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, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND 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 10, 1999, 66,303,163 Common Shares of Beneficial Interest, par
value $.001 per share, of Liberty Property Trust were outstanding.
LIBERTY PROPERTY TRUST/LIBERTY PROPERTY LIMITED PARTNERSHIP
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1999
INDEX
- -----
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements (unaudited) Page
----
Consolidated balance sheets of Liberty Property
Trust at March 31, 1999 and December 31, 1998. 4
Consolidated statements of operations of Liberty
Property Trust for the three months ended March
31, 1999 and March 31, 1998. 5
Consolidated statements of cash flows of Liberty
Property Trust for the three months ended March
31, 1999 and March 31, 1998. 6
Notes to consolidated financial statements for
Liberty Property Trust. 7
Consolidated balance sheets of Liberty Property
Limited Partnership at March 31, 1999 and
December 31, 1998. 10
Consolidated statements of operations of Liberty
Property Limited Partnership for the three months
ended March 31, 1999 and March 31, 1998. 11
Consolidated statements of cash flows of Liberty
Property Limited Partnership for the three months
ended March 31, 1999 and March 31, 1998. 12
Notes to consolidated financial statements for
Liberty Property Limited Partnership. 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 15
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 23
Part II. Other Information
- ---------------------------
Signatures 25
Exhibit Index 26
-2-
- -----------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in
this Quarterly Report on Form 10-Q contain statements that are or will be
forward-looking, such as statements relating to acquisitions and other
business development and development activities, future capital
expenditures, the costs and risks associated with the Year 2000 issue,
financing sources and availability, and the effects of regulation
(including environmental regulation) and competition. Such
forward-looking information involves important risks and uncertainties
that could significantly affect anticipated results in the future and,
accordingly, such results may differ from those expressed in any
forward-looking statements made by, or on behalf of, Liberty Property
Trust and Liberty Property Limited Partnership (together, the "Company").
These risks and uncertainties include, but are not limited to,
uncertainties affecting real estate businesses generally (such as entry
into new leases, renewals of leases and dependence on tenants' business
operations), risks relating to acquisition, construction and development
activities, possible environmental liabilities, risks relating to
leverage and debt service (including availability of financing terms
acceptable to the Company and sensitivity of the Company's operations to
fluctuations in interest rates), the potential for the use of borrowings
to make distributions necessary to qualify as a REIT, dependence on the
primary markets in which the Company's properties are located, the
existence of complex regulations relating to status as a REIT and the
adverse consequences of the failure to qualify as a REIT, the potential
adverse impact of market interest rates on the market price for the
Company's securities and risks relating to the Year 2000 issue.
-3-
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY TRUST
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -----------------
(UNAUDITED)
ASSETS
Real estate:
Land and land improvements $ 375,690 $ 366,853
Buildings and improvements 2,434,491 2,378,272
Less accumulated depreciation (226,977) (209,023)
---------- ----------
Operating real estate 2,583,204 2,536,102
Development in progress 218,600 207,563
Land held for development 77,381 75,454
---------- ----------
Net real estate 2,879,185 2,819,119
Cash and cash equivalents 14,726 14,391
Accounts receivable 9,879 15,391
Deferred financing and leasing costs,
net of accumulated amortization
(1999, $52,476; 1998, $49,390) 40,434 39,475
Prepaid expenses and other assets 40,988 44,995
---------- ----------
Total assets $2,985,212 $2,933,371
========== ==========
LIABILITIES
Mortgage loans $ 407,686 $ 413,224
Unsecured notes 780,000 645,000
Credit facility 197,000 264,000
Convertible debentures 96,836 101,619
Accounts payable 25,651 20,216
Accrued interest 8,691 18,263
Dividend payable 33,887 33,734
Other liabilities 61,095 69,025
---------- ----------
Total liabilities 1,610,846 1,565,081
Minority interest 95,244 101,254
SHAREHOLDERS' EQUITY
8.80% Series A cumulative redeemable preferred
shares, $.001 par value, 5,000,000 shares
authorized, issued and outstanding as of
March 31, 1999 and December 31, 1998 120,814 120,814
Common shares of beneficial interest, $.001
par value, 200,000,000 shares authorized,
66,294,961 and 65,645,340 shares issued
and outstanding as of March 31, 1999
and December 31, 1998, respectively 66 66
Additional paid-in capital 1,181,511 1,168,663
Unearned compensation (1,168) (562)
Dividends in excess of net income (22,101) (21,945)
---------- -----------
Total shareholders' equity 1,279,122 1,267,036
---------- -----------
Total liabilities and shareholders' equity $2,985,212 $2,933,371
========== ===========
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, 1999 MARCH 31, 1998
-------------- --------------
REVENUE
Rental $ 81,468 $ 61,015
Operating expense reimbursement 29,523 20,250
Management fees 150 147
Gain on sale 1,269 -
Interest and other 1,079 1,207
--------- ---------
Total revenue 113,489 82,619
--------- ---------
OPERATING EXPENSES
Rental property expenses 21,193 14,916
Real estate taxes 9,777 7,019
General and administrative 3,985 3,350
Depreciation and amortization 20,143 14,219
--------- ---------
Total operating expenses 55,098 39,504
--------- ---------
Operating income 58,391 43,115
Interest expense 23,753 16,566
--------- ---------
Income before minority interest 34,638 26,549
Minority interest 2,210 1,809
--------- ---------
Net income 32,428 24,740
Preferred distributions 2,750 2,750
--------- ---------
Income available to common shareholders $ 29,678 $ 21,990
========= =========
Income per common share - basic $ 0.45 $ 0.40
========= =========
Income per common share - diluted $ 0.45 $ 0.40
========= =========
Distributions declared per common share $ 0.45 $ 0.42
========= =========
Weighted average number of common shares
outstanding - basic 66,018 55,279
========= =========
Weighted average number of common shares
outstanding - diluted 66,177 55,667
========= =========
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, 1999 MARCH 31, 1998
-------------- --------------
OPERATING ACTIVITIES
Net income $ 32,428 $ 24,740
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,143 14,219
Amortization of deferred financing costs 1,152 1,103
Minority interest in net income 2,210 1,809
Gain on sale (1,269) -
Noncash compensation 1,309 793
Changes in operating assets and liabilities:
Accounts receivable 5,512 115
Prepaid expenses and other assets 3,590 (1,126)
Accounts payable 5,435 3,099
Accrued interest (9,572) (2,784)
Other liabilities (7,930) 7,123
---------- ---------
Net cash provided by operating activities 53,008 49,091
---------- ---------
INVESTING ACTIVITIES
Investment in properties (32,921) (248,417)
Proceeds from disposition of properties 12,920 -
Investment in development in progress (50,992) (68,249)
Investment in land held for development (5,654) (11,879)
Increase in deferred leasing costs (3,288) (2,195)
---------- ---------
Net cash used in investing activities (79,935) (330,740)
---------- ---------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 284 103,438
Proceeds from issuance of unsecured notes 135,000 175,000
Repayments of mortgage loans (5,538) (1,271)
Proceeds from credit facility 36,000 229,000
Repayments on credit facility (103,000) (216,000)
(Increase) decrease deferred financing costs (808) 576
Distributions paid on common shares (29,540) (22,130)
Distributions paid on preferred shares (2,750) (2,750)
Distributions paid on units (2,386) (2,174)
---------- ---------
Net cash provided by financing activities 27,262 263,689
Increase (decrease) in cash and cash equivalents 335 (17,960)
Cash and cash equivalents at beginning of period 14,391 55,079
---------- ---------
Cash and cash equivalents at end of period $ 14,726 $ 37,119
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ - $ 20
Acquisition of properties - (14,612)
Assumption of mortgage loans - 14,381
Issuance of operating partnership units - 231
Conversion of convertible debentures 4,674 2,212
========== =========
See accompanying notes.
-6-
LIBERTY PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
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
generally accepted accounting principles 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 generally accepted accounting principles 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, 1998. 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 restated to conform
to current period presentation.
The following table sets forth the computation of basic and diluted
income per common share for the three month periods ended March 31, 1999
and 1998:
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, 1999 ENDED MARCH 31, 1998
------------------------------------- -------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income $ 32,428 $ 24,740
Less: Preferred
distributions 2,750 2,750
-------- --------
Basic income per
common share
Income available
to common share-
holders 29,678 66,018 $ 0.45 21,990 55,279 $ 0.40
======= =======
Effect of dilutive
securities
Options - 159 - 388
-------- ------- -------- -------
Diluted income per
common share
Income available
to common share-
holders and assumed
conversions $ 29,678 66,177 $ 0.45 $ 21,990 55,667 $ 0.40
======== ======= ======= ======== ======= =======
Diluted income per common share includes the weighted average common
shares and dilutive effect of the outstanding options, and excludes the
effects of the conversion of the units of limited partnership interest in
the Operating Partnership (the "Units") and the Exchangeable Subordinated
-7-
Debentures due 2001 of the Operating Partnership (the "Convertible
Debentures") into common shares, as to do so would have been antidilutive
for the periods presented. The securities excluded from the diluted
calculation could potentially dilute basic income per common share in the
future.
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 its subsidiary, Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust, the "Company"). The Trust is the sole general
partner and also a limited partner of the Operating Partnership, with a
combined equity interest in the Operating Partnership of 93.1% at March
31, 1999. The Company provides leasing, property management,
development, acquisition, construction management and design management
for a portfolio of industrial and office properties which are located
principally within the Southeastern, Mid-Atlantic and Midwestern United
States.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed on a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
Liberty Property Trust operates its portfolio of properties throughout
the Southeastern, Mid-Atlantic and Midwestern United States. The
Company reviews performance of the portfolio on a geographical basis, as
such, the following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey/Delaware; Lehigh
Valley, Pennsylvania; Maryland; Virginia; the Carolinas; Jacksonville,
Florida; Tampa, Florida; South Florida; Minneapolis, Minnesota; Detroit,
Michigan; 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 geographical 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 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):
-8-
FOR THE THREE MONTHS ENDED MARCH 31, 1999
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
Real-estate
related revenues $ 26,808 $ 11,655 $ 10,739 $ 9,978 $ 9,510 $ 9,881 $ 11,686 $ 20,734 $110,991
Rental operating
expenses and real
estate taxes 7,850 3,472 2,377 2,264 2,724 2,296 3,737 6,250 30,970
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 18,958 8,183 8,362 7,714 6,786 7,585 7,949 14,484 80,021
Other income/
expenses, net 45,383
--------
Income before
minority interest 34,638
Minority interest 2,210
Preferred distributions 2,750
--------
Income available
to common shareholders $ 29,678
========
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
Real-estate
related revenues $ 22,720 $ 7,596 $ 8,851 $ 7,967 $ 6,329 $ 7,927 $ 7,932 $ 11,943 $ 81,265
Rental operating
expenses and real
estate taxes 6,621 2,184 1,743 1,695 1,700 1,744 2,751 3,497 21,935
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 16,099 5,412 7,108 6,272 4,629 6,183 5,181 8,446 59,330
Other income/
expenses, net 32,781
--------
Income before
minority interest 26,549
Minority interest 1,809
Preferred distributions 2,750
--------
Income available
to common shareholders $ 21,990
========
-9-
CONSOLIDATED BALANCE SHEETS OF LIBERTY PROPERTY LIMITED PARTNERSHIP
(IN THOUSANDS)
MARCH 31, 1999 DECEMBER 31, 1998
---------------- -----------------
(UNAUDITED)
ASSETS
Real estate:
Land and land improvements $ 375,690 $ 366,853
Buildings and improvements 2,434,491 2,378,272
Less accumulated depreciation (226,977) (209,023)
---------- ----------
Operating real estate 2,583,204 2,536,102
Development in progress 218,600 207,563
Land held for development 77,381 75,454
---------- ----------
Net real estate 2,879,185 2,819,119
Cash and cash equivalents 14,726 14,391
Accounts receivable 9,879 15,391
Deferred financing and leasing costs,
net of accumulated amortization
(1999, $52,476; 1998, $49,390) 40,434 39,475
Prepaid expenses and other assets 40,988 44,995
---------- ----------
Total assets $2,985,212 $2,933,371
========== ==========
LIABILITIES
Mortgage loans $ 407,686 $ 413,224
Unsecured notes 780,000 645,000
Credit facility 197,000 264,000
Convertible debentures 96,836 101,619
Accounts payable 25,651 20,216
Accrued interest 8,691 18,263
Dividend payable 33,887 33,734
Other liabilities 61,095 69,025
---------- ----------
Total liabilities 1,610,846 1,565,081
OWNERS' EQUITY
General partner's equity-preferred units 120,814 120,814
-common units 1,158,308 1,146,222
Limited partners' equity 95,244 101,254
---------- ----------
Total owners' equity 1,374,366 1,368,290
---------- ----------
Total liabilities and owners' equity $2,985,212 $2,933,371
========== ==========
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, 1999 MARCH 31, 1998
--------------- --------------
REVENUE
Rental $ 81,468 $ 61,015
Operating expense reimbursement 29,523 20,250
Management fees 150 147
Gain on sale 1,269 -
Interest and other 1,079 1,207
----------- ---------
Total revenue 113,489 82,619
----------- ---------
OPERATING EXPENSES
Rental property expenses 21,193 14,916
Real estate taxes 9,777 7,019
General and administrative 3,985 3,350
Depreciation and amortization 20,143 14,219
----------- ---------
Total operating expenses 55,098 39,504
----------- ---------
Operating income 58,391 43,115
Interest expense 23,753 16,566
----------- ---------
Net income 34,638 26,549
Net income allocated to general partner - preferred units 2,750 2,750
----------- ---------
Net income available to partners - common interest $ 31,888 $ 23,799
=========== =========
Net income allocated to general partner - common units $ 2,210 $ 1,809
=========== =========
Net income allocated to limited partners $ 29,678 $ 21,990
=========== =========
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, 1999 MARCH 31, 1998
-------------- --------------
OPERATING ACTIVITIES
Net income $ 34,638 $ 26,549
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,143 14,219
Amortization of deferred financing costs 1,152 1,103
Gain on sale (1,269) -
Noncash compensation 1,309 793
Changes in operating assets and liabilities:
Accounts receivable 5,512 115
Prepaid expenses and other assets 3,590 (1,126)
Accounts payable 5,435 3,099
Accrued interest (9,572) (2,784)
Other liabilities (7,930) 7,123
---------- ---------
Net cash provided by operating activities 53,008 49,091
---------- ---------
INVESTING ACTIVITIES
Investment in properties (32,921) (248,417)
Proceeds from disposition of properties 12,920 -
Investment in development in progress (50,992) (68,249)
Investment in land held for development (5,654) (11,879)
Increase in deferred leasing costs (3,288) (2,195)
---------- ---------
Net cash used in investing activities (79,935) (330,740)
---------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of unsecured notes 135,000 175,000
Repayments of mortgage loans (5,538) (1,271)
Proceeds from credit facility 36,000 229,000
Repayments on credit facility (103,000) (216,000)
(Increase) decrease in deferred financing costs (808) 576
Capital contributions 284 103,438
Distributions to partners (34,676) (27,054)
---------- ---------
Net cash provided by financing activities 27,262 263,689
Increase (decrease) in cash and cash equivalents 335 (17,960)
Cash and cash equivalents at beginning of period 14,391 55,079
---------- ---------
Cash and cash equivalents at end of period $ 14,726 $ 37,119
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Write-off of fully depreciated property and
deferred costs $ - $ 20
Acquisition of properties - (14,612)
Assumption of mortgage loans - 14,381
Issuance of operating partnership units - 231
Conversion of convertible debentures 4,674 2,212
========== =========
See accompanying notes.
-12-
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
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 generally
accepted accounting principles 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 generally accepted accounting principles 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, 1998. 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 restated to conform
to current period presentations.
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 its subsidiary, Liberty Property Limited Partnership, a
Pennsylvania limited partnership (the "Operating Partnership" and,
together with the Trust and its consolidated subsidiaries, the
"Company"). The Trust is the sole general partner and also a limited
partner of the Operating Partneship, with a combined equity interest in
the Operating Partnership of 93.1% at March 31, 1999. The Company
provides leasing, property management, acquisition, development,
construction management and design management for a portfolio of
industrial and office properties which are located principally within the
Southeastern, Mid-Atlantic and Midwestern United States.
In 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed on a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
-13-
NOTE 3 - SEGMENT INFORMATION
- ----------------------------
Liberty Property Trust operates its portfolio of properties throughout
the Southeastern, Mid-Atlantic and Midwestern United States. The
Company reviews performance of the portfolio on a geographical basis, as
such, the following regions are considered the Company's reportable
segments: Southeastern Pennsylvania; New Jersey/Delaware; Lehigh
Valley, Pennsylvania; Maryland; Virginia; the Carolinas; Jacksonville,
Florida; Tampa, Florida; South Florida; Minneapolis, Minnesota; Detroit,
Michigan; 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 geographical area. Within these
reportable segments, the Company derives its revenues from its two
product types: industrial 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 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, 1999
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
Real-estate
related revenues $ 26,808 $ 11,655 $ 10,739 $ 9,978 $ 9,510 $ 9,881 $ 11,686 $ 20,734 $110,991
Rental operating
expenses and real
estate taxes 7,850 3,472 2,377 2,264 2,724 2,296 3,737 6,250 30,970
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 18,958 8,183 8,362 7,714 6,786 7,585 7,949 14,484 80,021
Other income/
expenses, net 45,383
--------
Net income 34,638
Net income allocated to general partner - preferred units 2,750
--------
Net income allocated to partners - common interest $ 31,888
========
Net income allocated to general partner - common units $ 2,210
========
Net income allocated to limited partners $ 29,678
========
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -----------------------------------------------------------------------------------------------------
New
SE Jersey/ Lehigh The
Pennsyl. Delaware Valley Virginia Carolinas Jacksonville Michigan All Others Total
-------- -------- -------- -------- --------- ------------ -------- ---------- --------
Real-estate
related revenues $ 22,720 $ 7,596 $ 8,851 $ 7,967 $ 6,329 $ 7,927 $ 7,932 $ 11,943 $ 81,265
Rental operating
expenses and real
estate taxes 6,621 2,184 1,743 1,695 1,700 1,744 2,751 3,497 21,935
-------- -------- -------- -------- -------- -------- -------- -------- --------
Property-level net
operating income 16,099 5,412 7,108 6,272 4,629 6,183 5,181 8,446 59,330
Other income/
expenses, net 32,781
--------
Net income 26,549
Net income allocated to general partner - preferred units 2,750
--------
Net income allocated to partners - common interest $ 23,799
========
Net income allocated to general partner - common units $ 1,809
========
Net income allocated to limited partners $ 21,990
========
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------
OVERVIEW
The following discussion and analysis is based on a consolidated view of
the Company. Geographic segment data for the three month periods ended
March 31, 1999 and 1998 is included in Note 3 of the Notes to the Liberty
Property Trust and Liberty Property Limited Partnership Financial
Statements, respectively.
In 1999, the Company continued to pursue development and acquisition
opportunities and continued to focus on increasing the cash flow from its
Properties in Operation by increasing property occupancy and increasing
rental rates.
The composition of the Company's properties in operation as of March 31,
1999 and 1998 is as follows (in thousands):
TOTAL PERCENT OF TOTAL
SQUARE FEET SQUARE FEET PERCENT OCCUPIED
----------------- ---------------- -----------------
MARCH 31, MARCH 31, MARCH 31,
TYPE 1999 1998 1999 1998 1999 1998
- ------------------------- ------- ------- ------- ------- ------- -------
Industrial - Distribution 19,244 15,644 42.7% 43.2% 95.7% 94.6%
Industrial - Flex 13,213 10,108 29.4% 28.0% 93.8% 94.7%
Office 12,561 10,398 27.9% 28.8% 94.2% 95.4%
------ ------ ------- ------- ------- -------
Total 45,018 36,150 100.0% 100.0% 94.7% 94.9%
====== ====== ====== ====== ====== ======
The expiring square feet and annual base rent by year for the properties
in operation as of March 31, 1999 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
- ---------- ------ --------- ------ --------- ------ --------- ------ ---------
1999 2,366 $10,648 2,041 $ 14,683 1,598 $ 16,403 6,005 $ 41,734
2000 2,063 9,295 2,267 16,755 1,934 24,108 6,264 50,158
2001 2,904 13,093 2,101 14,680 1,543 19,247 6,548 47,020
2002 3,209 13,397 1,574 11,898 1,126 13,730 5,909 39,025
2003 1,852 8,882 1,903 17,567 1,139 15,435 4,894 41,884
2004 1,248 6,081 564 5,197 565 8,212 2,377 19,490
Thereafter 4,775 23,667 1,948 20,234 3,922 56,999 10,645 100,900
------ ------- ------ -------- ------ -------- ------ --------
Total 18,417 $85,063 12,398 $101,014 11,827 $154,134 42,642 $340,211
====== ======= ====== ======== ====== ======== ====== ========
-15-
The scheduled deliveries of the 3.3 million square feet of properties
under development as of March 31, 1999 are as follows (in thousands):
SQUARE FEET
-----------------------------
SCHEDULED IND- IND- PERCENT PRE-LEASED
IN-SERVICE DATE DIST. FLEX OFFICE TOTAL MARCH 31, 1999 TOTAL INVESTMENT
- ---------------- ------ ------ ------- ------ ------------------ ----------------
2nd Quarter 1999 697 81 456 1,234 91.4% $ 90,618
3rd Quarter 1999 250 123 255 628 92.2% 49,347
4th Quarter 1999 170 - 435 605 53.1% 81,635
1st Quarter 2000 - - 191 191 91.9% 24,530
Thereafter - 188 503 691 24.9% 76,061
------ ------ ------- ------ ------ ----------
Total 1,117 392 1,840 3,349 70.9% $322,191
===== ===== ====== ===== ====== ==========
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, 1999 (unaudited) with the
results of operations of the Company for the three months ended March 31,
1998 (unaudited). As a result of the significant level of acquisition
and development activities by the Company in 1999 and 1998, 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, 1999 compared to the three months
ended March 31, 1998.
- -----------------------------------------------------------------------
Total revenue (principally rental revenue and operating expense
reimbursement) increased to $113.5 million from $82.6 million for the
three months ended March 31, 1999 compared to 1998. These increases are
primarily due to the increase in the number of properties in operation
during the respective periods. As of March 31, 1998, the Company had 496
properties in operation and, as of March 31, 1999, the Company had 625
properties in operation. From January 1, 1998 through March 31, 1998, the
Company acquired or completed the development on 26 properties, for a
Total Investment (as defined below) of approximately $158.9 million.
From January 1, 1999 through March 31, 1999, the Company acquired or
completed the development on 19 properties, for a Total Investment of
approximately $71.2 million. Furthermore, total revenue increased
because the operating expense recovery percentage (the ratio of operating
expense reimbursement to rental property expenses and real estate taxes)
increased to 95.3% for the three months ended March 31, 1999 from 92.3%
for the three months ended March 31, 1998 due to the increase in
occupancy. 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
-16-
where appropriate, other development costs and carrying costs required to
reach rent commencement.
Rental property and real estate tax expenses increased to $31.0 million
from $21.9 million for the three months ended March 31, 1999 compared to
1998. These increases are due to the increase in the number of properties
owned during the respective periods.
Property-level operating income for the "Same Store" properties
(properties owned as of January 1, 1998) increased to $56.3 million for
the three months ended March 31, 1999 from $53.8 million for the three
months ended March 31, 1998, with straightlining (which recognizes rental
revenue evenly over the life of the lease), and increased to $55.5
million for the three months ended March 31, 1999 from $52.8 million for
the three months ended March 31, 1998, without straightlining. These
increases of 4.7% and 5.1%, respectively, are due to increases in the
rental rates for the properties and increases in occupancy.
Set forth below is a schedule comparing the property-level operating
income for the Same Store properties for the three month periods ended
March 31, 1999 and 1998 (in thousands).
WITH STRAIGHTLINING WITHOUT STRAIGHTLINING
------------------------------ ------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
------------------------------ ------------------------------
MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 1998
-------------- -------------- -------------- --------------
Rental Revenue $ 57,605 $ 55,441 $ 56,769 $ 54,408
Operating expense reimbursement 20,912 18,293 20,912 18,293
-------- -------- -------- --------
78,517 73,734 77,681 72,701
Rental property expenses 15,477 13,605 15,477 13,605
Real estate taxes 6,709 6,313 6,709 6,313
-------- -------- -------- --------
Property level operating income $ 56,331 $ 53,816 $ 55,495 $ 52,783
======== ======== ======== ========
General and administrative expenses increased to $4.0 million for the
three months ended March 31, 1999 from $3.4 million for the three months
ended March 31, 1998, due to the increase in personnel and other related
overhead costs necessitated by the increase in the number of properties
owned during the respective periods. This increase is somewhat mitigated
by the benefit of certain economies of scale experienced by the Company
in owning and operating the increased number of properties.
Depreciation and amortization expense increased to $20.1 million for the
three months ended March 31, 1999 from $14.2 million for the three months
ended March 31, 1998. This increase is due to an increase in the number
of properties owned during the respective periods.
Interest expense increased to $23.8 million for the three months ended
March 31, 1999 from $16.6 million for the three months ended March 31,
1998. This increase is due to an increase in the average debt
outstanding for the respective periods which was $1,452.7 million for the
first three months of 1999 and $1,059.5 million for the first three
months of 1998. This increase is offset by a decrease in the weighted
average interest rates for the periods, to 7.2% for the three months
ended March 31, 1999 from 7.4% for the three months ended March 31, 1998.
-17-
As a result of the foregoing, the Company's operating income increased to
$58.4 million for the three months ended March 31, 1999 from $43.1
million for the three months ended March 31, 1998. In addition, income
before minority interest for the three months increased to $34.6 million
for the three months ended March 31, 1999 from $26.5 million for the
three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had cash and cash equivalents of $14.7
million.
Net cash flow provided by operating activities increased to $53.0 million
for the three months ended March 31, 1999 from $49.1 million for the
three months ended March 31, 1998. This $3.9 million increase was
primarily due to the cash provided by the additional Operating Properties
in service during the latter period.
Net cash used in investing activities decreased to $79.9 million for the
three months ended March 31, 1999 from $330.7 million for the three
months ended March 31, 1998. This decrease primarily resulted from
decreased acquisition activity in 1999, and an increase in property
dispositions.
Net cash provided by financing activities decreased to $27.3 million for
the three months ended March 31, 1999 from $263.7 million for the three
months ended March 31, 1998. This decrease is due to a decrease in the
Company's financing requirements consistent with its decrease in
investment activities.
The Company believes that its undistributed cash flow from operations is
adequate to fund its short-term liquidity requirements.
The Company funds its acquisitions and completed development with long-
term capital sources. These activities may be funded on a temporary
basis through its $325.0 million unsecured line of credit (the "Credit
Facility"), which matures May 2000.
The interest rate on borrowings under the Credit Facility fluctuates
based upon the Company's leverage levels or ratings from Moody's and S&P.
Moody's and S&P have assigned senior debt ratings to the Company of Baa3
and BBB-, respectively. At these ratings, the interest rate for
borrowings under the Credit Facility is 110 basis points over LIBOR.
As of March 31, 1999, $407.7 million in mortgage loans, $645.0 million in
unsecured notes and $135.0 million in an unsecured term loan were
outstanding. The interest rates on $1,036.2 million of mortgage loans
and unsecured notes are fixed and range from 5.0% to 9.1%. Interest
rates on $151.5 million of mortgage loans and the unsecured term loan
float with LIBOR, prime or a municipal bond index, $10.0 million of which
is subject to certain caps. The weighted average remaining term for the
mortgage loans, unsecured notes and the unsecured term loan is 7.5 years.
The scheduled maturities of principal amortization of the Company's
mortgage loans, unsecured notes and the unsecured term loan outstanding
-18-
and the related weighted average interest rates are as follows (in
thousands):
MORTGAGES UNSECURED WEIGHTED
-------------------------- NOTES AND AVERAGE
AMORTIZATION MATURITIES TERM LOAN TOTAL INTEREST RATE
------------ ---------- --------- ---------- --------------
1999 $ 6,676 $ 16,412 $ - $ 23,088 6.7%
2000 9,228 26,521 - 35,749 8.4%
2001 8,860 23,298 135,000 167,158 6.5%
2002 7,676 - 100,000 107,676 6.7%
2003 7,621 26,606 50,000 84,227 7.3%
2004 7,661 15,911 100,000 123,572 7.0%
2005 6,847 99,018 - 105,865 7.6%
2006 5,544 30,078 100,000 135,622 7.2%
2007 5,133 - 100,000 105,133 7.3%
2008 4,868 28,835 - 33,703 7.2%
2009 2,587 42,096 20,000 64,683 8.1%
2010 1,608 - - 1,608 7.8%
2011 1,737 - - 1,737 7.8%
2012 882 17,674 - 18,556 7.7%
2013 641 1,571 75,000 (1) 77,212 6.4%
2014 468 - - 468 7.7%
2015 505 - - 505 7.7%
2016 546 - - 546 7.7%
2017 578 - - 578 7.7%
2018 - - 100,000 100,000 7.5%
--------- --------- ---------- ----------- -------
$ 79,666 $328,020 $ 780,000 $ 1,187,686 7.1%
========= ========= ========== =========== =======
(1) Callable 2003.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
General
The Company believes that its existing sources of capital will provide
sufficient funds to finance its continued development and acquisition
activities. The Company's need for capital has been somewhat reduced by
a decline in acquisition activity throughout the year, resulting from a
general marketplace decline in initial returns on acquisitions. The
Company's existing 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 1998, the Company received $296.3 million in aggregate net proceeds
from the issuance of Common Shares and $292.1 million in aggregate net
proceeds from the issuance of unsecured notes. The Company used the
aggregate net proceeds from the sale of Common Shares and the unsecured
notes to fund the Company's activities, including paying down the Credit
Facility, which funds acquisition and development activity.
On January 15, 1999, the Company closed a $135 million, two-year
unsecured term loan. The interest rate for the loan is 135 basis points
over LIBOR.
On April 20, 1999, the Company sold $250 million principal amount of
7.75% notes due 2009. The aggregate net proceeds from such issuance was
approximately $246.0 million.
-19-
The Company has an effective S-3 shelf registration statement on file
with the Securities and Exchange Commission. As of May 1, 1999, the
Company had the capacity pursuant to the Shelf Registration Statement to
issue $696.4 million in equity securities and the Operating Partnership
has the capacity to issue $108.0 million in debt securities.
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 acquisitions and
capital expenditures. Funds from operations is defined by NAREIT as net
income or loss after preferred distributions (computed in accordance with
generally accepted accounting principles ("GAAP")), excluding gains (or
losses) from debt restructuring and sales of property, plus real estate-
related depreciation and amortization and minority interest and excluding
significant nonrecurring events that materially distort the comparative
measurement of the Company's performance over time. 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, 1999 and March 31, 1998
are as follows (in thousands):
THREE MONTHS ENDED
(IN THOUSANDS)
----------------------
MARCH 31, MARCH 31,
1999 1998
---------- ----------
Income available to common shareholders $ 29,678 $ 21,990
Add back:
Minority interest 2,210 1,809
Depreciation and amortization 19,834 14,080
Gain on sale (1,269) -
======== ========
Funds from operations $ 50,453 $ 37,879
======== ========
YEAR 2000
Background
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the
year 1900 rather than the year 2000. This is generally referred to as
the Year 2000 issue. If this situation occurs, the potential exists for
computer system failures or miscalculations by computer programs, which
could disrupt operations.
-20-
Approach
The Company has established a group to coordinate the Company's response
to the Year 2000 issue. This group, which reports to the President and
Chief Operating Officer, includes the Company's MIS Director, a Vice-
President-Property Management and its General Counsel, as well as
support staff. The Company is in the process of implementing a Year
2000 compliance program at the Company's offices and properties
consisting of the following phases:
PHASE 1 Compilation of an inventory of information technology
(IT) and non-IT systems that may be sensitive to the Year 2000 problem.
PHASE 2 Identification and prioritization of the critical systems
from the systems inventory compiled in Phase 1 and inquiries of third
parties with whom the Company does significant business (i.e., vendors,
service providers and certain tenants) as to the state of their Year
2000 readiness.
PHASE 3 Analysis of critical systems to determine which systems
are not Year 2000 compliant and evaluation of the costs to repair or
replace those systems.
PHASE 4 Repair or replace noncompliant systems and testing of
critical systems.
Status
The Company's property management and accounting system uses four-digit
year fields and consequently is believed to be Year 2000 compliant.
Phases 1, 2, and 3 are substantially complete but for the process of
making inquiries of significant third parties as to their Year 2000
readiness, which is currently ongoing.
Phase 4 is ongoing and will continue through the first half of calendar
1999. It is the Company's goal to have this project completed by
mid-1999. Based upon the analysis conducted to date, the Company
believes the major critical systems at the Company's properties are
currently compliant or will be compliant by mid-1999.
Costs
The total cost to the Company of making its systems Year 2000 compliant
is currently estimated to be in the range of $200,000-$300,000. The
majority of this cost relates to repairing certain software, testing
systems and retrofitting or replacing energy management systems at
certain of the properties. The cost for the replacement of the
equipment and the software will be capitalized and depreciated over
their expected useful life. To the extent existing hardware or software
is replaced, the Company will write off the cost incurred. This write-
off is included in the above cost estimate. Furthermore, all costs
related to software modification, as well as all costs associated with
the Company's administration of its Year 2000 project, are being
expensed as incurred and are likewise included in the cost estimate
above.
Risks Associated with the Year 2000 Problem
The Company utilizes computer systems in many aspects of its business.
As noted, the Company's property management and accounting systems use
-21-
four-digit year fields and are believed to be Year 2000 compliant.
Additionally, with respect to the hardware and software systems utilized
by the Company in its management information systems, the Company's
assessment to date indicates that these systems are Year 2000 compliant
or can readily be made Year 2000 compliant on a stand-alone basis.
Testing of this preliminary assessment and of the operation of these
systems together is ongoing.
The Company's also utilizes microprocessors which are imbedded in
systems which are part of the building operations (e.g., a
microprocessors contained within the buildings' energy management
systems or fire and life safety systems). In particular, Year 2000
problems in the HVAC, elevator, security or other such systems at the
properties could disrupt operations at the affected properties. The
properties generally consist of suburban office and industrial
properties. The properties are also principally single-story and low-
rise buildings. The Company has reviewed its building operating systems
on a building-by-building basis. At this point, based on the status of
its assessment, the Company does not believe a material number of these
systems will be non-compliant. Additionally, many of these systems,
which operate automatically, can be operated manually and consequently
in the event these systems experience a failure as a result of the Year
2000 problem, the disruption caused by such failure should not be
material to the Company's operations.
The Company is also exposed to the risk that one or more of its vendors
or service providers could experience Year 2000 problems that impact the
ability of such vendor or service provider to provide goods and
services. Though this is not considered as significant a risk with
respect to the suppliers of goods, due to the availability of
alternative suppliers, the disruption of certain services, such as
utilities, could, depending upon the extent of the disruption, have a
material adverse impact on the Company's operations. To date, the
Company is not aware of any vendor or service provider Year 2000 issue
that management believes would have a material adverse impact on the
Company's operations. However, the Company has no means of ensuring
that its vendors or service providers will be Year 2000 ready. The
inability of vendors or service providers to complete their Year 2000
resolution process in a timely fashion could have a adverse impact on
the Company. The effect of non-compliance by vendors or service
providers is not determinable at this time.
In addition, the Company is exposed to the risk that one or more of its
tenants could experience Year 2000 problems that impact the ability of
such tenant to pay its rent to the Company in a timely fashion. The
Company does not believe that such a problem is likely to affect enough
tenants to pose a material problem for the Company. To date, the
Company is not aware of any tenant Year 2000 issue that would have a
material adverse impact on the Company's operations. However, the
Company has no means of ensuring that its tenants will be Year 2000
ready. The inability of tenants to complete their Year 2000 resolution
process in a timely fashion could have an adverse impact on the Company.
The effect of non-compliance by tenants is not determinable at this
time.
Widespread disruptions in the national or international economy,
including disruptions affecting the financial markets, resulting from
Year 2000 issues, or in certain industries, such as commercial or
investment banks, could also have an adverse impact on the Company. The
likelihood and effect of such disruptions is not determinable at this
time.
-22-
Readers are cautioned that forward-looking statements contained in the
Year 2000 discussion should be read in conjunction with the Company's
disclosures regarding forward-looking statements previously disclosed.
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 1998.
-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
4 Third Supplemental Indenture, dated as of April 20,
1999, between the Operating Partnership, as Issuer, and The First
National Bank of Chicago, as Trustee, supplementing the Senior Indenture,
dated as of October 24, 1997, between the Operating Partnership, as
Obligor, and The First National Bank of Chicago, as Trustee, and relating
to the $250,000,000 principal amount of 7.75% Senior Notes, due 2009 of
the Operating Partnership.
27 Financial Data Schedule (EDGAR VERSION ONLY)
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/ JOSEPH P. DENNY May 11, 1999
- ------------------------------ --------------------------------
Joseph P. Denny Date
President
/s/ GEORGE J. ALBURGER, JR. May 11, 1999
- ------------------------------ --------------------------------
George J. Alburger, Jr. Date
Chief Financial Officer
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: LIBERTY PROPERTY TRUST, GENERAL PARTNER
/s/ JOSEPH P. DENNY May 11, 1999
- ------------------------------ --------------------------------
Joseph P. Denny Date
President
/s/ GEORGE J. ALBURGER, JR. May 11, 1999
- ------------------------------ --------------------------------
George J. Alburger, Jr. Date
Chief Financial Officer
-25-
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------
4 Third Supplemental Indenture, dated as of April 20,
1999 between the Operating Partnership, as Issuer, and
The First National Bank of Chicago, as Trustee,
supplementing the Senior Indenture, dated as of
October 24, 1997, between the Operating Partnership,
as Obligor, and The First National Bank of Chicago, as
Trustee, and relating to the $250,000,000 principal
amount of 7.75% Senior Notes, due 2009 of the
Operating Partnership.
27 Financial Data Schedule (EDGAR VERSION ONLY)
-26-