SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 1998
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
------------------------------------
(Exact names of registrants as specified in their governing respective
documents)
MARYLAND 1-13130 23-7768996
PENNSYLVANIA 1-13132 23-2766549
- --------------------------- ------------- -------------------
State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
65 VALLEY STREAM PARKWAY, SUITE 100
MALVERN, PENNSYLVANIA 19355
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (610) 648-1700
ITEM 5: OTHER EVENTS
- ---------------------
Liberty Property Limited Partnership is a Pennsylvania limited partnership
(the "Operating Partnership"). Liberty Property Trust, a Maryland real estate
investment trust (the "Trust"), owns an approximate 91.86% interest in the
Operating Partnership (as of December 31, 1997) (the Trust and the Operating
Partnership are collectively referred to as the "Company").
On April 16, 1998, the Company acquired title to 17 industrial properties,
comprising 1,560,910 leaseable square feet, located in Bridgeport, New Jersey,
(the "Pureland Properties"). The Company's Total Investment (as defined below)
in these properties is anticipated to be approximately $81.7 million. The
"Total Investment" for a property is defined as the property's purchase price
plus closing costs and management's estimate, as determined at the time of
acquisition, of the cost of necessary building improvements in the case of
acquisitions, or land costs and land and building improvement costs in the
case of development projects, and where appropriate, other development costs
and carrying costs required to reach rent commencement.
Pursuant to Rule 3-14 of Regulation S-X, audited historical financial
information concerning the Pureland Properties is provided in Item 7 of this
Current Report on Form 8-K. Additionally, certain pro forma information is
provided in Item 7.
Factors considered by the Company in determining the price to be paid for the
Pureland Properties, included the historical and expected cash flow, the
nature of tenants and terms of leases in place, occupancy rates, opportunities
for alternative and new tenancies, current operating costs and real estate
taxes on the properties and anticipated changes therein under Company
ownership, physical condition and locations of the properties, the anticipated
effect to the Company's financial results (particularly funds from
operations), the ability to sustain and potentially increase its distributions
to Company shareholders, and other factors. The Company took into
consideration the capitalization rates at which it believed other comparable
buildings were recently sold, but determined the price it was willing to pay
primarily on factors discussed above relating to the properties themselves and
their fit into the Company's operations. The Company, after investigation of
the properties, is not aware of any material fact, other than those enumerated
above, that would cause the financial information reported not to be
necessarily indicative of future operating results.
- -------------------------------
Statements contained in this report contain forward-looking statements with
respect to estimates of Total Investment, pro forma financial information and
their underlying assumptions. As such, these statements involve risks and
uncertainties that could affect future results, and accordingly, such results
may differ from those expressed herein. These risks and uncertainties include,
but are not limited to, uncertainties affecting real estate businesses
generally, risks relating to acquisition activities and risks relating to
leasing and releasing activities and rates.
2
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
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PAGE
----
(a) Financial Statements of Real Estate Operations
Acquired
Statement of Operating Revenues and Certain
Operating Expenses for the Pureland Properties
Report of Independent Auditors........................ 4
Statement of Operating Revenues and Certain
Operating Expenses for the Pureland Properties
for the year ended December 31, 1997................. 5
Notes to the Statement of Operating Revenues and
Certain Operating Expenses for the Pureland
Properties for the year ended December 31, 1997...... 6
(b) Pro Forma Financial Information (unaudited)
Liberty Property Trust...................................... 8
Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1997.................................... 9
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1997..................... 10
Notes to Pro Forma Consolidated Financial Statements
as of and for the year ended December 31, 1997....... 11
Liberty Property Limited Partnership......................... 12
Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1997.................................... 13
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1997..................... 14
Notes to Pro Forma Consolidated Financial Statements
as of and for the year ended December 31, 1997....... 15
Signatures......................................................... 16
(c) Exhibits
23 Consent of Fegley & Associates...................... 17
3
REPORT OF INDEPENDENT AUDITORS
To The Board of Trustees and Shareholders
Liberty Property Trust
We have audited the accompanying Statement of Operating Revenues and Certain
Operating Expenses of the Pureland Properties, as defined in Note 1, for the
year ended December 31, 1997. This financial statement is the responsibility
of the management of the Pureland Properties. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall presentation of
the financial statement. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Statement of Operating Revenues and Certain Operating
Expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in the
Current Report on Form 8-K of Liberty Property Trust and Liberty Property
Limited Partnership) and, as described in Note 1, is not intended to be a
complete presentation of the Pureland Properties' revenues and expenses.
In our opinion, the Statement of Operating Revenues and Certain Operating
Expenses referred to above presents fairly, in all material respects, the
Operating Revenues and Certain Operating Expenses described in Note 1 for the
year ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ FEGLEY & ASSOCIATES
Plymouth Meeting, Pennsylvania FEGLEY & ASSOCIATES
April 16, 1998
4
STATEMENT OF OPERATING REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE PURELAND PROPERTIES FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1997
------------
Operating revenues:
Rental $ 6,203
Operating expense reimbursement 960
--------
Total operating revenues 7,163
--------
Certain operating expenses:
Rental property expenses 235
Real estate taxes 760
--------
Total certain operating expenses 995
--------
Operating revenues in excess of certain
operating expenses $ 6,168
========
The accompanying notes are an integral part of this statement.
5
NOTES TO THE STATEMENT OF OPERATING REVENUES AND
CERTAIN OPERATING EXPENSES FOR THE PURELAND PROPERTIES
FOR THE YEAR ENDED DECEMBER 31, 1997
1. Summary of Significant Accounting Policies
- ----------------------------------------------
The Statement of Operating Revenues and Certain Operating Expenses (see "Basis
of Presentation" below) includes the operations of the Pureland Properties.
Liberty Property Trust (the "Company") owns an approximate 91.86% partners'
interest in the Operating Partnership (as of December 31, 1997) (the Trust and
the Operating Partnership are collectively referred to as the "Company").
PROPERTY NAME LOCATION DESCRIPTION
- -------------------------- -------------------- --------------------
510 Heron Drive Bridgeport, NJ Flex building
125,284 square feet
602 Heron Drive Bridgeport, NJ Flex building
26,450 square feet
405 Heron Drive Bridgeport, NJ Industrial building
254,250 square feet
250 High Hill Road Bridgeport, NJ Industrial building
55,040 square feet
508 Center Square Road Bridgeport, NJ Industrial building
80,300 square feet
100 Eagle Court Bridgeport, NJ Industrial building
38,400 square feet
3 Mallard Court Bridgeport, NJ Industrial building
61,700 square feet
515 Heron Drive Bridgeport, NJ Industrial building
61,500 square feet
605 Heron Drive Bridgeport, NJ Industrial building
25,106 square feet
625 Heron Drive Bridgeport, NJ Industrial building
15,935 square feet
522 Pedericktown Road Bridgeport, NJ Industrial building
32,000 square feet
530 Pedericktown Road Bridgeport, NJ Industrial building
48,000 square feet
540 Pedericktown Road Bridgeport, NJ Industrial building
108,000 square feet
230 High Hill Road Bridgeport, NJ Industrial building
230,672 square feet
500 Center Square Road Bridgeport, NJ Industrial building
246,091 square feet
6
PROPERTY NAME LOCATION DESCRIPTION
- -------------------------- -------------------- --------------------
300 Eagle Court Bridgeport, NJ Industrial building
100,932 square feet
730 Cardinal Drive Bridgeport, NJ Industrial building
51,250 square feet
USE OF ESTIMATES
- ----------------
Generally accepted accounting principles required management to make estimates
and assumptions in preparing financial statements. Those estimates and
assumptions affect the reported revenues and expenses.
BASIS OF PRESENTATION
- ---------------------
The Statement of Operating Revenues and Certain Operating Expenses is
presented in conformity with Rule 3-14 of the Securities and Exchange
Commission. Accordingly, depreciation, interest and income taxes are not
presented. The Company is not aware of any factors relating to the Pureland
Properties that would cause the reported financial information not to be
indicative of future operating results. General company overhead has not been
allocated to the Pureland Properties.
The Pureland Properties consists of commercial industrial and flex space
leased to tenants under leases with varying terms. Tenant renewal options are
available.
REVENUE RECOGNITION
- -------------------
Base rental income attributable to leases is recorded on a straight-line basis
over the applicable lease term. The leases also typically provide for tenant
reimbursement of common area maintenance and other operating expenses which
are included in the accompanying Statement of Operating Revenue and Certain
Operating Expenses as operating expense reimbursements.
2. MINIMUM FUTURE RENTALS
- ---------------------------
Future minimum rental payments due from tenants of the Pureland Properties
under non-cancellable operating leases as of December 31, 1997 are as follows
(in thousands):
1998 $ 7,626
1999 6,694
2000 6,013
2001 3,938
2002 1,781
Thereafter 2,650
--------
Total $28,702
========
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LIBERTY PROPERTY TRUST
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of December
31, 1997 reflects the incremental effect of the Pureland Properties described
in Item 5 as if the acquisition had occurred on December 31, 1997. The
accompanying unaudited, pro forma consolidated statement of operations for the
year ended December 31, 1997 reflects the incremental effect of the Pureland
Properties, as if such acquisition had occurred on January 1, 1997. These
statements should be read in conjunction with respective consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997. In the opinion of
management, the unaudited, pro forma consolidated financial information
provides for all adjustments necessary to reflect the effects of the Pureland
Properties.
These pro forma statements may not necessarily be indicative of the results
that would have actually occurred if the acquisition of the Pureland
Properties had been in effect on the dates indicated, nor does it purport to
represent the financial position, results of operations or cash flows for
future periods.
8
LIBERTY PROPERTY TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(UNAUDITED, IN THOUSANDS)
LIBERTY
PROPERTY
HISTORICAL THE PURELAND TRUST
(F1) PROPERTIES CONSOLIDATED
---------- ------------ ------------
ASSETS:
Investment in real estate, net $1,947,026 $ 81,693 (F2) $2,028,719
Cash and cash equivalents 55,079 - 55,079
Deferred financing and
leasing costs, net 32,536 - 32,536
Other assets 59,696 - 59,696
---------- ----------- -----------
Total assets $2,094,337 $ 81,693 $2,176,030
========== =========== ===========
LIABILITIES:
Mortgage loans $ 363,591 $ - $ 363,591
Unsecured notes 350,000 - 350,000
Credit facility 135,000 81,693 (F3) 216,693
Convertible debentures 111,543 - 111,543
Other liabilities 93,930 - 93,930
---------- ----------- -----------
Total liabilities 1,054,064 81,693 1,135,757
---------- ----------- -----------
MINORITY INTEREST 84,678 - 84,678
SHAREHOLDERS' EQUITY:
Series A preferred shares 120,814 - 120,814
Common shares 53 - 53
Additional paid-in capital 846,949 - 846,949
Unearned compensation (985) - (985)
Dividends in excess of net income (11,236) - (11,236)
---------- ----------- -----------
Total shareholders' equity 955,595 - 955,595
---------- ----------- -----------
Total liabilities and
shareholders' equity $2,094,337 $ 81,693 $2,176,030
========== =========== ===========
The accompanying notes are an integral part of this unaudited, pro forma
condensed consolidated financial statement.
9
LIBERTY PROPERTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
LIBERTY
THE PURELAND PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
(F1) (F4) ADJUSTMENTS CONSOLIDATED
---------- ------------- ------------ ------------
REVENUE
Rental $ 169,859 $ 6,203 $176,062
Operating expense reim-
bursement 55,502 960 56,462
Management fees 673 - 673
Interest and other 6,483 - 6,483
---------- --------- -----------
Total revenue 232,517 7,163 239,680
---------- --------- -----------
OPERATING EXPENSES
Rental property expenses 43,118 235 43,353
Real estate taxes 17,961 760 18,721
General and administrative 10,650 - 10,650
Depreciation and amorti-
zation 40,752 - $ 2,042 (F5) 42,794
---------- --------- --------- -----------
Total operating expenses 112,481 995 2,042 115,518
---------- --------- --------- -----------
Operating income 120,036 6,168 (2,042) 124,162
Premium on debenture
conversion 98 - - 98
Interest expense 53,888 - 5,792 (F6) 59,680
---------- --------- --------- -----------
Income (loss) before
minority interest 66,050 6,168 (7,834) 64,384
Minority interest 5,606 559 (711) (F7) 5,454
---------- --------- --------- -----------
Net income (loss) 60,444 5,609 (7,123) 58,930 (F8)
Preferred dividend 4,247 - - 4,247
---------- --------- --------- -----------
Income available to
common shareholders $ 56,197 $ 5,609 $ (7,123) $ 54,683
========== ========= ========== ===========
Income per common
share - basic $ 1.39 $ 1.35
========== ===========
Income per common
share - diluted $ 1.38 $ 1.34
========== ==========
Weighted average number
of common shares out-
standing - basic 40,493 40,493
========== ===========
Weighted average number
of common shares out-
standing - diluted 40,806 40,806
========== ===========
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
10
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
(F1) Reflects historical financial information of the Company as of December
31, 1997 and for the year ended December 31, 1997.
(F2) Reflects the Total Investment in the Pureland Properties.
(F3) Reflects the use of $81,693 from the credit facility to finance the Total
Investment in the Pureland Properties.
(F4) Reflects incremental addition of revenues and certain expenses of
the Pureland Properties in order to reflect a full year of operations for the
acquisition.
(F5) Reflects incremental depreciation of the Pureland Properties based on asset
lives of 40 years.
(F6) Reflects an incremental increase in interest expense from the assumed
borrowings of $81,693 on the credit facility to fund the purchase of Pureland
Park.
(F7) Reflects the allocation of the pro forma adjustment to minority interest
based upon pro forma minority interest in the Operating Partnership of
approximately 9.07%.
(F8) The Company's pro forma taxable income for the year ended December 31,
1997 is approximately $45,563 which has been calculated as pro forma income
from operations of approximately $58,930 plus GAAP depreciation and
amortization of $42,794 less tax basis depreciation and amortization and other
tax differences of approximately $56,161.
11
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of December
31, 1997 reflects the incremental effect of the Pureland Properties described
in Item 5 as if the acquisition had occurred on December 31, 1997. The
accompanying unaudited, pro forma consolidated statement of operations for the
year ended December 31, 1997 reflects the incremental effect of the Pureland
Properties, as if such acquisition had occurred on January 1, 1997. These
statements should be read in conjunction with respective consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997. In the opinion of
management, the unaudited, pro forma consolidated financial information
provides for all adjustments necessary to reflect the effects of the Pureland
Properties.
These pro forma statements may not necessarily be indicative of the results
that would have actually occurred if the acquisition of the Pureland
Properties had been in effect on the dates indicated, nor does it purport to
represent the financial position, results of operations or cash flows for
future periods.
12
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(UNAUDITED, IN THOUSANDS)
LIBERTY
PROPERTY
LIMITED
HISTORICAL THE PURELAND PARTNERSHIP
(F1) PROPERTIES CONSOLIDATED
---------- ------------- ------------
ASSETS:
Investment in real estate, net $1,947,026 $ 81,693 (F2) $2,028,719
Cash and cash equivalents 55,079 - 55,079
Deferred financing and
leasing costs, net 32,536 - 32,536
Other assets 59,696 - 59,696
---------- ----------- -----------
Total assets $2,094,337 $ 81,693 $2,176,030
========== =========== ===========
LIABILITIES:
Mortgage loans $ 363,591 $ - $ 363,591
Unsecured notes 350,000 - 350,000
Credit facility 135,000 81,693 (F3) 216,693
Convertible debentures 111,543 - 111,543
Other liabilities 93,930 - 93,930
---------- ----------- -----------
Total liabilities 1,054,064 81,693 1,135,757
---------- ----------- -----------
OWNERS' EQUITY:
General partner's equity 955,595 - 955,595
Limited partners' equity 84,678 - 84,678
---------- ----------- -----------
Total owners' equity 1,040,273 - 1,040,273
---------- ----------- -----------
Total liabilities and
owners' equity $2,094,337 $ 81,693 $2,176,030
========== =========== ===========
13
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED AND IN THOUSANDS)
LIBERTY
PROPERTY
THE PURELAND PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
(F1) (F4) ADJUSTMENTS CONSOLIDATED
---------- ------------- ------------ ------------
REVENUE
Rental $ 169,859 $ 6,203 $ 176,062
Operating expense reim-
bursement 55,502 960 56,462
Management fees 673 - 673
Interest and other 6,483 - 6,483
---------- --------- ------------
Total revenue 232,517 7,163 239,680
---------- --------- ------------
OPERATING EXPENSES
Rental property expenses 43,118 235 43,353
Real estate taxes 17,961 760 18,721
General and administrative 10,650 - 10,650
Depreciation and amorti-
zation 40,752 - $ 2,042 (F5) 42,794
---------- --------- ---------- ------------
Total operating expenses 112,481 995 2,042 115,518
---------- --------- ---------- ------------
Operating income 120,036 6,168 (2,042) 124,162
Premium on debenture
conversion 98 - - 98
Interest expense 53,888 - 5,792 (F6) 59,680
---------- --------- ---------- ------------
Net income (loss) $ 66,050 $ 6,168 $ (7,834) $ 64,384
========== ========= ========== ============
Net income (loss)
allocated to general
partner $ 60,444 $ 5,609 $ (7,123) $ 58,930
Net income (loss)
allocated to limited
partners 5,606 559 (711) (F7) 5,454
========== ========= ========== ============
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
14
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
(F1) Reflects historical financial information of the Company as of December
31, 1997 and for the year ended December 31, 1997.
(F2) Reflects the Total Investment in the Pureland Properties.
(F3) Reflects the use of $81,693 from the credit facility to finance the Total
Investment in the Pureland Properties.
(F4) Reflects the incremental addition of revenues and certain expenses of
the Pureland Properties in order to reflect a full year of operations for the
acquisition.
(F5) Reflects incremental depreciation of the Pureland Properties based on
asset lives of 40 years.
(F6) Reflects an incremental increase in interest expense from the assumed
borrowings of $81,693 on the credit facility to fund the purchase of the
Pureland Properties.
(F7) Reflects the allocation of the pro forma adjustment to the net income
allocated to the limited partners based upon pro forma ownership in the
Operating Partnership of approximately 9.07%.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
LIBERTY PROPERTY TRUST
Dated: April 16, 1998 BY: /s/ WILLARD G. ROUSE III
----------------------------------------
NAME: Willard G. Rouse III
TITLE: Chief Executive Officer
LIBERTY PROPERTY LIMITED PARTNERSHIP
BY: LIBERTY PROPERTY TRUST,
SOLE GENERAL PARTNER
Dated: April 16, 1998 BY: /s/ WILLARD G. ROUSE III
----------------------------------------
NAME: Willard G. Rouse III
TITLE: Chief Executive Officer
16