
129 5139 Southridge Pkwy. (5) 1991 1994 100.0% Fritz Companies, Inc.
130 5149 Southridge Pkwy. (5) 1990 1994 100.0% Burlington Air Express, Inc.
131 5156 Southridge Pkwy. (5) 1992 1994 100.0% Kuehne & Nagel, Inc.
132 5169 Southridge Pkwy. 1994 100.0% Fokker Aircraft, USA, Inc.
---------------------------------------
---------------------------------------
Sullivan International
133 703 Sullivan Rd. 1990 1994 100.0% Southern World Int'l, Inc.
134 721 Sullivan Rd. 1991 1994 100.0% Never Late Air Freight, Inc.
135 727 Sullivan Rd. 1988 1994 100.0% Satair Corp, USA
136 739 Sullivan Rd. 1989 1994 100.0% Cargo Brokers International, Inc.
---------------------------------------
---------------------------------------
Other Airport/South Atlanta Properties
137 105 Kings Mill Rd. 1994 100.0% The Bombay Company
105 Kings Mill Rd. Expansion 1995 100.0% The Bombay Company
----------------------------------------
----------------------------------------
----------------------------------------
TOTAL AIRPORT/SOUTH ATLANTA
----------------------------------------
NORTHWEST/I-75 SUBMARKET
Townpoint
138 3330 West Town Point Dr. 1994 100.0% Ballard Designs
139 3350 West Town Point Dr. 1995 100.0% Brakepro, Inc.
----------------------------------------
----------------------------------------
Northwest Business Center
140 1331-37-41-51 Capital Circle 1985 1996 100.0% Blockbuster Music Retail, Inc.
141 1335 Capital Circle 1985 1996 100.0% DRMF
142 2250 Northwest Pkwy 1982 1997 100.0% Dover Elavator Company
143 2252 Northwest Pkwy 1982 1997 100.0% Interior Audio Design, Inc.
144 2254 Northwest Pkwy 1982 1997 100.0% American Home Craftman, Inc.
145 2256 Northwest Pkwy 1982 1997 100.0% Walton Construction, Inc.
146 2258 Northwest Pkwy 1982 1997 100.0% Prism, Inc.
147 2260 Northwest Pkwy 1982 1997 100.0% Computer Business Solutions
148 2262 Northwest Pkwy 1982 1997 100.0% Measurement Systems, Inc.
149 2264 Northwest Pkwy 1982 1997 100.0% Trosby of Georgia
----------------------------------------
----------------------------------------
</TABLE>
-47-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Number of Office Height
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/ (Feet)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Franklin Forest Business Center
150 805 Franklin Court D 40,410 3.1 4 74.6% 46% 18
151 810 Franklin Court S 27,386 2.3 6 84.3% 74% 14
154 825 Franklin Court D 55,259 3.6 4 82.2% 36% 18
155 830 Franklin Court S 14,340 1.2 1 100.0% 83% 14
156 835 Franklin Court D 60,772 3.9 3 100.0% 85% 18
157 840 Franklin Court D 35,908 2.4 1 100.0% 100% 18
152 811 Livingston Court S 20,780 1.8 2 88.9% 94% 14
153 821 Livingston Court S 15,558 1.3 3 100.0% 89% 14
158 841 Livingston Court D 35,908 2.7 1 100.0% 78% 18
---------------------------------------------------------------------------------------
306,321 27.4 25 91.3% 72%
---------------------------------------------------------------------------------------
Other Northwest/ I-75 Properties
159 240 Northpoint Pkwy. B 127,800 7.9 1 100.0% 7% 24
240 Northpoint Pkwy. - Exp. #1 B 95,100 4.9 0 100.0% 2% 24
160 1950 Vaughn Rd. D 162,651 15.5 1 100.0% 29% 30
---------------------------------------------------------------------------------------
385,551 28.2 2 100.0% 15%
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
TOTAL NORTHWEST 1,235,473 74.0 96 97.1% 43%
---------------------------------------------------------------------------------------
STONE MOUNTAIN SUBMARKET
Parknorth
161 675 Parknorth Blvd. D 96,500 7.5 3 83.1% 49% 24
162 696 Parknorth Blvd. D 97,800 6.1 2 100.0% 12% 22
163 715 Parknorth Blvd. D 75,600 4.7 2 80.3% 36% 22
164 735 Parknorth Blvd. D 112,320 8.1 8 86.3% 38% 22
165 736 Parknorth Blvd. S 36,450 4.1 1 100.0% 74% 14
166 780 Parknorth Blvd. D 67,200 3.8 2 100.0% 92% 18
167 808 Parknorth Blvd. S 21,600 1.8 2 40.0% 100% 14
168 815 Parknorth Blvd. S 35,000 2.9 1 100.0% 77% 16
---------------------------------------------------------------------------------------
542,470 39.0 21 89.0% 49%
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
TOTAL STONE MOUNTAIN 542,470 39.0 21 89.0% 49%
---------------------------------------------------------------------------------------
CHATTAHOOCHEE SUBMARKET
Chattahoochee
169 1670 DeFoors Ave. D 48,007 2.3 3 100.0% 26% 14
-----------------------------------------------------------------------------------------
48,007 2.3 3 100.0% 26%
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
TOTAL CHATTAHOOCHEE 48,007 2.3 3 100.0% 26%
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
TOTAL ATLANTA, GEORGIA 10,973,322 752.2 478 96.3% 35%
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Year Year Company
Market/Business Park/Property Dev./(4)/ Acq. Ownership Major Tenants
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin Forest Business Center
150 805 Franklin Court 1983 1997 100.0% Americable
151 810 Franklin Court 1983 1997 100.0% Active Parenting, Inc.
154 825 Franklin Court 1983 1997 100.0% Medaphis Physician Service
155 830 Franklin Court 1983 1997 100.0% American Homepatient
156 835 Franklin Court 1983 1997 100.0% Value Music Concepts, Inc.
157 840 Franklin Court 1983 1997 100.0% Emprise Corporation
152 811 Livingston Court 1983 1997 100.0% Tridom Corporation
153 821 Livingston Court 1983 1997 100.0% Tridom Corporation
158 841 Livingston Court 1983 1997 100.0% Tridom Corporation
---------------------------------------
---------------------------------------
Other Northwest/ I-75 Properties
159 240 Northpoint Pkwy. 1995 100.0% Auto-Lok, Inc.
240 Northpoint Pkwy. - Exp. # 1997 100.0% Auto-Lok, inc.
160 1950 Vaughn Rd. 1992 100.0% Athlete's Foot Group, Inc.
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL NORTHWEST
---------------------------------------
STONE MOUNTAIN SUBMARKET
Parknorth
161 675 Parknorth Blvd. 1990 1995 100.0% Westinghouse Electric Corp.
162 696 Parknorth Blvd. 1986 1995 100.0% Ingram-Micro, Inc.
163 715 Parknorth Blvd. 1989 1995 100.0% Ingram-Micro, Inc.
164 735 Parknorth Blvd. 1989 1995 100.0% Action Expediting, Inc.
165 736 Parknorth Blvd. 1992 1995 100.0% Electronic Data Systems Corp.
166 780 Parknorth Blvd. 1988 1995 100.0% Serologicals, Inc.
167 808 Parknorth Blvd. 1986 1995 100.0% Dekalb Home Care
168 815 Parknorth Blvd. 1989 1995 100.0% American District Telegraph
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL STONE MOUNTAIN
---------------------------------------
CHATTAHOOCHEE SUBMARKET
Chattahoochee
169 1670 DeFoors Ave. 1960 1989 100.0% Ballard Designs
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL CHATTAHOOCHEE
---------------------------------------
---------------------------------------
TOTAL ATLANTA, GEORGIA
---------------------------------------
</TABLE>
-48-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Number of Office Height
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/ (Feet)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NASHVILLE, TENNESSEE
Airpark Business Center
170 400 Airpark Center Dr. S 52,748 3.2 2 62.1% 7% 16
171 500 Airpark Center Dr. D 90,150 5.4 7 100.0% 23% 18
172 600 Airpark Center Dr. D 78,800 4.7 8 99.8% 15% 18
173 700 Airpark Center Dr. D 77,500 4.5 11 100.0% 32% 17
174 800 Airpark Center Dr. D 93,928 6.0 7 90.1% 35% 19
175 900 Airpark Center Dr. D 84,307 6.0 4 91.9% 12% 26
176 1400 Donelson Pike S 102,727 7.7 6 100.0% 84% 16
177 1410 Donelson Pike S 108,300 9.3 17 100.0% 55% 16
178 1413 Donelson Pike B 66,737 6.2 1 100.0% 9% 26
179 1420 Donelson Pike S 90,000 7.2 21 92.9% 52% 16
180 5270 Harding Place B 51,960 4.0 1 100.0% 10% 26
---------------------------------------------------------------------------------------------
897,157 63.2 85 95.2% 34%
---------------------------------------------------------------------------------------------
Brentwood South Business Center
181 7104 Crossroad Blvd. D 103,200 7.0 12 100.0% 26% 18
182 7106 Crossroad Blvd. D 103,200 6.7 11 100.0% 26% 18
183 7108 Crossroad Blvd. D 99,000 6.6 9 100.0% 9% 18
184 119 Seaboard Lane D 90,024 5.4 1 100.0% 7% 23
185 121 Seaboard Lane D 45,480 3.1 5 100.0% 33% 24
186 123 Seaboard Lane D 63,360 4.1 2 100.0% 6% 24
---------------------------------------------------------------------------------------------
504,264 32.9 40 100.0% 17%
---------------------------------------------------------------------------------------------
Aspen Grove Business Center
187 277 Mallory Station Road D 127,285 93.6% 31% 17
---------------------------------------------------------------------------------------------
127,285 93.6% 31%
---------------------------------------------------------------------------------------------
Four-Forty Business Center
188 735 Melrose Ave B 165,902 90.0% 6% 18
---------------------------------------------------------------------------------------------
165,902 90.0% 6%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL NASHVILLE, TENNESSEE 1,694,608 96.0% 26%
---------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
Year Year Company
Market/Business Park/Property Dev./(4)/ Acq. Ownership Major Tenants
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NASHVILLE, TENNESSEE
Airpark Business Center
170 400 Airpark Center Dr. 1989 1996 100.0% TN Boil & Screw
171 500 Airpark Center Dr. 1988 1996 100.0% Accelarated Cartage Inc.
172 600 Airpark Center Dr. 1990 1996 100.0% American & Efird, Inc.
173 700 Airpark Center Dr. 1992 1996 100.0% Piedmont Plastics, Inc.
174 800 Airpark Center Dr. 1995 1996 100.0% Jackson Machine Sales, Inc.
175 900 Airpark Center Dr. 1995 1996 100.0% Northern Telecom, Inc.
176 1400 Donelson Pike 1986 1996 100.0% National Health Laboratories
177 1410 Donelson Pike 1986 1996 100.0% Square D Company
178 1413 Donelson Pike 1996 1996 100.0% Nippon Express USA Inc.
179 1420 Donelson Pike 1985 1996 100.0% MDL Information Systems
180 5270 Harding Place 1996 1996 100.0% Airborne Freight Corp.
----------------------------------
----------------------------------
Brentwood South Business Center
181 7104 Crossroad Blvd. 1987 1996 100.0% Cool Springs Antique Mall
182 7106 Crossroad Blvd. 1987 1996 100.0% Numatics, Inc.
183 7108 Crossroad Blvd. 1989 1996 100.0% Service Merchandise
184 119 Seaboard Lane 1990 1996 100.0% Matrix Exhibits, Inc.
185 121 Seaboard Lane 1990 1996 100.0% Let It Shine Gymnastics
186 123 Seaboard Lane 1990 1996 100.0% Telco, Inc.
----------------------------------
----------------------------------
Aspen Grove Business Center
187 277 Mallory Station Road 1996 100.0%
----------------------------------
----------------------------------
Four-Forty Business Center
188 735 Melrose Ave 1997 100.0%
----------------------------------
----------------------------------
----------------------------------
TOTAL NASHVILLE, TENNESSEE
----------------------------------
</TABLE>
-49-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Number of Office Height
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/ (Feet)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
189 900 Perimeter Park S 47,642 4.0 4 93.5% 100% 16
---------------------------------------------------------------------------------------------
47,642 4.0 4 93.5% 100%
---------------------------------------------------------------------------------------------
Perimeter Park West
190 1400 Perimeter Park West O 44,916 3.3 1 100.0% 100% 12
191 1500 Perimeter Park West O 79,712 5.5 4 100.0% 100% 12
192 1600 Perimeter Park West O 94,897 5.7 2 100.0% 100% 12
193 1800 Perimeter Park West O 54,434 3.9 4 100.0% 100% 12
---------------------------------------------------------------------------------------------
273,959 18.4 11 100.0% 100%
---------------------------------------------------------------------------------------------
Metro Center
194 2800 Perimeter Park Dr. D 135,492 8.2 4 100.0% 87% 24
195 2900 Perimeter Park Dr. D 59,927 4.5 2 100.0% 4% 24
196 3000 Perimeter Park Dr. D 74,922 5.8 3 100.0% 43% 24
---------------------------------------------------------------------------------------------
270,341 18.5 9 100.0% 57%
---------------------------------------------------------------------------------------------
Enterprise Center
197 507 Airport Blvd. S 106,583 7.2 5 100.0% 100% 14
198 5151 McCrimmon Pkwy. S 104,066 7.7 3 100.0% 8% 14
---------------------------------------------------------------------------------------------
210,649 14.8 8 100.0% 54%
---------------------------------------------------------------------------------------------
Woodlake Center
199 1000 Innovation Ave. D 108,000 7.5 1 100.0% 100% 24
---------------------------------------------------------------------------------------------
108,000 7.5 1 100.0% 100%
---------------------------------------------------------------------------------------------
Interchange Plaza
200 5520 Capital Center Dr. O 37,630 3.7 1 100.0% 100% 12
201 801 Jones Franklin Rd. O 69,151 4.1 8 100.0% 21% 12
---------------------------------------------------------------------------------------------
106,781 7.8 9 100.0% 49%
---------------------------------------------------------------------------------------------
Research Triangle Industrial Center
202 409 Airport Blvd - 1 D 85,129 3.1 4 100.0% 12% 20
203 409 Airport Blvd - 2 D 42,712 1.8 2 100.0% 20% 20
204 409 Airport Blvd - 3 D 26,215 6.1 1 100.0% 5% 20
---------------------------------------------------------------------------------------------
154,056 11.1 7 100.0% 13%
---------------------------------------------------------------------------------------------
Other Raleigh Properties
205 6501 Weston Pkwy. O 93,990 100.0% 91% 12
---------------------------------------------------------------------------------------------
93,990 100.0% 91%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL RESEARCH TRIANGLE, NC 1,265,418 99.8% 68%
---------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Year Year Company
Market/Business Park/Property Dev./(4)/ Acq. Ownership Major Tenants
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESEARCH TRIANGLE, NORTH CAROLINA
Perimeter Park
189 900 Perimeter Park 1982 1996 100.0% Radian International LLC
-------------------------------
-------------------------------
Perimeter Park West
190 1400 Perimeter Park West 1991 1996 100.0% PPD Phamaco, Inc.
191 1500 Perimeter Park West 1996 1996 100.0% Intersoiv, Inc.
192 1600 Perimeter Park West 1994 1996 100.0% Radian International LLC
193 1800 Perimeter Park West 1994 1996 100.0% AT&T Corporation
-------------------------------
-------------------------------
Metro Center
194 2800 Perimeter Park Dr. 1992 1996 100.0% Allegiance Healthcare Corp
195 2900 Perimeter Park Dr. 1990 1996 100.0% Burnham Service Corporation
196 3000 Perimeter Park Dr. 1989 1996 100.0% Skyway Freight Systems, Inc.
-------------------------------
-------------------------------
Enterprise Center
197 507 Airport Blvd. 1993 1996 100.0% Davinci Systems Corporation
198 5151 McCrimmon Pkwy. 1995 1996 100.0% Tekelec
-------------------------------
-------------------------------
Woodlake Center
199 1000 Innovation Ave. 1994 1996 100.0% Stream International, Inc.
-------------------------------
-------------------------------
Interchange Plaza
200 5520 Capital Center Dr. 1993 1996 100.0% 380 Degree Communications
201 801 Jones Franklin Rd. 1995 1996 100.0% DSAtlantic
-------------------------------
-------------------------------
Research Triangle Industrial Center
202 409 Airport Blvd - 1 1982 1997 0.0% Caliber Logistics, Inc.
203 409 Airport Blvd - 2 1983 1997 0.0% Waste Industries
204 409 Airport Blvd - 3 1986 1997 0.0% Emco-Wheaton
-------------------------------
-------------------------------
Other Raleigh Properties
205 6501 Weston Pkwy. 1996 1996 100.0%
-------------------------------
-------------------------------
-------------------------------
TOTAL RESEARCH TRIANGLE, NC
-------------------------------
</TABLE>
-50-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Ceiling
Property Square Number of Office Height
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/ (Feet)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
206 2500 Principal Row B 140,015 7.5 1 100.0% 14% 26
---------------------------------------------------------------------------------------------
140,015 7.5 1 100.0% 14%
---------------------------------------------------------------------------------------------
Airport Commerce Center
207 8249 Parkline Blvd. D 33,600 2.4 6 100.0% 33% 20
208 8351 Parkline Blvd. D 33,600 2.4 4 100.0% 65% 20
209 8500 Parkline Blvd. D 102,400 7.9 7 100.0% 31% 23
210 8501 Parkline Blvd. D 27,000 1.9 4 100.0% 22% 20
211 8549 Parkline Blvd. D 27,007 1.7 2 78.3% 47% 20
212 1630 Prime Court D 43,200 3.7 2 100.0% 10% 22
---------------------------------------------------------------------------------------------
266,807 20.1 25 97.8% 33%
---------------------------------------------------------------------------------------------
Technology Park
213 100 Technology Park S 60,711 61.3% 82%
---------------------------------------------------------------------------------------------
60,711 0.0 0 61.3% 82%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL ORLANDO, FLORIDA 467,533 27.6 26 93.7% 33%
---------------------------------------------------------------------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
214 170 Parkway West B 96,000 6.5 3 100.0% 18% 24
215 190 Parkway West D 92,400 8.6 1 100.0% 5% 22
216 285 Parkway East B 139,600 10.2 1 100.0% 7% 24
285 Parkway East Expansion B 57,600 4.7 0 100.0% 0% 24
---------------------------------------------------------------------------------------------
385,600 30.0 5 100.0% 8%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL SPARTANBURG, SOUTH CAROLINA 385,600 30.0 5 100.0% 8%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL PROPERTIES IN-SERVICE 14,786,481 1,026.7 708 96.5% 36%
---------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Year Year Company
Market/Business Park/Property Dev./(4)/ Acq. Ownership Major Tenants
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ORLANDO, FLORIDA
ParkSouth Distribution
206 2500 Principal Row 1996 100.0% General Medical Corporation
-------------------------------
-------------------------------
Airport Commerce Center
207 8249 Parkline Blvd. 1996 100.0% NMC Homecare, Inc.
208 8351 Parkline Blvd. 1994 1995 100.0% Chrysler Corporation
209 8500 Parkline Blvd. 1986 1995 100.0% United Parcel Service, Inc.
210 8501 Parkline Blvd. 1991 1995 100.0% Wirth Florida, Inc.
211 8549 Parkline Blvd. 1992 1995 100.0% American Medical Labs.
212 1630 Prime Court 1996 100.0% Bakery Express of Central Fla.
-------------------------------
-------------------------------
Technology Park
213 100 Technology Park 1986 1997 100.0% Slemens Stromberg-Carlson
-------------------------------
-------------------------------
-------------------------------
TOTAL ORLANDO, FLORIDA
-------------------------------
SPARTANBURG, SOUTH CAROLINA
Hillside
214 170 Parkway West 1995 100.0% W.R. Grace & Co. Com
215 190 Parkway West 1996 100.0% BMG Music
216 285 Parkway East 1994 100.0% Sally Foster, Inc.
285 Parkway East Expansion 1996 100.0% Sally Foster, Inc.
-------------------------------
-------------------------------
-------------------------------
TOTAL SPARTANBURG, SOUTH CAROLINA
-------------------------------
-------------------------------
TOTAL PROPERTIES IN-SERVICE
-------------------------------
</TABLE>
-51-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Total
Property Square Number of Office
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PROPERTIES UNDER DEVELOPMENT
Metropolitan Atlanta, Georgia
217 1750 Beaver Ruin Rd. S 67,600 6.4 2 85.9% 100%
218 250 Horizon Dr. B 267,619 18.1 1 23.1% 5%
219 3280 Summit Ridge Pkwy. B 173,360 10.2 2 83.4% 4%
220 3805 Crestwood Pkwy. O 105,295 7.2 6 87.5% 100%
221 3885 Crestwood Pkwy O 105,295 6.3 0 0.0% 43%
222 2775 Eastside Parkway D 79,588 6.2 1 45.8% 20%
223 2850 Eastside Parkway/(8)/ D 86,000 7.5 1 100.0% 100%
224 5755 Peachtree Industrial Blvd. O 50,000 8.0 1 100.0% 100%
225 5765 Peachtree Industrial Blvd. D 60,000 4.7 1 100.0% 100%
226 5775 Peachtree Industrial Blvd. D 60,000 4.7 1 100.0% 37%
227 250 Hembree Pkwy./(7)/ D 94,500 8.1 5 71.5% 25%
228 1335 Northmeadow Pkwy./(7)/ S 88,783 8.6 6 100.0% 100%
229 11390 Old Roswell Road/(7)/ S 47,600 4.4 0 30.8% 50%
230 2550 Northwinds Pkwy O 149,797 14.2 0 0.0% 100%
231 5025 Derrick Jones Rd./(7)/ D 89,600 8.6 3 100.0% 15%
5149 Southridge Pkwy - Exp #1/(6)/D 46,800 3.7 0 64.1% 19%
232 5195 Southridge Pkwy. D 60,000 5.6 0 0.0% 25%
233 120 Declaration Dr. B 301,200 14.7 1 69.9% 2%
234 3240 Town Point Dr. D 140,400 10.4 3 77.2% 33%
235 2885 Breckinridge Blvd S 82,349 8.9 2 83.8% 0%
236 130 Declaration Drive B 210,000 10.8 0 0.0% 0%
237 3270 Summit Ridge Parkway B 152,000 10.5 0 0.0% 0%
238 660 Hembree Parkway/(7)/ D 94,500 9.2 1 53.0% 0%
------------------------------------------------------------------------------
TOTAL ATLANTA, GEORGIA 2,612,286 195.0 37 52.7%
------------------------------------------------------------------------------
Nashville, Tennessee
239 736 Melrose Ave. D 103,400 8.7 0 0.0% 25%
240 3300 Briley Park Blvd. South B 194,750 18.3 0 0.0% 10%
------------------------------------------------------------------------------
TOTAL NASHVILLE, TENNESSEE 298,150 27.0 0 0.0%
------------------------------------------------------------------------------
Research Triangle, North Carolina
241 1700 Perimeter Park O 81,000 6.0 0 0.0% 100%
242 5400 McCrimmon Pkwy S 146,250 12.3 0 0.0% 50%
243 Paramount Parkway O 99,684 6.0 1 100.0% 0%
------------------------------------------------------------------------------
TOTAL RESERACH TRIANGLE, NC 326,934 24.3 1 30.5%
------------------------------------------------------------------------------
Orlando, Florida
244 2490 Principal Row B 101,800 5.6 2 100.0% 10%
245 2435 Principal Row B 126,818 7.1 1 100.0% 10%
246 Celebration Blvd S 58,702 5.5 0 0.0% 50%
247 1629 Prime Court D 43,200 3.1 4 88.9% 25%
248 Technology Park S 52,777 5.3 0 0.0% 0%
------------------------------------------------------------------------------
TOTAL ORLANDO, FLORIDA 383,297 28.6 7 69.7%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
TOTAL PROPERTIES UNDER DEVELOPMENT 3,620,667 48.2%
------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Ceiling
Height Year Year Company
Market/Business Park/Property (Feet) Dev./(4)/ Acq. Ownership Major Tenants
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROPERTIES UNDER DEVELOPMENT
Metropolitan Atlanta, Georgia
217 1750 Beaver Ruin Rd. 16 1996 100.0% Liberty Mutual Insurance Co.
218 250 Horizon Dr. 30 1997 100.0% Euromarket Designs, Inc.
219 3280 Summit Ridge Pkwy. 28 1997 100.0% Public Storage
220 3805 Crestwood Pkwy. 9 1997 100.0% Astronet
221 3885 Crestwood Pkwy 9 1997 100.0% ---
222 2775 Eastside Parkway 24 1997 100.0% Walman Optical Company
223 2850 Eastside Parkway/(8)/ 24 1997 50.0% Data General Corporation
224 5755 Peachtree Industrial Blvd. 9 1997 100.0% Ikon Office Solutions
225 5765 Peachtree Industrial Blvd. 22 1997 100.0% Ikon Office Solutions
226 5775 Peachtree Industrial Blvd. 22 1997 100.0% Ikon Office Solutions
227 250 Hembree Pkwy./(7)/ 22 1996 0.0% Paul Davis Systems
228 1335 Northmeadow Pkwy./(7)/ 14 1996 0.0% United Parcel Service
229 11390 Old Roswell Road/(7)/ 14 1997 0.0% ---
230 2550 Northwinds Pkwy 9 1997 100.0% ---
231 5025 Derrick Jones Rd./(7)/ 22 1996 0.0% Professional Sales Group, Ltd.
5149 Southridge Pkwy - Exp #1/(6)/ 21 1996 2.5% Burlington Air Express, Inc.
232 5195 Southridge Pkwy. 24 1995 2.5% ---
233 120 Declaration Dr. 28 1997 0.0% Appleton Papers, Inc.
234 3240 Town Point Dr. 24 1996 100.0% Barco, Inc.
235 2885 Breckinridge Blvd 14 1997 100.0% Equifax Services, Inc.
236 130 Declaration Drive 28 1997 100.0% ---
237 3270 Summit Ridge Parkway 28 1997 100.0% ---
238 660 Hembree Parkway/(7)/ 22 1998 100.0% Bell South Entertainment, Inc.
-----------------------------------------------
TOTAL ATLANTA, GEORGIA
-----------------------------------------------
Nashville, Tennessee
239 736 Melrose Ave. 18 1997 100.0% ---
240 3300 Briley Park Blvd. South 26 1997 100.0% ---
-----------------------------------------------
TOTAL NASHVILLE, TENNESSEE
-----------------------------------------------
Research Triangle, North Carolina
241 1700 Perimeter Park 12 1997 100.0% ---
242 5400 McCrimmon Pkwy 14 1997 100.0% ---
243 Paramount Parkway 12 1999 100.0% PPD Pharmaco
-----------------------------------------------
TOTAL RESERACH TRIANGLE, NC
-----------------------------------------------
Orlando, Florida
244 2490 Principal Row 26 1997 100.0% Greenmount Moving & Storage
245 2435 Principal Row 26 1997 100.0% The Smith Wilson Company
246 Celebration Blvd 14 1997 100.0% ---
247 1629 Prime Court 22 1997 100.0% Sabratek Corporation
248 Technology Park 14 1998 100.0% ---
-----------------------------------------------
TOTAL ORLANDO, FLORIDA
-----------------------------------------------
-----------------------------------------------
TOTAL PROPERTIES UNDER DEVELOPMENT
-----------------------------------------------
</TABLE>
-52-
<PAGE>
Weeks Corporation Properties
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Total
Property Square Number of Office
Market/Business Park/Property Type/(1)/ Feet Acreage Tenants Occup./(2)/ Finish/(3)/
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PROPERTIES TO BE ACQUIRED
Nashville, Tennessee
249 Airpark Center X B 106,122 7.9 1 5.0% 75%
250 Airpark Center XII D 156,830 12.1 5 66.1% 25%
251 320 Premier Court D 106,358 4.5 2 13.1% 40%
252 Bldg V D 160,848 10.0 2 34.3% 15%
--------------------------------------------------------------------------------
TOTAL NASHVILLE, TENNESSEE 530,158 34.6 10 33.6%
--------------------------------------------------------------------------------
Research Triangle, North Carolina
253 100 Perimeter Park (9) S 55,664 5.3 1 100.0% 100%
254 200 Perimeter Park (9) S 55,664 6.3 2 100.0% 100%
255 300 Perimeter Park (9) S 55,664 6.3 1 100.0% 100%
256 400 Perimeter Park (9) S 74,088 5.4 1 100.0% 100%
257 500 Perimeter Park (9) S 74,017 5.8 1 100.0% 100%
258 800 Perimeter Park (9) S 55,637 4.5 1 100.0% 100%
259 1000 Perimeter Park (9) S 56,436 4.5 8 91.7% 0%
260 2000 Perimeter Park West O 55,636 4.3 2 69.3% 100%
261 1100 Perimeter Park West (10) S 84,950 9.5 8 100.0% 0%
262 2600 Perimeter Park Dr S 70,848 6.1 1 76.4% 0%
263 101 Innovation Ave D 97,200 7.9 2 100.0% 0%
264 Regency Forest O 100,000 10.5 1 50.0% 100%
--------------------------------------------------------------------------------
TOTAL RESEARCH TRIANGLE, NC 835,804 76.4 29 89.4% 63%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL PROPERTIES TO BE ACQUIRED 1,365,962 111.0 39 67.8% 52%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL PORTFOLIO 19,773,110 1,410.5 791 85.7% 36%
--------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Ceiling
Height Year Year Company
Market/Business Park/Property (Feet) Dev./(4)/ Acq. Ownership Major Tenants
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROPERTIES TO BE ACQUIRED
Nashville, Tennessee
249 Airpark Center X 17 1996 0.0% ---
250 Airpark Center XII 19 1996 0.0% Molecular Systems Labs.
251 320 Premier Court 19 1996 0.0% Bellsouth Comm. Systems, Inc.
252 Bldg V 25 1996 0.0% Corrigan Moving & Storage
------------------------------------------
TOTAL NASHVILLE, TENNESSEE
------------------------------------------
Research Triangle, North Carolina
253 100 Perimeter Park (9) 14 1987 1997 0.0% Northern Telecom
254 200 Perimeter Park (9) 14 1987 1997 0.0% Northern Telecom
255 300 Perimeter Park (9) 14 1986 1997 0.0% Northern Telecom
256 400 Perimeter Park (9) 14 1983 1997 0.0% Northern Telecom
257 500 Perimeter Park (9) 14 1985 1997 0.0% Northern Telecom
258 800 Perimeter Park (9) 14 1984 1997 0.0% Northern Telecom
259 1000 Perimeter Park (9) 14 1982 1997 0.0% Tecnomagnele, Inc.
260 2000 Perimeter Park West 12 1997 0.0% BE&K Engineering of NC
261 1100 Perimeter Park West 14 1990 0.0% Gannymede Software
262 2600 Perimeter Park Dr 14 1997 0.0% Apria Healthcare
263 101 Innovation Ave 24 1997 0.0% Time Warner Entertainment
264 Regency Forest 12 1997 0.0% 360 Communications
------------------------------------------
TOTAL RESEARCH TRIANGLE, NC
------------------------------------------
------------------------------------------
TOTAL PROPERTIES TO BE ACQUIRED
------------------------------------------
------------------------------------------
TOTAL PORTFOLIO
------------------------------------------
</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 Operating Partnership is developer for a joint venture which owns this
Property and in which the Operating Partnership 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 the 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 a joint venture
agreement.
(9) Effective July 1, 1997, the Operating Partnership acquired 100% of this
Property.
(10) Effective August 1, 1997, the Operating Partnership acquired 100% of this
Property.
The leases for the Operating Partnership's industrial Properties have terms
ranging from one to 15 years, with terms for multi-tenant buildings typically
between three and five years and for build-to-suit facilities typically between
seven and ten years. Typically, the tenant in a multi-tenant building pays for
increases in taxes, operating costs and insurance above a base year. In build-
to-suit facilities, the tenant typically pays for all taxes, insurance and
operating costs. Approximately 57% of the Operating Partnership's leases
(representing 65% of the Operating Partnership's aggregate square feet) have
rent increases during the term of the lease. The renewal provisions of the
industrial Properties' leases typically provide for renewal rents to be at
market rates.
The following table sets forth the average Occupancy Rate and annual base rent
per leased square foot of the Properties for the periods specified. Information
regarding the Properties is included from the earliest date the Operating
Partnership (i) developed or acquired the Property, (ii) acquired an interest
in the Property through a joint venture or (iii) began to manage the
Property.
Occupancy Rate and Annual Base Rent
<TABLE>
<CAPTION>
Average
Average Average Average Average Annual Base
Total Leased Occupancy Annual Rent Per
Year/(1)/ Sq. Ft. Sq. Ft. Rate Base Rent Sq. Ft./(2)/
- ---------------------------------------------------------------------------------------------------------------------
(in thousands) (in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
1992.......................... 3,816 3,372 88.4% $ 16,476 $ 4.89
1993.......................... 3,956 3,664 92.6% $ 18,783 $ 5.13
1994.......................... 4,146 3,993 96.3% $ 20,139 $ 5.04
1995.......................... 6,752 6,507 96.4% $ 32,072 $ 4.93
1996.......................... 9,828 9,471 96.4% $ 48,547 $ 5.13
</TABLE>
- -----------------------
/(1)/ Data is an average over the period.
/(2)/ Calculated as average annual base rent divided by the average total leased
square feet during the period.
LEASE EXPIRATIONS
The following table shows scheduled lease expirations for the Operating
Partnership's total Property portfolio based on leases under which tenants were
paying rent in both stabilized and pre-stabilized properties as of June 30,
1997, assuming no exercise of renewal options or termination rights, if any:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NUMBER OF SQUARE ANNUALIZED
LEASES YEAR OF FEET % OF TOTAL BASE RENT/(1)/
EXPIRING EXPIRATION (IN THOUSANDS) SQUARE FEET (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO
<S> <C> <C> <C> <C> <C>
105 1997 1,434 9.5% $ 8,049
170 1998 2,494 16.5% 13,233
165 1999 1,896 12.5% 12,049
138 2000 2,590 17.1% 15,729
91 2001 1,278 8.5% 7,052
67 2002 1,282 8.5% 10,071
18 2003 592 3.9% 5,242
18 2004 1,283 8.5% 6,170
10 2005 523 3.5% 2,606
17 2006 603 4.0% 3,011
6 2007 514 3.4% 2,442
2 2008 223 1.5% 783
2 2011 294 1.9% 1,704
2 2012 109 0.7% 1,497
- --------------------------------------------------------------------------------------------------------------
811 15,115/(2)/ 100.0% $89,638
=== =========== ====== =======
</TABLE>
/(1)/ Annualized base rent represents the annualized monthly base rental at the
time of lease expiration.
/(2)/ The total square footage as of June 30, 1997, is comprised of
approximately 14,271,240 square feet of leases in stabilized Properties,
and approximately 843,724 square feet of leases in Properties under
development or in lease-up where tenants are paying rent as of June 30,
1997.
The following table summarizes by year the Operating Partnership's capitalized
tenant improvement and leasing costs incurred in the renewal or re-leasing of
previously occupied space.
Capitalized Tenant Improvements and Leasing Costs
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
(In thousands, except per square foot information) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial Properties
Re-leasing
Square feet leased 678 317 360
Capitalized tenant improvements and
leasing commissions $1,395 $ 462 $ 171
Capitalized tenant improvements and
leasing commissions per square foot $ 2.06 $ 1.46 $ 0.47
Renewal
Square feet renewed 1,027 814 472
Capitalized tenant improvements and
leasing commissions $1,055 $ 469 $ 191
Capitalized tenant improvements and
leasing commissions per square foot $ 1.03 $ 0.58 $ 0.40
Total
Square feet 1,705 1,131 832
Capitalized tenant improvements and
leasing commissions $2,450 $ 931 $ 362
Capitalized tenant improvements and
leasing commissions per square foot $ 1.44 $ 0.82 $ 0.43
Suburban Office Properties
Re-leasing
Square feet leased 16 111/(1)/ 29
Capitalized tenant improvements and
leasing commissions $ 45 $1,578/(1)/ $ 217
Capitalized tenant improvements and
leasing commissions per square foot $ 2.80 $14.25/(1)/ $ 7.43
Renewal
Square feet renewed 106 47 86
Capitalized tenant improvements and
leasing commissions $ 290 $ 50 $ 187
Capitalized tenant improvements and
leasing commissions per square foot $ 2.74 $ 1.06 $ 2.17
Total
Square feet 122 158/(1)/ 115
Capitalized tenant improvements and
leasing commissions $ 335 $1,628/(1)/ $ 404
Capitalized tenant improvements and
leasing commissions per square foot $ 2.75 $10.27/(1,2)/ $ 3.50
</TABLE>
- ---------------------------
/(1)/ Includes $1,377,000 or $15.68 per square foot to re-tenant 87,845 square
feet of the Operating Partnership's 94,677 square foot suburban office
property which was vacated by Matsushita Electric Corp. and which was
converted from a single tenant to a multi-tenant property.
/(2)/ Excluding amounts incurred to re-lease the office property discussed in
(1) above, capitalized tenant improvements and leasing commissions would
have been $3.56 per square foot for released and renewed space during
1995.
Certain Property Tax Information
The aggregate real estate property tax obligations for the In-Service
Properties during 1996 were approximately $4,725,000.
Insurance Coverage
The Operating Partnership carries property, liability and rental loss
insurance covering all of the Properties, with policy specifications and insured
limits that the Operating Partnership believes are adequate and appropriate
under the circumstances.
-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 163,048 Units beneficially 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
Effective July 1, 1997, the Operating Partnership issued a total of 83,568 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 $2.2 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 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.
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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.
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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
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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.
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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.
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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 X. Policies with Respect to Certain Activities
The following is a discussion of investment objectives and policies, disposition
policies, financing policies and policies with respect to certain other
activities of the Operating Partnership. The policies with respect to these
activities have been determined by the General Partner and may be amended or
revised from time to time at the discretion of the board of directors of the
General Partner without a vote of the Operating Partnership's Limited Partners,
except that (1) The General Partner cannot change its policy of holding its
assets and conducting its business through the Operating Partnership, (2)
changes in certain policies with respect to conflicts of interest must be
consistent with legal requirements, (3) the policies with respect to competition
by Messrs. Weeks, Senkbeil, Robinson, Nelley and Lichtin and NWI (an entity
controlled by Mr. Nelley) are imposed pursuant to contracts that cannot be
amended or waived without the vote of a majority of the disinterested directors
of Weeks, and (4) Weeks cannot take any action intended to terminate its
qualification as a REIT without the approval of a majority of the shares of
Weeks' common stock. No assurance can be given that the Operating Partnership's
investment objectives will be attained or that the value of the Operating
Partnership will not decrease.
Investment Objectives and Policies
The Operating Partnership's investment objectives are to provide quarterly cash
distributions and to achieve long-term capital appreciation through increases in
cash flow and the value of the Operating Partnership. The Operating Partnership
will seek to accomplish these objectives through the ownership of the
Properties, development of additional Properties on development land,
acquisitions of additional Properties and real estate companies, improved
operations of the Properties, lease-up of unleased space in existing Properties
and in any developed or acquired Properties and, where deemed appropriate,
renovations and expansions of these Properties. The key criterion for new
investments will be that they offer the opportunity for growth in per share cash
available for distribution.
The Operating Partnership may purchase Properties for long-term investment,
expand and improve the Properties presently owned, or sell such Properties, in
whole or in part, when circumstances warrant. The Operating Partnership may
also participate with other entities in property ownership, through joint
ventures or other types of co-ownership. Equity investments may be subject to
existing mortgage financing and other indebtedness which may have priority over
the equity interest of the Operating Partnership. The Operating Partnership may,
from time to time under certain circumstances, make loans in connection with the
acquisition or development of Properties.
While the Operating Partnership emphasizes equity real estate investments, it
may, in its discretion, invest in mortgages, stock of other real estate
investment trusts and other real estate interests, including mortgage-backed
securities. Such mortgage investments may include participating or convertible
mortgages. The Operating Partnership, however, has not invested previously in
mortgages or stock of other real estate investment trusts and currently has no
plans to do so.
Disposition Policies
The Operating Partnership does not currently intend to dispose of any of the
Properties, although it reserves the right to do so if, based upon management's
periodic review of the Properties, the Operating Partnership determines that
such action would be in the best interests of the Operating Partnership. The
Operating Partnership's ability to sell a Property is in some cases subject to a
tenant's option to purchase or right of first refusal with respect to such
Property.
The Operating Partnership may dispose of Properties developed in the future for
third parties and may sell its interests in certain of the development land as
part of its strategy of generating activity in the business parks. The
Operating Partnership's ability to sell land held through joint ventures may in
some cases be limited by the requirements to obtain approvals from the Operating
Partnership's partners in the joint ventures. The Operating Partnership's
ability to sell development land is in some cases also subject to options to
purchase or rights of first refusal with respect to such development land which
have been granted to tenants of adjacent Properties or other third parties. The
Operating Partnership intends to continue to develop build-to-suit properties
for sale to owner-users, although its focus will remain on developing multi-
tenant and build-to-suit for lease buildings.
Financing Policies
At June 30, 1997, the Operating Partnership had a Debt-to-Total Market
Capitalization Ratio of approximately 28% (including the Operating Partnership's
proportionate share of indebtedness of unconsolidated joint ventures). The Debt-
to-Total Market Capitalization Ratio, which is based upon market values of
equity and accordingly fluctuates with changes in the price of Weeks' common
stock, differs from debt-to-book capitalization ratios which are based upon book
values and which may not reflect the current income potential of the assets and
the operating businesses. The Operating Partnership believes that Debt-to-Total
Market Capitalization provides a more appropriate indication of leverage for a
company whose assets are primarily operating real estate. The Operating
Partnership currently intends to adhere to a policy of maintaining a less than
50% Debt-to-Total Market Capitalization Ratio. The organizational documents of
the Operating Partnership, Weeks GP and Weeks, however, do not limit the amount
or percentage of indebtedness that they may incur. The Operating Partnership may
modify its debt policy in light of then-current economic conditions, relative
costs of debt and equity capital, the market values of its Properties, general
conditions in the market for debt and equity securities, fluctuations in the
market price of Week's common stock, growth and acquisition opportunities and
other factors. Accordingly, the Operating Partnership may increase its Debt-to-
Total Market Capitalization Ratio beyond the limits described above. To the
extent that the Operating Partnership determines to seek additional capital,
Weeks or the Operating Partnership may raise such funds through additional
equity offerings, debt financing or retention of cash flow (subject to
provisions in the Code concerning taxability of undistributed real estate
investment trust income), or a combination of these methods.
In the event that the General Partner determines to raise additional equity
capital, the General Partner has the authority, without the approval of the
Limited Partners, to issue additional Units in any manner (and on such terms and
for such consideration) it deems appropriate, including in exchange for
property. Existing Limited Partners would have no preemptive right to purchase
Units issued in any offering, and any such offering might cause a dilution of a
Limited Partner's investment in the Operating Partnership.
As long as the Operating Partnership is in existence, the proceeds of the sale
of equity securities by Weeks will be contributed to the Operating Partnership
in exchange for Units in the Operating Partnership. Weeks presently anticipates
that any additional borrowings will be made through the Operating Partnership,
although Weeks may also incur indebtedness which may be re-loaned to the
Operating Partnership. Indebtedness incurred by Weeks may be in the form of bank
borrowings, secured and unsecured, and publicly and privately placed debt
instruments. Indebtedness incurred by the Operating Partnership or its operating
subsidiaries may be in the form of purchase money obligations to the sellers of
properties, publicly or privately placed debt instruments, or financing from
banks, institutional investors or other lenders, any of which indebtedness may
be unsecured or may be secured by mortgages or other interests in the property
owned by the Operating Partnership. Such indebtedness may be recourse to all or
any part of the property of Weeks or the Operating Partnership or its operating
subsidiaries, or may be limited to the particular property to which the
indebtedness relates. The proceeds from any borrowings by the Operating
Partnership or its operating subsidiaries may be used for the payment of
distributions, working capital, to refinance existing indebtedness or to finance
the development or acquisition of properties.
Working Capital Reserve Policies
The Operating Partnership will maintain working capital reserves in amounts that
the board of directors of the General Partner determines to be adequate to meet
normal contingencies in connection with the operation of the Operating
Partnership's business and investments.
Conflicts of Interest Policies
The General Partner has adopted certain policies which are designed to eliminate
or minimize potential conflicts of interest. The General Partner is subject to
certain provisions of Georgia law which are designed to eliminate or minimize
certain potential conflicts of interest. However, there can be no assurance
that these policies or provisions of Georgia law always will be successful in
eliminating the influence of such conflicts, and if they are not successful,
decisions could be made that might fail to reflect fully the interests of all
partners.
Noncompetition Agreements
Each of A. Ray Weeks, Jr., Thomas D. Senkbeil, Forrest W. Robinson, David P.
Stockert, John W. Nelley, Jr. and Harold S. Lichtin and NWI (an entity
controlled by Mr. Nelley) has entered into a noncompetition agreement (the
"Noncompete Agreements") with Weeks, the Operating Partnership, Weeks Realty
Services, and Weeks Construction Services. The Noncompete Agreements, with
certain exceptions, prohibit (a) 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 Weeks
and/or the Operating Partnership, as applicable, 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 and (b) NWI from
serving as partner of, or owning any interest in, or engaging in the
acquisition, development, operating, management, leasing, construction, or
landscaping of industrial or office properties and activities substantially
similar to those that NWI has performed within the two years immediately prior
to the execution of the Noncompete Agreement until March 31, 1998.
Policies Applicable to All Directors of the General Partner
Pursuant to Georgia law (the jurisdiction under which the General Partner is
organized), each director will be subject to restrictions on misappropriation of
corporate opportunities to himself or his affiliates learned solely as a result
of his service as a member of the board of directors of the General Partner. In
addition, under Georgia law, a transaction effected by the General Partner or
any entity controlled by the General Partner in which a director or certain
related persons or entities of the director has a conflicting interest, as
defined thereunder, of such financial significance that it would reasonably be
expected to exert an influence on the director's judgment, may not be enjoined,
set aside or give rise to damages on the ground of such interest if (i) the
transaction is approved, after disclosure of the interest, by the affirmative
vote of a majority of the disinterested directors, or by the affirmative vote of
a majority of the votes cast by disinterested shareholders, or (ii) the
transaction is established to have been fair to the General Partner.
Other Policies
The Operating Partnership may make investments other than as previously
described, although it does not currently intend to do so. The Operating
Partnership may in the future make loans to its employees and officers, although
the Operating Partnership does not expect that such loans would be material in
amount. During the last three years, the Operating Partnership has not engaged
in trading, underwriting or agency distribution or sale of securities of other
issuers, and the Operating Partnership does not intend to do so in the future.
The Operating Partnership's policies with respect to such activities may be
reviewed and modified from time to time by the board of directors of the General
Partner without the vote of the Limited Partners.
The Operating Partnership may, from time to time under certain circumstances,
purchase Units. The Operating Partnership has no present intention to
repurchase any of its Units, and any such action would be taken only in
conformity with applicable federal and state laws.
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.
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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.
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Item 13. Financial Statements and Supplementary Data
The financial statements of the Operating Partnership are included
herein as listed on the Index to Financial Statements on page F-1
of this Form 10.
The financial statements of Weeks included in Weeks' Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 are
hereby incorporated herein by this reference.
The financial statements of NWI and Weeks included in Weeks'
Current Report on Form 8-K dated November 1, 1996 and filed with
the Commission on November 6, 1996 (as amended by Weeks' Current
Report on Form 8-K/A dated November 1, 1996 and filed with the
Commission on November 8, 1996) are hereby incorporated herein by
this reference.
The financial statements of Lichtin and Weeks included in Weeks'
Current Report on Form 8-K dated November 5, 1996 and filed with
the Commission on November 6, 1996 are hereby incorporated herein
by this reference.
The financial statements of Lichtin and Weeks incorporated by
reference in Weeks' Current Report on Form 8-K dated December 31,
1996 and filed with the Commission on January 15, 1997 (as amended
by Weeks' Current Report on Form 8-K/A dated December 31, 1996 and
filed with the Commission on March 14, 1997) are hereby
incorporated herein by this reference.
The financial statements of NWI and Weeks included in Weeks'
Current Report on Form 8-K dated March 25, 1997 and filed with the
Commission on March 26, 1997 are hereby incorporated herein by
this reference.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
Item 15. Financial Statements and Exhibits
(a) Financial Statements
-------------------
The financial statements of the Operating Partnership are included
herein as listed on the Index to Financial Statements on page F-1
of this Form 10.
The financial statements of Weeks included in Weeks' Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 are
hereby incorporated herein by this reference.
The financial statements of NWI and Weeks included in Weeks'
Current Report on Form 8-K dated November 1, 1996 and filed with
the Commission on November 6, 1996 (as amended by Weeks' Current
Report on Form 8-K/A dated November 1, 1996 and filed with the
Commission on November 8, 1996) are hereby incorporated herein by
this reference.
The financial statements of Lichtin and Weeks included in
Weeks' Current Report on Form 8-K dated November 5, 1996
and filed with the Commission on November 6, 1996 are hereby
incorporated herein by this reference.
The financial statements of Lichtin and Weeks incorporated by
reference in Weeks' Current Report on Form 8-K dated December 31,
1996 and filed with the Commission on January 15, 1997 (as amended
by Weeks' Current Report on Form 8-K/A dated December 31, 1996 and
filed with the Commission on March 14, 1997) are hereby
incorporated herein by this reference.
The financial statements of NWI and Weeks included in Weeks'
Current Report on Form 8-K dated March 25, 1997 and filed with the
Commission on March 26, 1997 are hereby incorporated herein by
this reference.
(b) Exhibits
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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(x) List of subsidiaries of the Registrant.
27.1 Financial Data Schedule.
99.1(x) Executive Officers of the Registrant.
99.2(x) Executive Compensation.
99.3(x) Certain Relationships and Related
Transactions.
99.4 Audited financial statements of the Company
for the fiscal years ended December 31, 1996
and 1995, including notes thereto.
99.5 Audited combined financial statements of NWI for the
years ended December 31, 1994 and 1995, including notes thereto.
Unaudited pro forma condensed consolidated
balance sheet of the Company as of June 30, 1996,
including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement
of operations of the Company for the six months ended
June 30, 1996, including notes and assumptions thereto.
Unaudited pro forma condensed consolidated
statement of operations of the Company for the
year ended December 31, 1995, including notes and
assumptions thereto.
99.6 Audited combined financial statements of
Lichtin for the years ended December 31,
1994 and 1995, including notes thereto.
Unaudited pro forma condensed consolidated balance
sheet of the Company as of June 30, 1996,
including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement
of operations of the Company for the six months
ended June 30, 1996, including notes and assumptions
thereto.
Unaudited pro forma condensed consolidated statement
of operations of the Company for the year ended
December 31, 1995, including notes and assumptions thereto.
99.7 Unaudited combined financial statements of Lichtin for
the nine month periods ended September 30, 1996 and 1995,
including notes thereto.
Unaudited pro forma condensed consolidated balance
sheet of the Company as of September 30, 1996, including
notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the nine months ended
September 30, 1996, including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31,
1995, including notes and assumptions thereto.
99.8 Unaudited combined financial statements
of NWI for the nine-month periods ended
September 30, 1996 and 1995, including notes thereto.
Unaudited pro forma condensed consolidated balance
sheet of the Company as of September 30, 1996,
including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the nine months ended
September 30, 1996, including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31, 1995,
including notes and assumptions thereto.
* 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 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>
- ---------------
(x) Previously filed
-74-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Pre-Effective Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Norcross, State of Georgia on the 15th day of
September, 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 June 30, 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 six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 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>
June 30, December 31, December 31,
(In thousands, except per unit data) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C> <C>
Real estate assets
Land $ 88,644 $ 77,233 $ 40,100
Buildings and improvements 516,266 450,002 253,414
Accumulated depreciation (51,031) (41,469) (29,889)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating real estate assets 553,879 485,766 263,625
Developments in progress 73,236 56,571 21,448
Land held for future development 9,763 9,035 4,801
- ------------------------------------------------------------------------------------------------------------------------------------
Net real estate assets 636,878 551,372 289,874
Real estate loans 16,112 9,455 1,309
Cash and cash equivalents 124 260 982
Direct financing lease, net 5,075 5,136 5,229
Receivables 7,427 5,858 4,544
Deferred costs, net 11,324 10,286 9,457
Investments in and notes receivable
from unconsolidated entities 8,909 7,760 7,751
Other assets 2,346 1,722 1,295
- ------------------------------------------------------------------------------------------------------------------------------------
$ 688,195 $ 591,849 $ 320,441
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Partners' Capital
Mortgage notes payable $ 169,056 $ 197,575 $ 113,022
Bank credit facility borrowings 101,790 99,400 34,283
Accounts payable and accrued expenses 13,910 9,970 7,783
Other liabilities 3,873 2,963 1,741
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 288,629 309,908 156,829
- ------------------------------------------------------------------------------------------------------------------------------------
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) 158,057 149,133 64,508
Partners' capital (17,682,788, 14,048,593
and 11,155,704 Units) (Note 1) 241,509 132,808 99,104
- ------------------------------------------------------------------------------------------------------------------------------------
$ 688,195 $ 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
---------------------------------------------------------------------------- ------------
Six Months Six Months Aug. 24, 1994 Jan. 1, 1994
Ended Ended Year Ended Year Ended to to
(In thousands, except per unit data) June 30, 1997 June 30, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental $ 36,279 $ 21,943 $ 48,162 $ 31,217 $ 8,144 $ 10,937
Tenant reimbursements 4,416 2,007 4,517 2,798 733 977
Direct financing lease 376 384 768 776 277 504
Other 267 174 436 480 158 107
Development and
construction fees --- --- --- --- --- 990
Landscape fees --- --- --- --- --- 2,169
Property management fees --- --- --- --- --- 425
Commissions --- --- --- --- --- 429
- ---------------------------------------------------------------------------------------------------------------------------------
41,338 24,508 53,883 35,271 9,312 16,538
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and
maintenance 4,622 2,687 6,025 3,899 979 1,747
Real estate taxes 3,467 2,153 4,725 2,997 735 974
Depreciation and
amortization 11,044 6,000 13,474 8,177 2,098 2,920
Interest 9,554 4,955 11,779 8,106 1,958 6,682
Amortization of deferred
financing costs 452 421 864 691 252 322
General and administrative 2,419 1,414 3,039 1,848 472 1,514
Labor and materials --- --- --- --- --- 1,954
- ---------------------------------------------------------------------------------------------------------------------------------
31,558 17,630 39,906 25,718 6,494 16,113
- ---------------------------------------------------------------------------------------------------------------------------------
Income before Equity in Earnings
of Unconsolidated Entities,
Interest Income and Gain on Sale of
Real Estate Asset 9,780 6,878 13,977 9,553 2,818 425
Equity in income of
unconsolidated entities 1,224 543 1,340 1,220 692 91
Interest income 543 198 492 334 224 --
Gain on sale of real estate asset 209 --- --- --- --- --
- ---------------------------------------------------------------------------------------------------------------------------------
Income before Extraordinary Loss 11,756 7,619 15,809 11,107 3,734 516
Extraordinary loss --- --- --- --- (2,667) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income $ 11,756 $ 7,619 $ 15,809 $ 11,107 $ 1,067 $ 516
- ---------------------------------------------------------------------------------------------------------------------------------
Per Unit Data
Income before
extraordinary loss $ 0.59 $ 0.56 $ 1.11 $ 1.03 $ 0.36
Extraordinary loss --- --- --- --- (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.59 $ 0.56 $ 1.11 $ 1.03 $ 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average
units outstanding 19,791 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 106,891 ---
Units issued in exchange for property --- 14,334
Net income 8,906 2,850
Distributions ($0.86 per Unit) (12,105) (3,396)
Restricted share grants, net of deferred compensation (Note 16) 145 ---
Adjustment to reflect other limited partners'
capital at redemption value 4,864 (4,864)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1997 (Unaudited) $ 241,509 $ 158,057
- -----------------------------------------------------------------------------------------------------------------------------------
</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
---------------------------------------------------------------------------- ------------
Six Months Six Months Aug. 24, 1994 Jan. 1, 1994
Ended Ended Year Ended Year Ended to to
(In thousands) June 30, 1997 June 30, 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 $ 11,756 $ 7,619 $ 15,809 $ 11,107 $ 1,067 $ 516
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization 11,044 6,000 13,474 8,177 2,098 2,920
Amortization of deferred
financing costs 452 421 864 691 252 322
Amortization of deferred
compensation 145 --- --- --- --- ---
Income from direct financing lease (376) (384) (768) (776) (277) (504)
Straight-line rent revenue (324) (191) (475) 19 31 216
Gain on sale of real estate asset (209) --- --- --- --- ---
Equity in earnings of
partnership joint ventures --- --- --- --- --- (91)
Extraordinary loss --- --- --- --- 2,667 ---
Net change in:
Receivables (1,245) (43) (184) (734) (846) (815)
Other assets (1,989) (1,392) (659) (239) 2,643 (4,213)
Deferred costs (2,414) (1,018) (2,618) (2,451) (1,186) (706)
Accounts payable and accrued
expenses 5,666 2,042 1,366 2,078 (1,411) 1,732
Other liabilities 910 78 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 23,416 13,132 28,031 18,678 3,954 2,769
- ---------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Property acquisition, development
and construction (80,647) (31,317) (113,056) (113,870) (34,599) (15,593)
Real estate development loans (6,657) (3,124) (8,146) (1,309) --- ---
Payments received on direct
financing lease 437 425 861 835 291 520
Proceeds from sale of real estate
asset 2,484 --- --- --- --- ---
Notes receivable collections --- --- 18 1,467 --- ---
Notes receivable and deposits --- --- --- (4,540) --- ---
Distributions from (investments
in) unconsolidated entities --- --- --- 290 (3,840) 120
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (84,383) (34,016) (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
------------------------------------------------------------------------------ --------------
Six Months Six Months Aug. 24, 1994 Jan. 1, 1994
Ended Ended Year Ended Year Ended to to
(In thousands) June 30, 1997 June 30, 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 106,891 4 69,279 72,800 118,571 ---
Line of credit proceeds
(repayments), net 2,390 31,402 65,117 34,283 (9,477) 669
Proceeds from mortgage notes
payable --- --- --- 5,200 39,000 15,763
Payments of mortgage notes payable (32,879) (237) (20,075) (3,650) (98,180) (2,162)
Deferred financing costs (70) (181) (783) (133) (3,444) (470)
Distributions (15,501) (10,979) (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 60,831 20,009 91,570 93,097 40,352 12,229
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash
and Cash Equivalents (136) (875) (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 $ 124 $ 107 $ 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 June 30, 1997 and
for the six months ended June 30, 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 June 30, 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 six months ended June 30, 1997 and 1996, totaled $2,222,000
and $928,000, 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 $9,250,000 and $4,787,000 for the six months ended June 30,
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.
On May 30, 1997, the Operating Partnership acquired 17 industrial
buildings totaling approximately 546,000 square feet located in the
Northwest submarket of Atlanta, Georgia for approximately $29.2
million, including closing costs and acquisition expenses. The
acquisition was funded through Credit Facility borrowings. On April 22,
1997, the Operating Partnership acquired an industrial building
totaling approximately 61,000 squared feet located in Orlando, Florida
for $2.9 million, including closing costs and acquisition expenses.
This acquisition was also funded through Credit Facility borrowings.
In 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 ($1,005,000 at June 30, 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 used 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 (x) List of subsidiaries of the Registrant.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
27.1 Financial Data Schedule.
99.1 (x) Executive Officers of the Registrant.
99.2 (x) Executive Compensation.
99.3 (x) Certain Relationships and Related Transactions.
99.4 Audited financial statements of the Company for the fiscal
years ended December 31, 1996 and 1995, including notes
thereto.
99.5 Audited combined financial statements of NWI for the years
ended December 31, 1994 and 1995, including notes thereto.
Unaudited pro forma condensed consolidated balance sheet
of the Company as of June 30, 1996, including notes and
assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the six months ended
June 30, 1996, including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31,
1995, including notes and assumptions thereto.
99.6 Audited combined financial statements of Lichtin for the
years ended December 31, 1994 and 1995, including notes
thereto.
Unaudited pro forma condensed consolidated balance sheet of
the Company as of June 30, 1996, including notes and
assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the six months ended June 30,
1996, including notes and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31,
1995, including notes and assumptions thereto.
99.7 Unaudited combined financial statements of Lichtin
for the nine month periods ended September 30, 1996 and
1995, including notes thereto.
Unaudited pro forma condensed consolidated balance sheet of
the Company as of September 30, 1996, including notes and
assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the nine months ended
September 30, 1996, including notes and assumptions
thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31,
1995, including notes and assumptions thereto.
99.8 Unaudited combined financial statements of NWI for the
nine-month periods ended September 30, 1996 and 1995,
including notes thereto.
Unaudited pro forma condensed consolidated balance sheet
of the Company as of September 30, 1996, including notes
and assumptions thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the nine months ended
September 30, 1996, including notes and assumptions
thereto.
Unaudited pro forma condensed consolidated statement of
operations of the Company for the year ended December 31,
1995, including notes and assumptions thereto.
* 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 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>
- ---------------
(x) Previously filed
<PAGE>
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER OPERATING PARTNERSHIP UNIT
FOR THE SIX MONTHS ENDED JUNE 30, 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>
Six Months Six Months
Ended Ended Year ended Year ended Aug. 24 to
(In thousands, except per share data) Jun. 30, 1997 Jun. 30, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Weighted average number of
Units outstanding 19,791 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 19,791 13,723 14,280 10,760 10,268
- ---------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss $ 11,756 $ 7,619 $15,809 $11,107 $ 3,734
Extraordinary loss --- --- --- --- (2,667)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 11,756 $ 7,619 $15,809 $11,107 $ 1,067
- ---------------------------------------------------------------------------------------------------------------------------------
Per Unit data
Income before extraordinary loss $ 0.59 $ 0.56 $ 1.11 $ 1.03 $ 0.36
Extraordinary loss --- --- --- --- (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.59 $ 0.56 $ 1.11 $ 1.03 $ 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 124 260
<SECURITIES> 0 0
<RECEIVABLES> 7,427 5,858
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 636,878 551,372
<DEPRECIATION> 51,031 41,469
<TOTAL-ASSETS> 688,195 591,849
<CURRENT-LIABILITIES> 0 0
<BONDS> 270,846 296,975
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 241,509 132,808
<TOTAL-LIABILITY-AND-EQUITY> 688,195 591,849
<SALES> 0 0
<TOTAL-REVENUES> 41,338 53,883
<CGS> 0 0
<TOTAL-COSTS> 31,558 39,906
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,554 11,779
<INCOME-PRETAX> 11,756 15,809
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 11,756 15,809
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,756 15,809
<EPS-PRIMARY> .59 1.11
<EPS-DILUTED> .59 1.11
</TABLE>
<PAGE>
EXHIBIT 99.4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Weeks Corporation:
We have audited the accompanying consolidated balance sheets of Weeks
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1996 and 1995, and for the period from August 24,
1994 to December 31, 1994. We have also audited the combined statements of
operations, owners' deficit and cash flows of Weeks Group for the period from
January 1, 1994 to August 23, 1994. These financial statements and schedule are
the responsibility of the management of Weeks Corporation. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Weeks Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended December 31, 1996 and 1995
and for the period from August 24, 1994 to December 31, 1994, and the results of
operations and the cash flows of Weeks Group for the period from January 1, 1994
to August 23, 1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 21, 1997
F-1
<PAGE>
WEEKS CORPORATION CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share data) Dec. 31, 1996 Dec. 31, 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate assets
Land $ 77,233 $ 40,100
Buildings and improvements 450,002 253,414
Accumulated depreciation (41,469) (29,889)
- ------------------------------------------------------------------------------------------------------------
Operating real estate assets 485,766 263,625
Developments in progress 56,571 21,448
Land held for future development 9,035 4,801
- ------------------------------------------------------------------------------------------------------------
Net real estate assets 551,372 289,874
Real estate development loans 9,455 1,309
Direct financing lease, net 5,136 5,229
Cash and cash equivalents 260 982
Receivables, net 5,858 4,544
Deferred costs, net 10,286 9,457
Investments in and notes receivable from
unconsolidated subsidiaries 7,760 7,751
Other assets 1,722 1,295
- ------------------------------------------------------------------------------------------------------------
$ 591,849 $ 320,441
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 197,575 $ 113,022
Bank credit facility borrowings 99,400 34,283
Accounts payable and accrued expenses 9,970 7,783
Other liabilities 2,963 1,741
- ------------------------------------------------------------------------------------------------------------
Total liabilities 309,908 156,829
- ------------------------------------------------------------------------------------------------------------
Minority interests in Operating Partnership 68,230 30,663
- ------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 14)
Shareholders' equity
Common stock, $0.01 par value; 100,000,000 shares
authorized; 14,048,593 and 11,155,704 shares issued
and outstanding at December 31, 1996 and 1995, respectively 140 112
Preferred stock, $0.01 par value; 20,000,000 shares
authorized; none issued -- --
Additional paid-in capital 267,634 191,259
Accumulated deficit (54,063) (58,422)
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 213,711 132,949
- ------------------------------------------------------------------------------------------------------------
$ 591,849 $ 320,441
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-2
<PAGE>
WEEKS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
AND WEEKS GROUP COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Weeks Corporation Weeks Group
----------------------------------------------- -------------
Year Ended Year Ended Aug. 24 to Jan. 1 to
(In thousands, except per share data) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Rental $48,162 $31,217 $ 8,144 $10,937
Tenant reimbursements 4,517 2,798 733 977
Direct financing lease 768 776 277 504
Other 436 480 158 107
Development and construction fees -- -- -- 990
Landscape -- -- -- 2,169
Property management fees -- -- -- 425
Commissions -- -- -- 429
- -------------------------------------------------------------------------------------------------------------------
53,883 35,271 9,312 16,538
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating and maintenance 6,025 3,899 979 1,747
Real estate taxes 4,725 2,997 735 974
Depreciation and amortization 13,474 8,177 2,098 2,920
Interest 11,779 8,106 1,958 6,682
Amortization of deferred financing costs 864 691 252 322
General and administrative 3,039 1,848 472 1,514
Labor and materials -- -- -- 1,954
- -------------------------------------------------------------------------------------------------------------------
39,906 25,718 6,494 16,113
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EQUITY IN EARNINGS OF UNCONSOLIDATED
ENTITIES AND INTEREST INCOME 13,977 9,553 2,818 425
Equity in earnings of unconsolidated entities 1,340 1,220 692 91
Interest income 492 334 224 --
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTERESTS
AND EXTRAORDINARY LOSS 15,809 11,107 3,734 516
Minority interests (3,064) (2,681) (943) --
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS 12,745 8,426 2,791 516
Extraordinary loss, net of minority interests -- -- (1,993) --
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $12,745 $ 8,426 $ 798 $ 516
===================================================================================================================
PER SHARE DATA
Income before extraordinary loss $1.11 $1.03 $0.36
Extraordinary loss -- -- (0.26)
- -------------------------------------------------------------------------------------------------------------------
Net income $1.11 $1.03 $0.10
===================================================================================================================
Weighted average shares outstanding 11,512 8,171 7,675
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
WEEKS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND WEEKS GROUP COMBINED STATEMENT OF OWNERS' DEFICIT
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
(In thousands, except per share amounts) Stock Capital Deficit Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OWNERS' DEFICIT, DECEMBER 31, 1993 $ -- $ -- $(24,197) $(24,197)
Capital distributions, net -- -- (1,571) (1,571)
Net income -- -- 516 516
- ------------------------------------------------------------------------------------------------------------------------
OWNERS' DEFICIT, AUGUST 23, 1994 -- -- (25,252) (25,252)
Initial public offering of common stock, net of
underwriting discount and offering costs
of $14,543 77 118,205 -- 118,282
Private placement of shares -- 289 -- 289
Acquisition of property interests of non-controlled
entities for Units in Operating Partnership -- -- 8,053 8,053
Distributions to controlling interests -- -- (2,547) (2,547)
Adjustment for minority interest of Unitholders
in Operating Partnership at initial offering date -- -- (25,002) (25,002)
Dividends ($0.15 per share) -- -- (1,151) (1,151)
Net income -- -- 798 798
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1994 77 118,494 (45,101) 73,470
Public offering of common stock, net of
underwriting discount and offering costs
of $4,825 35 72,765 -- 72,800
Adjustments primarily for minority interest of
Unitholders in Operating Partnership upon
public offering and upon conversions of Units
into shares -- -- (10,234) (10,234)
Dividends ($1.50 per share) -- -- (11,513) (11,513)
Net income -- -- 8,426 8,426
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1995 112 191,259 (58,422) 132,949
Public offering of common stock, net of
underwriting discount and offering costs
of $3,843 26 68,506 -- 68,532
Acquisition consideration 2 7,122 -- 7,124
Exercise of stock options -- 706 -- 706
Dividend reinvestment plan -- 41 -- 41
Adjustments for minority interest of Unitholders
in Operating Partnership upon public offering
and upon issuance of additional shares and Units -- -- 9,474 9,474
Dividends ($1.60 per share) -- -- (17,860) (17,860)
Net income -- -- 12,745 12,745
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY, DECEMBER 31, 1996 $140 $267,634 $(54,063) $213,711
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
WEEKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
AND WEEKS GROUP COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Weeks Corporation Weeks Group
----------------------------------------------- --------------
Year Ended Year Ended Aug. 24 to Jan. 1 to
(In thousands) Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,745 $ 8,426 $ 798 $ 516
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 3,064 2,681 943 --
Depreciation and amortization 13,474 8,177 2,098 2,920
Amortization of deferred financing costs 864 691 252 322
Income from direct financing lease (768) (776) (277) (504)
Straight-line rent revenue (475) 19 31 216
Equity in earnings of partnerships
and joint ventures -- -- -- (91)
Extraordinary loss, net of minority interests -- -- 1,993 --
Net change in:
Receivables (184) (734) (846) (815)
Other assets (659) (239) 2,643 (4,213)
Deferred costs (2,618) (2,451) (1,186) (706)
Accounts payable and accrued expenses 1,366 2,078 (1,411) 1,732
Other liabilities 1,222 806 531 3,053
Construction receivables -- -- -- (109)
Costs in excess of billings -- -- -- 1,559
Cash overdraft payable -- -- (1,615) (829)
Billings in excess of costs -- -- -- (282)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 28,031 18,678 3,954 2,769
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property acquisition, development and construction (113,056) (113,870) (34,599) (15,593)
Real estate development loans (8,146) (1,309) -- --
Payments received on direct financing lease 861 835 291 520
Notes receivable collections 18 1,467 -- --
Notes receivable and deposits -- (4,540) -- --
Distributions from (investments in)
unconsolidated entities -- 290 (3,840) 120
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (120,323) (117,127) (38,148) (14,953)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Public offering proceeds 72,375 77,625 132,825 --
Underwriting discount and offering costs (3,843) (4,825) (14,543) --
Proceeds from stock option exercises and
dividend reinvestment plan 747 -- -- --
Line of credit proceeds (repayments), net 65,117 34,283 (9,477) 669
Proceeds from mortgage notes payable -- 5,200 39,000 15,763
Payments of construction and mortgage notes payable (20,075) (3,650) (98,180) (2,162)
Deferred financing costs (783) (133) (3,444) (470)
Dividends to shareholders (17,860) (11,513) (1,151) --
Distributions to minority interests (4,108) (3,890) (388) --
Debt prepayment penalties -- -- (2,180) --
Private placement proceeds -- -- 289 --
Distributions to Weeks Group owners, net -- -- (2,399) (1,571)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 91,570 93,097 40,352 12,229
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (722) (5,352) 6,158 45
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 982 6,334 176 131
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 260 $ 982 $ 6,334 $ 176
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WEEKS CORPORATION AND WEEKS GROUP
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Weeks Corporation and its subsidiaries own, operate, develop, construct,
acquire and manage industrial and suburban office buildings in the
southeast United States. As used herein, the term "Company" includes Weeks
Corporation and its subsidiaries, including Weeks Realty, L.P. (the
"Operating Partnership"), unless the context indicates otherwise. The
Company, through its wholly owned subsidiaries, is the general partner and
owns a majority interest in the Operating Partnership which, including the
operations of its subsidiaries, conducts substantially all of the on-going
operations of the Company. The Company has elected to qualify and operate
as a self-administered and self-managed real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
As a REIT, the Company will not generally be subject to corporate federal
income taxes as long as it satisfies certain technical requirements of the
Code relating to the composition of its income and assets, and the
requirement to distribute 95% of its taxable income to its shareholders.
As of December 31, 1996, the Company had outstanding 14,048,593 shares of
common stock and owned the same number of units of partnership interest
("Units") in the Operating Partnership representing a 75.8% ownership
interest in the Operating Partnership. Units held by persons other than the
Company totaled 4,485,190 as of December 31, 1996, and represented a 24.2%
minority interest in the Operating Partnership. Units are convertible by
their holders into shares of common stock on a one-for-one basis, or into
cash, at the Company's option. The Company's weighted average ownership
interest in the Operating Partnership was 80.6% and 75.9% for the years
ended December 31, 1996 and 1995, respectively.
The Company conducts its third-party service businesses through two
subsidiaries (the "Subsidiaries"): Weeks Realty Services, Inc. conducts
third-party landscape, property management and leasing services, and Weeks
Construction Services, Inc. conducts third-party construction services. The
Company holds 100% of the nonvoting and 1% of the voting common stock of
these Subsidiaries. The remaining voting common stock is held by three
executive officers of the Company. The ownership of the common stock of the
Subsidiaries entitles the Company to substantially all (99%) of the
economic benefits from the results of the Subsidiaries' operations.
On August 24, 1994, the Company completed a business combination and an
initial public offering ("IPO") of common stock resulting in the
organizational and operating structure discussed above. The Company and its
subsidiaries succeeded to substantially all of the interests in certain
land and industrial and suburban office buildings under common ownership
and to the development, construction, landscape and management businesses
of the predecessors to the Company referred to herein as the "Weeks Group."
F-6
<PAGE>
As of December 31, 1996, the Company owned 168 industrial properties, 17
suburban office properties and three retail properties comprising 13.0
million square feet. The Company's primary markets and the concentration of
the Company's portfolio (based on square footage) are Atlanta, Georgia
(74%), Nashville, Tennessee (11%), Raleigh-Durham-Chapel Hill, North
Carolina (9%), Orlando, Florida (3%), and Spartanburg, South Carolina (3%).
In addition, 24 industrial and suburban office properties and two property
expansions were under development or in lease-up at December 31, 1996,
comprising an additional 3.0 million square feet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
financial position of the Company and its subsidiaries at December 31, 1996
and 1995, and their results of operations for the years ended December 31,
1996 and 1995 and for the period from August 24, 1994 to December 31, 1994.
Subsequent to the IPO, the Subsidiaries are reflected in the accompanying
consolidated financial statements on the equity method of accounting as
discussed below. The accompanying historical results of operations of Weeks
Group for the period from January 1, 1994 to August 23, 1994, represent the
operations of certain industrial and suburban office properties controlled
by the predecessors to the Company through real estate partnerships and
affiliated entities which provided development, construction, landscape,
and property management services for the partnerships and third parties.
The historical results of operations of Weeks Group are presented on a
combined basis because these entities were under common ownership and
control and were the subject of a business combination in connection with
the IPO. All significant intercompany balances and transactions have been
eliminated in the consolidated and combined financial statements.
REAL ESTATE ASSETS
Real estate assets are stated at depreciated cost. Major improvements and
replacements are capitalized and depreciated over their estimated useful
lives when they extend the useful life, increase capacity or improve
efficiency of the related asset. All other repairs and maintenance are
expensed as incurred. Costs related to the acquisition, planning,
development and construction of buildings and improvements, including
interest, property taxes and insurance and allocated overhead costs
incurred during the construction period, are capitalized.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" in the fourth quarter of 1995. SFAS 121
established new standards on how impairment losses on long-lived assets,
including real estate assets, should be measured. The implementation of
SFAS 121 had no impact on the Company's 1996 and 1995 consolidated
financial statements.
Depreciation is calculated using the straight-line method, generally over
35 years, for buildings and improvements. Tenant improvements are
capitalized and depreciated using the straight-line method over the term of
the related lease.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments,
consisting primarily of money market accounts, with original maturities of
three months or less.
F-7
<PAGE>
REVENUE RECOGNITION
All leases, other than the lease discussed in Note 3, are classified as
operating leases and the related rental income is recognized on a straight-
line basis over the terms of the respective leases. Straight-line rent
receivables totaled $3,023,000 and $2,548,000 at December 31, 1996 and
1995, respectively. Tenant reimbursements for property taxes and other
recoverable expenses are recognized as revenues in the period the
applicable expenses are incurred.
Revenues for development, construction, landscape, property management and
leasing services provided by the Subsidiaries, and Weeks Group prior to the
IPO, are recognized over the period during which the related services were
rendered.
DEFERRED COSTS
Costs incurred to procure operating leases and in conjunction with
financing arrangements are capitalized and amortized on a straight-line
basis over the terms of the related lease or loan arrangements. Unamortized
lease and financing costs are written off upon the early termination of the
related lease or loan agreement.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
Effective for years ended December 31, 1995 and thereafter, the Company
changed its method of accounting for the Subsidiaries to the equity method
in accordance with Emerging Issues Task Force Issue No. 95-6, "Accounting
by a Real Estate Investment Trust for an Invesment in a Service
Corporation." For the period from August 24, 1994 to December 31, 1994, the
Subsidiaries were accounted for on the cost method. The consolidated
financial statements of the Company were not restated for periods prior to
January 1, 1995 as the impact of this change was not material.
INTEREST RATE SWAP AGREEMENTS
The Company uses interest rate swap arrangements to manage its exposure to
interest rate changes. Such arrangements are considered hedges of specific
borrowings, and differences paid and received under the swap arrangements
are recognized as adjustments to interest expense.
INCOME TAXES
The Company has elected to be taxed as a REIT under the Code for all
periods subsequent to August 24, 1994. As a REIT, the Company will not
generally be subject to corporate level federal income taxes as long as it
satisfies certain technical requirements of the Code relating to the
composition of its income and assets, and the requirement that it
distribute 95% of its taxable income to its shareholders. In any event, the
Company may be subject to certain state and local taxes and to federal
income and excise taxes on its undistributed income. If the Company fails
to qualify as a REIT under the Code, it will be subject to federal income
taxes at regular corporate tax rates in such year of disqualification.
The Subsidiaries of the Company, which conduct the related construction,
landscape, property management and leasing service businesses, are taxed as
regular taxable corporations. The impact of income taxes, if any, reduces
the amount of Subsidiary earnings otherwise recognized by the Company under
the equity method. For the years ended December 31, 1996 and 1995 and for
the period August 24, 1994 to December 31, 1994, the impact of the
Subsidiaries' income taxes and their related tax attributes were not
material to the accompanying consolidated financial statements.
F-8
<PAGE>
Weeks Group is a combination of legal entities, primarily partnerships and
subchapter S corporations, not subject to federal and state income taxes.
Accordingly, no income taxes have been provided for in the accompanying
combined financial statements of Weeks Group. The individual partners and
subchapter S corporation shareholders included their respective share of
profits and losses from these entities in their individual income tax
returns. There could be significant differences between each individual
owner's tax basis and their proportionate share of the net assets reported
in the financial statements. SFAS No. 109, "Accounting for Income Taxes,"
requires a public enterprise to disclose the aggregate difference in the
basis of its net assets for financial and tax reporting purposes. However,
Weeks Group does not have access to information about each individual
owner's tax attributes in Weeks Group, and the aggregate tax bases cannot
be readily determined. In any event, management does not believe that, with
respect to Weeks Group, the aggregate difference would be meaningful
information.
DIVIDENDS
The Company declared and paid dividends of $17,860,000 or $1.60 per share,
$11,513,000 or $1.50 per share and $1,151,000 or $0.15 per share in 1996,
1995 and 1994, respectively. The Company's 1996 dividends are estimated to
be 95% taxable to the Company's shareholders as ordinary income with the
remaining 5% representing a return of capital. The 1995 and 1994 dividends
were 100% taxable to the Company's shareholders as ordinary income.
Additionally, Unitholders of the minority interests in the Operating
Partnership received cash distributions totaling $4,108,000 or $1.60 per
Unit, $3,890,000 or $1.50 per Unit and $388,000 or $0.15 per Unit in 1996,
1995 and 1994, respectively. In January 1997, the Company declared and paid
dividends and made distributions of $6,043,000 or $0.43 per share and
$1,446,000 or $0.43 per Unit relating to fourth quarter 1996 operating
results.
PER SHARE DATA
Net income per share is calculated using the weighted average number of
common shares outstanding of 11,512,000 in 1996, 8,171,000 in 1995 and
7,675,000 for the period from August 24, 1994 to December 31, 1994. The
impact of outstanding stock options was not dilutive in any period. An
assumed conversion of Units into common stock would not affect net income
per share.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and footnotes thereto. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
F-9
<PAGE>
3. DIRECT FINANCING LEASE
The Company holds an investment in a 15-year direct financing lease with
the tenant of a build-to-suit facility in Atlanta, Georgia. The lease
agreement, which commenced in June 1992, provides the tenant the option to
acquire the facility and associated land on the tenth anniversary of lease
commencement for $3,766,000 plus any prepayment penalty due on the mortgage
note encumbering the property. The lease also provides for the transfer of
the property to the tenant upon lease termination if the early buyout
option is not exercised. The components of the investment in the direct
financing lease are as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------
<S> <C> <C>
Future minimum rentals $10,378 $11,239
Less unearned income (5,242) (6,010)
-----------------------------------------------------------------
Direct financing lease, net $ 5,136 $ 5,229
-----------------------------------------------------------------
</TABLE>
Future minimum rentals receivable under the lease as of December 31, 1996,
assuming the lessee exercises its buyout option after year ten are $886,000
in 1997, $913,000 in 1998, $940,000 in 1999, $968,000 in 2000, $998,000 in
2001 and $4,188,000 through June 2002. Minimum annual rentals will be
$1,050,000 during the remaining five years of the lease, if the tenant does
not exercise the buyout option.
4 DEFERRED COSTS
Deferred costs consist of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------------------
<S> <C> <C>
Deferred lease costs $12,781 $11,246
Deferred financing costs 3,870 3,576
-----------------------------------------------------------------
16,651 14,822
Less accumulated amortization (6,365) (5,365)
-----------------------------------------------------------------
$10,286 $ 9,457
-----------------------------------------------------------------
</TABLE>
F-10
<PAGE>
5. BORROWINGS
The Operating Partnership, the Subsidiaries and Weeks Development
Partnership (Note 7), as co-borrowers, entered into a new $175 million
syndicated revolving credit facility (the "Credit Facility") with four
banks in 1996. The Credit Facility is unsecured and can be used for
development and construction, acquisitions and general corporate purposes.
Each co-borrower is liable for its own borrowing; however, the entire
Credit Facility is guaranteed by the Company. Additionally, the Company and
the co-borrowers are required to meet certain financial and non-financial
covenants including limitations on secured borrowings and a restriction on
the amount of dividends and distributions to not more than 95% of funds
from operations, a REIT industry measure of operating performance, unless
additional amounts are necessary to maintain the Company's REIT status
under the Code. The Credit Facility matures on December 31, 1999 and may be
extended annually through December 31, 2002, subject to an annual extention
fee of 0.125%. The Credit Facility replaced the Company's previous single-
bank revolving line of credit.
The Credit Facility provides for advances of up to $175 million, subject to
certain covenants, including those governing the Company's maximum
unsecured borrowings and total leverage. Maximum available advances,
governed by the existing covenants, currently total $175 million. Credit
Facility borrowings are detailed as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
---------------------------------------------------------------------
<S> <C> <C>
Operating Partnership $ 99,400 $34,283
Weeks Construction Services, Inc. -- 3,210
Weeks Development Partnership 2,085 927
Weeks Realty Services, Inc. 1,510 100
---------------------------------------------------------------------
$102,995 $38,520
---------------------------------------------------------------------
</TABLE>
Interest under the Credit Facility accrues at bank prime minus 0.25% or at
LIBOR plus 1.35% at the election of the co-borrowers. The weighted average
interest rate on Credit Facility borrowings, exclusive of the impact of the
interest rate swaps discussed below, was 6.94% and 7.32% at December 31,
1996 and 1995, respectively. Fees on the unused portion of the Credit
Facility are 0.20%.
In July 1996, the Company entered into three interest rate swap agreements
with a commercial bank to effectively change the interest costs on
$50,000,000 of Credit Facility borrowings from the variable rates discussed
above to fixed rates. The agreements, with notional principal amounts of
$10,000,000, $10,000,000 and $30,000,000, terminate in July 1998, July
1999, and July 2001 with effective fixed interest rates of 7.72%, 7.89% and
8.14%, respectively.
F-11
<PAGE>
Mortgage notes payable at December 31, 1996 and 1995, specifically listed
for notes with outstanding balances in excess of $10 million, consist of
the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED RATE
Mortgage note, interest only at 7.13%,
due in 1999 $ 38,000 $ 38,000
Three mortgage notes, interest only at 7.75%,
due in 1998 31,170 31,170
Mortgage note, principal and interest at 9.24%,
due in 2005 16,028 --
Mortgage note, principal and interest at 8.10%,
due in 2006 12,278 --
Mortgage note, interest only at 7.625%, due in 2000 10,300 10,300
Other mortgage notes (20 at December 31, 1996),
principal and interest at 6.71% to 9.80%,
due in 1998 to 2006 83,956 27,663
VARIABLE RATE
Industrial revenue bonds, interest at 4.15% to 6.45%
at December 31, 1996, due in 2004 and 2010 5,843 5,889
------------------------------------------------------------------------------------------
$197,575 $113,022
------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1996 and 1995, fixed rate mortgage notes payable included
27 notes with a weighted average interest rate of 7.98% and 12 notes with a
weighted average interest rate of 7.58%, respectively. The weighted average
term to maturity of fixed rate mortgage notes payable was 5.1 years at
December 31, 1996. Fixed rate mortgage indebtedness increased by
$84,553,000 in 1996 due to the assumption of 16 notes totaling $89,535,000
in conjunction with the NWI and Lichtin acquisition transactions (Note 8),
net of principal repayments. The weighted average interest rate on the
assumed fixed rate indebtedness was approximately 8.50%. Certain Company
officers and Unitholders guarantee a portion of fixed rate mortgage notes.
Variable rate industrial revenue bonds include two separate arrangements.
One bond issue with an outstanding balance of $5,140,000 was refunded in
1996 through the issuance of tax-exempt adjustable-rate bonds with interest
at rates equivalent to short-term tax-exempt Aa2 rated securities. The
second bond issue accrues interest at 78% of the prime lending rate.
Weighted average interest rates under these arrangements were 4.43% and
7.63% at December 31, 1996 and 1995, respectively. The bonds are supported
by letters of credit totaling $5,345,000.
F-12
<PAGE>
Scheduled maturities of mortgage notes payable, at December 31, 1996, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
----------------------------------
<S> <C>
1997 $ 2,035
1998 39,196
1999 48,440
2000 21,329
2001 10,682
2002 and thereafter 75,893
----------------------------------
$197,575
----------------------------------
</TABLE>
Net real estate assets totaling $265,235,000 and $127,228,000 at December
31, 1996 and 1995, respectively, are pledged as collateral under mortgage
notes payable. Interest capitalized for the years ended December 31,1996
and 1995, and for the period from January 1, 1994 to August 23, 1994,
totaled $2,358,000, $1,198,000, and $89,000, respectively.
The extraordinary loss of $2,667,000 ($1,993,000 net of minority interests)
during the period from August 24, 1994 to December 31, 1994 resulted from
mortgage loan prepayment penalties of $2,180,000 and the write-off of
deferred financing costs of $487,000 related to the early retirement of
debt from the proceeds of the IPO.
6. REAL ESTATE DEVELOPMENT LOANS
As part of certain joint development agreements entered into with third
parties, and upon the approval of joint development projects, the Company
lends funds on a secured basis to develop and construct certain properties
and can be required by its development partners to acquire the properties
upon their completion based on the terms specified in the development
agreements, generally at prices equal to the greater of capitalized costs
or the property's net operating income capitalized at specified
capitalization rates, as defined. Additionally, the Company has options to
acquire the properties upon substantial lease-up of the buldings. At
December 31, 1996, the Company had funded $7,645,000 under development loan
agreements relating to three industrial buildings under development in
Atlanta, Georgia. Total loan commitments from the Company for the three
approved projects are approximately $11,741,000. Loans under these
agreements are secured by the industrial buildings under development, bear
interest at rates ranging from LIBOR plus 2.35% to LIBOR plus 2.50%, and
mature from August 1998 to March 1999.
Additionally, at December 31, 1996, the Company had a real estate
development loan to an affiliated joint venture with an outstanding balance
of $1,810,000 ($1,309,000 at December 31, 1995). The total loan commitment
is $2,360,000 and the loan is secured by an industrial building. Interest
accrues at 9% and the loan matures in March 1998. The Company has an option
to acquire the property upon substantial lease-up of the building.
F-13
<PAGE>
7. INVESTMENTS IN AND NOTES RECEIVABLE FROM UNCONSOLIDATED ENTITIES
The Company conducts third-party construction, landscape, property
management and leasing service businesses through the Subsidiaries. Through
Weeks Development Partnership ("Weeks Development"), wholly owned by the
Subsidiaries, the Subsidiaries also own land in various business parks,
either directly or through ownership interests in real estate partnerships
and joint ventures. The Company and Weeks Group developed and own operating
properties in these business parks. The Company intends, based on market
conditions, to acquire land from Weeks Development and its affiliated
partnerships and joint ventures for the development of future operating
properties. As discussed in Note 2, these Subsidiaries are accounted for on
the equity method of accounting. Under the equity method, the Company
recognizes, in its consolidated statements of operations, its economic
share (99%) of the Subsidiaries' earnings and losses.
The following information summarizes the financial position, results of
operations and cash flows of the Subsidiaries and Weeks Development on a
combined basis for the years ending December 31, 1996 and 1995, and for the
period from August 24, 1994 to December 31, 1994, and selected operating
data of Weeks Group for the period from January 1, 1994 to August 23, 1994.
The operating data of Weeks Group is included in the combined financial
statements of Weeks Group (Note 2) but is also reflected below for
comparison purposes (in thousands):
<TABLE>
<CAPTION>
FINANCIAL POSITION Dec. 31, 1996 Dec. 31,1995
------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate assets, principally land $ 7,200 $ 7,012
Investments in real estate partnerships
and joint ventures 3,025 3,417
Receivables and other assets 13,113 10,892
-------------------------------------------------------------------------
$23,338 $21,321
-------------------------------------------------------------------------
LIABILITIES AND EQUITY
Notes payable to Company $10,921 $10,939
Credit facility borrowings 3,595 4,237
Other borrowings 1,261 1,828
Other liabilities 10,725 7,505
Total equity (3,164) (3,188)
-------------------------------------------------------------------------
$23,338 $21,321
-------------------------------------------------------------------------
</TABLE>
The notes payable to the Company accrue interest at 12%, payable annually,
and mature in 2004. The notes are secured by land and by Weeks
Development's interests in real estate partnerships and joint ventures. The
operations of the Subsidiaries and Weeks Development are financed, as
necessary, through direct borrowings under the Credit Facility.
F-14
<PAGE>
At December 31, 1996, the Company's investment in and notes receivable from
the Subsidiaries totaling $7,760,000 includes notes receivable from the
Subsidiaries of $10,921,000 and the Company's investment in the Susidiaries
of ($3,161,000).
<TABLE>
<CAPTION>
Subsidiaries Weeks Group
--------------------------------------------- -------------
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23,1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
REVENUE
Construction and development
fees $ 2,233 $ 1,483 $ 636 $ 990
Landscape 5,035 3,854 1,054 2,169
Property management fees 193 498 196 425
Commissions 448 582 316 429
Other 316 191 25 --
---------------------------------------------------------------------------------------------------
8,225 6,608 2,227
---------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Direct costs 4,327 3,504 1,034 1,954
Interest expense - Company 1,314 1,326 468 --
Interest expense - third parties 365 295 -- --
General and administrative 1,694 1,518 555 802
Other 498 173 16 --
---------------------------------------------------------------------------------------------------
8,198 6,816 2,073
---------------------------------------------------------------------------------------------------
Equity in earnings of partnerships
and joint ventures (1) 101 72
---------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 26 $ (107) $ 226
---------------------------------------------------------------------------------------------------
Net income (loss) attributable
to Company $ 26 $ (106) $ 224
Interest expense - Company 1,314 1,326 468
---------------------------------------------------------------------------------------------------
Equity in earnings of Subsidiaries $ 1,340 $ 1,220 $ 692
---------------------------------------------------------------------------------------------------
Distributions and interest
paid to the Company $ 1,313 $ 1,510 $ 692
---------------------------------------------------------------------------------------------------
CASH FLOWS:
---------------------------------------------------------------------------------------------------
Operating activities $ 4,460 $ 1,529 $(2,401)
Investing activities (2,540) (2,786) (553)
Financing activities (487) 1,190 3,121
</TABLE>
F-15
<PAGE>
8. ACQUISITIONS
On November 1, 1996, the Company completed the first phase of an acquistion
of a 2.2 million square foot, 23 building industrial portfolio located in
Nashville, Tennessee, owned and managed by NWI Warehouse Group, L.P. and
its affiliates ("NWI"). The first phase of the transaction was comprised of
the acquisition of 17 industrial buildings and the combination of NWI's
business operations, management and employees with those of the Company,
for aggregate acquisition consideration of approximately $71.1 million
including closing costs and acquisition expenses. Acquisition consideration
was comprised of the assumption of approximately $42.0 million of mortgage
debt, the issuance of approximately $27.5 million of Units in the Operating
Partnership (at a price of $25.00 per Unit), and the funding of closing
costs and acquisition expenses of approximately $1.6 million through Credit
Facility borrowings. In 1996, subsequent to the initial closing, the
Company acquired 45 net usable acres of undeveloped land for aggregate
consideration, consisting solely of Units in the Operating Partnership, of
approximately $6.3 million, including reimbursement for certain
infrastructure costs. The Company has agreed, subject to updating its due
diligence procedures and the completion of properties under development, to
acquire six development properties over a 17-month period and to acquire
105 net usable acres of undeveloped land over a period of up to six years.
The estimated aggregate acquisition consideration for the remaining assets
to be acquired is expected to be comprised primarily of Units in the
Operating Partnership and assumed indebtedness that total approximately
$47.9 million (subject to adjustment for inflation and actual operating
results for certain development properties to be acquired).
On December 31, 1996, the Company completed the first phase of a separate
acquisition of a 2.1 million square foot, 29 building industrial and
suburban office portfolio in the Raleigh-Durham-Chapel Hill area of North
Carolina, owned and managed by Lichtin Properties, Inc. and its affiliates
("Lichtin"). The first phase of the transaction was comprised of the
acquisition of 14 industrial and suburban office buildings and the
combination of Lichtin's business operations, management and employees with
those of the Company for aggregate acquisition consideration of
approximately $90.5 million (including closing costs and acquisition
expenses), and approximately 37 net usable acres of undeveloped land and
options to acquire an additional 177 net usable acres of undeveloped land
for total acquisition consideration of approximately $3.3 million.
Acquisition consideration consisted of shares of Company common stock and
Units in the Operating Partnership having an aggregate value of
approximately $7.1 million and $14.3 million, respectively, (at a price of
$25.25 per share and Unit), approximately $8.6 million of cash, the
assumption of approximately $47.6 million of mortgage indebtedness, the
assumption and repayment of other indebtedness through borrowings under the
Company's Credit Facility of approximatley $15.0 million and the funding of
closing costs and acquisition expenses of approximately $1.2 million
through Credit Facility borrowings. The Company has agreed, subject to due
diligence procedures and the completion of properties under development, to
acquire 15 completed and under development properties over the ensuing 18-
month period and to acquire 64 net usable acres of undeveloped land over
the next four years. The estimated aggregate acquisition consideration for
the remaining assets to be acquired is expected to be comprised primarily
of Units in the Operating Partnership and assumed indebtedness that total
approximately $71.7 million (subject to adjustment for the actual operating
results for certain completed and development properties to be acquired).
F-16
<PAGE>
The NWI and Lichtin acquisitions have been accounted for as purchases and
the related acquisition costs have been allocated to the assets acquired
and liabilities assumed based on estimates of their fair values.
The Company's consolidated results of operations for the year ended
December 31, 1996, included the operating results of NWI beginning on
November 1, 1996, the acquisition date. The unaudited pro forma information
below presents the consolidated results of operations as if the initial
phases of the NWI and Lichtin acquisitions had occurred at the beginning of
the respective periods presented. The unaudited pro forma information is
not necessarily indicative of the results of operations of the Company had
the acquisitions occurred at the beginning of the periods presented, nor is
it necessarily indicative of future results. Additionally, the unaudited
pro forma information excludes the impact of the buildings and land to be
acquired in future periods from NWI and Lichtin.
<TABLE>
<CAPTION>
(Unaudited, in thousands, except per share amounts) Dec. 31, 1996 Dec. 31, 1995
------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $70,954 $49,478
Net income 10,555 6,226
Earnings per share $ 0.89 $ 0.74
</TABLE>
Additionally in 1996, the Company acquired 15 industrial and suburban
office buildings totaling approximately 761,000 square feet located
primarily in the northeast submarket of Atlanta, Georgia for an aggregate
price of $40,102,000, including closing costs and acquisition expenses. The
acquisitions were funded through Credit Facility borrowings.
In 1995, the Company acquired 49 industrial buildings totaling 2,564,000
square feet for an aggregate price of $110,141,000, including closing costs
and acquisition expenses. These acquisitions were funded through Credit
Facility borrowings and through the assumption of existing mortgage
indebtedness of $39,511,000. Four of the acquired buildings totaling
190,000 square feet are located in Orlando, Florida, and the other
buildings are located in metropolitan Atlanta, Georgia. In conjunction with
two of the property acquisitions, the Company entered into agreements with
the sellers to jointly develop additional industrial buildings, as market
conditions warrant, on adjacent land controlled by the sellers (Note 6).
9. SHAREHOLDERS' EQUITY
In November 1996, the Company completed a public offering of 2,573,333
shares of common stock and received net proceeds of $68,532,000. The
proceeds of the offering were used to reduce Credit Facility borrowings.
This equity offering was the final drawdown under a $150 million equity
shelf registration filed in 1995. In January 1997, the Company completed a
new $300 million equity shelf registration. Additionally in 1996, the
Company implemented a dividend reinvestment plan and registered 300,000
shares of common stock for future issuance thereunder. In 1996, a total of
1,514 shares of common stock were issued through the dividend reinvestment
plan.
F-17
<PAGE>
In November 1995, the Company completed a public offering of 3,450,000
shares of common stock and received net proceeds of $72,800,000. The
proceeds were used to reduce Credit Facility borrowings. The equity
offering was a partial drawdown under the Company's $150 million equity
shelf registration filed in 1995. Additionally, in November 1995, Operating
Partnership Units totaling 25,602 were converted into 25,602 shares of
common stock. The conversion was reflected in the accompanying consolidated
financial statements at book value.
10. LEASING ACTIVITY
Future minimum rents due under noncancelable operating leases with tenants
at December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
--------------------------------
<S> <C>
1997 $ 65,003
1998 54,685
1999 44,004
2000 32,808
2001 24,779
2002 and thereafter 62,518
--------------------------------
$283,797
--------------------------------
</TABLE>
11. RELATED-PARTY TRANSACTIONS
At December 31, 1996 and 1995, receivables included $465,000, due from the
Subsidiaries, relating to accrued interest (payable annually) on the
Subsidiaries' notes. At December 31, 1996 and 1995, accounts payable and
accrued expenses included $154,000 and $1,395,000, respectively, due to the
Subsidiaries.
In periods subsequent to the IPO, the Subsidiaries have provided
development, construction, landscape, property management and leasing
services to affiliated partnerships and joint ventures. Prior to the IPO,
those services were provided by Weeks Group. Total revenues for such
services to related parties of the Subsidiaries and Weeks Group were (in
thousands):
<TABLE>
<CAPTION>
Subsidiaries Weeks Group
------------------------------------------- -------------
Year ended Year ended Aug. 24 to Jan. 1 to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Aug. 23, 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Construction and development fees $ 678 $ 418 $142 $658
Landscape 271 423 81 183
Commissions 94 169 156 148
---------------------------------------------------------------------------------------------------
$1,043 $1,010 $379 $989
---------------------------------------------------------------------------------------------------
</TABLE>
The controlling partners of Weeks Group historically utilized their capital
accounts in the various Weeks Group entities similar to a clearing account
whereby they regularly made contributions and received distributions. Since
the contributions and distributions did not necessarily reflect the
economic cash flows or cash needs of Weeks Group, management believes that,
in Weeks Group's circumstances, the separation of contributions or
distributions made in periods prior to the IPO would not provide meaningful
information. Therefore, such amounts are reported net in the accompanying
Weeks Group financial statements.
F-18
<PAGE>
12. INCENTIVE STOCK PLAN
The Company has an Incentive Stock Plan (the "Plan") under which shares of
Company common stock have been reserved for the issuance of options and
restricted stock. Total shares reserved for issuance under the Plan were
increased by 390,000 shares in 1996, to a total of 1,000,000 shares, as
approved by the shareholders in May 1996. Participants in the Plan may be
officers and employees of the Company, its Subsidiaries or designated
affiliates, as well as Company directors. The exercise price of all options
under the Plan is not less than the fair market value of the Company's
common stock on the date of grant and such options may be exercised for
periods up to ten years.
In 1995, SFAS 123, "Accounting for Stock-Based Compensation" was issued
requiring the Company either to continue its current accounting for stock-
based compensation under Accounting Principles Board Opinion ("APB") No. 25
or elect the fair value-based method of accounting prescribed by SFAS 123.
The Company elected to continue to account for stock-based compensation
under APB No. 25 and has implemented the additional disclosure requirements
prescribed by SFAS 123 and such disclosures are included below.
Under SFAS 123, the fair value of stock options granted in 1996 and 1995
has been estimated using a binomial option pricing model with the following
weighted average assumptions for grants in 1996 and 1995, respectively:
risk free interest rates of 5.7% and 5.8%, expected option lives of five
years for options granted in both years, expected volatility of 16.5% for
both years and expected dividend yields of 5.7% and 6.2%. Using these
assumptions, the estimated fair value of options granted in 1996 and 1995
was $945,220 and $174,850, respectively, and such amounts would be included
in compensation expense over the vesting period of the options. Pro forma
net income and earnings per share for the years ended December 31, 1996 and
1995, assuming the Company had accounted for the Plan under SFAS 123 are as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-----------------------------------------------------
<S> <C> <C>
Net income:
As reported $12,745 $8,426
Pro forma 12,264 8,381
Net income per share:
As reported $ 1.11 $ 1.03
Pro forma 1.07 1.03
</TABLE>
As the provisions of SFAS 123 have not been applied to options granted
prior to January 1, 1995, the resulting pro forma annual compensation cost
may not be representative of that expected in future years.
F-19
<PAGE>
A summary of stock option activity under the Plan is presented in the table and
narrative below (share amounts in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 503 $19.90 443 $19.28 -- $ --
Granted 283 28.22 65 24.11 443 19.28
Exercised (33) 19.25 -- -- -- --
Forfeited -- -- (5) 19.25 -- --
---------------------------------------------------------------------------------------------------
Options outstanding,
end of year 753 $23.06 503 $19.90 443 $19.28
---------------------------------------------------------------------------------------------------
Options exercisable,
end of year 552 52 16
---------------------------------------------------------------------------------------------------
Weighted average per
share fair value
of options granted $3.34 $2.69
</TABLE>
At December 31, 1996, options for 606,000 shares are outstanding having
exercise prices ranging from $19.25 to $26.00, with a weighted average
exercise price of $21.31 and a weighted average contractual life of 7.70
years, of which 420,000 options are exercisable with a weighted average
exercise price of $19.48. Options for 147,000 shares are also outstanding
having exercise prices ranging from $28.63 to $33.25, with a weighted
average exercise price of $30.27 and a weighted average contractual life of
9.9 years, of which 132,000 options are exercisable with a weighted average
exercise price of $30.45.
13. EMPLOYEE BENEFIT PLAN
The Company and the Subsidiaries ("Plan Sponsors") sponsor a 401(k)
retirement savings plan covering substantially all employees meeting
certain age and service requirements. Employees may contribute up to the
lesser of 20% of their annual compensation or the annual statutory limit
($9,500 in 1996) to the plan. Plan Sponsors' contributions are made on a
discretionary basis up to a maximum of 100% of the employees' contributions
(currently 50% of the employee's contribution up to 3.2% of an employee's
annual compensation). Total Plan Sponsor contributions were $88,000,
$76,000, and $63,000 in 1996, 1995 and 1994, respectively.
14. COMMITMENTS AND CONTINGENCIES
As reflected in Note 8, the Company has entered into agreements for the
future acquisition of land and buildings from NWI and Lichtin totaling
approximately $119.6 million at December 31, 1996. In addition, the Company
has agreed, subject to updating its due diligence procedures, to acquire
development land totaling approximately $2.2 million. Letters of credit
totaling approximately $7.2 million were issued on behalf of the Company in
support of certain development, land acquisition and financing arrangements
at December 31, 1996.
F-20
<PAGE>
The Company is subject to various legal proceedings and claims that arise
in the ordinary course of business. While the resolution of these matters
cannot be predicted with certainty, management believes that the final
outcome of such matters will not have a material adverse effect on the
Company's financial position or results of operations.
15. SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of amounts capitalized (Note 5), totaled $11,265,000 in
1996, $7,892,000 in 1995, $1,809,000 for the period from August 24, 1994 to
December 31, 1994 and $6,568,000 for the period from January 1, 1994 to
August 23, 1994.
Significant noncash investing and financing activities were as follows:
a. The Company's 1996 acquisitions of NWI and Lichtin included the
assumption of mortgage notes payable of $104,628,000, the issuance of
Units valued at $48,085,000 and the issuance of common stock valued at
$7,124,000.
b. The Company's 1995 property acquisitions included the assumption of
mortgage notes payable of $39,511,000 and the application of notes
receivable and deposits of $3,540,000.
c. In conjunction with the Company's IPO in 1994, the Company acquired
certain property interests subject to mortgage notes payable of
$9,072,000 and in exchange for Units totaling $8,053,000.
16. FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to the
Company at December 31, 1996, the Company estimates that the carrying
values of cash and cash equivalents, the notes receivable from the
Subsidiaries, the real estate development loans, the direct financing lease
receivable, other receivables, mortgage notes payable, other liabilities
and Credit Facility borrowings approximate their fair values when compared
to instruments of similar type, terms and maturity.
The estimated fair value of the Company's interest rate swap arrangements
(Note 5), determined based on quoted market prices for similar financial
instruments, was approximately $955,000 less than the Company's carrying
value at December 31, 1996. The Company uses interest rate swaps to manage
its exposure to interest rate changes on Credit Facility borrowings. Under
current accounting principles and as long as the Company maintains
outstanding Credit Facility borrowings at least equal to the $50,000,000
notional amounts of the interest rate swaps, the difference between the
fair value and carrying amount of the arrangements are not recognized in
the Company's consolidated financial statements. The Company monitors the
credit quality of the financial institution which is the counterparty to
its interest rate swap arrangements and does not anticipate nonperformance
from the financial institution.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1996. Although
management is not aware of any factors that would significantly affect the
fair value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date.
F-21
<PAGE>
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information for 1996 and 1995 was as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Revenue $12,129 $12,379 $13,555 $15,820
Income before minority interests 3,814 3,805 3,731 4,459
Net income 3,101 3,092 3,033 3,519
Net income per share $ 0.28 $ 0.28 $ 0.27 $ 0.28
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------
1995
Revenue $ 6,994 $ 7,535 $ 9,186 $11,556
Income before minority interests 2,765 2,824 2,543 2,975
Net income 2,067 2,111 1,901 2,347
Net income per share $ 0.27 $ 0.28 $ 0.25 $ 0.24
</TABLE>
F-22
<PAGE>
EXHIBIT 99.5
Audited Combined Financial Statements
NWI Warehouse Group
Years ended December 31, 1994 and 1995
with Report of Independent Auditors
<PAGE>
NWI Warehouse Group
Audited Combined Financial Statements
Years ended December 31, 1994 and 1995
CONTENTS
Report of Independent Auditors................................................1
Audited Combined Financial Statements
Combined Balance Sheets as of December 31, 1994
and 1995 and June 30, 1996 (Unaudited)......................................2
Combined Statements of Income for the Years Ended
December 31, 1994 and 1995 and the Six Months
Ended June 30, 1995 and 1996 (Unaudited)....................................3
Combined Statements of OwnersO Equity for the Years
Ended December 31, 1994 and 1995 and the Six Months
Ended June 30, 1996 (Unaudited).............................................4
Combined Statements of Cash Flows for the Years Ended
December 31, 1994 and 1995 and the Six Months
Ended June 30, 1995 and 1996 (Unaudited)....................................5
Notes to Combined Financial Statements........................................7
<PAGE>
Report of Independent Auditors
To the Partners of NWI Warehouse Group, L.P.
and Owners of Buckley & Company Real Estate, Inc.
We have audited the accompanying combined balance sheets as of DecemberE31, 1994
and 1995, of NWI Warehouse Group (Note 1), and the related combined statements
of income, owners' equity, and cash flows for the years ended December 31, 1994
and 1995. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements 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 combined financial position at DecemberE31, 1994 and
1995, of NWI Warehouse Group (Note 1), and the combined results of their
operations and their cash flows for the years ended December 31, 1994 and 1995
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Atlanta, Georgia
September 27,1996
<PAGE>
NWI Warehouse Group
Combined Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30,
1994 1995 1996
--------------------------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Real estate assets:
Land $ 9,113 $13,008 $17,342
Buildings and improvements 30,885 35,255 41,817
Accumulated depreciation (5,453) (6,575) (7,181)
------------------------------
Operating real estate assets 34,545 41,688 51,978
Developments in progress 1,870 11,149 10,255
Land held for future development 4,866 9,555 7,037
------------------------------
Net real estate assets 41,281 62,392 69,270
Cash and cash equivalents 785 1,313 2,669
Notes receivable from related parties 4,662 - -
Deferred financing costs, net 354 716 875
Receivables, net 981 753 936
Receivables, related parties 55 166 36
Other assets 313 85 121
------------------------------
Total assets $48,431 $65,425 $73,907
==============================
LIABILITIES AND OWNERS' EQUITY
Mortgage notes payable $29,237 $43,641 $50,269
Bank line of credit 185 640 1,500
Notes payable, other 523 963 899
Notes payable, related parties 1,362 1,220 1,560
Accounts payable and accrued expenses 2,098 2,438 2,313
Other liabilities 92 126 155
------------------------------
Total liabilities 33,497 49,028 $50,269
1,500
Owners' equity 24,180 25,219 899
Less: notes receivable from owners (9,246) (8,822) 1,560
Owners' equity, net 14,934 16,397 2,313
155
------------------------------
Total liabilities and owners' equity $48,431 $65,425 $73,907
==============================
</TABLE>
See accompanying notes.
<PAGE>
NWI Warehouse Group
Combined Statements of Income
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
1994 1995 1995 1996
------------------------- --------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Rental income $4,978 $5,836 $2,718 $3,675
Tenant reimbursements 875 994 350 662
Other 28 348 84 134
------------------------- --------------------------
5,881 7,178 3,152 4,471
------------------------- --------------------------
Expenses:
Property operating and maintenance 763 762 380 426
Real estate taxes 559 642 321 335
Tenant improvements and lease
commissions 131 445 200 307
Depreciation 984 1,127 543 621
Interest - third party 2,470 3,000 1,440 2,029
Interest - related party 11 93 45 65
Amortization of deferred financing
costs 53 93 47 54
General and administrative 479 643 271 325
------------------------- --------------------------
5,450 6,805 3,247 4,162
------------------------- --------------------------
Operating income (loss) 431 373 (95) 309
Interest income from related parties 1,385 1,117 588 445
------------------------- --------------------------
Income before income taxes 1,816 1,490 493 754
Income tax expense 39 102 41 48
------------------------- --------------------------
Net income $1,777 $1,388 $ 452 $ 706
========================= ==========================
</TABLE>
See accompanying notes.
<PAGE>
NWI Warehouse Group
Combined Statements of Owners' Equity
(In thousands)
<TABLE>
<S> <C>
Owners' equity, January 1, 1994 $22,431
Contributions 288
Distributions/dividends (316)
Net income 1,777
---------
Owners' equity, December 31, 1994 24,180
Distributions/dividends (349)
Net income 1,388
---------
Owners' equity, December 31, 1995 25,219
Distributions/dividends (unaudited) (1,147)
Net income (unaudited) 706
---------
Owners' equity, June 30, 1996 (unaudited) $24,778
=========
</TABLE>
See accompanying notes.
<PAGE>
NWI Warehouse Group
Combined Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
1994 1995 1995 1996
------------------------ --------------------------
(Unaudited)
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income $ 1,777 $ 1,388 $ 452 $ 706
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,037 1,220 590 675
Provision for bad debts 168 183 61 36
Straight-line rent revenue 60 171 86 47
Accrued interest income on notes
receivable from related parties (905) (572) (42) (162)
Net change in:
Receivables 259 (203) 155 (106)
Accounts payable, accrued expenses and
other liabilities 196 211 (130) (63)
Other (300) 153 171 (52)
----------------------- --------------------------
Net cash provided by operating
activities 2,292 2,551 1,343 1,081
----------------------- --------------------------
INVESTING ACTIVITIES
Property acquisition, development and
construction (9,499) (22,034) (10,367) (7,546)
Notes receivable collections 1,762 10,823 10,823 850
Interest proceeds on notes receivable - 3,483 3,483 572
Notes receivable additions - (8,648) (8,649) (5)
------------------------ --------------------------
Net cash used in investing activities (7,737) (16,376) (4,710) (6,129)
------------------------ --------------------------
</TABLE>
<PAGE>
NWI Warehouse Group
Combined Statements of Cash Flows (continued)
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
1994 1995 1995 1996
------------------------- --------------------------
(Unaudited)
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from mortgage, construction
and other notes payable 3,730 21,610 4,269 8,583
Repayments of mortgage, construction
and other notes payable (625) (6,766) (315) (2,019)
Proceeds from notes payable to related
parties 961 517 427 520
Principal payments on notes payable to
related parties (62) (659) (659) (180)
Line of credit proceeds (repayments),
net 185 455 (90) 860
Contributions 288 - - -
Distributions/dividends (316) (349) (162) (1,147)
Deferred financing costs (44) (455) (219) (213)
------------------------- --------------------------
Net cash provided by financing
activities 4,117 14,353 3,251 6,404
------------------------- --------------------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,328) 528 (116) 1,356
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,113 785 785 1,313
------------------------- --------------------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 785 $ 1,313 $ 669 $ 2,669
========================= ==========================
Supplemental disclosure of cash flow
information:
Interest paid $ 2,478 $ 2,972 $ 1,258 $ 2,185
========================= ==========================
Interest capitalized $ 75 $ 135 $ 112 $ 156
========================= ==========================
</TABLE>
See accompanying notes.
<PAGE>
NWI Warehouse Group
Notes to Combined Financial Statements
Years ended December 31, 1994 and 1995
1. ORGANIZATION AND BASIS OF COMBINATION
NWI Warehouse Group ("NWI") represents the combined industrial building
development, construction, ownership and management operations of NWI Warehouse
Group, L.P. (the "Partnership") and certain assets, liabilities and operations
of Buckley & Company Real Estate, Inc. ("Buckley"), comprising primarily the
property management operations of NWI. The accompanying financial statements of
NWI have been presented on a combined basis due to the anticipated common
ownership through their acquisition by a real estate investment trust (Note 10).
As of December 31, 1995, NWI owned and managed 15 industrial buildings
comprising 1.3 million square feet and had nine additional buildings under
development or in lease-up comprising an additional 1.1 million square feet.
The buildings are located in Nashville, Tennessee.
The Partnership commenced business operations in 1993 through a combination with
nine related partnerships and the contribution of certain assets and liabilities
of other related partnerships and entities under common management and control.
In 1994, six additional related partnerships were combined with and into the
Partnership. These combining, related partnerships (the "Predecessor
Partnerships") discussed herein, and their related properties, are as follows:
<PAGE>
1. ORGANIZATION AND BASIS OF COMBINATION (CONTINUED)
<TABLE>
<CAPTION>
COMMENCEMENT OF
RENTAL OPERATIONS
PREDECESSOR PARTNERSHIPS PROPERTY
------------------------------------------------------------------------------
<S> <C> <C>
Partnerships:
Pine Tree Corporation Airpark I 1985
NWI VI, L.P. Airpark II 1986
NWI VII, L.P. Airpark III 1986
NWI XIV, L.P. Airpark IV 1989
NWI XI, L.P. Airpark V 1988
NWI XVI, L.P. Airpark VI 1990
NWI XIX, L.P. Airpark VII 1992
NWI XX, L.P. Airpark VIII 1995
NWI XXI, L.P. Airpark IX 1995
NWI VIII, L.P. Brentwood South I 1987
NWI IX, L.P. Brentwood South II 1987
NWI XVII, L.P. Brentwood South III 1989
NWI XVIII, L.P. Brentwood South IV 1990
NWI XXIII, L.P. Brentwood South V 1990
NWI XXII, L.P. Brentwood South VI 1990
</TABLE>
The combination of the Predecessor Partnerships, described above, was accounted
for as a reorganization of entities under common control and, accordingly, the
related assets, liabilities and owner's equity were reflected at historical cost
in a manner similar to that in pooling of interests accounting. Accordingly,
the accompanying combined financial statements of NWI, have been presented
giving retroactive effect to all periods prior to the combinations. All
significant intercompany accounts and transactions have been eliminated in these
combined financial statements.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REAL ESTATE ASSETS
Buildings and improvements are recorded at the lower of cost or estimated fair
value and are depreciated on the straight-line basis over their estimated useful
lives of 19 to 31.5 years. The cost of buildings and improvements includes
interest, property taxes and insurance incurred during the period of
construction. Initial tenant finishes are capitalized and depreciated over the
life of the building. Subsequent tenant finishes are generally expensed unless
permanent changes are made to the leasehold improvement. Significant
renovations or betterments which extend the economic useful life of an asset are
capitalized. Expenditures for maintenance and repairs are charged to operations
as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid investments purchased with
original maturities of three months or less from the date of purchase. NWI
maintains, from time to time, cash deposits in excess of federally insured
amounts at one banking institution.
REVENUE RECOGNITION
All leases are classified as operating leases and the related rental income is
recognized on a straight-line basis over the terms of the respective leases.
Costs incurred to procure operating leases are expensed. Straight-line rent
receivables totaled $392,000 and $563,000 as of December 31, 1994 and 1995,
respectively. Tenant reimbursements for property taxes and other recoverable
expenses are recognized as revenues in the period the applicable expenses are
incurred. NWI provides for uncollectible tenant receivables based on a review
of specific receivable balances and past collection experience. The allowance
for doubtful accounts totaled $77,000 and $114,000 at December 31, 1994 and
1995, respectively.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs include fees and costs incurred to obtain long-term
financing, and are amortized over the term of the loan. Accumulated
amortization totaled $146,000 and $239,000 at December 31, 1994 and 1995,
respectively.
ACCOUNTING RECORDS
NWI's underlying accounting records are maintained on the cash basis of
accounting utilized for income-tax reporting purposes. The accompanying
combined financial statements have been adjusted to the accrual basis of
accounting prescribed by generally accepted accounting principles and thus
reflect accounts receivable, accrued straight-line rents, accrued interest on
notes receivable to related parties, accounts payable, accrued interest, and
other accruals that are not recorded in the accounting records. The combined
financial statements also reflect adjustments for depreciation and amortization
to convert the accounting records to the accrual basis of accounting.
USE OF ESTIMATES
The preparation of the 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
accompanying notes. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, was issued. SFAS 121 established
new standards on how impairment losses on long-lived assets, including real
estate assets, should be measured. NWI's adoption of Statement 121, effective
January 1, 1995, had no effect on the accompanying combined financial
statements.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM FINANCIAL INFORMATION
The combined balance sheet as of June 30, 1996 and the combined statements of
income and cash flows for the six months ended June 30, 1995 and 1996 (interim
financial statements) have been prepared by management and are unaudited. In
the opinion of management the interim financial statements include all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of the interim results. The results for the six months ended
June 30, 1995 and 1996 may not be indicative of operating results for the full
respective years.
3. NOTES RECEIVABLE FROM OWNERS AND RELATED PARTIES
NWI has $13,908,000 and $8,822,000 at December 31, 1994 and 1995, respectively,
in notes receivable from the owners of NWI and other related real estate
partnerships that have the same owners and/or general partner as the
Partnership. The notes are unsecured, payable upon demand and are generally
repaid from the sale of the assets, if any. The notes bear interest at 10% which
is not due until the note is paid in full. However, at the option of the payee
interest can be paid throughout the period that the note is outstanding.
Interest earned on notes receivable from related parties totaled $1,385,000 and
$1,117,000 for the years ended DecemberE31, 1994 and 1995, respectively.
<PAGE>
3. NOTES RECEIVABLE FROM OWNERS AND RELATED PARTIES (CONTINUED)
The related parties, along with the principal and interest owed by each at
December 31, 1994 and 1995, are as follows:
<TABLE>
<CAPTION>
1994
- ------------------------------------------------------------------------
RELATED PARTY PRINCIPAL INTEREST TOTAL
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Notes receivable from Owners:
NWI X, L.P. $4,594 $1,795 $6,389
Albert Buckley 193 116 309
John W. Nelley, Jr. 948 532 1,480
Pine Tree Corporation 765 303 1,068
--------------------------------
$6,500 $2,746 $9,246
================================
Notes receivable from Related Parties:
Four Forty Associates, L.P. $3,759 $ 713 $4,472
Airpark West, L.P. 167 23 190
--------------------------------
$3,926 $ 736 $4,662
================================
</TABLE>
<TABLE>
<CAPTION>
1995
- ------------------------------------------------------------------------
RELATED PARTY PRINCIPAL INTEREST TOTAL
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Notes receivable from Owners:
NWI X, L.P. $5,200 $ 311 $5,511
Albert Buckley 360 31 391
John W. Nelley, Jr. 1,500 130 1,630
Pine Tree Corporation 1,190 100 1,290
--------------------------------
$8,250 $ 572 $8,822
================================
</TABLE>
NWI X, L.P. is the general partner of the Partnership. The general partners of
NWI X, L.P. are also the general partners of Airpark West, L.P. and Four Forty
Associates, L.P.
<PAGE>
4. RELATED PARTY TRANSACTIONS
NWI has notes payable to partners of the Partnership of $1,362,000 and
$1,220,000 and accrued interest payable of $11,000 and $7,000 at DecemberE31,
1994 and 1995, respectively. These notes payable are unsecured, payable upon
demand and bear interest ranging from 9% to 10%.
NWI purchased undeveloped land from related parties for $3,895,000 and
$5,204,000 in 1994 and 1995, respectively. NWI also paid legal, accounting and
property maintenance fees to related parties totaling $241,000 and $26,000 in
1994 and 1995, respectively.
NWI received rental income and expense reimbursements of $639,000 and $251,000,
for the years ended December 31, 1994 and 1995, respectively, from entities
which are owned by individuals who are also investors in NWI.
<PAGE>
5. NOTES PAYABLE AND BANK LINE CREDIT
Mortgage notes payable consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1994 1995
------------------------
<S> <C> <C>
Mortgage note, principal and interest payable
monthly at 8.1%, due in 2006 $12,745 $12,521
Mortgage note, principal and interest payable
monthly at 8.0%, due in 2006 - 8,962
Mortgage note, principal and interest payable
monthly at 9.5%, due in 2000 7,230 7,157
Mortgage note, principal and interest payable
monthly at 9.5%, due in 1998 2,683 2,659
Mortgage note, with monthly payments at varying
amounts, including interest at bank prime plus
1/2% (9.0% at December 31, 1995), due in 1998 2,411 2,404
Mortgage note, principal and interest payable
monthly at 9.80%, due in 2000 2,210 2,193
Mortgage note, principal and interest payable
monthly at 8.0%, due in 2006 - 1,990
Construction loans, with varying monthly
payments and interest at bank prime plus 1/2%,
due in 1997 through 1999 1,958 3,503
Land loan, annual principal payments of $300,000
plus monthly payments of interest at bank prime
plus 1/2% (9.0% at December 31, 1995), due in
1998 - 2,252
-----------------------
$29,237 $43,641
=======================
</TABLE>
<PAGE>
5. NOTES PAYABLE AND BANK LINE OF CREDIT (CONTINUED)
At December 31, 1995, the Partnership had a secured line of credit agreement
with a bank. Under its terms, the Partnership could borrow up to $1,110,000 at
the bankOs index rate (8.5% at DecemberE31, 1995). The agreement was secured by
land held for development totaling $2,090,000 at DecemberE31, 1995. At December
31, 1994 and 1995, the Partnership had borrowings of $185,000 and $640,000 under
this agreement, respectively. In 1996, the line of credit was renewed and
expanded into a $5,600,000 agreement which matures in 1999.
As of December 31, 1994 and 1995 NWI had other notes payable totaling $523,000
and $963,000, respectively, to various unrelated individuals and trusts that are
unsecured and payable upon demand. These notes bear interest ranging from 9% to
10% and are used to purchase land, construct buildings, and fund operations.
At December 31, 1995, aggregate available borrowing capacity under construction
loans was approximately $6,102,000.
Aggregate principal payments required by mortgage, construction and other notes
payable as of December 31, 1995 are as follows (in thousands):
1995
----------------
1996 $ 2,469
1997 1,494
1998 6,031
1999 3,058
2000 11,060
Thereafter 21,132
----------------
$45,244
================
<PAGE>
6. LEASING ACTIVITY
Future minimum rentals receivable in accordance with tenant lease terms under
noncancelable operating leases as of DecemberE31, 1995 are as follows (in
thousands):
1995
---------------
1996 $ 5,870
1997 5,202
1998 4,200
1999 3,134
2000 1,514
Thereafter 860
---------------
$20,780
===============
7. COMMITMENTS AND CONTINGENCIES
As of DecemberE31, 1995, NWI had total construction commitments of $11,228,000
on buildings under development.
NWI is involved in litigation arising in the ordinary course of business. Such
matters, if decided adversely to NWI, would not, in the opinion of management,
have a material adverse effect on the combined financial condition of NWI.
8. INCOME TAXES
The Partnership is not subject to federal or state income taxes as Partnership
income or loss is reported by the individual partners in their respective tax
returns. Accordingly, income taxes are not reflected in the accompanying
combined financial statements of NWI related to the Partnership. Buckley is a
taxable entity. In accordance with the provisions of the SFAS No. 109,
Accounting for Income Taxes, current taxes have been attributed to the accounts
of Buckley as if it were a separate tax payer. At December 31, 1994 and 1995
income tax expense of $39,000 and $102,000, respectively, has been reflected in
the combined financial statements at statutory rates.
<PAGE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to NWI at
December 31, 1995, NWI estimates that the carrying value of cash and cash
equivalents, receivables, notes payable, line of credit borrowings and other
liabilities approximate their fair values when compared to instruments of
similar type, terms and maturity. The carrying amount of related party notes
receivable and notes payable approximate fair value however, such amounts have
not been revalued by a party independent of management.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1995. Although
management is not aware of any factors that would significantly affect its
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these combined financial statements since that date.
10. PROPOSED MERGER
On July 31, 1996, NWI announced it had reached an agreement to contribute
substantially all of its assets and operations to a real estate investment trust
(Weeks Corporation and its subsidiaries) in a staged transaction for aggregate
consideration of approximately $120 million, upon its completion. The
transaction is structured in the form of a merger of ownership interests. The
initial closing, involving aggregate consideration of approximately $70 million,
is expected to occur in November 1996.
<PAGE>
EXHIBIT 99.5
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
Company Acquisition Acquisition Properties Pro Forma
(Unaudited, in thousands) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Land $ 43,207 $17,342 $ 4,422 $ 4,353 $ 7,999 (e) $ 77,323
Building and improvements 272,753 41,817 86,648 26,602 16,560 (e) 444,380
Accumulated depreciation (35,029) (7,181) (19,244) -- 26,425 (C) (35,029)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating real estate assets 280,931 51,978 71,826 30,955 50,984 486,674
- ------------------------------------------------------------------------------------------------------------------------------------
Development in progress 28,307 10,255 3,524 -- (13,779)(j) 28,307
Land held for future development 4,208 7,037 2,017 -- (8,054)(e) 5,208
- ------------------------------------------------------------------------------------------------------------------------------------
Net real estate assets 313,446 69,270 77,367 30,955 29,151 520,189
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 107 2,669 276 -- (2,312)(j) 740
Direct financing lease 5,188 -- -- -- -- 5,188
Deferred costs, net 9,486 875 3,564 -- (4,439)(j) 9,486
Investments in and notes
receivable from unconsolidated
subsidiaries 7,639 -- -- -- -- 7,639
Receivables and other assets 11,929 1,093 2,327 -- (3,308)(e)(j) 12,041
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 347,795 73,907 83,534 30,955 19,092 555,283
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities & Shareholders' Equity
Mortgage notes payable 112,785 50,269 92,096 -- (28,525)(f) 226,625
Bank credit facility borrowings 65,685 1,500 3,407 30,955 10,200 (g) 111,747
Notes payable -- related parties -- 2,459 8,819 -- (11,278)(j) --
Accounts payable and accrued
expenses 7,250 2,313 3,155 -- (5,468)(j) 7,250
Other liabilities 1,819 155 478 -- -- 2,452
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 187,539 56,696 107,955 30,955 (35,071) 348,074
- ------------------------------------------------------------------------------------------------------------------------------------
Minority Interests in
Operating Partnership 30,034 -- -- -- 28,943 (h) 58,977
Shareholders' and Owners'Equity
Common Stock 112 -- -- -- -- 112
Preferred Stock -- -- -- -- -- --
Additional paid-in capital 191,263 -- -- -- -- 191,263
Accumulated deficit (61,153) -- -- -- 18,010 (i) (43,143)
Owners' equity -- 17,211 (24,421) -- 7,210 (j) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' and
Owners' Equity 130,222 17,211 (24,421) -- 25,220 148,232
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' and
Owners' Equity $347,795 $73,907 $ 83,534 $30,955 $ 19,092 $555,283
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 1996
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated balance sheet is presented as if
the Company acquired as of June 30, 1996, the business operations and real
estate assets of NWI (described in this Current Report on Form 8-K), the
business operations and real estate assets of Lichtin Properties (described in a
separate Current Report on Form 8-K of the Company dated November 5, 1996), and
the Principal Properties (described in the Company's Current Report on Form 8-K
dated August 9, 1996). The unaudited pro forma condensed consolidated balance
sheet is not necessarily indicative of what the actual financial position would
have been at June 30, 1996, nor does it purport to represent the future
financial position of the Company.
The unaudited pro forma condensed consolidated balance sheet should be read in
conjunction with the unaudited pro forma condensed consolidated statements of
operations of the Company included herein, the consolidated financial statements
and accompanying notes thereto of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1995, and the unaudited condensed
consolidated financial statements and accompanying notes thereto of the Company
included in its June 30, 1996 Quarterly Report on Form 10-Q.
The unaudited pro forma amounts of NWI and Lichtin Properties reflected in the
June 30, 1996 condensed consolidated pro forma balance sheet include the
operating businesses, land and the office and industrial properties acquired or
to be acquired at the respective initial closing dates of each acquisition. The
Northern Telecom properties, office and industrial properties under development
and land held for future development of NWI and Lichtin Properties to be
acquired subsequent to the initial closing dates discussed herein and in the
separate Current Report on Form 8-K of the Company dated November 5, 1996
relating to Lichtin Properties have been excluded from the accompanying pro
forma amounts as of June 30, 1996.
The acquisitions of NWI, Lichtin Properties and the Principal Properties have
been accounted for under the purchase method of accounting. Accordingly, assets
acquired and liabilities assumed have been or will be recorded at their
estimated fair values which may be subject to further modification based upon
the final determination of actual closing costs associated with each of the NWI
and Lichtin Properties transactions and the final terms of the Lichtin
Properties' transaction. Management believes that its final allocation of the
purchase price will not differ materially from the purchase price allocations
included herein.
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Represents the Company's unaudited condensed consolidated historical
balance sheet contained in its Quarterly Report on Form 10-Q as of
June 30, 1996.
(b) Represents the historical unaudited combined balance sheet of NWI as
of June 30, 1996, included herein in Exhibit A.
<PAGE>
(c) Represents the historical unaudited combined balance sheet of Lichtin
Properties as of June 30, 1996, as set forth in Exhibit A to the
Company's Current Report on Form 8-K dated November 5, 1996 relating
to the Lichtin Properties acquisition.
(d) Represents the aggregate purchase price, including closing costs and
acquisition expenses, of the Principal Properties of $30,955,000
funded through borrowings under the Company's revolving credit
facility, as set forth in the Company's Current Report on Form 8-K
dated August 9, 1996, relating to the Principal acquisition.
(e) Represents the adjustments to reflect the initial purchase price of
the NWI business operations and real estate assets of $71,000,000 and
the estimated purchase price of the Lichtin Properties business
operations and real estate assets of $104,900,000, including closing
costs and acquisition expenses. Approximately $112,000 of the purchase
price relating to furniture and equipment is included in receivables
and other assets.
(f) Represents the adjustment to reflect the assumption of mortgage,
construction and other notes payable of NWI of $42,196,000 (as of June
30, 1996) and of Lichtin Properties of $71,644,000 (as of June 30,
1996). The weighted average interest rate was 8.5% on the NWI debt and
8.4% on the Lichtin Properties debt.
(g) Represents the assumption of $3,407,000 of Lichtin Properties' line of
credit borrowings and borrowings of $11,700,000 under the Company's
revolving credit facility to fund the cash component and closing costs
of the NWI and Lichtin Properties transactions.
(h) Represents the issuance of 1,092,000 Units with an agreed upon value
for purposes of the initial closing of the NWI transaction at $25.00
per Unit, and an estimated 778,000 Units with an agreed upon value for
purposes of the initial closing of the Lichtin Properties transaction
of $25.25 per Unit. The resulting consolidated pro forma minority
interest balance was adjusted to reflect the consolidated pro forma
minority interest percentage of 28.46% at June 30, 1996 as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Value of NWI Units $ 27,304
Value of Lichtin Properties Units 19,649
Reclassification to shareholders' equity (18,010)
---------
$ 28,943
=========
</TABLE>
(i) Represents the adjustment to state the consolidated pro forma shareholders'
equity balance and minority interest balance to 71.54% and 28.46%,
respectively, of the total consolidated pro forma equity interests (both
shareholders' equity and minority interests) in the Company.
(j) Represents adjustments to eliminate certain asset and liability amounts
that are not acquired or assumed as part of the NWI and Lichtin Properties
transactions or which are not being acquired or assumed as part of the
initial closings of the acquisition transactions reflected in this pro
forma balance sheet.
<PAGE>
EXHIBIT 99.6
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
(Unaudited, in thousands, except Company Acquisition Acquisition Properties Pro Forma
per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $21,943 $3,675 $ 5,609 $1,639 $(1,793) (e) $31,073
Tenant reimbursements 2,007 662 1,709 137 (993) (e) 3,522
Income from directfinancing lease 384 -- -- -- -- 384
Other 174 134 53 -- 182 (k) 543
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 24,508 4,471 7,371 1,776 (2,604) 35,522
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating andmaintenance 2,687 426 1,700 197 (811) (e) 4,199
Real estate taxes 2,153 335 494 146 (185) (e) 2,943
Depreciation and amortization 6,000 928 1,840 -- 493 (f) 9,261
Interest 4,955 2,094 3,893 -- (256) (g) 10,686
Amortization of deferred
financing costs 421 54 107 -- (161) (g) 421
General and administrative 1,414 325 568 -- -- 2,307
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 17,630 4,162 8,602 343 (920) 29,817
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income 6,878 309 (1,231) 1,433 (1,684) 5,705
Interest income 198 445 13 -- (458) (h) 198
Equity in earnings of
unconsolidated subsidiaries 543 -- -- -- -- 543
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 7,619 754 (1,218) 1,433 (2,142) 6,446
Income Taxes -- (48) -- -- 48 (i) --
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Minority Interests 7,619 706 (1,218) 1,433 (2,094) 6,446
Minority Interests (1,426) -- -- -- (409) (j) (1,835)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 6,193 $ 706 $(1,218) $1,433 $(2,503) $ 4,611
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net Income $ 0.56 -- -- -- -- $ 0.41
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding 11,156 -- -- -- -- 11,156
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
and Units Outstanding 13,723 1,092 778 -- -- 15,593
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statement of operations for the
six months ended June 30, 1996 is presented as if the Company acquired as of
January 1, 1996 the business operations and real estate assets of NWI (described
in this Current Report on Form 8-K), the business operations and real estate
assets of Lichtin Properties (described in a seperate Current Report on Form 8-K
of the Company dated November 5, 1996) and the Principal Properties (described
in the Company's Current Report on Form 8-K dated August 9, 1996). In
management's opinion, all adjustments necessary to present fairly the effects of
these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations should
be read in conjunction with unaudited pro forma condensed consolidated balance
sheet of the Company included herein, the consolidated financial statements and
accompanying notes thereto of the Company included in its Annual Report on Form
10-K for the year ended December 31, 1995, and the unaudited condensed
consolidated financial statements and accompanying notes thereto of the Company
included in its June 30, 1996 Quarterly Report on Form 10-Q.
This unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired NWI, Lichtin Properties and
the Principal Properties (as described above) as of the beginning of the period
presented, nor do they purport to represent the results of operations for future
periods.
The unaudited historical results of operations of NWI included herein have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the NWI transaction on
November 1, 1996. NWI's industrial properties under development or in lease-up
and land held for development and their associated results of operations to be
acquired subsequent to the initial closing on November 1, 1996 discussed herein
have been excluded from the accompanying pro forma amounts for the period
presented.
The unaudited historical results of operations of Lichtin Properties included
herein have been adjusted to reflect on a pro forma basis the operating
business, land and industrial and office properties to be acquired at the
initial closing of the Lichten Properties' transaction which is probable of
closing in December 1996, or January 1997. Certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other of Lichtin Properties'
office and industrial properties under development and land held for future
development and their associated results of operations to be acquired subsequent
to the initial closing date discussed in the separate Current Report on Form 8-K
of the Company dated November 5, 1996 relating to Lichtin Properties have been
excluded from the accompanying pro forma amounts for the period presented.
<PAGE>
2. ASSUMPTION TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
(a) Represents the Company's unaudited condensed consolidated historical
statement of operations contained in its Quarterly Report on Form 10-Q
for the six months ended June 30, 1996.
(b) Represents the historical unaudited combined statement of operations
of NWI for the six months ended June 30, 1996, included herein in
Exhibit A.
(c) Represents the historical unaudited combined statement of operations
of Lichtin Properties for the six months ended June 30, 1996, as set
forth in Exhibit A to the Company's Current Report on Form 8-K dated
November 5, 1996, relating to the Lichtin Properties acquisition.
(d) Represents the historical unaudited rental income, tenant
reimbursements, real estate taxes and property operating and
maintenance expenses of the Principal Properties for the six months
ended June 30, 1996, as set forth in the Company's Current Report on
Form 8-K dated August 9, 1996, relating to the Principal acquisition.
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and
maintenance expenses for the results of operations of certain of
Lichtin Properties' buildings leased to Northern Telecom, certain
properties of NWI and Lichtin Properties under development or in
lease-up and expenses associated with land held for development which
are to be acquired subsequent to the initial closing dates of the NWI
and Lichtin Properties acquisitions as shown below (in thousands):
<TABLE>
<CAPTION>
Lichtin
NWI Properties Total
--- ---------- -----
<S> <C> <C> <C>
Rental income $331 $1,462 $1,793
Tenant reimbursement 41 952 993
Property operating and
maintenance expenses 59 752 811
Real estate taxes 36 149 185
</TABLE>
(f) Represents the adjustment to reflect depreciation and amortization
expense of the acquired properties (consisting of properties acquired
and to be acquired at the initial closing dates for the NWI and
Lichtin Properties acquisitions and the closing of the Principal
Properties) based upon the assumed allocation of the acquisition price
to land, buildings and improvements using a 35 year life for buildings
and the life of the lease for tenant improvements. Aggregate pro forma
depreciation and amortization expense for the six months ended June
30, 1996, was $1,122,000, $1,623,000 and $516,000 for NWI, Lichtin
Properties and the Principal Properties, respectively.
(g) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank
line of credit borrowings assumed or to be assumed at the initial
closing dates in the NWI and Lichtin Properties transactions, interest
costs associated with additional borrowings under the Company's
<PAGE>
revolving credit facility of $30.9 million at 7.0% for the purchase of
the Principal Properties and interest costs associated with additional
borrowings under the Company's revolving credit facility of $11.7
million at 7.0% to fund the cash portion of the Lichtin Properties
initial closing price and cash closing and acquisition expenses of the
NWI and Lichtin Properties transactions.
(h) Represents the adjustment to eliminate interest income included in the
NWI and Lichtin Properties historical amounts as the notes receivable
and cash balances are not being acquired by the Company.
(i) Represents the adjustment to eliminate income tax expense as the
Company has and expects to continue to qualify as a real estate
investment trust.
(j) Represents the net adjustment of pro forma minority interest to adjust
the pro forma consolidated minority interest amount to reflect the
weighted average ownership percentage of the Unitholders in the
Operating Partnership of 28.46% for the six months ended June 30,
1996.
(k) Represents the reduction of general and administrative expenses
resulting from the payment by Lichtin Properties to the Company of
management fees and overhead cost reimbursements relating to the
Company's management of certain buildings leased to Northern Telecom
for periods subsequent to the initial closing date of the Lichtin
Properties transaction.
<PAGE>
EXHIBIT 99.7
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
(Unaudited, in thousands, except Company Acquisition Acquisition Properties Pro Forma
per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $31,217 $5,836 $10,245 $3,235 $(3,065) (e) $47,468
Tenant reimbursements 2,464 994 3,374 281 (2,046) (e) 5,067
Income from direct financing lease 776 -- -- -- -- 776
Other 480 348 24 -- 365 (l) 1,217
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 34,937 7,178 13,643 3,516 (4,746) 54,528
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and maintenance 3,565 762 3,029 455 (1,770) (e) 6,041
Real estate taxes 2,997 642 817 293 (337) (e) 4,412
Depreciation and amortization 8,177 1,572 3,264 -- 1,685 (f) 14,698
Interest 8,106 3,093 7,094 -- (277) (g) 18,016
Amortization of deferred
financing costs 691 93 191 -- (284) (g) 691
General and administrative 1,848 643 1,154 -- -- 3,645
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 25,384 6,805 15,549 748 (983) 47,503
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income 9,553 373 (1,906) 2,768 (3,763) 7,025
Gain on sale of property -- -- 1,245 -- (1,245) (h) --
Interest income 334 1,117 18 -- (1,135) (i) 334
Equity in earnings of
unconsolidated subsidiaries 1,220 -- -- -- -- 1,220
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 11,107 1,490 (643) 2,768 (6,143) 8,579
Income Taxes -- (102) -- -- 102 (j) --
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Minority Interests 11,107 1,388 (643) 2,768 (6,041) 8,579
Minority Interests (2,681) -- -- -- (362) (k) (3,043)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 8,426 $1,388 $ (643) $2,768 $(6,403) $ 5,536
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net Income $ 1.03 -- -- -- -- $ 0.66
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
Outstanding 8,171 -- -- -- -- 8,171
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
and Units Outstanding 10,760 1,092 778 -- -- 12,630
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1995 is presented as if the Company acquired as of
January 1, 1995, the business operations and real estate assets of NWI
(described in this Current Report on Form 8-K), the business operations and real
estate assets of Lichtin Properties (described in a separate Current Report on
Form 8-K of the Company dated November 5, 1996) and the Principal Properties
(described in the Company's Current Report on Form 8-K dated August 9, 1996).
In management's opinion, all adjustments necessary to present fairly the effects
of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations should
be read in conjunction with unaudited pro forma condensed consolidated balance
sheet of the Company included herein and the consolidated financial statements
and accompanying notes thereto of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1995.
The unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired NWI, Lichtin Properties and
the Principal Properties (as described above) as of the beginning of the period
presented, nor do they purport to represent the results of operations for future
periods.
The historical results of operations of NWI included herein have been adjusted
to reflect on a pro forma basis the operating business, land and industrial
properties acquired at the initial closing of the NWI transaction on November 1,
1996. NWI's industrial properties under development or in lease-up and land
held for development and their associated results of operations to be acquired
subsequent to the initial closing on November 1, 1996 discussed herein have been
excluded from the accompanying pro forma amounts for the period presented.
The unaudited historical results of operations of Lichtin Properties included
herein have been adjusted to reflect on a pro forma basis the operating
business, land and industrial and office properties to be acquired at the
initial closing of an acquisition transaction which is probable of closing in
December 1996, or January 1997. Certain of Lichtin Properties' buildings leased
to Northern Telecom certain other of Lichtin Properties' office and industrial
properties under development and land held for future development and their
associated results of operations to be acquired subsequent to the initial
closing date discussed in the separate Current Report on Form 8-K of the Company
dated November 5, 1996 relating to Lichtin Properties have been excluded from
the accompanying pro forma amounts for the period presented.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
(a) Represents the Company's historical consolidated historical statement
of operations contained in its Annual Report on Form 10-K for the year
ended December 31, 1995.
(b) Represents the historical combined statement of operations
of NWI for the year ended December 31, 1995, included herein in
Exhibit A.
(c) Represents the historical combined statement of operations of Lichtin
Properties for the year ended December 31, 1995 as set forth in
Exhibit A to the Company's Current Report on Form 8-K dated
November 5, 1996 relating to the Lichtin Properties Acquisition.
(d) Represents the historical rental income, tenant reimbursements, real
estate taxes and property operating and maintenance expenses for the
Principal Properties for the year ended December 31, 1995, as set
forth in the Company's Current Report on Form 8-K dated August 9,
1996, relating to the Pricipal Acquisition.
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and
maintenance expenses for the results of operations of certain of
Lichtin Properties' buildings leased to Northern Telecom, certain
properties of NWI and Lichtin Properties under development or in
lease-up and expenses associated with land held for development which
are to be acquired subsequent to the initial closing dates of the NWI
and Lichtin Properties acquisitions as shown below (in thousands):
<TABLE>
<CAPTION>
Lichtin
NWI Properties Total
--- ---------- -----
<S> <C> <C> <C>
Rental income $122 $2,943 $3,065
Tenant reimbursements 11 2,035 2,046
Property operating and
maintenance expenses 29 1,741 1,770
Real estate taxes 33 304 337
</TABLE>
(f) Represents the adjustment to reflect depreciation and amortization
expense of the acquired properties (consisting of properties acquired
and to be acquired at the initial closing dates for the NWI and
Lichtin Properties acquisitions and the closing of the Principal
Properties) based upon the assumed allocation of the acquisition price
to land, buildings and improvements using a 35 year life for buildings
and the life of the lease for tenant improvements. Aggregate pro forma
depreciation and amortization expense for the year ended December 31,
1995, was $2,243,000, $3,245,000 and $1,033,000 for NWI, Lichtin
Properties and the Principal Properties, respectively.
(g) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank
line of credit borrowing assumed or to be assumed at the initial
closing dates of the NWI and Lichtin Properties transactions, interest
costs associated with additional borrowings under the Company's
<PAGE>
revolving credit facility of $30.9 million at 7.0% for the purchase of
the Principal Properties and interests cost associated with additional
borrowings under the Company's revolving credit facility of $11.7
million at 7.0% to fund the cash portion of the Lichtin Properties
initial closing price and cash closing and acquisition expenses of the
NWI and Lichtin Properties transactions.
(h) Represents the adjustment to eliminate the gain on sale of property as
the property was not part of the Lichtin Properties acquisition
transaction.
(i) Represents the adjustment to eliminate interest income included in the
NWI and Lichtin Properties historical amounts as the notes receivable
and cash balances are not being acquired by the Company.
(j) Represents the adjustment to eliminate income tax expense as the
Company has and expects to continue to qualify as a real estate
investment trust.
(k) Represents the net adjustment of pro forma minority interest to adjust
the pro forma consolidated minority interest amount to reflect the
weighted average ownership percentage of the Unitholders in the
Operating Partnership of 35.47% for the year ended December 31, 1995.
(l) Represents the reduction of general and administrative expenses
resulting from the assumed payment by Lichtin Properties to the
Company of management fees and overhead cost reimbursements relating
to the Company's management of certain buildings leased to Northern
Telecom for periods subsequent to the initial closing date of the
Lichtin Properties transaction.
<PAGE>
EXHIBIT 99.6
LICHTIN PROPERTIES
Combined Financial Statements
December 31, 1994 and 1995
<PAGE>
Report of Independent Public Accountants
To the Partners and Shareholders of Lichtin Properties:
We have audited the accompanying combined balance sheets of Lichtin
Properties, as defined in Note 1, as of December 31, 1994 and 1995 and the
related combined statements of operations, owners' deficit and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of Lichtin Properties' management. Our
responsibility is to express an opinion on these financial statements 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 Lichtin Properties
as of December 31, 1994 and 1995 and the combined results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
Atlanta, Georgia ARTHUR ANDERSEN LLP
September 24, 1996
<PAGE>
LICHTIN PROPERTIES
Combined Balance Sheets
(In thousands)
<TABLE>
December 31, June 30,
--------------------- -----------
1994 1995 1996
(Unaudited)
<S> <C> <C> <C>
Assets
Real estate assets:
Land $ 2,449 $ 3,321 $ 4,422
Buildings and improvements 58,486 70,368 86,648
-------------------- --------
Accumulated depreciation (14,790) (17,696) (19,244)
Operating real estate assets 46,145 55,993 71,826
Developments in progress 8,920 14,484 3,524
Land held for development 3,285 2,606 2,017
-------------------- --------
Net real estate assets 58,350 73,083 77,367
Cash and cash equivalents 2,205 783 276
Receivables:
Trade 998 1,769 1,763
Related party 109 116 116
Deferred costs, net 2,702 3,210 3,564
Other assets 415 507 448
-------------------- --------
$ 64,779 $ 79,468 $ 83,534
==================== ========
Liabilities and Owners Deficit
Notes payable $ 71,039 $ 86,151 $ 92,096
Line of credit borrowings 1,424 2,519 3,407
Notes payable and accrued interest-
related parties 7,242 8,241 8,819
Accounts payable:
Trade 3,438 3,539 1,798
Related parties 252 299 148
Accrued interest payable 431 677 717
Property taxes payable 560 654 492
Other liabilities 212 119 478
-------------------- --------
Total liabilities 84,598 102,199 107,955
-------------------- --------
Owners Deficit (19,819) (22,731) (24,421)
-------------------- --------
$ 64,779 $ 79,468 $ 83,534
==================== ========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
<PAGE>
LICHTIN PROPERTIES
Combined Statements of Operations
(In thousands)
<TABLE>
Six Months
Year Ended December 31, Ended June 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
---------------------------- -----------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenue
Rental $ 6,731 $ 7,765 $ 10,245 $ 4,877 $ 5,609
Tenant reimbursements 2,648 2,906 3,374 1,524 1,709
Other 4 - 24 - 53
---------------------------- -----------------
9,383 10,671 13,643 6,401 7,371
---------------------------- -----------------
Expenses
Property operating and
maintenance 2,223 2,351 3,029 1,424 1,700
Real estate taxes 618 651 817 409 494
Depreciation and amortization 2,344 2,630 3,264 1,572 1,840
Interest 4,828 5,038 6,699 3,279 3,659
Interest - related parties 310 332 395 209 234
Amortization of deferred
financing costs 201 173 191 87 107
General and administrative 711 848 1,154 469 568
---------------------------- -----------------
11,235 12,023 15,549 7,449 8,602
---------------------------- -----------------
Operating Loss (1,852) (1,352) (1,906) (1,048) (1,231)
Gain on sale of property - - 1,245 - -
Interest income 5 5 18 9 13
---------------------------- -----------------
Net Loss $ (1,847) $ (1,347) $ (643) $(1,039) $(1,218)
---------------------------- -----------------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
LICHTIN PROPERTIES
COMBINED STATEMENTS OF OWNERS' DEFICIT
(In thousands)
Owners' Deficit, December 31, 1992 $ (16,164)
Net loss (1,847)
Distributions (20)
----------
Owners Deficit, December 31, 1993 (18,031)
Net loss (1,347)
Distributions (441)
----------
Owners Deficit, December 31, 1994 (19,819)
Net loss (643)
Distributions (2,269)
----------
Owners Deficit, December 31, 1995 (22,731)
Net loss (Unaudited) (1,218)
Distributions (Unaudited) (472)
----------
Owners Deficit, June 30, 1996 (Unaudited) $ (24,421)
==========
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
LICHTIN PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
Six Months
Year Ended December 31, Ended June 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
Operating Activities (Unaudited)
Net loss $ (1,847) $ (1,347) $ (643) $ (1,039) $ (1,218)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,344 2,630 3,264 1,572 1,840
Amortization of deferred
financing costs 201 173 191 87 107
Straight-line rent revenue (232) (379) (258) (129) (140)
Gain on sale of property - - (1,245) - -
Net change in:
Receivables 82 (212) (58) 105 (317)
Deferred lease costs (230) (1,050) (946) (448) (657)
Other assets (4) (383) (92) (17) 59
Accounts payable and accrued expenses 391 520 899 59 (26)
Other liabilities 38 (178) (93) 312 359
--------------------------------- --------------------
Net cash provided by (used in)
operating activities 743 (226) 1,019 502 7
--------------------------------- --------------------
Investing Activities
Property acquisition, development and
construction (3,889) (17,297) (30,840) (14,414) (6,900)
Proceeds from sale of property - - 14,824 - -
--------------------------------- --------------------
Net cash used in investing activities (3,889) (17,297) (16,016) (14,414) (6,900)
--------------------------------- --------------------
Financing Activities
Line of credit proceeds (repayments), net (476) (185) 1,095 832 888
Proceeds from mortgage, construction and
other notes payable 27,101 42,280 27,331 12,908 12,661
Payments of mortgage, construction and
other notes payable (22,139) (21,844) (12,218) (1,397) (6,716)
Proceeds from related party notes payable 2,338 2,202 841 - 146
Repayments of related party notes payable (2,873) (1,848) (902) - -
Deferred financing costs (373) (915) (303) (35) (121)
Distributions to owners (20) (441) (2,269) (336) (472)
--------------------------------- --------------------
Net cash provided by financing activities 3,558 19,249 13,575 11,972 6,386
--------------------------------- --------------------
Increase (decrease) in cash and cash
equivalents 412 1,726 (1,422) (1,940) (507)
Cash and cash equivalents, beginning of
period 67 479 2,205 2,205 783
--------------------------------- --------------------
Cash and cash equivalents, end of period $ 479 $ 2,205 $ 783 $ 265 $ 276
================================= ====================
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
<PAGE>
LICHTIN PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Lichtin Properties (the "Company") represents the combined office and
industrial building development, construction and management operations of
Lichtin Properties, Inc. and its affiliated partnerships and corporations. The
Company began operations in 1977 and is owned primarily by members of two
families. The accompanying combined financial statements include the financial
condition and results of operations of the following entities:
Lichtin Properties, Inc. (a Subchapter S corporation)
Morrisville Industrial Associates (a general partnership)
Perimeter Park Associates (a general partnership)
Perimeter Park West Associates Limited Partnership
Interchange Associates Limited Partnership
Woodlake Limited Liability Company
Interchange II LLC
Woodlake II LLC
6501 Weston Parkway LLC
Woodlake III LLC (formed in 1996)
As of December 31, 1995, the Company owned and managed 22 warehouse and
office buildings comprising approximately 1.5 million square feet located in
central North Carolina's Research Triangle Area. In addition, three buildings
were under development or in lease-up comprising an additional 280,000 square
feet.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Combination
The accompanying financial statements of the Company have been presented on
a combined basis because of the common ownership, control and management and
because the entities are expected to be the subject of a business combination
with a real estate investment trust (see Note 9). All significant intercompany
balances and transactions have been eliminated in the combined financial
statements.
Real Estate Assets
Real estate assets are stated as the lower of depreciated cost or net
realizable value. 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 overhead costs, interest, property taxes and insurance
incurred during the construction period are capitalized.
<PAGE>
Depreciation is calculated using the straight-line method 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
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
include overnight investments in North Carolina municipal bonds. The Company
maintains, from time to time, cash deposits in excess of federally insured
amounts at one banking institution.
Revenue Recognition
All leases 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 $611,000 and $868,000 as of December 31,
1994 and 1995, respectively. Tenant reimbursements for property taxes and
other recoverable expenses are recognized as revenues in the period the
applicable expenses are incurred. Uncollectible tenant receivables are charged
to expense in the period that they are deemed uncollectible by management.
Deferred Costs
Costs incurred to procure operating leases are capitalized and amortized on
a straight-line basis over the terms of the related leases. Costs incurred in
conjunction with financing arrangements are capitalized and amortized over the
related loan terms using a method approximating the interest method.
Unamortized lease and financing costs are written off upon the early
termination of the related lease or loan agreement.
Sales of Real Estate
Sales of real estate are accounted for under the full accrual method. Under
that method, gain is not recognized until the collectibility of the sales price
is reasonably assured and the earnings process is virtually complete. When a
sale does not meet the requirements for income recognition, gain is deferred
until those requirements are met.
Income Taxes
The Company is not a legal entity subject to income taxes. The combined
entities consist of a subchapter S corporation, limited liability companies,
and limited and general partnerships whose owners are taxed on their
proportionate share of each legal entity's taxable income (loss). Therefore,
no provision or liability for income taxes has been included in the
accompanying combined financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
<PAGE>
assumptions that affect the amounts reported in the financial statements and
disclosures made in the accompanying notes to the financial statements. Actual
results could differ from those estimates.
Recent Accounting Pronouncements
In March 1995, SFAS 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed Of," was issued. SFAS 121 established
new standards on how impairment losses on long-lived assets, including real
estate assets, should be measured. The Company adopted SFAS 121 in the first
quarter of 1996 resulting in no impact on its combined financial statements.
Unaudited Interim Financial Statements
The combined financial statements for the six months ended June 30, 1995 and
1996 are unaudited; however, they 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 a fair presentation of the combined
financial statements for these interim periods have been included. The results
for the interim periods ended June 30, 1995 and 1996 are not necessarily
indicative of the results to be obtained for the full fiscal years ending
December 31, 1995 and 1996, respectively.
3. DEFERRED COSTS
Deferred costs at December 31, 1994 and 1995 consist of the following (in
thousands):
1994 1995
------------------
Deferred lease costs $ 2,150 $ 2,630
Deferred financing costs 1,750 1,595
------------------
3,900 4,225
Less accumulated amortization (1,198) (1,015)
------------------
$ 2,702 $ 3,210
==================
4. INDEBTEDNESS
As of December 31, 1995, the Company had outstanding borrowings of
$2,519,000 under a $3,150,000 revolving line of credit facility, which is used
for construction, development and general operating purposes. The line of
credit is secured by 96 acres of land and is guaranteed by the two principal
owners of the Company. Minimum monthly payments are $40,000, including
interest at the lender's prime rate (8.5% at December 31, 1995). The line of
credit matures in March 1998.
<PAGE>
The Company's mortgage, construction and other notes payable at December
31, 1994 and 1995 consist of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
-----------------
<S> <C> <C>
Mortgage note, payable monthly, including interest at
9.24%, due in 2004 $16,380 $16,220
Mortgage note, payable monthly, including interest at
9.625%, due in 2000 13,420 13,267
Mortgage note, payable monthly, including interest at
10.15%, due in 1997 5,249 5,217
Mortgage note, payable monthly, including interest at
9.5%(a) 4,258 4,217
Mortgage note, payable monthly, including interest at
8.625% due in 2012 3,969 3,869
Mortgage note, payable monthly, including interest at
8.625%, due in 2000(b)(c) 3,572 3,522
Mortgage note, payable monthly, including interest at
9.625%, due in 1996(c) 3,487 3,438
Mortgage note, payable monthly, including interest at
9.89%(a) 3,135 3,107
Mortgage note, payable monthly, including interest at
9.6%, due in 1996(e) 3,027 2,991
Mortgage note, payable monthly, including interest at
9%, due in 2003(b) 2,970 2,947
Mortgage note, payable monthly, including interest at
9.375%, due in 1999(b) 2,951 2,927
Mortgage note, payable monthly, including interest at
9.375%, due in 1999 2,754 2,732
Mortgage note, payable monthly, including interest at
7.625%, due in 2001(b) 2,816 2,707
Construction loans, interest payable at LIBOR plus 2.5% to
bank prime plus 1/2% (8% to 9% at December 31, 1995),
due from 1996 to 2000(b)(d) 2,796 18,580
Notes payable, due monthly, interest ranging from 6% to
bank prime rate, due from 1996 to 1998 172 347
Equipment obligation, payable monthly, including interest
at 9.5%, due in 1998 81 63
--------------------
$71,039 $86,151
====================
</TABLE>
(a) Notes were refinanced in 1996. Principal and interest are payable
monthly at 8.0%, due in 2006.
(b) Notes are partially or fully guaranteed by certain Company owners.
(c) Notes were refinanced and combined into one note in August 1996.
Principal and interest are payable monthly at 8.25%, due in 2006.
(d) One construction loan totaling $5,547,000 at December 31,1995 and due in
1996 was refinanced in September 1996. Principal and interest under the
new mortgage note are payable monthly at 9.5%, due in 2006.
(e) Note was refinanced in November 1996 with a nine-month term loan bearing
interest at LIBOR plus 2.20%.
<PAGE>
Scheduled maturities of notes payable at December 31, 1995 are as follows
(in thousands):
1996 $20,424
1997 6,582
1998 1,815
1999 7,049
2000 27,188
Thereafter 23,093
-------
$86,151
=======
Substantially all of the Company's net real estate assets at December 31,
1995, were pledged as collateral under notes payable. Interest capitalized
totaled $73,000, $443,000 and $976,000 for the years ended December 31, 1993,
1994 and 1995, respectively. Interest paid totaled $4,907,000, $5,461,000 and
$7,451,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
5. RELATED PARTY TRANSACTIONS
Amounts receivable from and payable to related parties (primarily from two
families which are the principal owners of the Company) at December 31, 1994
and 1995 were as follows (in thousands):
1994 1995
--------------
Accounts receivable $ 109 $ 116
Accounts payable 252 299
Notes payable and accrued interest 7,242 8,241
The related party notes payable and compounded interest accrue interest at
rates ranging from 5% to 7%, and are due on demand. Generally, the notes and
accrued interest are unsecured, however, certain amounts are secured by a
second priority lien on certain of the Company's land held for development.
Other related party transactions for the years ended December 31, 1993, 1994
and 1995, respectively were as follows (in thousands):
1993 1994 1995
--------------------
Development fees payable
to principal owner $231 $1,000 $ 687
Interest expense 310 332 395
Equipment rent expense 174 175 223
Lease commissions - - 114
<PAGE>
6. LEASING ACTIVITY
Future minimum rents receivable in accordance with tenant lease terms under
noncancelable operating leases as of December 31, 1995 (assuming no renewals)
are as follows:
1996 $11,517
1997 11,987
1998 10,950
1999 10,266
2000 8,911
Thereafter 26,750
------
$80,381
=======
Rents and tenants reimbursement revenue from one tenant with leases in six
of the Company's buildings totaled 53%, 47% and 36% of total rental and tenant
reimbursement revenue for the years ended December 31, 1993, 1994 and 1995,
respectively. Accounts receivable from this tenant at December 31, 1994 and
1995 amounted to 17% and 6%, respectively, of the Company's tenant receivable
balances (including straight-line rents receivable) at such dates. Future
minimum rents receivable from this tenant under noncancelable operating leases
as of December 31, 1995, represent 24% in 1996, 23% in 1997, 25% in 1998, 27%
in 1999, 31% in 2000, and 47% thereafter, of total future minimum rents
receivable. The lease agreements with this tenant expire in 2005, however, the
tenant has early termination options effective on June 30, 1998 and June 30,
2000. Both termination options require one year advance written notice from
the tenant.
7. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) retirement savings plan covering substantially
all employees meeting certain age and service requirements. Employees may
contribute up to the lesser of 15% of their annual compensation or the annual
statutory limit ($9,240 in 1995) to the plan. The Company's contributions are
made on a discretionary basis up to a maximum of 100% of the employees'
contributions. Total contributions were $6,000, $6,000 and $6,000 in 1993,
1994 and 1995, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to the
Company at December 31, 1995, the Company estimates that the carrying value of
cash and cash equivalents, accounts receivable, notes payable, line of credit
borrowings and other liabilities approximate their fair values when compared to
instruments of similar type, terms and maturity. None of the Company's
financial instruments are held for trading purposes. The carrying amount of
related party accounts receivable and payable, and related party notes and
accrued interest payable approximated fair value at the time of the
transactions, however, such amounts have not been revalued by a party
independent of management.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1995. Although
management is not aware of any factors that would significantly affect its
<PAGE>
estimated fair value of amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date.
9. PROPOSED MERGER
On August 12, 1996, the Company announced it had reached an agreement to
contribute substantially all of its assets and operations to a real estate
investment trust ("Weeks Corporation") in a staged transaction for expected
aggregate consideration of approximately $164 million, upon its completion. The
transaction will generally be structured in the form of a merger of ownership
interests.
<PAGE>
EXHIBIT 99.9
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
Lichtin
NWI Properties
Company Acquisition Acquisition Principal Pro Forma
(Unaudited, in thousands.) Historical(a) Historical(b) Historical(c) Properties(d) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Land $ 43,207 $ 17,342 $ 4,422 $ 4,353 $ 7,999 (e) $ 77,323
Building and improvements 272,753 41,817 86,648 26,602 16,560 (e) 444,380
Accumulated depreciation (35,029) (7,181) (19,244) -- 26,425 (e) (35,029)
- -----------------------------------------------------------------------------------------------------------------------------
Operating real estate assets 280,931 51,978 71,826 30,955 50,984 486,674
- -----------------------------------------------------------------------------------------------------------------------------
Development in progress 28,307 10,255 3,524 -- (13,779) (j) 28,307
Land held for future development 4,208 7,037 2,017 -- (8,054) (e) 5,208
- -----------------------------------------------------------------------------------------------------------------------------
Net real estate assets 313,446 69,270 77,367 30,955 29,151 520,189
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 107 2,669 276 -- (2,312) (j) 740
Direct financing lease 5,188 -- -- -- -- 5,188
Deferred costs, net 9,486 875 3,564 -- (4,439) (j) 9,486
Investments in and notes receivable
from unconsolidated subsidiaries 7,639 -- -- -- -- 7,639
Receivables and other assets 11,929 1,093 2,327 -- (3,308) (e)(j) 12,041
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $347,795 $73,907 $ 83,534 $30,955 $ 19,092 $555,283
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities & Shareholders'
Equity
Mortgage notes payable $112,785 $50,269 $ 92,096 $ -- $(28,525) (f) $226,625
Bank credit facility borrowings 65,685 1,500 3,407 30,955 10,200 (g) 111,747
Notes payable -- related parties
and other -- 2,459 8,819 -- (11,278) (j) --
Accounts payable and accrued
expenses 7,250 2,313 3,155 -- (5,468) (j) 7,250
Other liabilities 1,819 155 478 -- -- 2,452
- -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 187,539 56,696 107,955 30,955 (35,071) 348,074
- -----------------------------------------------------------------------------------------------------------------------------
Minority Interests in
Operating Partnership 30,034 -- -- -- 28,943 (h) 58,977
- -----------------------------------------------------------------------------------------------------------------------------
Shareholders' and Owners' Equity
Common Stock 112 -- -- -- -- 112
Preferred Stock -- -- -- -- -- --
Additional paid-in capital 191,263 -- -- -- -- 191,263
Accumulated deficit (61,153) -- -- -- 18,010 (i) (43,143)
Owners' equity -- 17,211 (24,421) -- 7,210 (j) --
- -----------------------------------------------------------------------------------------------------------------------------
Total Shareholders' and
Owners' Equity 130,222 17,211 (24,421) -- 25,220 148,232
- -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' and Owners'
Equity $347,795 $ 73,907 $ 83,534 $30,955 $ 19,092 $555,283
- -----------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
Weeks Corporation
Notes and Assumptions to Unaudited Pro Forma
Condensed Consolidated Balance Sheet as of
June 30, 1996
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet is presented as
if the Company acquired as of June 30, 1996, the business operations and real
estate assets of Lichtin Properties (described in this Current Report on Form
8-K), the business operations and real estate assets of NWI (described in a
separate Current Report on Form 8-K of the Company dated November 1, 1996), and
the Principal Properties (described in the Company's Current Report on Form 8-K
dated August 9, 1996). The unaudited pro forma condensed consolidated balance
sheet is not necessarily indicative of what the actual financial position would
have been at June 30, 1996, nor does it purport to represent the future
financial position of the Company.
The unaudited pro forma condensed consolidated balance sheet should be read
in conjunction with the unaudited pro forma condensed consolidated statements
of operations of the Company included herein, the consolidated financial
statements and accompanying notes thereto of the Company included in its Annual
Report on Form 10-K for the year ended December 31, 1995, and the unaudited
condensed consolidated financial statements and accompanying notes thereto of
the Company included in its June 30, 1996 Quarterly Report on Form 10-Q.
The unaudited pro forma amounts of Lichtin Properties and NWI reflected in
the June 30, 1996 pro forma condensed consolidated balance sheet include the
operating businesses, land and the office and industrial properties to be
acquired or acquired at the respective initial closing dates of each
acquisition. The Northern Telecom Properties, office and industrial properties
under development and land held for future development of Lichtin Properties
and NWI to be acquired subsequent to the initial closing dates discussed herein
and in the separate Current Report on Form 8-K of the Company dated November 1,
1996 relating to NWI have been excluded from the accompanying pro forma amounts
as of June 30, 1996.
The acquisitions of Lichtin Properties, NWI and the Principal Properties
have been accounted for under the purchase method of accounting. Accordingly,
assets acquired and liabilities assumed have been or will be recorded at their
estimated fair values which may be subject to further modification based upon
the final terms of the Lichtin Properties' transaction and the final
determination of actual closing costs associated with each of the Lichtin
Properties and NWI transactions. Management believes that its final allocation
of the purchase price will not differ materially from the purchase price
allocations included herein.
<PAGE>
2. Assumptions to the Unaudited Pro Forma Condensed Consolidated Balance
Sheet
(a) Represents the Company's historical unaudited condensed consolidated
balance sheet contained in its Quarterly Report on Form 10-Q as of June
30, 1996.
(b) Represents the historical unaudited combined balance sheet of NWI as of
June 30, 1996, as set forth in Exhibit A to the Company's Current
Report on Form 8-K dated November 1, 1996, relating to the NWI
acquisition.
(c) Represents the historical unaudited combined balance sheet of Lichtin
Properties as of June 30, 1996, included herein in Exhibit A.
(d) Represents the aggregate purchase price, including closing costs and
acquisition expenses, of the Principal Properties of $30,955,000 funded
through borrowings under the Company's revolving credit facility, as
set forth in the Company's Current Report on Form 8-K dated August 9,
1996, relating to the Principal acquisition.
(e) Represents the adjustments to reflect the estimated initial purchase
price of the Lichtin Properties business operations and real estate
assets of $104,900,000 and the NWI business operations and real estate
assets of $71,000,000, including estimated closing costs and
acquisition expenses. Approximately $112,000 of the purchase price
relating to furniture and equipment is included in receivables and
other assets.
(f) Represents the adjustment to reflect the assumption of mortgage,
construction and other notes payable of Lichtin of $71,644,000 (as of
June 30, 1996) and of NWI of $42,196,000 (as of June 30, 1996). The
weighted average interest rate was 8.4% on the Lichtin Properties debt
and 8.5% on the NWI debt.
(g) Represents the assumption of $3,407,000 of Lichtin Properties' line
of credit borrowings and borrowings of $11,700,000 under the Company's
revolving credit facility to fund the cash component of the Lichtin
Properties transaction and closing costs of the NWI and Lichtin
Properties transactions.
(h) Represents the issuance of an estimated 778,000 Units with an agreed
upon value for purposes of the initial closing of the Lichtin
Properties transaction of $25.25 per Unit, and 1,092,000 Units with an
agreed upon value for purposes of the initial closing of the NWI
transaction of $25.00 per Unit. The resulting consolidated pro forma
minority interest balance was adjusted to reflect the consolidated pro
forma minority interest percentage of 28.46% at June 30, 1996 as
follows (in thousands):
Value of Lichtin Properties Units $ 19,649
Value of NWI Units 27,304
Reclassification to shareholders' equity (18,010)
---------
$ 28,943
=========
(i) Represents the adjustment to state the consolidated pro forma
shareholders' equity balance and minority interest balance to 71.54%
and 28.46%, respectively, of the total consolidated pro forma equity
interests (both shareholders' equity and minority interests) in the
Company.
<PAGE>
(j) Represents adjustments to eliminate certain asset and liability amounts
that are not acquired or assumed as part of the Lichtin Properties and
NWI transactions or which are not being acquired or assumed as part of
the initial closings of the acquisition transactions reflected in this
pro forma balance sheet.
<PAGE>
EXHIBIT 99.10
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Lichtin
NWI Properties Principal
(Unaudited, in thousands, except Company Acquisition Acquisition Properties Pro Forma
per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $21,943 $3,675 $ 5,609 $1,639 $(1,793) (e) $31,073
Tenant reimbursements 2,007 662 1,709 137 (993) (e) 3,522
Income from direct financing
lease 384 -- -- -- -- 384
Other 174 134 53 -- 182 (k) 543
- -----------------------------------------------------------------------------------------------------------------------------
Total Revenue 24,508 4,471 7,371 1,776 (2,604) 35,522
- -----------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and
maintenance 2,687 426 1,700 197 (811) (e) 4,199
Real estate taxes 2,153 335 494 146 (185) (e) 2,943
Depreciation and amortization 6,000 928 1,840 -- 493 (f) 9,261
Interest 4,955 2,094 3,893 -- (256) (g) 10,686
Amortization of deferred
financing costs 421 54 107 -- (161) (g) 421
General and administrative 1,414 325 568 -- -- 2,307
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses 17,630 4,162 8,602 343 (920) 29,817
- -----------------------------------------------------------------------------------------------------------------------------
Operating Income 6,878 309 (1,231) 1,433 (1,684) 5,705
Interest income 198 445 13 -- (458) (h) 198
Equity in earnings of
unconsolidated subsidiaries 543 -- -- -- -- 543
- -----------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 7,619 754 (1,218) 1,433 (2,142) 6,446
Income Taxes -- (48) -- -- 48 (i) --
- -----------------------------------------------------------------------------------------------------------------------------
Income before Minority Interests 7,619 706 (1,218) 1,433 (2,094) 6,446
Minority Interests (1,426) -- -- -- (409) (j) (1,835)
- -----------------------------------------------------------------------------------------------------------------------------
Net Income $ 6,193 $ 706 $(1,218) $1,433 $(2,503) $ 4,611
- -----------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net Income $0.56 -- -- -- -- $ 0.41
- -----------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
Outstanding 11,156 -- -- -- -- 11,156
- -----------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
and Units Outstanding 13,723 1,092 778 -- -- 15,593
- -----------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
Weeks Corporation
Notes and Assumptions to Unaudited Pro Forma
Condensed Consolidated Statement of Operations
for the Six Months ended June 30, 1996
1. Basis of Presentation
The unaudited pro forma condensed consolidated statement of operations for
the six months ended June 30, 1996 is presented as if the Company acquired as
of January 1, 1996 the business operations and real estate assets of Lichtin
Properties (described in this Current Report on Form 8-K), the business
operations and real estate assets of NWI (described in a seperate Current
Report on Form 8-K of the Company dated November 1, 1996) and the Principal
Properties (described in the Company's Current Report on Form 8-K dated August
9, 1996). In management's opinion, all adjustments necessary to present fairly
the effects of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations
should be read in conjunction with unaudited pro forma condensed consolidated
balance sheet of the Company included herein, the consolidated financial
statements and accompanying notes thereto of the Company included in its Annual
Report on Form 10-K for the year ended December 31, 1995, and the unaudited
condensed consolidated financial statements and accompanying notes thereto of
the Company included in its June 30, 1996 Quarterly Report on Form 10-Q.
This unaudited pro forma condensed consolidated statement of operations is
not necessarily indicative of what the actual results of operations of the
Company would have been assuming the Company had acquired Lichtin Properties,
NWI and the Principal Properties (as described above) as of the beginning of
the period presented, nor do they purport to represent the results of
operations for future periods.
The unaudited historical results of operations of Lichtin Properties
included herein have been adjusted to reflect on a pro forma basis the
operating business, land and office and industrial properties to be acquired at
the initial closing of the Lichtin Properties transaction which is probable to
occur in December 1996, or January 1997. Certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other of Lichtin Properties'
office and industrial properties under development or in lease-up and land held
for development and their associated results of operations to be acquired
subsequent to the proposed initial closing date discussed herein have been
excluded from the accompanying pro forma amounts for the period presented.
The unaudited historical results of operations of NWI included in a separate
Current Report on Form 8-K of the Company dated November 1, 1996 have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the acquisition
transaction on November 1, 1996. NWI's industrial properties under development
and land held for future development and their associated results of operations
to be acquired subsequent to November 1, 1996 discussed in the separate Current
Report on Form 8-K dated November 1, 1996 relating to NWI have been excluded
from the accompanying pro forma amounts for the period presented.
<PAGE>
2. Assumption to the Unaudited Pro Forma Condensed Consolidated Statement of
Operations
(a) Represents the Company's unaudited condensed consolidated historical
statement of operations contained in its Quarterly Report on Form 10-Q
for the six months ended June 30, 1996.
(b) Represents the historical unaudited combined statement of operations of
NWI for the six months ended June 30, 1996, as set forth in Exhibit A to
the Company's Current Report on Form 8-K dated November 1, 1996 relating
to the NWI acquisition.
(c) Represents the historical unaudited combined statement of operations of
Lichtin Properties for the six months ended June 30, 1996, included
herein in Exhibit A.
(d) Represents the historical unaudited rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses of the Principal Properties for the six months ended June 30,
1996, as set forth in the Company's Current Report on Form 8-K dated
August 9, 1996, relating to the Principal acquisition.
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses for the results of operations of certain of Lichtin Properties
buildings leased to Northern Telecom, certain properties of Lichtin
Properties and NWI under development or in lease-up and expenses
associated with land held for development which are to be acquired
subsequent to the initial closing dates of the Lichtin Properties and
NWI acquisitions, as shown below (in thousands):
Lichtin
Properties NWI Total
---------- ---- ------
Rental income $1,462 $331 $1,793
Tenant reimbursements 952 41 993
Property operating and
maintenance expenses 752 59 811
Real estate taxes 149 36 185
(f) Represents the adjustment to reflect depreciation and amortization
expense of the acquired properties (consisting of properties to be
acquired and acquired at the initial closing dates for the Lichtin
Properties and NWI acquisitions and the closing of the Principal
Properties) based upon the assumed allocation of the acquisition price
to land, buildings and improvements, using a 35 year life for buildings
and the life of the lease for tenant improvements. Aggregate pro forma
depreciation and amortization expense for the six months ended June 30,
1996 was $1,623,000, $1,122,000 and $516,000 for Lichtin Properties,
NWI and the Principal Properties, respectively.
(g) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank
line of credit borrowings to be assumed or assumed at the initial
closing dates in the Lichtin Properties and NWI transactions, interest
<PAGE>
costs associated with additional borrowings under the Company's
revolving credit facility of $30.9 million at 7.0% for the purchase of
the Principal Properties and interest costs associated with additional
borrowings under the Company's revolving credit facility of $11.7
million at 7.0% to fund the cash portion of the Lichtin Properties
initial closing price and cash closing and acquisition expenses of the
Lichtin Properties and NWI transactions.
(h) Represents the adjustment to eliminate interest income included in the
NWI and Lichtin Properties historical amounts as the notes receivable
and cash balances are not being acquired by the Company.
(i) Represents the adjustment to eliminate income tax expense as the Company
has and expects to continue to qualify as a real estate investment
trust.
(j) Represents the net adjustment of pro forma minority interest to adjust
the pro forma consolidated minority interest amount to reflect the
weighted average ownership percentage of the Unitholders in the
Operating Partnership of 28.46% for the six months ended June 30, 1996.
(k) Represents the reduction of general and administrative expenses
resulting from the payment by Lichtin Properties to the Company of
management fees and overhead cost reimbursements relating to the
Company's management of certain buildings leased to Northern Telecom for
periods subsequent to the initial closing date of the Lichtin Properties
transaction.
<PAGE>
EXHIBIT 99.11
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Lichtin
NWI Properties Principal
(Unaudited, in thousands, Company Acquisition Acquisition Properties Pro Forma
except per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $31,217 $ 5,836 $10,245 $ 3,235 $(3,065) (e) $47,468
Tenant reimbursements 2,464 994 3,374 281 (2,046) (e) 5,067
Income from direct financing lease 776 -- -- -- -- 776
Other 480 348 24 -- 365 (l) 1,217
- -----------------------------------------------------------------------------------------------------------------------------
Total Revenue 34,937 7,178 13,643 3,516 (4,746) 54,528
- -----------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and maintenance 3,565 762 3,029 455 (1,770) (e) 6,041
Real estate taxes 2,997 642 817 293 (337) (e) 4,412
Depreciation and amortization 8,177 1,572 3,264 -- 1,685 (f) 14,698
Interest 8,106 3,093 7,094 -- (277) (g) 18,016
Amortization of deferred
financing costs 691 93 191 -- (284) (g) 691
General and administrative 1,848 643 1,154 -- -- 3,645
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses 25,384 6,805 15,549 748 (983) 47,503
- -----------------------------------------------------------------------------------------------------------------------------
Operating Income 9,553 373 (1,906) 2,768 (3,763) 7,025
Gain on sale of property -- -- 1,245 -- (1,245) (h) --
Interest income 334 1,117 18 -- (1,135) (i) 334
Equity in earnings of
unconsolidated subsidiaries 1,220 -- -- -- -- 1,220
- -----------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 11,107 1,490 (643) 2,768 (6,143) 8,579
Income Taxes -- (102) -- -- 102 (j) --
- -----------------------------------------------------------------------------------------------------------------------------
Income before Minority Interests 11,107 1,388 (643) 2,768 (6,041) 8,579
Minority Interests (2,681) -- -- -- (362) (k) (3,043)
- -----------------------------------------------------------------------------------------------------------------------------
Net Income $ 8,426 $ 1,388 $ (643) $ 2,768 $(6,403) $ 5,536
- -----------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net Income $ 1.03 -- -- -- -- $ 0.68
- -----------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding 8,171 -- -- -- -- 8,171
- -----------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares
and Units Outstanding 10,760 1,092 778 -- -- 12,630
- -----------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
Weeks Corporation
Notes and Assumptions to Unaudited Pro Forma
Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1995
1. Basis of Presentation
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1995 is presented as if the Company acquired as of
January 1, 1995 the business operations and real estate assets of Lichtin
Properties (described in this Current Report on Form 8-K), the business
operations and real estate assets of NWI (described in a separate Current
Report on Form 8-K of the Company dated November 1, 1996) and the Principal
Properties (described in the Company's Current Report on Form 8-K dated August
9, 1996). In management's opinion, all adjustments necessary to present fairly
the effects of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations
should be read in conjunction with unaudited pro forma condensed consolidated
balance sheet of the Company included herein and the consolidated financial
statements and accompanying notes thereto of the Company included in its Annual
Report on Form 10-K for the year ended December 31, 1995.
The unaudited pro forma condensed consolidated statement of operations is
not necessarily indicative of what the actual results of operations of the
Company would have been assuming the Company had acquired Lichtin Properties,
NWI and the Principal Properties (as described above) as of the beginning of
the period presented, nor do they purport to represent the results of
operations for future periods.
The historical results of operations of Lichtin Properties included herein
have been adjusted to reflect on a pro forma basis the operating business, land
and office and industrial properties to be acquired at the initial closing of
the Lichtin Properties transaction which is probable to occur in December 1996,
or January 1997. Certain of Lichtin Properties' buildings leased to Northern
Telecom, certain other of Lichtin Properties' office and industrial properties
under development or in lease-up and land held for development and their
associated results of operations to be acquired subsequent to the initial
closing date discussed herein have been excluded from the accompanying pro
forma amounts for the period presented.
The unaudited historical results of operations of NWI included in a separate
Current Report on Form 8-K of the Company dated November 1, 1996 have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the acquisition
transaction on November 1, 1996. NWI's industrial properties under development
and land held for future development and their associated results of operations
to be acquired subsequent to November 1, 1996 discussed in the separate Current
Report on Form 8-K dated November 1, 1996 relating to NWI have been excluded
from the accompanying pro forma amounts for the period presented.
<PAGE>
2. Assumptions to the Unaudited Pro Forma Condensed Consolidated Statement
of Operations
(a) Represents the Company's historical consolidated historical statement of
operations contained in its Annual Report on Form 10-K for the year
ended December 31, 1995.
(b) Represents the historical combined statement of operations of NWI for
the year ended December 31, 1995, as set forth in Exhibit A to the
Company's Current Report on Form 8-K dated November 1, 1996 relating to
the NWI acquisition.
(c) Represents the historical combined statement of operations of Lichtin
Properties for the year ended December 31, 1995, included herein in
Exhibit A.
(d) Represents the historical rental income, tenant reimbursements, real
estate taxes and property operating and maintenance expenses for the
Principal Properties for the year ended December 31, 1995, as set forth
in the Company's Current Report on Form 8-K dated August 9, 1996,
relating to the Principal acquisition.
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses for the results of operations of certain of Lichtin Properties
buildings leased to Northern Telecom, certain properties of Lichtin
Properties and NWI under development or in lease-up and expenses
associated with land held for development which are to be acquired
subsequent to the initial closing dates of the Lichtin Properties and
NWI acquisitions as shown below (in thousands):
Lichtin
Properties NWI Total
---------- ---- ------
Rental income $2,943 $122 $3,065
Tenant reimbursements 2,035 11 2,046
Property operating and
maintenance expenses 1,741 29 1,770
Real estate taxes 304 33 337
(f) Represents the adjustment to reflect depreciation and amortization
expense of the acquired properties (consisting of properties to be
acquired and acquired at the initial closing dates for the Lichtin
Properties and NWI acquisitions and the closing of the Principal
Properties) based upon the assumed allocation of the acquisition price
to land, buildings and improvements using a 35 year life for buildings
and the life of the lease for tenant improvements. Aggregate pro forma
depreciation and amortization expense for the year ended December 31,
1995 was $3,245,000 $2,243,000, and $1,033,000 for Lichtin Properties,
NWI and the Principal Properties, respectively.
(g) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank
line of credit borrowings to be assumed or assumed at the initial
closing dates of the Lichtin Properties and NWI transactions, interest
costs
<PAGE>
associated with additional borrowings under the Company's revolving
credit facility of $30.9 million at 7.0% for the purchase of the
Principal Properties and interest costs associated with additional
borrowings under the Company's revolving credit facility of $11.7
million at 7.0% to fund the cash portion of the Lichtin Properties
initial closing price and cash closing and acquisition expenses of the
Lichtin Properties and NWI transactions.
(h) Represents the adjustment to eliminate the gain on sale of property as
the property was not part of the Lichtin Properties acquisition
transaction.
(i) Represents the adjustment to eliminate interest income included in the
NWI and Lichtin Properties historical amounts as the notes receivable
and cash balances are not being acquired by the Company.
(j) Represents the adjustment to eliminate income tax expense as the Company
has and expects to continue to qualify as a real estate investment
trust.
(k) Represents the net adjustment of pro forma minority interest to adjust
the pro forma consolidated minority interest amount to reflect the
weighted average ownership percentage of the Unitholders in the
Operating Partnership of 35.47% for the year ended December 31, 1995.
(l) Represents the reduction of general and administrative expenses
resulting from the payment by Lichtin Properties to the Company of
management fees and overhead cost reimbursements relating to the
Company's management of certain buildings leased to Northern Telecom for
periods subsequent to the initial closing date of the Lichtin Properties
transaction.
<PAGE>
EXHIBIT 99.7
LICHTIN PROPERTIES
COMBINED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
<PAGE>
LICHTIN PROPERTIES
COMBINED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets:
Land $ 3,321 $ 4,422
Buildings and improvements 70,368 87,052
Accumulated depreciation (17,696) (20,134)
-------- --------
Operating real estate assets 55,993 71,340
Developments in progress 14,484 7,288
Land held for development 2,606 2,017
-------- --------
Net real estate assets 73,083 80,645
Cash and cash equivalents 783 665
Receivables:
Trade 1,769 1,951
Related party 116 116
Deferred costs, net 3,210 3,837
Other assets 507 615
-------- --------
$ 79,468 $ 87,829
======== ========
LIABILITIES AND OWNERS' DEFICIT
Notes payable $ 86,151 $ 94,629
Line of credit borrowings 2,519 4,036
Notes payable and accrued interest- 8,241 9,043
related parties
Accounts payable:
Trade 3,539 2,584
Related parties 299 276
Accrued interest payable 677 741
Property taxes payable 654 823
Other liabilities 119 535
-------- --------
Total liabilities 102,199 112,667
Owners' Deficit (22,731) (24,838)
-------- --------
$ 79,468 $ 87,829
======== ========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
<PAGE>
LICHTIN PROPERTIES
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1995 1996
------- -------
(Unaudited)
<S> <C> <C>
REVENUE
Rental $ 7,538 $ 8,921
Tenant reimbursements 2,516 2,694
Other - 89
------- -------
10,054 11,704
------- -------
EXPENSES
Property operating and maintenance 2,256 2,618
Real estate taxes 613 746
Depreciation and amortization 2,396 2,760
Interest 4,939 5,758
Interest - related parties 314 360
Amortization of deferred financing costs 140 170
General and administrative 793 941
------- -------
11,451 13,353
------- -------
OPERATING LOSS (1,397) (1,649)
Gain on sale of property 1,245 -
Interest income 13 21
------- -------
NET LOSS $ (139) $(1,628)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
LICHTIN PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1995 1996
-------- --------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (139) $ (1,628)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 2,396 2,760
Amortization of deferred financing costs 140 170
Straight-line rent revenue (193) (210)
Gain on sale of property (1,245) --
Net change in:
Receivables (348) (187)
Deferred lease costs (235) (968)
Other assets (504) (113)
Accounts payable and accrued expenses 1,080 677
Other liabilities 193 416
-------- --------
Net cash provided by operating
activities 1,145 917
-------- --------
INVESTING ACTIVITIES
Property acquisition, development and
construction (25,018) (10,580)
Proceeds from sale of property 14,824 --
-------- --------
Net cash used in investing activities (10,194) (10,580)
-------- --------
FINANCING ACTIVITIES
Line of credit proceeds (repayments), net 523 1,517
Proceeds from mortgage, construction
and other notes payable 20,111 15,529
Payments of mortgage, construction and
other notes payable (11,051) (7,051)
Proceeds from related party notes
payable 385 1,466
Repayments of related party notes
payable (442) (1,266)
Deferred financing costs (125) (171)
Distributions to owners (2,262) (479)
-------- --------
Net cash provided by financing
activities 7,139 9,545
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (1,910) (118)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 2,205 783
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 295 $ 665
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
LICHTIN PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Lichtin Properties represents the combined office and industrial building
development, construction and management operations of Lichtin Properties, Inc.
and its affiliated partnerships and corporations. Lichtin Properties began
operations in 1977 and is owned primarily by members of two families. The
accompanying combined financial statements include the financial condition and
results of operations of the following entities:
Lichtin Properties, Inc. (a Subchapter S corporation)
Morrisville Industrial Associates (a general partnership)
Perimeter Park Associates (a general partnership)
Perimeter Park West Associates Limited Partnership
Interchange Associates Limited Partnership
Woodlake Limited Liability Company
Interchange II LLC
Woodlake II LLC
6501 Weston Parkway LLC
Woodlake III LLC (formed in 1996)
As of September 30, 1996, Lichtin Properties owned and managed 25 warehouse and
office buildings comprising approximately 1.8 million square feet located in
central North Carolina's Research Triangle Area. In addition, four buildings
were under development or in lease-up comprising an additional 324,000 square
feet.
2. BASIS OF PRESENTATION
The accompanying combined financial statements of Lichtin Properties have been
presented on a combined basis because of the common ownership, control and
management and because the entities are expected to be the subject of a business
combination with a real estate investment trust (see Note 3). All significant
intercompany balances and transactions have been eliminated in the combined
financial statements.
The accompanying interim unaudited combined financial statements have been
prepared by Lichtin Properties' management in accordance with generally accepted
accounting principles for interim financial information and in conformity with
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the interim combined financial statements presented
herein reflect all adjustments of a normal and recurring nature which are
necessary to fairly state the interim combined financial statements. The
results of operations for the interim periods are not necessarily indicative of
the results that may be expected for the years ending December 31, 1995 and
1996, respectively. These financial statements should be read in conjunction
with Lichtin Properties' audited financial statements and the notes thereto
included in the Weeks Corporation Form 8-K dated November 5, 1996 and filed on
November 6, 1996.
<PAGE>
3. ACQUISITION - MERGER
On December 31, 1996, Lichtin Properties completed the first phase of an
acquisition and merger transaction with Weeks Corporation, a real estate
investment trust, and its subsidiaries (collectively, "Weeks"). The first phase
of the transaction was comprised of the merger of 14 industrial and suburban
office buildings, certain parcels of development land, and the combination of
Lichtin Properties' business operations, management and employees with those of
Weeks. The remaining assets of Lichtin Properties will be contributed to Weeks
in staged transactions over a period of up to four additional years.
<PAGE>
EXHIBIT 99.13
<TABLE>
<CAPTION>
EXHIBIT B
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties
Company Acquisition Acquisition Pro Forma
(Unaudited, in thousands.) Historical(a) Historical(b) Historical(c) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Land $ 48,740 $ 19,186 $ 4,422 $ 4,132(d) $ 76,480
Building and improvements 312,382 42,889 87,052 3,877(d) 446,200
Accumulated depreciation (37,958) (7,560) (20,134) 27,694(d) (37,958)
- -----------------------------------------------------------------------------------------------------------------------------------
Operating real estate assets 323,164 54,515 71,340 35,703 484,722
- -----------------------------------------------------------------------------------------------------------------------------------
Developments in progress 32,276 11,236 7,288 (18,524)(i) 32,276
Land held for future development 4,323 6,598 2,017 (5,325)(d) 7,613
- -----------------------------------------------------------------------------------------------------------------------------------
Net real estate assets 359,763 72,349 80,645 11,854 524,611
- -----------------------------------------------------------------------------------------------------------------------------------
Real estate development loans 7,521 - - - 7,521
Direct financing lease 5,162 - - - 5,162
Cash and cash equivalents 48 1,673 665 (1,315)(i) 1,071
Deferred costs, net 9,929 858 3,837 (4,695)(i) 9,929
Investments in and notes receivable
from unconsolidated subsidiaries 7,668 - - - 7,668
Receivables and other assets 6,534 1,014 2,682 (3,398)(d)(i) 6,832
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 396,625 $ 75,894 $ 87,829 $ 2,446 $ 562,794
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
Mortgage notes payable $ 112,662 $ 54,607 $ 94,629 $ (59,604)(e) $ 202,294
Bank credit facility borrowings 112,905 1,500 4,036 21,283 (f) 139,724
Notes payable - related parties and other - 1,550 9,043 (10,593)(i) -
Accounts payable and accrued expenses 9,383 1,109 4,424 (5,533)(i) 9,383
Other liabilities 2,660 167 535 - 3,362
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 237,610 58,933 112,667 (54,447) 354,763
- -----------------------------------------------------------------------------------------------------------------------------------
Minority Interests in
Operating Partnership 29,706 - - 26,462 (g) 56,168
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholders' and Owners' Equity
Common Stock 112 - - 2 (h) 114
Preferred Stock - - - - -
Additional paid-in capital 191,779 - - 7,122 (h) 198,901
Accumulated deficit (62,582) - - 15,430 (j) (47,152)
Owners' equity (deficit) - 16,961 (24,838) 7,877 (i) -
- -----------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' and
Owners' Equity (Deficit) 129,309 16,961 (24,838) 30,431 151,863
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders'
and Owners' Equity (Deficit) $ 396,625 $ 75,894 $ 87,829 $ 2,446 $ 562,794
===================================================================================================================================
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated balance sheet is presented as if
Weeks Corporation (the "Company") acquired as of September 30, 1996, the
business operations and real estate assets of Lichtin Properties (described in
the Company's Current Report on Form 8-K dated December 31, 1996 and filed on
January 15, 1997) and the business operations and real estate assets of NWI
(described in a separate Current Report on Form 8-K of the Company dated
November 1, 1996 and filed on November 6, 1996). The unaudited pro forma
condensed consolidated balance sheet is not necessarily indicative of what the
actual financial position would have been at September 30, 1996, nor does it
purport to represent the future financial position of the Company.
The unaudited pro forma condensed consolidated balance sheet should be read in
conjunction with the unaudited pro forma condensed consolidated statements of
operations of the Company included herein, the consolidated financial statements
and accompanying notes thereto of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1995, and the unaudited condensed
consolidated financial statements and accompanying notes thereto of the Company
included in its September 30, 1996 Quarterly Report on Form 10-Q.
The unaudited pro forma amounts of Lichtin Properties and NWI reflected in the
September 30, 1996 condensed consolidated pro forma balance sheet include the
operating businesses, land and the office and industrial properties acquired at
the respective initial closing dates of each acquisition. Certain completed
properties, office and industrial properties under development and land held for
future development of Lichtin Properties and NWI which are under agreements to
be acquired subsequent to the initial closing dates discussed in the Company's
Current Report on Form 8-K dated December 31, 1996 and filed on January 15, 1997
relating to Lichtin Properties and in the separate Current Report on Form 8-K of
the Company dated November 1, 1996 and filed on November 6, 1996 relating to NWI
have been excluded from the accompanying pro forma amounts as of September 30,
1996.
The acquisitions of Lichtin Properties and NWI have been accounted for under the
purchase method of accounting. Accordingly, assets acquired and liabilities
assumed have been reflected herein at their estimated fair values which may be
subject to further modification based upon the final determination of the
acquired properties' fair values and the final determination of actual closing
costs associated with each of the Lichtin Properties and NWI transactions.
Management believes that its final allocation of the purchase price will not
differ materially from the purchase price allocations included herein.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Represents the Company's unaudited condensed consolidated historical
balance sheet contained in its Quarterly Report on Form 10-Q as of
September 30, 1996.
(b) Represents the historical unaudited combined balance sheet of NWI as of
September 30, 1996.
(c) Represents the historical unaudited combined balance sheet of Lichtin
Properties as of September 30, 1996, included herein in Exhibit A.
(d) Represents the adjustments to reflect the estimated initial purchase price
of the Lichtin Properties business operations and real estate assets of
$93,800,000 and the NWI business operations and real estate assets of
$71,100,000, including estimated closing costs and acquisition expenses.
Approximately $300,000 of the purchase price relating to furniture and
equipment is included in receivables and other assets.
(e) Represents the adjustment to reflect the assumption of mortgage,
construction and other notes payable of Lichtin of $47,590,000 (as of
September 30, 1996) and of NWI of $42,042,000 (as of September 30, 1996).
The weighted average interest rate was 8.5% on the Lichtin Properties debt
and 8.5% on the NWI debt.
(f) Represents borrowings of $26,819,000 under the Company's revolving credit
facility to fund the cash components of, and the debt assumption and
retirement relating to, the Lichtin Properties transaction and closing
costs of the NWI and Lichtin Properties transactions.
(g) Represents the issuance of approximately 565,000 units of partnership
interest ("Units") in Weeks Realty, L.P., the partnership subsidiary
through which the Company conducts substantially all of its operations,
with a value for purposes of the initial closing of the Lichtin Properties
transaction of $25.25 per Unit, and approximately 1,105,000 Units with a
value for purposes of the initial closing of the NWI transaction of $25.00
per Unit. The resulting consolidated pro forma minority interest balance
was adjusted to reflect the consolidated pro forma minority interest
percentage of 27.0% at September 30, 1996 as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Value of Lichtin Properties Units $ 14,275
Value of NWI Units 27,617
Reclassification to shareholders' equity (15,430)
--------
$ 26,462
========
</TABLE>
(h) Represents the issuance of approximately 282,000 shares of common stock
valued at $25.25 per share relating to the Lichtin Properties transaction.
(i) Represents adjustments to eliminate certain asset and liability amounts
that are not acquired or assumed as part of the NWI and Lichtin Properties
transactions or which are not being acquired or assumed as part of the
initial closings of the acquisition transactions reflected in this pro forma
balance sheet.
<PAGE>
(j) Represents the adjustment to state the consolidated pro forma shareholders'
equity balance and minority interest balance to 73.0% and 27.0%,
respectively, of the total consolidated pro forma equity interests (both
shareholders' equity and minority interests) in the Company.
<PAGE>
<TABLE>
<CAPTION>
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
(Unaudited, in thousands, Company Acquisition Acquisition Properties Pro Forma
except per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $ 34,136 $ 5,496 $ 8,921 $ 2,002 $ (3,742)(e) $ 46,813
Tenant reimbursements 3,064 1,046 2,694 167 (1,801)(e) 5,170
Income from direct
financing lease 576 - - - - 576
Other 287 163 89 - 448 (f) 987
- -----------------------------------------------------------------------------------------------------------------------------------
Total Revenue 38,063 6,705 11,704 2,169 (5,095) 53,546
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and
maintenance 4,276 628 2,618 241 (1,523)(e) 6,240
Real estate taxes 3,288 585 746 178 (378)(e) 4,419
Depreciation and
amortization 9,416 1,279 2,760 - 555 (g) 14,010
Interest 8,157 3,166 6,118 - (1,504)(h) 15,937
Amortization of deferred
financing costs 642 96 170 - (266)(h) 642
General and
administrative 2,174 594 941 - - 3,709
- -----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 27,953 6,348 13,353 419 (3,116) 44,957
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Equity in
Earnings of
Unconsolidated
Subsidiaries and
Interest Income 10,110 357 (1,649) 1,750 (1,979) 8,589
Equity in earnings of
unconsolidated
subsidiaries 919 - - - - 919
Interest income 321 606 21 - (627)(i) 321
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Income
Taxes 11,350 963 (1,628) 1,750 (2,606) 9,829
Income taxes - (73) - - (73)(j) -
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Minority
Interests 11,350 890 (1,628) 1,750 (2,533) 9,829
Minority interests (2,124) - - - (530)(k) (2,654)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 9,226 $ 890 $ (1,628) $ 1,750 $ (3,063) $ 7,175
===================================================================================================================================
Per Share Data
Net Income $0.83 - - - - $0.63
===================================================================================================================================
Weighted Average
Shares Outstanding 11,162 - - - 282 11,444
===================================================================================================================================
Weighted Average
Shares and Units
Outstanding 13,729 - - - 1,953 15,682
===================================================================================================================================
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statement of operations for the
nine months ended September 30, 1996 is presented as if the Company acquired as
of January 1, 1996 the business operations and real estate assets of Lichtin
Properties (described in the Company's Current Report on Form 8-K dated December
31, 1996 and filed on January 15, 1997), the business operations and real estate
assets of NWI (described in a seperate Current Report on Form 8-K of the Company
dated November 1, 1996 and filed on November 6, 1996) and the Principal
Properties (described in the Company's Current Report on Form 8-K dated August
9, 1996 and filed on August 22, 1996). In management's opinion, all adjustments
necessary to present fairly the effects of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations should
be read in conjunction with unaudited pro forma condensed consolidated balance
sheet of the Company included herein, the consolidated financial statements and
accompanying notes thereto of the Company included in its Annual Report on Form
10-K for the year ended December 31, 1995, and the unaudited condensed
consolidated financial statements and accompanying notes thereto of the Company
included in its September 30, 1996 Quarterly Report on Form 10-Q.
This unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired Lichtin Properties, NWI and
the Principal Properties (as described above) as of the beginning of the period
presented, nor do they purport to represent the results of operations for future
periods.
The unaudited historical results of operations of Lichtin Properties included
herein have been adjusted to reflect on a pro forma basis the operating
business, land and office and industrial properties acquired at the initial
closing of the Lichtin Properties transaction on December 31, 1996. Certain of
Lichtin Properties' buildings leased to Northern Telecom, certain other of
Lichtin Properties' completed office and industrial properties, certain
properties under development or in lease-up and land held for development, which
are under agreements to be acquired subsequent to the initial closing date
discussed herein, and their associated results of operations have been excluded
from the accompanying pro forma amounts for the period presented.
The unaudited historical results of operations of NWI included herein have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the acquisition
transaction on November 1, 1996. NWI's industrial properties under development
and land held for future development, which are under agreements to be acquired
subsequent to November 1, 1996, and their associated results of operations, have
been excluded from the accompanying pro forma amounts for the period presented.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
(a) Represents the Company's unaudited condensed consolidated historical
statement of operations contained in its Quarterly Report on Form 10-Q for
the nine months ended September 30, 1996.
(b) Represents the historical unaudited combined statement of operations of
NWI for the nine months ended September 30, 1996.
(c) Represents the historical unaudited combined statement of operations of
Lichtin Properties for the nine months ended September 30, 1996, included
herein in Exhibit A.
(d) Represents the historical unaudited rental income, tenant reimbursements,
real estate taxes and property operating and maintenance expenses for the
Principal Properties for the period from January 1, 1996 to August 9, 1996
(the acquisition date).
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses for the results of operations of certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other completed buildings of
Lichtin Properties, certain properties of NWI and Lichtin Properties under
development or in lease-up and expenses associated with land held for
development which are to be acquired subsequent to the initial closing
dates of the NWI and Lichtin Properties acquisitions as shown below (in
thousands):
<TABLE>
<CAPTION>
Lichtin
Properties NWI Total
---------- ----- -----
<S> <C> <C> <C>
Rental income $3,221 $521 $3,742
Tenant reimbursements 1,708 93 1,801
Property operating and maintenance
expenses 1,429 94 1,523
Real estate taxes 318 60 378
</TABLE>
(f) Represents the assumed payment by Lichtin Properties and NWI to the
Company of management fees and overhead cost reimbursements relating to
the Company's management of certain operating buildings and buildings in
lease-up not acquired at the respective initial closing dates.
(g) Represents the adjustment to reflect depreciation and amortization expense
of the acquired properties (consisting of properties acquired at the
initial closing dates for the Lichtin Properties and NWI acquisitions and
the closing of the Principal Properties) based upon the assumed allocation
of the acquisition price to land, buildings and improvements, using a 35
year life for buildings and the life of the lease for tenant improvements.
Aggregate pro forma depreciation and amortization expense for the nine
months ended September 30, 1996 was $2,346,000 and $1,619,000 for Lichtin
Properties and NWI, respectively, and was $629,000 for the Principal
Properties for the period from January 1, 1996 to August 9, 1996 (the date
of acquisition).
<PAGE>
(h) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank
line of credit borrowings assumed at the initial closing dates in the
Lichtin Properties and NWI transactions, interest costs through August 9,
1996 (the acquisition date) associated with additional borrowings under
the Company's revolving credit facility of $30.8 million at 7.0% for the
purchase of the Principal Properties, including closing costs and
acquisition expenses, and interest costs associated with additional
borrowings under the Company's revolving credit facility of $26.8 million
at 7.0% to fund the cash portion of, and the debt assumption and
retirement relating to, the Lichtin Properties transaction and cash
closing and acquisition expenses of the Lichtin Properties and NWI
transactions.
(i) Represents the adjustment to eliminate interest income included in the NWI
and Lichtin Properties historical amounts as the notes receivable and cash
balances were not acquired by the Company.
(j) Represents the adjustment to eliminate income tax expense as the Company
has and expects to continue to qualify as a real estate investment trust.
(k) Represents the net adjustment of pro forma minority interest to adjust the
pro forma consolidated minority interest amount to reflect the weighted
average ownership percentage of the Unitholders in the Operating
Partnership of 27.0% for the nine months ended September 30, 1996.
<PAGE>
EXHIBIT 99.15
<TABLE>
<CAPTION>
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
(Unaudited, in thousands, Company Acquisition Acquisition Properties Pro Forma
except per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $ 31,217 $ 5,836 $ 10,245 $ 3,235 $ (4,792)(e) $ 45,741
Tenant reimbursements 2,464 994 3,374 281 (2,385)(e) 5,062
Income from direct
financing lease 776 - - - - 776
Other 480 348 24 - 563 (f) 1,415
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenue 34,937 7,178 13,643 3,516 (6,614) 52,994
- ---------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and
maintenance 3,565 762 3,029 455 (2,076)(e) 6,069
Real estate taxes 2,997 642 817 293 (462)(e) 4,287
Depreciation and
amortization 8,177 1,572 3,264 - 1,010 (g) 14,023
Interest 8,106 3,093 7,094 - (1,401)(h) 16,892
Amortization of deferred
financing costs 691 93 191 - (284)(h) 691
General and
administrative 1,848 643 1,154 - - 3,645
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 25,384 6,805 15,549 748 (3,213) 45,607
- ---------------------------------------------------------------------------------------------------------------------------
Income before Equity in
Earnings of
Unconsolidated
Subsidiaries and
Interest Income 9,553 373 (1,906) 2,768 (3,401) 7,387
Gain on sale of property - - 1,245 - (1,245)(l) -
Equity in earnings of
unconsolidated
subsidiaries 1,220 - - - - 1,220
Interest income 334 1,117 18 - (1,135)(i) 334
- ---------------------------------------------------------------------------------------------------------------------------
Income before Income
Taxes 11,107 1,490 (643) 2,768 (5,781) 8,941
Income taxes - (102) - - (102)(j) -
- ---------------------------------------------------------------------------------------------------------------------------
Income before Minority
Interests 11,107 1,388 (643) 2,768 (5,679) 8,941
Minority interests (2,681) - - - (314)(k) (2,995)
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 8,426 $ 1,388 $ (643) $ 2,768 $ (5,993) $ 5,946
===========================================================================================================================
Per Share Data
Net Income $1.03 - - - - $0.70
===========================================================================================================================
Weighted Average
Shares Outstanding 8,171 - - - 282 8,453
===========================================================================================================================
Weighted Average
Shares and Units
Outstanding 10,760 - - - 1,953 12,713
===========================================================================================================================
</TABLE>
<PAGE>
WEEKS CORPORATION
-----------------
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1995 is presented as if the Company acquired as of
January 1, 1995 the business operations and real estate assets of Lichtin
Properties (described in the Company's Current Report on Form 8-K dated December
31, 1996 and filed on January 15, 1997), the business operations and real estate
assets of NWI (described in a separate Current Report on Form 8-K of the Company
dated November 1, 1996 and filed on November 6, 1996) and the Principal
Properties (described in the Company's Current Report on Form 8-K dated August
9, 1996 and filed on August 22, 1996). In management's opinion, all adjustments
necessary to present fairly the effects of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations should
be read in conjunction with unaudited pro forma condensed consolidated balance
sheet of the Company included herein and the consolidated financial statements
and accompanying notes thereto of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1995.
The unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired Lichtin Properties, NWI and
the Principal Properties (as described above) as of the beginning of the period
presented, nor do they purport to represent the results of operations for future
periods.
The historical results of operations of Lichtin Properties included herein have
been adjusted to reflect on a pro forma basis the operating business, land and
office and industrial properties acquired at the initial closing of the Lichtin
Properties transaction on December 31, 1996. Certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other of Lichtin Properties'
completed office and industrial properties, certain properties under development
or in lease-up and land held for development, which are under agreements to be
acquired subsequent to the initial closing date discussed herein, and their
associated results of operations have been excluded from the accompanying pro
forma amounts for the period presented.
The unaudited historical results of operations of NWI included herein have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the acquisition
transaction on November 1, 1996. NWI's industrial properties under development
and land held for future development, which are under agreements to be acquired
subsequent to November 1, 1996, and their associated results of operations have
been excluded from the accompanying pro forma amounts for the period presented.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
(a) Represents the Company's historical consolidated historical statement of
operations contained in its Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) Represents the historical combined statement of operations of NWI for the
year ended December 31, 1995, as set forth in Exhibit A to the Company's
Current Report on Form 8-K dated November 1, 1996 and filed on November 6,
1996 relating to the NWI acquisition.
(c) Represents the historical combined statement of operations of Lichtin
Properties for the year ended December 31, 1995, as set forth in Exhibit A
to the Company's Current Report on Form 8-K dated November 5, 1996 and
filed on November 6, 1996.
(d) Represents the historical unaudited rental income, tenant reimbursements,
real estate taxes and property operating and maintenance expenses for the
Principal Properties for the year ended December 31, 1995, as set forth in
the Company's Current Report on Form 8-K dated August 9, 1996 and filed on
August 22, 1996, relating to the Principal acquisition.
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses for the results of operations of certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other completed properties
of Lichtin Properties, certain properties of NWI and Lichtin Properties
under development or in lease-up and expenses associated with land held
for development which are to be acquired subsequent to the initial closing
dates of the NWI and Lichtin Properties acquisitions as shown below (in
thousands):
<TABLE>
<CAPTION>
Lichtin
Properties NWI Total
---------- ---- ------
<S> <C> <C> <C>
Rental income $4,670 $122 $4,792
Tenant reimbursements 2,374 11 2,385
Property operating and maintenance
expenses 2,047 29 2,076
Real estate taxes 429 33 462
</TABLE>
(f) Represents the assumed payment by Lichtin Properties to the Company of
management fees and overhead cost reimbursements relating to the Company's
management of certain operating buildings and buildings in lease-up not
acquired at the initial closing date of the Lichtin Properties
transaction.
(g) Represents the adjustment to reflect depreciation and amortization expense
of the acquired properties (consisting of properties acquired at the
initial closing dates for the Lichtin Properties and NWI acquisitions and
the closing of the Principal Properties) based upon the assumed allocation
of the acquisition price to land, buildings and improvements, using a 35
year life for buildings and the life of the lease for tenant improvements.
Aggregate pro forma depreciation and amortization expense for the year
<PAGE>
ended December 31, 1995 was $2,716,000, $2,100,000 and $1,030,000 for
Lichtin Properties, NWI and the Principal Properties, respectively.
(h) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank
line of credit borrowing assumed at the initial closing dates of the
Lichtin Properties and NWI transactions, interest costs associated with
additional borrowings under the Company's revolving credit facility of
$30.8 million at 7.0% for the purchase of the Principal Properties,
including closing costs and acquisition expenses, and interest costs
associated with additional borrowings under the Company's revolving credit
facility of $26.8 million at 7.0% to fund the cash portion of, and the
debt assumption and retirement relating to, the Lichtin Properties
transaction and cash closing and acquisition expenses of the Lichtin
Properties and NWI transactions.
(i) Represents the adjustment to eliminate interest income included in the NWI
and Lichtin Properties historical amounts as the notes receivable and cash
balances were not acquired by the Company.
(j) Represents the adjustment to eliminate income tax expense as the Company
has and expects to continue to qualify as a real estate investment trust.
(k) Represents the net adjustment of pro forma minority interest to adjust the
pro forma consolidated minority interest amount to reflect the weighted
average ownership percentage of the Unitholders in the Operating
Partnership of 33.5% for the year ended December 31, 1995.
(l) Represents the adjustment to eliminate the gain on sale of property as the
property was not part of the Lichtin Properties acquisition transaction.
<PAGE>
EXHIBIT 99.8
NWI WAREHOUSE GROUP
COMBINED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
<PAGE>
NWI WAREHOUSE GROUP
COMBINED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30,
1995 1996
----------------------------
(Unaudited)
ASSETS
Real estate assets:
Land $13,008 $19,186
Buildings and improvements 35,255 42,889
Accumulated depreciation (6,575) (7,560)
----------------------------
Operating real estate assets 41,688 54,515
Developments in progress 11,149 11,236
Land held for future development 9,555 6,598
----------------------------
Net real estate assets 62,392 72,349
Cash and cash equivalents 1,313 1,673
Receivables and other assets 1,004 1,014
Deferred costs, net 716 858
----------------------------
$65,425 $75,894
============================
LIABILITIES AND OWNERS' EQUITY
Notes payable $44,604 $54,607
Line of credit borrowings 640 1,500
Notes payable - related parties 1,220 1,550
Accounts payable and accrued expenses 2,438 1,109
Other liabilities 126 167
----------------------------
Total liabilities 49,028 58,933
----------------------------
Owners' equity 25,219 24,888
Less: notes receivable from owners (8,822) (7,927)
----------------------------
Owners' equity, net 16,397 16,961
----------------------------
$65,425 $75,894
============================
The accompanying notes are an integral part of the combined balance sheets.
<PAGE>
NWI WAREHOUSE GROUP
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1995 1996
-------------------
(Unaudited)
Revenues:
Rental income $4,218 $5,496
Tenant reimbursements 681 1,046
Other 109 163
-------------------
5,008 6,705
-------------------
Expenses:
Property operating and maintenance 571 628
Real estate taxes 482 585
Tenant improvements and lease 322 347
commissions
Depreciation 835 932
Interest 2,190 3,069
Interest--related party 69 97
Amortization of deferred financing costs 70 96
General and administrative 435 594
-------------------
4,974 6,348
-------------------
Income before interest income and
income taxes 34 357
Interest income from related parties 853 606
-------------------
Income before income taxes 887 963
Income tax expense (72) (73)
-------------------
Net income $ 815 $ 890
===================
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
NWI WAREHOUSE GROUP
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1995 1996
-------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 815 $ 890
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 835 932
Amortization of deferred financing costs 70 96
Straight-line rent revenue 128 69
Accrued interest income on notes
receivable from related parties (301) (314)
Provision for bad debts 110 215
Net change in:
Receivables and other assets 244 (294)
Accounts payable, accrued expenses and
other liabilities 64 152
-------------------------------
Net cash provided by operating activities 1,965 1,746
-------------------------------
INVESTING ACTIVITIES
Property acquisition, development and construction (13,678) (12,329)
Notes receivable collections 10,824 850
Interest proceeds on notes receivable 3,481 569
Notes receivable additions (8,647) (210)
-------------------------------
Net cash used in investing activities (8,020) (11,120)
-------------------------------
FINANCING ACTIVITIES
Line of credit proceeds (repayments), net (185) 860
Proceeds from mortgage, construction
and other notes payable 15,696 12,175
Payments of mortgage, construction and other notes
payable (6,481) (2,172)
Proceeds from related party notes payable 393 520
Repayments of related party notes payable (622) (190)
Deferred financing costs (347) (238)
Distributions to owners (234) (1,221)
-------------------------------
Net cash provided by financing activities 8,220 9,734
-------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 2,165 360
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 785 1,313
-------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,950 $ 1,673
===============================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
NWI WAREHOUSE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
1. ORGANIZATION AND BASIS OF COMBINATION
NWI Warehouse Group ("NWI") represents the combined industrial building
development, construction, ownership and management operations of NWI Warehouse
Group, L.P. (the "Partnership"), and certain assets, liabilities and operations
of Buckley & Company Real Estate, Inc. ("Buckley"), comprising primarily the
property management operations of NWI. The accompanying condensed financial
statements of NWI have been presented on a combined basis due to the common
ownership and control resulting from their acquisition by a real estate
investment trust (Note 2).
As of September 30, 1996, NWI owned and managed 17 industrial buildings
comprising 1.4 million square feet and had seven additional buildings under
development or in lease-up comprising an additional 1.0 million square feet.
The buildings are located in Nashville, Tennessee.
The Partnership commenced business operations in 1993 through a combination with
nine related partnerships and the contribution of certain assets and liabilities
of other related partnerships and entities under common management and control.
In 1994, six additional related partnerships were combined with and into the
Partnership. These combined, related partnerships (the "Predecessor
Partnerships") discussed herein, and their related properties, are as follows:
<PAGE>
1. ORGANIZATION AND BASIS OF COMBINATION (CONTINUED)
COMMENCEMENT OF
PREDECESSOR PARTNERSHIPS PROPERTY RENTAL OPERATIONS
- ----------------------------------------------------------------------------
Partnerships:
Pine Tree Corporation Airpark I 1985
NWI VI, L.P. Airpark II 1986
NWI VII, L.P. Airpark III 1986
NWI XIV, L.P. Airpark IV 1989
NWI XI, L.P. Airpark V 1988
NWI XVI, L.P. Airpark VI 1990
NWI XIX, L.P. Airpark VII 1992
NWI XX, L.P. Airpark VIII 1995
NWI XXI, L.P. Airpark IX 1995
NWI VIII, L.P. Brentwood South I 1987
NWI IX, L.P. Brentwood South II 1987
NWI XVII, L.P. Brentwood South III 1989
NWI XVIII, L.P. Brentwood South IV 1990
NWI XXIII, L.P. Brentwood South V 1990
NWI XXII, L.P. Brentwood South VI 1990
The combination of the Predecessor Partnerships, described above, was accounted
for as a reorganization of entities under common control and, accordingly, the
related assets, liabilities and owner's equity were reflected at historical cost
in a manner similar to that in pooling of interests accounting. Accordingly, the
accompanying combined financial statements of NWI have been presented giving
retroactive effect to all periods prior to the combinations. All significant
intercompany accounts and transactions have been eliminated in these combined
financial statements.
The accompanying interim unaudited combined financial statements have been
prepared by the Company's management in accordance with generally accepted
accounting prinicples for interim financial information and in conformity with
the rules and regulations of the Securities and Exhchange Commission. In the
opinion of management, the interim combined financial statements presented
herein reflect all adjustments of a normal and recurring nature which are
necessary to fairly state the interim combined financial statements. The results
of operations for the interim periods are not necessarily indicative of the
results that may be expected for the years ending December 31, 1995 and 1996,
respectively. These financial statements should be read in conjunction with
NWI's audited financial statements and the notes thereto included in the Weeks
Corporation Form 8-K dated November 1, 1996.
<PAGE>
2. ACQUISITION-MERGER
On November 1, 1996, NWI completed the first phase of an acquisition and merger
transaction with Weeks Corporation, a real estate investment trust, and its
subsidiaries (collectively "Weeks"). The first phase of the transaction was
comprised of the acquisition by Weeks of 17 industrial buildings and the
combination of NWI's business operations, management and employees with those of
Weeks. During the remainder of 1996, NWI contributed to Weeks approximately 45
net usable acres of undeveloped land, including reimbursement of certain
infrastructure costs, valued at approximatley $6.3 million. The remaining assets
of NWI will be contributed to Weeks over a period of up to six additional years.
<PAGE>
EXHIBIT 99.16
<TABLE>
<CAPTION>
EXHIBIT B
WEEKS CORPORATIONS
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties
Company Acquisition Acquisition Pro Forma
(Unaudited, in thousands.) Historical(a) Historical(b) Historical(c) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Land $ 48,740 $ 19,186 $ 4,422 $ 4,132 (d) $ 76,480
Building and improvements 312,382 42,889 87,052 3,877 (d) 446,200
Accumulated depreciation (37,958) (7,560) (20,134) 27,694 (d) (37,958)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating real estate assets 323,164 54,515 71,340 35,703 484,722
- ------------------------------------------------------------------------------------------------------------------------------------
Developments in progress 32,276 11,236 7,288 (18,524) (i) 32,276
Land held for future development 4,323 6,598 2,017 (5,325) (d) 7,613
- ------------------------------------------------------------------------------------------------------------------------------------
Net real estate assets 359,763 72,349 80,645 11,854 524,611
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate development loans 7,521 - - - 7,521
Direct financing lease 5,162 - - - 5,162
Cash and cash equivalents 48 1,673 665 (1,315) (i) 1,071
Deferred costs, net 9,929 858 3,837 (4,695) (i) 9,929
Investments in and notes receivable
from unconsolidated subsidiaries 7,668 - - - 7,668
Receivables and other assets 6,534 1,014 2,682 (3,398) (d)(i) 6,832
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 396,625 $ 75,894 $ 87,829 $ 2,446 $ 562,794
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
Mortgage notes payable $ 112,662 $ 54,607 $ 94,629 $ (59,604) (e) $ 202,294
Bank credit facility borrowings 112,905 1,500 4,036 21,283 (f) 139,724
Notes payable - related parties and other - 1,500 9,043 (10,593) (i) -
Accounts payable and accrued expenses 9,383 1,109 4,424 (5,533) (i) 9,383
Other liabilities 2,660 167 535 - 3,362
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 237,610 58,933 112,667 (54,447) 354,763
- ------------------------------------------------------------------------------------------------------------------------------------
Minority Interests in
Operating Partnership 29,706 - - 26,462 (g) 56,168
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' and Owners' Equity
Common Stock 112 - - 2 (h) 114
Preferred Stock - - - - -
Additional paid-in capital 191,779 - - 7,122 (h) 198,901
Accumulated deficit (62,582) - - 15,430 (j) (47,152)
Owners' equity (deficit) - 16,961 (24,838) 7,877 (i) -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' and
Owners' Equity (Deficit) 129,309 16,961 (24,838) 30,431 151,863
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders'
and Owners' Equity (Deficit) $ 396,625 $ 75,894 $ 87,829 $ 2,446 $ 562,794
====================================================================================================================================
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated balance sheet is presented as if
Weeks Corporation (the "Company") acquired as of September 30, 1996, the
business operations and real estate assets of NWI (described in the Company's
Current Report on Form 8-K dated November 1, 1996 and filed on November 6, 1996)
and the business operations and real estate assets of Lichtin Properties
(described in the Company's Current Report on Form 8-K dated December 31, 1996
and filed on January 15, 1997). The unaudited pro forma condensed consolidated
balance sheet is not necessarily indicative of what the actual financial
position would have been at September 30, 1996, nor does it purport to represent
the future financial position of the Company.
The unaudited pro forma condensed consolidated balance sheet should be read in
conjunction with the unaudited pro forma condensed consolidated statements of
operations of the Company included herein, the consolidated financial statements
and accompanying notes thereto of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1995, and the unaudited condensed
consolidated financial statements and accompanying notes thereto of the Company
included in its September 30, 1996 Quarterly Report on Form 10-Q.
The unaudited pro forma amounts of Lichtin Properties and NWI reflected in the
September 30, 1996 condensed consolidated pro forma balance sheet include the
operating businesses, land and the office and industrial properties acquired at
the respective initial closing dates of each acquisition. Certain completed
properties, office and industrial properties under development and land held for
future development of Lichtin Properties and NWI which are under agreements to
be acquired subsequent to the initial closing dates discussed in the Company's
Current Report on Form 8-K dated December 31, 1996 and filed on January 15, 1997
relating to Lichtin Properties and in the separate Current Report on Form 8-K of
the Company dated November 1, 1996 and filed on November 6, 1996 relating to NWI
have been excluded from the accompanying pro forma amounts as of September 30,
1996.
The acquisitions of Lichtin Properties and NWI have been accounted for under the
purchase method of accounting. Accordingly, assets acquired and liabilities
assumed have been reflected herein at their estimated fair values which may be
subject to further modification based upon the final determination of the
acquired properties' fair values and the final determination of actual closing
costs associated with each of the Lichtin Properties and NWI transactions.
Management believes that its final allocation of the purchase price will not
differ materially from the purchase price allocations included herein.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Represents the Company's unaudited condensed consolidated historical
balance sheet contained in its Quarterly Report on Form 10-Q as of
September 30, 1996.
(b) Represents the historical unaudited combined balance sheet of NWI as of
September 30, 1996, included herein in Exhibit A.
(c) Represents the historical unaudited combined balance sheet of Lichtin
Properties as of September 30, 1996, as set forth in Exhibit A to the
Company's Current Report on Form 8-K/A dated December 31, 1996 and filed on
March 14, 1997, relating to the Lichtin Properties acquisition.
(d) Represents the adjustments to reflect the estimated initial purchase price
of the Lichtin Properties business operations and real estate assets of
$93,800,000 and the NWI business operations and real estate assets of
$71,100,000, including estimated closing costs and acquisition expenses.
Approximately $300,000 of the purchase price relating to furniture and
equipment is included in receivables and other assets.
(e) Represents the adjustment to reflect the assumption of mortgage,
construction and other notes payable of Lichtin of $47,590,000 (as of
September 30, 1996) and of NWI of $42,042,000 (as of September 30, 1996).
The weighted average interest rate was 8.5% on the Lichtin Properties debt
and 8.5% on the NWI debt.
(f) Represents borrowings of $26,819,000 under the Company's revolving credit
facility to fund the cash components of, and the debt assumption and
retirement relating to, the Lichtin Properties transaction and closing
costs of the NWI and Lichtin Properties transactions.
(g) Represents the issuance of approximately 565,000 units of partnership
interest ("Units") in Weeks Realty, L.P., the partnership subsidiary
through which the Company conducts substantially all of its operations,
with a value for purposes of the initial closing of the Lichtin Properties
transaction of $25.25 per Unit, and approximately 1,105,000 Units with a
value for purposes of the initial closing of the NWI transaction of $25.00
per Unit. The resulting consolidated pro forma minority interest balance
was adjusted to reflect the consolidated pro forma minority interest
percentage of 27.0% at September 30, 1996 as follows (in thousands):
Value of Lichtin Properties Units $ 14,275
Value of NWI Units 27,617
Reclassification to shareholders' equity (15,430)
---------
$ 26,462
---------
(h) Represents the issuance of approximately 282,000 shares of common stock
valued at $25.25 per share relating to the Lichtin Properties transaction.
<PAGE>
(i) Represents adjustments to eliminate certain asset and liability amounts
that were not acquired or assumed as part of the NWI and Lichtin Properties
transactions.
(j) Represents the adjustment to state the consolidated pro forma shareholders'
equity balance and minority interest balance to 73.0% and 27.0%,
respectively, of the total consolidated pro forma equity interests (both
shareholders' equity and minority interests) in the Company.
<PAGE>
EXHIBIT 99.17
<TABLE>
<CAPTION>
WEEKS CORPORATIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
(Unaudited, in thousands, Company Acquisition Acquisition Properties Pro Forma
except per share data) Historical(a) Historical(b) Historical(c) Historical(c) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $ 34,136 $ 5,496 $ 8,921 $ 2,002 $(3,742)(e) $ 46,813
Tenant reimbursements 3,064 1,046 2,694 167 (1,801)(e) 5,170
Income from direct financing lease 576 - - - - 576
Other 287 163 89 - 448 (f) 987
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 38,063 6,705 11,704 2,169 (5,095) 53,546
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and maintenance 4,276 628 2,618 241 (1,523)(e) 6,240
Real estate taxes 3,288 585 746 178 (378)(e) 4,419
Depreciation and amortization 9,416 1,279 2,760 - 555 (g) 14,010
Interest 8,157 3,166 6,118 - (1,504)(h) 15,937
Amortization of deferred financing costs 642 96 170 - (266)(h) 642
General and administrative 2,174 594 941 - - 3,709
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 27,953 6,348 13,353 419 (3,116) 44,957
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Equity in Earnings of
Unconsolidated Subsidiares and
Interest Income 10,110 357 (1,649) - (1,979) 8,589
Equity in earnings of
unconsolidated subsidiaries 919 - - - - 919
Interest income 321 606 21 - (627)(i) 321
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 11,350 963 (1,628) 1,750 (2,606) 9,829
Income taxes - (73) - - (73)(j) (2,654)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before Minority Interests 11,350 890 (1,628) 1,750 (2,533) 9,829
Minority interests (2,124) - - - (530)(k) (2,654)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 9,226 $ 890 $ (1,628) $ 1,750 $(3,063) $ 7,175
===================================================================================================================================
Per Share Data
Net Income $ 0.83 - - - - $ 0.63
===================================================================================================================================
Weighted Average Shares Outstanding 11,162 - - - 282 11,444
===================================================================================================================================
Weighted Average Shares
and Units Outstanding 13,729 - - - 1,953 15,682
===================================================================================================================================
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statement of operations for the
nine months ended September 30, 1996 is presented as if the Company acquired as
of January 1, 1996, the business operations and real estate assets of NWI
(described in the Company's Current Report on Form 8-K dated November 1, 1996
and filed on November 6, 1996), the business operations and real estate assets
of Lichtin Properties (described in the Company's Current Report on Form 8-K
dated December 31, 1996 and filed on January 15, 1997), and the Principal
Properties (described in the Company's Current Report on Form 8-K dated August
9, 1996 and filed on August 22, 1996). In management's opinion, all adjustments
necessary to present fairly the effects of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations should
be read in conjunction with unaudited pro forma condensed consolidated balance
sheet of the Company included herein, the consolidated financial statements and
accompanying notes thereto of the Company included in its Annual Report on Form
10-K for the year ended December 31, 1995, and the unaudited condensed
consolidated financial statements and accompanying notes thereto of the Company
included in its September 30, 1996 Quarterly Report on Form 10-Q.
This unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired NWI, Lichtin Properties and
the Principal Properties (as described above) as of the beginning of the period
presented, nor do they purport to represent the results of operations for future
periods.
The unaudited historical results of operations of NWI included herein have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the acquisition
transaction on November 1, 1996. NWI's industrial properties under development
and land held for future development, which are under agreements to be acquired
subsequent to November 1, 1996, and their associated results of operations, have
been excluded from the accompanying pro forma amounts for the period presented.
The unaudited historical results of operations of Lichtin Properties included
herein have been adjusted to reflect on a pro forma basis the operating
business, land and office and industrial properties acquired at the initial
closing of the Lichtin Properties transaction on December 31, 1996. Certain of
Lichtin Properties' buildings leased to Northern Telecom, certain other of
Lichtin Properties' completed office and industrial properties, certain
properties under development or in lease-up and land held for development, which
are under agreements to be acquired subsequent to the initial closing date
discussed herein, and their associated results of operations, have been excluded
from the accompanying pro forma amounts for the period presented.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
(a) Represents the Company's unaudited condensed consolidated historical
statement of operations contained in its Quarterly Report on Form 10-Q for
the nine months ended September 30, 1996.
(b) Represents the historical unaudited combined statement of operations of NWI
for the nine months ended September 30, 1996, included herein in Exhibit A.
(c) Represents the historical unaudited combined statement of operations of
Lichtin Properties for the nine months ended September 30, 1996, as set
forth in Exhibit A to the Company's Current Report on Form 8-K/A dated
December 31, 1996 and filed on March 14, 1997, relating to the Lichtin
Properties acquisition.
(d) Represents the historical unaudited rental income, tenant reimbursements,
real estate taxes and property operating and maintenance expenses for the
Principal Properties for the period from January 1, 1996 to August 9, 1996
(the acquisition date).
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses for the results of operations of certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other completed buildings of
Lichtin Properties, certain properties of NWI and Lichtin Properties under
development or in lease-up and expenses associated with land held for
development which are to be acquired subsequent to the initial closing
dates of the NWI and Lichtin Properties acquisitions as shown below (in
thousands):
Lichtin
Properties NWI Total
---------- ---- ------
Rental income $3,221 $521 $3,742
Tenant reimbursements 1,708 93 1,801
Property operating and
maintenance expenses 1,429 94 1,523
Real estate taxes 318 60 378
(f) Represents the assumed payment by Lichtin Properties and NWI to the Company
of management fees and overhead cost reimbursements relating to the
Company's management of certain operating buildings and buildings in lease-
up not acquired at the respective initial closing dates.
<PAGE>
(g) Represents the adjustment to reflect depreciation and amortization expense
of the acquired properties (consisting of properties acquired at the
initial closing dates for the Lichtin Properties and NWI acquisitions and
the closing of the Principal Properties) based upon the assumed allocation
of the acquisition price to land, buildings and improvements, using a 35
year life for buildings and the life of the lease for tenant improvements.
Aggregate pro forma depreciation and amortization expense for the nine
months ended September 30, 1996 was $2,346,000 and $1,619,000 for Lichtin
Properties and NWI, respectively, and was $629,000 for the Principal
Properties for the period from January 1, 1996 to August 9, 1996 (the date
of acquisition).
(h) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank line
of credit borrowings assumed at the initial closing dates in the Lichtin
Properties and NWI transactions, interest costs through August 9, 1996 (the
acquisition date) associated with additional borrowings under the Company's
revolving credit facility of $30.8 million at 7.0% for the purchase of the
Principal Properties, including closing costs and acquisition expenses, and
interest costs associated with additional borrowings under the Company's
revolving credit facility of $26.8 million at 7.0% to fund the cash portion
of, and the debt assumption and retirement relating to, the Lichtin
Properties transaction and cash closing and acquisition expenses of the
Lichtin Properties and NWI transactions.
(i) Represents the adjustment to eliminate interest income included in the NWI
and Lichtin Properties historical amounts as the notes receivable and cash
balances were not acquired by the Company.
(j) Represents the adjustment to eliminate income tax expense as the Company
has and expects to continue to qualify as a real estate investment trust.
(k) Represents the net adjustment of pro forma minority interest to adjust the
pro forma consolidated minority interest amount to reflect the weighted
average ownership percentage of the Unitholders in the Operating
Partnership of 27.0% for the nine months ended September 30, 1996.
<PAGE>
EXHIBIT 99.18
<TABLE>
<CAPTION>
WEEKS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Lichtin
NWI Properties Principal
Company Acquisition Acquisition Properties Pro Forma
(Unaudited, in thousands, except per share data) Historical(a) Historical(b) Historical(c) Historical(d) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income $31,217 $5,836 $10,245 $3,235 $(4,792)(e) $45,741
Tenant reimbursements 2,464 994 3,374 281 (2,385)(e) 5,062
Income from direct financing lease 776 - - - - 776
Other 480 348 24 - 563 (f) 1,415
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 34,937 7,178 13,643 3,516 (6,614) 52,994
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Property operating and maintenance 3,565 762 3,029 455 (2,076)(e) 6,069
Real estate taxes 2,997 642 817 293 (462)(e) 4,287
Depreciation and amortization 8,177 1,572 3,264 - 1,010 (g) 14,023
Interest 8,106 3,093 7,094 - (1,401)(h) 16,892
Amortization of deferred financing costs 691 93 191 - (284)(h) 691
General and administrative 1,848 643 1,154 - - 3,645
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 25,384 6,805 15,549 748 (3,213) 45,607
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Equity in Earnings of
Unconsolidated Subsidiaries and
Interest Income 9,553 373 (1,906) 2,768 (3,401) 7,387
Gain on sale of property - - 1,245 - (1,245)(l) -
Equity in earnings of unconsolidated subsidiaries 1,220 - - - - 1,220
Interest income 334 1,117 18 - (1,135)(i) 334
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 11,107 1,490 (643) 2,768 (5,781) 8,941
Income taxes - (102) - - 102 (j) -
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Minority Interests 11,107 1,388 (643) 2,768 (5,679) 8,941
Minority interests (2,681) - - - (314)(k) (2,995)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 8,426 $1,388 $ (643) $ 2,768 $(5,993) $ 5,946
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net Income $1.03 - - - - $0.07
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares Outstanding 8,171 - - - 282 8,453
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares and Unites Outstanding 10,760 - - - 1,953 12,713
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
WEEKS CORPORATION
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1995 is presented as if the Company acquired as of
January 1, 1995 the business operations and real estate assets of NWI (described
in the Company's Current Report on Form 8-K dated November 1, 1996 and filed on
November 6, 1996), the business operations and real estate assets of Lichtin
Properties (described in the Company's Current Report on Form 8-K dated December
31, 1996 and filed on January 15, 1997), and the Principal Properties (described
in the Company's Current Report on Form 8-K dated August 9, 1996 and filed on
August 22, 1996). In management's opinion, all adjustments necessary to present
fairly the effects of these acquisitions have been made.
This unaudited pro forma condensed consolidated statement of operations should
be read in conjunction with unaudited pro forma condensed consolidated balance
sheet of the Company included herein and the consolidated financial statements
and accompanying notes thereto of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1995.
The unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired NWI, Lichtin Properties and
the Principal Properties (as described above) as of the beginning of the period
presented, nor do they purport to represent the results of operations for future
periods.
The unaudited historical results of operations of NWI included herein have been
adjusted to reflect on a pro forma basis the operating business, land and
industrial properties acquired at the initial closing of the acquisition
transaction on November 1, 1996. NWI's industrial properties under development
and land held for future development, which are under agreements to be acquired
subsequent to November 1, 1996, and their associated results of operations have
been excluded from the accompanying pro forma amounts for the period presented.
The historical results of operations of Lichtin Properties included herein have
been adjusted to reflect on a pro forma basis the operating business, land and
office and industrial properties acquired at the initial closing of the Lichtin
Properties transaction on December 31, 1996. Certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other of Lichtin Properties'
completed office and industrial properties, certain properties under development
or in lease-up and land held for development, which are under agreements to be
acquired subsequent to the initial closing date discussed herein, and their
associated results of operations, have been excluded from the accompanying pro
forma amounts for the period presented.
<PAGE>
2. ASSUMPTIONS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
(a) Represents the Company's consolidated historical statement of operations
contained in its Annual Report on Form 10-K for the year ended December 31,
1995.
(b) Represents the historical combined statement of operations of NWI for the
year ended December 31, 1995, as set forth in Exhibit A to the Company's
Current Report on Form 8-K dated November 1, 1996 and filed on November 6,
1996 relating to the NWI acquisition.
(c) Represents the historical combined statement of operations of Lichtin
Properties for the year ended December 31, 1995, as set forth in Exhibit A
to the Company's Current Report on Form 8-K dated November 5, 1996 and filed
on November 6, 1996.
(d) Represents the historical rental income, tenant reimbursements, real estate
taxes and property operating and maintenance expenses for the Principal
Properties for the year ended December 31, 1995, as set forth in the
Company's Current Report on Form 8-K dated August 9, 1996 and filed on
August 22, 1996, relating to the Principal Properties acquisition.
(e) Represents the net adjustment to reduce rental income, tenant
reimbursements, real estate taxes and property operating and maintenance
expenses for the results of operations of certain of Lichtin Properties'
buildings leased to Northern Telecom, certain other completed properties of
Lichtin Properties, certain properties of NWI and Lichtin Properties under
development or in lease-up and expenses associated with land held for
development which are to be acquired subsequent to the initial closing dates
of the NWI and Lichtin Properties acquisitions as shown below (in
thousands):
Lichtin
Properties NWI Total
---------- ---- ------
Rental income $4,670 $122 $4,792
Tenant reimbursements 2,374 11 2,385
Property operating and maintenance
expenses 2,047 29 2,076
Real estate taxes 429 33 462
(f) Represents the assumed payment by Lichtin Properties to the Company of
management fees and overhead cost reimbursements relating to the Company's
management of certain operating buildings and buildings in lease-up not
acquired at the initial closing date of the Lichtin Properties transaction.
(g) Represents the adjustment to reflect depreciation and amortization expense
of the acquired properties (consisting of properties acquired at the
initial closing dates for the Lichtin Properties and NWI acquisitions and
the closing of the Principal Properties) based upon the assumed allocation
of the acquisition price to land, buildings and improvements, using a 35
year life for buildings and the life of the lease for tenant improvements.
Aggregate pro forma depreciation and amortization expense for the year ended
<PAGE>
December 31, 1995 was $2,716,000, $2,100,000 and $1,030,000 for Lichtin
Properties, NWI and the Principal Properties, respectively.
(h) Represents the adjustment of interest expense and the amortization of
deferred financing costs to reflect interest on notes payable and bank line
of credit borrowing assumed at the initial closing dates of the Lichtin
Properties and NWI transactions, interest costs associated with additional
borrowings under the Company's revolving credit facility of $30.8 million at
7.0% for the purchase of the Principal Properties, including closing costs
and acquisition expenses, and interest costs associated with additional
borrowings under the Company's revolving credit facility of $26.8 million at
7.0% to fund the cash portion of, and the debt assumption and retirement
relating to, the Lichtin Properties transaction and cash closing and
acquisition expenses of the Lichtin Properties and NWI transactions.
(i) Represents the adjustment to eliminate interest income included in the NWI
and Lichtin Properties historical amounts as the notes receivable and cash
balances were not acquired by the Company.
(j) Represents the adjustment to eliminate income tax expense as the Company has
and expects to continue to qualify as a real estate investment trust.
(k) Represents the net adjustment of pro forma minority interest to adjust the
pro forma consolidated minority interest amount to reflect the weighted
average ownership percentage of the Unitholders in the Operating Partnership
of 33.5% for the year ended December 31, 1995.
(l) Represents the adjustment to eliminate the gain on sale of property as the
property was not part of the Lichtin Properties acquisition transaction.
