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 19, 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 November 19, 1997, the Company entered into a contract to acquire title to twenty-two industrial and office properties, comprising 992,925 leaseable square feet, located in Horsham, Pennsylvania, which the Company considers probable of closing (the "Horsham Properties"). The Company's total investment in these properties is $85.3 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 the Horsham Properties, 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 Horsham 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, after investigation of the properties, is not aware of any material fact, 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, 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 the Horsham Properties Report of Independent Auditors........................ 6 Statement of Operating Revenues and Certain Operating Expenses for the Horsham Properties 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 the Horsham Properties for the nine months ended September 30, 1997 (unaudited) and for the year December 31, 1996............................................... 8 (b) Pro Forma Financial Information (unaudited) Liberty Property Trust...................................... 11 Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997................................. 12 Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 1997........... 13 Notes to Pro Forma Condensed Consolidated Financial Statements as of and for the nine months ended September 30, 1997................................. 14 Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996................... 15 Notes to Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996.... 16 Liberty Property Limited Partnership......................... 17 Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997................................. 18 Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 1997........... 19 Notes to Pro Forma Condensed Consolidated Financial Statements as of and for the nine months ended September 30, 1997.................................. 20 Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996................... 21 Notes to Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996.... 22 Signatures......................................................... 23 -4- (c) Exhibits 23 Consent of Fegley & Associates...................... 24 -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 the Horsham Properties, as defined in Note 1, for the year ended December 31, 1996. This financial statement is the responsibility of the management of the Horsham Properties. 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 the Horsham Properties' 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 19, 1997 -6- STATEMENT OF OPERATING REVENUES AND CERTAIN OPERATING EXPENSES FOR THE HORSHAM PROPERTIES 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 $ 5,081 $ 6,499 Operating expense reimbursement 2,918 4,174 ------- ------- Total operating revenues 7,999 10,673 ------- ------- Certain operating expenses: Rental property expenses 2,106 3,105 Real estate taxes 698 897 ------- ------- Total certain operating expenses 2,804 4,002 ------- ------- Operating revenues in excess of certain operating expenses $ 5,195 $ 6,671 ======= ======= The accompanying notes are an integral part of this statement. -7- NOTES TO THE STATEMENT OF OPERATING REVENUES AND CERTAIN OPERATING EXPENSES FOR THE HORSHAM PROPERTIES 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 the Horsham Properties. 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 - -------------------------- -------------------- -------------------- 181-187 Gibraltar Road Horsham, Pennsylvania Single story flex building 48,870 square feet 104 Rock Road Horsham, Pennsylvania Single story flex building 51,375 square feet 123-135 Rock Road Horsham, Pennsylvania Single story flex building 37,500 square feet 111-159 Gibraltar Road Horsham, Pennsylvania Single story flex building 62,992 square feet 161-175 Gibraltar Road Horsham, Pennsylvania Single story flex building 49,732 square feet 125-137 Gibraltar Road Horsham, Pennsylvania Single story flex building 42,000 square feet 261-283 Gibraltar Road Horsham, Pennsylvania Single story flex building 60,000 square feet 201-223 Witmer Road Horsham, Pennsylvania Single story flex building 60,000 square feet 231-237 Gibraltar Road Horsham, Pennsylvania Single story flex building 60,000 square feet -8- PROPERTY NAME LOCATION DESCRIPTION - -------------------------- -------------------- -------------------- 100 Gibraltar Road Horsham, Pennsylvania Single story office building 2,800 square feet 101 Gibraltar Road Horsham, Pennsylvania Two story office building 56,845 square feet 506 Prudential Road Horsham, Pennsylvania Single story office building 18,200 square feet 113-123 Rock Road Horsham, Pennsylvania Single story office building 37,500 square feet 101-111 Rock Road Horsham, Pennsylvania Single story office building 37,884 square feet 120 Gibraltar Road Horsham, Pennsylvania Three story office building 49,118 square feet 110 Gibraltar Road Horsham, Pennsylvania Two story office building 59,069 square feet 100-107 Lakeside Drive Horsham, Pennsylvania Single story office building 27,465 square feet 200-264 Lakeside Drive Horsham, Pennsylvania Single story office building 54,623 square feet 300-309 Lakeside Drive Horsham, Pennsylvania Single story office building 43,832 square feet 400-445 Lakeside Drive Horsham, Pennsylvania Two story office building 62,123 square feet 104 Witmer Road Horsham, Pennsylvania Single story office building 24,300 square feet 201 Gibraltar Road Horsham, Pennsylvania Single story office building 46,697 square feet -9- 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 the Horsham Properties that would cause the reported financial information not to be indicative of future operating results. General company overhead has not been allocated to the Horsham Properties. 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 the Horsham Properties. The property consists of commercial office space leased to tenants under leases with varying terms. Tenant renewal options are available. 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 the Horsham Properties under non-cancellable operating leases as of December 31, 1996 are as follows (in thousands): 1997 $ 6,209 1998 3,862 1999 2,150 2000 718 2001 229 Thereafter 152 ------- Total $13,320 ======= -10- LIBERTY PROPERTY TRUST PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The unaudited, pro forma condensed consolidated balance sheet as of September 30, 1997 reflects the incremental effect of the Horsham 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 Horsham 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 Horsham Properties. These pro forma statements may not necessarily be indicative of the results that would have actually occurred if the acquisition of the Horsham 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. -11- LIBERTY PROPERTY TRUST PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 (UNAUDITED, IN THOUSANDS) LIBERTY THE PROPERTY HISTORICAL HORSHAM TRUST <F1> PROPERTIES CONSOLIDATED ---------- ----------- ------------ ASSETS: Investment in real estate, net $1,625,549 $ 85,305 <F2> $1,710,854 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 $ 85,305 $1,820,504 ========== =========== =========== LIABILITIES: Mortgage loans $ 391,055 $ - $ 391,055 Unsecured notes 200,000 - 200,000 Subordinated debentures 114,820 - 114,820 Line of credit 146,000 85,305 <F3> 231,305 Other liabilities 86,633 - 86,633 ---------- ----------- ----------- Total liabilities 938,508 85,305 1,023,813 ---------- ----------- ----------- 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 $ 85,305 $1,820,504 ========== =========== =========== The accompanying notes are an integral part of this unaudited, pro forma condensed consolidated financial statement. -12- 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) THE LIBERTY HORSHAM PRO PROPERTY HISTORICAL PROPERTIES FORMA TRUST <F1> <F4> ADJUSTMENTS CONSOLIDATED ---------- ----------- ------------ ------------ REVENUE Rental $ 119,223 $ 5,081 $124,304 Operating expense reim- bursement 38,121 2,918 41,039 Management fees 516 - 516 Interest and other 2,244 - 2,244 ---------- --------- ----------- Total revenue 160,104 7,999 168,103 ---------- --------- ----------- OPERATING EXPENSES Rental property expenses 29,849 2,106 31,955 Real estate taxes 12,297 698 12,995 General and administrative 7,602 - 7,602 Depreciation and amorti- zation 28,787 - $1,599 <F5> 30,386 ---------- --------- --------- ----------- Total operating expenses 78,535 2,804 1,599 82,938 ---------- --------- --------- ----------- Operating income 81,569 5,195 (1,599) 85,165 Premium on debenture conversion 98 - - 98 Write off of deferred financing costs 2,919 - - 2,919 Interest expense 37,252 - 4,344 <F6> 41,596 ---------- --------- --------- ----------- Income (loss) before minority interest 41,300 5,195 (5,943) 40,552 Minority interest 3,815 497 (571) <F7> 3,741 ---------- --------- --------- ----------- Net income (loss) 37,485 4,698 (5,372) 36,811 <F8> Preferred dividend 1,497 - - 1,497 ---------- --------- --------- ----------- Income available to common shareholders $ 35,988 $ 4,698 $(5,372) $ 35,314 ========== ========= ========== =========== Net income per common share - primary $ .92 =========== Weighted average number of common shares out- standing 38,551 =========== The accompanying notes are an integral part of this unaudited, proforma consolidated financial statement. -13- 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 the Horsham Properties. <F3> Reflects the use of $85,305 from the line of credit to finance the Total Investment in the Horsham Properties. <F4> Reflects incremental addition of revenues and certain expenses of the Horsham Properties in order to reflect a full nine months of operations for these acquisitions. <F5> Reflects incremental depreciation of the Horsham Properties based on asset lives of 40 years. <F6> Reflects an incremental increase in interest expense from the assumed borrowings of $85,305 on the line of credit to fund the purchase of the Horsham Properties. <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 $29,682 which has been calculated as pro forma income from operations of approximately $36,811 GAAP depreciation and amortization of $30,386 less tax basis depreciation and amortization and other tax differences of approximately $37,515. -14- LIBERTY PROPERTY TRUST PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT) THE LIBERTY HORSHAM PRO PROPERTY HISTORICAL PROPERTIES FORMA TRUST <F1> <F2> ADJUSTMENTS CONSOLIDATED ---------- ---------- ------------ ------------ REVENUE Rental $ 112,841 $ 6,499 $ 119,340 Operating expense reim- bursement 35,886 4,174 40,060 Management fees 1,340 - 1,340 Interest and other 4,198 - 4,198 ---------- -------- --------- Total revenue 154,265 10,673 164,938 ---------- -------- --------- OPERATING EXPENSES Rental property expenses 29,624 3,105 32,729 Real estate taxes 11,229 897 12,126 General and administrative 8,023 - 8,023 Depreciation and amorti- zation 28,203 - $ 2,133 <F3> 30,336 ---------- -------- -------- --------- Total operating expenses 77,079 4,002 2,133 83,214 ---------- -------- --------- --------- Operating income 77,186 6,671 (2,133) 81,724 Premium on debenture con- version 1,027 - - 1,027 Interest expense 38,528 - 5,792 <F4> 44,320 ---------- -------- -------- --------- Income (loss) before minority interest 37,631 6,671 (7,925) 36,377 Minority interest 3,891 690 (820) <F5> 3,761 ---------- -------- -------- ---------- Net income (loss) $ 33,740 $ 5,981 $(7,105) $ 32,616 <F6> ========== ======== ======== ========== Net income per common share - primary $ 1.10 ========== Weighted average number of common shares out- standing 29,678 ========== The accompanying notes are an integral part of this unaudited, proforma consolidated financial statement. -15- 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 the Horsham Properties in order to reflect a full twelve months of operations for these acquisitions. <F3> Reflects incremental depreciation of the Horsham Properties based on asset lives of 40 years. <F4> Reflects an incremental increase in interest expense from the assumed borrowings of $85,305 on the line of credit to fund the purchase of the Horsham Properties. <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 $31,283 which has been calculated as pro forma income from operations of approximately $32,616 plus GAAP depreciation and amortization of $30,336 less tax basis depreciation and amortization and other tax differences of approximately $31,669. -16- 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 the Horsham 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 reflects the incremental effect of the Horsham 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 Horsham Properties. These pro forma statements may not necessarily be indicative of the results that would have actually occurred if the acquisition of the Horsham 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. -17- LIBERTY PROPERTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 (UNAUDITED, IN THOUSANDS) LIBERTY THE PROPERTY HISTORICAL HORSHAM TRUST <F1> PROPERTIES CONSOLIDATED ---------- ----------- ------------ ASSETS: Investment in real estate, net $1,625,549 $ 85,305 <F2> $1,710,854 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 $ 85,305 $1,820,504 ========== =========== =========== LIABILITIES: Mortgage loans $ 391,055 $ - $ 391,055 Unsecured notes 200,000 - 200,000 Subordinated debentures 114,820 - 114,820 Line of credit 146,000 85,305 <F3> 231,305 Other liabilities 86,633 - 86,633 ---------- ----------- ----------- Total liabilities 938,508 85,305 1,023,813 ---------- ----------- ----------- OWNERS' EQUITY: General partner's equity 730,261 - 730,261 Limited partners' equity 66,430 - 66,430 ---------- ----------- ----------- Total owners' equity 796,691 - 796,691 ---------- ----------- ----------- Total liabilities and shareholders' equity $1,735,199 $ 85,305 $1,820,504 ========== =========== =========== -18- LIBERTY PROPERTY LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED AND IN THOUSANDS) LIBERTY THE PROPERTY HORSHAM PRO LIMITED HISTORICAL PROPERTIES FORMA PARTNERSHIP <F1> <F4> ADJUSTMENTS CONSOLIDATED ---------- ----------- ------------ ------------ REVENUE Rental $ 119,223 $ 5,081 $ 124,304 Operating expense reim- bursement 38,121 2,918 41,039 Management fees 516 - 516 Interest and other 2,244 - 2,244 ---------- --------- ------------ Total revenue 160,104 7,999 168,103 ---------- --------- ------------ OPERATING EXPENSES Rental property expenses 29,849 2,106 31,955 Real estate taxes 12,297 698 12,995 General and administrative 7,602 - 7,602 Depreciation and amorti- zation 28,787 - $ 1,599 <F5> 30,386 ---------- --------- ---------- ------------ Total operating expenses 78,535 2,804 1,599 82,938 ---------- --------- ---------- ------------ Operating income 81,569 5,195 (1,599) 85,165 Premium on debenture conversion 98 - - 98 Write off of deferred financing costs 2,919 - - 2,919 Interest expense 37,252 - 4,344 <F6> 41,596 ---------- --------- ---------- ------------ Net income (loss) $ 41,300 $ 5,195 $ (5,943) $ 40,552 ========== ========= ========== ============ Net income (loss) allocated to general partner $ 37,485 $ 4,698 $ (5,372) $ 36,811 Net income (loss) allocated to limited partners 3,815 497 (571) <F7> 3,741 ========== ========= ========== ============ The accompanying notes are an integral part of this unaudited, proforma consolidated financial statement. -19- 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 September 30, 1997 and for the nine months ended September 30, 1997. <F2> Reflects the Total Investment in the Horsham Properties. <F3> Reflects the use of $85,305 from the line of credit to finance the Total Investment in the Horsham Properties. <F4> Reflects the incremental addition of revenues and certain expenses of the Horsham Properties in order to reflect a full nine months of operations for these acquisitions. <F5> Reflects incremental depreciation of the Horsham Properties based on asset lives of 40 years. <F6> Reflects an incremental increase in interest expense from the assumed borrowings of $85,305 on the line of credit to fund the purchase of the Horsham Properties. <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%. -20- LIBERTY PROPERTY LIMITED PARTNERSHIP PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED AND IN THOUSANDS) LIBERTY THE PROPERTY HORSHAM PRO LIMITED HISTORICAL PROPERTIES FORMA PARTNERSHIP <F1> <F2> ADJUSTMENTS CONSOLIDATED ---------- ------------ ------------ ------------ REVENUE Rental $ 112,841 $ 6,499 $ 119,340 Operating expense reim- bursement 35,886 4,174 40,060 Management fees 1,340 - 1,340 Interest and other 4,198 - 4,198 ---------- ---------- --------- Total revenue 154,265 10,673 164,938 ---------- ---------- --------- OPERATING EXPENSES Rental property expenses 29,624 3,105 32,729 Real estate taxes 11,229 897 12,126 General and administrative 8,023 - 8,023 Depreciation and amorti- zation 28,203 - $ 2,133 <F3> 30,336 ---------- ---------- ---------- --------- Total operating expenses 77,079 4,002 2,133 83,214 ---------- ---------- ---------- --------- Operating income 77,186 6,671 (2,133) 81,724 Premium on debenture con- version 1,027 - - 1,027 Interest expense 38,528 - 5,792 <F4> 44,320 ---------- ---------- ---------- --------- Net income (loss) $ 37,631 $ 6,671 $ (7,925) $ 36,377 ========== ========== ========== ========= Net income (loss) allocated to general partner $ 33,740 $ 5,981 $ (7,105) $ 32,616 Net income (loss) allocated to limited partners 3,891 690 (820) <F5> 3,761 ========== ========== ========== ========= The accompanying notes are an integral part of this unaudited, proforma consolidated financial statement. -21- 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 the Horsham Properties in order to reflect a full twelve months of operations for these acquisitions. <F3> Reflects incremental depreciation of the Horsham Properties based on asset lives of 40 years. <F4> Reflects an incremental increase in interest expense from the assumed borrowings of $85,305 on the line of credit to fund the purchase of the Horsham Properties. <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%. -22- 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 hereunto duly authorized. LIBERTY PROPERTY TRUST Dated: November 19, 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 19, 1997 BY: /s/ WILLARD G. ROUSE, III ---------------------------------------- NAME: Willard G. Rouse, III TITLE: Chief Executive Officer -23- EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and 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 19, 1997, with respect to the Statement of Operating Revenues and Certain Operating Expenses for the Horsham Properties included in the Current Report on Form 8-K of Liberty Property Trust and Liberty Property Limited Partnership dated November 19, 1997, filed with the Securities and Exchange Commission. /s/ FEGLEY & ASSOCIATES Fegley & Associates Plymouth Meeting, PA November 19, 1997