UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number: 1-13130 (Liberty Property Trust)
1-13132 (Liberty Property Limited Partnership)
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Exact name of registrants as specified in their governing documents)
MARYLAND (Liberty Property Trust) 23-7768996
PENNSYLVANIA (Liberty Property Limited Partnership) 23-2766549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
65 Valley Stream Parkway, Suite 100, Malvern, Pennsylvania 19355
(Address of Principal Executive Offices) (Zip Code)
Registrants' Telephone Number, Including Area Code (610)648-1700
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding twelve (12) months (or for such shorter period
that the registrants were required to file such reports) and (2) have been
subject to such filing requirements for the past ninety (90) days.
YES X NO
On May 6, 2002, 74,809,789 Common Shares of Beneficial Interest, par value
$.001 per share, of Liberty Property Trust were outstanding.
2
LIBERTY PROPERTY TRUST/LIBERTY PROPERTY LIMITED PARTNERSHIP
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2002
INDEX
- -----
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements (unaudited) Page
----
Consolidated balance sheets of Liberty Property
Trust at March 31, 2002 and December 31, 2001. 3
Consolidated statements of operations of Liberty
Property Trust for the three months ended March
31, 2002 and March 31, 2001. 4
Consolidated statements of cash flows of Liberty
Property Trust for the three months ended March 31,
2002 and March 31, 2001. 5
Notes to consolidated financial statements for
Liberty Property Trust. 6
Consolidated balance sheets of Liberty Property
Limited Partnership at March 31, 2002 and
December 31, 2001. 9
Consolidated statements of operations of Liberty
Property Limited Partnership for the three months
ended March 31, 2002 and March 31, 2001. 10
Consolidated statements of cash flows of Liberty
Property Limited Partnership for the three months
ended March 31, 2002 and March 31, 2001. 11
Notes to consolidated financial statements for
Liberty Property Limited Partnership. 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 14
Item 3. Quantitative and Qualitative Disclosures About Market
Risk. 22
Part II. Other Information
- ---------------------------
Signatures 24
3
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, 2002 DECEMBER 31, 2001
-------------- -----------------
(UNAUDITED)
ASSETS
Real estate:
Land and land improvements $ 478,960 $ 467,311
Buildings and improvements 2,920,688 2,874,903
Less accumulated depreciation (426,904) (404,617)
---------- ----------
Operating real estate 2,972,744 2,937,597
Development in progress 246,205 252,789
Land held for development 160,621 163,547
---------- ----------
Net real estate 3,379,570 3,353,933
Cash and cash equivalents 22,200 19,390
Accounts receivable 21,743 15,470
Deferred financing and leasing costs,
net of accumulated amortization
(2002, $64,490; 2001, $60,488) 68,500 68,163
Prepaid expenses and other assets 99,639 95,869
---------- ----------
Total assets $3,591,652 $3,552,825
========== ==========
LIABILITIES
Mortgage loans $ 347,930 $ 340,131
Unsecured notes 1,345,000 1,345,000
Credit facility 98,000 68,000
Accounts payable 18,315 19,057
Accrued interest 19,275 31,392
Dividend payable 47,964 47,577
Other liabilities 85,498 83,852
---------- ----------
Total liabilities 1,961,982 1,935,009
Minority interest 194,402 194,394
SHAREHOLDERS' EQUITY
Series A preferred shares, $.001 par value, 5,000,000
shares authorized, issued and outstanding as of
March 31, 2002 and December 31, 2001 120,814 120,814
Common shares of beneficial interest, $.001 par
value, 191,200,000 shares authorized, 74,408,377
(includes 59,100 in treasury) and 73,721,045
(includes 59,100 in treasury) shares issued and
outstanding as of March 31, 2002 and December 31,
2001, respectively 74 74
Additional paid-in capital 1,353,728 1,336,350
Unearned compensation (2,221) (1,056)
Distributions in excess of net income (35,800) (31,433)
Common shares in treasury, at cost, 59,100 shares
as of March 31, 2002 and December 31, 2001 (1,327) (1,327)
---------- ----------
Total shareholders' equity 1,435,268 1,423,422
---------- ----------
Total liabilities and shareholders' equity $3,591,652 $3,552,825
========== ==========
See accompanying notes.
4
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
REVENUE
Rental $ 106,679 $ 102,586
Operating expense reimbursement 40,272 41,604
Interest and other 1,628 1,417
--------- ---------
Total revenue 148,579 145,607
--------- ---------
EXPENSES
Rental property 27,561 29,217
Real estate taxes 14,423 13,430
Interest 28,057 27,788
General and administrative 5,969 5,759
Depreciation and amortization 26,506 24,944
--------- ---------
Total expenses 102,516 101,138
--------- ---------
Income before property dispositions
and minority interest 46,063 44,469
Gain on property dispositions 871 1,477
--------- ---------
Income before minority interest 46,934 45,946
Minority interest 4,734 4,830
--------- ---------
Net income 42,200 41,116
Preferred distributions 2,750 2,750
--------- ---------
Income available to common shareholders $ 39,450 $ 38,366
========= =========
Earnings per share:
Income per common share - basic $ 0.53 $ 0.56
========= =========
Income per common share - diluted $ 0.53 $ 0.55
========= =========
Distributions declared per common share $ 0.59 $ 0.57
========= =========
Weighted average number of common shares
outstanding
Basic 73,899 68,415
Diluted 75,103 72,600
========= =========
See accompanying notes.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY TRUST
(UNAUDITED AND IN THOUSANDS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
OPERATING ACTIVITIES
Net income $ 42,200 $ 41,116
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 26,506 24,944
Amortization of deferred financing costs 908 1,029
Minority interest in net income 4,734 4,830
Gain on property dispositions (871) (1,477)
Noncash compensation 1,188 1,152
Changes in operating assets and liabilities:
Accounts receivable (6,273) (3,980)
Prepaid expenses and other assets (4,362) 26,454
Accounts payable (742) 12,061
Accrued interest (12,117) (9,300)
Other liabilities 1,646 (7,332)
---------- ---------
Net cash provided by operating activities 52,817 89,497
---------- ---------
INVESTING ACTIVITIES
Investment in properties (18,987) (27,537)
Proceeds from disposition of properties/land 14,924 13,271
Investment in development in progress (33,490) (71,065)
Investment in land held for development (9,796) (21,713)
Increase in deferred leasing costs (4,562) (3,979)
---------- ---------
Net cash used in investing activities (51,911) (111,023)
---------- ---------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 15,317 2,182
Proceeds from issuance of unsecured notes - 250,000
Proceeds from mortgage loans 9,695 -
Repayments of mortgage loans (1,896) (5,129)
Proceeds from credit facility 40,000 73,000
Repayments on credit facility (10,000) (249,000)
Increase in deferred financing costs - (3,965)
Distributions paid on common shares (43,430) (38,849)
Distributions paid on preferred shares (2,750) (2,750)
Distributions paid on units (5,032) (5,191)
---------- ---------
Net cash provided by financing activities 1,904 20,298
---------- ---------
Increase (decrease) in cash and cash equivalents 2,810 (1,228)
Cash and cash equivalents at beginning of period 19,390 4,638
---------- ---------
Cash and cash equivalents at end of period $ 22,200 $ 3,410
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ 649 $ 1,382
Acquisition of properties - (328)
Assumption of mortgage loans - 328
Conversion of convertible debentures - 27,496
========== =========
See accompanying notes.
6
LIBERTY PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2002
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Liberty
Property Trust (the "Trust") and its subsidiaries, including Liberty
Property Limited Partnership (the "Operating Partnership") (the Trust,
Operating Partnership and their respective subsidiaries referred to
collectively as the "Company"), have been prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP")
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by US GAAP for complete financial
statements and should be read in conjunction with the consolidated
financial statements and notes thereto included in the Annual Report on
Form 10-K of the Trust and the Operating Partnership for the year ended
December 31, 2001. In the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the financial statements for these interim periods have
been included. The results of interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year. Certain
amounts from prior periods have been reclassified to conform to current
period presentation.
The following table sets forth the computation of basic and diluted income
per common share for the three months ended March 31, 2002 and 2001:
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, 2002 ENDED MARCH 31, 2001
------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income $ 42,200 $ 41,116
Less: Preferred
distributions 2,750 2,750
-------- --------
Basic income per
common share
Income available
to common share-
holders 39,450 73,899 $ 0.53 38,366 68,415 $ 0.56
====== ======
Dilutive shares
Long-term compen-
sation plans - 1,204 - 932
Convertible
debentures - - 1,371 3,253
-------- ------- -------- -------
Diluted income per
common share
Income available
to common share-
holders and assumed
conversions $ 39,450 75,103 $ 0.53 $ 39,737 72,600 $ 0.55
======== ======= ====== ======== ======= ======
7
NOTE 2 - ORGANIZATION
- ---------------------
The Trust is a self-administered and self-managed Maryland real estate
investment trust (a "REIT"). Substantially all of the Trust's assets are
owned directly or indirectly, and substantially all of the Trust's
operations are conducted directly or indirectly, by the Operating
Partnership. The Trust is the sole general partner and also a limited
partner of the Operating Partnership, owning 95.0% of the common equity of
the Operating Partnership at March 31, 2002. The Company provides leasing,
property management, development, acquisition, and other tenant-related
services for a portfolio of industrial and office properties which are
located principally within the Southeastern, Mid-Atlantic and Midwestern
United States.
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
The Company reviews the performance of the portfolio on a geographic
basis. The following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey; Lehigh Valley,
Pennsylvania; Virginia; the Carolinas; Jacksonville, Florida; Minneapolis,
Minnesota; Detroit, Michigan; and all others combined (including Maryland,
Tampa, Florida; South Florida; and the United Kingdom). The Company's
reportable segments are distinct business units, which are each managed
separately in order to concentrate market knowledge within a geographic
area. Within these reportable segments, the Company derives its revenues
from its two product types: industrial properties and office properties.
The Company evaluates performance of the reportable segments based on
property-level net operating income, which is calculated as rental revenue
and operating expense reimbursement less rental property expenses and real
estate taxes. The accounting policies of the reportable segments are the
same as those for the Company on a consolidated basis.
The operating information by segment is as follows (in thousands):
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- -----------------------------------------------------------------------------------------------------------------------
SE New Lehigh The Jackson- Minne- All
Pennsyl. Jersey Valley Virginia Carolinas ville sota Michigan Others Total
-------- -------- -------- -------- --------- -------- -------- -------- -------- --------
Real estate
related revenues $ 44,994 $ 11,703 $ 14,934 $ 12,430 $ 9,029 $ 11,361 $ 12,354 $ 15,395 $ 14,751 $146,951
Rental property
expenses and
real estate taxes 12,797 3,737 3,262 3,165 2,717 2,630 4,527 4,874 4,275 41,984
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 32,197 7,966 11,672 9,265 6,312 8,731 7,827 10,521 10,476 104,967
Other income/expenses, net 58,904
--------
Income before property dispositions and minority interest 46,063
Gain on property dispositions 871
Minority interest 4,734
Preferred distributions 2,750
--------
Income available to common shareholders $ 39,450
========
8
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- -----------------------------------------------------------------------------------------------------------------------
SE New Lehigh The Jackson- Minne- All
Pennsyl. Jersey Valley Virginia Carolinas ville sota Michigan Others Total
-------- -------- -------- -------- --------- -------- -------- -------- -------- --------
Real estate
related revenues $ 43,094 $ 11,686 $ 14,665 $ 10,754 $ 10,982 $ 11,648 $ 11,923 $ 14,177 $ 15,261 $144,190
Rental property
expenses and
real estate taxes 13,167 3,761 4,256 2,474 2,998 2,986 4,569 4,322 4,114 42,647
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 29,927 7,925 10,409 8,280 7,984 8,662 $ 7,354 9,855 11,147 101,543
Other income/expenses, net 57,074
--------
Income before property dispositions and minority interest 44,469
Gain on property dispositions 1,477
Minority interest 4,830
Preferred distributions 2,750
--------
Income available to common shareholders $ 38,366
========
NOTE 4 - ADOPTION OF ACCOUNTING STANDARD
- ----------------------------------------
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets." The adoption did not have a material impact on the
Company's results of operations or financial position.
9
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(IN THOUSANDS)
MARCH 31, 2002 DECEMBER 31, 2001
-------------- -----------------
(UNAUDITED)
ASSETS
Real estate:
Land and land improvements $ 478,960 $ 467,311
Buildings and improvements 2,920,688 2,874,903
Less accumulated depreciation (426,904) (404,617)
---------- ----------
Operating real estate 2,972,744 2,937,597
Development in progress 246,205 252,789
Land held for development 160,621 163,547
---------- ----------
Net real estate 3,379,570 3,353,933
Cash and cash equivalents 22,200 19,390
Accounts receivable 21,743 15,470
Deferred financing and leasing costs,
net of accumulated amortization
(2002, $64,490; 2001, $60,488) 68,500 68,163
Prepaid expenses and other assets 99,639 95,869
---------- ----------
Total assets $3,591,652 $3,552,825
========== ==========
LIABILITIES
Mortgage loans $ 347,930 $ 340,131
Unsecured notes 1,345,000 1,345,000
Credit facility 98,000 68,000
Accounts payable 18,315 19,057
Accrued interest 19,275 31,392
Distributions payable 47,964 47,577
Other liabilities 85,498 83,852
---------- ----------
Total liabilities 1,961,982 1,935,009
Minority interest 6,188 6,173
OWNERS' EQUITY
General partner's equity - preferred units 120,814 120,814
- common units 1,314,454 1,302,608
Limited partners' equity - preferred units 112,516 112,516
- common units 75,698 75,705
---------- ----------
Total owners' equity 1,623,482 1,611,643
---------- ----------
Total liabilities and owners' equity $3,591,652 $3,552,825
========== ==========
See accompanying notes.
10
CONSOLIDATED STATEMENTS OF OPERATIONS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
REVENUE
Rental $ 106,679 $ 102,586
Operating expense reimbursement 40,272 41,604
Interest and other 1,628 1,417
--------- ---------
Total revenue 148,579 145,607
--------- ---------
EXPENSES
Rental property 27,561 29,217
Real estate taxes 14,423 13,430
Interest 28,057 27,788
General and administrative 5,969 5,759
Depreciation and amortization 26,506 24,944
--------- ---------
Total expenses 102,516 101,138
--------- ---------
Income before property dispositions 46,063 44,469
Gain on property dispositions 871 1,477
--------- ---------
Net income $ 46,934 $ 45,946
========= =========
Net income allocated to general partner $ 42,200 $ 41,116
========= =========
Net income allocated to limited partners $ 4,734 $ 4,830
========= =========
See accompanying notes.
11
CONSOLIDATED STATEMENTS OF CASH FLOWS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(UNAUDITED AND IN THOUSANDS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
OPERATING ACTIVITIES
Net income $ 46,934 $ 45,946
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 26,506 24,944
Amortization of deferred financing costs 908 1,029
Gain on property dispositions (871) (1,477)
Noncash compensation 1,188 1,152
Changes in operating assets and liabilities:
Accounts receivable (6,273) (3,980)
Prepaid expenses and other assets (4,362) 26,454
Accounts payable (742) 12,061
Accrued interest (12,117) (9,300)
Other liabilities 1,646 (7,332)
---------- ---------
Net cash provided by operating activities 52,817 89,497
---------- ---------
INVESTING ACTIVITIES
Investment in properties (18,987) (27,537)
Proceeds from disposition of properties/land 14,924 13,271
Investment in development in progress (33,490) (71,065)
Investment in land held for development (9,796) (21,713)
Increase in deferred leasing costs (4,562) (3,979)
---------- ---------
Net cash used in investing activities (51,911) (111,023)
---------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of unsecured notes - 250,000
Proceeds from mortgage loans 9,695 -
Repayments of mortgage loans (1,896) (5,129)
Proceeds from credit facility 40,000 73,000
Repayments on credit facility (10,000) (249,000)
Increase in deferred financing costs - (3,965)
Capital contributions 15,317 2,182
Distributions to partners (51,212) (46,790)
---------- ---------
Net cash provided by financing activities 1,904 20,298
---------- ---------
Increase (decrease) in cash and cash equivalent 2,810 (1,228)
Cash and cash equivalents at beginning of period 19,390 4,638
---------- ---------
Cash and cash equivalents at end of period $ 22,200 $ 3,410
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ 649 $ 1,382
Acquisition of properties - (328)
Assumption of mortgage loans - 328
Conversion of convertible debentures - 27,496
========== =========
See accompanying notes.
12
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2002
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Liberty
Property Limited Partnership (the "Operating Partnership") and its direct
and indirect subsidiaries have been prepared in accordance with accounting
principles generally accepted in the United States ("US GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by US GAAP for complete financial statements and
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Annual Report on Form 10-K of the Trust
and the Operating Partnership for the year ended December 31, 2001. In the
opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the financial
statements for these interim periods have been included. The results of
interim periods are not necessarily indicative of the results to be
obtained for a full fiscal year. Certain amounts from prior periods have
been reclassified to conform to current period presentation.
NOTE 2 - ORGANIZATION
- ---------------------
Liberty Property Trust (the "Trust") is a self-administered and self-
managed Maryland real estate investment trust (a "REIT"). Substantially
all of the Trust's assets are owned directly or indirectly, and
substantially all of the Trust's operations are conducted directly or
indirectly, by the Operating Partnership (the Trust, Operating Partnership
and their respective subsidiaries referred to collectively as the
"Company"). The Trust is the sole general partner and also a limited
partner of the Operating Partnership, owning 95.0% of the common equity of
the Operating Partnership at March 31, 2002. The Company provides leasing,
property management, development, acquisition, and other tenant-related
services for a portfolio of industrial and office properties which are
located principally within the Southeastern, Mid-Atlantic and Midwestern
United States.
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
The Company reviews the performance of the portfolio on a geographic
basis. The following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey; Lehigh Valley,
Pennsylvania; Virginia; the Carolinas; Jacksonville, Florida; Minneapolis,
Minnesota; Detroit, Michigan; and all others combined (including Maryland,
Tampa, Florida; South Florida; and the United Kingdom). The Company's
reportable segments are distinct business units, which are each managed
separately in order to concentrate market knowledge within a geographic
area. Within these reportable segments, the Company derives its revenues
from its two product types: industrial properties and office properties.
The Company evaluates performance of the reportable segments based on
property-level net operating income, which is calculated as rental revenue
13
and operating expense reimbursement less rental property expenses and real
estate taxes. The accounting policies of the reportable segments are the
same as those for the Company on a consolidated basis.
The operating information by segment is as follows (in thousands):
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- -----------------------------------------------------------------------------------------------------------------------
SE New Lehigh The Jackson- Minne- All
Pennsyl. Jersey Valley Virginia Carolinas ville sota Michigan Others Total
-------- -------- -------- -------- --------- -------- -------- -------- -------- --------
Real estate
related revenues $ 44,994 $ 11,703 $ 14,934 $ 12,430 $ 9,029 $ 11,361 $ 12,354 $ 15,395 $ 14,751 $146,951
Rental property
expenses and
real estate taxes 12,797 3,737 3,262 3,165 2,717 2,630 4,527 4,874 4,275 41,984
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 32,197 7,966 11,672 9,265 6,312 8,731 7,827 10,521 10,476 104,967
Other income/expenses, net 58,904
--------
Income before property dispositions 46,063
Gain on property dispositions 871
--------
Net income $ 46,934
========
Net income allocated to general partner $ 42,200
========
Net income allocated to limited partners $ 4,734
========
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- -----------------------------------------------------------------------------------------------------------------------
SE New Lehigh The Jackson- Minne- All
Pennsyl. Jersey Valley Virginia Carolinas ville sota Michigan Others Total
-------- -------- -------- -------- --------- -------- -------- -------- -------- --------
Real estate
related revenues $ 43,094 $ 11,686 $ 14,665 $ 10,754 $ 10,982 $ 11,648 $ 11,923 $ 14,177 $ 15,261 $144,190
Rental property
expenses and real
estate taxes 13,167 3,761 4,256 2,474 2,998 2,986 4,569 4,322 4,114 42,647
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 29,927 7,925 10,409 8,280 7,984 8,662 7,354 9,855 11,147 101,543
Other income/expenses, net 57,074
--------
Income before property dispositions 44,469
Gain on property dispositions 1,477
--------
Net income $ 45,946
========
Net income allocated to general partner $ 41,116
========
Net income allocated to limited partners $ 4,830
========
NOTE 4 - ADOPTION OF ACCOUNTING STANDARD
- ----------------------------------------
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets." The adoption did not have a material impact on the
Company's results of operations or financial position.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------
OVERVIEW
The following discussion and analysis of the consolidated financial
condition and consolidated results of operations should be read together
with the consolidated financial statements of the Company and notes thereto
contained in this Form 10-Q.
The Company's operating results depend primarily upon income from rental
operations. This income is substantially influenced by rental demand for
the properties in operation. The general slowdown in the economy has
negatively affected occupancy rates. Occupancy rates as of March 31, 2002
and 2001 are provided in the table below. Rental operations have been
negatively impacted by occupancy declines. Declines in occupancy have been
partially offset by rental rate increases the Company has realized on
renewal and replacement leases. To the extent this trend continues, the
Company may experience little to no increase in "Same Store" property-level
operating income.
The Company seeks to achieve growth in operating income from its
development pipeline activity. The decline in demand for real estate has
also negatively impacted the pre-leasing occupancy levels and rental rates
of the properties under development. If this demand trend continues, the
contribution to growth in income from properties under development may
decline. The Company anticipates that its development efforts in 2002 will
be principally focused on build-to-suit development opportunities.
The composition of the Company's properties in operation as of March 31,
2002 and 2001 is as follows (in thousands, expect percentages):
TOTAL PERCENT OF TOTAL
SQUARE FEET SQUARE FEET PERCENT OCCUPIED
---------------- ---------------- ----------------
MARCH 31, MARCH 31, MARCH 31,
TYPE 2002 2001 2002 2001 2002 2001
- ------------------------- ------- ------- ------- ------- ------- -------
Industrial - Distribution 21,206 21,102 42.3% 42.7% 97.7% 95.0%
Industrial - Flex 12,866 12,657 25.7% 25.6% 90.4% 96.1%
Office 16,084 15,694 32.0% 31.7% 91.6% 94.5%
------- ------- ------- ------- ------- -------
Total 50,156 49,453 100.0% 100.0% 93.9% 95.1%
======= ======= ======= ======= ======= =======
Geographic segment data for the three months ended March 31, 2002 and 2001
is included in Note 3 of the Notes to the Liberty Property Trust and
Liberty Property Limited Partnership Financial Statements.
FORWARD-LOOKING STATEMENTS
Statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which are not historical
fact may be forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 (the "Exchange Act"). The Company
intends such forward-looking statements to be covered by the safe harbor
15
provision for forward-looking statements contained in Section 21E of the
Exchange Act. Although the Company believes that the expectations reflected
in such forward-looking statements are based on reasonable assumptions, it
can give no assurance that its expectations will be achieved. As forward-
looking statements, these statements involve important risks, uncertainties
and other factors that could cause actual results to differ materially from
the expected results and, accordingly, such results may differ from those
expressed in any forward-looking statements. These risks, uncertainties
and other factors include, without limitation, uncertainties affecting
future economic conditions and the real estate businesses generally (such
as entry into new leases, renewals of leases, tenant defaults, dependence
on tenants' business operations and the cost to complete and lease-up
pending developments), risks relating to our ability to maintain and
increase property occupancy and rental rates, risks relating to
construction and development activities, acquisition, disposition, possible
environmental liabilities and risks relating to leverage and debt service.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of
these financial statements requires the Company to make estimates,
judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. The Company bases these estimates,
judgments and assumptions on historical experience and on other various
factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions
or conditions.
The Company believes the following critical policies affect its more
significant estimates and assumptions used in preparation of its
consolidated financial statements.
CAPITALIZED COSTS
Expenditures directly related to acquisition or improvement of real
estate, including interest and other costs capitalized during development,
are included in net real estate and are stated at cost. The capitalized
costs include pre-construction costs essential to the development of the
property, development and construction costs, interest costs, real estate
taxes, salaries and other costs incurred during the period of development.
Expenditures for maintenance and repairs are charged to operations as
incurred.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its tenants to make required rental
payments.
IMPAIRMENT OF REAL ESTATE
The Company evaluates its real estate investments upon occurrence of
significant adverse changes in their operations to assess whether any
impairment indicators are present that affect the recovery of the recorded
value. If any real estate investment is considered impaired, a loss is
provided to reduce the carrying value of the property to its estimated
16
fair value. As of March 31, 2002 and 2001, none of the Company's assets
were considered impaired.
RESULTS OF OPERATIONS
The following discussion is based on the consolidated financial statements
of the Company. It compares the results of operations of the Company for
the three months ended March 31, 2002 (unaudited) with the results of
operations of the Company for the three months ended March 31, 2001
(unaudited). As a result of the development, acquisition and disposition
activities by the Company in 2002 and 2001, the overall operating results
of the Company during such periods are not directly comparable. However,
certain data, including the "Same Store" comparison, do lend themselves to
direct comparison. As used herein, the term "Company" includes the Trust,
the Operating Partnership and their subsidiaries.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes included elsewhere in this
report.
For the three months ended March 31, 2002 compared to the three months
ended March 31, 2001.
- -----------------------------------------------------------------------
Total revenue (principally rental revenue and operating expense
reimbursement) increased to $148.6 million from $145.6 million for the
three months ended March 31, 2002 compared to the same period in 2001.
This increase is primarily due to the net increased investment in
properties developed, acquired, or disposed of during the respective
periods. The average gross investment in operating real estate owned for
the quarter ended March 31, 2002 was $3,370.9 million as compared to
$3,235.0 million for the quarter ended March 31, 2001.
The following is a summary of the Company's acquisition, development and
disposition activity for the three months ended March 31, 2002 and 2001:
2002 2001
----------------------------- -----------------------------
NO. OF TOTAL INVESTMENT (1) NO. OF TOTAL INVESTMENT (1)
BLDGS. OR PROCEEDS BLDGS. OR PROCEEDS
------ -------------------- ------ --------------------
(in millions) (in millions)
Properties owned as of:
Beginning January 1, 645 652
Acquisitions - $ - 3 $ 23.8
Completed developments 8 57.1 7 56.7
Dispositions (2) (12.8) (2) (4.4)
---- ----
March 31, 651 660
==== ====
(1) The "Total Investment" for a property is defined as the property's purchase price plus
closing costs and management's estimate, as determined at the time of acquisition, of the cost
of necessary building improvements in the case of acquisitions, or land costs and land and
building improvement costs in the case of development projects, and where appropriate, other
development costs and carrying costs required to reach rent commencement.
The operating expense recovery percentage (the ratio of operating expense
reimbursement to rental property expenses and real estate taxes) decreased
17
to 95.9% for the three months ended March 31, 2002 from 97.6% for the three
months ended March 31, 2001, due to the decrease in average occupancy
during the respective periods.
Rental property and real estate tax expenses decreased to $42.0 million
from $42.6 million for the three months ended March 31, 2002 compared to
the same period in 2001. This decrease is due to a decrease in snow
removal and other seasonal operating costs during the mild 2002 winter
compared to 2001, partially offset by an increased investment in properties
owned during respective periods.
Property-level net operating income for the Same Store properties
(properties owned as of January 1, 2001) decreased to $94.4 million for the
three months ended March 31, 2002 from $94.9 million for the three months
ended March 31, 2001, on a straight line basis, (which recognizes rental
revenue evenly over the life of the lease), and increased to $92.7 million
for the three months ended March 31, 2002 from $92.3 million for the three
months ended March 31, 2001, on a cash basis. These variances, a decrease
of 0.5% and an increase of 0.4%, respectively, are due to increases in
rental rates for the properties, partially offset by a decrease in
occupancy.
Set forth below is a schedule comparing the property-level net operating
income for the Same Store properties for the three months ended March 31,
2002 and 2001 (in thousands).
STRAIGHT LINE BASIS CASH BASIS
--------------------- ---------------------
QUARTER ENDED QUARTER ENDED
--------------------- ---------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2002 2001 2002 2001
--------- --------- --------- ---------
Rental Revenue $ 95,673 $ 95,699 $ 94,006 $ 93,162
-------- -------- -------- --------
Operating expenses:
Rental property expense 25,704 27,783 25,704 27,783
Real estate taxes 12,847 12,540 12,847 12,540
Operating expense recovery (37,248) (39,484) (37,248) (39,484)
-------- -------- -------- --------
Unrecovered operating expenses 1,303 839 1,303 839
-------- -------- -------- --------
Property-level net operating income $ 94,370 $ 94,860 $ 92,703 $ 92,323
======== ======== ======== ========
General and administrative expenses increased to $6.0 million for the three
months ended March 31, 2002 from $5.8 million compared to the same period
in 2001. This increase is primarily due to the ongoing funding of
initiatives which the Company undertook relating to training, property
management and marketing.
Depreciation and amortization expense increased to $26.5 million from $24.9
million for the three months ended March 31, 2002 compared to the same
period in 2001. This increase is primarily due to an increase in the
investment in properties owned during the respective periods.
Interest expense increased to $28.1 million from $27.8 million for the
three months ended March 31, 2002 compared to the same period in 2001.
This increase is due to an increase in the average debt outstanding for the
respective periods, which was $1,772.0 million for the three months ended
18
March 31, 2002 compared to $1,724.7 million for the same period in 2001.
The affect of the increase in the average debt outstanding was partially
offset by a decrease in interest rates. The weighted average interest
rates for the respective periods have decreased from 7.60% for the three
months ended March 31, 2001 to 7.23% for the three months ended March 31,
2002.
Costs directly related to the development of rental properties are
capitalized. Capitalized development costs include interest, salaries,
property taxes, insurance and other directly identifiable costs during the
period of development. Capitalized salaries historically represent
approximately 1% of the cost of developed properties brought into service.
These amounts are not included in general and administrative expenses as
discussed above. Capitalized interest for the three months ended March
31, 2002 was $5.0 million as compared to $5.9 million for the three months
ended March 31, 2001. These costs are not included in the interest
expense as discussed above.
In the first quarter of 2002, the Company realized a gain on property
dispositions of $871,000, due to the sale of two properties and three
parcels of land for $15.5 million. In the first quarter of 2001, the
Company realized a gain on property dispositions of $1.5 million, due to
the sale of two properties, one development property and two parcels of
land for $13.6 million.
As a result of the foregoing, the Company's income before minority interest
increased to $46.9 million for the three months ended March 31, 2002 from
$45.9 million for the three months ended March 31, 2001. In addition, net
income increased to $42.2 million for the three months ended March 31, 2002
from $41.1 million for the three months ended March 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2002, the Company had cash and cash equivalents of $22.2
million.
Net cash flow provided by operating activities decreased to $52.8 million
for the three months ended March 31, 2002 from $89.5 million for the three
months ended March 31, 2001. This $36.7 million decrease was primarily due
to the fluctuations in prepaid expenses and other liabilities during the
respective periods. Net cash flow provided by operations is the primary
source of liquidity to fund distributions to shareholders and for the
recurring capital expenditures and leasing transaction costs for the
Company's properties in operation.
Net cash used in investing activities decreased to $51.9 million for the
three months ended March 31, 2002 from $111.0 million for the three months
ended March 31, 2001. This decrease primarily resulted from a decrease in
investment in development in progress and land held for development in
2002, which is consistent with the general economic slowdown.
Cash flows provided by financing activities decreased by $18.4 million for
the three months ended March 31, 2002 versus the three months ended March
31, 2001. This decrease is primarily due to the decreased utilization of
the credit facility. This decrease is consistent with the decrease in the
level of the Company's investment activities particularly in development as
described above. Net cash provided by financing activities includes
proceeds from the issuance of equity and debt net of debt repayments and
shareholder distributions. It is a source of capital utilized by the
Company to fund investment activities.
19
The Company believes that its undistributed cash flow from operations is
adequate to fund its operating needs.
The Company funds its development and acquisitions with long-term capital
sources to include proceeds from the disposition of properties. In 2000,
the Company increased its borrowing capacity and obtained a $450 million
unsecured credit facility, (the "Credit Facility"). The Company uses debt
financing to lower its overall cost of capital in an attempt to increase
the return to shareholders. The Company staggers its debt maturities and
maintains debt levels it considers to be prudent. In determining its debt
levels, the Company considers various financial measures to include debt to
gross assets and earnings to fixed charges ratios. As of March 31, 2002
the Company's debt to gross assets ratio was 44.6%, and the earnings to
fixed charges ratio was 2.60. Debt to gross assets equals total long term
debt divided by total assets plus accumulated depreciation. Earnings to
fixed charges equals income before property dispositions and minority
interest plus interest expense and depreciation and amortization expense
divided by interest expense, including capitalized interest, plus
distributions on preferred shares and units.
The interest rate on borrowings under the Credit Facility fluctuates based
upon ratings from Moody's, S&P and Fitch. During 2001, Standard and Poor's
Ratings Group ("S&P") and Moody's Investors Services, Inc. ("Moody's")
raised their corporate credit rating for the Company from BBB- to BBB and
from Baa3 to Baa2, respectively. In 2001, Fitch, Inc. ("Fitch") initiated
coverage on the Company with a BBB senior debt rating. At the Company's
current ratings, the interest rate for borrowings under the Credit Facility
is 105 basis points over LIBOR, or 3.0% on March 31, 2002.
As of March 31, 2002, $347.9 million in mortgage loans and $1,345.0
million in unsecured notes were outstanding. The interest rates on
$1,667.9 million of mortgage loans and unsecured notes are fixed and range
from 6.0% to 8.8%. Interest rates on $25.0 million of mortgage loans float
with the base rate of the respective lending bank or a municipal bond
index. The weighted average remaining term for the mortgage loans and the
unsecured notes is 6.7 years. The scheduled maturities of principal
amortization of the Company's mortgage loans and the unsecured notes
outstanding and the related weighted average interest rates as of March 31,
2002 are as follows (in thousands, except percentages):
MORTGAGES WEIGHTED
-------------------------- UNSECURED AVERAGE
AMORTIZATION MATURITIES NOTES TOTAL INTEREST RATE
------------ ---------- ---------- ---------- --------------
2002 $ 6,171 $ - 100,000 $ 106,171 6.6%
2003 8,092 26,606 50,000 84,698 7.3%
2004 8,167 35,594 100,000 143,761 7.0%
2005 7,091 115,039 - 122,130 7.6%
2006 5,002 30,078 100,000 135,080 7.2%
2007 4,543 - 100,000 104,543 7.3%
2008 4,237 29,268 - 33,505 7.2%
2009 2,146 42,050 270,000 314,196 7.8%
2010 1,348 - 200,000 201,348 8.5%
2011 1,098 3,533 250,000 254,631 7.3%
2012 192 17,675 - 17,867 7.7%
2013 - - 75,000 (1) 75,000 6.4%
2018 - - 100,000 100,000 7.5%
--------- --------- ---------- ---------- ------
$ 48,087 $ 299,843 $1,345,000 $1,692,930 7.4%
========= ========= ========== ========== ======
(1) Callable in 2003.
20
GENERAL
The Company has continued to pursue development and acquisition
opportunities and the strategic disposition of certain properties. In
addition, the Company has continued to focus on improving the performance
of the Same Store portfolio by achieving and maintaining high occupancy
levels and maximizing rental rates.
The expiring square feet and annual base rent by year for the properties in
operation as of March 31, 2002 are as follows (in thousands):
INDUSTRIAL-
DISTRIBUTION INDUSTRIAL-FLEX OFFICE TOTAL
------------------ ------------------ ------------------ ------------------
SQUARE ANNUAL SQUARE ANNUAL SQUARE ANNUAL SQUARE ANNUAL
YEAR FEET BASE RENT FEET BASE RENT FEET BASE RENT FEET BASE RENT
- ---------- ------ --------- ------ --------- ------ --------- ------ ---------
2002 3,453 $ 14,661 1,606 $ 13,212 1,578 $ 20,033 6,637 $ 47,906
2003 1,797 8,039 2,374 20,533 1,748 23,483 5,919 52,055
2004 1,918 9,727 1,914 16,969 1,642 25,291 5,474 51,987
2005 2,826 14,662 1,342 12,541 2,891 42,030 7,059 69,233
2006 2,796 12,885 1,625 18,330 1,298 19,643 5,719 50,858
2007 897 5,149 716 6,865 769 12,329 2,382 24,343
Thereafter 7,033 39,212 2,057 23,012 4,807 81,315 13,897 143,539
------ -------- ------ -------- ------ -------- ------ --------
Total 20,720 $104,335 11,634 $111,462 14,733 $224,124 47,087 $439,921
====== ======== ====== ======== ====== ======== ====== ========
The Company believes that its existing sources of capital will provide
sufficient funds to finance its continued development and acquisition
activities. The scheduled deliveries of the 3.5 million square feet of
properties under development as of March 31, 2002 are as follows (in
thousands, except percentages):
SQUARE FEET
----------------------------- PERCENT
SCHEDULED IND- IND- PRE-LEASED TOTAL
IN-SERVICE DATE DIST. FLEX OFFICE TOTAL MARCH 31, 2002 INVESTMENT
- ---------------- ------ ------ ------- ------ -------------- ----------
2nd Quarter 2002 114 170 161 445 67.2% $ 37,965
3rd Quarter 2002 300 291 442 1,033 52.6% 100,509
4th Quarter 2002 654 - 189 843 63.7% 50,385
1st Quarter 2003 55 - 792 847 67.5% 132,145
Thereafter - 127 190 317 42.6% 83,495
----- ----- ----- ----- ------ --------
Total 1,123 588 1,774 3,485 59.9% $404,499
===== ===== ===== ===== ====== ========
The Company's sources of capital include the public debt and equity
markets, proceeds from property dispositions and net cash provided from
its operating activities. Additionally, the Company expects to incur
variable rate debt, including borrowings under the Credit Facility, from
time to time.
In 2001, the Company received approximately $246.2 million in net proceeds
from the issuance of unsecured notes. The Company used the net proceeds to
pay down borrowings on the Credit Facility which is used to fund
development and acquisition activity.
The Company has authorized a share repurchase program whereby the Company
may purchase up to $100 million of the Company's common shares, convertible
21
debentures or preferred shares. Through May 6, 2002, the Company purchased
59,100 common shares and purchased convertible debentures exchangeable into
877,950 common shares. The total cost for the purchase of the common shares
and convertible debentures was approximately $21.9 million. The
convertible debentures matured in July 2001.
The Company has an effective S-3 shelf registration statement on file with
the Securities and Exchange Commission (the "Shelf Registration
Statement"). As of May 6, 2002, pursuant to this Shelf Registration
Statement, the Trust had the capacity to issue up to $688.4 million in
equity securities and the Operating Partnership had the capacity to issue
up to $561.1 million in debt securities.
RELATED PARTY TRANSACTIONS
Pursuant to agreements, the Company has been retained by an affiliate
(Rouse Kent Limited) to provide development, management and other services.
For the three months ended March 31, 2002 and 2001, the fees for these
services were $150,000 per quarter. The Company had accounts receivable
and loans receivable from Rouse Kent Limited and affiliates with balances
of $4.4 million and $19.9 million, respectively, as of March 31, 2002 and
$6.5 million and $12.9 million, respectively, as of March 31, 2001. The
Company has the option to purchase this affiliate for a nominal
consideration.
CALCULATION OF FUNDS FROM OPERATIONS
Management generally considers Funds from operations (as defined below) a
useful financial performance measure of the operating performance of an
equity REIT, because, together with net income and cash flows, Funds from
operations provides investors with an additional basis to evaluate the
ability of a REIT to incur and service debt and to fund dividends and on-
going capital expenditures. Funds from operations is defined by NAREIT as
net income (computed in accordance with generally accepted accounting
principles ("GAAP")), excluding gains (or losses) from the disposition of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Funds from operations does
not represent net income or cash flows from operations as defined by GAAP
and does not necessarily indicate that cash flows will be sufficient to
fund cash needs. It should not be considered as an alternative to net
income as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. Funds from operations also does not
represent cash flows generated from operating, investing or financing
activities as defined by GAAP. Funds from operations for the three months
ended March 31, 2002 and March 31, 2001 are as follows:
THREE MONTHS ENDED
(IN THOUSANDS)
---------------------
MARCH 31, MARCH 31,
2002 2001
--------- ---------
Income available to common shareholders $ 39,450 $ 38,366
Adjustments:
Minority interest less preferred unit distributions 2,081 2,177
Depreciation and amortization 26,078 24,533
Gain on disposition of properties (871) (1,477)
======== ========
Funds from operations $ 66,738 $ 63,599
======== ========
22
INFLATION
- ---------
Inflation has remained relatively low during the last three years, and as a
result, it has not had a significant impact on the Company during this
period. The Credit Facility bears interest at a variable rate; therefore,
the amount of interest payable under the Credit Facility will be influenced
by changes in short-term interest rates, which tend to be sensitive to
inflation. To the extent an increase in inflation would result in increased
operating costs, such as in insurance, real estate taxes and utilities,
substantially all of the tenants' leases require the tenants to absorb
these costs as part of their rental obligations. In addition, inflation
also may have the effect of increasing market rental rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
There have been no material changes to the Company's exposure to market
risk since its Annual Report on Form 10-K for the year ended December 31,
2001.
23
PART II: OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBERTY PROPERTY TRUST
/s/ WILLARD G. ROUSE III May 13, 2002
- ------------------------------------- --------------------------
Willard G. Rouse III Date
Chairman of the Board of Trustees and
Chief Executive Officer
/s/ GEORGE J. ALBURGER, JR. May 13, 2002
- ------------------------------------- --------------------------
George J. Alburger, Jr. Date
Chief Financial Officer and
Executive Vice President
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: LIBERTY PROPERTY TRUST, GENERAL PARTNER
/s/ WILLARD G. ROUSE III May 13, 2002
- ------------------------------------- --------------------------
Willard G. Rouse III Date
Chairman of the Board of Trustees and
Chief Executive Officer
/s/ GEORGE J. ALBURGER, JR. May 13, 2002
- ------------------------------------- --------------------------
George J. Alburger, Jr. Date
Chief Financial Officer and
Executive Vice President
12