SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED September 30, 2001
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COMMISSION FILE NO. 000-22741
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CARRAMERICA REALTY, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 52-1976308
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1850 K Street, N.W., Washington, D.C. 20006
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(Address or principal executive office) (Zip code)
Registrant's telephone number, including area code (202) 729-1000
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N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Number of Partnership Units outstanding of each of the registrant's
classes of Partnership Units as of September 30, 2001:
(# of shares) 14,362,972
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Indicate by check mark whether the registrant (1) has 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 such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
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Index
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Page
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Part I: Financial Information
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Item 1. Financial Statements
Consolidated balance sheets of CarrAmerica Realty, L.P. and subsidiary
as of September 30, 2001 (unaudited) and December 31, 2000................ 4
Consolidated statements of operations of CarrAmerica Realty, L.P. and
subsidiary for the three months and nine months ended September 30, 2001
and 2000 (unaudited)..................................................... 5 to 6
Consolidated statements of cash flows of CarrAmerica Realty, L.P. and
subsidiary for the nine months ended September 30, 2001 and 2000 (unaudited).. 7
Notes to consolidated financial statements (unaudited)...................... 8 to 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................... 11 to 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................. 16
Part II: Other Information
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Item 6. Exhibits and Reports on Form 8-K............................................ 17
2
Part I
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Item 1. Financial Information
---------------------
The information furnished in the accompanying consolidated balance sheets,
consolidated statements of operations and consolidated statements of cash flows
of CarrAmerica Realty, L.P. and subsidiary reflect all adjustments which are, in
our opinion, necessary for a fair presentation of the aforementioned financial
statements for the interim periods.
These financial statements should be read in conjunction with the notes to such
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations in our December 31, 2000 Annual Report on
Form 10-K. The results of operations for the nine months ended September 30,
2001 are not necessarily indicative of the operating results to be expected for
the full year.
3
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Balance Sheets
As of September 30, 2001 and December 31, 2000
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September 30, December 31,
(In thousands) 2001 2000
-------------- ------------
(unaudited)
Assets
Rental property:
Land $ 113,573 $ 103,294
Buildings 532,017 505,043
Tenant improvements 61,961 56,089
Furniture, fixtures, and equipment 563 909
----------- -----------
708,114 665,335
Less - accumulated depreciation (85,173) (66,100)
----------- -----------
Total rental property 622,941 599,235
Land held for development 6,286 6,706
Cash and cash equivalents 3,132 5,819
Restricted deposits 1,822 24,332
Accounts and notes receivable, net 9,752 13,795
Investments in unconsolidated entities 47,515 89,616
Accrued straight-line rents 11,905 10,810
Tenant leasing costs, net 11,867 12,578
Deferred financing costs, net 182 231
Prepaid expenses and other assets, net 1,515 1,424
----------- -----------
$ 716,917 $ 764,546
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Mortgages and notes payable $ 137,321 $ 169,616
Accounts payable and accrued expenses 11,939 15,768
Due to affiliates 57,426 73,495
Rent received in advance and security deposits 4,507 4,610
----------- -----------
Total liabilities 211,193 263,489
Partners' capital:
General partner 5,158 5,089
Limited partners 500,566 495,968
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Total partners' capital 505,724 501,057
Commitments and contingencies
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$ 716,917 $ 764,546
=========== ===========
See accompanying notes to consolidated financial statements.
4
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended September 30, 2001 and 2000
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(Unaudited and in thousands) 2001 2000
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Operating revenues:
Rental revenues:
Minimum base rent $ 21,577 24,612
Recoveries from tenants 3,151 4,133
Other tenant charges 827 838
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Total rental revenues 25,555 29,583
Cost reimbursements 195 1,202
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Total operating revenues 25,750 30,785
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Operating expenses:
Property expenses:
Operating expenses 5,871 7,565
Real estate taxes 1,708 2,003
Interest expense 4,333 8,156
General and administrative 1,699 1,403
Depreciation and amortization 7,946 7,866
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Total operating expenses 21,557 26,993
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Operating income 4,193 3,792
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Other income:
Interest income 332 310
Equity in earnings of unconsolidated entities 363 379
Gain on sale of assets and other provisions, net 67 11,352
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Total other income 762 12,041
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Net income $ 4,955 $ 15,833
========= ==========
Net income attributable to general partner $ 50 $ 159
========= ==========
Net income attributable to limited partners $ 4,905 $ 15,674
========= ==========
See accompanying notes to consolidated financial statements.
5
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Operations
For the Nine Months Ended September 30, 2001 and 2000
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(Unaudited and in thousands) 2001 2000
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Operating revenues:
Rental revenues:
Minimum base rent $ 65,491 $ 80,113
Recoveries from tenants 9,208 13,651
Other tenant charges 2,304 3,393
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Total rental revenues 77,003 97,157
Cost reimbursements 676 3,168
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Total operating revenues 77,679 100,325
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Operating expenses:
Property expenses:
Operating expenses 18,803 22,755
Real estate taxes 5,296 8,785
Interest expense 15,289 21,173
General and administrative 6,154 3,780
Depreciation and amortization 22,606 25,473
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Total operating expenses 68,148 81,966
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Operating income 9,531 18,359
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Other (loss) income:
Interest income 1,359 1,182
Equity in earnings of unconsolidated entities 3,400 298
(Loss) gain on sale of assets and other provisions, net (7,435) 12,329
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Total other (loss) income (2,676) 13,809
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Net income $ 6,855 $ 32,168
========= =========
Net income attributable to general partner $ 69 $ 322
========= =========
Net income attributable to limited partners $ 6,786 $ 31,846
========= =========
See accompanying notes to consolidated financial statements.
6
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2001 and 2000
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(Unaudited and in thousands) 2001 2000
----------- -----------
Net income $ 6,855 $ 32,168
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 22,606 25,473
Loss (gain) on sale of assets and other provisions, net 7,435 (12,329)
Equity in earnings of unconsolidated entities (3,400) (298)
Other (67) 340
Changes in assets and liabilities:
Decrease in accounts and notes receivable 1,752 5,777
(Increase) decrease in accrued straight-line rents (1,095) 1,085
Additions to tenant leasing costs (1,486) (2,853)
Increase in prepaid expenses and other assets (207) (712)
(Decrease) increase in accounts payable, accrued expenses and due to affiliates (17,796) 24,426
Decrease in rent received in advance and security deposits (51) (2,210)
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Total adjustments 7,691 38,699
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Net cash provided by operating activities 14,546 70,867
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Cash flows from investing activities:
Acquisitions and additions to rental property (63,896) (14,830)
Additions to land held for development (472) (3,146)
Additions to construction in progress - (27,422)
Distributions from unconsolidated entities 50,709 -
Investments in unconsolidated entities (5,224) (4,546)
Decrease (increase) in restricted deposits 22,510 (1,615)
Proceeds from sales of properties 13,203 124,565
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Net cash provided by investing activities 16,830 73,006
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Cash flows from financing activities:
Partner distributions (2,032) (1,806)
Repayments on notes and mortgages payable (32,031) (146,457)
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Net cash used by financing activities (34,063) (148,263)
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Decrease in cash and cash equivalents (2,687) (4,390)
Cash and cash equivalents, beginning of the period 5,819 8,309
---------- ----------
Cash and cash equivalents, end of the period $ 3,132 $ 3,919
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest of $594 and
$1,646 for the nine months ended September 30, 2001 and 2000, respectively. $ 16,117 $ 19,853
========== ==========
See accompanying notes to consolidated financial statements.
7
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
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(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
We are a Delaware limited partnership formed in March 1996 for the
purpose of owning, acquiring, developing and operating office
buildings across the United States. At September 30, 2001, we owned
53 operating properties with no properties under development. We
consider our principal markets to be Austin, Chicago, Dallas, Denver,
Orange County/Los Angeles, San Francisco Bay Area, Salt Lake City, San
Diego and Seattle.
Our general partner is CarrAmerica Realty GP Holdings, Inc. (the
"General Partner"), a wholly-owned subsidiary of CarrAmerica Realty
Corporation ("CarrAmerica"), a self-administered and self-managed real
estate investment trust. The General Partner owned a 1% interest in
us at September 30, 2001. Our limited partners are CarrAmerica Realty
LP Holdings, Inc., a wholly-owned subsidiary of CarrAmerica, which
owned an approximate 90% interest in us at September 30, 2001 and
various other individuals and entities, which collectively owned an
approximate 9% interest in us at September 30, 2001.
(b) Basis of Presentation
Our accounts and those of our wholly-owned subsidiary are consolidated
in the accompanying financial statements. We use the equity method of
accounting for our investments in and our share of earnings and losses
of unconsolidated entities. These entities are not majority owned or
controlled by us.
Management has made estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses in the financial
statements, and the disclosure of contingent assets and liabilities.
Estimates are required in order for us to prepare our financial
statements in conformity with accounting principles generally accepted
in the United States of America. Significant estimates are required
in a number of areas, including the evaluation of impairment of long-
lived assets, determination of useful lives of assets subject to
depreciation or amortization and evaluation of the collectibility of
accounts and notes receivable. Actual results could differ from these
estimates.
(c) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. We adopted this statement as
of January 1, 2001 and the adoption had no effect on our financial
statements. We had no derivative instruments as of September 30,
2001.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No.
141 requires that the purchase method of accounting be used for all
business combinations initiated after June 2001. SFAS No. 142 changes
the accounting for goodwill and intangible assets with indefinite
useful lives from an amortization approach to an impairment-only
approach. We believe that the adoption of SFAS No. 142 in 2002 will
not have a material effect on our financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and APB Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently
8
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
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Occurring Events and Transactions." The Statement does not change the
fundamental provisions of SFAS No. 121; however, it resolves various
implementation issues of SFAS No. 121 and establishes a single
accounting model for long-lived assets to be disposed of by sale. It
retains the requirement of Opinion No. 30 to report separately
discontinued operations, but extends that reporting to a component of
an entity that either has been disposed of (by sale, abandonment, or
in distribution to owners) or is classified as held for sale. We
believe that adoption of this statement in 2002 will not have a
material effect on our financial statements.
(d) Interim Financial Statements
The financial statements reflect all adjustments, which are, in our
opinion, necessary to reflect a fair presentation of results for the
interim periods, and all adjustments are of a normal, recurring
nature.
(e) Reclassifications
Certain reclassifications of prior period amounts have been made to
conform to the current period's presentation.
(2) Mortgages and Notes Payable
Our mortgages, note payable, and credit facility are summarized as follows
(in thousands):
September 30, December 31,
2001 2000
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Fixed rate mortgages $ 109,662 $ 141,062
Unsecured credit facility -- 500
Fixed rate note payable to affiliate 27,659 28,054
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$ 137,321 $ 169,616
============= ============
Fixed rate mortgages are collateralized by certain rental properties and
generally require monthly principal and/or interest payments. The
mortgages mature at various dates to May 2017. Our fixed rate debt bore an
effective weighted average interest rate of 7.8% at September 30, 2001.
The weighted average term of this debt is 6.0 years.
On June 28, 2001, CarrAmerica closed on a new three-year $500 million
unsecured credit facility with J.P. Morgan Chase, as agent for a group of
banks. We are a guarantor of borrowings under this facility. CarrAmerica
can extend the life of the facility for one year at its option. This
replaces the previous $450 million credit facility, under which we were a
co-borrower, which would have matured in August 2001. The interest rate of
the unsecured credit facility is 70 basis points over 30-day LIBOR.
We have a $30.0 million borrowing agreement with CarrAmerica. The related
note bears interest at 8.5% and requires monthly principal and interest
payments of $242,000. The note matures on May 31, 2011. The note is
secured by certain office properties and other assets. The outstanding
balance of the note payable to CarrAmerica was $27.7 million at September
30, 2001 and $28.1 million at December 31, 2000.
9
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
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Debt maturities at September 30, 2001 were as follows:
(In thousands)
2001 $ 8,595
2002 10,098
2003 20,532
2004 15,576
2005 11,177
2006 and thereafter 71,343
----------
$ 137,321
==========
(3) (Loss) Gain on Sale of Assets and Other Provisions, Net
We dispose of assets that are inconsistent with our long-term strategic or
return objectives or where market conditions for sale are favorable.
During the three months ended September 30, 2001, we did not dispose of any
operating properties. During the three months ended September 30, 2000, we
did not dispose of any operating properties, exclusive of the properties
contributed to Carr Office Park, L.L.C.
On August 17, 2000, we and CarrAmerica closed on a joint venture with New
York State Teachers' Retirement System ("NYSTRS"). At closing, we and some
affiliates contributed properties to the joint venture, Carr Office Park,
L.L.C., and NYSTRS contributed cash. We received approximately $107.0
million in cash, including payment on an intercompany obligation, and a
21.2% interest in the joint venture in exchange for the properties
contributed and recognized a net gain on the partial sale of $11.1 million.
During the nine months ended September 30, 2001 we disposed of one
operating property in connection with the sale of a group of properties by
CarrAmerica. There was a net gain on this transaction; however, we
incurred a loss of $6.6 million on our property. We also recognized an
impairment loss of $0.9 million on a parcel of land held for development.
During the nine months ended September 30, 2000, we disposed of 2 operating
properties, exclusive of the properties contributed to Carr Office Park,
L.L.C. We recognized a net gain of $0.2 million.
(4) Supplemental Cash Flow Information
In April 2001, CarrAmerica exercised an option under a loan agreement to
acquire two office buildings and related land located in the San Francisco
Bay area. CarrAmerica then transferred the buildings and land to us in
exchange for approximately $51 million.
10
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The discussion that follows is based primarily on our consolidated
financial statements as of September 30, 2001 and December 31, 2000, and for the
three months and nine months ended September 30, 2001 and 2000. It should be
read along with the accompanying consolidated financial statements and related
notes. The ability to compare one period to another may be significantly
affected by acquisitions completed, development properties placed in service and
dispositions made during the above mentioned periods.
RESULTS OF OPERATIONS
Operating results are summarized as follows:
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For the three Variance For the nine Variance
months ended --------- months ended --------
September 30, 2001 vs. September 30, 2001 vs.
-------------- -------------
2001 2000 2000 2001 2000 2000
---- ---- ---- ---- ---- ----
(in millions)
Operating revenues $ 25.8 $ 30.8 $ (5.0) $ 77.7 $ 100.3 $ (22.6)
Property operating
expenses 7.6 9.6 (2.0) 24.1 31.5 (7.4)
General and
administrative 1.7 1.4 0.3 6.2 3.8 2.4
Depreciation and
amortization 7.9 7.9 - 22.6 25.5 (2.9)
Interest expense 4.3 8.2 (3.9) 15.3 21.2 (5.9)
Other (loss)
income, net 0.8 12.0 (11.2) (2.7) 13.8 (16.5)
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For the three months ended September 30, 2001, operating revenues decreased
$5.0 million (16.2%) as compared to 2000. For the nine months ended September
30, 2001, operating revenues decreased $22.6 million (22.5%) as compared to
2000. These decreases resulted principally from properties contributed to Carr
Office Park, L.L.C. in August 2000. The decreases in revenues were partially
offset by the acquisition of 2 properties in April of 2001. Same store rental
revenues decreased 4.4% ($1.0 million) for the three months ended September 30,
2001 as compared to 2000. This decrease was primarily the result of vacancies
in the California markets. Same store rental revenues were 0.8% ($0.5 million)
lower for the first nine months of 2001 as compared to 2000 for the same reason.
For the three months ended September 30, 2001, property operating expenses
decreased $2.0 million (20.8%) as compared to 2000. For the first nine months
of 2001, property operating expenses decreased $7.4 million (23.5%) as compared
to the same period in 2000. In both instances, this was due to the dispositions
of interests in properties, including the properties contributed to Carr Office
Park, L.L.C. Same store operating expenses for 2001 compared to 2000 increased
$0.5 million (7.0%) and $1.4 million (6.9%), respectively, for the three and
nine month periods.
General and administrative expenses increased $0.3 million (21.4%) during
the third quarter of 2001 as compared to the third quarter of 2000. For the
nine months ended September 30, 2001, general and administrative expenses
increased $2.4 million (63.2%) as compared to 2000. The increases in 2001
resulted primarily from costs associated with CarrAmerica's internal process
improvement efforts and other initiatives.
As compared to 2000, depreciation and amortization expense was flat for the
three months and decreased $2.9 million (11.4%) for the nine months ended
September 30, 2001, respectively. The year-to-date decrease is due primarily to
dispositions of interests in properties, including the properties contributed to
Carr Office Park, L.L.C., partially offset by the acquisition of 2 properties in
April, 2001.
Interest expense decreased $3.9 million (47.6%) for the three months ended
September 30, 2001 as compared to 2000. For the nine months ended September 30,
2001, interest expense decreased $5.9 million (27.8%) as compared to 2000.
These decreases are principally the result of lower levels of debt in 2001. As
of September 30, 2001 fixed rate debt totaled $137.3 million as compared to
$178.9 million at September 30, 2000.
11
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Other income decreased $11.2 million in the third quarter of 2001 as
compared to 2000. This decrease is due almost entirely to the gain recognized
in 2000 on the Carr Office Park, L.L.C. transaction.
For the first nine months of 2001 as compared to 2000, other income decreased
$16.5 million. This decrease is due to a $6.6 million loss on the disposal of
one operating property during the first quarter of 2001. We also recognized an
impairment loss of $0.9 million on a parcel of land held for development during
the same period. For the first nine months of 2000, we recognized a gain of
$1.0 million on the disposal of two properties and $11.1 million on the
contribution of properties to Carr Office Park, L.L.C. Increased equity in
earnings from unconsolidated entities (primarily Carr Office Park, L.L.C) of
$3.1 million partially offset the decrease in other income in 2001.
As a result of the deteriorating economic climate, the real estate markets
have materially softened over the first three quarters of 2001. Demand for
office space has declined significantly and vacancy rates have increased in each
of our core markets. As a result, occupancy in our portfolio of operating
properties decreased to 92.3% at September 30, 2001, as compared to 96.9% at
June 30, 2001.
We expect vacancy rates to continue to increase in most of our markets
through the balance of the year due to expected weak demand. We do not expect
the softened market conditions to have a material adverse affect on our
operating results for the remainder of 2001. We expect that real estate markets
will remain soft throughout 2002.
Consolidated Cash Flows
Consolidated cash flow information is summarized as follows:
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For the nine months ended Variance
--------
September 30, 2001 vs.
-------------------------
(in millions) 2001 2000 2000
---- ---- ----
Cash provided by operating activities $ 14.5 $ 70.9 $ (56.4)
Cash provided by investing activities 16.8 73.0 (56.2)
Cash used by financing activities (34.1) (148.3) 114.2
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Operations generated net cash of $14.5 million in 2001 compared to $70.9
million in 2000. The changes in cash flow from operating activities were
primarily the result of factors discussed above in the analysis of operating
results and the payment of accounts payable to affiliates with the monies
received as a distribution from Carr Office Park, L.L.C. in 2001. The level of
net cash provided by operating activities is also affected by the timing of
receipt of revenues and payment of expenses.
Our investing activities provided net cash of $16.8 million in 2001
compared to $73.0 million in 2000. Cash received in 2000 for properties
contributed to Carr Office Park, L.L.C. ($107.0 million) was the primary cause
of net cash from investing activities to decrease in 2001 as compared to 2000.
The acquisition of 2 operating properties ($51.2 million) in 2001 also
contributed to the decrease in cash from investing activities compared to 2000.
Partially offsetting the decreases on net cash by investing in 2001 was no
development activity ($27.4 million), a receipt of a distribution from Carr
Office Park, L.L.C. ($47.2 million), and a release of restricted deposits ($22.5
million).
Financing activities used net cash of $34.1 million in 2001 and $148.3
million 2000. During the third quarter 2001, we paid $16.9 million on a
mortgage, which had matured. In 2000, we paid down our portion of the unsecured
credit facility ($140.3 million).
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, our total indebtedness, comprised entirely of fixed
rate debt, was $137.3 million. This debt has an effective weighted average
interest rate of 7.8% and an average term to maturity
12
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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of 6.0 years. On June 28, 2001, CarrAmerica closed on a new three year $500
million unsecured credit facility with J.P. Morgan Chase, as agent for a group
of banks. We are a guarantor of borrowings under this facility. CarrAmerica can
extend the life of the facility one year at its option. This facility replaces
the previous $450 million credit facility, under which we were a co-borrower,
which would have matured in August 2001. The interest rate of the unsecured
credit facility is 70 basis points over 30-day LIBOR. CarrAmerica had $384.1
million available for draw at September 30, 2001.
We will require capital to invest in our existing portfolio of operating
assets for major capital projects. These capital projects can be such things as
large-scale renovations, routine capital expenditures, deferred maintenance on
properties we have recently acquired and tenant related matters, including
tenant improvements, allowances and leasing commissions. Our capital
requirements for tenant related capital expenditures are dependent upon a number
of factors. These factors include square feet of expiring leases, tenant
retention ratios and whether the expiring leases are in central business
district properties or suburban properties. During the remainder of 2001, we
have 106,303 square feet of leases expiring, representing 2.3% of total leased
space.
In general, we also require capital for development projects currently
underway and planned for in the future. As of September 30, 2001, we did not
have any wholly owned development properties under construction. We did have
minority interests in three development projects totaling 0.3 million square
feet of office space under construction. These projects are expected to cost
$39.6 million, of which our total investment is expected to be approximately
$11.7 million. Through September 30, 2001, approximately $24.4 million, or
61.7%, of the total project costs had been expended. We have financed our
investment in projects under construction at September 30, 2001, primarily from
the proceeds of asset dispositions. As a result of the refinancing of
CarrAmerica's line of credit, we are no longer a co-borrower under that
facility, and therefore cannot utilize that facility going forward to satisfy
our funding obligations. Instead, we intend to rely on contributions from
CarrAmerica, either in the form of equity or debt, to satisfy these obligations.
We expect that fundings from CarrAmerica and project-specific financing of
selected assets will provide additional funds required to complete current
development commitments and to finance the costs of additional projects.
We intend to use cash flow from operations and the proceeds from the
disposition of assets to meet our working capital needs. We anticipate that
adequate cash should be available to fund our operating and administrative
expenses, continue to service debt obligations and pay our quarterly
distributions. We believe that we will have access to the capital resources
necessary to expand and develop our business. However, our ability to access
additional capital necessary to support our activities is dependent upon
CarrAmerica's ability to access capital and willingness to provide us with the
funds necessary to satisfy our needs. Prior to the second quarter of 1998,
CarrAmerica primarily met its capital requirements by accessing the public debt
and equity markets. As a general matter, conditions in the public equity
markets for most REITs have not been favorable since that time. As a result,
CarrAmerica has curtailed its acquisition program and satisfied its and our
capital requirements through the disposition of selected assets, the refinancing
of selected assets, prudent use of joint ventures to reduce its investment
requirements and use of its credit facility. If CarrAmerica determines that it
is in its best interest to fund its and our current development projects, it may
have to access either the public equity or debt markets at a time when those
markets may not be the best source of capital for it.
Our distributions are paid quarterly. We primarily invest amounts
accumulated for distribution in short-term investments that are collateralized
by securities of the United States Government or certain of its agencies.
13
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Building and Lease Information
The following table sets forth certain information about each wholly-owned
operating property as of September 30, 2001:
Net
Rentable
Area Percent Number
Consolidated Properties (square feet)(1) Leased(2) of Buildings
- ---------------------------------------------- ------------------- --------------- ----------------
Southern California, Orange County/Los Angeles
South Coast Executive Center 161,692 65.7% 2
2600 W. Olive 144,831 100.0% 1
Bay Technology Center 107,481 100.0% 2
Southern California, San Diego
Jaycor 105,358 100.0% 1
Northern California, San Francisco Bay Area
San Mateo I 70,000 0.0% 1
San Mateo II and III 141,404 62.3% 2
Ellis @ Middlefield 236,400 100.0% 2
Seattle:
Canyon Park Commons 95,290 100.0% 1
Austin, Texas:
City View Centre 136,183 24.0% 3
Tower of the Hills 166,149 98.5% 2
City View Center 128,716 100.0% 1
Chicago:
Bannockburn I & II 209,540 90.1% 2
Bannockburn IV 105,756 95.9% 1
Dallas, Texas:
Quorum North 116,178 95.0% 1
Quorum Place 178,296 90.9% 1
Cedar Maple Plaza 113,343 87.9% 3
Commons @ Las Colinas 1, 2, 3 604,234 100.0% 3
Two Mission Park 77,832 100.0% 1
5000 Quorum 162,165 94.2% 1
Denver:
Harlequin Plaza 329,273 98.2% 2
Quebec Court I & II 287,294 100.0% 2
Quebec Centre 106,865 93.5% 3
Phoenix, Arizona:
Qwest Communications 532,506 100.0% 4
Salt Lake City, Utah:
Sorenson Research Park 282,944 96.7% 5
Wasatch Corporate Center 299,885 98.5% 5
Sorensen X 41,288 100.0% 1
TOTAL CONSOLIDATED PROPERTIES: 4,940,903 53
WEIGHTED AVERAGE 92.3%
(1) Includes office and retail space but excludes storage space.
(2) Includes space for leases that have been executed and have commenced as
of September 30, 2001.
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Management's Discussion and Analysis
- --------------------------------------------------------------------------------
The following table is a schedule of our lease expirations for leases in place
as of September 30, 2001:
Rentable Area Subject Square Footage
to Expiring Lease Represented by
Year of Lease Expiration (square feet) (1) Expiring Leases
------------------------ --------------------- ---------------
2001 106,303 2.3%
2002 419,460 9.2%
2003 580,158 12.7%
2004 854,359 18.7%
2005 399,804 8.8%
2006 217,404 4.8%
2007 633,392 13.9%
2008 219,645 4.8%
2009 476,054 10.4%
2010 223,470 4.9%
2011 and thereafter 429,060 9.5%
(1) Excludes 381,794 square feet of vacant space.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our, and our affiliates, or the
industry's actual results, performance, achievements or transactions to be
materially different from any future results, performance, achievements or
transactions expressed or implied by such forward-looking statements. Such
factors include, among others, the following:
. National and local economic, business and real estate conditions that will,
among other things, affect:
. Demand for office properties
. The ability of the general economy to recover timely from the current
economic downturn
. Availability and creditworthiness of tenants
. Level of lease rents
. Availability of financing for both tenants and us;
. Adverse changes in the real estate markets, including, among other things:
. Competition with other companies
. Risks of real estate acquisition and development
. Failure of pending acquisitions to close and pending developments to be
completed on time and within budget
. Actions, strategies and performance of affiliates that we may not control or
companies in which we have made investments;
. Governmental actions and initiatives; and
. Environmental/safety requirements.
For a further discussion of these and other factors that could impact our
future results, performance, achievements or transactions, see the documents we
file from time to time with the Securities and Exchange Commission, and in
particular the section titled "The Company - Risk Factors" in our Annual Report
on Form 10-K.
15
Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Any significant changes in our market risk that have occurred since the
filing of our Annual Report on Form 10-K for the year ended December 31, 2000
are summarized in the Liquidity and Capital Resources section of the
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
16
Part II
OTHER INFORMATION
- -----------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARRAMERICA REALTY, L.P.
a Delaware Limited Partnership
By: CarrAmerica Realty GP Holdings, Inc.,
its general partner
/s/ Thomas A. Carr
- -------------------------
Thomas A. Carr, President
/s/ Richard F. Katchuk
- -------------------------------------------
Richard F. Katchuk, Chief Financial Officer
Date: November 13, 2001
18