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): November 4, 1997
(August 14, 1997)
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
------------------------------------
(Exact name of registrant as specified in their governing documents)
MARYLAND 1-13130 23-7768996
PENNSYLVANIA 1-13132 23-2766549
- --------------------------- ------------- -------------------
State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
65 VALLEY STREAM PARKWAY, SUITE 100
MALVERN, PENNSYLVANIA 19355
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 648-1700
ITEM 5: OTHER EVENTS
- ---------------------
Liberty Property Limited Partnership is a Pennsylvania limited
partnership (the "Operating Partnership"). Liberty Property Trust, a
Maryland real estate investment trust (the "Trust"), owns an approximate
90.11% interest in the Operating Partnership (as of September 30, 1997)
(the Trust and the Operating Partnership are collectively referred to as
the "Company"):
On August 14, 1997, the Company acquired title to one office property,
comprising 43,387 leaseable square feet, located in Glen Allen, Virginia
("4198 Cox Road"). On September 11, 1997, the Company acquired title to
one office property comprising 72,509 leaseable square feet also located
in Glen Allen, Virginia ("4510 Cox Road" and, collectively with 4198 Cox
Road, the "4198 and 4510 Cox Road Properties"). The Company's total
investment in these properties is $13.2 million. 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 "Total Investment").
Pursuant to Rule 3-14 of Regulation S-X, audited historical financial
information concerning 4198 Cox Road and 4510 Cox Road, is provided in
Item 7 of this Current Report on Form 8-K. Additionally, certain pro
forma information is provided in Item 7.
Factors considered by the Company in determining the price to be paid
for the 4198 and 4510 Cox Road Properties, included their historical and
expected cash flow, the nature of tenants and terms of leases in place,
occupancy rates, opportunities for alternative and new tenancies,
current operating costs and real estate taxes on the properties and
anticipated changes therein under Company ownership, physical condition
and locations of the properties, the anticipated effect to the Company's
financial results (particularly funds from operations), the ability to
sustain and potentially increase its distributions to Company
shareholders, and other factors. The Company took into consideration
the capitalization rates at which it believed other comparable buildings
were recently sold, but determined the price it was willing to pay
primarily on factors discussed above relating to the properties
themselves and their fit into the Company's operations. The Company,
other than those enumerated above, that would cause the financial
information reported not to be necessarily indicative of future
operating results.
-2-
- -------------------------------
Statements contained in this report contain forward-looking statements
with respect to estimates of Total Investment, future acquisitions and
pro forma financial information and their underlying assumptions. As
such, these statements involve risks and uncertainties that could affect
future results, and accordingly, such results may differ from those
expressed herein. These risks and uncertainties include, but are not
limited to, uncertainties affecting real estate businesses generally,
risks relating to acquisition activities and risks relating to leasing
and releasing activities and rates.
-3-
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
PAGE
----
(a) Financial Statements of Businesses Acquired
(1) Statement of Operating Revenues and Certain
Operating Expenses for 4198 Cox Road
Report of Independent Auditors........................ 6
Statement of Operating Revenues and Certain
Operating Expenses for 4198 Cox Road
for the nine months ended September 30, 1997
(unaudited) and for the year ended December 31,
1996............................................... 7
Notes to the Statement of Operating Revenues and
Certain Operating Expenses for 4198 Cox Road
for the nine months ended September 30, 1997
(unaudited) and for the year December 31, 1996..... 8
(2) Statement of Operating Revenues and Certain
Operating Expenses for 4510 Cox Road
Report of Independent Auditors........................ 10
Statement of Operating Revenues and Certain
Operating Expenses for 4510 Cox Road
for the nine months ended September 30, 1997
(unaudited) and for the year ended December 31,
1996............................................... 11
Notes to the Statement of Operating Revenues and
Certain Operating Expenses for 4510 Cox Road
for the nine months ended September 30, 1997
(unaudited) and for the year December 31, 1996..... 12
(b) Pro Forma Financial Information (unaudited)
Liberty Property Trust....................................... 14
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997................................. 15
Pro Forma Consolidated Statement of Operations for
the nine months ended September 30, 1997........... 16
Notes to Pro Forma Condensed Consolidated Financial
Statements as of and for the nine months ended
September 30, 1997................................. 17
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996................... 18
Notes to Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996.... 19
-4-
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS - Cont'd
- ---------------------------------------------------
Liberty Property Limited Partnership......................... 20
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997................................. 21
Pro Forma Consolidated Statement of Operations for
the nine months ended September 30, 1997........... 22
Notes to Pro Forma Condensed Consolidated Financial
Statements as of and for the nine months ended
September 30, 1997.................................. 23
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996................... 24
Notes to Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996.... 25
Signatures......................................................... 26
(c) Exhibits
23 Consent of Fegley & Associates...................... 27
-5-
REPORT OF INDEPENDENT AUDITORS
To The Board of Trustees and Shareholders
Liberty Property Trust
We have audited the accompanying Statement of Operating Revenues and
Certain Operating Expenses of 4198 Cox Road, as defined in Note 1, for
the year ended December 31, 1996. This financial statement is the
responsibility of the management of 4198 Cox Road. 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 accounting principles
used and significant estimates made by management as well as evaluating
the overall presentation of the financial statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Operating Revenues and Certain Operating
Expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in
the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership) and, as described in Note 1, is not
intended to be a complete presentation of 4198 Cox Road's revenues and
expenses.
In our opinion, the Statement of Operating Revenues and Certain
Operating Expenses referred to above presents fairly, in all material
respects, the Operating Revenues and Certain Operating Expenses
described in Note 1 for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ FEGLEY & ASSOCIATES
Plymouth Meeting, Pennsylvania FEGLEY & ASSOCIATES
November 3, 1997
-6-
STATEMENT OF OPERATING REVENUES AND CERTAIN OPERATING EXPENSES
FOR 4198 COX ROAD FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
NINE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Operating revenues:
Rental $ 333 $ 394
Operating expense
reimbursement 152 235
------ ------
Total operating
revenues 485 629
------ ------
Certain operating
expenses:
Rental property
expenses 111 185
Real estate taxes 24 33
------ ------
Total certain
operating expenses 135 218
------ ------
Operating revenues in
excess of certain
operating expenses $ 350 $ 411
======= ======
The accompanying notes are an integral part of this statement.
-7-
NOTES TO THE STATEMENT OF OPERATING REVENUES AND
CERTAIN OPERATING EXPENSES FOR 4198 COX ROAD
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
1. Summary of Significant Accounting Policies
- ----------------------------------------------
The Statement of Operating Revenues and Certain Operating Expenses (see
"Basis of Presentation" below) includes the operations of 4198 Cox Road,
Liberty Property Trust (the "Company") owns an approximate 90.11%
partners' interest in the Operating Partnership (as of September 30,
1997) (the Trust and the Operating Partnership are collectively referred
to as the "Company").
PROPERTY NAME LOCATION DESCRIPTION
- -------------------------- -------------------- --------------------
4198 Cox Road Glen Allen, Virginia Single story office
building
43,387 square feet
USE OF ESTIMATES
- ----------------
Generally accepted accounting principles required management to make
estimates and assumptions in preparing financial statements. Those
estimates and assumptions affect the reported revenues and expenses.
BASIS OF PRESENTATION
- ---------------------
The Statement of Operating Revenues and Certain Operating Expenses is
presented in conformity with Rule 3-14 of the Securities and Exchange
Commission. Accordingly, depreciation, interest and income taxes are
not presented. The Company is not aware of any factors relating to 4198
Cox Road that would cause the reported financial information not to be
indicative of future operating results. General company overhead has
not been allocated to 4198 Cox Road.
The financial information presented for the nine months ended September
30, 1997 is unaudited. In the opinion of management, the unaudited
financial information contains all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the Statement
of Revenues and Certain Operating Expenses for 4198 Cox Road.
The property consists of commercial office space leased to tenants under
leases with varying terms. Tenant renewal options are available.
-8-
REVENUE RECOGNITION
- -------------------
Base rental income attributable to leases is recorded on a straight-line
basis over the applicable lease term. The leases also typically provide
for tenant reimbursement of common area maintenance and other operating
expenses which are included in the accompanying Statement of Operating
Revenue and Certain Operating Expenses as operating expense
reimbursements.
2. MINIMUM FUTURE RENTALS
- ---------------------------
Future minimum rental payments due from tenants of 4198 Cox Road under
non-cancellable operating leases as of December 31, 1996 are as follows
(in thousands):
1997 $ 321
1998 321
1999 131
2000 15
2001 -
Thereafter -
-------
Total $ 788
=======
-9-
REPORT OF INDEPENDENT AUDITORS
To The Board of Trustees and Shareholders
Liberty Property Trust
We have audited the accompanying Statement of Operating Revenues and
Certain Operating Expenses of 4510 Cox Road, as defined in Note 1, for
the year ended December 31, 1996. This financial statement is the
responsibility of the management of 4510 Cox Road. 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 accounting principles
used and significant estimates made by management as well as evaluating
the overall presentation of the financial statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Operating Revenues and Certain Operating
Expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in
the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership) and, as described in Note 1, is not
intended to be a complete presentation of 4510 Cox Road's revenues and
expenses.
In our opinion, the Statement of Operating Revenues and Certain
Operating Expenses referred to above presents fairly, in all material
respects, the Operating Revenues and Certain Operating Expenses
described in Note 1 for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ FEGLEY & ASSOCIATES
Plymouth Meeting, Pennsylvania FEGLEY & ASSOCIATES
November 3, 1997
-10-
STATEMENT OF OPERATING REVENUES AND CERTAIN OPERATING EXPENSES
FOR 4510 COX ROAD FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
NINE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Operating revenues:
Rental $ 743 $ 995
Operating expense
reimbursement 243 325
------- -------
Total operating
revenues 986 1,320
------- -------
Certain operating
expenses:
Rental property
expenses 157 239
Real estate taxes 51 58
------- -------
Total certain
operating expenses 208 297
------- -------
Operating revenues in
excess of certain
operating expenses $ 778 $1,023
======= =======
The accompanying notes are an integral part of this statement.
-11-
NOTES TO THE STATEMENT OF OPERATING REVENUES AND
CERTAIN OPERATING EXPENSES FOR 4510 COX ROAD
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
1. Summary of Significant Accounting Policies
- ----------------------------------------------
The Statement of Operating Revenues and Certain Operating Expenses (see
"Basis of Presentation" below) includes the operations of 4510 Cox Road,
Liberty Property Trust (the "Company") owns an approximate 90.11%
partners' interest in the Operating Partnership (as of September 30,
1997) (the Trust and the Operating Partnership are collectively referred
to as the "Company").
PROPERTY NAME LOCATION DESCRIPTION
- -------------------------- -------------------- --------------------
4510 Cox Road Glen Allen, Virginia Single story office
building
72,509 square feet
USE OF ESTIMATES
- ----------------
Generally accepted accounting principles required management to make
estimates and assumptions in preparing financial statements. Those
estimates and assumptions affect the reported revenues and expenses.
BASIS OF PRESENTATION
- ---------------------
The Statement of Operating Revenues and Certain Operating Expenses is
presented in conformity with Rule 3-14 of the Securities and Exchange
Commission. Accordingly, depreciation, interest and income taxes are
not presented. The Company is not aware of any factors relating to 4510
Cox Road that would cause the reported financial information not to be
indicative of future operating results. General company overhead has
not been allocated to 4510 Cox Road.
The financial information presented for the nine months ended September
30, 1997 is unaudited. In the opinion of management, the unaudited
financial information contains all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the Statement
of Revenues and Certain Operating Expenses for 4510 Cox Road.
The property consists of commercial office space leased to tenants under
leases with varying terms. Tenant renewal options are available.
-12-
REVENUE RECOGNITION
- -------------------
Base rental income attributable to leases is recorded on a straight-line
basis over the applicable lease term. The leases also typically provide
for tenant reimbursement of common area maintenance and other operating
expenses which are included in the accompanying Statement of Operating
Revenue and Certain Operating Expenses as operating expense
reimbursements.
2. MINIMUM FUTURE RENTALS
- ---------------------------
Future minimum rental payments due from tenants of 4510 Cox Road under
non-cancellable operating leases as of December 31, 1996 are as follows
(in thousands):
1997 $ 988
1998 995
1999 906
2000 470
2001 119
Thereafter -
-------
Total $ 3,478
=======
-13-
LIBERTY PROPERTY TRUST
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of
September 31, 1997 reflects the incremental effect of the 4198 and 4510
Cox Road Properties described in Item 5 as if the acquisitions had
occurred on September 30, 1997. The accompanying unaudited, pro forma
consolidated statement of operations for the nine months ended September
30, 1997 and the year ended December 31, 1996 reflect the incremental
effect of the 4198 and 4510 Cox Road Properties, as if such acquisitions
had occurred on January 1, 1996. These statements should be read in
conjunction with respective consolidated financial statements and notes
thereto included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and its Annual Report on Form 10-K for
the year ended December 31, 1996. In the opinion of management, the
unaudited, pro forma consolidated financial information provides for all
adjustments necessary to reflect the effects of the 4198 and 4510 Cox
Road Properties.
These pro forma statements may not necessarily be indicative of the
results that would have actually occurred if the acquisition of the 4198
and 4510 Cox Road Properties had been in effect on the dates indicated,
nor does it purport to represent the financial position, results of
operations or cash flows for future periods.
-14-
LIBERTY PROPERTY TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED, IN THOUSANDS)
4198 LIBERTY
AND 4510 PROPERTY
HISTORICAL COX ROAD TRUST
<F1> PROPERTIES CONSOLIDATED
---------- ----------- ------------
ASSETS:
Investment in real estate, net $1,625,549 $ 13,184 <F2> $1,638,733
Cash and cash equivalents 24,097 - 24,097
Deferred financing and
leasing costs, net 29,439 - 29,439
Other assets 56,114 - 56,114
---------- ----------- -----------
Total assets $1,735,199 $ 13,184 $1,748,383
========== =========== ===========
LIABILITIES:
Mortgage loans $ 391,055 $ - $ 391,055
Unsecured notes 200,000 - 200,000
Subordinated debentures 114,820 - 114,820
Lines of credit 146,000 13,184 <F3> 159,184
Other liabilities 86,633 - 86,633
---------- ----------- -----------
Total liabilities 938,508 13,184 951,692
---------- ----------- -----------
MINORITY INTEREST 66,430 - 66,430
---------- ----------- -----------
SHAREHOLDERS' EQUITY:
Series A preferred shares 125,000 - 125,000
Common shares 43 - 43
Additional paid-in capital 606,309 - 606,309
Unearned compensation (1,091) - (1,091)
Retained earnings - - -
---------- ----------- -----------
Total shareholders' equity 730,261 - 730,261
---------- ----------- -----------
Total liabilities and
shareholders' equity $1,735,199 $ 13,184 $1,748,383
========== =========== ===========
The accompanying notes are an integral part of this unaudited, pro forma
condensed consolidated financial statement.
-15-
LIBERTY PROPERTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
4198
AND 4510 LIBERTY
COX ROAD PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
<F1> <F4> ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------ ------------
REVENUE
Rental $ 119,223 $ 1,076 $ 120,299
Operating expense reim-
bursement 38,121 395 38,516
Management fees 516 - 516
Interest and other 2,244 - 2,244
---------- --------- -----------
Total revenue 160,104 1,471 161,575
---------- --------- -----------
OPERATING EXPENSES
Rental property expenses 29,849 268 30,117
Real estate taxes 12,297 75 12,372
General and administrative 7,602 - 7,602
Depreciation and amorti-
zation 28,787 - $ 247 <F5> 29,034
---------- --------- --------- -----------
Total operating expenses 78,535 343 247 79,125
---------- --------- --------- -----------
Operating income 81,569 1,128 (247) 82,450
Premium on debenture
conversion 98 - - 98
Write off of deferred
financing costs 2,919 - - 2,919
Interest expense 37,252 - 671 <F6> 37,923
---------- --------- --------- -----------
Income (loss) before
minority interest 41,300 1,128 (918) 41,510
Minority interest 3,815 108 (88) <F7> 3,835
---------- --------- --------- -----------
Net income (loss) 37,485 1,020 (830) 37,675 <F8>
Preferred dividend 1,497 - - 1,497
---------- --------- --------- -----------
Income available to
common shareholders $ 35,988 $ l,020 $ (830) $ 36,178
========== ========= ========== ===========
Net income per common
share - primary $ .94
===========
Weighted average number
of common shares out-
standing 38,551
===========
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
-16-
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical financial information of the Company as of
September 30, 1997 and for the nine months ended September 30, 1997.
<F2> Reflects the Total Investment in 4198 and 4510 Cox Road.
<F3> Reflects the use of $13,184 from the line of credit to finance the
Total Investment in 4198 and 4510 Cox Road.
<F4> Reflects incremental addition of revenues and certain expenses of
4198 and 4510 Cox Road in order to reflect a full nine months of
operations for these acquisitions.
<F5> Reflects incremental depreciation of 4198 and 4510 Cox Road based
on asset lives of 40 years.
<F6> Reflects an incremental increase in interest expense from the
assumed borrowings of $13,184 on the line of credit to fund the purchase
of 4198 and 4510 Cox Road.
<F7> Reflects the allocation of the pro forma adjustment to minority
interest based upon pro forma minority interest in the Operating
Partnership of approximately 9.58%.
<F8> The Company's pro forma taxable income for the nine month period
ended September 30, 1997 is approximately $30,543 which has been
calculated as pro forma income from operations of approximately $37,676
GAAP depreciation and amortization of $29,034 less tax basis
depreciation and amortization and other tax differences of approximately
$36,167.
-17-
LIBERTY PROPERTY TRUST
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
4198
AND 4510 LIBERTY
COX ROAD PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
<F1> <F2> ADJUSTMENTS CONSOLIDATED
---------- ---------- ------------ ------------
REVENUE
Rental $ 112,841 $ 1,389 $ 114,230
Operating expense reim-
bursement 35,886 560 36,446
Management fees 1,340 - 1,340
Interest and other 4,198 - 4,198
---------- -------- ---------
Total revenue 154,265 1,949 156,214
---------- -------- ---------
OPERATING EXPENSES
Rental property expenses 29,624 424 30,048
Real estate taxes 11,229 91 11,320
General and administrative 8,023 - 8,023
Depreciation and amorti-
zation 28,203 - $ 330 <F3> 28,533
---------- -------- -------- ---------
Total operating expenses 77,079 515 330 77,924
---------- -------- --------- ---------
Operating income 77,186 1,434 (330) 78,290
Premium on debenture con-
version 1,027 - - 1,027
Interest expense 38,528 - 895 <F4> 39,423
---------- -------- -------- ---------
Income (loss) before
minority interest 37,631 1,434 $(1,225) 37,840
Minority interest 3,891 148 (127) <F5> 3,912
---------- -------- -------- ----------
Net income (loss) $ 33,740 $ 1,286 $(1,098) $ 33,928 <F6>
========== ======== ======== ==========
Net income per common
share - primary $ 1.14
==========
Weighted average number
of common shares out-
standing 29,678
==========
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
-18-
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical operations of the company for the year ended
December 31, 1996.
<F2> Reflects the incremental addition of revenues and certain expenses
of 4198 and 4510 Cox Road in order to reflect a full twelve months of
operations for these acquisitions.
<F3> Reflects incremental depreciation of 4198 and 4510 Cox Road based
on asset lives of 40 years.
<F4> Reflects an incremental increase in interest expense from the
assumed borrowings of $13,184 on the line of credit to fund the purchase
of 4198 and 4510 Cox Road.
<F5> Reflects the allocation of the pro forma adjustment to minority
interest based upon pro forma minority interest in the Operating
Partnership of approximately 10.34%.
<F6> The Company's pro forma taxable income for the year ended December
31, 1996 is approximately $32,765 which has been calculated as pro forma
income from operations of approximately $33,928 plus GAAP depreciation
and amortization of $28,533 less tax basis depreciation and amortization
and other tax differences of approximately $29,696.
-19-
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of
September 30, 1997 reflects the incremental effect of 4198 and 4510 Cox
Road described in Item 5 as if the acquisitions had occurred on
September 30, 1997. The accompanying unaudited, pro forma consolidated
statement of operations for the nine months ended September 30, 1997 and
the year ended December 31, 1996 reflects the incremental effect of 4198
and 4510 Cox Road, as if such acquisitions had occurred on January 1,
1996. These statements should be read in conjunction with respective
consolidated financial statements and notes thereto included in the
Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997 and its Annual Report on Form 10-K for the year ended December
31, 1996. In the opinion of management, the unaudited, pro forma
consolidated financial information provides for all adjustments
necessary to reflect the effects of 4198 and 4510 Cox Road.
These pro forma statements may not necessarily be indicative of the
results that would have actually occurred if the acquisition of 4198 and
4510 Cox Road had been in effect on the dates indicated, nor does it
purport to represent the financial position, results of operations or
cash flows for future periods.
-20-
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED, IN THOUSANDS)
LIBERTY
4198 PROPERTY
AND 4510 LIMITED
HISTORICAL COX ROAD PARTNERSHIP
<F1> PROPERTIES CONSOLIDATED
---------- ----------- ------------
ASSETS:
Investment in real estate,
net $1,625,549 $ 13,184 <F2> $1,638,733
Cash and cash equivalents 24,097 - 24,097
Deferred financing and
leasing costs, net 29,439 - 29,439
Other assets 56,114 - 56,114
---------- ----------- -----------
Total assets $1,735,199 $ 13,184 $1,748,383
========== =========== ===========
LIABILITIES:
Mortgage loans $ 391,055 $ - $ 391,055
Unsecured notes 200,000 - 200,000
Subordinated debentures 114,820 - 114,820
Line of credit 146,000 13,184 <F3> 159,184
Other liabilities 86,633 - 86,633
---------- ----------- -----------
Total liabilities 938,508 13,184 951,692
---------- ----------- -----------
OWNERS' EQUITY
General partner's equity 730,261 - 730,261
Limited partners' equity 66,430 - 66,430
---------- ----------- -----------
Total owners' equity
equity 796,691 - 796,691
---------- ----------- -----------
Total liabilities and
owners' equity $1,735,199 $ 13,184 $1,748,383
========== =========== ===========
The accompanying notes are an integral part of this unaudited, pro forma
condensed consolidated financial statement.
-21-
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED AND IN THOUSANDS)
4198 LIBERTY
AND 4510 PROPERTY
COX ROAD PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
<F1> <F4> ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------ ------------
REVENUE
Rental $ 119,223 $ 1,076 $ 120,299
Operating expense reim-
bursement 38,121 395 38,516
Management fees 516 - 516
Interest and other 2,244 - 2,244
---------- --------- ------------
Total revenue 160,104 1,471 161,575
---------- --------- ------------
OPERATING EXPENSES
Rental property expenses 29,849 268 30,117
Real estate taxes 12,297 75 12,372
General and administrative 7,602 - 7,602
Depreciation and amorti-
zation 28,787 - $ 247 <F5> 29,034
---------- --------- ---------- ------------
Total operating expenses 78,535 343 247 79,125
---------- --------- ---------- ------------
Operating income 81,569 1,128 (247) 82,450
Premium on debenture
conversion 98 - - 98
Write off of deferred
financing costs 2,919 - - 2,919
Interest expense 37,252 - 671 <F6> 37,923
---------- --------- ---------- ------------
Net income (loss) $ 41,300 $ 1,128 $ (918) $ 41,510
========== ========= ========== ============
Net income (loss)
allocated to general
partner $ 37,485 $ 1,020 $ (830) $ 37,675
Net income (loss)
allocated to limited
partners 3,815 108 (88) <F7> 3,835
========== ========= ========== ============
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
-22-
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical financial information of the Company as of
Septenber 30, 1997 and for the nine months ended September 30, 1997.
<F2> Reflects the Total Investment in 4198 and 4510 Cox Road.
<F3> Reflects the use of $13,184 from the line of credit to finance the
Total Investment in 4198 and 4510 Cox Road.
<F4> Reflects the incremental addition of revenues and certain expenses
of 4198 and 4510 Cox Road in order to reflect a full nine months of
operations for these acquisitions.
<F5> Reflects incremental depreciation of 4198 and 4510 Cox Road based
on asset lives of 40 years.
<F6> Reflects an incremental increase in interest expense from the
assumed borrowings of $13,184 on the line of credit to fund the purchase
of 4198 and 4510 Cox Road.
<F7> Reflects the allocation of the pro forma adjustment to the net
income allocated to the limited partners based upon pro forma ownership
in the Operating Partnership of approximately 9.58%.
-23-
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED AND IN THOUSANDS)
4198 LIBERTY
AND 4510 PROPERTY
COX ROAD PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
<F1> <F2> ADJUSTMENTS CONSOLIDATED
---------- ------------ ------------ ------------
REVENUE
Rental $ 112,841 $ 1,389 $ 114,230
Operating expense reim-
bursement 35,886 560 36,446
Management fees 1,340 - 1,340
Interest and other 4,198 - 4,198
---------- ---------- ---------
Total revenue 154,265 1,949 156,214
---------- ---------- ---------
OPERATING EXPENSES
Rental property expenses 29,624 424 30,048
Real estate taxes 11,229 91 11,320
General and administrative 8,023 - 8,023
Depreciation and amorti-
zation 28,203 - $ 330 <F3> 28,533
---------- ---------- ---------- ---------
Total operating expenses 77,079 515 330 77,924
---------- ---------- ---------- ---------
Operating income 77,186 1,434 (330) 78,290
Premium on debenture con-
version 1,027 - - 1,027
Interest expense 38,528 - 895 <F4> 39,423
---------- ---------- ---------- ---------
Net income (loss) $ 37,631 $ 1,434 $ (1,225) $ 37,840
========== ========== ========== =========
Net income (loss)
allocated to general
partner $ 33,740 $ 1,286 $ (1,098) $ 33,928
Net income (loss)
allocated to limited
partners 3,891 148 (127) <F5> 3,912
========== ========== ========== =========
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
-24-
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<F1> Reflects historical financial information of the Company for the
year ended December 31, 1996.
<F2> Reflects the incremental addition of revenue and certain expenses
of 4198 and 4510 Cox Road in order to reflect a full twelve months of
operations for these acquisitions.
<F3> Reflects incremental depreciation of 4198 and 4510 Cox Road based
on asset lives of 40 years.
<F4> Reflects an incremental increase in interest expense from the
assumed borrowings of $13,184 on the line of credit to fund the purchase
of 4198 and 4510 Cox Road.
<F5> Reflects the allocation of the pro forma adjustment to the net
income allocated to the limited partners based upon pro forma ownership
in the Operating Partnership of approximately 10.34%.
-25-
SIGNATURE
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 hereunto duly authorized.
LIBERTY PROPERTY TRUST
Dated: November 3, 1997 BY: /s/ WILLARD G. ROUSE, III
----------------------------------------
NAME: Willard G. Rouse, III
TITLE: Chief Executive Officer
LIBERTY PROPERTY LIMITED PARTNERSHIP
BY: LIBERTY PROPERTY TRUST,
SOLE GENERAL PARTNER
Dated: November 3, 1997 BY: /s/ WILLARD G. ROUSE, III
----------------------------------------
NAME: Willard G. Rouse, III
TITLE: Chief Executive Officer
-26-
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-94782) and related Prospectus of Liberty
Property Trust and Liberty Property Limited Partnership, to the
incorporation by reference in the Registration Statement (Form S-3 No.
333-14139) and related Prospectus of Liberty Property Trust, to the
incorporation by reference in the Registration Statement (Form S-3 No.
333-22211) and related Prospectus of Liberty Property Trust and Liberty
Property Limited Partnership, to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-94036) and related Prospectus of
Liberty Property Trust, of our report dated November 3, 1997, with
respect to the Statement of Operating Revenues and Certain Operating
Expenses for 4198 and 4510 Cox Road included in the Current Report on
Form 8-K of Liberty Property Trust and Liberty Property Limited
Partnership dated August 14, 1997, filed with the Securities and
Exchange Commission.
/s/ FEGLEY & ASSOCIATES
Fegley & Associates
Plymouth Meeting, PA
November 3, 1997
-27-