SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 18, 1998
HIGHWOODS REALTY LIMITED PARTNERSHIP
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(Exact name of registrant specified in its charter)
North Carolina 0-21731 56-1869557
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(State of Formation) (Commission File Number) (IRS Employer Identification No.)
3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (919) 872-4924
<PAGE>
ITEM 5. OTHER EVENTS
The purpose of this filing is to set forth certain audited financial
statements of certain businesses recently acquired by Highwoods Realty Limited
Partnership.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
LANDMARK CENTER
Report of Independent Auditors
Combined Statement of Revenue and Certain Expenses
Notes to Combined Statement of Revenue and Certain Expenses
SHELTON PROPERTIES
Report of Independent Auditors
Combined Statement of Revenue and Certain Expenses
Notes to Combined Statement of Revenue and Certain Expenses
(b) Pro Forma Information
None
(c) Exhibits
23 Consent of Independent Auditors
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 23, 1998
HIGHWOODS REALTY LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., its general partner
By: /s/ Carman J. Liuzzo
------------------------------------------
Carman J. Liuzzo
Vice-President, Chief Executive Officer
and Treasurer
<PAGE>
Audited Combined Financial Statement
Landmark Center
Year ended December 31, 1997
with Report of Independent Auditors
<PAGE>
Landmark Center
Audited Combined Financial Statement
Year ended December 31, 1997
Contents
Report of Independent Auditors...............................................1
Audited Combined Financial Statement
Combined Statement of Revenue and Certain Expenses...........................2
Notes to Combined Statement of Revenue and Certain Expenses..................3
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Highwoods Properties, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Landmark Center as described in Note 1 for the year ended December
31, 1997. This financial statement is the responsibility of Landmark Center's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the basis of accounting used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was prepared
using the basis of accounting described in Note 1 for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to
be a complete presentation of Landmark Center's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses described in Note 1 of
Landmark Center for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Raleigh, North Carolina
June 18, 1998
<PAGE>
Landmark Center
Combined Statement of Revenue and Certain Expenses
Year ended December 31, 1997
Rental income $8,217,908
Expenses:
Repairs and maintenance 1,495,293
Taxes 973,349
Utilities 564,049
Insurance 26,645
Management fees 61,186
-------------
Total expenses 3,120,522
-------------
Revenue in excess of certain expenses $5,097,386
=============
See accompanying notes.
<PAGE>
Landmark Center
Notes to Combined Statement of Revenue and Certain Expenses
December 31, 1997
1. Basis of Presentation
Presented herein is the Combined Statement of Revenue and Certain Expenses
related to the operations of two commercial real estate properties located in
the Orlando, Florida metropolitan market identified as Landmark Center.
Landmark Center is not a legal entity but rather a combination of the operations
of certain real estate properties acquired by Highwoods Properties, Inc. in
February 1998. The accompanying Combined Statement of Revenue and Certain
Expenses includes the accounts of the following commercial real estate
properties, each of which is owned by entities under common control, but not
affiliated with Highwoods Properties, Inc.
Number of
Property Properties Owner
---------------------------------------------------------------------------
Landmarks Orlando I Limited
Landmark Center I 1 Partnership
Landmarks Orlando II Limited
Landmark Center II 1 Partnership
The accompanying financial statement is prepared in accordance with Rule 3-14 of
Regulation S-X and thus is not necessarily representative of the actual
operations for the year presented as certain expenses that may not be comparable
to the expenses expected to be incurred by Highwoods Properties, Inc. in the
proposed future operations of the aforementioned properties have been excluded.
Expenses excluded consist of interest, depreciation and general and
administrative expenses not directly related to future operations.
2. Significant Accounting Policies
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the lease.
Certain lease agreements contain provisions which provide reimbursement of real
estate taxes, insurance, advertising and certain common area maintenance (CAM)
costs. These additional rents are recorded on the accrual basis. All rent and
other receivables from tenants are due from commercial building tenants located
in the properties.
<PAGE>
Landmark Center
Notes to Combined Statement of Revenue and Certain Expenses (continued)
2. Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in accordance 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 amounts.
3. Leases
Landmark Center is being leased to tenants under operating leases that will
expire over the next nine years. The minimum rental amounts under the leases are
either subject to scheduled fixed increases or adjustments based on the Consumer
Price Index. Generally, the leases also require that the tenants reimburse
Landmark Center for increases in certain costs above their base year costs.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1997 are as
follows:
Total
--------------
1998 $ 7,778,749
1999 6,647,040
2000 5,593,267
2001 4,343,103
2002 2,369,008
Thereafter 4,916,422
==============
$31,647,589
==============
4. Environmental Matters
All of the Company's properties have been subjected to Phase I environmental
reviews. Such reviews have not revealed, nor is management aware of, any
environmental liability that management believes would have a material adverse
effect on the accompanying combined financial statement.
<PAGE>
Audited Combined Financial Statement
Shelton Properties
Year ended December 31, 1997
with Report of Independent Auditors
<PAGE>
Shelton Properties
Audited Combined Financial Statement
Year ended December 31, 1997
Contents
Report of Independent Auditors...............................................1
Audited Combined Financial Statement
Combined Statement of Revenue and Certain Expenses...........................2
Notes to Combined Statement of Revenue and Certain Expenses..................3
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Highwoods Properties, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of the Shelton Properties as described in Note 1 for the year ended
December 31, 1997. This financial statement is the responsibility of Shelton
Properties' management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the basis of accounting used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was prepared
using the basis of accounting described in Note 1 for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to
be a complete presentation of Shelton Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses described in Note 1 of
Shelton Properties for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Raleigh, North Carolina
July 1, 1998
<PAGE>
Shelton Properties
Combined Statement of Revenue and Certain Expenses
Year ended December 31, 1997
Rental income $17,997,279
Expenses:
Repairs and maintenance 438,420
Taxes 1,220,276
Utilities 31,077
Insurance 102,409
Management fees 35,844
--------------
Total expenses 1,828,026
-------------
Revenue in excess of certain expenses $16,169,253
=============
See accompanying notes.
<PAGE>
Shelton Properties
Notes to Combined Statement of Revenue and Certain Expenses
December 31, 1997
1. Basis of Presentation
Presented herein is the Combined Statement of Revenue and Certain Expenses
related to the 32 commercial real estate properties and one parking deck located
in Winston-Salem, Greensboro and Charlotte, North Carolina.
Shelton Properties is not a legal entity but rather a combination of the
operations of certain real estate properties under common control acquired by
Highwoods Properties, Inc. The accompanying Combined Statement of Revenue and
Certain Expenses includes the accounts of the following commercial real estate
properties, each of which was owned by a party not affiliated with Highwoods
Properties, Inc.
Number of
Property Properties Owner
---------------------------------------------------------------------------
Colony Center 1 Chedren, Inc.
Madison 1 Chedren, Inc.
Chimney Rock Road 6 SMS Partnership
Madison Park 7 Shelton Company
Northridge 7 Shelton Company
Members 1 Shelton Company
Twin Lakes 1 Shelton Company
Grassy Creek 3 GMS Partnership
Clementine Road 5 Hampton Investments
Indiana Avenue 1 Wright-Shelton Partners
The accompanying financial statement is prepared in accordance with Rule 3-14 of
Regulation S-X and thus is not necessarily representative of the actual
operations for the year presented as certain expenses that may not be comparable
to the expenses expected to be incurred by Highwoods Properties, Inc. in the
proposed future operations of the aforementioned properties have been excluded.
Expenses excluded consist of interest, depreciation and general and
administrative expenses not directly related to future operations.
<PAGE>
Shelton Properties
Notes to Combined Statement of Revenue and Certain Expenses (continued)
2. Significant Accounting Policies
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the lease.
Certain lease agreements contain provisions which provide reimbursement of real
estate taxes, insurance, advertising and certain common area maintenance (CAM)
costs. These additional rents are recorded on the accrual basis. All rent and
other receivables from tenants are due from commercial building tenants located
in the properties.
Use of Estimates
The preparation of financial statements in accordance 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 amounts.
3. Leases
Shelton Properties are being leased to tenants under operating leases that will
expire over the next eleven years. The minimum rental amounts under the leases
are either subject to scheduled fixed increases or adjustments based on the
Consumer Price Index. Generally, the leases also require that the tenants
reimburse the Shelton Properties for increases in certain costs above their base
year costs.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1997 are as
follows:
Total
------------
1998 $ 16,488,722
1999 15,570,220
2000 13,563,201
2001 11,218,683
2002 9,756,293
Thereafter 39,006,202
------------
$105,603,321
============
Three major tenants represent 63% of rental income for the year ended December
31, 1997.
<PAGE>
Shelton Properties
Notes to Combined Statement of Revenue and Certain Expenses (continued)
4. Environmental Matters
All of the Company's properties have been subjected to Phase I environmental
reviews. Such reviews have not revealed, nor is management aware of, any
environmental liability that management believes would have a material adverse
effect on the accompanying combined financial statement.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-3 Nos. 333-39247, 333-51671-01, 333-51759 and 333-61913, and
Form S-8 Nos. 333-12117, 333-29759, 333-29763 and 333-55901) and related
Prospectuses of Highwoods Properties, Inc. and in the Registration Statement
(Form S-3 Nos. 333-51671) and related Prospectus of Highwoods Realty Limited
Partnership of our report dated June 18, 1998 with respect to the statement of
revenue and certain expenses of Landmark Center for the year ended December 31,
1997, and of our report dated July 1, 1998 with respect to the statement of
revenue and certain expenses of Shelton Properties for the year ended December
31, 1997, included in the Current Reports on Form 8-K of Highwoods Properties,
Inc. and Highwoods Realty Limited Partnership dated June 18, 1998, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Raleigh, North Carolina
December 22, 1998
