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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number 000-21731
HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
North Carolina 56-1869557
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Smoketree Court, Suite 600
Raleigh, N.C. 27604
(Address of principal executive offices) (Zip Code)
919-872-4924
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- --------------------------------------------- -------------------------
6 3/4% Notes due December 1, 2003 New York Stock Exchange
7% Notes due December 1, 2006 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of
this Form 10-K. [check mark]
The aggregate value of the Common Units held by nonaffiliates of the
registrant (based on the closing price on the New York Stock Exchange of a
share of Common Stock of Highwoods Properties, Inc., the general partner of the
registrant) on February 23, 2001 was $175,051,317.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Highwoods Properties, Inc. in
connection with its Annual Meeting of Shareholders to be held May 15, 2001 are
incorporated by reference in Part III Items 10, 11 and 13.
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HIGHWOODS REALTY LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item No. Page No.
- ---------- ---------
PART I
1. Business .................................................................. 3
2. Properties ................................................................ 10
3. Legal Proceedings ......................................................... 15
4. Submission of Matters to a Vote of Security Holders ....................... 15
X. Executive Officers of the Registrant ...................................... 16
PART II
5. Market for Registrant's Equity and Related Security Holder Matters ........ 17
6. Selected Financial Data ................................................... 18
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations ............................................................. 19
7A. Quantitative and Qualitative Disclosures About Market Risk ................ 27
8. Financial Statements and Supplementary Data ............................... 28
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ...................................................... 28
PART III
10. Directors and Executive Officers of the Registrant ........................ 29
11. Executive Compensation .................................................... 29
12. Security Ownership of Certain Beneficial Owners and Management ............ 29
13. Certain Relationships and Related Transactions ............................ 29
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........... 30
2
PART I
We refer to (1) Highwoods Properties, Inc. as the "Company," (2) Highwoods
Realty Limited Partnership as the "Operating Partnership," (3) the Company's
common stock as "Common Stock" and (4) the Operating Partnership's common
partnership interests as "Common Units."
ITEM 1. BUSINESS
General
The Operating Partnership is managed by its general partner, the Company,
a self-administered and self-managed equity REIT that began operations through
a predecessor in 1978. Since our formation in 1994, we have evolved into one of
the largest owners and operators of surburban office, industrial and retail
properties in the southeastern and midwestern United States. At December 31,
2000, we:
o owned 493 in-service office, industrial and retail properties,
encompassing approximately 36.2 million rentable square feet and 1,885
apartment units;
o owned an interest (50% or less) in 65 in-service office and industrial
properties, encompassing approximately 6.2 million rentable square feet
and 418 apartment units;
o owned 1,317 acres (and have agreed to purchase an additional 97 acres
over the next two years) of undeveloped land suitable for future
development; and
o were developing an additional 33 properties, which will encompass
approximately 3.9 million rentable square feet (including seven properties
encompassing 1.1 million rentable square feet that we are developing with
our joint venture partners).
The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At December 31, 2000, the Company owned
88.0% of the Common Units in the Operating Partnership. Limited partners
(including certain officers and directors of the Company) own the remaining
Common Units. Holders of Common Units may redeem them for the cash value of one
share of the Company's Common Stock or, at the Company's option, one share
(subject to certain adjustments) of Common Stock.
The Company was incorporated in Maryland in 1994. The Operating
Partnership was formed in North Carolina in 1994. Our executive offices are
located at 3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604, and
our telephone number is (919) 872-4924. We maintain offices in each of our
primary markets.
Operating Strategy
Diversification. Since our formation in 1994, we have significantly
reduced our dependence on any particular market, property type or tenant. We
initially owned only a limited number of office properties in North Carolina,
most of which were in the Research Triangle. Today, with our various joint
venture partners, our portfolio includes office, industrial, retail and
multi-family properties, development projects and development land throughout
the Southeast and Midwest.
Development and Acquisition Opportunities. We generally seek to engage in
the development of office and industrial projects in our existing geographic
markets, primarily in suburban business parks. We intend to focus our
development efforts on build-to-suit projects and projects where we have
identified sufficient demand. In build-to-suit development, the building is
significantly pre-leased to one or more tenants prior to construction.
Build-to-suit projects often foster strong long-term relationships with
tenants, creating future development opportunities as the facility needs of
tenants increase. We believe our commercially zoned and unencumbered
development land in existing business parks is an advantage we have over many
of our competitors in pursuing development opportunities.
3
We also seek to acquire selective suburban office and industrial
properties in our existing geographic markets at prices below replacement cost
that offer attractive returns. These would include acquisitions of
underperforming, high quality properties in our existing markets that offer us
opportunities to improve such properties' operating performance.
Managed Growth Strategy. Our strategy has been to focus our real estate
activities in markets where we believe our extensive local knowledge gives us a
competitive advantage over other real estate developers and operators. As we
expanded into new markets, we have continued to maintain this localized
approach by combining with local real estate operators with many years of
development and management experience in their respective markets. Our
development and acquisition activities also benefit from our local market
presence and knowledge. Our property-level officers have significant real
estate experience in their respective markets. Because of this experience, we
are in a better position to evaluate acquisition and development opportunities.
In addition, our relationships with our tenants and those tenants at properties
for which we conduct third-party, fee-based services may lead to development
projects when these tenants seek new space.
Efficient, Customer Service-Oriented Organization. We provide a complete
line of real estate services to our tenants and third parties. We believe that
our in-house development, acquisition, construction management, leasing and
management services allow us to respond to the many demands of our existing and
potential tenant base. We provide our tenants cost-effective services, such as
build-to-suit construction and space modification, including tenant
improvements and expansions. In addition, the breadth of our capabilities and
resources provides us with market information not generally available. We
believe that the operating efficiencies achieved through our fully integrated
organization also provide a competitive advantage in setting our lease rates
and pricing other services.
Flexible and Conservative Capital Structure. We are committed to
maintaining a flexible and conservative capital structure that: (1) allows
growth through development and acquisition opportunities; (2) promotes future
earnings growth; and (3) provides access to the private and public equity and
debt markets on favorable terms. Accordingly, we expect to meet our long-term
liquidity requirements, including funding our existing and future development
activity, through a combination of:
o borrowings under our unsecured revolving credit facility;
o the issuance of unsecured debt securities;
o borrowings of secured debt;
o the issuance of equity securities by both the Company and the Operating
Partnership;
o the selective disposition of non-core assets; and
o the sale or contribution of certain of our wholly owned properties,
development projects and development land to strategic joint ventures
formed with selected partners.
4
Recent Developments
The following table summarizes our acquisition, disposition and joint
venture activity during 2000 ($ in thousands):
Acquisition Activity
Acquisition
Building Closing Rentable Initial
Property Market Type (1) Date Square Feet Cost
- -------- ------ ---------- ------------ ------------- ----------
One Harbour Place Tampa O 08/01/00 208,000 $27,200
Virginia Mutual Richmond O 08/25/00 58,000 7,050
1700 Century Circle Atlanta O 11/17/00 27,000 2,450
6060 Poplar Memphis O 12/21/00 110,000 10,312
Ramparts Nashville O 12/21/00 134,000 14,777
6000 Poplar Memphis O 12/29/00 132,000 13,418
------- -------
Total 669,000 $75,207
======= =======
Disposition Activity
Building Date Rentable Sales
Property Market Type (1) Sold Square Feet Price
- -------- ------ -------- ---------- ------------- -----------
Hampton 5-9 Piedmont Triad I 01/31/00 315,000 $ 5,400
2616 Phoenix Drive Piedmont Triad I 02/01/00 32,000 800
Holly Building Research Triangle O 02/11/00 20,000 2,500
Bannister Business Center Kansas City I 03/01/00 32,000 1,900
Red Bridge Professional Building Kansas City O 03/08/00 47,000 2,800
Crestwood Shops Kansas City R 03/21/00 23,000 1,900
Kenilworth Shops Kansas City R 03/31/00 11,000 1,100
Fulton Corporate Center Atlanta I 04/01/00 101,000 2,300
Oak Park Building Kansas City O 05/01/00 32,000 2,700
Pomona/Dundas/Spring Garden Piedmont Triad I 05/04/00 290,000 13,900
Colony Corporate Centre Research Triangle O 06/15/00 52,000 5,300
Battlefield Business Center II Hampton Roads I 06/22/00 98,000 5,900
Highwoods Centre Hampton Roads O 06/22/00 100,000 8,800
Birchwood Research Triangle O 06/27/00 13,000 2,000
Quivira Business Park Kansas City I 06/29/00 299,000 11,100
5301 Departure Drive Research Triangle I 06/30/00 85,000 6,100
Jacksonville Portfolio 1 Jacksonville O 06/30/00 924,000 68,600
1077 Fred Drive Atlanta I 07/07/00 106,000 1,600
Grassmere Nashville I 07/07/00 336,000 23,500
Jacksonville Portfolio 2 Jacksonville/Tallahassee O 07/12/00 1,074,000 100,300
Hartford Office Building Kansas City O 07/14/00 49,000 3,200
Westwood Shops Kansas City R 07/19/00 5,000 800
Trailwoods & 96th Nall Kansas City R 07/21/00 72,000 6,000
Romanelli Kansas City R 08/10/00 25,000 1,900
Ridgefield I Asheville I 08/28/00 61,000 5,300
Triangle Business Center Research Triangle O/I 09/29/00 394,000 27,700
A4 Health Systems Research Triangle O 10/25/00 55,000 6,400
Ridgefield II Asheville O 12/29/00 64,000 6,000
Ridgefield III Asheville O 12/29/00 56,000 6,000
Expressway Warehouse Research Triangle I 12/29/00 60,000 2,265
--------- --------
Total 4,831,000 $334,065
========= ========
- ----------
(1) O = Office
I = Industrial
R = Retail
5
Joint Venture Activity
Square
Building Date Rentable Sales
Name Market Type (1) Contributed Feet Price
- ---- ------ ---------- ------------- ------------ -----------
Highwoods DLF 97/26
DLF 99/32 Various O 05/09/00 816,000 $117,000
MG-HIW, LLC Various O 12/19/00 2,581,000 350,000
--------- --------
Total 3,397,000 $467,000
========= ========
Development Activity
The following wholly owned development projects were placed in service
during 2000 ($ in thousands):
Placed In Service
Month
Building Placed Number of Rentable Cost
Name Market Type (1) in Service Properties Square Feet to Date
- ---- ------ ---------- ------------ ------------ ------------- -----------
Southwind Office Center D Memphis O 01/00 1 64,000 $7,018
Airpark South Warehouse IV Piedmont Triad I 01/00 1 86,000 2,952
Highwoods Preserve I Tampa O 01/00 1 208,000 28,923
Parkway Plaza 11 Charlotte O 01/00 1 32,000 2,766
Parkway Plaza 12 Charlotte O 01/00 1 22,000 1,929
Westwood South Nashville O 02/00 1 127,000 14,131
Eastshore III Richmond O 02/00 1 80,000 8,519
Lakefront Plaza One Hampton Roads O 03/00 1 76,000 8,297
Caterpillar Financial Nashville O 03/00 1 312,000 52,110
Air Park South Warehouse III Piedmont Triad I 03/00 1 120,000 3,139
Highwoods Preserve II Tampa O 03/00 1 34,000 1,738
Highwoods Preserve III Tampa O 03/00 1 178,000 25,104
Eastshore I Richmond O 03/00 1 69,000 7,693
Lakeview Ridge III Nashville O 04/00 1 134,000 13,230
HIW Distribution Center Richmond I 04/00 1 166,000 6,835
Highwoods Center II
@ Tradeport Atlanta O 06/00 1 54,000 5,147
Seville Square Kansas City R 06/00 1 99,000 21,379
Stony Point II Richmond O 06/00 1 141,000 14,490
ALO Piedmont Triad I 06/00 1 27,000 1,171
Bluegrass Valley I Atlanta I 06/00 1 136,000 5,307
Parkway Plaza 14 Charlotte O 07/00 1 90,000 7,614
Newpoint II Atlanta I 07/00 1 131,000 6,262
Incharge Institute Orlando O 08/00 1 32,000 3,522
Lakepoint II Tampa O 08/00 1 225,000 31,092
3737 Glenwood Ave. Research Triangle O 08/00 1 108,000 19,024
Highwoods Preserve IV Tampa O 09/00 1 211,000 30,968
Highwoods VIII Richmond O 09/00 1 60,000 7,201
Jones Apparel Expansion Piedmont Triad I 10/00 1 209,000 5,614
ECPI Piedmont Triad O 11/00 1 31,000 3,204
Mallard Creek V Charlotte O 11/00 1 119,000 12,203
Valencia Place Retail Kansas City R 11/00 1 72,000 14,328
-- ------- ------
Total 31 3,453,000 $372,910
== ========= ========
- ----------
(1) O = Office
I = Industrial
R = Retail
6
As of December 31, 2000, we were developing 23 suburban office properties
and three industrial properties totaling 2.9 million rentable square feet of
office and industrial space. The following table summarizes these development
projects. In addition to the properties described in this table, we are
developing with our joint venture partners seven additional properties totaling
1.1 million rentable square feet. At December 31, 2000, these seven development
projects had an aggregate budgeted cost of $140.1 million and were 61.0%
pre-leased.
In-Process
Rentable Estimated Cost at Pre-Leasing Estimated Estimated
Name Market Square Feet Cost 12/31/00 Percentage (1) Completion Stabilization (2)
- ------------------------ ------------------- ------------- ---------- ---------- ---------------- ------------ ------------------
($ in thousands)
Office:
Highwoods Preserve V Tampa 185,000 $ 27,633 $12,817 100% 3Q01 3Q01
Met Life Building
at Brookfield Greenville 118,000 13,220 1,704 67 3Q01 4Q01
380 Park Place Tampa 82,000 9,675 4,961 64 1Q01 4Q01
Romac Tampa 128,000 18,582 2,375 100 4Q01 4Q01
Maplewood Research Triangle 36,000 3,901 2,308 100 1Q01 1Q02
ParkWest One Research Triangle 46,000 4,364 574 26 1Q01 1Q02
ParkWest Two Research Triangle 48,000 4,544 583 100 1Q01 1Q02
Situs III Research Triangle 39,000 4,543 1,804 94 1Q01 1Q02
International Place 3 Memphis 214,000 34,272 3,037 100 2Q02 2Q02
Cool Springs II Nashville 205,000 22,718 13,661 19 2Q01 2Q02
Highwoods Tower II Research Triangle 167,000 25,134 15,415 74 1Q01 2Q02
CentreGreen Two Research Triangle 97,000 11,596 4,025 58 2Q01 2Q02
Hickory Trace Nashville 52,000 5,933 1,164 -- 3Q01 3Q02
CentreGreen Four Research Triangle 100,000 11,764 1,800 -- 3Q01 3Q02
North Shore Commons Richmond 116,000 13,084 6,063 58 2Q01 3Q02
Stony Point III Richmond 106,000 11,425 2,572 45 2Q01 3Q02
Highwoods Park
at Jefferson Village Piedmont Triad 101,000 9,839 1,917 -- 4Q01 4Q02
GlenLake I Research Triangle 158,000 19,089 1,435 -- 4Q01 4Q02
------- -------- ------- ---
In-Process
Office Total
or Weighted
Average 1,998,000 $251,316 $78,215 56%
========= ======== ======= ===
Industrial:
Holden Road Piedmont Triad 64,000 $ 2,014 $ 1,134 40% 1Q01 3Q01
Tradeport Place IV Atlanta 122,000 4,447 1,612 -- 3Q01 3Q02
--------- -------- ------- ---
In-Process Industrial
Total or Weighted
Average 186,000 $ 6,461 $ 2,746 14%
========= ======== ======= ===
Total or Weighted
Average of all
In-Process
Development
Projects 2,184,000 $257,777 $80,961 53%
========= ======== ======= ===
- ----------
(1) Includes the effect of letters of intent.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95% occupied or one
year from the date of completion.
7
Completed-Not Stabilized
Percent
Rentable Estimated Cost at leased/ Estimated Estimated
Name Market Square Feet Cost 12/31/00 Pre-leased (1) Completion Stabilization (2)
------- ------------- ------------- ---------- ---------- ---------------- ------------ ------------------
($ in thousands)
Office:
Valencia Place Kansas City 250,000 $ 40,586 $ 40,022 91% 1Q00 1Q01
Deerfield III Atlanta 54,000 5,276 3,494 100 4Q00 3Q01
CentreGreen One Research Triangle 97,000 11,246 10,362 97 3Q00 3Q01
Shadow Creek Memphis 80,000 8,989 6,720 82 4Q00 4Q01
Highwoods Plaza Tampa 66,000 7,505 6,011 29 4Q00 4Q01
------- -------- -------- ---
Completed-Not
Stabilized Office
Total or Weighted
Average 547,000 $ 73,602 $ 66,609 84%
======= ======== ======== ===
Industrial:
Tradeport Place III Atlanta 122,000 $ 4,780 $ 4,633 90% 4Q00 4Q01
------- -------- -------- ---
Completed-Not
Stabilized
Industrial Total or
Weighted Average 122,000 $ 4,780 $ 4,633 90%
======= ======== ======== ===
Total or Weighted
Average of all
Completed-Not
Stabilized
Development
Projects 669,000 $ 78,382 $ 71,242 85%
======= ======== ======== ===
Total or Weighted
Average of all
Development
Projects 2,853,000 $336,159 $152,203 60%
========= ======== ======== ===
- ----------
(1) Includes the effect of letters of intent.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95% occupied or one
year from the date of completion.
8
Development Analysis
Rentable Estimated Pre-Leasing
Square Feet Cost Percentage (1)
------------- ----------------- ---------------
($ in thousands)
Summary By Estimated Stabilization Date
First Quarter 2001 250,000 $ 40,586 91%
Second Quarter 2001 -- -- --
Third Quarter 2001 400,000 46,169 90
Fourth Quarter 2001 596,000 62,751 76
First Quarter 2002 169,000 17,352 78
Second Quarter 2002 683,000 93,720 63
Third Quarter 2002 496,000 46,653 23
Fourth Quarter 2002 259,000 28,928 --
------- -------- --
Total or Weighted Average 2,853,000 $336,159 60%
========= ======== ==
Summary by Market:
Atlanta 298,000 $ 14,503 55%
Greenville 118,000 13,220 67
Kansas City 250,000 40,586 91
Memphis 294,000 43,261 95
Nashville 257,000 28,651 15
Piedmont Triad 165,000 11,853 16
Research Triangle 788,000 96,181 52
Richmond 222,000 24,509 52
Tampa 461,000 63,395 83
--------- -------- --
Total or Weighted Average 2,853,000 $336,159 60%
========= ======== ==
Build-to-Suit 527,000 $ 80,487 100%
Multi-tenant 2,326,000 255,672 51
--------- -------- ---
Total or Weighted Average 2,853,000 $336,159 60%
========= ======== ===
Average
Rentable Average
Square Estimated Average
Feet Cost Pre-Leasing (1)
--------- ----------------- ----------------
($ in thousands)
Average Per Property Type:
Office 110,652 $14,127 62%
Industrial 102,667 3,747 44
------- ------- --
Weighted Average 109,731 $12,929 60%
======= ======= ==
- ----------
(1) Includes the effect of letters of intent.
Competition
Our properties compete for tenants with similar properties located in our
markets primarily on the basis of location, rent charged, services provided and
the design and condition of the facilities. We also compete with other REITs,
financial institutions, pension funds, partnerships, individual investors and
others when attempting to acquire and develop properties.
Employees
As of December 31, 2000, the Operating Partnership employed 535 persons,
as compared to 529 at December 31, 1999.
9
ITEM 2. PROPERTIES
General
As of December 31, 2000, we owned 493 in-service office, industrial and
retail properties, encompassing approximately 36.2 million rentable square
feet, and 1,885 apartment units. The following table sets forth information
about our wholly owned in-service properties at December 31, 2000:
Percentage of December 2000 Rental Revenue
Rentable --------------------------------------------------------
Square Feet (1) Occupancy (2) Office Industrial Retail Multi-Family Total
----------------- --------------- -------- ------------ -------- -------------- ----------
Piedmont Triad ............ 8,334,000 96% 6.6% 4.7% -- -- 11.3%
Atlanta ................... 6,143,000 94 10.1 3.4 -- -- 13.5
Tampa ..................... 4,053,000 95 13.4 0.3 -- -- 13.7
Research Triangle ......... 3,741,000 94 12.7 0.1 -- -- 12.8
Nashville ................. 2,789,000 94 10.0 -- -- -- 10.0
Richmond .................. 2,698,000 96 7.5 0.4 -- -- 7.9
Kansas City ............... 2,617,000 93 4.3 -- 6.8% 4.0% 15.1
Charlotte ................. 2,157,000 92 4.8 0.6 -- -- 5.4
Greenville ................ 1,220,000 93 3.2 0.2 -- -- 3.4
Memphis ................... 1,086,000 93 3.4 -- -- -- 3.4
Orlando ................... 662,000 95 1.4 -- -- -- 1.4
Columbia .................. 426,000 77 1.2 -- -- -- 1.2
Other ..................... 257,000 99 0.9 -- -- -- 0.9
--------- -- ---- --- --- --- -----
Total ..................... 36,183,000 94% 79.5% 9.7% 6.8% 4.0% 100.0%
========== == ==== === === === =====
- ----------
(1) Excludes Kansas City's basement space and apartment units.
(2) Excludes Kansas City's apartment occupancy percentage of 95%.
10
The following table sets forth certain information about our wholly owned
in-service and development properties as of December 31, 2000 and 1999:
December 31, 2000 December 31, 1999
---------------------------- ---------------------------
Percent Percent
Rentable Leased/ Rentable Leased/
Square Feet Pre-Leased Square Feet Pre-Leased
------------- ------------ ------------- ------------
In-Service
Office ............................. 24,177,000 94% 26,072,000 94%
Industrial ......................... 10,357,000 95 11,325,000 94
Retail ............................. 1,649,000 94 1,579,000 94
---------- -- ---------- --
Total or Weighted Average ......... 36,183,000 94% 38,976,000 94%
========== == ========== ==
Development
Completed -- Not Stabilized
Office ............................. 547,000 84% 1,826,000 72%
Industrial ......................... 122,000 90 503,000 77
Retail ............................. -- -- 99,000 97
---------- -- ---------- --
Total or Weighted Average ......... 669,000 85% 2,428,000 74%
========== == ========== ==
In Process
Office ............................. 1,998,000 56% 2,089,000 87%
Industrial ......................... 186,000 14 162,000 100
Retail ............................. -- -- 81,000 83
---------- -- ---------- ---
Total or Weighted Average ......... 2,184,000 53% 2,332,000 88%
========== == ========== ===
Total
Office ............................. 26,722,000 29,987,000
Industrial ......................... 10,665,000 11,990,000
Retail ............................. 1,649,000 1,759,000
---------- ----------
Total ............................. 39,036,000 43,736,000
========== ==========
Tenants
The following table sets forth information concerning the 20 largest
tenants of our wholly owned in-service properties as of December 31, 2000:
Percent of Total
Number Annualized Annualized
Tenant of Leases Rental Revenue (1) Rental Revenue
- ------- ----------- -------------------- -----------------
($ in thousands)
Intermedia Communications .............. 12 $ 12,979 2.9%
Federal Government ..................... 55 11,448 2.6
Capital One Services, Inc. ............. 8 10,664 2.4
Bell South ............................. 51 10,010 2.2
AT&T ................................... 8 9,084 2.0
Caterpillar Financial Services ......... 3 8,055 1.8
IBM .................................... 9 7,978 1.8
Price Waterhouse Coopers ............... 7 6,522 1.5
US Air ................................. 7 5,778 1.3
Northern Networks Corporation .......... 3 5,211 1.2
Sara Lee ............................... 9 4,807 1.1
Sprint ................................. 11 4,386 1.0
Lockton Companies, Inc. ................ 1 2,927 0.7
International Paper .................... 9 2,753 0.6
Barclays American Mortgage ............. 2 2,736 0.6
Bank of America ........................ 18 2,575 0.6
Carlton, Fields, Ward Et al ............ 2 2,454 0.5
General Electric ....................... 13 2,440 0.5
Voicestream Wireless ................... 3 2,390 0.5
BTI .................................... 4 2,335 0.5
-- -------- ----
Total .............................. 235 $117,532 26.3%
=== ======== ====
- ----------
(1) Annualized Rental Revenue is December 2000 rental revenue (base rent plus
operating expense pass-throughs) multiplied by 12.
11
The following tables set forth certain information about leasing
activities at our wholly owned in-service properties (excluding apartment
units) for the years ended December 31, 2000, 1999 and 1998.
2000
--------------------------------------------
Office Industrial Retail
-------------- -------------- --------------
Net Effective Rents Related to
Re-Leased Space:
Number of lease transactions
(signed leases) ........................ 801 174 71
Rentable square footage leased .......... 4,166,054 2,373,244 162,866
Average per rentable square foot
over the lease term:
Base rent .............................. $ 17.05 $ 4.64 $ 21.99
Tenant improvements .................... (1.20) (0.24) (1.41)
Leasing commissions .................... (0.50) (0.12) (0.60)
Rent concessions ....................... (0.03) (0.00) (0.00)
----------- ---------- ----------
Effective rent ......................... $ 15.32 $ 4.28 $ 19.98
Expense stop (1) ....................... (4.76) (0.23) (0.03)
----------- ---------- ----------
Equivalent effective net rent .......... $ 10.56 $ 4.05 $ 19.95
=========== ========== ==========
Average term in years ................... 5 4 7
=========== ========== ==========
Rental Rate Trends:
Average final rate with expense
pass-throughs .......................... $ 15.56 $ 4.16 $ 15.71
Average first year cash rental rate ..... $ 16.33 $ 4.46 $ 19.89
----------- ---------- ----------
Percentage increase ..................... 4.90% 7.20% 26.60%
=========== ========== ==========
Capital Expenditures Related to
Re-leased Space:
Tenant Improvements:
Total dollars committed under
signed leases ......................... $24,215,684 $2,279,129 $2,252,002
Rentable square feet ................... 4,166,054 2,373,244 162,866
----------- ---------- ----------
Per rentable square foot ............... $ 5.81 $ 0.96 $ 13.83
=========== ========== ==========
Leasing Commissions:
Total dollars committed under
signed leases ......................... $ 9,398,696 $1,203,586 $ 530,437
Rentable square feet ................... 4,166,054 2,373,244 162,866
----------- ---------- ----------
Per rentable square foot ............... $ 2.26 $ 0.51 $ 3.26
=========== ========== ==========
Total:
Total dollars committed under
signed leases ......................... $33,614,380 $3,482,715 $2,782,439
Rentable square feet ................... 4,166,054 2,373,244 162,866
----------- ---------- ----------
Per rentable square foot ............... $ 8.07 $ 1.47 $ 17.08
=========== ========== ==========
1999 1998
-------------------------------------------- -----------------------------------------
Office Industrial Retail Office Industrial Retail
-------------- -------------- -------------- -------------- -------------- -----------
Net Effective Rents Related to
Re-Leased Space:
Number of lease transactions
(signed leases) ........................ 1,051 249 101 1,042 207 26
Rentable square footage leased .......... 5,086,408 2,786,017 378,304 5,004,005 1,400,108 66,964
Average per rentable square foot
over the lease term:
Base rent .............................. $ 15.58 $ 5.35 $ 17.24 $ 16.00 $ 5.81 $ 14.81
Tenant improvements .................... (.82) (.28) (1.02) (0.81) (0.26) (0.82)
Leasing commissions .................... (.39) (.13) (.44) (0.35) (0.12) (0.58)
Rent concessions ....................... (.03) (.01) (.01) (0.03) -- (0.26)
----------- ---------- ---------- ----------- ---------- --------
Effective rent ......................... $ 14.34 $ 4.93 $ 15.77 $ 14.81 $ 5.43 $ 13.15
Expense stop (1) ....................... (4.19) (.28) (.07) (4.25) (0.37) (0.84)
----------- ---------- ---------- ----------- ---------- --------
Equivalent effective net rent .......... $ 10.15 $ 4.65 $ 15.70 $ 10.56 $ 5.06 $ 12.31
=========== ========== ========== =========== ========== ========
Average term in years ................... 5 4 6 5 3 6
=========== ========== ========== =========== ========== ========
Rental Rate Trends:
Average final rate with expense
pass-throughs .......................... $ 15.13 $ 5.05 $ 12.21 $ 14.12 $ 5.39 $ 10.35
Average first year cash rental rate ..... $ 15.68 $ 5.24 $ 16.28 $ 15.12 $ 5.58 $ 12.41
----------- ---------- ---------- ----------- ---------- --------
Percentage increase ..................... 3.64% 3.76% 33.33% 7.08% 3.53% 19.90%
=========== ========== ========== =========== ========== ========
Capital Expenditures Related to
Re-leased Space:
Tenant Improvements:
Total dollars committed under
signed leases ......................... $21,748,441 $3,621,621 $4,589,543 $19,144,349 $1,226,526 $340,620
Rentable square feet ................... 5,086,408 2,786,017 378,304 5,004,005 1,400,108 66,964
----------- ---------- ---------- ----------- ---------- --------
Per rentable square foot ............... $ 4.28 $ 1.30 $ 12.13 $ 3.83 $ 0.88 $ 5.09
=========== ========== ========== =========== ========== ========
Leasing Commissions:
Total dollars committed under
signed leases ......................... $ 8,990,333 $1,336,828 $1,069,227 $ 8,348,495 $ 558,840 $222,315
Rentable square feet ................... 5,086,408 2,786,017 378,304 5,004,005 1,400,108 66,964
----------- ---------- ---------- ----------- ---------- --------
Per rentable square foot ............... $ 1.77 $ .48 $ 2.83 $ 1.67 $ 0.40 $ 3.32
=========== ========== ========== =========== ========== ========
Total:
Total dollars committed under
signed leases ......................... $30,738,774 $4,958,449 $5,658,770 $27,492,844 $1,785,367 $562,935
Rentable square feet ................... 5,086,408 2,786,017 378,304 5,004,005 1,400,108 66,964
----------- ---------- ---------- ----------- ---------- --------
Per rentable square foot ............... $ 6.04 $ 1.78 $ 14.96 $ 5.49 $ 1.28 $ 8.41
=========== ========== ========== =========== ========== ========
- ----------
(1) "Expense stop" represents operating expenses (generally including taxes,
utilities, routine building expense and common area maintenance) for which
we will not be reimbursed by our tenants.
12
The following tables set forth scheduled lease expirations for executed
leases at our wholly owned in-service properties (excluding apartment units) as
of December 31, 2000, assuming no tenant exercises renewal options.
Office Properties:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expirations Leases
-------- -------- --------------- ----------------- ------------ ------------ -------------
(in thousands)
2001 692 2,702,635 12.2% $ 45,507 $ 16.84 12.3%
2002 530 2,771,026 12.5 44,791 16.16 12.1
2003 525 3,462,759 15.5 59,465 17.17 16.0
2004 341 2,694,725 12.1 47,035 17.45 12.7
2005 393 3,011,191 13.5 49,929 16.58 13.5
2006 88 1,881,955 8.5 31,096 16.52 8.4
2007 43 1,040,198 4.7 16,196 15.57 4.4
2008 44 1,221,905 5.5 17,609 14.41 4.7
2009 18 714,403 3.2 11,267 15.77 3.0
2010 41 1,431,499 6.4 24,234 16.93 6.5
Thereafter 66 1,307,399 5.9 23,883 18.27 6.4
----- --------- ----- -------- -------- -----
2,781 22,239,695 100.0% $371,012 $ 16.68 100.0%
===== ========== ===== ======== ======== =====
Industrial Properties:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expirations Leases
-------- -------- --------------- ----------------- ------------ ------------ -------------
(in thousands)
2001 126 1,665,614 16.7% $ 7,845 $ 4.71 17.2%
2002 107 1,695,379 17.0 7,445 4.39 16.3
2003 84 1,352,681 13.5 6,622 4.90 14.5
2004 57 2,119,192 21.2 8,765 4.14 19.2
2005 44 769,896 7.7 4,019 5.22 8.7
2006 11 356,062 3.6 2,294 6.44 5.0
2007 13 1,081,566 10.8 3,698 3.42 8.1
2008 4 196,045 2.0 1,306 6.66 2.9
2009 6 268,813 2.7 1,808 6.73 4.0
2010 4 182,746 1.8 897 4.91 2.0
Thereafter 10 295,453 3.0 968 3.28 2.1
--- --------- ----- ------- ------- -----
466 9,983,447 100.0% $45,667 $ 4.57 100.0%
=== ========= ===== ======= ======= =====
- ----------
(1) Annual Rents Under Expiring Leases are December 2000 rental revenue (base
rent plus operating expense pass-throughs) multiplied by 12.
13
Retail Properties:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expiration Leases
-------- -------- --------------- ----------------- ------------ ------------ -------------
(in thousands)
2001 60 188,894 12.1% $ 3,300 $ 17.47 10.4%
2002 34 74,376 4.8 1,406 18.90 4.4
2003 44 110,790 7.1 2,392 21.59 7.5
2004 36 213,861 13.7 2,670 12.48 8.4
2005 38 88,207 5.7 2,420 27.44 7.6
2006 24 89,285 5.7 2,098 23.50 6.6
2007 17 72,560 4.7 1,421 19.58 4.5
2008 16 108,901 7.0 3,582 32.89 11.3
2009 21 169,286 10.9 3,185 18.81 10.0
2010 15 79,314 5.1 2,367 29.84 7.5
Thereafter 22 363,723 23.2 6,878 18.91 21.8
--- ------- ----- ------- -------- -----
327 1,559,197 100.0% $31,719 $ 20.34 100.0%
=== ========= ===== ======= ======== =====
Total:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expiration Leases
-------- -------- --------------- ----------------- ------------ ------------ -------------
(in thousands)
2001 878 4,557,143 13.5% $ 56,652 $ 12.43 12.6%
2002 671 4,540,781 13.4 53,642 11.81 12.0
2003 653 4,926,230 14.6 68,479 13.90 15.3
2004 434 5,027,778 14.9 58,470 11.63 13.0
2005 475 3,869,294 11.5 56,368 14.57 12.6
2006 123 2,327,302 6.9 35,488 15.25 7.9
2007 73 2,194,324 6.5 21,315 9.71 4.8
2008 64 1,526,851 4.5 22,497 14.73 5.0
2009 45 1,152,502 3.4 16,260 14.11 3.6
2010 60 1,693,559 5.0 27,498 16.24 6.1
Thereafter 98 1,966,575 5.8 31,729 16.13 7.1
----- ---------- ----- -------- -------- -----
3,574 33,782,339 100.0% $448,398 $ 13.27 100.0%
===== ========== ===== ======== ======== =====
- ----------
(1) Annual Rents Under Expiring Leases are December 2000 rental revenue (base
rent plus operating expense pass-throughs) multiplied by 12.
14
Development Land
We estimate that we can develop approximately 13.5 million square feet of
office, industrial and retail space on our wholly owned development land. All
of this development land is zoned and available for office, industrial or
retail development, substantially all of which has utility infrastructure
already in place. We believe that our commercially zoned and unencumbered land
in existing business parks gives us an advantage in our future development
activities over other commercial real estate development companies in many of
our markets. Any future development, however, is dependent on the demand for
industrial or office space in the area, the availability of favorable financing
and other factors, and no assurance can be given that any construction will
take place on the development land. In addition, if construction is undertaken
on the development land, we will be subject to the risks associated with
construction activities, including the risk that occupancy rates and rents at a
newly completed property may not be sufficient to make the property profitable,
construction costs may exceed original estimates and construction and lease-up
may not be completed on schedule, resulting in increased debt service expense
and construction expense.
ITEM 3. LEGAL PROCEEDINGS
On October 2, 1998, John Flake, a former stockholder of J.C. Nichols
Company, filed a putative class action lawsuit on behalf of himself and the
other former stockholders of J.C. Nichols in the United States District Court
for the District of Kansas against J.C. Nichols, certain of its former officers
and directors and the Company. The complaint asserts claims against J.C.
Nichols and certain named directors and officers of J.C. Nichols for breach of
fiduciary duty to J.C. Nichols' stockholders and to members of the J.C. Nichols
Company Employee Stock Ownership Trust, as well as claims under Section 14(a)
of the Securities Exchange Act of 1934 and Sections 11 and 12(2) of the
Securities Act of 1933 variously against J.C. Nichols, the named directors and
officers of J.C. Nichols and the Company. By order dated June 18, 1999, the
court granted in part and denied in part our motion to dismiss, and the court
thereafter certified the proposed class of plaintiffs with respect to the
remaining claims. By order dated August 28, 2000, the court granted in part and
denied in part defendants' summary judgment motion. Defendants sought
reconsideration of the court's ruling with respect to certain of the securities
claims as to which the court denied their summary judgment motion, and by order
dated January 11, 2001, the court granted in part that reconsideration motion.
On the eve of the trial of this matter, the parties settled all their remaining
claims. The terms of that settlement are now being documented. We do not
believe the settlement will have a material adverse effect on our business,
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
15
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is the sole general partner of the Operating Partnership. The
following table sets forth certain information with respect to the Company's
executive officers:
Name Age Position and Background
- ----- ----- ------------------------
Ronald P. Gibson 56 Director, President and Chief Executive Officer. Mr. Gibson is one of our
founders and has served as president or managing partner of our
predecessor since its formation in 1978.
Edward J. Fritsch 42 Director, Executive Vice President, Chief Operating Officer and
Secretary. Mr. Fritsch joined us in 1982 and was a partner of our
predecessor.
John L. Turner 54 Director, Vice Chairman of the Board of Directors and Chief Investment
Officer. Mr. Turner co-founded the predecessor of Forsyth Properties in
1975.
Gene H. Anderson 55 Director and Senior Vice President. Mr. Anderson manages the operations
of our Georgia properties. Mr. Anderson was the founder and president
of Anderson Properties, Inc. prior to its merger with the Company.
Michael F. Beale 47 Senior Vice President. Mr. Beale is responsible for our operations in
Florida. Prior to joining us in 2000, Mr. Beale was vice president of Koger
Equity, Inc.
Michael E. Harris 51 Senior Vice President. Mr. Harris is responsible for our operations in
Tennessee, Missouri, Kansas and Charlotte. Mr. Harris was executive vice
president of Crocker Realty Trust prior to its merger with the Company.
Before joining Crocker Realty Trust, Mr. Harris served as senior vice
president, general counsel and chief financial officer of Towermarc
Corporation, a privately owned real estate development firm.
Marcus H. Jackson 44 Senior Vice President. Mr. Jackson is responsible for our operations in
Virginia and the Research Triangle and Piedmont Triad divisions of North
Carolina. Prior to joining us in 1998, Mr. Jackson was senior vice
president of Compass Development and Construction Services.
Carman J. Liuzzo 40 Vice President, Chief Financial Officer and Treasurer. Prior to joining us
in 1994, Mr. Liuzzo was vice president and chief accounting officer for
Boddie-Noell Enterprises, Inc. and Boddie-Noell Restaurant Properties,
Inc. Mr. Liuzzo is a certified public accountant.
Mack D. Pridgen III 51 Vice President and General Counsel. Prior to joining us in 1997,
Mr. Pridgen was a partner with Smith Helms Mulliss & Moore, L.L.P.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S EQUITY AND RELATED SECURITY HOLDER MATTERS
Market Information and Distributions
There is no established public trading market for the Common Units. The
following table sets forth the cash distributions paid per Common Unit during
each quarter. Comparable cash distributions are expected in the future. As of
February 23, 2001, there were 191 record holders of Common Units (other than
the Company).
Quarter 2000 1999
Ended: Distributions Distributions
- -------- --------------- --------------
March 31 ................................ $ .555 $ .54
June 30 ................................. .555 .54
September 30 ............................ .57 .555
December 31 ............................. .57 .555
Sales of Unregistered Securities
In connection with the acquisition of real estate, the Operating
Partnership frequently issues Common Units to sellers of real estate in
reliance on exemptions from registration under the Securities Act of 1933. In
connection with acquisitions in 2000, the Operating Partnership issued 71,013
Common Units in offerings exempt from the registration requirements of the
Securities Act. We exercised reasonable care to assure that each of the
offerees of Common Units in 2000 was an "accredited investor" under Rule 501 of
the Securities Act and that the investors were not purchasing the Common Units
with a view to their distribution. Specifically, we relied on the exemptions
provided by Section 4(2) of the Securities Act or Rule 506 under the Securities
Act.
17
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating
information for the Operating Partnership as of and for the years ended
December 31, 2000, 1999, 1998, 1997 and 1996 ($ in thousands, except per share
amounts):
---------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2000 1999 1998 1997 1996
------------- ------------- ------------- ------------- -------------
Operating Data:
Total revenue .............................. $ 561,925 $ 579,874 $ 509,762 $ 273,165 $ 132,302
Rental property
operating expenses (1) ................... 157,170 173,676 154,211 76,743 33,657
General and
administrative ........................... 23,092 22,345 20,630 10,216 5,636
Interest expense ........................... 108,795 111,385 93,959 47,394 25,230
Depreciation and amortization .............. 119,088 112,039 91,397 47,260 21,105
---------- ----------- ----------- ----------- -----------
Income before cost of unsuccessful
transactions, gain on disposition
of assets and extraordinary item ......... 153,780 160,429 149,565 91,552 46,674
Cost of unsuccessful transactions .......... -- (1,500) (146) -- --
Gain on disposition of assets .............. 4,657 7,997 1,716 -- --
---------- ----------- ----------- ----------- -----------
Income before extraordinary item ........... 158,437 166,926 151,135 91,552 46,674
Extraordinary item-loss
on early extinguishment
of debt .................................. (4,732) (7,341) (387) (6,945) (2,432)
---------- ----------- ----------- ----------- -----------
Net income ................................. $ 153,705 $ 159,585 $ 150,748 $ 84,607 $ 44,242
Dividends on preferred units ............... (32,580) (32,580) (30,092) (13,117) --
---------- ----------- ----------- ----------- -----------
Net income available for Class A
common units ............................. $ 121,125 $ 127,005 $ 120,656 $ 71,490 $ 44,242
========== =========== =========== =========== ===========
Net income per common
unit -- basic ............................ $ 1.81 $ 1.81 $ 1.86 $ 1.54 $ 1.48
========== =========== =========== =========== ===========
Net income per common
unit -- diluted .......................... $ 1.80 $ 1.81 $ 1.85 $ 1.53 $ 1.47
========== =========== =========== =========== ===========
Balance Sheet Data
(at end of period):
Net real estate assets ..................... 3,104,494 $3,649,059 $3,891,883 $2,601,211 $1,364,606
---------- ----------- ----------- ----------- -----------
Total assets ............................... 3,661,037 3,972,079 4,247,700 2,707,240 1,429,488
---------- ----------- ----------- ----------- -----------
Total mortgages and
notes payable ............................ 1,568,019 1,719,117 1,906,216 978,558 555,876
---------- ----------- ----------- ----------- -----------
Other data:
Number of in-service
properties ............................... 493 563 658 481 292
---------- ----------- ----------- ----------- -----------
Total rentable square
feet ..................................... 36,183,000 38,976,000 44,642,000 30,721,000 17,455,000
========== =========== =========== =========== ===========
- ----------
(1) Rental property operating expenses include salaries, real estate taxes,
insurance, repairs and maintenance, property management, security and
utilities.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview and Background
This Annual Report on Form 10-K contains certain forward-looking
statements with respect to our operations, industry, financial condition and
liquidity. These statements reflect our assessment of a number of risks and
uncertainties. Our actual results could differ materially from the results
anticipated in these forward-looking statements as a result of certain factors
set forth in this Annual Report. An additional statement made pursuant to the
Private Securities Litigation Reform Act of 1995 and summarizing certain of the
principal risks and uncertainties inherent in our business is included under
the caption " -- Disclosure Regarding Forward-Looking Statements." You are
encouraged to read this section carefully.
You should read the following discussion and analysis in conjunction with
the accompanying consolidated financial statements and related notes contained
elsewhere in this Annual Report on Form 10-K.
Overview
The Operating Partnership is managed by its general partner, the Company,
a self-administered and self-managed equity REIT that began operations through
a predecessor in 1978. Since our formation in 1994, we have evolved into one of
the largest owners and operators of suburban office, industrial and retail
properties in the southeastern and midwestern United States. The Company
conducts substantially all of its activities through, and substantially all of
its interests in the properties are held directly or indirectly by, the
Operating Partnership.
Results of Operations
Comparison of 2000 to 1999. Revenues from rental operations decreased
$23.4 million, or 4.1%, from $565.2 million for the year ended December 31,
1999 to $541.8 million for the year ended December 31, 2000. The decrease was
primarily a result of the disposition and contribution of 6.9 million square
feet of wholly owned office, industrial and retail properties offset in part by
the acquisition of 669,000 square feet of additional wholly owned office space
and the completion of 3.5 million square feet of wholly owned development
activity in 2000. Our in-service wholly owned portfolio decreased from 39.0
million square feet at December 31, 1999 to 36.2 million square feet at
December 31, 2000. Same property revenues, which are the revenues of the 443
in-service properties and 1,885 apartment units wholly owned on January 1,
1999, increased 2.7% for the year ended December 31, 2000, compared to the year
ended December 31, 1999.
During the year ended December 31, 2000, 1,046 leases represented 6.3
million square feet of office, industrial and retail space were executed at an
average rate per square foot which was 5.9% higher than the average rate per
square foot on the expired leases.
Interest and other income increased $3.0 million, or 21.4%, from $14.0
million in 1999 to $17.0 million in 2000. The increase was a result of an
increase in interest income related to a $30.0 million note receivable that was
recorded as a result of certain property dispositions in June 1999 and an
increase in development fee income in 2000 related to the DLF II Joint Venture.
Rental operating expenses decreased $16.5 million, or 9.5%, from $173.7
million in 1999 to $157.2 million in 2000. The decrease was primarily a result
of the disposition and contribution of 6.9 million square feet of wholly owned
office, industrial and retail properties offset in part by the acquisition of
669,000 square feet of additional wholly owned office space and the completion
of 3.5 million square feet of wholly owned development activity in 2000. Rental
operating expenses as a percentage of related revenues decreased from 30.7% for
the year ended December 31, 1999 to 29.0% for the year ended December 31, 2000.
19
Depreciation and amortization for the years ended December 31, 2000 and
1999 totaled $119.1 million and $112.0 million, respectively. The increase of
$7.1 million, or 6.3%, was due to an increase in depreciation of leasing
commissions and tenant improvements, partly offset by a decrease in
depreciation on buildings that resulted from the disposition activity during
1999 and 2000. Interest expense decreased $2.6 million, or 2.3%, from $111.4
million in 1999 to $108.8 million in 2000. The decrease was attributable to the
decrease in the outstanding debt for the entire year of 2000. Interest expense
for the years ended December 31, 2000 and 1999 included $2.5 million and $2.8
million, respectively, of amortization of deferred financing costs and the
costs related to our interest rate hedge contracts. General and administrative
expenses as a percentage of total revenues was 3.9% in 1999 and 4.1% in 2000.
Income before extraordinary item equaled $158.4 million and $166.9 million
for the years ended December 31, 2000 and 1999, respectively. The Operating
Partnership recorded $32.6 million in preferred unit distributions for each of
the years ended December 31, 2000 and 1999.
Comparison of 1999 to 1998. Revenues from rental operations increased
$66.2 million, or 13.3%, from $499.0 million for the year ended December 31,
1998 to $565.2 million for the year ended December 31, 1999. The increase was
primarily a result of our acquisition and development activity in 1998 and
1999. In total, we acquired or completed the development of 3.1 million
rentable square feet of wholly owned office, industrial and retail properties
during 1999. These additions to our portfolio were offset by the disposition of
8.8 million rentable square feet of majority-owned office, industrial and
retail properties and 418 apartment units (including the removal of certain
properties from our consolidated financial statements as a result of the
reorganization of the Des Moines partnerships). Same property revenues, which
are the revenues of the 403 in-service properties wholly owned on January 1,
1998, increased 3.0% for the year ended December 31, 1999 compared to the year
ended December 31, 1998.
During the year ended December 31, 1999, 1,401 leases representing 8.3
million square feet of office, industrial and retail space were executed at an
average rate per square foot which was 4.9% higher than the average rate per
square foot on the expired leases.
Interest and other income increased $3.0 million, or 27.2%, from $11.0
million in 1998 to $14.0 million in 1999. The increase was a result of higher
cash balances during the year ended December 31, 1999 and additional income
generated from management fees and development fees.
Rental operating expenses increased $19.5 million, or 12.6%, from $154.2
million in 1998 to $173.7 million in 1999. The increase was primarily a result
of our acquisition and development activity in 1998 and 1999. In total, we
acquired or completed the development of 3.1 million rentable square feet of
wholly owned office, industrial and retail properties during 1999. These
additions to our portfolio were offset by the disposition of 8.8 million
rentable square feet of majority-owned office, industrial and retail properties
and 418 apartment units (including the removal of certain properties from our
consolidated financial statements as a result of the reorganization of the Des
Moines partnerships). Rental operating expenses as a percentage of related
revenues remained consistent at 31.0% in 1998 and 1999.
Depreciation and amortization for the years ended December 31, 1999 and
1998 were $112.0 million and $91.4 million, respectively. The increase of $20.6
million, or 22.6%, was due to an average increase in depreciable assets and
deferred leasing costs. Interest expense increased $17.4 million, or 18.6%,
from $94.0 million in 1998 to $111.4 million in 1999. The increase was
attributable to an average increase in outstanding debt related to our
acquisition and development activities. The weighted average interest rates on
outstanding debt remained consistent in 1998 and 1999. Interest expense for the
years ended December 31, 1999 and 1998 included $2.8 million and $2.6 million,
respectively, of amortization of deferred financing costs and of the costs
related to our interest rate hedge contracts. General and administrative
expenses decreased from 4.1% of total revenue in 1998 to 3.8% in 1999.
Income before extraordinary item equaled $166.9 million and $151.1 million
for the years ended December 31, 1999 and 1998, respectively. The Operating
Partnership incurred extraordinary losses in 1999 and 1998 of $7.3 million and
$387,000, respectively, related to the early extinguishment of debt.
20
The Operating Partnership recorded $32.6 million and $30.1 million in preferred
unit distributions for the years ended December 31, 1999 and 1998, respectively.
Liquidity and Capital Resources
Statement of Cash Flows. For the year ended December 31, 2000, the
Operating Partnership generated $257.4 million in cash flows from operating
activities and $252.2 million from investing activities (primarily as a result
of the dispositions of assets, offset in part by additions to assets). These
combined cash flows of $509.6 million were used in 2000 to fund financing
activities of $441.0 million, primarily consisting of repayments of unsecured
debt, the repurchase of Common Units and the payment of distributions.
Capitalization. The Operating Partnership's total indebtedness at December
31, 2000 was $1.6 billion and was comprised of $616.7 million of secured
indebtedness with a weighted average interest rate of 7.9% and $1.0 billion of
unsecured indebtedness with a weighted average interest rate of 7.3%. Except as
stated below, all of the mortgage and notes payable outstanding at December 31,
2000 were either fixed rate obligations or variable rate obligations covered by
interest rate hedge contracts. Approximately $37.0 million of floating rate
notes were not covered by interest rate hedge contracts on December 31, 2000.
On December 14, 2000, the Operating Partnership obtained a new $300.0
million revolving loan (the "Revolving Loan") from a group of ten lender banks.
The Revolving Loan matures in December 2003 and replaces our previous $450.0
million revolving credit facility. The Revolving Loan carries an interest rate
based upon our senior unsecured credit ratings. As a result, interest would
currently accrue on borrowings under the Revolving Loan at an average rate of
LIBOR plus 85 basis points. The Revolving Loan also includes a $150.0 million
competitive bid sub-facility. At December 31, 2000, the Operating Partnership
had not borrowed any funds under the new Revolving Loan. The terms of the
Revolving Loan require the Operating Partnership to pay an annual facility fee
equal to .20% of the aggregate amount of the Revolving Loan and require
compliance with certain financial covenants. At December 31, 2000, the
Operating Partnership was in compliance with these covenants.
To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under the Revolving Loan
bear interest at variable rates. Our long-term debt, which consists of
long-term financings and the issuance of debt securities, typically bears
interest at fixed rates. In addition, we have assumed fixed rate and variable
rate debt in connection with acquiring properties. Our interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, from time to time we enter into interest rate hedge contracts
such as collars, swaps, caps and treasury lock agreements in order to mitigate
our interest rate risk with respect to various debt instruments. We do not hold
or issue these derivative contracts for trading or speculative purposes.
The following table sets forth information regarding our interest rate
hedge contracts as of December 31, 2000 ($ in thousands):
Notional Maturity Fixed Fair Market
Type of Hedge Amount Date Reference Rate Rate Value
- ---------------- ------ ------ ----------------------- ----- -----
Swap $ 19,839 6/10/02 1-Month LIBOR + 0.75% 6.95% $(125)
Collar 80,000 10/01/01 1-Month LIBOR 5.60-6.25% (2)
Cap 8,434 6/15/01 1-Month LIBOR 7.75% --
We enter into swaps, collars and caps to limit our exposure to an increase
in variable interest rates, particularly with respect to amounts outstanding
under our Revolving Loan. The interest rate on all of our variable rate debt is
adjusted at one- and three-month intervals, subject to settlements under these
contracts. We also enter into treasury lock agreements from time to time in
order to limit our exposure
21
to an increase in interest rates with respect to future debt offerings. Net
receipts from counterparties under interest rate hedge contracts were $206,894
during 2000 and were recorded as decreases to interest expense.
In addition, we are exposed to certain losses in the event of
nonperformance by the counterparties under the interest rate hedge contracts.
We expect the counterparties, which are major financial institutions, to
perform fully under these contracts. However, if the counterparties were to
default on their obligations under the interest rate hedge contracts, we could
be required to pay the full rates on our debt, even if such rates were in
excess of the rates in the contracts.
Current and Future Cash Needs. Historically, rental revenue has been the
principal source of funds to pay operating expenses, debt service, stockholder
distributions and capital expenditures, excluding nonrecurring capital
expenditures. In addition, construction management, maintenance, leasing and
management fees have provided sources of cash flow. We presently have no plans
for major capital improvements to the existing properties, other than normal
recurring building improvements, tenant improvements and lease commissions. We
expect to meet our short-term liquidity requirements generally through working
capital and net cash provided by operating activities along with our Revolving
Loan.
Our short-term (within the next 12 months) liquidity needs also include,
among other things, the funding of approximately $161.7 million of our existing
development activity. See "Business -- Development Activity." We expect to fund
our short-term liquidity needs through a combination of:
o borrowings under our Revolving Loan;
o the issuance of secured debt;
o the selective disposition of non-core assets; and
o the sale or contribution of some of our wholly owned properties,
development projects and development land to strategic joint ventures to
be formed with selected partners interested in investing with us, which
will have the net effect of generating additional capital through such
sale or contributions.
Our long-term liquidity needs generally include the funding of existing
and future development activity, selective asset acquisitions and the
retirement of mortgage debt, amounts outstanding under the Revolving Loan and
long-term unsecured debt. We remain committed to maintaining a flexible and
conservative capital structure. Accordingly, we expect to meet our long-term
liquidity needs through a combination of (1) the issuance by the Operating
Partnership of additional unsecured debt securities, (2) the issuance of
additional equity securites by the Company and the Operating Partnership as
well as (3) the soures described above with respect to our short-term
liquidity. We expect to use such sources to meet our long-term liquidity
requirements either through direct payments or repayment of borrowings under
the Revolving Loan. We do not intend to reserve funds to retire existing
secured or unsecured indebtedness upon maturity. Instead, we will seek to
refinance such debt at maturity or retire such debt through the issuance of
equity or debt securities.
We anticipate that our available cash and cash equivalents and cash flows
from operating activities, together with cash available from borrowings and
other sources, will be adequate to meet our capital and liquidity needs in both
the short and longterm. However, if these sources of funds are insufficient or
unavailable, our ability to satisfy our cash requirements may be adversely
affected.
Recent Developments
Common Unit Repurchase. Since the Company commenced its share repurchase
program in December 1999, the Company has repurchased 8.0 million shares of
Common Stock and Common Units at a weighted average price of $23.95 per
share/unit for an aggregate purchase price of approximately $190.8 million. For
each share of Common Stock repurchased by the Company, one equivalent Common
Unit is retired.
22
Disposition Activity. Since December 31, 2000, we have sold 76,000 square
feet of office properties and 277 apartment units for gross proceeds of $46.8
million. In addition, we currently have 182,000 rentable square feet of wholly
owned properties and 1,395 apartment units under contract for sale in various
transactions totaling $114.5 million. These transactions are subject to
customary closing conditions, including due diligence and documentation, and
are expected to close during the first and second quarters of 2001. However, we
can provide no assurance that all or parts of these transactions will be
consummated.
We expect to use a portion of the net proceeds from our recent and pending
disposition activity to reinvest in tax-deferred exchange transactions under
Section 1031 of the Internal Revenue Code. We expect to reinvest up to $12.8
million of the remaining net proceeds from disposition activity as of December
31, 2000 and up to $152.4 million of the net proceeds from pending disposition
activity to acquire, in tax-deferred exchange transactions, in-service
properties, development land and development projects located in core markets
and in sub-markets where we have a strong presence. For an exchange to qualify
for tax-deferred treatment under Section 1031, the net proceeds from the sale
of a property must be held by an escrow agent until applied toward the purchase
of real estate qualifying for gain deferral. Given the competition for
properties meeting our investment criteria, there may be some delay in
reinvesting such proceeds. Delays in reinvesting such proceeds will reduce our
income from operations. In addition, the use of net proceeds from dispositions
to fund development activity, either through direct payments or repayment of
borrowings under our Revolving Loan, will reduce our income from operations
until such development projects are placed in service.
Possible Environmental Liabilities
In connection with owning or operating our properties, we may be liable
for certain costs due to possible environmental liabilities. Under various
laws, ordinances and regulations, such as the Comprehensive Environmental
Response Compensation and Liability Act, and common law, an owner or operator
of real estate is liable for the costs to remove or remediate certain hazardous
or toxic chemicals or substances on or in the property. Owners or operators are
also liable for certain other costs, including governmental fines and injuries
to persons and property. Such laws often impose liability without regard to
whether the owner or operator knew of, or was responsible for, the presence of
the hazardous or toxic chemicals or substances. The presence of such
substances, or the failure to remediate such substances properly, may adversely
affect the owner's or operator's ability to sell or rent such property or to
borrow using such property as collateral. Persons who arrange for the disposal,
treatment or transportation of hazardous or toxic chemicals or substances may
also be liable for the same types of costs at a disposal, treatment or storage
facility, whether or not that person owns or operates that facility.
Certain environmental laws also impose liability for releasing
asbestos-containing materials. Third parties may seek recovery from owners or
operators of real property for personal injuries associated with
asbestos-containing materials. A number of our properties have
asbestos-containing materials or material that we presume to be
asbestos-containing materials. In connection with owning and operating our
properties, we may be liable for such costs.
In addition, it is not unusual for property owners to encounter on-site
contamination caused by off-site sources. The presence of hazardous or toxic
chemicals or substances at a site close to a property could require the
property owner to participate in remediation activities or could adversely
affect the value of the property. Contamination from adjacent properties has
migrated onto at least three of our properties; however, based on current
information, we do not believe that any significant remedial action is
necessary at these affected sites.
As of the date hereof, we have obtained Phase I environmental assessments
(and, in certain instances, Phase II environmental assessments) on
substantially all of our in-service properties. These assessments have not
revealed, nor are we aware of, any environmental liability at our properties
that we believe would materially adversely affect our financial position,
operations or liquidity taken as a whole. This
23
projection, however, could be incorrect depending on certain factors. For
example, material environmental liabilities may have arisen after the
assessments were performed or our assessments may not have revealed all
environmental liabilities or may have underestimated the scope and severity of
environmental conditions observed. There may also be unknown environmental
liabilities at properties for which we have not obtained a Phase I
environmental assessment or have not yet obtained a Phase II environmental
assessment. In addition, we base our assumptions regarding environmental
conditions, including groundwater flow and the existence and source of
contamination, on readily available sampling data. We cannot guarantee that
such data is reliable in all cases. Moreover, we cannot provide any assurances
(1) that future laws, ordinances or regulations will not impose a material
environmental liability or (2) that tenants, the condition of land or
operations in the vicinity of our properties or unrelated third parties will
not affect the current environmental condition of our properties.
Some tenants use or generate hazardous substances in the ordinary course
of their respective businesses. In their leases, we require these tenants to
comply with all applicable laws and to be responsible to us for any damages
resulting from their use of the property. We are not aware of any material
environmental problems resulting from tenants' use or generation of hazardous
or toxic chemicals or substances. We cannot provide any assurances, however,
that all tenants will comply with the terms of their leases or remain solvent.
If tenants do not comply or do not remain solvent, we may at some point be
responsible for contamination caused by such tenants.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, which is required to be adopted in fiscal years beginning after
June 15, 1999. In June 1999, the FASB issued Statement No. 137, Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the FASB Statement
No. 133, which stipulates the required adoption date to be all fiscal years
beginning after June 15, 2000. In June, 2000, FASB issued Statement No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities --
an amendment of FASB Statement No. 133. Statement No. 133, as amended by
Statement No. 138, requires us to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
We will adopt SFAS No. 133/138, Accounting for Derivative Instruments and
Hedging Activities on January 1, 2001. This new accounting standard requires
companies to carry all derivative instruments, including certain embedded
derivatives, in the statement of financial condition at fair value. The
accounting for changes in the fair value of a derivative instrument depends on
whether it has been designated and qualifies as part of a hedging relationship
and, if so, on the reason for holding it. We use only qualifying hedges that
are designated specifically to reduce exposure to interest rate risk by locking
in the expected future cash payments on certain liabilities. This is typically
accomplished using an interest rate swap, collar or cap. For financial
reporting purposes, the gain or loss on the effective portion of the interest
rate hedge is recorded as a component of equity, which becomes reclassified
into earnings along with payments on the hedged liability.
Upon adoption of SFAS No. 133/138 in January 2001, we will record a net
transition adjustment of $555,962 in unrealized loss (income statement) and a
net transition adjustment of $125,000 in accumulated other comprehensive income
(equity) at that time. Adoption of the standard also results in us recognizing
$127,000 of derivative instrument liabilities and a reclassification of
approximately $10.6 million of deferred financing costs from past cashflow
hedging relationships from other assets to other comprehensive income. As in
the past, these amounts will be recognized as additional interest expense when
the related cash flow payments on the debt are made. In general, the amount of
volatility will vary with the level of derivative activities during any period.
The fair market value of our derivatives is discussed under " -- Liquidity and
Capital Resources."
24
Effective January 1, 2000, we adopted Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 does not
change existing rules on revenue recognition. Rather, the SAB explains how
existing revenue recognition guidance should be applied for transactions not
specifically addressed by existing rules. The adoption of SAB 101 did not have
a material impact on our net income or financial position.
Compliance with the Americans with Disabilities Act
Under the Americans with Disabilities Act (the "ADA"), all public
accommodations and commercial facilities are required to meet certain federal
requirements related to access and use by disabled persons. These requirements
became effective in 1992. Compliance with the ADA requirements could require
removal of access barriers, and noncompliance could result in imposition of
fines by the U.S. government or an award of damages to private litigants.
Although we believe that our properties are substantially in compliance with
these requirements, we may incur additional costs to comply with the ADA.
Although we believe that such costs will not have a material adverse effect on
us, if required changes involve a greater expenditure than we currently
anticipate, our results of operations, liquidity and capital resources could be
materially adversely affected.
Funds From Operations and Cash Available for Distributions
We consider funds from operations ("FFO") to be a useful financial
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt
and to fund acquisitions and other capital expenditures. FFO does not represent
net income or cash flows from operating, investing or financing activities as
defined by Generally Accepted Accounting Principles ("GAAP"). It should not be
considered as an alternative to net income as an indicator of our operating
performance or to cash flows as a measure of liquidity. FFO does not measure
whether cash flow is sufficient to fund all cash needs, including principal
amortization, capital improvements and distributions to stockholders. Further,
FFO as disclosed by other REITs may not be comparable to our calculation of
FFO, as described below. FFO and cash available for distributions should not be
considered as alternatives to net income as an indication of our performance or
to cash flows as a measure of liquidity.
FFO equals net income (computed in accordance with GAAP) excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures. In March 1995, the National Association of Real Estate
Investment Trusts ("NAREIT") issued a clarification of the definition of FFO.
The clarification provides that amortization of deferred financing costs and
depreciation of non-real estate assets are no longer to be added back to net
income in arriving at FFO. In October 1999, NAREIT issued an additional
clarification effective as of January 1, 2000 stipulating that FFO should
include both recurring and non-recurring operating results. Consistent with
this clarification, non-recurring items that are not defined as "extraordinary"
under GAAP will be reflected in the calculation of FFO. Gains and losses from
the sale of depreciable operating property will continue to be excluded from
the calculation of FFO.
Cash available for distribution is defined as funds from operations
reduced by non-revenue enhancing capital expenditures for building improvements
and tenant improvements and lease commissions related to second generation
space.
25
FFO and cash available for distribution for the years ended December 31,
2000, 1999 and 1998 are summarized in the following table (in thousands):
Year Ended
December 31,
-----------------------------------------
2000 1999 1998
------------ ------------ -----------
FFO:
Income before minority interest and extraordinary item ......... $ 158,437 $ 166,926 $151,135
Add/(Deduct):
Distributions on preferred units ............................. (32,580) (32,580) (30,092)
Cost of unsuccessful transactions ............................ -- 1,500 146
Severance costs and other division closing expenses .......... -- 1,813 --
Gain on disposition of land and depreciable assets ........... (4,657) (7,997) (1,716)
Gain on disposition of land .................................. 6,449 -- --
Depreciation and amortization ................................ 119,088 112,039 91,397
Depreciation on unconsolidated subsidiaries .................. 5,192 3,215 974
--------- --------- ---------
FFO ......................................................... 251,929 244,916 211,844
Cash Available for Distribution:
Add/(Deduct):
Rental income from straight-line rents ....................... (14,892) (14,983) (13,385)
Amortization of deferred financing costs ..................... 2,512 2,823 2,598
Non-incremental revenue generating capital expenditures:
Building improvements paid .................................. (10,566) (10,056) (9,029)
Second generation tenant improvements paid .................. (22,287) (25,043) (20,115)
Second generation lease commissions paid .................... (13,033) (13,653) (13,055)
--------- --------- ---------
Cash available for distribution ........................... $ 193,663 $ 184,004 $158,858
========= ========= =========
Weighted average Common Units outstanding -- diluted ........... 67,226 70,268 65,132
========= ========= =========
Dividend payout ratio:
FFO .......................................................... 60.0% 62.8% 64.6%
========= ========= =========
Cash available for distribution .............................. 78.1% 83.6% 86.1%
========= ========= =========
Inflation
In the last five years, inflation has not had a significant impact on us
because of the relatively low inflation rate in our geographic areas of
operation. Most of the leases require the tenants to pay their pro rata share
of operating expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing our exposure to increases in operating expenses
resulting from inflation. In addition, 91.7% of the leases are for remaining
terms of less than seven years, which may enable us to replace existing leases
with new leases at a higher base if rents on the existing leases are below the
then-existing market rate.
Disclosure Regarding Forward-looking Statements
Some of the information in this Annual Report on Form 10-K may contain
forward-looking statements. Such statements include, in particular, statements
about our plans, strategies and prospects under the headings "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." You can identify forward-looking statements by our use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. Although we believe that our
plans, intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, we cannot assure you that our plans,
intentions or expectations will be achieved. When considering such
forward-looking statements, you should keep in mind the following important
26
factors that could cause our actual results to differ materially from those
contained in any forward-looking statement:
o our markets could suffer unexpected increases in development of office,
industrial and retail properties;
o the financial condition of our tenants could deteriorate;
o the costs of our development projects could exceed our original estimates;
o we may not be able to complete development, acquisition or joint venture
projects as quickly or on as favorable terms as anticipated;
o we may not be able to lease or release space quickly or on as favorable terms
as old leases;
o we may have incorrectly assessed the environmental condition of our
properties;
o an unexpected increase in interest rates would increase our debt service
costs;
o we may not be able to continue to meet our long-term liquidity requirements on
favorable terms;
o we could lose key executive officers; and
o our southeastern markets may suffer an unexpected decline in economic growth
or increase in unemployment rates.
Given these uncertainties, we caution you not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances or to reflect the occurrence of
unanticipated events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The effects of potential changes in interest rates are discussed below.
Our market risk discussion includes "forward-looking statements" and represents
an estimate of possible changes in fair value or future earnings that would
occur assuming hypothetical future movements in interest rates. These
disclosures are not precise indicators of expected future losses, but only
indicators of reasonably possible losses. As a result, actual future results
may differ materially from those presented. See "Management's Discussion and
Analysis of Results of Operations -- Liquidity and Capital Resources" and the
notes to the consolidated financial statements for a description of our
accounting policies and other information related to these financial
instruments.
To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under the Revolving Loan
bear interest at variable rates. Our long-term debt, which consists of
long-term financings and the issuance of debt securities, typically bears
interest at fixed rates. In addition, we have assumed fixed rate and variable
rate debt in connection with acquiring properties. Our interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, from time to time we enter into interest rate hedge contracts
such as collars, swaps, caps and treasury lock agreements in order to mitigate
our interest rate risk with respect to various debt instruments. We do not hold
or issue these derivative contracts for trading or speculative purposes.
Certain Variable Rate Debt. As of December 31, 2000, the Operating
Partnership had approximately $37.0 million of variable rate debt outstanding
that was not protected by interest rate hedge contracts. If the weighted
average interest rate on this variable rate debt is 100 basis points higher or
lower during the 12 months ended December 31, 2001, our interest expense would
increase or decrease by approximately $370,000.
Interest Rate Hedge Contracts. For a discussion of our interest rate hedge
contracts in effect at December 31, 2000, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Capitalization." If interest rates increase by 100 basis
27
points, the aggregate fair market value of these interest rate hedge contracts
as of December 31, 2000 would increase by approximately $552,000. If interest
rates decrease by 100 basis points, the aggregate fair market value of these
interest rate hedge contracts as of December 31, 2000 would decrease by
approximately $761,000.
In addition, we are exposed to certain losses in the event of
nonperformance by the counterparties under the hedge contracts. We expect the
counterparties, which are major financial institutions, to perform fully under
these contracts. However, if the counterparties were to default on their
obligations under the interest rate hedge contracts, we could be required to
pay the full rates on our debt, even if such rates were in excess of the rates
in the contracts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See page F-1 of the financial report included herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is the sole general partner of the Operating Partnership. The
section under the heading "Election of Directors" of the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held May 15, 2001 is
incorporated herein by reference for information on directors of the Company.
See ITEM X in Part I hereof for information regarding executive officers of the
Company.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled
"Compensation of Directors" of the Proxy Statement and the section titled
"Executive Compensation" of the Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Operating Partnership has no executive officers or directors. As of
December 31, 2000, the only person or group known by us to be holding more than
5.0% of the Common Units was the Company, which owned 57,715,396 Common Units,
or approximately 88.0% of the outstanding Common Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section under the heading "Certain Relationships and Related
Transactions" of the Proxy Statement is incorporated herein by reference.
29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents Filed as a Part of this Report
1. Consolidated Financial Statements and Report of Independent Auditors
See Index on Page F-1
2. Financial Statement Schedules
See Index on Page F-1
3. Exhibits
Ex. FN Description
- ------------ ----------- ------------------------------------------------------------------------
2.1 (1) Operating Agreement of MG-HIW, LLC, entered into as of December 1,
2000, by and among Miller Global HIW 20, LLC and the Operating
Partnership
3.1 (2) Amended and Restated Articles of Incorporation of the Company
3.2 (3) Amended and Restated Bylaws of the Company
4.1 (3) Specimen of certificate representing shares of Common Stock
4.2 (4) Indenture among the Operating Partnership, the Company and First
Union National Bank of North Carolina dated as of December 1, 1996
4.3 (5) Specimen of certificate representing 8 5/8% Series A Cumulative
Redeemable Preferred Shares
4.4 (6) Specimen of certificate representing 8% Series B Cumulative
Redeemable Preferred Shares
4.5 (7) Specimen of certificate representing 8% Series D Cumulative
Redeemable Preferred Shares
4.6 (7) Specimen of Depositary Receipt evidencing the Depositary Shares
each representing 1/10 of an 8% Series D Cumulative Redeemable
Preferred Share
4.7 (7) Deposit Agreement, dated April 23, 1998, between the Company and
First Union National Bank, as preferred share depositary
4.8 (8) Rights Agreement, dated as of October 6, 1997, between the Company
and First Union National Bank, as rights agent
4.9 (9) Agreement to furnish certain instruments defining the rights of
long-term debt holders
10.1 (3) Amended and Restated Agreement of Limited Partnership of the
Operating Partnership
10.2 (5) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to Series A
Preferred Units
10.3 (6) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to Series B
Preferred Units
10.4 (7) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to Series D
Preferred Units
10.5 (10) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to certain rights
of limited partners upon a change of control
10.6 (11) Form of Registration Rights and Lockup Agreement among the
Company and the Holders named therein, which agreement is signed
by all Common Unit holders
10.7 (12) Amended and Restated 1994 Stock Option Plan
10.8 (9) 1997 Performance Award Plan
10.9 (13) Form of Executive Supplemental Employment Agreement between the
Company and Named Executive Officers
30
Ex. FN Description
- ------------ ---------- -------------------------------------------------------------------
10.10 (14) Form of warrants to purchase Common Stock of the Company issued
to John L. Turner, William T. Wilson III and John E. Reece II
10.11 (15) Form of warrants to purchase Common Stock of the Company issued
to W. Brian Reames, John W. Eakin and Thomas S. Smith
10.12 (16) 1999 Shareholder Value Plan
10.13 (1) Credit Agreement among Highwoods Realty Limited Partnership,
Highwoods Properties, Inc., the Subsidiaries named therein and the
Lenders named therein, dated as of December 13, 2000
21 (13) Schedule of subsidiaries of the Company
23 Consent of Ernst & Young LLP
- ----------
(1) Filed as part of the Company's Current Report on Form 8-K dated December
14, 2000 and incorporated herein by reference.
(2) Filed as part of the Company's Current Report on Form 8-K dated September
25, 1997 and amended by articles supplementary filed as part of the
Company's Current Report on Form 8-K dated October 4, 1997 and articles
supplementary filed as part of the Company's Current Report on Form 8-K
dated April 20, 1998, each of which is incorporated herein by reference.
(3) Filed as part of Registration Statement 33-76952 with the SEC and
incorporated herein by reference.
(4) Filed as part of the Operating Partnership's Current Report on Form 8-K
dated December 2, 1996 and incorporated herein by reference.
(5) Filed as part of the Company's Current Report on Form 8-K dated February
12, 1997 and incorporated herein by reference.
(6) Filed as part of the Company's Current Report on Form 8-K dated September
25, 1997 and incorporated herein by reference.
(7) Filed as part of the Company's Current Report on Form 8-K dated April 20,
1998 and incorporated herein by reference.
(8) Filed as part of the Company's Current Report on Form 8-K dated October 4,
1997 and incorporated herein by reference.
(9) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference.
(10) Filed as part of the Operating Partnership's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 and incorporated herein by reference.
(11) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference.
(12) Filed as part of the Company's proxy statement on Schedule 14A relating to
the 1997 Annual Meeting of Stockholders.
(13) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by reference.
(14) Filed as part of Registration Statement 33-88364 with the SEC and
incorporated herein by reference.
(15) Filed as part of the Company's Current Report on Form 8-K dated April 1,
1996 and incorporated herein by reference.
(16) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 and incorporated herein by reference.
The Operating Partnership will provide copies of any exhibit, upon written
request, at a cost of $.05 per page.
31
(b) Reports on Form 8-K
On December 20, 2000, the Operating Partnership filed a current report on
Form 8-K, dated December 14, 2000, reporting under Items 2 and 5 of the Form
that it had formed a joint venture with Miller Global Properties, LLC and
executed a new credit facility with a group of ten lender banks.
On January 25, 2001, the Operating Partnership filed a current report on
Form 8-K, dated January 25, 2001, reporting under Item 5 of the Form that the
Company had repurchased a certain number of shares of Common Stock pursuant to
its previously announced share repurchase program.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Raleigh, State of North Carolina, on April 2, 2001.
HIGHWOODS REALTY LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., in its
capacity as general partner (the
"General Partner")
By:/s/ RONALD P. GIBSON
-------------------------------------
Ronald P. Gibson, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
------------ ------- --------------
/s/ O. TEMPLE SLOAN, JR. Chairman of the Board of April 2, 2001
------------------------------------- Directors of the General
O. Temple Sloan, Jr. Partner
/s/ RONALD P. GIBSON President, Chief Executive April 2, 2001
------------------------------------- Officer and Director of the
Ronald P. Gibson General Partner
/s/ EDWARD J. FRITSCH Executive Vice President, April 2, 2001
------------------------------------- Chief Operating Officer,
Edward J. Fritsch Secretary and Director of
the General Partner
/s/ JOHN L. TURNER Vice Chairman of the Board April 2, 2001
------------------------------------- and Chief Investment
John L. Turner Officer of the General
Partner
/s/ GENE H. ANDERSON Senior Vice President and April 2, 2001
------------------------------------- Director of the General
Gene H. Anderson Partner
/s/ THOMAS W. ADLER Director of the General Partner April 2, 2001
-------------------------------------
Thomas W. Adler
/s/ KAY N. CALLISON Director of the General Partner April 2, 2001
-------------------------------------
Kay N. Callison
/s/ WILLIAM E. GRAHAM, JR. Director of the General Partner April 2, 2001
-------------------------------------
William E. Graham, Jr.
33
Signature Title Date
- --------------------------------------- --------------------------------- --------------
/s/ LAWRENCE S. KAPLAN Director of the General Partner April 2, 2001
-------------------------------------
Lawrence S. Kaplan
/s/ L. GLENN ORR, JR. Director of the General Partner April 2, 2001
-------------------------------------
Glenn Orr, Jr.
/s/ WILLARD H. SMITH JR. Director of the General Partner April 2, 2001
-------------------------------------
Willard H. Smith Jr.
/s/ CARMAN J. LIUZZO Vice President and Chief April 2, 2001
------------------------------------- Financial Officer (Principal
Carman J. Liuzzo Financial Officer and
Principal Accounting
Officer) and Treasurer of the
General Partner
34
INDEX TO FINANCIAL STATEMENTS
Page
-----
Highwoods Realty Limited Partnership
Report of Independent Auditors ......................................................... F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999 ........................... F-3
Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998.. F-4
Consolidated Statements of Partners' Capital for the Years Ended December 31, 2000, 1999
and 1998 .............................................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and
1998 .................................................................................. F-6
Notes to Consolidated Financial Statements ............................................. F-8
Schedule III -- Real Estate and Accumulated Depreciation ............................... F-30
All other schedules are omitted because they are not applicable, or
because the required information is included in the financial statements or
notes thereto.
F-1
REPORT OF INDEPENDENT AUDITORS
TO THE OWNERS
HIGHWOODS REALTY LIMITED PARTNERSHIP
We have audited the accompanying consolidated balance sheets of Highwoods
Realty Limited Partnership (a majority-owned subsidiary of Highwoods
Properties, Inc.) as of December 31, 2000 and 1999, and the related
consolidated statements of income, partners' capital, and cash flows for each
of the three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Operating
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Highwoods
Realty Limited Partnership at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
Raleigh, North Carolina
February 19, 2001
F-2
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Balance Sheets
($ in thousands, except per unit amounts)
December 31,
-----------------------------
2000 1999
------------- -------------
Assets
Real estate assets, at cost:
Land & improvements .................................................. $ 398,944 $ 468,077
Buildings and tenant improvements .................................... 2,742,377 3,055,859
Development in process ............................................... 87,622 186,925
Land held for development ............................................ 144,727 168,396
Furniture, fixtures and equipment .................................... 11,433 7,917
---------- ----------
3,385,103 3,887,174
Less -- accumulated depreciation ..................................... (280,609) (238,115)
---------- ----------
Net real estate assets ............................................... 3,104,494 3,649,059
Property held for sale ............................................... 127,824 48,960
Cash and cash equivalents ............................................. 102,486 33,915
Restricted cash ....................................................... 2,192 1,854
Accounts receivable, net of allowance of $825 and $800
at December 31, 2000 and 1999, respectively .......................... 23,841 22,127
Advances to related parties ........................................... 27,560 15,096
Notes receivable ...................................................... 72,047 44,892
Accrued straight-line rents receivable ................................ 39,295 35,951
Investment in unconsolidated affiliates ............................... 72,951 33,758
Other assets:
Deferred leasing costs ............................................... 83,269 66,783
Deferred financing costs ............................................. 43,110 40,125
Prepaid expenses and other ........................................... 11,857 15,612
---------- ----------
138,236 122,520
Less -- accumulated amortization ..................................... (49,889) (36,053)
---------- ----------
Other assets, net .................................................. 88,347 86,467
---------- ----------
Total assets ...................................................... $3,661,037 $3,972,079
========== ==========
Liabilities and Partners' capital
Mortgages and notes payable ........................................... $1,568,019 $1,719,117
Accounts payable, accrued expenses and other liabilities .............. 104,342 106,601
---------- ----------
Total liabilities .................................................... 1,672,361 1,825,718
Redeemable operating partnership units:
Class A Common Units, 7,630,088 and 8,809,218 outstanding
at December 31, 2000 and 1999, respectively ........................ 189,798 208,140
Class B Common Units, 196,492 outstanding
at December 31, 2000 and 1999 ...................................... 4,888 4,643
Series A Preferred Units, 125,000 outstanding
at December 31, 1999 and 1998 ...................................... 121,809 121,809
Series B Preferred Units, 6,900,000 outstanding
at December 31, 1999 and 1998 ...................................... 166,346 166,346
Series D Preferred Units, 400,000 outstanding
at December 31, 1999 and 1998 ...................................... 96,842 96,842
Partners' capital:
Class A Common Units:
General partner Common Units, 652,649 and 692,384, outstanding
at December 31, 2000 and 1999, respectively .......................... 14,089 15,485
Limited partner Common Units, 56,982,135 and 59,736,808 outstanding at
December 31, 2000 and 1999, respectively ........................... 1,394,904 1,533,096
---------- ----------
Total Partners' capital ........................................... 1,408,993 1,548,581
---------- ----------
$3,661,037 $3,972,079
========== ==========
See accompanying notes to consolidated financial statements.
F-3
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Income
(in thousands, except per unit amounts)
For the Years Ended December 31, 2000, 1999 and 1998
2000 1999 1998
------------ ------------ -----------
Revenue:
Rental property .................................................. $ 541,813 $ 565,239 $ 498,960
Equity in net earnings/(losses) of unconsolidated affiliates ..... 3,112 633 (207)
Interest and other income ........................................ 17,000 14,002 11,009
--------- --------- ---------
Total Revenue .................................................... 561,925 579,874 509,762
Operating expenses:
Rental property .................................................. 157,170 173,676 154,211
Depreciation and amortization .................................... 119,088 112,039 91,397
Interest expense:
Contractual .................................................... 106,283 108,562 91,361
Amortization of deferred financing costs ....................... 2,512 2,823 2,598
--------- --------- ---------
108,795 111,385 93,959
General and administrative ....................................... 23,092 22,345 20,630
--------- --------- ---------
Income before cost of unsuccessful transactions, gain on
disposition of assets and extraordinary item ................... 153,780 160,429 149,565
Costs of unsuccessful transactions ............................... -- (1,500) (146)
Gain on disposition of assets .................................... 4,657 7,997 1,716
--------- --------- ---------
Income before extraordinary item ................................. 158,437 166,926 151,135
Extraordinary item -- loss on early extinguishment
of debt .......................................................... (4,732) (7,341) (387)
--------- --------- ---------
Net income ....................................................... 153,705 159,585 150,748
Distributions on preferred units .................................. (32,580) (32,580) (30,092)
--------- --------- ---------
Net income available for Class A Common Units .................... $ 121,125 $ 127,005 $ 120,656
========= ========= =========
Net income per Common Unit -- Basic:
Income before extraordinary item ................................. $ 1.88 $ 1.91 $ 1.87
Extraordinary item -- loss on early extinguishment of debt ....... ( .07) (.10) (.01)
--------- --------- ---------
Net income ....................................................... $ 1.81 $ 1.81 $ 1.86
========= ========= =========
Net income per Common Unit -- Diluted:
Income before extraordinary item ................................. $ 1.87 $ 1.91 $ 1.86
Extraordinary item -- loss on early extinguishment of debt ....... ( .07) (.10) (.01)
--------- --------- ---------
Net income ....................................................... $ 1.80 $ 1.81 $ 1.85
========= ========= =========
Weighted average Common Units outstanding -- Basic:
Class A Common Units:
General Partner ................................................ 669 700 646
Limited Partners ............................................... 66,189 69,285 63,910
Class B Common Units:
Limited Partners ............................................... 196 197 291
--------- --------- ---------
Total ............................................................ 67,054 70,182 64,847
========= ========= =========
Weighted average Common Units outstanding -- Diluted:
Class A Common Units:
General Partner ................................................ 670 701 648
Limited Partners ............................................... 66,359 69,371 64,192
Class B Common Units:
Limited Partners ............................................... 196 196 292
--------- --------- ---------
Total ............................................................ 67,225 70,268 65,132
========= ========= =========
See accompanying notes to consolidated financial statements.
F-4
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Partners' Capital
(in thousands)
For the Years Ended December 31, 2000, 1999 and 1998
Class A Common Unit
------------------------
General Limited Total
Partner's Partners' Partners'
Capital Capital Capital
---------- ------------- -------------
Balance at December 31, 1997 ............................ $ 9,997 $ 989,773 $ 999,770
Offering proceeds ....................................... -- 405,912 405,912
Distributions paid ...................................... (1,369) (135,522) (136,891)
Preferred distributions paid ............................ (301) (29,791) (30,092)
Net income .............................................. 1,507 149,241 150,748
Adjustments of redeemable Common Unit to fair value ..... 1,387 137,213 138,600
Conversion of redeemable Common Unit to Common
Shares ................................................. 408 40,347 40,755
Redemption of Common Units .............................. (54) (5,325) (5,379)
Transfer of limited partners' interest .................. 4,059 (4,059) --
-------- ---------- ----------
Balance at December 31, 1998 ............................ 15,634 1,547,789 1,563,423
Offering proceeds ....................................... -- 22,053 22,053
Purchase of treasury units .............................. (255) (25,220) (25,475)
Distributions paid ...................................... (1,541) (152,547) (154,088)
Preferred distributions paid ............................ (326) (32,254) (32,580)
Net income .............................................. 1,596 157,989 159,585
Adjustments of redeemable Common Unit to fair value ..... (219) (21,680) (21,899)
Conversion of redeemable Common Unit to Common
Shares ................................................. 376 37,186 37,562
Transfer of limited partner's interest .................. 220 (220) --
-------- ---------- ----------
Balance at December 31, 1999 ............................ 15,485 1,533,096 1,548,581
-------- ---------- ----------
Offering proceeds ....................................... -- 6,101 6,101
Purchase of treasury units .............................. (987) (97,756) (98,743)
Distributions paid ...................................... (1,519) (150,371) (151,890)
Preferred distributions paid ............................ (326) (32,254) (32,580)
Net income .............................................. 1,537 152,168 153,705
Adjustments of redeemable Common Unit to fair value ..... (136) (13,557) (13,693)
Transfer of limited partner's interest .................. 61 (61) --
Issuance of restricted stock ............................ (31) (3,018) (3,049)
Amortization of deferred compensation ................... 5 556 561
-------- ---------- ----------
Balance at December 31, 2000 ............................ $ 14,089 $1,394,904 $1,408,993
======== ========== ==========
See accompanying notes to consolidated financial statements.
F-5
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
For the Years Ended December 31, 2000, 1999 and 1998
2000 1999 1998
------------- ------------- -------------
Operating activities:
Net income ......................................................... $ 153,705 $ 159,585 $ 150,748
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ..................................................... 107,764 101,230 84,738
Amortization ..................................................... 13,836 13,632 9,257
Amortization of deferred compensation ............................ 561 -- --
Equity in earnings of unconsolidated affiliates .................. (3,112) (633) 207
Loss on early extinguishment of debt ............................. 4,732 7,341 387
Gain on disposition of land and depreciable assets ............... (4,657) (7,997) (1,716)
Changes in operating assets and liabilities:
Accounts receivable ............................................. (1,714) 5,455 (7,139)
Prepaid expenses and other assets ............................. 3,417 336 393
Accrued straight-line rents receivable ........................ (14,892) (14,983) (13,385)
Accounts payable, accrued expenses and other
liabilities ................................................... (2,259) (29,305) 38,972
---------- ---------- ----------
Net cash provided by operating activities ..................... 257,381 234,661 262,462
---------- ---------- ----------
Investing activities:
Proceeds from disposition of real estate assets .................... 729,945 696,379 26,347
Additions to real estate assets .................................... (420,494) (514,270) (943,048)
Advances to subsidiaries ........................................... (12,464) (4,676) (1,348)
Distributions from unconsolidated affiliates ....................... 2,400 785 --
Investments in notes receivable .................................... (20,035) (32,027) (12,865)
Other investing activities ......................................... (27,155) 7,577 (23,450)
---------- ---------- ----------
Net cash provided by/(used in) investing activities ............. 252,197 153,768 (954,364)
---------- ---------- ----------
Financing activities:
Distributions paid ............................................... (151,890) (154,088) (136,891)
Payment of preferred unit distributions .......................... (32,580) (32,580) (30,092)
Net proceeds from contributed capital -- Preferred Units ......... -- -- 197,746
Net proceeds from contributed capital -- Common Units ............ 1,021 23,089 96,842
Repurchase of Common Units ....................................... (98,743) (25,475) --
Payment of prepayment penalties .................................. (4,732) (7,341) (387)
Borrowings on revolving loans .................................... 522,000 536,500 873,000
Repayment of revolving loans ..................................... (723,000) (676,500) (846,500)
Proceeds from mortgages and notes payable ........................ 218,162 324,693 745,356
Repayment of mortgages and notes payable ......................... (168,260) (371,792) (170,304)
Payment of deferred financing costs .............................. (2,985) (1,716) (14,988)
---------- ---------- ----------
Net cash (used in)/provided by financing activities ............. (441,007) (385,210) 713,782
---------- ---------- ----------
Net increase in cash and cash equivalents ........................ 68,571 3,219 21,880
Cash and cash equivalents at beginning of the period ............. 33,915 30,696 8,816
---------- ---------- ----------
Cash and cash equivalents at end of the period ................... $ 102,486 $ 33,915 $ 30,696
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................... $ 131,034 $ 143,836 $ 63,664
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-6
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows -- Continued
(in thousands)
For the Years Ended December 31, 2000, 1999 and 1998
Supplemental disclosure of non-cash investing and financing activities:
The following summarizes the net assets contributed by the Common Unit holders
of the Operating Partnership or assets acquired/(or sold) subject to mortgage
notes payable or note receivable.
2000 1999 1998
------------- ------------- -----------
Assets:
Net real estate assets ........................................... $ (56,055) $ (78,012) $465,078
Cash and cash equivalents ........................................ -- (4,719) 55,064
Accounts receivable and other .................................... -- (2,975) 6,634
Investment in unconsolidated affiliates .......................... 48,054 13,830 12,364
Notes receivable ................................................. 6,372 32,695 29,176
--------- --------- --------
Total Assets ................................................... $ (1,629) $ (39,181) $568,316
========= ========= ========
Liabilities:
Mortgages and notes payable ...................................... -- (58,531) 326,106
Accounts payable, accrued expenses and other liabilities ......... -- 7,604 34,044
--------- --------- --------
Total Liabilities .............................................. -- (50,927) 360,150
--------- --------- --------
Net Assets .................................................... $ (1,629) $ 11,746 $208,166
========= ========= ========
See accompanying notes to consolidated financial statements.
F-7
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of the Operating Partnership
Highwoods Realty Limited Partnership (the "Operating Partnership") is
managed by its general partner, Highwoods Properties, Inc. (the "Company"), a
self-administered and self-managed real estate investment trust ("REIT") which
operates in the southeastern and midwestern United States. The Operating
Partnership's wholly owned assets include: 493 in-service office, industrial
and retail properties; 1,885 apartment units; 1,317 acres of undeveloped land
suitable for future development; and an additional 26 properties under
development.
The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At December 31, 2000, the Company owned
88.0% of the common partnership interests ("Common Units") in the Operating
Partnership. Limited partners (including certain officers and directors of the
Company) own the remaining Common Units. Holders of Common Units may redeem
them for the cash value of one share of the Company's common stock, $.01 par
value (the "Common Stock"), or, at the Company's option, one share (subject to
certain adjustments) of Common Stock.
Generally one year after issuance, the Operating Partnership is obligated
to redeem each Common Unit at the request of the holder thereof for cash equal
to the fair market value of one share of the Company's Common Stock at the time
of such redemption, provided that the Company at its option may elect to
acquire any such Common Unit presented for redemption for cash or one share of
Common Stock. When a Common Unit holder redeems a Common Unit for a share of
Common Stock or cash, the Company's minority interest in the Operating
Partnership will be reduced and its share in the Operating Partnership will be
increased. The Common Units owned by the Company are not redeemable for cash.
Basis of Presentation
The consolidated financial statements include the accounts of the
Operating Partnership and its wholly owned affiliates. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
The extraordinary loss represents the payment of prepayment penalties and
the write off of loan origination fees related to the early extinguishment of
debt.
Real Estate Assets
All capitalizable costs related to the improvement or replacement of
commercial real estate properties are capitalized. Depreciation is computed by
the straight-line method over the estimated useful life of 40 years for
buildings and improvements and five to seven years for furniture, fixtures and
equipment. Tenant improvements are amortized over the life of the respective
leases, using the straight-line method. Real estate assets are stated at the
lower of cost or fair value, if impaired.
The Operating Partnership evaluates its real estate assets upon the
occurrence of significant adverse changes in their operations to assess whether
any impairment indicators are present that affect the recovery of the recorded
value. If any real estate assets are considered impaired, a loss is provided to
reduce the carrying value of the property to its estimated fair value. As of
December 31, 2000, none of the Operating Partnership's assets were considered
impaired.
F-8
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
As of December 31, 2000, the Operating Partnership had 258,000 square feet
of properties and 1,672 apartment units under contract for sale in various
transactions totaling $161.3 million. These real estate assets have a carrying
value of $127.8 million and have been classified as assets held for sale in the
accompanying financial statements.
Cash Equivalents
The Operating Partnership considers highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
The Operating Partnership is required by certain mortgage notes to escrow
real estate taxes with the mortgagor. At December 31, 2000, and 1999, those
balances were $737,602 and $1,683,282, respectively.
Investments in Unconsolidated Affiliates
Investments in unconsolidated affiliates are accounted for using the
equity method and reflect the Operating Partnership's share of income or loss
of the affiliate, reduced by distributions received and increased by
contributions made.
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the term
of the lease. Unpaid rents are included in accounts receivable. Certain lease
agreements provide for the reimbursement of real estate taxes, insurance,
advertising and certain common area maintenance costs. These additional rents
are recorded on the accrual basis. All rent and other receivables from tenants
are due from commercial building tenants located in the properties.
Deferred Lease Fees and Loan Costs
Lease fees, concessions and loan costs are capitalized at cost and
amortized over the life of the related lease or loan term, respectively.
Redeemable Common Units
Holders of redeemable Common Units may request redemption of each of their
Common Units by the Operating Partnership for cash equal to the fair market
value of one share of the Company's Common Stock at any time after expiration
of the applicable "lock-up" period. The Company, the general partner of the
Operating Partnership, may at its option choose to satisfy the redemption
requirement by issuing Common Stock on a one-for-one basis for the number of
Common Units submitted for redemption. In accordance with ASR 268 issued by the
Securities and Exchange Commission, these Common Units are classified outside
of permanent partners' capital in the accompanying balance sheet. The recorded
value of the Common Units is based on fair value at the balance sheet date as
measured by the closing price of the Company's common stock on that date
multiplied by the total number of Common Units outstanding.
Income Taxes
No provision has been made for income taxes because such taxes, if any,
are the responsibility of the individual partners.
F-9
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Concentration of Credit Risk
Management of the Operating Partnership performs ongoing credit
evaluations of its tenants. As of December 31, 2000, the wholly owned
in-service properties (excluding apartment units) were leased to 2,712 tenants
in 14 geographic locations. The Operating Partnership's tenants engage in a
wide variety of businesses. There is no dependence upon any single tenant.
Interest Rate Risk Management
The Operating Partnership may enter into interest rate hedge contracts
such as swaps, caps and collars in order to mitigate its interest rate risk on
financial instruments. The Operating Partnership has designated these
derivative financial instruments as hedges and applies deferral accounting.
Gains and losses related to the termination of such derivative financial
instruments are deferred and amortized to interest expense over the term of the
applicable debt instrument. Payments to or from counterparties are recorded as
adjustments to interest expense.
The Operating Partnership also utilizes treasury lock agreements to hedge
interest rate risk on anticipated debt offerings. These anticipatory hedges are
designated as hedges of identified debt issuances which have a high probability
of occurring. Gains and losses resulting from changes in the market value of
these contracts are deferred and amortized into interest expense over the life
of the related debt instrument.
The Operating Partnership is exposed to certain losses in the event of
non-performance by the counterparties under the interest rate hedge contracts.
The counterparties are major financial institutions and are expected to perform
fully under the agreements. However, if they were to default on their
obligations under the arrangements, the Operating Partnership could be required
to pay the full rate under its $300.0 million unsecured revolving loan (the
"Revolving Loan") and the variable rate mortgages, even if such rate were in
excess of the rate in the interest rate hedge contracts. The Operating
Partnership would not realize a material loss as of December 31, 2000, in the
event of non-performance by any one counterparty. Additionally, the Operating
Partnership limits the amount of credit exposure with any one institution.
Common Unit and Stock Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. With each issuance of a share, the Operating Partnership will issue to
the Company one Common Unit upon payment of the exercise price to the Operating
Partnership; therefore, the Operating Partnership accounts for the Company's
stock options as if issued by the Operating Partnership. In addition, the
Operating Partnership grants options for a fixed number of Common Units to
employees with an exercise price equal to the fair value of the shares of
Common Stock at the date of grant. As described in Note 9, the Operating
Partnership has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for stock and Common Unit options.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-10
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("FAS 130") requires that total comprehensive income and
comprehensive income per share be disclosed with equal prominence as net income
and earnings per share. Comprehensive income is defined as changes in partners'
capital exclusive of transactions with owners such as capital contributions and
dividends. The Operating Partnership did not report any comprehensive income
items in any of the years presented.
Segment Reporting
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("FAS 131"), establishes
standards for the public reporting of information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, which is required to be adopted in fiscal years beginning after
June 15, 1999. In June 1999, the FASB issued Statement No. 137, Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the FASB Statement
No. 133, which stipulates the required adoption date to be all fiscal years
beginning after June 15, 2000. In June 2000, FASB issued Statement No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities --
an amendment of FASB Statement No. 133. Statement No. 133, as amended by
Statement No. 138, requires the Operating Partnership to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The fair market value of the Operating Partnership's
derivatives is discussed in Note 3. The Operating Partnership will adopt SFAS
No. 133/138, Accounting for Derivative Instruments and Hedging Activities, on
January 1, 2001. This new accounting standard requires companies to carry all
derivative instruments, including certain embedded derivatives, in the
statement of financial condition at fair value. The accounting for changes in
the fair value of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and, if so, on the
reason for holding it. The Operating Partnership uses only qualifying hedges
that are designated specifically to reduce exposure to interest rate risk by
locking in the expected future cash payments on certain liabilities. This is
typically accomplished using an interest rate swap, collar or cap. For
financial reporting purposes, the gain or loss on the effective portion of the
interest rate hedge is recorded as a component of equity, which becomes
reclassified into earnings along with payments on the hedged liability.
Upon adoption of SFAS No. 133/138 in January 2001, the Operating
Partnership will record a net transition adjustment of $555,962 in unrealized
loss (income statement) and a net transition adjustment of $125,000 in
accumulated other comprehensive income (equity). Adoption of the standard will
also result in the Operating Partnership recognizing $127,000 of derivative
instrument liabilities and a reclassification of approximately $10.6 million of
deferred financing costs from past cashflow hedging relationships from other
assets to other comprehensive income. As in the past, these amounts will be
recognized as additional interest expense
F-11
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
when the related cash flow payments on the debt are made. In general, the
amount of volatility will vary with the level of derivative activities during
any period.
Effective January 1, 2000, the Operating Partnership adopted Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 did not change existing rules on revenue recognition. Rather,
SAB 101 explains how existing revenue recognition guidance should be applied
for transactions not specifically addressed by existing rules. The adoption of
SAB 101 did not have a material impact on the Operating Partnership's net
income or financial position.
Reclassifications
Certain amounts in the December 31, 1999 and 1998 Financial Statements
have been reclassified to conform to the December 31, 2000 presentation. These
reclassifications had no material effect on net income or partners' capital as
previously reported.
2. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
On March 15, 1999, the Operating Partnership closed a transaction with
Schweiz-Deutschland-USA Dreilander Beteiligung Objekt DLF 98/29-Walker Fink-KG
("DLF"), pursuant to which the Operating Partnership sold or contributed
certain office properties valued at approximately $142.0 million to a newly
created limited partnership (the "Joint Venture"). DLF contributed
approximately $55.0 million for a 77.19% interest in the Joint Venture, and the
Joint Venture borrowed approximately $71.0 million from third-party lenders.
The Operating Partnership retained the remaining 22.81% interest in the Joint
Venture, received net cash proceeds of approximately $124.0 million and is the
sole and exclusive manager and leasing agent of the Joint Venture's properties,
for which the Operating Partnership receives customary management fees and
leasing commissions.
In addition, in connection with its merger with J.C. Nichols Company in
July 1998, the Company succeeded to the interests of J.C. Nichols in a
strategic alliance with R&R Investors, Ltd. pursuant to which R&R Investors
manages and leases certain co-venture properties located in the Des Moines
area. As a result of the merger, the Operating Partnership acquired an
ownership interest of 50% or more in a series of nine co-ventures with R&R
Investors. Certain of these properties were previously included in the
Operating Partnership's consolidated financial statements. On June 2, 1999, the
Operating Partnership agreed with R&R Investors to reorganize its respective
ownership interests in the Des Moines properties such that each would own a 50%
interest in the properties in the Des Moines area. Accordingly, the Operating
Partnership has adopted the equity method of accounting for its investment in
each of the Des Moines properties as a result of such reorganization. The
impact of the reorganization was immaterial to the consolidated financial
statements of the Operating Partnership.
On May 9, 2000, the Operating Partnership closed a transaction with
Dreilander-Fonds 97/26 and 99/32 ("DLF II") pursuant to which the Operating
Partnership sold or contributed five in-service office properties encompassing
570,000 rentable square feet and a 246,000-square-foot development project
valued at approximately $110.0 million to a newly created limited partnership
(the "DLF II Joint Venture"). DLF II contributed $24.0 million in cash for a
40.0% ownership interest in the DLF II Joint Venture and the DLF II Joint
Venture borrowed approximately $50.0 million from a third-party lender. The
Operating Partnership initially retained the remaining 60.0% interest in the
DLF II Joint Venture, received net cash proceeds of approximately $74.0 million
and is the sole and exclusive manager and leasing agent of the DLF II Joint
Venture's properties, for which the Operating Partnership receives customary
management fees and leasing commissions. During 2000, DLF II contributed an
additional $8.2 million
F-12
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. INVESTMENTS IN UNCONSOLIDATED AFFILIATES -- (Continued)
in cash to the DLF II Joint Venture, which increased its ownership percentage
to 53.0%. The Operating Partnership has adopted the equity method of accounting
for this joint venture.
On December 19, 2000, the Operating Partnership formed various joint
ventures with Denver-based Miller Global Properties, LLC ("Miller Global"). In
the first joint venture, the Operating Partnership sold or contributed 19
in-service office properties encompassing approximately 2.5 million rentable
square feet valued at approximately $335.0 million to a newly created limited
liability company. As part of the formation of the first joint venture, Miller
Global contributed approximately $85.0 million in cash for an 80% ownership
interest and the joint venture borrowed approximately $238.8 million from a
third-party lender. The Operating Partnership retained a 20.0% ownership
interest and received net cash proceeds of approximately $307.0 million. The
Operating Partnership has also agreed to contribute two additional development
properties valued at approximately $10.3 million for a 20.0% ownership interest
during the first part of 2001. The joint venture expects to borrow up to $7.2
million in connection with these two projects that will be funded by the
existing third party lender. In the remaining joint ventures, the Operating
Partnership contributed approximately $7.5 million of development land to
various newly created limited liability companies. These joint ventures expect
to develop four properties encompassing 435,000 rentable square feet with a
budgeted cost of approximately $61.0 million. The Operating Partnership and
Miller Global each own 50.0% of these joint ventures. In addition, the
Operating Partnership is the sole and exclusive manager and leasing agent for
the properties in all of these joint ventures and receives customary management
fees and leasing commissions. The Operating Partnership has adopted the equity
method of accounting for all of these joint ventures.
As a result of these transactions, the Operating Partnership had
investments accounted for under the equity method of accounting which consisted
of the following at December 31, 2000 and 1999:
2000 1999
Percent owned Percent owned
--------------- --------------
Dallas County Partners ............................. 50.00% 50.00%
Dallas County Partners II .......................... 50.00 50.00
Dallas County Partners III ......................... 50.00 50.00
Fountain Three ..................................... 50.00 50.00
Schweiz-Deutschland-USA DreilanderBeteiligung Objekt
DLF 98/29-Walker Fink-KG .......................... 22.81 22.81
Dreilander-Fonds 97/26 and 99/32 ................... 47.00 --
RRHWoods, LC ....................................... 50.00 50.00
Highwoods-Markel Assoc., LLC ....................... 50.00 50.00
MG - HIW, LLC ...................................... 20.00 --
MG - HIW Peachtree Corners III, LLC ................ 50.00 --
MG - HIW Rocky Point, LLC .......................... 50.00 --
MG - HIW Metrowest I, LLC .......................... 50.00 --
MG - HIW Metrowest II, LLC ......................... 50.00 --
Selected aggregate financial data for unconsolidated affiliates for 2000
and 1999 is presented below:
2000 1999
----------- -----------
(in thousands)
Total assets ........................................ $818,041 $246,830
Total liabilities ................................... $549,547 $333,034
Net income .......................................... $ 9,453 $ 3,786
F-13
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable consisted of the following at December 31,
2000 and 1999:
2000 1999
------------- ------------
(in thousands)
Mortgage notes payable:
9.0% mortgage note due 2005 ................... $ 37,697 $ 38,400
8.1% mortgage note due 2005 ................... 29,328 29,914
8.2% mortgage note due 2007 ................... 71,183 42,167
7.8% mortgage note due 2009 ................... 92,840 94,024
7.9% mortgage note due 2009 ................... 92,861 94,027
7.8% mortgage note due 2010 ................... 136,836 --
8.0% mortgage notes due 2013 .................. -- 59,064
6.0% to 10.5% mortgage notes due between
2000 and 2022 ................................ 110,736 166,080
Industrial Revenue Bonds due 2015 ............. 37,000 37,000
Variable rate mortgage note due 2001 .......... 8,199 --
Variable rate mortgage notes due 2021 ......... -- 1,889
---------- ----------
616,680 562,565
---------- ----------
Unsecured indebtedness:
6.75% notes due 2003 .......................... $ 100,000 $ 100,000
8.0% notes due 2003 ........................... 146,500 150,000
7.0% notes due 2006 ........................... 110,000 110,000
7.125% notes due 2008 ......................... 100,000 100,000
8.125% notes due 2009 ......................... 50,000 50,000
7.19% notes due 2011 .......................... 100,000 100,000
6.835% notes due 2013 ......................... 125,000 125,000
7.5% notes due 2018 ........................... 200,000 200,000
Variable rate note due 2002 ................... 19,839 20,552
Revolving loan due 2001 and 2003 .............. -- 201,000
---------- ----------
951,339 1,156,552
---------- ----------
Total ...................................... $1,568,019 $1,719,117
========== ==========
Secured Indebtedness
Mortgage notes payable were secured by real estate with an aggregate
carrying value of $1.0 billion at December 31, 2000.
Unsecured Indebtedness
On June 24, 1997, the Operating Partnership sold $100.0 million of
Exercisable Put Option Notes due June 15, 2011 (the "Put Option Notes"). The
Put Option Notes bear an interest rate of 7.19%. Under certain circumstances,
the Put Option Notes could become subject to early maturity on June 15, 2004.
On February 2, 1998, the Operating Partnership sold $125.0 million of
MandatOry Par Put Remarketed Securities ("MOPPRS") due February 1, 2013. The
MOPPRS bear an interest rate of 6.835%. Under certain circumstances, the MOPPRS
could become subject to early maturity on January 31, 2003.
On December 14, 2000, the Operating Partnership obtained its new $300.0
million revolving loan (the "Revolving Loan") from a group of 10 lender banks.
The Revolving Loan matures in December 2003
F-14
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. MORTGAGES AND NOTES PAYABLE -- (Continued)
and replaces the Operating Partnership's previous $450.0 million revolving
credit facility. The Revolving Loan carries an interest rate based upon the
Operating Partnership's senior unsecured credit ratings. As a result, interest
would currently accrue on borrowings under the Revolving Loan at an average
rate of LIBOR plus 85 basis points. The Revolving Loan also includes a $150.0
million competitive bid sub-facility. At December 31, 2000, the Operating
Partnership had not borrowed any funds under the Revolving Loan. The terms of
the Revolving Loan require the Operating Partnership to pay an annual facility
fee equal to .20% of the aggregate amount of the Revolving Loan and require
compliance with certain financial covenants. At December 31, 2000, the
Operating Partnership was in compliance with these covenants.
Interest Rate Hedge Contracts
To meet in part its long-term liquidity requirements, the Operating
Partnership borrows funds at a combination of fixed and variable rates.
Borrowings under the Revolving Loan bear interest at variable rates. The
Operating Partnership's long-term debt, which consists of long-term financings
and the issuance of debt securities, typically bears interest at fixed rates.
In addition, the Operating Partnership has assumed fixed rate and variable rate
debt in connection with acquiring properties. The Operating Partnership's
interest rate risk management objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower its overall borrowing costs. To
achieve these objectives, from time to time the Operating Partnership enters
into interest rate hedge contracts such as collars, swaps, caps and treasury
lock agreements in order to mitigate its interest rate risk with respect to
various debt instruments. The Operating Partnership does not hold or issue
these derivative contracts for trading or speculative purposes.
The following table sets forth information regarding the Operating
Partnership's interest rate hedge contracts as of December 31, 2000 ($ in
thousands):
Notional Maturity Fixed Fair Market
Type of Hedge Amount Date Reference Rate Rate Value
- --------------- --------- ----------- ----------------------- -------------- ------------
Swap $19,839 6/10/02 1-Month LIBOR + 0.75% 6.95% $(125)
Collar 80,000 10/01/01 1-Month LIBOR 5.60-6.25% (2)
Cap 8,434 6/15/01 1-Month LIBOR 7.75% --
The interest rate on all of the Operating Partnership's variable rate debt
is adjusted at one- and three-month intervals, subject to settlements under
these contracts. Net (receipts)/payments made to counterparties under interest
rate hedge contracts were ($206,894), $304,720 and $48,000 in 2000, 1999 and
1998, respectively, and were recorded as (decreases)/increases to interest
expense.
In addition, the Operating Partnership is exposed to certain losses in the
event of non-performance by the counterparties under the interest rate hedge
contracts. The Operating Partnership expects the counterparties, which are
major financial institutions, to perform fully under these contracts. However,
if the counterparties were to default on their obligations under the interest
rate hedge contracts, the Operating Partnership could be required to pay the
full rates on its debt, even if such rates were in excess of the rates in the
contracts.
F-15
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. MORTGAGES AND NOTES PAYABLE -- (Continued)
Other Information
The aggregate maturities of the mortgage and notes payable at December 31,
2000 are as follows:
Year of Maturity Principal Amount
-------------------------------- -----------------
(in thousands)
2001 ......................... $ 19,226
2002 ......................... 58,455
2003 ......................... 262,031
2004 ......................... 13,957
2005 ......................... 80,944
Thereafter ................... 1,133,406
----------
$1,568,019
==========
Total interest capitalized was approximately $23,669,000, $29,147,000 and
$17,968,000 in 2000, 1999 and 1998, respectively.
4. EMPLOYEE BENEFIT PLANS
Management Compensation Program
The executive officers of the Company, which is the general partner of the
Operating Partnership, participate in an annual cash incentive bonus program
whereby they are eligible for cash bonuses based on a percentage of their
annual base salary as of the prior December. Each executive's target level
bonus is determined by competitive analysis and the executive's ability to
influence overall performance of the Company and, assuming certain levels of
the Company's performance, ranges from 40% to 85% of base salary depending on
position in the Company. The eligible bonus percentage for each executive is
determined by a weighted average of the Company's actual performance versus its
annual plan using the following measures: return on invested capital; growth in
funds from operations ("FFO") per share; property level cash flow as a
percentage of plan; general and administrative expenses as a percentage of
revenue; and growth in same store net operating income. To the extent this
weighted average is less than or exceeds the Company's targeted performance
level, the bonus percentage paid is proportionally reduced or increased on a
predetermined scale. Depending on the Company's performance, annual incentive
bonuses could range from zero to 200% of an executive's target level bonus.
Bonuses are accrued in the year earned and are included in accrued expenses in
the Consolidated Balance Sheets.
Beginning on January 1, 1999, the Company established a Shareholder Value
Plan which allows executive officers to participate in a long term incentive
plan which includes annual grants of stock options and restricted shares. The
mix of awards varies by position in the Company. The stock options vest ratably
over four years. The restricted shares vest 50% after three years and 50% after
five years. The awards are recorded at market value on the date of grant as
unearned compensation expense and amortized over the restriction periods.
Generally, recipients are eligible to receive dividends on restricted stock
issued. Restricted stock and annual expense information is as follows:
F-16
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. EMPLOYEE BENEFIT PLANS -- (Continued)
2000
------------
Restricted shares outstanding at January 1 ........... --
Number of restricted shares awarded .................. 112,903
Restricted shares repurchased or cancelled ........... (7,958)
-------
Restricted shares outstanding at December 31 ......... 104,945
=======
Annual expense, net .................................. $561,000
========
Average fair value per share ......................... $ 24.19
========
The Shareholder Value Plan rewards the executive officers of the Company
when the total shareholder returns measured by increases in the market value of
the Common Stock plus the dividends on those shares exceeds a comparable index
of the Company's peers over a three year period. The payout for this program is
determined by the Company's percent change in shareholder return compared to
the composite index of its peer group. If the Company's performance is not at
least 100% of the peer group index, no payout is made. To the extent
performance exceeds the peer group, the payout increases. A new three year plan
cycle beings each year under this program.
In September 2000, the Company established a deferred compensation plan
pursuant to which various executive officers could elect to defer a portion of
the compensation that would otherwise be paid to the executive officer for
investment in units of phantom stock. The maximum amount any executive officer
can elect to defer for investment in units of phantom stock in any year is 25%
each of his gross base salary and annual incentive bonus. At the end of each
calendar quarter, any executive officer that elects to defer compensation in
such a manner is credited with units of phantom stock at a 15% discount.
Payouts will generally be made five years after the end of the calendar year in
which units of phantom stock were credited.
The Company's obligations to its executive officers are reimbursed by the
Operating Partnership.
401(k) Savings Plan
The Company has a 401(k) savings plan covering substantially all employees
who meet certain age and employment criteria. The Company matches the first 6%
of compensation deferred at the rate of 75% of employee contributions. During
2000, 1999, and 1998, the Company contributed $955,303, $763,319 and $588,000,
respectively, to the 401(k) savings plan. Administrative expenses of the plan
are paid by the Company. The Company's obligations under and related to the
401(k) savings plan are reimbursed by the Operating Partnership.
Employee Stock Purchase Plan
In August 1997, the Company instituted an Employee Stock Purchase Plan for
all active employees. At the end of each three-month offering period, each
participant's account balance is applied to acquire shares of Common Stock at
85% of the market value of the Common Stock, calculated as the lower of the
average closing price on the New York Stock Exchange on the five consecutive
days preceding the first day of the quarter or the five days preceding the last
day of the quarter. A participant may not invest more than $7,500 per quarter.
Employees purchased 55,593 and 29,214 shares of Common Stock under the Employee
Stock Purchase Plan during the years ended December 31, 2000 and 1999,
respectively. With each share of Common Stock issued under the Employee Stock
Purchase Plan, the Operating Partnership issues one Common Unit to the Company
in exchange for the price paid by the employee for the share.
F-17
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. RENTAL INCOME
The Operating Partnership's real estate assets are leased to tenants under
operating leases, substantially all of which expire over the next ten years.
The minimum rental amounts under the leases are generally either subject to
scheduled fixed increases or adjustments based on the Consumer Price Index.
Generally, the leases also require that the tenants reimburse the Operating
Partnership for increases in certain costs above the base year costs.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 2000, are as
follows (in thousands):
2001 ...................................... $ 425,080
2002 ...................................... 394,587
2003 ...................................... 342,600
2004 ...................................... 285,812
2005 ...................................... 229,350
Thereafter ................................ 839,586
----------
$2,517,015
==========
6. RELATED PARTY TRANSACTIONS
The Operating Partnership makes advances to Highwoods Services, Inc. for
working capital purposes. These advances bear interest at a rate of 8% per
annum, are due on demand and totaled $27.1 million at December 31, 2000 and
$15.1 million at December 31, 1999. The Operating Partnership recorded interest
income from these advances of $1.2 million, $1.1 million and $826,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.
On December 8, 1998, the Operating Partnership purchased the Bluegrass
Valley office development project from a limited liability company controlled
by an executive officer and director of the Company for approximately $2.5
million. On July 16, 1999, the Operating Partnership purchased development land
and an option to purchase other development land in the Bluegrass Valley office
development project from the same limited liability company controlled by the
same executive officer and director of the Company for approximately $4.6
million in Common Units.
During 2000, the Operating Partnership sold certain properties
encompassing 2.0 million square feet to an entity controlled by a former
executive officer and director for approximately $169.0 million, consisting of
cash, shares of Common Stock, Common Units and the waiver and/or termination of
certain outstanding obligations existing under various agreements between the
Operating Partnership and such former executive officer and director.
7. PARTNERS' CAPITAL
Distributions
Distributions paid on Common Units (including Redeemable Class A and Class
B Common Units) were $2.25, $2.19 and $2.10 per Common Unit for the years ended
December 31, 2000, 1999 and 1998, respectively.
On January 30, 2001, the Board of Directors declared a Common Unit
distribution of $.57 per Common Unit payable on February 22, 2001, to Common
Unitholders of record on February 9, 2001.
F-18
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. PARTNERS' CAPITAL -- (Continued)
Preferred Units
On February 12, 1997, the Operating Partnership issued 125,000 Series A
Preferred Units to the Company. The Series A Preferred Units are non-voting and
have a liquidation preference of $1,000 per unit for an aggregate liquidation
preference of $125.0 million plus accrued and unpaid distributions. The net
proceeds of the Series A Preferred Units issued were $121.8 million. The
Company is entitled to receive cumulative preferential cash distributions at a
rate of 8 5/8% of the liquidation preference per annum (equivalent to $86.25
per unit). On or after February 12, 2027, the Series A Preferred Units may be
redeemed for cash upon the redemption of the corresponding Series A Preferred
Stock issued by the Company. The redemption price (other than the portion
thereof consisting of accrued and unpaid distributions) is payable solely out
of the sale proceeds of other units, which may include other preferred units.
On September 25, 1997, the Operating Partnership issued 6,900,000 Series B
Preferred Units to the Company. The Series B Preferred Units are non-voting and
have a liquidation preference of $25 per unit for an aggregate liquidation
preference of $172.5 million plus accrued and unpaid distributions. The net
proceeds of the Series B Preferred Units issued were $166.3 million. The
Company is entitled to receive cumulative preferential cash distributions at a
rate of 8% of the liquidation preference per annum (equivalent to $2.00 per
unit). On or after September 25, 2002, the Series B Preferred Units may be
redeemed for cash upon the redemption of the corresponding Series B Preferred
Stock issued by the Company. The redemption price (other than the portion
thereof consisting of accrued and unpaid distributions) is payable solely out
of the sale proceeds of other units, which may include other preferred units.
On April 23, 1998, the Operating Partnership issued 400,000 Series D
Preferred Units to the Company. The Series D Preferred Units are non-voting and
have a liquidation preference of $250 per unit for an aggregate liquidation
preference of $100 million plus accrued and unpaid distributions. The net
proceeds (after underwriting and commission and other offering costs) of the
Series D Preferred Units issued were $96.8 million. The Company is entitled to
receive cumulative preferential cash distributions at a rate of 8% of the
liquidation preference per annum (equivalent to $20.00 per unit). On or after
April 23, 2003, the Series D Preferred Units may be redeemed for cash upon the
redemption of the corresponding Series D Preferred Stock issued by the Company.
The redemption price (other than the portion thereof consisting of accrued and
unpaid distributions) is payable solely out of the sale proceeds of other units,
which may include other preferred units.
8. EARNINGS PER COMMON UNIT
FASB Statement No. 128 replaced the calculation of primary and fully
diluted earnings per Common Unit with basic and diluted earnings per Common
Unit. Unlike primary earnings per Common Unit, basic earnings per Common Unit
excludes any dilutive effects of options, warrants and convertible securities.
Diluted earnings per Common Unit is computed using the weighted average number
of Common Units and the dilutive effect of options, warrants and convertible
securities outstanding, using the "treasury stock" method. Earnings per Common
Unit data are required for all periods for which an income statement or summary
of earnings is presented, including summaries outside the basic financial
statements. All earnings per Common Unit amounts for all periods presented
have, where appropriate, been restated to conform to the FASB Statement 128
requirements.
F-19
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
8. EARNINGS PER COMMON UNIT -- (Continued)
The following table sets forth the computation of basic and diluted
earnings per Common Unit:
2000 1999 1998
----------- ----------- -----------
(in thousands, except per unit amounts)
Numerator:
Income before extraordinary item .............................. $ 158,437 $ 166,926 $ 151,135
Dividends on preferred units .................................. (32,580) (32,580) (30,092)
Extraordinary item -- loss on early extinguishment of debt..... (4,732) (7,341) (387)
--------- --------- ---------
Numerator for basic earnings per Common Unit -- net
income available for Class A Common Unit holders .............. $ 121,125 $ 127,005 $ 120,656
Numerator for diluted earnings per share -- net income
available for Class A Common Unit holders ..................... $ 121,125 $ 127,005 $ 120,656
Denominator:
Denominator for basic earnings per Common
Unit -- weighted-average shares ............................... 67,054 70,182 64,847
Effect of dilutive securities:
Employee stock options ...................................... 161 78 240
Warrants .................................................... 10 8 45
--------- --------- ---------
Dilutive potential Common Units ............................... 171 86 285
Denominator for diluted earnings per Common
Unit -- adjusted weighted average Common Units and
assumed conversions ........................................... 67,225 70,268 65,132
Basic earnings per Common Unit ................................. $ 1.81 $ 1.81 $ 1.86
========= ========= =========
Diluted earnings per Common Unit ............................... $ 1.80 $ 1.81 $ 1.85
========= ========= =========
9. STOCK OPTIONS AND WARRANTS
As of December 31, 2000, 6,000,000 shares of the Company's authorized
Common Stock were reserved for issuance upon the exercise of options under the
Amended and Restated 1994 Stock Option Plan. Options generally vest over a
four- or five-year period beginning with the date of grant.
In 1995, the Financial Accounting Standards Board issued a Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123"). SFAS 123 recommends the use of a fair value based
method of accounting for an employee stock option whereby compensation cost is
measured at the grant date on the fair value of the award and is recognized
over the service period (generally the vesting period of the award). However,
SFAS 123 specifically allows an entity to continue to measure compensation cost
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB 25") so long as pro forma disclosures of net income and
earnings per share are made as if SFAS 123 had been adopted. The Operating
Partnership has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because the Operating Partnership
believes that the models available to estimate the fair value of employee stock
options do not provide a reliable single measure of the fair value of employee
stock options. Moreover, such models required the input of highly subjective
assumptions, which can materially affect the fair value estimates. APB 25
requires the recognition of compensation expense at the date of grant equal to
the difference between the option price and the value of the underlying stock.
Because the exercise price of the employee stock options equals the market
price of the underlying stock on the date of grant, the Operating Partnership
records no compensation expense for the award of employee stock options.
F-20
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. STOCK OPTIONS AND WARRANTS -- (Continued)
Under SFAS 123, a public entity must estimate the fair value of a stock
option by using an option-pricing model that takes into account as of the grant
date the exercise price and expected life of the options, the current price of
the underlying stock and its expected volatility, expected dividends on the
stock, and the risk-free interest rate for the expected term of the option.
SFAS 123 provides examples of possible pricing models and includes the
Black-Scholes pricing model, which the Operating Partnership used to develop
its pro forma disclosures. However, as previously noted, the Operating
Partnership does not believe that such models provide a reliable single measure
of the fair value of employee stock options. Furthermore, the Black-Scholes
model was developed for use in estimating the fair value of traded options that
have no vesting restrictions and are fully transferable, rather than for use in
estimating the fair value of employee stock options subject to vesting and
transferability restrictions.
Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, only options granted subsequent to that date were valued
using this Black-Scholes model. The fair value of the options granted in 2000
was estimated at the dates of grant using the following weighted average
assumptions: risk-free interest rates ranging between 5.78% and 6.67%, dividend
yield of 10.91% and a weighted average expected life of the options of five
years. The fair value of the options granted in 1999 was estimated at the dates
of grant using the following weighted average assumptions: risk-free interest
rates ranging between 4.21% and 6.81%, dividend yield of 10.65% and a weighted
average expected life of the options of five years. The fair value of the
options granted in 1998 was estimated at the dates of grant using the following
weighted average assumptions: risk-free interest rates ranging between 3.29%
and 6.01%, dividend yield of 9.0% and a weighted average expected life of the
options of five years. Had the compensation cost for the stock option plans
been determined based on the fair value at the dates of grant for awards in
2000, 1999 and 1998 consistent with the provisions of SFAS 123, the Operating
Partnership's net income and net income per unit would have decreased to the
pro forma amounts indicated below (dollars in thousands, except per share
amounts):
Year ended
December 31
---------------------------------------------
2000 1999 1998
------------- ------------- -------------
Net income -- as reported ................................... $ 121,125 $ 127,005 $ 120,656
Net income -- pro forma ..................................... $ 118,686 $ 124,673 $ 118,491
Net income per Common Unit -- basic (as reported) ........... $ 1.81 $ 1.81 $ 1.86
Net income per Common Unit -- diluted (as reported) ......... $ 1.80 $ 1.81 $ 1.85
Net income per Common Unit -- basic (pro forma) ............. $ 1.77 $ 1.78 $ 1.83
Net income per Common Unit -- diluted (pro forma) ........... $ 1.77 $ 1.77 $ 1.82
F-21
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. STOCK OPTIONS AND WARRANTS -- (Continued)
The following table summarizes information about stock options outstanding
at December 31, 2000, 1999 and 1998:
Options Outstanding
-----------------------------
Weighted
Average
Number Exercise
of Shares Price
------------ -----------
Balances at December 31, 1997 ......... 3,322,997 $ 30.40
Options granted ....................... 737,754 27.21
Options canceled ...................... (11,800) 31.11
Options exercised ..................... (25,400) 21.98
--------- --------
Balances at December 31, 1998 ......... 4,023,551 29.83
Options granted ....................... 1,091,051 22.24
Options canceled ...................... (614,328) 30.82
Options exercised ..................... (100,840) 19.91
--------- --------
Balances at December 31, 1999 ......... 4,399,434 28.01
Options granted ....................... 1,050,204 20.96
Options canceled ...................... (2,072,453) 32.17
Options exercised ..................... (103,527) 16.87
---------- --------
Balances at December 31, 2000 ......... 3,273,658 $ 23.06
========== ========
Options Exercisable
-----------------------------
Weighted
Average
Number of Exercise
Shares Price
------------ --------------
December 31, 1998 ..................... 1,315,898 $ 26.65
December 31, 1999 ..................... 1,227,004 $ 26.47
December 31, 2000 ..................... 1,242,629 $ 24.45
Exercise prices for options outstanding as of December 31, 2000 ranged
from $9.54 to $35.88. The weighted average remaining contractual life of those
options is 7.5 years. Using the Black-Scholes options valuation model, the
weighted average fair value of options granted during 2000, 1999 and 1998 was
$0.90, $0.68 and $2.98, respectively.
Warrants
In connection with various acquisitions in 1997, 1996 and 1995, the
Company issued warrants to purchase shares of Common Stock. The following table
sets forth information regarding warrants outstanding as of December 31, 2000:
Number of
Warrants Exercise
Date of Issuance Outstanding Price
- ----------------- ------------- ----------
February 1995 ..................... 35,000 $ 21.00
April 1996 ........................ 150,000 $ 28.00
October 1997 ...................... 538,035 $ 32.50
December 1997 ..................... 120,000 $ 34.13
-------
Total ............................. 843,035
=======
F-22
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. STOCK OPTIONS AND WARRANTS -- (Continued)
The warrants granted in February 1995, April 1996 and December 1997 expire
10 years from the respective dates of issuance. All warrants are exercisable
from the date of issuance. The warrants granted in October 1997 do not have an
expiration date. Upon exercise of a warrant, the Company will contribute the
exercise price to the Operating Partnership in exchange for Common Units;
therefore, the Operating Partnership accounts for such warrants as if issued by
the Operating Partnership.
10. COMMITMENTS AND CONTINGENCIES
Lease
Certain properties in the Operating Partnership's wholly owned portfolio
are subject to land leases expiring through 2082. Rental payments on these
leases are adjusted annually based on either the consumer price index or on a
predetermined schedule.
For three properties, the Operating Partnership has the option to purchase
the leased land during the lease term at the greater of 85% of appraised value
or $35,000 per acre.
For one property, the Operating Partnership has the option to purchase the
leased land at any time during the lease term. The purchase price ranges from
$1,800,000 to $2,200,000 depending on the exercise date.
The obligation for future minimum lease payments is as follows (in
thousands):
2001 ............................................... $ 1,236
2002 ............................................... 1,211
2003 ............................................... 1,194
2004 ............................................... 1,194
2005 ............................................... 1,194
Thereafter ......................................... 48,840
-------
$54,869
=======
Litigation
On October 2, 1998, John Flake, a former stockholder of J.C. Nichols
Company, filed a putative class action lawsuit on behalf of himself and the
other former stockholders of J.C. Nichols in the United States District Court
for the District of Kansas against J.C. Nichols, certain of its former officers
and directors and the Company. The complaint asserts claims against J.C.
Nichols and certain named directors and officers of J.C. Nichols for breach of
fiduciary duty to J.C. Nichols' stockholders and to members of the J.C. Nichols
Company Employee Stock Ownership Trust, as well as claims under Section 14(a)
of the Securities Exchange Act of 1934 and Sections 11 and 12(2) of the
Securities Act of 1933 variously against J.C. Nichols, the named directors and
officers of J.C. Nichols and the Company. By order dated June 18, 1999, the
court granted in part and denied in part our motion to dismiss, and the court
thereafter certified the proposed class of plaintiffs with respect to the
remaining claims. By order dated August 28, 2000, the court granted in part and
denied in part defendants' summary judgment motion. Defendants sought
reconsideration of the court's ruling with respect to certain of the securities
claims as to which the court denied their summary judgment motion, and by order
dated January 11, 2001, the court granted in part that reconsideration motion.
On the eve of the trial of this matter, the parties settled all their remaining
claims. The terms of that settlement are now being documented. The Operating
Partnership does not believe the settlement will have a material adverse effect
on its business, financial condition or results of operations.
F-23
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. COMMITMENTS AND CONTINGENCIES -- (Continued)
In addition, the Operating Partnership is a party to a variety of legal
proceedings arising in the ordinary course of its business. The Operating
Partnership believes that it is adequately covered by insurance and
indemnification agreements. Accordingly, none of such proceedings are expected
to have a material adverse effect on the Operating Partnership's business,
financial condition and results of operations.
Contracts
The Operating Partnership has entered into construction contracts totaling
$417.4 million at December 31, 2000. The amounts remaining on these contracts
as of December 31, 2000 totaled $81.5 million.
The Operating Partnership has entered into various contracts under which
it is committed to acquire 97.4 acres of land over a three-year period for an
aggregate purchase price of approximately $11.5 million.
Capital Expenditures
The Operating Partnership presently has no plans for major capital
improvements to the existing properties, other than normal recurring building
improvements, tenant improvements and lease commissions.
Environmental Matters
Substantially all of the Operating Partnership's in-service properties
have been subjected to Phase I environmental assessments (and, in certain
instances, Phase II environmental assessments). Such assessments and/or updates
have not revealed, nor is management aware of, any environmental liability that
management believes would have a material adverse effect on the accompanying
consolidated financial statements.
Employment Agreements
As the Operating Partnership has expanded into new markets, it has sought
to enter into business combinations with local real estate operators with many
years of management and development experience in their respective markets.
Accordingly, in connection with joining the Company as executive officers as a
result of such business combinations, these persons have entered into
employment agreements with the Company. The Operating Partnership reimburses
the Company with respect to its obligations under such agreements.
11. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair values were determined by
management using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data and
develop estimated fair values. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts that the Operating Partnership could
realize upon disposition of the financial instruments. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair values. The carrying amounts and estimated fair values of
the Operating Partnership's financial instruments at December 31, 2000 were as
follows (in thousands):
Carrying Fair
Amount Value
------------- -------------
(in thousands)
Cash and cash equivalents ............. $ 102,486 $ 102,486
Accounts and notes receivable ......... $ 95,888 $ 95,888
Mortgages and notes payable ........... $1,568,019 $1,592,861
Interest rate hedge contracts ......... $ 554 $ (127)
F-24
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
11. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- (Continued)
The fair values for the Operating Partnership's fixed rate mortgages and
notes payable were estimated using discounted cash flow analysis, based on the
Operating Partnership's estimated incremental borrowing rate at December 31,
2000, for similar types of borrowing arrangements. The carrying amounts of the
Operating Partnership's variable rate borrowings approximate fair value.
The fair values of the Operating Partnership's interest rate hedge
contracts represent the estimated amount the Operating Partnership would
receive or pay to terminate or replace the financial instruments at current
market rates.
Disclosures about the fair value of financial instruments are based on
relevant information available to the Operating Partnership at December 31,
2000. Although management is not aware of any factors that would have a
material effect on the fair value amounts reported herein, such amounts have
not been revalued since that date and current estimates of fair value may
significantly differ from the amounts presented herein.
12. ACQUISITION AND DISPOSITIONS
On July 13, 1998, the Company completed its acquisition of J.C. Nichols
Company ("JCN"), a Missouri real estate operating company, pursuant to a merger
agreement dated December 22, 1997 and amended on April 29, 1998. The aggregate
consideration totaled $544.0 million and consisted of the issuance of
approximately 5.63 million shares of the Company's Common Stock, the assumption
of approximately $229.0 million of debt, approximately $15.0 million in
transaction costs and a cash payment of approximately $120.0 million, net of
cash acquired of approximately $59.0 million. The merger was accounted for
under the purchase method of accounting. The results of operations of JCN have
been included in the Operating Partnership's financial statements for the
period from July 13, 1998 to December 31, 1998. Unaudited pro forma information
is provided in Note 13 as if the acquisition of JCN had occurred at the
beginning of 1998.
During 1999, the Operating Partnership sold approximately 3.3 million
rentable square feet of office and industrial properties, 49 acres of
development land in the South Florida area and 36 in-service central Florida
office properties encompassing 2.1 million rentable square feet for gross
proceeds of approximately $488.3 million. In addition, the Operating
Partnership sold approximately 2.9 million rentable square feet of office and
industrial properties for gross proceeds of $208.1 million. The Operating
Partnership recorded a gain of $8.0 million related to these dispositions.
In addition to the properties sold or contributed to the joint ventures,
during 2000, as discussed in Note 2, the Operating Partnership sold
approximately 4.8 million rentable square feet of office and industrial
properties and 272.0 acres of development land for gross proceeds of $369.5
million. Since December 31, 2000, the Operating Partnership has sold 76,000
square feet of office properties and 277 apartment units for gross proceeds of
$46.8 million.
F-25
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
13. SUPPLEMENTAL PRO FORMA INFORMATION (UNAUDITED)
The following unaudited pro forma information has been prepared assuming
the acquisition of J.C. Nichols Company occurred as of January 1, 1998 (in
thousands, except per share amounts):
Pro Forma Year Ended
December 31, 1998
---------------------
Revenues ..................................... $ 558,090
Net income before extraordinary item ......... $ 158,084
Net income ................................... $ 157,697
Net income per share -- basic ................ $ 1.97
Net income per share -- diluted .............. $ 1.96
The pro forma information is not necessarily indicative of what the
Operating Partnership's results of operations would have been if the
transaction had occurred at the beginning of the period presented.
Additionally, the pro forma information does not purport to be indicative of
the Operating Partnership's results of operations for future periods.
14. SEGMENT INFORMATION
The sole business of the Operating Partnership is the acquisition,
development and operation of rental real estate properties. The Operating
Partnership operates office, industrial and retail properties and apartment
units. There are no material inter-segment transactions.
The Operating Partnership's chief operating decision maker ("CDM")
assesses and measures operating results based upon property level net operating
income. The operating results for the individual assets within each property
type have been aggregated since the CDM evaluates operating results and
allocates resources on a property-by-property basis within the various property
types.
F-26
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
14. SEGMENT INFORMATION -- (Continued)
The accounting policies of the segments are the same as those described in
Note 1. Further, all operations are within the United States and no tenant
comprises more than 10% of consolidated revenues. The following table
summarizes the rental income, net operating income and assets for each
reportable segment for the years ended December 31, 2000, 1999 and 1998 (in
thousands):
2000 1999 1998
------------- ------------- -----------
Rental Income:
Office segment ................................................. $ 442,454 $ 464,450 $427,530
Industrial segment ............................................. 45,758 51,168 48,134
Retail segment ................................................. 36,127 32,799 13,922
Apartment segment .............................................. 17,474 16,822 9,374
---------- ---------- --------
Total Rental Income ............................................ $ 541,813 $ 565,239 $498,960
========== ========== ========
Net Operating Income:
Office segment ................................................. $ 311,130 $ 318,031 $291,624
Industrial segment ............................................. 38,269 42,361 39,392
Retail segment ................................................. 25,054 21,685 8,869
Apartment segment .............................................. 10,190 9,486 4,864
---------- ---------- --------
Total Net Operating Income ..................................... $ 384,643 $ 391,563 $344,749
Reconciliation to income before minority interest and
extraordinary item:
Equity in income of unconsolidated affiliates .................. 3,112 633 (207)
Cost of unsuccessful transactions .............................. -- (1,500) (146)
Gain on disposition of assets .................................. 4,657 7,997 1,716
Interest and other income ...................................... 17,000 14,002 11,009
Interest expense ............................................... (108,795) (111,385) (93,959)
General and administrative expenses ............................ (23,092) (22,345) (20,630)
Depreciation and amortization .................................. (119,088) (112,039) (91,397)
---------- ---------- --------
Income before minority interest and extraordinary item ......... $ 158,437 $ 166,926 $151,135
========== ========== ========
At December 31,
---------------------------------------------
2000 1999 1998
------------- ------------- -------------
Total Assets:
Office segment ................................................ $2,638,007 $2,995,360 $3,235,815
Industrial segment ............................................ 299,660 435,022 495,675
Retail segment ................................................ 273,023 258,853 239,555
Apartment segment ............................................. 118,144 118,549 139,093
Corporate and other ........................................... 332,203 164,295 137,562
---------- ---------- ----------
Total Assets .................................................. $3,661,037 $3,972,079 $4,247,700
========== ========== ==========
15. SUBSEQUENT EVENTS (UNAUDITED)
From January 1, 2001 to March 8, 2001, the Company repurchased 2.6 million
shares of Common Stock and Common Units at a weighted average price of $25.19
per share/unit for an aggregate purchase price of approximately $65.1 million.
F-27
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
15. SUBSEQUENT EVENTS (UNAUDITED) -- (Continued)
In 1999, legislation affecting REITs was enacted that became effective
January 1, 2001. As part of this legislation, REITs are permitted to own,
directly or indirectly, taxable subsidiaries through which the REIT can provide
non-customary services to its tenants without tainting the rents received by
the REIT. Highwoods Services, Inc, was converted, tax-free, into a taxable REIT
subsidiary on January 1, 2001.
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Selected quarterly financial data for the years ended December 31, 2000,
and 1999 are as follows (in thousands except per unit amounts):
For the year ended December 31, 2000
---------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Total
--------------- ---------------- --------------- ---------------- ---------
Total Revenue ............................. $140,282 $144,114 $137,664 $139,865 $561,925
-------- -------- -------- -------- --------
Income before cost of unsuccessful
transactions, gain/(loss) on disposition
of assets and extraordinary item ........ 40,828 40,966 36,115 35,871 153,780
Gain/(loss) on disposition of assets ...... 6,946 (26,062) 10,557 13,216 4,657
-------- -------- -------- -------- --------
Income before extraordinary item .......... 47,774 14,904 46,672 49,087 158,437
Extraordinary Item-loss on early
extinguishment of debt .................. (195) (839) (3,310) (388) (4,732)
-------- -------- -------- -------- --------
Net income ................................ 47,579 14,065 43,362 48,699 153,705
Dividends on preferred units .............. (8,145) (8,145) (8,145) (8,145) (32,580)
-------- -------- -------- -------- --------
Net income available for Class A common
units ................................... $ 39,434 $ 5,920 $35,217 $40,554 $121,125
======== ======== ======== ======== ========
Net income per common unit-basic:
Income before extraordinary item ........ $ 0.57 $ 0.10 $ 0.58 $ 0.63 $ 1.88
Extraordinary item -- loss on early
extinguishment of debt ................. -- (0.01) (0.05) (0.01) (0.07)
-------- -------- -------- -------- --------
Net income .............................. $ 0.57 $ 0.09 $ 0.53 $ 0.62 $ 1.81
======== ======== ======== ======== ========
Net income per common unit-diluted:
Income before extraordinary item ........ $ 0.57 $ 0.10 $ 0.58 $ 0.62 $ 1.87
Extraordinary item -- loss on early
extinguishment of debt ................. -- (0.01) (0.05) (0.01) (0.07)
-------- -------- -------- -------- --------
Net income .............................. $ 0.57 $ 0.09 $ 0.53 $ 0.61 $ 1.80
======== ======== ======== ======== ========
F-28
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED): -- (Continued)
For the year ended December 31, 1999
---------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Total
--------------- ---------------- --------------- ---------------- ---------
Total Revenue ............................. $150,586 $146,255 $139,847 $143,186 $579,874
-------- -------- -------- -------- ---------
Income before cost of unsuccessful
transactions, gain on disposition of
assets, and extraordinary item .......... $ 40,804 $ 40,140 $42,780 $36,705 $160,429
Cost of unsuccessful transactions ......... -- -- -- (1,500) (1,500)
Gain on disposition of assets ............. 569 1,524 163 5,741 7,997
-------- -------- -------- -------- ---------
Income before extraordinary item .......... 41,373 41,664 42,943 40,946 166,926
Extraordinary Item-loss on early
extinguishment of debt .................. -- (777) (4,997) (1,567) (7,341)
-------- -------- -------- -------- ---------
Net Income ................................ 41,373 40,887 37,946 39,379 159,585
Dividends on preferred units .............. (8,145) (8,145) (8,145) (8,145) (32,580)
-------- -------- -------- -------- ---------
Net income available for Class A common
units ................................... $ 33,228 $ 32,742 $29,801 $31,234 $127,005
======== ======== ======== ======== =========
Net income per common unit-basic:
Income before extraordinary item ........ $ 0.48 $ 0.48 $ 0.49 $ 0.46 $ 1.91
Extraordinary item -- loss on early
extinguishment of debt ................. -- (0.01) (0.07) (0.02) (0.10)
-------- -------- -------- -------- ---------
Net Income .............................. $ 0.48 $ 0.47 $ 0.42 $ 0.44 $ 1.81
======== ======== ======== ======== =========
Net income per common unit-diluted:
Income before extraordinary item ........ $ 0.48 $ 0.48 $ 0.49 $ 0.46 $ 1.91
Extraordinary item -- loss on early
extinguishment of debt ................. -- (0.01) (0.07) (0.02) (0.10)
-------- -------- -------- -------- ---------
Net Income .............................. $ 0.48 $ 0.47 $ 0.42 $ 0.44 $ 1.81
======== ======== ======== ======== =========
F-29
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(In thousands)
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Asheville, NC
Ridgefield I -- 636 3,607 (636) (3,607)
Ridgefield II -- 910 5,157 (910) (5,157)
Ridgefield III -- 743 4,722 (743) (4,722)
Ridgefield IV -- -- -- 791 --
Atlanta, GA
Two Point Royal -- 1,793 14,951 -- 294
400 North Business Park -- 979 6,112 -- 189
50 Glenlake -- 2,500 20,000 -- 242
6348 Northeast Expressway 1,319 277 1,629 -- 105
6438 Northeast Expressway 1,495 181 2,225 -- 77
Bluegrass Lakes -- 816 3,775 -- (11)
Bluegrass Place 1 -- 491 2,016 -- 25
Bluegrass Place 2 -- 412 2,529 -- 41
Bluegrass Valley 1 -- 1,363 -- -- 3,641
Bluegrass Land Site V10 -- 1,812 -- -- --
Bluegrass Land Site V14 -- 1,419 -- -- --
1700 Century Court -- -- 2,456 -- --
1700 Century Circle -- 1,115 3,148 -- 514
1800 Century Boulevard -- 1,441 28,939 -- 608
1875 Century Boulevard -- -- 8,790 -- 376
1900 Century Boulevard -- -- 4,721 -- 605
2200 Century Parkway -- -- 14,274 -- 1,302
2400 Century Center -- -- 14,970 -- 20
2600 Century Parkway -- -- 10,254 -- 1,058
2635 Century Parkway -- -- 21,083 -- 1,268
2800 Century Parkway -- -- 19,963 -- 385
Chattahoochee Avenue -- 248 1,817 -- 241
Chastain Place I -- 472 3,011 -- 924
Chastain Place II -- 607 2,097 -- 8
Chastain Place III -- 539 1,662 -- (9)
Corporate Lakes Distribution
Center -- 1,275 7,227 -- 503
Cosmopolitan North -- 2,855 4,155 -- 900
Century Plaza 1 -- 1,290 8,425 -- 164
Century Plaza 2 -- 1,380 7,589 -- 186
Century Plaza 3 -- 570 -- -- --
Deerfield Land -- 879 -- (879) --
Deerfield 1 -- 1,194 2,612 (1,194) (2,612)
EKA Chemical -- 609 9,883 -- 3
1035 Fred Drive -- 270 1,239 -- 31
1077 Fred Drive -- 384 1,191 (384) (1,191)
5125 Fulton Industrial Blvd -- 578 3,116 -- 92
Fulton Corporate Center -- 542 2,042 (542) (2,042)
10 Glenlake -- 3,021 30,966 (3,021) (30,856)
Gwinnett Distribution Center -- 1,128 5,943 -- 399
Kennestone Corporate
Center -- 518 4,874 -- 247
Lavista Business Park -- 821 5,244 -- 619
Norcross, I, II -- 326 1,979 -- 81
Nortel -- 3,342 32,109 -- 14
Newpoint Place I -- 825 3,799 -- 20
Newpoint Place II -- 1,436 3,321 47 556
Newpoint Place III -- 661 1,866 -- 694
Newpoint Place -- 187 -- 3,039 10
Oakbrook I (6) 873 4,948 -- 144
Oakbrook II (6) 1,579 8,388 -- 1,199
Oakbrook III (6) 1,480 8,388 -- 220
Oakbrook IV (6) 953 5,400 -- 154
Oakbrook V (6) 2,206 12,501 -- 348
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
----------- -------- -------------- --------- -------------- -------------- -------------
Asheville, NC
Ridgefield I -- -- -- -- 1987 5-40 yrs.
Ridgefield II -- -- -- -- 1989 5-40 yrs.
Ridgefield III -- -- -- -- 1998 5-40 yrs.
Ridgefield IV 791 -- 791 -- N/A N/A
Atlanta, GA
Two Point Royal 1,793 15,245 17,038 1,210 1997 5-40 yrs.
400 North Business Park 979 6,301 7,280 619 1985 5-40 yrs.
50 Glenlake 2,500 20,242 22,742 1,648 1997 5-40 yrs.
6348 Northeast Expressway 277 1,734 2,011 170 1978 5-40 yrs.
6438 Northeast Expressway 181 2,302 2,483 230 1981 5-40 yrs.
Bluegrass Lakes 816 3,764 4,580 301 1999 5-40 yrs.
Bluegrass Place 1 491 2,041 2,532 174 1995 5-40 yrs.
Bluegrass Place 2 412 2,570 2,982 218 1996 5-40 yrs.
Bluegrass Valley 1 1,363 3,641 5,004 87 2000 5-40 yrs.
Bluegrass Land Site V10 1,812 -- 1,812 -- 1999 5-40 yrs.
Bluegrass Land Site V14 1,419 -- 1,419 -- 1999 5-40 yrs.
1700 Century Court -- 2,456 2,456 3 1983 5-40 yrs.
1700 Century Circle 1,115 3,662 4,777 552 1972 5-40 yrs.
1800 Century Boulevard 1,441 29,547 30,988 2,997 1975 5-40 yrs.
1875 Century Boulevard -- 9,166 9,166 961 1976 5-40 yrs.
1900 Century Boulevard -- 5,326 5,326 677 1971 5-40 yrs.
2200 Century Parkway -- 15,576 15,576 1,828 1971 5-40 yrs.
2400 Century Center -- 14,990 14,990 1,747 1998 5-40 yrs.
2600 Century Parkway -- 11,312 11,312 1,122 1973 5-40 yrs.
2635 Century Parkway -- 22,351 22,351 2,382 1980 5-40 yrs.
2800 Century Parkway -- 20,348 20,348 2,016 1983 5-40 yrs.
Chattahoochee Avenue 248 2,058 2,306 318 1970 5-40 yrs.
Chastain Place I 472 3,935 4,407 721 1997 5-40 yrs.
Chastain Place II 607 2,105 2,712 292 1998 5-40 yrs.
Chastain Place III 539 1,653 2,192 182 1999 5-40 yrs.
Corporate Lakes Distribution
Center 1,275 7,730 9,005 928 1988 5-40 yrs.
Cosmopolitan North 2,855 5,055 7,910 738 1980 5-40 yrs.
Century Plaza 1 1,290 8,589 9,879 294 1981 5-40 yrs.
Century Plaza 2 1,380 7,775 9,155 257 1984 5-40 yrs.
Century Plaza 3 570 -- 570 -- 1984 5-40 yrs.
Deerfield Land -- -- -- -- N/A N/A
Deerfield 1 -- -- -- -- 1999 5-40 yrs.
EKA Chemical 609 9,886 10,495 690 1998 5-40 yrs.
1035 Fred Drive 270 1,270 1,540 126 1973 5-40 yrs.
1077 Fred Drive -- -- -- -- 1973 5-40 yrs.
5125 Fulton Industrial Blvd 578 3,208 3,786 337 1973 5-40 yrs.
Fulton Corporate Center -- -- -- -- 1973 5-40 yrs.
10 Glenlake -- 110 110 -- 1998 5-40 yrs.
Gwinnett Distribution Center 1,128 6,342 7,470 689 1991 5-40 yrs.
Kennestone Corporate
Center 518 5,121 5,639 508 1985 5-40 yrs.
Lavista Business Park 821 5,863 6,684 679 1973 5-40 yrs.
Norcross, I, II 326 2,060 2,386 206 1970 5-40 yrs.
Nortel 3,342 32,123 35,465 2,241 1998 5-40 yrs.
Newpoint Place I 825 3,819 4,644 707 1998 5-40 yrs.
Newpoint Place II 1,483 3,877 5,360 153 1999 5-40 yrs.
Newpoint Place III 661 2,560 3,221 302 1998 5-40 yrs.
Newpoint Place 3,226 10 3,236 -- N/A N/A
Oakbrook I 873 5,092 5,965 597 1981 5-40 yrs.
Oakbrook II 1,579 9,587 11,166 1,430 1983 5-40 yrs.
Oakbrook III 1,480 8,608 10,088 1,069 1984 5-40 yrs.
Oakbrook IV 953 5,554 6,507 636 1985 5-40 yrs.
Oakbrook V 2,206 12,849 15,055 1,559 1985 5-40 yrs.
F-30
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Oakbrook Summitt 4,497 950 6,572 -- 447
Oxford Lake Business Center -- 855 7,014 -- 99
Peachtree Corners Land -- 1,394 -- (386) --
Peachtree Corners I -- 1,923 5,100 (1,923) (5,100)
Peachtree Corners II -- 1,392 4,482 (1,392) (4,482)
Southside Distribution
Center -- 810 1,219 -- 3,370
Highwoods Center I
Tradeport -- 305 3,299 -- 17
HIW Center II at Tradeport -- 635 3,474 -- 768
Atlanta Tradeport -- 6,694 -- (660) 23
Tradeport I -- 557 2,669 -- 173
Tradeport II -- 557 3,456 -- 57
Tradeport III -- -- -- 668 3,812
Baltimore, MD
Sportsman Club -- 15,291 -- 8,797 --
Eakin & Smith -- -- -- 2,692 23,981
Charlotte, NC
4101 Stuart Andrew
Boulevard -- 70 510 -- 254
4105 Stuart Andrew
Boulevard -- 26 189 -- 22
4109 Stuart Andrew
Boulevard -- 87 636 -- 65
4201 Stuart Andrew
Boulevard -- 110 809 -- 58
4205 Stuart Andrew
Boulevard -- 134 979 -- 60
4209 Stuart Andrew
Boulevard -- 91 665 -- 80
4215 Stuart Andrew
Boulevard -- 133 978 -- 74
4301 Stuart Andrew
Boulevard -- 232 1,702 -- 121
4321 Stuart Andrew
Boulevard -- 73 534 -- 41
4601 Park Square -- 2,601 7,802 -- 270
Alston & Bird -- 2,362 5,379 4 40
First Citizens Building -- 647 5,528 -- 493
Twin Lakes Distribution
Center -- 2,816 6,570 -- 1
Mallard Creek I -- 1,248 4,142 -- 143
Mallard Creek III -- 845 4,762 -- 82
Mallard Creek IV -- 348 1,152 -- 3
Mallard Creek V -- 1,665 8,738 -- 1,461
Mallard Creek VI -- 834 -- -- --
NationsFord Business Park -- 1,206 -- (1,206) --
Oakhill Land -- 2,796 -- -- --
Oak Hill Business Park
English (6) 750 4,248 -- 93
Oak Hill Business Park Laurel (6) 471 2,671 -- 398
Oak Hill Business Park+B150
Live Oak -- 1,403 5,611 -- 611
Oak Hill Business Park
Scarlett (6) 1,073 6,078 -- 446
Oak Hill Business Park Twin
Oak (6) 1,243 7,044 -- 634
Oak Hill Business Park
Willow (6) 442 2,505 -- 880
Oak Hill Business Park Water (6) 1,623 9,196 -- 829
Pinebrook -- 846 4,607 -- 272
Parkway Plaza Building 1 -- 1,110 4,741 -- 670
Parkway Plaza Building 2 -- 1,694 6,777 -- 1,227
Parkway Plaza Building 3 (3) 1,570 6,282 -- 532
Parkway Plaza Building 6 -- -- 2,438 -- 526
Parkway Plaza Building 7 -- -- 4,648 -- 237
Parkway Plaza Building 8 -- -- 4,698 -- 203
Parkway Plaza Building 9 -- -- 6,008 -- 28
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
- ------------------------------- -------- -------------- --------- -------------- -------------- -------------
Oakbrook Summitt 950 7,019 7,969 781 1981 5-40 yrs.
Oxford Lake Business Center 855 7,113 7,968 740 1985 5-40 yrs.
Peachtree Corners Land 1,008 -- 1,008 -- N/A N/A
Peachtree Corners I -- -- -- -- 1999 5-40 yrs.
Peachtree Corners II -- -- -- -- 1999 5-40 yrs.
Southside Distribution
Center 810 4,589 5,399 451 1988 5-40 yrs.
Highwoods Center I
Tradeport 305 3,316 3,621 346 1999 5-40 yrs.
HIW Center II at Tradeport 635 4,242 4,877 258 1999 5-40 yrs.
Atlanta Tradeport 6,034 23 6,057 -- N/A N/A
Tradeport I 557 2,842 3,399 243 1999 5-40 yrs.
Tradeport II 557 3,513 4,070 333 1999 5-40 yrs.
Tradeport III 668 3,812 4,480 8 1999 5-40 yrs.
Baltimore, MD
Sportsman Club 24,088 -- 24,088 -- N/A N/A
Eakin & Smith 2,692 23,981 26,673 467 1998 5-40 yrs.
Charlotte, NC
4101 Stuart Andrew
Boulevard 70 764 834 224 1984 5-40 yrs.
4105 Stuart Andrew
Boulevard 26 211 237 43 1984 5-40 yrs.
4109 Stuart Andrew
Boulevard 87 701 788 109 1984 5-40 yrs.
4201 Stuart Andrew
Boulevard 110 867 977 144 1982 5-40 yrs.
4205 Stuart Andrew
Boulevard 134 1,039 1,173 165 1982 5-40 yrs.
4209 Stuart Andrew
Boulevard 91 745 836 127 1982 5-40 yrs.
4215 Stuart Andrew
Boulevard 133 1,052 1,185 173 1982 5-40 yrs.
4301 Stuart Andrew
Boulevard 232 1,823 2,055 286 1982 5-40 yrs.
4321 Stuart Andrew
Boulevard 73 575 648 87 1982 5-40 yrs.
4601 Park Square 2,601 8,072 10,673 567 1972 5-40 yrs.
Alston & Bird 2,366 5,419 7,785 396 1965 5-40 yrs.
First Citizens Building 647 6,021 6,668 1,141 1989 5-40 yrs.
Twin Lakes Distribution
Center 2,816 6,571 9,387 487 1991 5-40 yrs.
Mallard Creek I 1,248 4,285 5,533 338 1986 5-40 yrs.
Mallard Creek III 845 4,844 5,689 330 1990 5-40 yrs.
Mallard Creek IV 348 1,155 1,503 76 1993 5-40 yrs.
Mallard Creek V 1,665 10,199 11,864 460 1999 5-40 yrs.
Mallard Creek VI 834 -- 834 -- N/A N/A
NationsFord Business Park -- -- -- -- N/A N/A
Oakhill Land 2,796 -- 2,796 -- N/A N/A
Oak Hill Business Park
English 750 4,341 5,091 500 1984 5-40 yrs.
Oak Hill Business Park Laurel 471 3,069 3,540 435 1984 5-40 yrs.
Oak Hill Business Park+B150
Live Oak 1,403 6,222 7,625 898 1989 5-40 yrs.
Oak Hill Business Park
Scarlett 1,073 6,524 7,597 808 1982 5-40 yrs.
Oak Hill Business Park Twin
Oak 1,243 7,678 8,921 911 1985 5-40 yrs.
Oak Hill Business Park
Willow 442 3,385 3,827 619 1982 5-40 yrs.
Oak Hill Business Park Water 1,623 10,025 11,648 1,430 1985 5-40 yrs.
Pinebrook 846 4,879 5,725 467 1986 5-40 yrs.
Parkway Plaza Building 1 1,110 5,411 6,521 758 1982 5-40 yrs.
Parkway Plaza Building 2 1,694 8,004 9,698 1,667 1983 5-40 yrs.
Parkway Plaza Building 3 1,570 6,814 8,384 1,111 1984 5-40 yrs.
Parkway Plaza Building 6 -- 2,964 2,964 591 1996 5-40 yrs.
Parkway Plaza Building 7 -- 4,885 4,885 625 1985 5-40 yrs.
Parkway Plaza Building 8 -- 4,901 4,901 617 1986 5-40 yrs.
Parkway Plaza Building 9 -- 6,036 6,036 765 1984 5-40 yrs.
F-31
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Parkway Plaza Building 10 -- -- 2,328 160 217
Parkway Plaza Bldg 12 -- 112 1,489 -- 265
Parkway Plaza Bldg 14 -- 483 6,077 -- 440
Columbia, SC
Center Point I -- 1,313 7,441 -- 99
Center Point II -- 1,183 8,724 1 12
Center Point V -- 265 1,279 -- 330
Center Point VI -- 265 -- -- --
Fontaine I -- 1,219 6,907 -- 326
Fontaine II -- 941 5,335 -- 778
Fontaine III -- 853 4,833 -- 87
Fontaine V -- 395 2,237 -- 3
Piedmont Triad, NC
Concourse Center 1 -- 946 7,646 180 63
ECPI -- 431 2,522 -- --
Bissell Land -- 990 -- -- --
6348 Burnt Poplar -- 721 2,883 -- 26
6350 Burnt Poplar -- 339 1,365 -- 17
Chimney Rock A/B -- 1,610 3,757 1 293
Chimney Rock C -- 604 1,408 -- 5
Chimney Rock D -- 236 550 -- 7
Chimney Rock E -- 1,692 3,948 1 55
Chimney Rock F -- 1,431 3,338 1 3
Chimney Rock G -- 1,044 2,435 1 12
Deep River Corporate Center -- 1,033 5,855 -- 310
Airpark East-Copier
Consultants (2) 252 1,008 (29) 124
Airpark East-Building 1 (2) 377 1,510 -- 101
Airpark East-Building 2 (2) 461 1,842 -- 27
Airpark East-Building 3 (2) 321 1,283 -- 85
Airpark East-HewlettPackard (2) 149 727 315 205
Airpark East-Inacom Building (2) 106 478 159 294
Airpark East-Simplex (2) 103 526 168 259
Airpark East-Building A (2) 541 2,913 (33) 550
Airpark East-Building B (2) 779 3,200 (43) 381
Airpark East-Building C (2) 2,384 9,535 -- 668
Airpark East-Building D (2) 271 3,213 579 727
Airpark East Expansion (2) -- -- 36 --
Airpark East Land -- 1,317 -- (1,317) --
Airpark East-Service Center 1 (2) 275 1,099 (39) 133
Airpark East-Service Center 2 (2) 222 889 (31) 119
Airpark East-Service Center 3 (2) 304 1,214 -- 66
Airpark East-Service Center 4 (2) 224 898 -- 198
Airpark East-Service Court (2) 194 774 (24) 57
Airpark East-Warehouse 1 (2) 384 1,535 (29) 67
Airpark East-Warehouse 2 (2) 372 1,488 -- 86
Airpark East-Warehouse 3 (2) 370 1,480 (30) 49
Airpark East-Warehouse 4 (2) 657 2,628 -- 179
Airpark East-Highland (2) 175 699 (30) 386
206 South Westgate Drive -- 91 664 (91) (664)
207 South Westgate Drive -- 138 1,012 (138) (1,012)
300 South Westgate Drive -- 68 496 (68) (496)
305 South Westgate Drive -- 30 220 (30) (220)
307 South Westgate Drive -- 66 485 (66) (485)
309 South Westgate Drive -- 68 496 (68) (496)
311 South Westgate Drive -- 75 551 (75) (551)
315 South Westgate Drive -- 54 396 (54) (396)
317 South Westgate Drive -- 81 597 (81) (597)
319 South Westgate Drive -- 54 396 (54) (396)
Inman Road Land -- 2,357 -- -- --
7906 Industrial Village Road -- 62 455 -- 23
7908 Industrial Village Road -- 62 455 -- 34
7910 Industrial Village Road -- 62 455 -- 47
Jefferson Pilot Land 5,069 13,560 -- (1,471) --
Airpark North - DC1 (2) 723 2,891 -- 206
Airpark North - DC2 (2) 1,094 4,375 -- 95
Airpark North - DC3 (2) 378 1,511 -- 215
Gross Amount at
Which Carried at Close of Period
-----------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------ ---------- -------------- --------- -------------- -------------- -------------
Parkway Plaza Building 10 160 2,545 2,705 453 1999 5-40 yrs.
Parkway Plaza Bldg 12 112 1,754 1,866 95 1999 5-40 yrs.
Parkway Plaza Bldg 14 483 6,517 7,000 331 1999 5-40 yrs.
Columbia, SC
Center Point I 1,313 7,540 8,853 848 1988 5-40 yrs.
Center Point II 1,184 8,736 9,920 1,190 1996 5-40 yrs.
Center Point V 265 1,609 1,874 266 1997 5-40 yrs.
Center Point VI 265 -- 265 -- N/A N/A
Fontaine I 1,219 7,233 8,452 792 1985 5-40 yrs.
Fontaine II 941 6,113 7,054 1,154 1987 5-40 yrs.
Fontaine III 853 4,920 5,773 569 1988 5-40 yrs.
Fontaine V 395 2,240 2,635 242 1990 5-40 yrs.
Piedmont Triad, NC
Concourse Center 1 1,126 7,709 8,835 489 1999 5-40 yrs.
ECPI 431 2,522 2,953 13 2000 5-40 yrs.
Bissell Land 990 -- 990 -- N/A N/A
6348 Burnt Poplar 721 2,909 3,630 427 1990 5-40 yrs.
6350 Burnt Poplar 339 1,382 1,721 203 1992 5-40 yrs.
Chimney Rock A/B 1,611 4,050 5,661 257 1981 5-40 yrs.
Chimney Rock C 604 1,413 2,017 96 1983 5-40 yrs.
Chimney Rock D 236 557 793 37 1983 5-40 yrs.
Chimney Rock E 1,693 4,003 5,696 273 1985 5-40 yrs.
Chimney Rock F 1,432 3,341 4,773 229 1987 5-40 yrs.
Chimney Rock G 1,045 2,447 3,492 166 1987 5-40 yrs.
Deep River Corporate Center 1,033 6,165 7,198 803 1989 5-40 yrs.
Airpark East-Copier
Consultants 223 1,132 1,355 175 1990 5-40 yrs.
Airpark East-Building 1 377 1,611 1,988 269 1990 5-40 yrs.
Airpark East-Building 2 461 1,869 2,330 276 1986 5-40 yrs.
Airpark East-Building 3 321 1,368 1,689 229 1986 5-40 yrs.
Airpark East-HewlettPackard 464 932 1,396 225 1996 5-40 yrs.
Airpark East-Inacom Building 265 772 1,037 205 1996 5-40 yrs.
Airpark East-Simplex 271 785 1,056 172 1997 5-40 yrs.
Airpark East-Building A 508 3,463 3,971 682 1986 5-40 yrs.
Airpark East-Building B 736 3,581 4,317 684 1988 5-40 yrs.
Airpark East-Building C 2,384 10,203 12,587 1,611 1990 5-40 yrs.
Airpark East-Building D 850 3,940 4,790 804 1997 5-40 yrs.
Airpark East Expansion 36 -- 36 -- N/A N/A
Airpark East Land -- -- -- -- N/A N/A
Airpark East-Service Center 1 236 1,232 1,468 238 1985 5-40 yrs.
Airpark East-Service Center 2 191 1,008 1,199 165 1985 5-40 yrs.
Airpark East-Service Center 3 304 1,280 1,584 232 1985 5-40 yrs.
Airpark East-Service Center 4 224 1,096 1,320 165 1985 5-40 yrs.
Airpark East-Service Court 170 831 1,001 144 1990 5-40 yrs.
Airpark East-Warehouse 1 355 1,602 1,957 256 1985 5-40 yrs.
Airpark East-Warehouse 2 372 1,574 1,946 261 1985 5-40 yrs.
Airpark East-Warehouse 3 340 1,529 1,869 232 1986 5-40 yrs.
Airpark East-Warehouse 4 657 2,807 3,464 451 1988 5-40 yrs.
Airpark East-Highland 145 1,085 1,230 122 1990 5-40 yrs.
206 South Westgate Drive -- -- -- -- 1986 5-40 yrs.
207 South Westgate Drive -- -- -- -- 1986 5-40 yrs.
300 South Westgate Drive -- -- -- -- 1986 5-40 yrs.
305 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
307 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
309 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
311 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
315 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
317 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
319 South Westgate Drive -- -- -- -- 1985 5-40 yrs.
Inman Road Land 2,357 -- 2,357 -- N/A N/A
7906 Industrial Village Road 62 478 540 65 1985 5-40 yrs.
7908 Industrial Village Road 62 489 551 75 1985 5-40 yrs.
7910 Industrial Village Road 62 502 564 74 1985 5-40 yrs.
Jefferson Pilot Land 12,089 -- 12,089 -- N/A N/A
Airpark North - DC1 723 3,097 3,820 455 1986 5-40 yrs.
Airpark North - DC2 1,094 4,470 5,564 674 1987 5-40 yrs.
Airpark North - DC3 378 1,726 2,104 362 1988 5-40 yrs.
F-32
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Airpark North - DC4 (2) 377 1,508 -- 141
Airpark North Land -- 804 -- -- --
2606 Phoenix Drive-100
Series -- 63 466 -- --
2606 Phoenix Drive-200
Series -- 63 466 -- 84
2606 Phoenix Drive-300
Series -- 31 229 -- 100
2606 Phoenix Drive-400
Series -- 52 382 -- 11
2606 Phoenix Drive-500
Series -- 64 471 -- 20
2606 Phoenix Drive-600
Series -- 78 575 -- 16
Network Construction -- -- 533 -- 200
5 Dundas Circle -- 72 531 (72) (531)
7 Dundas Circle -- 75 552 (75) (552)
8 Dundas Circle -- 84 617 (84) (617)
302 Pomona Drive -- 84 617 (84) (617)
304 Pomona Drive -- 22 163 (22) (163)
306 Pomona Drive -- 50 368 (50) (368)
308 Pomona Drive -- 72 531 (72) (531)
9 Dundas Circle -- 51 373 (51) (373)
2616 Phoenix Drive -- 135 990 (135) (990)
500 Radar Road -- 202 1,484 -- 118
502 Radar Road -- 39 285 -- 80
504 Radar Road -- 39 285 -- 14
506 Radar Road -- 39 285 -- 12
Regency One-Piedmont
Center -- 515 2,347 -- 579
Regency Two-Piedmont
Center -- 435 1,859 -- 509
Sears Cenfact -- 861 3,446 (31) 43
4000 Spring Garden Street -- 127 933 (127) (933)
4002 Spring Garden Street -- 39 290 (39) (290)
4004 Spring Garden Street -- 139 1,019 (139) (1,019)
Airpark South Warehouse I -- 537 2,934 8 (427)
Airpark South Warehouse 2 -- 733 2,548 11 (37)
Airpark South Warehouse 3 -- 599 2,365 -- --
Airpark South Warehouse 4 -- 489 2,175 7 287
Airpark South Warehouse VI -- 1,690 3,915 26 3
Airpark West-1 (3) 954 3,817 -- 390
Airpark West-2 (3) 887 3,536 (3) 505
Airpark West-4 (3) 226 903 -- 132
Airpark West-5 (3) 242 966 -- 127
Airpark West-6 (3) 326 1,308 -- 128
7327 West Friendly Avenue -- 60 441 -- 11
7339 West Friendly Avenue -- 63 465 -- 27
7341 West Friendly Avenue -- 113 831 -- 108
7343 West Friendly Avenue -- 72 531 -- 26
7345 West Friendly Avenue -- 66 485 -- 14
7347 West Friendly Avenue -- 97 709 -- 63
7349 West Friendly Avenue -- 53 388 -- 14
7351 West Friendly Avenue -- 106 778 -- 30
7353 West Friendly Avenue -- 123 901 -- 16
7355 West Friendly Avenue -- 72 525 -- 21
150 Stratford -- 2,777 11,459 -- 112
ALO -- 177 986 -- 2
Chesapeake (3) 1,236 4,944 -- 8
Forsyth Corporate Center (6) 326 1,850 -- 652
The Knollwood(370) (2) 1,819 7,451 -- 476
The Knollwood(380) (2) 2,977 11,912 -- 570
The Knollwood - Retail@380 (2) -- 1 -- 141
RMIC -- 1,091 5,525 (1,091) (5,525)
Robinhood -- 290 1,159 -- 130
101 Stratford -- 1,205 6,810 -- 381
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
-------------- -------- -------------- --------- -------------- -------------- -------------
Airpark North - DC4 377 1,649 2,026 290 1988 5-40 yrs.
Airpark North Land 804 -- 804 -- N/A N/A
2606 Phoenix Drive-100
Series 63 466 529 64 1989 5-40 yrs.
2606 Phoenix Drive-200
Series 63 550 613 66 1989 5-40 yrs.
2606 Phoenix Drive-300
Series 31 329 360 67 1989 5-40 yrs.
2606 Phoenix Drive-400
Series 52 393 445 60 1989 5-40 yrs.
2606 Phoenix Drive-500
Series 64 491 555 78 1989 5-40 yrs.
2606 Phoenix Drive-600
Series 78 591 669 94 1989 5-40 yrs.
Network Construction -- 733 733 94 1988 5-40 yrs.
5 Dundas Circle -- -- -- -- 1987 5-40 yrs.
7 Dundas Circle -- -- -- -- 1986 5-40 yrs.
8 Dundas Circle -- -- -- -- 1986 5-40 yrs.
302 Pomona Drive -- -- -- -- 1987 5-40 yrs.
304 Pomona Drive -- -- -- -- 1987 5-40 yrs.
306 Pomona Drive -- -- -- -- 1987 5-40 yrs.
308 Pomona Drive -- -- -- -- 1987 5-40 yrs.
9 Dundas Circle -- -- -- -- 1986 5-40 yrs.
2616 Phoenix Drive -- -- -- -- 1985 5-40 yrs.
500 Radar Road 202 1,602 1,804 257 1981 5-40 yrs.
502 Radar Road 39 365 404 79 1986 5-40 yrs.
504 Radar Road 39 299 338 43 1986 5-40 yrs.
506 Radar Road 39 297 336 43 1986 5-40 yrs.
Regency One-Piedmont
Center 515 2,926 3,441 524 1996 5-40 yrs.
Regency Two-Piedmont
Center 435 2,368 2,803 584 1996 5-40 yrs.
Sears Cenfact 830 3,489 4,319 513 1989 5-40 yrs.
4000 Spring Garden Street -- -- -- -- 1983 5-40 yrs.
4002 Spring Garden Street -- -- -- -- 1983 5-40 yrs.
4004 Spring Garden Street -- -- -- -- 1983 5-40 yrs.
Airpark South Warehouse I 545 2,507 3,052 269 1998 5-40 yrs.
Airpark South Warehouse 2 744 2,511 3,255 97 1999 5-40 yrs.
Airpark South Warehouse 3 599 2,365 2,964 56 1999 5-40 yrs.
Airpark South Warehouse 4 496 2,462 2,958 164 1999 5-40 yrs.
Airpark South Warehouse VI 1,716 3,918 5,634 179 1999 5-40 yrs.
Airpark West-1 954 4,207 5,161 905 1984 5-40 yrs.
Airpark West-2 884 4,041 4,925 814 1985 5-40 yrs.
Airpark West-4 226 1,035 1,261 214 1985 5-40 yrs.
Airpark West-5 242 1,093 1,335 202 1985 5-40 yrs.
Airpark West-6 326 1,436 1,762 282 1985 5-40 yrs.
7327 West Friendly Avenue 60 452 512 62 1987 5-40 yrs.
7339 West Friendly Avenue 63 492 555 75 1989 5-40 yrs.
7341 West Friendly Avenue 113 939 1,052 158 1988 5-40 yrs.
7343 West Friendly Avenue 72 557 629 79 1988 5-40 yrs.
7345 West Friendly Avenue 66 499 565 75 1988 5-40 yrs.
7347 West Friendly Avenue 97 772 869 145 1988 5-40 yrs.
7349 West Friendly Avenue 53 402 455 62 1988 5-40 yrs.
7351 West Friendly Avenue 106 808 914 121 1988 5-40 yrs.
7353 West Friendly Avenue 123 917 1,040 125 1988 5-40 yrs.
7355 West Friendly Avenue 72 546 618 74 1988 5-40 yrs.
150 Stratford 2,777 11,571 14,348 1,858 1991 5-40 yrs.
ALO 177 988 1,165 13 1998 5-40 yrs.
Chesapeake 1,236 4,952 6,188 729 1993 5-40 yrs.
Forsyth Corporate Center 326 2,502 2,828 468 1985 5-40 yrs.
The Knollwood(370) 1,819 7,927 9,746 1,309 1994 5-40 yrs.
The Knollwood(380) 2,977 12,482 15,459 2,095 1990 5-40 yrs.
The Knollwood - Retail@380 -- 142 142 56 1995 5-40 yrs.
RMIC -- -- -- -- 1998 5-40 yrs.
Robinhood 290 1,289 1,579 233 1989 5-40 yrs.
101 Stratford 1,205 7,191 8,396 557 1986 5-40 yrs.
F-33
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Consolidated Center/
Building I -- 625 2,126 -- 56
Consolidated Center/
Building II -- 625 4,376 -- 138
Consolidated Center/
Building III -- 680 3,522 -- 51
Consolidated Center/
Building IV -- 376 1,624 -- 184
Champion Headquarters -- 1,725 6,280 (1,725) (6,280)
Hampton Park - Building 5 -- 318 742 (318) (742)
Hampton Park - Building 6 -- 371 866 (371) (866)
Hampton Park - Building 7 -- 212 495 (212) (495)
Hampton Park - Building 8 -- 212 495 (212) (495)
Hampton Park - Building 9 -- 212 495 (212) (495)
5100 Indiana Avenue -- 490 1,143 -- 2
Madison Park - Building 5610 -- 211 493 -- --
Madison Park - Building 5620 -- 941 2,196 -- --
Madison Park - Building 5630 -- 1,486 3,468 -- 13
Madison Park - Building 5635 -- 893 2,083 -- --
Madison Park - Building 5640 -- 3,632 8,476 -- 35
Madison Park - Building 5650 -- 1,081 2,522 -- 1
Madison Park - Building 5660 -- 1,910 4,456 -- 83
Madison Park - Building 5655 -- 5,891 13,753 -- 1
711 Almondridge -- 301 702 -- 25
710 Almondridge -- 1,809 4,221 523 5,211
500 Northridge -- 1,789 4,174 -- 6
520 Northridge -- 1,645 3,876 -- 243
531 Northridge Warehouse -- 4,992 11,648 -- 174
531 Northridge Office -- 766 1,788 -- 1
540 Northridge -- 2,038 4,755 -- 415
550 Northridge -- 472 1,102 -- 154
US Airways (6) 2,625 14,824 -- 209
University Commercial
Center-Landmark 03 -- 429 1,771 -- 170
University Commercial
Center-Archer 04 -- 514 2,058 -- 181
University Commercial
Center-Service Center 1 -- 276 1,155 -- 66
University Commercial
Center-Service Center 2 -- 215 859 -- 127
University Commercial
Center-Service Center 3 -- 167 668 -- 26
University Commercial
Center-Warehouse 1 -- 203 812 -- 8
University Commercial
Center-Warehouse 2 -- 196 786 -- 13
Westpoint Business Park-BMF -- 795 3,181 -- 3
Westpoint Business
Park-Luwabahnson -- 346 1,384 -- 1
Westpoint Business Park
(3 & 4) -- 120 480 -- 38
Westpoint Business Park -- 1,759 -- (1,759) --
Westpoint Business
Park-Wp 11 -- 393 1,570 -- 69
Westpoint Business
Park-Wp 12 -- 382 1,531 -- 42
Westpoint Business
Park-Wp 13 -- 297 1,192 -- 41
Westpoint Business
Park-Fairchild -- 640 2,577 -- 25
Westpoint Business
Park-Warehouse 5 -- 178 590 -- 452
Greenville, SC
385 Land -- 1,800 -- -- --
Nationsbank Plaza -- 642 9,349 -- 1,883
Brookfield Plaza (6) 1,489 8,437 -- 345
Brookfield-CRS Sirrine -- 3,022 17,125 -- 24
Brookfield-YMCA -- 33 189 -- 16
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------ -------- -------------- --------- -------------- -------------- -------------
Consolidated Center/
Building I 625 2,182 2,807 170 1983 5-40 yrs.
Consolidated Center/
Building II 625 4,514 5,139 368 1983 5-40 yrs.
Consolidated Center/
Building III 680 3,573 4,253 279 1989 5-40 yrs.
Consolidated Center/
Building IV 376 1,808 2,184 195 1989 5-40 yrs.
Champion Headquarters -- -- -- -- 1993 5-40 yrs.
Hampton Park - Building 5 -- -- -- -- 1981 5-40 yrs.
Hampton Park - Building 6 -- -- -- -- 1980 5-40 yrs.
Hampton Park - Building 7 -- -- -- -- 1983 5-40 yrs.
Hampton Park - Building 8 -- -- -- -- 1984 5-40 yrs.
Hampton Park - Building 9 -- -- -- -- 1985 5-40 yrs.
5100 Indiana Avenue 490 1,145 1,635 73 1982 5-40 yrs.
Madison Park - Building 5610 211 493 704 31 1988 5-40 yrs.
Madison Park - Building 5620 941 2,196 3,137 141 1983 5-40 yrs.
Madison Park - Building 5630 1,486 3,481 4,967 223 1983 5-40 yrs.
Madison Park - Building 5635 893 2,083 2,976 134 1986 5-40 yrs.
Madison Park - Building 5640 3,632 8,511 12,143 544 1985 5-40 yrs.
Madison Park - Building 5650 1,081 2,523 3,604 162 1984 5-40 yrs.
Madison Park - Building 5660 1,910 4,539 6,449 285 1984 5-40 yrs.
Madison Park - Building 5655 5,891 13,754 19,645 882 1987 5-40 yrs.
711 Almondridge 301 727 1,028 56 1988 5-40 yrs.
710 Almondridge 2,332 9,432 11,764 300 1989 5-40 yrs.
500 Northridge 1,789 4,180 5,969 274 1988 5-40 yrs.
520 Northridge 1,645 4,119 5,764 274 1988 5-40 yrs.
531 Northridge Warehouse 4,992 11,822 16,814 757 1989 5-40 yrs.
531 Northridge Office 766 1,789 2,555 116 1989 5-40 yrs.
540 Northridge 2,038 5,170 7,208 311 1987 5-40 yrs.
550 Northridge 472 1,256 1,728 126 1989 5-40 yrs.
US Airways 2,625 15,033 17,658 1,177 1970-1987 5-40 yrs.
University Commercial
Center-Landmark 03 429 1,941 2,370 315 1985 5-40 yrs.
University Commercial
Center-Archer 04 514 2,239 2,753 387 1986 5-40 yrs.
University Commercial
Center-Service Center 1 276 1,221 1,497 212 1983 5-40 yrs.
University Commercial
Center-Service Center 2 215 986 1,201 190 1983 5-40 yrs.
University Commercial
Center-Service Center 3 167 694 861 105 1984 5-40 yrs.
University Commercial
Center-Warehouse 1 203 820 1,023 120 1983 5-40 yrs.
University Commercial
Center-Warehouse 2 196 799 995 117 1983 5-40 yrs.
Westpoint Business Park-BMF 795 3,184 3,979 467 1986 5-40 yrs.
Westpoint Business
Park-Luwabahnson 346 1,385 1,731 204 1990 5-40 yrs.
Westpoint Business Park
(3 & 4) 120 518 638 78 1988 5-40 yrs.
Westpoint Business Park -- -- -- -- N/A N/A
Westpoint Business
Park-Wp 11 393 1,639 2,032 256 1988 5-40 yrs.
Westpoint Business
Park-Wp 12 382 1,573 1,955 232 1988 5-40 yrs.
Westpoint Business
Park-Wp 13 297 1,233 1,530 182 1988 5-40 yrs.
Westpoint Business
Park-Fairchild 640 2,602 3,242 380 1990 5-40 yrs.
Westpoint Business
Park-Warehouse 5 178 1,042 1,220 292 1995 5-40 yrs.
Greenville, SC
385 Land 1,800 -- 1,800 -- N/A N/A
Nationsbank Plaza 642 11,232 11,874 1,250 1973 5-40 yrs.
Brookfield Plaza 1,489 8,782 10,271 1,115 1987 5-40 yrs.
Brookfield-CRS Sirrine 3,022 17,149 20,171 1,849 1990 5-40 yrs.
Brookfield-YMCA 33 205 238 33 1990 5-40 yrs.
F-34
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
385 Building 1 -- 1,413 1,401 -- 2,783
Patewood I -- 942 5,016 -- 71
Patewood II -- 942 5,018 -- 285
Patewood III (6) 835 4,733 -- 158
Patewood IV (6) 1,210 6,856 -- 14
Patewood V (6) 1,677 9,503 -- 22
Patewood VI -- 2,375 9,643 -- (32)
769 Pelham Road -- 705 2,778 -- 3
Patewood Business Center -- 1,312 7,436 -- 252
Jacksonville, FL
9A Land -- 3,915 -- -- --
Belfort Park I -- 1,322 4,285 (1,322) (4,285)
Belfort Park II -- 831 5,066 (831) (5,066)
Belfort Park III -- 647 4,063 (647) (4,063)
Belfort Park VI -- -- -- 656 --
Belfort Park VII -- -- -- 2,103 --
CIGNA Building -- 381 1,592 (381) (1,592)
Harry James Building -- 272 1,360 (272) (1,360)
Independent Square -- 3,985 44,633 (3,985) (44,633)
Three Oaks Plaza -- 1,630 14,036 (1,630) (14,036)
Reflections -- 958 9,877 (958) (9,877)
Southpoint Building -- 594 3,987 (594) (3,987)
SWD Land Annex -- -- -- 1 5
Highwoods Center -- 1,143 6,476 (1,143) (6,476)
Life of the South Building -- 184 4,750 (184) (4,750)
Tallahasse, FL
Blair Stone Building -- 1,550 32,988 (1,550) (32,988)
215 South Monroe St.
Building -- 1,950 17,853 (1,950) (17,853)
Shawnee Mission, KS
Corinth Square North Shops (4) 2,693 10,772 -- 64
Corinth Shops South (4) 1,043 4,172 -- 13
Fairway Shops 2,620 673 2,694 -- 127
Prairie Village Rest & Bank (7) -- -- -- 247
Prairie Village Shops (7) 3,289 13,157 -- 1,216
Shannon Valley Shopping
Center 6,258 1,669 6,678 -- 1,844
Trailwood III Shops -- 223 893 (223) (893)
Trailwood Shops -- 458 1,831 (458) (1,831)
Westwood Shops -- 113 453 (113) (453)
Brymar Building -- 329 1,317 -- 2
Corinth Executive Square -- 514 2,054 -- 286
Corinth Office Building 821 529 2,116 -- 20
Fairway North Building 4,500 753 3,013 -- 252
Fairway West Building 3,775 851 3,402 -- 223
Hartford Office Building -- 568 2,271 (568) (2,271)
Land - Kansas -- 28,275 121 (8,194) (121)
Nichols Building 870 490 1,959 -- 73
Oak Park Building -- 368 1,470 (368) (1,470)
Prairie Village Office Center -- 749 2,997 -- 102
QUIVIRA Business Park A -- 191 447 (191) (447)
QUIVIRA Business Park B -- 179 417 (179) (417)
QUIVIRA Business Park C -- 189 440 (189) (440)
QUIVIRA Business Park D -- 154 360 (154) (360)
QUIVIRA Business Park E -- 251 586 (251) (586)
QUIVIRA Business Park F -- 171 400 (171) (400)
QUIVIRA Business Park G -- 205 477 (205) (477)
QUIVIRA Business Park H -- 175 407 (175) (407)
QUIVIRA Business Park J -- 360 839 (360) (839)
QUIVIRA Business Park L -- 98 222 (98) (222)
QUIVIRA Business Park K -- 95 222 (95) (222)
QUIVIRA Business Park SWB -- 257 600 (257) (600)
Kansas City, MO
48th & Penn (5) 418 3,765 -- 812
Balcony Retail (5) 889 8,002 -- 2,945
Brookside Shopping Center 3,699 2,002 8,602 154 649
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------ -------- -------------- --------- -------------- -------------- -------------
385 Building 1 1,413 4,184 5,597 604 1998 5-40 yrs.
Patewood I 942 5,087 6,029 497 1985 5-40 yrs.
Patewood II 942 5,303 6,245 560 1987 5-40 yrs.
Patewood III 835 4,891 5,726 651 1989 5-40 yrs.
Patewood IV 1,210 6,870 8,080 741 1989 5-40 yrs.
Patewood V 1,677 9,525 11,202 1,027 1990 5-40 yrs.
Patewood VI 2,375 9,611 11,986 1,103 1999 5-40 yrs.
769 Pelham Road 705 2,781 3,486 202 1989 5-40 yrs.
Patewood Business Center 1,312 7,688 9,000 841 1983 5-40 yrs.
Jacksonville, FL
9A Land 3,915 -- 3,915 -- N/A N/A
Belfort Park I -- -- -- -- 1988 5-40 yrs.
Belfort Park II -- -- -- -- 1988 5-40 yrs.
Belfort Park III -- -- -- -- 1988 5-40 yrs.
Belfort Park VI 656 -- 656 -- N/A N/A
Belfort Park VII 2,103 -- 2,103 -- N/A N/A
CIGNA Building -- -- -- -- 1972 5-40 yrs.
Harry James Building -- -- -- -- 1982 5-40 yrs.
Independent Square -- -- -- -- 1975 5-40 yrs.
Three Oaks Plaza -- -- -- -- 1972 5-40 yrs.
Reflections -- -- -- -- 1985 5-40 yrs.
Southpoint Building -- -- -- -- 1980 5-40 yrs.
SWD Land Annex 1 5 6 1 N/A N/A
Highwoods Center -- -- -- -- 1991 5-40 yrs.
Life of the South Building -- -- -- -- 1964 5-40 yrs.
Tallahasse, FL
Blair Stone Building -- -- -- -- 1994 5-40 yrs.
215 South Monroe St.
Building -- -- -- -- 1976 5-40 yrs.
Shawnee Mission, KS
Corinth Square North Shops 2,693 10,836 13,529 713 1962 5-40 yrs.
Corinth Shops South 1,043 4,185 5,228 267 1953 5-40 yrs.
Fairway Shops 673 2,821 3,494 215 1940 5-40 yrs.
Prairie Village Rest & Bank -- 247 247 2 1948 5-40 yrs.
Prairie Village Shops 3,289 14,373 17,662 995 1948 5-40 yrs.
Shannon Valley Shopping
Center 1,669 8,522 10,191 633 1988 5-40 yrs.
Trailwood III Shops -- -- -- -- 1986 5-40 yrs.
Trailwood Shops -- -- -- -- 1968 5-40 yrs.
Westwood Shops -- -- -- -- 1926 5-40 yrs.
Brymar Building 329 1,319 1,648 91 1968 5-40 yrs.
Corinth Executive Square 514 2,340 2,854 200 1973 5-40 yrs.
Corinth Office Building 529 2,136 2,665 135 1960 5-40 yrs.
Fairway North Building 753 3,265 4,018 254 1985 5-40 yrs.
Fairway West Building 851 3,625 4,476 302 1983 5-40 yrs.
Hartford Office Building -- -- -- -- 1978 5-40 yrs.
Land - Kansas 20,081 -- 20,081 -- N/A N/A
Nichols Building 490 2,032 2,522 155 1978 5-40 yrs.
Oak Park Building -- -- -- -- 1976 5-40 yrs.
Prairie Village Office Center 749 3,099 3,848 232 1960 5-40 yrs.
QUIVIRA Business Park A -- -- -- -- 1975 5-40 yrs.
QUIVIRA Business Park B -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park C -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park D -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park E -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park F -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park G -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park H -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park J -- -- -- -- 1973 5-40 yrs.
QUIVIRA Business Park L -- -- -- -- 1985 5-40 yrs.
QUIVIRA Business Park K -- -- -- -- 1985 5-40 yrs.
QUIVIRA Business Park SWB -- -- -- -- 1973 5-40 yrs.
Kansas City, MO
48th & Penn 418 4,577 4,995 415 1948 5-40 yrs.
Balcony Retail 889 10,947 11,836 687 1925 5-40 yrs.
Brookside Shopping Center 2,156 9,251 11,407 582 1919 5-40 yrs.
F-35
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Court of the Penguins (5) 566 5,091 -- 491
Colonial Shops -- 138 550 -- 14
Crestwood Shops -- 253 1,013 (253) (1,013)
Esplanade (5) 748 6,734 -- 1,407
Land Under Ground Leases
Retail -- 9,789 114(18) (8,688) (114)
Ground Leases Retail KH -- 677 -- -- --
Halls Block (5) 275 2,478 -- 3,335
Kenilworth -- 113 452 (113) (452)
Macy's Block (5) 504 4,536 -- 503
Millcreek Retail (5) 602 5,422 -- 1,714
Nichols Block Retail (5) 600 5,402 -- 795
96th & Nall Shops -- 99 397 (99) (397)
Plaza Central (5) 405 3,649 -- 1,452
Plaza Savings South (5) 357 3,211 -- 1,724
Romanelli Annex Shops -- 24 97 (24) (97)
Red Bridge Shops -- 1,091 4,364 -- 1,007
Romanelli Shops -- 219 875 (219) (875)
Seville Shops West (5) 300 2,696 -- 9,494
Seville Square (5) -- 20,973 -- 719
Swanson Block (5) 949 8,537 -- 3,769
Theater Block (5) 1,197 10,769 -- 4,321
Time Block Retail (5) 1,292 11,627 -- 4,330
Triangle (5) 308 2,771 -- 539
Corinth Gardens -- 283 1,603 -- 119
Coach House North 8,000 1,604 9,092 -- 322
Coach House South 20,000 4,578 21,008 -- 5,973
Coach Lamp -- 870 4,929 -- 302
Corinth Paddock -- 1,050 5,949 -- 411
Corinth Place 4,500 639 3,623 -- 95
Rental Houses -- -- -- -- --
Kenilworth 6,910 2,160 12,240 -- 675
Kirkwood Circle -- 3,000 -- (3,000) --
Mission Valley 994 576 3,266 -- 105
Neptune 4,372 1,073 6,079 -- 81
Parklane -- 273 1,548 -- 108
Regency House 4,063 1,853 10,500 -- 1,859
St. Charles Apartments -- -- -- -- --
Sulgrave 7,546 2,621 14,855 -- 1,306
Wornall Road Apartments -- 30 171 -- 14
4900 Main Building -- -- 12,809 4,476 337
63rd & Brookside Building -- 71 283 -- 14
Balcony Office (5) 65 585 -- 94
Bannister Business Center -- 306 713 (306) (713)
Esplanade Block Office (5) 375 3,374 -- 261
Marley Continental
Homes of KS -- 180 1,620 (180) (1,620)
Millcreek Office (5) 79 717 -- 183
Land - Missouri -- 3,794 190 (434) --
Nichols Block Office (5) 74 668 -- 76
One Ward Parkway -- 666 2,663 -- 212
Park Plaza Building (5) 1,352 5,409 -- 276
Parkway Building -- 395 1,578 -- 135
Romanelli Annex Office
Building -- 73 294 (73) (294)
Red Bridge Professional
Building -- 405 1,621 (405) (1,621)
Somerset -- 30 122 -- --
Two Brush Creek Plaza -- 961 3,845 -- 182
Theatre Block Office (5) 242 2,179 -- 142
Time Block Office (5) 199 1,792 -- 911
Valencia Place Retail (5) -- 2,245 441 10,927
Valencia Place Office (5) 1,530 27,548 -- 4,665
HPI Rental Houses -- -- 949 -- --
HPI St. Charles Apartments -- 45 165 -- --
HPI 4900 Main St -- 3,202 -- -- --
HPI Challenger -- 19,095 -- -- --
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------- -------- -------------- --------- -------------- -------------- -------------
Court of the Penguins 566 5,582 6,148 446 1945 5-40 yrs.
Colonial Shops 138 564 702 44 1907 5-40 yrs.
Crestwood Shops -- -- -- -- 1932 5-40 yrs.
Esplanade 748 8,141 8,889 586 1928 5-40 yrs.
Land Under Ground Leases
Retail 1,101 -- 1,101 -- N/A N/A
Ground Leases Retail KH 677 -- 677 -- N/A N/A
Halls Block 275 5,813 6,088 198 1964 5-40 yrs.
Kenilworth -- -- -- -- 1965 5-40 yrs.
Macy's Block 504 5,039 5,543 364 1926 5-40 yrs.
Millcreek Retail 602 7,136 7,738 585 1920 5-40 yrs.
Nichols Block Retail 600 6,197 6,797 435 1930 5-40 yrs.
96th & Nall Shops -- -- -- -- 1976 5-40 yrs.
Plaza Central 405 5,101 5,506 455 1958 5-40 yrs.
Plaza Savings South 357 4,935 5,292 275 1948 5-40 yrs.
Romanelli Annex Shops -- -- -- -- 1963 5-40 yrs.
Red Bridge Shops 1,091 5,371 6,462 294 1959 5-40 yrs.
Romanelli Shops -- -- -- -- 1925 5-40 yrs.
Seville Shops West 300 12,190 12,490 656 1999 5-40 yrs.
Seville Square -- 21,692 21,692 818 1999 5-40 yrs.
Swanson Block 949 12,306 13,255 687 1967 5-40 yrs.
Theater Block 1,197 15,090 16,287 1,033 1928 5-40 yrs.
Time Block Retail 1,292 15,957 17,249 945 1929 5-40 yrs.
Triangle 308 3,310 3,618 265 1925 5-40 yrs.
Corinth Gardens 283 1,722 2,005 109 1961 5-40 yrs.
Coach House North 1,604 9,414 11,018 586 1986 5-40 yrs.
Coach House South 4,578 26,981 31,559 1,326 1984 5-40 yrs.
Coach Lamp 870 5,231 6,101 321 1961 5-40 yrs.
Corinth Paddock 1,050 6,360 7,410 391 1973 5-40 yrs.
Corinth Place 639 3,718 4,357 230 1987 5-40 yrs.
Rental Houses -- -- -- -- N/A 5-40 yrs.
Kenilworth 2,160 12,915 15,075 799 1965 5-40 yrs.
Kirkwood Circle -- -- -- -- N/A N/A
Mission Valley 576 3,371 3,947 210 1964 5-40 yrs.
Neptune 1,073 6,160 7,233 386 1988 5-40 yrs.
Parklane 273 1,656 1,929 99 1924 5-40 yrs.
Regency House 1,853 12,359 14,212 829 1960 5-40 yrs.
St. Charles Apartments -- -- -- -- 1922 5-40 yrs.
Sulgrave 2,621 16,161 18,782 1,030 1967 5-40 yrs.
Wornall Road Apartments 30 185 215 11 1918 5-40 yrs.
4900 Main Building 4,476 13,146 17,622 852 1986 5-40 yrs.
63rd & Brookside Building 71 297 368 20 1919 5-40 yrs.
Balcony Office 65 679 744 38 1928 5-40 yrs.
Bannister Business Center -- -- -- -- 1985 5-40 yrs.
Esplanade Block Office 375 3,635 4,010 218 1945 5-40 yrs.
Marley Continental
Homes of KS -- -- -- -- N/A 5-40 yrs.
Millcreek Office 79 900 979 54 1925 5-40 yrs.
Land - Missouri 3,360 190 3,550 12 N/A 5-40 yrs.
Nichols Block Office 74 744 818 64 1938 5-40 yrs.
One Ward Parkway 666 2,875 3,541 289 1980 5-40 yrs.
Park Plaza Building 1,352 5,685 7,037 412 1983 5-40 yrs.
Parkway Building 395 1,713 2,108 169 1906-1910 5-40 yrs.
Romanelli Annex Office
Building -- -- -- -- 1963 5-40 yrs.
Red Bridge Professional
Building -- -- -- -- 1972 5-40 yrs.
Somerset 30 122 152 7 1998 5-40 yrs.
Two Brush Creek Plaza 961 4,027 4,988 305 1983 5-40 yrs.
Theatre Block Office 242 2,321 2,563 148 1928 5-40 yrs.
Time Block Office 199 2,703 2,902 155 1945 5-40 yrs.
Valencia Place Retail 441 13,172 13,613 89 1999 5-40 yrs.
Valencia Place Office 1,530 32,213 33,743 390 1999 5-40 yrs.
HPI Rental Houses -- 949 949 58 1960 5-40 yrs.
HPI St. Charles Apartments 45 165 210 10 1922 5-40 yrs.
HPI 4900 Main St 3,202 -- 3,202 -- N/A 5-40 yrs.
HPI Challenger 19,095 -- 19,095 -- N/A 5-40 yrs.
F-36
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Memphis, TN
Atrium I & II -- 1,530 6,121 40 374
Centrum -- 1,013 5,488 -- 268
Colonnade -- 1,300 7,994 -- (19)
Hickory Hill Medical Plaza -- 398 2,256 -- 18
3400 Players Club Parkway (6) 1,005 5,515 -- 9
International Place Phase II -- 4,847 27,469 -- 1,176
Kirby Centre -- 525 2,973 -- 125
International Place Phase III -- 2,566 -- -- --
6000 Poplar Ave -- 2,340 11,385 -- (210)
6060 Poplar Ave -- 1,980 8,677 -- (289)
Shadow Creek I -- 973 5,493 -- --
Southwind Office Center A -- 996 5,643 -- 272
Southwind Office Center B -- 1,356 7,684 -- 356
Southwind Office Center D -- 744 6,232 -- (131)
Southwind Office Center C (6) 1,070 5,924 -- --
Norfolk, VA
Battlefield Business Center II -- 774 4,387 (774) (4,387)
Greenbriar Business Center -- 936 5,305 -- 63
Hampton Center Two -- 945 6,567 -- 801
Riverside II 675 2 9,148 481 (9,148)
Nashville, TN
3322 West End -- 3,021 27,266 4 273
3401 Westend -- 6,103 23,343 (1,147) (1,857)
5310 Maryland Way -- 1,923 7,360 (368) (1,082)
Ayers Land -- 1,164 -- -- --
Southpointe -- 1,655 9,059 -- (98)
BNA Corporate Center 11,049 -- 22,588 -- (2,066)
Caterpillar Financial Center -- -- 2,964 5,120 39,499
Century City Plaza I -- 903 3,612 -- 552
Cool Springs Land -- -- -- 7,412 --
Cool Springs - Building II -- -- -- -- --
Cool Springs I -- 1,983 13,854 -- 75
Eastpark 1, 2, 3 3,630 3,137 11,842 (766) (1,099)
Grassmere -- 1,779 --(19) (1,779) --
Grassmere I -- 1,251 7,091 (1,251) (7,091)
Grassmere II -- 2,260 12,804 (2,260) (12,804)
Grassmere III -- 1,340 7,592 (1,340) (7,592)
Highwoods Plaza I -- 1,772 9,029 -- 68
Highwoods Plaza II -- 1,448 6,948 -- 1,549
Harpeth on The Green II -- 1,419 5,677 1 572
Harpeth on the Green III -- 1,658 6,633 2 465
Harpeth on the Green IV -- 1,709 6,835 5 729
Harpeth on the Green V -- 662 5,771 -- (124)
Lakeview Ridge -- 2,179 7,545 (411) (1,125)
Lakeview Ridge II -- 605 5,883 -- (41)
Lakeview Ridge III -- 1,073 9,708 -- 692
The Ramparts at Brentwood -- 2,394 12,806 -- (1,052)
The Sparrow Building -- 1,262 5,047 -- 272
Grassmere/Thousdale Land -- 760 -- (760) --
Winners Circle -- 1,495 7,072 2 236
Westwood South -- 2,106 10,517 -- 510
Orlando, FL
Sunport Center -- 1,505 9,777 -- 107
Oakridge Center -- 4,700 18,761 -- 805
Sandlake Southwest -- 1,025 4,049 (1,025) (4,049)
Lake Mary Land -- 2,804 -- -- --
InCharge Institute -- 501 2,085 -- --
MetroWest Center -- 1,344 7,618 -- 330
Landmark I -- 6,785 28,243 (6,785) (28,243)
Landmark II -- 6,785 28,206 (6,785) (28,206)
C N A Maitland I -- 1,858 16,129 (1,858) (15,817)
Maitland Building B -- 1,115 8,121 (1,115) (8,121)
C N A Maitland II -- 743 2,639 (743) (2,636)
Hard Rock Cafe -- 1,305 3,570 (1,305) (2,409)
MetroWest Land -- -- -- 3,044 --
Gross Amount at
Which Carried at Close of Period
--------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------ ------- -------------- --------- -------------- -------------- -------------
Memphis, TN
Atrium I & II 1,570 6,495 8,065 679 1984 5-40 yrs.
Centrum 1,013 5,756 6,769 551 1979 5-40 yrs.
Colonnade 1,300 7,975 9,275 944 1998 5-40 yrs.
Hickory Hill Medical Plaza 398 2,274 2,672 250 1988 5-40 yrs.
3400 Players Club Parkway 1,005 5,524 6,529 919 1997 5-40 yrs.
International Place Phase II 4,847 28,645 33,492 3,508 1988 5-40 yrs.
Kirby Centre 525 3,098 3,623 347 1984 5-40 yrs.
International Place Phase III 2,566 -- 2,566 -- N/A N/A
6000 Poplar Ave 2,340 11,175 13,515 12 1985 5-40 yrs.
6060 Poplar Ave 1,980 8,388 10,368 9 1987 5-40 yrs.
Shadow Creek I 973 5,493 6,466 11 2000 5-40 yrs.
Southwind Office Center A 996 5,915 6,911 687 1991 5-40 yrs.
Southwind Office Center B 1,356 8,040 9,396 961 1990 5-40 yrs.
Southwind Office Center D 744 6,101 6,845 400 1999 5-40 yrs.
Southwind Office Center C 1,070 5,924 6,994 423 1998 5-40 yrs.
Norfolk, VA
Battlefield Business Center II -- -- -- -- 1987 5-40 yrs.
Greenbriar Business Center 936 5,368 6,304 585 1984 5-40 yrs.
Hampton Center Two 945 7,368 8,313 457 1999 5-40 yrs.
Riverside II 483 -- 483 -- 1999 5-40 yrs.
Nashville, TN
3322 West End 3,025 27,539 30,564 839 1986 5-40 yrs.
3401 Westend 4,956 21,486 26,442 3,004 1982 5-40 yrs.
5310 Maryland Way 1,555 6,278 7,833 738 1994 5-40 yrs.
Ayers Land 1,164 -- 1,164 -- N/A N/A
Southpointe 1,655 8,961 10,616 1,229 1998 5-40 yrs.
BNA Corporate Center -- 20,522 20,522 2,626 1985 5-40 yrs.
Caterpillar Financial Center 5,120 42,463 47,583 819 1999 5-40 yrs.
Century City Plaza I 903 4,164 5,067 630 1987 5-40 yrs.
Cool Springs Land 7,412 -- 7,412 -- N/A N/A
Cool Springs - Building II -- -- -- -- N/A N/A
Cool Springs I 1,983 13,929 15,912 1,255 1999 5-40 yrs.
Eastpark 1, 2, 3 2,371 10,743 13,114 1,543 1978 5-40 yrs.
Grassmere -- -- -- -- N/A N/A
Grassmere I -- -- -- -- 1984 5-40 yrs.
Grassmere II -- -- -- -- 1985 5-40 yrs.
Grassmere III -- -- -- -- 1990 5-40 yrs.
Highwoods Plaza I 1,772 9,097 10,869 1,727 1996 5-40 yrs.
Highwoods Plaza II 1,448 8,497 9,945 1,577 1997 5-40 yrs.
Harpeth on The Green II 1,420 6,249 7,669 765 1984 5-40 yrs.
Harpeth on the Green III 1,660 7,098 8,758 827 1987 5-40 yrs.
Harpeth on the Green IV 1,714 7,564 9,278 978 1989 5-40 yrs.
Harpeth on the Green V 662 5,647 6,309 822 1998 5-40 yrs.
Lakeview Ridge 1,768 6,420 8,188 763 1986 5-40 yrs.
Lakeview Ridge II 605 5,842 6,447 865 1998 5-40 yrs.
Lakeview Ridge III 1,073 10,400 11,473 632 1999 5-40 yrs.
The Ramparts at Brentwood 2,394 11,754 14,148 13 1986 5-40 yrs.
The Sparrow Building 1,262 5,319 6,581 565 1982 5-40 yrs.
Grassmere/Thousdale Land -- -- -- -- N/A N/A
Winners Circle 1,497 7,308 8,805 607 1987 5-40 yrs.
Westwood South 2,106 11,027 13,133 701 1999 5-40 yrs.
Orlando, FL
Sunport Center 1,505 9,884 11,389 800 1990 5-40 yrs.
Oakridge Center 4,700 19,566 24,266 1,654 1966-1992 5-40 yrs.
Sandlake Southwest -- -- -- -- 1986 5-40 yrs.
Lake Mary Land 2,804 -- 2,804 -- N/A N/A
InCharge Institute 501 2,085 2,586 23 2000 5-40 yrs.
MetroWest Center 1,344 7,948 9,292 904 1988 5-40 yrs.
Landmark I -- -- -- -- 1983 5-40 yrs.
Landmark II -- -- -- -- 1985 5-40 yrs.
C N A Maitland I -- 312 312 -- 1998 5-40 yrs.
Maitland Building B -- -- -- -- 1999 5-40 yrs.
C N A Maitland II -- 3 3 -- 1998 5-40 yrs.
Hard Rock Cafe -- 1,161 1,161 -- 1998 5-40 yrs.
MetroWest Land 3,044 -- 3,044 -- N/A N/A
F-37
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
One Winter Park -- 1,000 3,652 (1,000) (3,652)
The Palladium -- 1,400 5,500 (1,400) (5,500)
201 Pine Street Building -- 4,400 29,836 (4,400) (29,836)
Capital Plaza -- -- -- -- (14)
Capital Plaza III -- -- -- 2,970 --
Pine Street Parking -- 1,030 8,087 (1,030) (8,087)
Interlachen Village 2,026 1,100 2,689 -- 66
Signature Plaza -- 4,300 30,294 (4,300) (30,294)
Research Triangle, NC
Blue Ridge II -- 463 1,485 -- (15)
Blue Ridge I -- 722 4,538 -- 1,053
3600 Glenwood Avenue -- -- 10,994 -- --
3645 Trust Drive - One North
Commerce Center -- 520 2,949 268 460
3737 Glenwood Ave. -- -- 15,889 -- 1,889
4101 Research Commons -- 1,349 6,928 -- --
4201 Research Commons -- 1,204 7,715 (1,204) (7,715)
4301 Research Commons -- 900 7,425 (900) (7,425)
4401 Research Commons -- 1,249 8,929 -- 4,938
4501 Research Commons -- 785 4,448 (785) (4,448)
4800 North Park -- 2,678 17,673 -- 307
4900 North Park 1,334 770 1,989 -- 275
5000 North Park (6) 1,010 4,697 -- 1,110
5200 Green's Dairy - One
North Commerce Center -- 169 959 -- 40
5220 Green's Dairy - One
North Commerce Center -- 382 2,165 -- 196
5301 Departure Drive -- 882 5,000 (882) (5,000)
Amica -- 289 1,517 -- 91
Arrowwood -- 955 3,406 -- 631
Aspen -- 560 2,088 -- 453
Birchwood -- 201 907 (201) (907)
BTI -- -- 15,504 -- 3,867
BTI Houses -- 250 250 (250) (250)
Capital Center -- 851 -- (474) (377)
Cedar East -- 563 2,491 -- 268
Cedar West -- 563 2,475 -- 614
CentreGreen 1 -- 1,677 7,133 -- --
Clintrials Land Parcel 2 -- 657 -- -- --
Clintrials Land Parcel 3 -- 548 -- -- --
Colony Corporate Center -- 613 3,296 (613) (3,296)
Concourse -- 986 12,069 (986) (12,069)
Cape Fear -- 131 -- -- 2,627
Creekstone Crossing -- 728 3,841 -- 100
Catawba -- 125 1,635 -- 293
Cottonwood -- 609 3,253 -- 8
Cypress -- 567 1,729 -- 164
Day Tract Land -- 3,860 -- -- --
Dogwood -- 766 2,777 -- 23
EPA Annex -- 2,601 10,920 -- 111
Expressway Warehouse -- 242 -- (242) --
Global Software (6) 465 7,471 -- --
Hawthorn -- 904 3,782 -- 214
Highwoods Health Club -- 142 524 -- 2,516
Holiday Inn Reservations
Center -- 867 2,735 -- 132
Holly -- 300 1,144 (300) (1,144)
Healthsource -- 1,294 10,593 10 1,696
Highwoods Tower One (6) 203 16,914 -- 554
Highwoods Center -- 532 7,902 -- (127)
Ironwood -- 319 1,276 -- 367
Kaiser -- 133 3,625 -- 567
Laurel -- 884 2,524 -- 449
Lake Plaza East -- 856 4,893 (856) (4,893)
Highwoods Office Center
North -- 1,103 49(16) (746) --
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------- -------- -------------- --------- -------------- -------------- -------------
One Winter Park -- -- -- -- 1982 5-40 yrs.
The Palladium -- -- -- -- 1988 5-40 yrs.
201 Pine Street Building -- -- -- -- 1980 5-40 yrs.
Capital Plaza -- (14) (14) -- N/A 5-40 yrs.
Capital Plaza III 2,970 -- 2,970 -- 1999 5-40 yrs.
Pine Street Parking -- -- -- -- 1999 5-40 yrs.
Interlachen Village 1,100 2,755 3,855 248 1987 5-40 yrs.
Signature Plaza -- -- -- -- 1986 5-40 yrs.
Research Triangle, NC
Blue Ridge II 463 1,470 1,933 527 1988 5-40 yrs.
Blue Ridge I 722 5,591 6,313 1,153 1982 5-40 yrs.
3600 Glenwood Avenue -- 10,994 10,994 1,042 1986 5-40 yrs.
3645 Trust Drive - One North
Commerce Center 788 3,409 4,197 366 1984 5-40 yrs.
3737 Glenwood Ave. -- 17,778 17,778 688 1999 5-40 yrs.
4101 Research Commons 1,349 6,928 8,277 49 1999 5-40 yrs.
4201 Research Commons -- -- -- -- 1991 5-40 yrs.
4301 Research Commons -- -- -- -- 1989 5-40 yrs.
4401 Research Commons 1,249 13,867 15,116 4,651 1987 5-40 yrs.
4501 Research Commons -- -- -- -- 1985 5-40 yrs.
4800 North Park 2,678 17,980 20,658 3,025 1985 5-40 yrs.
4900 North Park 770 2,264 3,034 472 1984 5-40 yrs.
5000 North Park 1,010 5,807 6,817 1,455 1980 5-40 yrs.
5200 Green's Dairy - One
North Commerce Center 169 999 1,168 119 1984 5-40 yrs.
5220 Green's Dairy - One
North Commerce Center 382 2,361 2,743 279 1984 5-40 yrs.
5301 Departure Drive -- -- -- -- 1984 5-40 yrs.
Amica 289 1,608 1,897 327 1983 5-40 yrs.
Arrowwood 955 4,037 4,992 882 1979 5-40 yrs.
Aspen 560 2,541 3,101 555 1980 5-40 yrs.
Birchwood -- -- -- -- 1983 5-40 yrs.
BTI -- 19,371 19,371 1,275 1995 5-40 yrs.
BTI Houses -- -- -- -- N/A 5-40 yrs.
Capital Center 377 (377) -- -- N/A N/A
Cedar East 563 2,759 3,322 582 1981 5-40 yrs.
Cedar West 563 3,089 3,652 768 1981 5-40 yrs.
CentreGreen 1 1,677 7,133 8,810 61 2000 5-40 yrs.
Clintrials Land Parcel 2 657 -- 657 -- N/A N/A
Clintrials Land Parcel 3 548 -- 548 -- N/A N/A
Colony Corporate Center -- -- -- -- 1985 5-40 yrs.
Concourse -- -- -- -- 1986 5-40 yrs.
Cape Fear 131 2,627 2,758 1,776 1979 5-40 yrs.
Creekstone Crossing 728 3,941 4,669 580 1990 5-40 yrs.
Catawba 125 1,928 2,053 1,225 1980 5-40 yrs.
Cottonwood 609 3,261 3,870 548 1983 5-40 yrs.
Cypress 567 1,893 2,460 437 1980 5-40 yrs.
Day Tract Land 3,860 -- 3,860 -- N/A N/A
Dogwood 766 2,800 3,566 461 1983 5-40 yrs.
EPA Annex 2,601 11,031 13,632 1,634 1966 5-40 yrs.
Expressway Warehouse -- -- -- -- 1990 5-40 yrs.
Global Software 465 7,471 7,936 1,720 1996 5-40 yrs.
Hawthorn 904 3,996 4,900 2,044 1987 5-40 yrs.
Highwoods Health Club 142 3,040 3,182 347 1998 5-40 yrs.
Holiday Inn Reservations
Center 867 2,867 3,734 492 1984 5-40 yrs.
Holly -- -- -- -- 1984 5-40 yrs.
Healthsource 1,304 12,289 13,593 1,678 1996 5-40 yrs.
Highwoods Tower One 203 17,468 17,671 6,932 1991 5-40 yrs.
Highwoods Center 532 7,775 8,307 747 1998 5-40 yrs.
Ironwood 319 1,643 1,962 422 1978 5-40 yrs.
Kaiser 133 4,192 4,325 1,711 1988 5-40 yrs.
Laurel 884 2,973 3,857 528 1982 5-40 yrs.
Lake Plaza East -- -- -- -- 1984 5-40 yrs.
Highwoods Office Center
North 357 49 406 15 N/A N/A
F-38
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Highwoods Office Center
South -- 2,519 -- -- --
Leatherwood -- 213 851 -- 445
Martin Land -- -- -- -- --
A4 Health Systems -- 717 3,418 (717) (3,418)
Creekstone Park -- 796 -- (647) --
Northpark I -- 405 -- 93 3,774
North Park - Land -- 962 -- 510 --
Phase I - One North
Commerce Center -- 768 4,353 -- 395
`W' Building - One North
Commerce Center -- 1,163 6,592 -- 1,513
Overlook -- 398 10,401 -- 592
Pamlico/Roanoke -- 269 -- 20 11,087
Raleigh Corp Center Lot D -- -- -- 2,039 --
Red Oak at Highwoods -- 389 6,086 -- 358
Rexwoods Center I (3) 775 -- 103 3,749
Rexwoods II -- 355 -- 7 1,851
Rexwoods III -- 886 -- 34 2,916
Rexwoods IV -- 586 -- -- 3,629
Rexwoods V (6) 1,301 5,979 -- 60
Riverbirch (6) 448 -- 21 4,281
Situs I -- 693 2,917 (693) (2,917)
Situs II -- 718 5,950 (718) (5,950)
Six Forks Center I -- 666 2,663 -- 499
Six Forks Center II -- 1,086 4,345 -- 435
Six Forks Center III (6) 862 4,411 -- 431
Smoketree Tower -- 2,353 11,802 -- 1,684
South Square I (3) 606 3,785 -- 557
South Square II -- 525 4,710 -- 297
Sycamore (6) 255 5,830 -- --
Building 2A - Triangle
Business Center -- 377 4,004 (377) (4,004)
Building 2B - Triangle
Business Center -- 118 1,225 (118) (1,225)
Building 3 - Triangle
Business Center -- 409 5,349 (409) (5,349)
Building 7 - Triangle
Business Center -- 414 6,301 2,610 (6,301)
Weston -- 1,544 -- (1,544) --
Willow Oak (6) 458 4,685 -- 1,776
Richmond, VA
Lakefront Plaza I -- 520 7,412 -- 363
Lakefront Plaza II Land -- 425 -- -- --
Highwoods Distribution
Center -- -- -- 6,690 --
Airport Center I -- 708 4,374 -- 998
Airport Center 2 -- 362 2,896 -- 305
Capital One Building I -- 1,278 10,690 -- 313
Capital One Building II -- 477 3,946 -- 243
Capital One Building III -- 1,278 11,515 -- (171)
Capital One Parking Deck -- -- 2,288 -- 132
1309 Cary Street -- 171 685 -- 77
4900 Cox -- 1,324 5,305 -- 165
Technology Park 1 -- 541 2,166 -- 146
Development Opportunity
Strip -- 29 -- -- --
East Shore I -- -- 1,254 953 4,492
East Shore II -- 907 6,662 -- 110
East Shore III -- -- 2,220 1,319 3,965
Eastshore Four -- 1,183 -- -- --
Grove Park -- 349 2,685 364 3,149
Grove Park II -- 907 -- -- --
Highwoods Distribution
Center -- 517 5,714 -- 405
Highwoods One (6) 1,846 8,613 -- 1,985
Richfood Holdings Building -- 785 5,170 -- 1,375
North Shore Commons -- 71 -- (71) --
Gross Amount at
Which Carried at Close of Period
--------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
----------- ------- -------------- --------- -------------- -------------- -------------
Highwoods Office Center
South 2,519 -- 2,519 -- N/A N/A
Leatherwood 213 1,296 1,509 373 1979 5-40 yrs.
Martin Land -- -- -- -- N/A N/A
A4 Health Systems -- -- -- -- 1996 5-40 yrs.
Creekstone Park 149 -- 149 -- N/A N/A
Northpark I 498 3,774 4,272 523 1997 5-40 yrs.
North Park - Land 1,472 -- 1,472 -- N/A N/A
Phase I - One North
Commerce Center 768 4,748 5,516 607 1981 5-40 yrs.
`W' Building - One North
Commerce Center 1,163 8,105 9,268 1,171 1983 5-40 yrs.
Overlook 398 10,993 11,391 754 1999 5-40 yrs.
Pamlico/Roanoke 289 11,087 11,376 3,432 1980 5-40 yrs.
Raleigh Corp Center Lot D 2,039 -- 2,039 -- N/A N/A
Red Oak at Highwoods 389 6,444 6,833 491 1999 5-40 yrs.
Rexwoods Center I 878 3,749 4,627 1,136 1990 5-40 yrs.
Rexwoods II 362 1,851 2,213 344 1993 5-40 yrs.
Rexwoods III 920 2,916 3,836 712 1992 5-40 yrs.
Rexwoods IV 586 3,629 4,215 958 1995 5-40 yrs.
Rexwoods V 1,301 6,039 7,340 788 1998 5-40 yrs.
Riverbirch 469 4,281 4,750 1,443 1987 5-40 yrs.
Situs I -- -- -- -- 1996 5-40 yrs.
Situs II -- -- -- -- 1998 5-40 yrs.
Six Forks Center I 666 3,162 3,828 497 1982 5-40 yrs.
Six Forks Center II 1,086 4,780 5,866 732 1983 5-40 yrs.
Six Forks Center III 862 4,842 5,704 881 1987 5-40 yrs.
Smoketree Tower 2,353 13,486 15,839 2,815 1984 5-40 yrs.
South Square I 606 4,342 4,948 862 1988 5-40 yrs.
South Square II 525 5,007 5,532 906 1989 5-40 yrs.
Sycamore 255 5,830 6,085 996 1997 5-40 yrs.
Building 2A - Triangle
Business Center -- -- -- -- 1984 5-40 yrs.
Building 2B - Triangle
Business Center -- -- -- -- 1984 5-40 yrs.
Building 3 - Triangle
Business Center -- -- -- -- 1988 5-40 yrs.
Building 7 - Triangle
Business Center 3,024 -- 3,024 -- 1986 5-40 yrs.
Weston -- -- -- -- N/A N/A
Willow Oak 458 6,461 6,919 1,989 1995 5-40 yrs.
Richmond, VA
Lakefront Plaza I 520 7,775 8,295 457 -- 5-40 yrs.
Lakefront Plaza II Land 425 -- 425 -- N/A N/A
Highwoods Distribution
Center 6,690 -- 6,690 -- N/A N/A
Airport Center I 708 5,372 6,080 728 1997 5-40 yrs.
Airport Center 2 362 3,201 3,563 251 1998 5-40 yrs.
Capital One Building I 1,278 11,003 12,281 565 1999 5-40 yrs.
Capital One Building II 477 4,189 4,666 200 1999 5-40 yrs.
Capital One Building III 1,278 11,344 12,622 484 1999 5-40 yrs.
Capital One Parking Deck -- 2,420 2,420 79 1999 5-40 yrs.
1309 Cary Street 171 762 933 97 1987 5-40 yrs.
4900 Cox 1,324 5,470 6,794 724 1991 5-40 yrs.
Technology Park 1 541 2,312 2,853 339 1991 5-40 yrs.
Development Opportunity
Strip 29 -- 29 -- N/A N/A
East Shore I 953 5,746 6,699 112 N/A N/A
East Shore II 907 6,772 7,679 520 1999 5-40 yrs.
East Shore III 1,319 6,185 7,504 145 1999 5-40 yrs.
Eastshore Four 1,183 -- 1,183 -- N/A N/A
Grove Park 713 5,834 6,547 794 1997 5-40 yrs.
Grove Park II 907 -- 907 -- N/A N/A
Highwoods Distribution
Center 517 6,119 6,636 316 1999 5-40 yrs.
Highwoods One 1,846 10,598 12,444 2,009 1996 5-40 yrs.
Richfood Holdings Building 785 6,545 7,330 872 1997 5-40 yrs.
North Shore Commons -- -- -- -- N/A N/A
F-39
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
Highwoods Five -- 806 4,948 -- 936
Sadler & Cox Land -- -- -- 1,682 --
Innslake Building -- 774 -- -- --
IXL Building -- 907 4,937 -- --
Highwoods Common -- 547 4,342 (26) (774)
Innsbrook Centre -- 914 6,768 -- 184
Liberty Mutual Building 3,169 1,205 4,819 -- 608
Mercer Plaza -- 1,556 12,350 -- --
Markel-American -- 1,372 8,667 -- 896
North Park Building -- 2,163 8,659 -- 328
Hamilton Beach Building -- 1,086 4,344 -- 329
Pavillion - Richmond -- 401 -- -- --
One Shockoe Plaza -- -- 19,324 -- (3,954)
Pickles Land 731 850 -- -- --
Stony Point I -- 1,384 11,445 -- 1,050
Stony Point II -- 1,561 10,949 -- 1,496
Stony Point III -- 2,546 -- -- --
Technology Park 2 -- 264 1,058 -- 46
Vantage Place-A -- 203 811 -- 147
Vantage Place-B -- 233 931 -- 129
Vantage Place-C -- 235 940 -- 89
Vantage Place-D -- 218 873 -- 187
Vantage Point -- 1,089 4,354 -- 206
Waterfront Plaza -- 585 2,347 -- 626
Westshore I -- 358 1,431 -- 28
Westshore II -- 545 2,181 -- 34
Westshore III -- 961 3,601 -- 1,348
Virginia Mutual -- 1,301 6,034 -- (252)
South Florida
Debartolo Land -- 1,727 -- (1,727) --
The 1800 Eller Drive Building -- -- 9,724 -- 491
Tampa, FL
5400 Gray Street -- 350 295 -- 8
Anchor Glass -- 1,281 11,034 (1,281) (11,034)
Atrium -- 1,639 9,286 (287) 2,219
Bayshore Place -- 2,248 10,323 (2,248) (10,323)
Bay View -- 1,304 5,964 -- 178
Bay Vista Garden Center -- 447 4,777 -- 11
Bay Vista Garden Center II -- 1,328 6,981 134 400
Bay Vista Office Center -- 935 4,480 -- 295
Bay Vista Retail Center -- 283 1,135 -- 31
Countryside Place -- 843 3,731 -- 114
Clearwater Point -- 317 1,531 -- 38
Cypress Center Land -- 1,410 -- -- --
Cypress Commons -- 1,211 11,488 -- 7
Cypress Center I Cigna -- 3,171 12,635 -- 3
Cypress Center III -- 1,190 7,690 -- 5
Cypress West 2,054 615 4,988 -- 191
Brookwood Day Care Center -- 61 347 -- 25
Expo Building -- 171 969 -- 23
Feathersound II 2,227 800 7,282 -- 367
Fireman's Fund Building -- 500 4,107 -- 95
Fireman's Fund Land -- 1,000 -- -- --
Federated -- 6,028 -- -- --
Horizon Office Building (1) -- 6,114 -- 172
Highwoods Preserve I -- -- 2,268 1,618 18,970
Highwoods Preserve III -- -- 1,524 1,488 17,165
Highwoods Preserve IV -- 1,639 16,355 -- 6,717
Highwoods Plaza -- 545 4,650 -- 334
Highwoods Preserve Land -- 3,231 -- -- --
Lakepointe II Office Building (1) 2,000 20,376 -- 2,817
Lakeside (1) -- 7,272 -- 106
Lakepointe I (1) 2,100 31,390 -- 444
Northside Square Office
Building -- 601 3,601 -- 103
Northside Square Retail
Building (3) 800 2,808 -- 61
Gross Amount at
Which Carried at Close of Period
---------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------ -------- -------------- --------- -------------- -------------- -------------
Highwoods Five 806 5,884 6,690 546 1998 5-40 yrs.
Sadler & Cox Land 1,682 -- 1,682 -- N/A N/A
Innslake Building 774 -- 774 -- N/A N/A
IXL Building 907 4,937 5,844 36 2000 5-40 yrs.
Highwoods Common 521 3,568 4,089 137 1999 5-40 yrs.
Innsbrook Centre 914 6,952 7,866 190 1989 5-40 yrs.
Liberty Mutual Building 1,205 5,427 6,632 690 1990 5-40 yrs.
Mercer Plaza 1,556 12,350 13,906 324 1984 5-40 yrs.
Markel-American 1,372 9,563 10,935 780 1998 5-40 yrs.
North Park Building 2,163 8,987 11,150 1,110 1989 5-40 yrs.
Hamilton Beach Building 1,086 4,673 5,759 636 1986 5-40 yrs.
Pavillion - Richmond 401 -- 401 -- N/A N/A
One Shockoe Plaza -- 15,370 15,370 1,916 1996 5-40 yrs.
Pickles Land 850 -- 850 -- N/A N/A
Stony Point I 1,384 12,495 13,879 1,161 1990 5-40 yrs.
Stony Point II 1,561 12,445 14,006 714 1999 5-40 yrs.
Stony Point III 2,546 -- 2,546 -- N/A N/A
Technology Park 2 264 1,104 1,368 160 1991 5-40 yrs.
Vantage Place-A 203 958 1,161 186 1987 5-40 yrs.
Vantage Place-B 233 1,060 1,293 180 1988 5-40 yrs.
Vantage Place-C 235 1,029 1,264 171 1987 5-40 yrs.
Vantage Place-D 218 1,060 1,278 215 1988 5-40 yrs.
Vantage Point 1,089 4,560 5,649 690 1990 5-40 yrs.
Waterfront Plaza 585 2,973 3,558 545 1988 5-40 yrs.
Westshore I 358 1,459 1,817 181 1995 5-40 yrs.
Westshore II 545 2,215 2,760 268 1995 5-40 yrs.
Westshore III 961 4,949 5,910 770 1997 5-40 yrs.
Virginia Mutual 1,301 5,782 7,083 44 1996 5-40 yrs.
South Florida
Debartolo Land -- -- -- -- N/A N/A
The 1800 Eller Drive Building -- 10,215 10,215 573 1983 5-40 yrs.
Tampa, FL
5400 Gray Street 350 303 653 24 1973 5-40 yrs.
Anchor Glass -- -- -- -- 1988 5-40 yrs.
Atrium 1,352 11,505 12,857 1,111 1989 5-40 yrs.
Bayshore Place -- -- -- -- 1990 5-40 yrs.
Bay View 1,304 6,142 7,446 477 1982 5-40 yrs.
Bay Vista Garden Center 447 4,788 5,235 348 1982 5-40 yrs.
Bay Vista Garden Center II 1,462 7,381 8,843 720 1997 5-40 yrs.
Bay Vista Office Center 935 4,775 5,710 450 1982 5-40 yrs.
Bay Vista Retail Center 283 1,166 1,449 91 1987 5-40 yrs.
Countryside Place 843 3,845 4,688 316 1988 5-40 yrs.
Clearwater Point 317 1,569 1,886 122 1981 5-40 yrs.
Cypress Center Land 1,410 -- 1,410 -- N/A N/A
Cypress Commons 1,211 11,495 12,706 1,121 1985 5-40 yrs.
Cypress Center I Cigna 3,171 12,638 15,809 1,441 1982 5-40 yrs.
Cypress Center III 1,190 7,695 8,885 322 1983 5-40 yrs.
Cypress West 615 5,179 5,794 460 1985 5-40 yrs.
Brookwood Day Care Center 61 372 433 43 1986 5-40 yrs.
Expo Building 171 992 1,163 109 1981 5-40 yrs.
Feathersound II 800 7,649 8,449 714 1986 5-40 yrs.
Fireman's Fund Building 500 4,202 4,702 365 1982 5-40 yrs.
Fireman's Fund Land 1,000 -- 1,000 -- N/A N/A
Federated 6,028 -- 6,028 -- N/A N/A
Horizon Office Building -- 6,286 6,286 524 1980 5-40 yrs.
Highwoods Preserve I 1,618 21,238 22,856 492 1999 5-40 yrs.
Highwoods Preserve III 1,488 18,689 20,177 352 1999 5-40 yrs.
Highwoods Preserve IV 1,639 23,072 24,711 160 1999 5-40 yrs.
Highwoods Plaza 545 4,994 5,539 34 1999 5-40 yrs.
Highwoods Preserve Land 3,231 -- 3,231 -- N/A N/A
Lakepointe II Office Building 2,000 23,193 25,193 715 1999 5-40 yrs.
Lakeside -- 7,378 7,378 592 1978 5-40 yrs.
Lakepointe I 2,100 31,834 33,934 2,595 1986 5-40 yrs.
Northside Square Office
Building 601 3,704 4,305 304 1986 5-40 yrs.
Northside Square Retail
Building 800 2,869 3,669 227 1986 5-40 yrs.
F-40
Cost Capitalized
Subsequent
Initial Cost to Acquisition
----------------------- --------------------------
2000
Encum- Building & Building &
Description brance Land Improvements Land Improvements
------------ ----------- -------- ----------- ----------- ----------
One Harbour Place -- 2,015 25,252 -- 1
Parkside (1) -- 9,193 -- 277
Pavillion Office Building (1) -- 16,022 -- 205
Pavilion Parking Garage -- -- 5,618 -- --
Park Place -- 1,508 -- -- --
REO Building -- 795 4,484 -- 181
Registry I -- 744 4,216 -- 337
Registry II -- 908 5,147 -- 394
Registry Square -- 344 1,951 -- 104
Rocky Point Land -- 3,484 -- -- --
Sabal Business Center I -- 375 2,127 -- 128
Sabal Business Center II -- 342 1,935 -- 137
Sabal Business Center III -- 290 1,642 -- 45
Sabal Business Center IV -- 819 4,638 -- 7
Sabal Business Center V -- 1,026 5,813 -- 86
Sabal Business Center VI -- 1,609 9,116 -- 80
Sabal Business Center VII -- 1,519 8,605 -- 44
Sabal Lake Building -- 572 3,241 -- 152
Sabal Industrial Park Land -- 473 -- -- --
Sabal Park Plaza -- 611 3,460 -- 384
Sabal Tech Center -- 548 3,107 -- 97
Summit Executive Centre -- 579 2,749 -- 1
Spectrum (1) 1,450 14,173 -- 264
Sabal Pavilion - Phase I -- 660 8,633 304 (69)
Sabal Pavilion - Phase II -- 357 -- -- --
Tower Place -- 3,194 18,098 (3,194) (18,098)
USF&G -- 1,366 7,742 -- 1,391
Westshore Square 2,911 1,130 5,155 -- 16
----- ------ ------ -------
$673,463 $3,046,386 $(66,546) $(231,920)
======= ========== ======== =========
Gross Amount at
Which Carried at Close of Period
----------------------------------------
Life on
Which
Building & Accumulated Date of Depreciation
Description Land Improvements Total Depreciation Construction is Computed
------------ ----------- -------------- ------------- -------------- -------------- -------------
One Harbour Place 2,015 25,253 27,268 237 1985 5-40 yrs.
Parkside -- 9,470 9,470 763 1979 5-40 yrs.
Pavillion Office Building -- 16,227 16,227 1,314 1982 5-40 yrs.
Pavilion Parking Garage -- 5,618 5,618 168 1999 5-40 yrs.
Park Place 1,508 -- 1,508 -- N/A N/A
REO Building 795 4,665 5,460 384 1983 5-40 yrs.
Registry I 744 4,553 5,297 546 1985 5-40 yrs.
Registry II 908 5,541 6,449 667 1987 5-40 yrs.
Registry Square 344 2,055 2,399 225 1988 5-40 yrs.
Rocky Point Land 3,484 -- 3,484 -- N/A N/A
Sabal Business Center I 375 2,255 2,630 259 1982 5-40 yrs.
Sabal Business Center II 342 2,072 2,414 273 1984 5-40 yrs.
Sabal Business Center III 290 1,687 1,977 187 1984 5-40 yrs.
Sabal Business Center IV 819 4,645 5,464 501 1984 5-40 yrs.
Sabal Business Center V 1,026 5,899 6,925 652 1988 5-40 yrs.
Sabal Business Center VI 1,609 9,196 10,805 994 1988 5-40 yrs.
Sabal Business Center VII 1,519 8,649 10,168 935 1990 5-40 yrs.
Sabal Lake Building 572 3,393 3,965 425 1986 5-40 yrs.
Sabal Industrial Park Land 473 -- 473 -- N/A N/A
Sabal Park Plaza 611 3,844 4,455 648 1987 5-40 yrs.
Sabal Tech Center 548 3,204 3,752 341 1989 5-40 yrs.
Summit Executive Centre 579 2,750 3,329 200 1988 5-40 yrs.
Spectrum 1,450 14,437 15,887 1,211 1984 5-40 yrs.
Sabal Pavilion - Phase I 964 8,564 9,528 443 1998 5-40 yrs.
Sabal Pavilion - Phase II 357 -- 357 -- N/A N/A
Tower Place -- -- -- -- 1988 5-40 yrs.
USF&G 1,366 9,133 10,499 1,402 1988 5-40 yrs.
Westshore Square 1,130 5,171 6,301 383 1976 5-40 yrs.
----- ------ ------ -----
$606,917 $2,814,466 $3,421,383 $282,803
======== ========== ========== ========
- --------
(1) These assets are pledged as collateral for a $71,183,000 first mortgage
loan.
(2) These assets are pledged as collateral for a $45,396,000 first mortgage
loan.
(3) These assets are pledged as collateral for a $29,328,000 first mortgage
loan.
(4) These assets are pledged as collateral for a $7,883,000 first mortgage
loan.
(5) These assets are pledged as collateral for a $136,836,000 first mortgage
loan.
(6) These assets are pledged as collateral for a $185,701,000 first mortgage
loan.
(7) These assets are pledged as collateral for an $11,141,000 first mortgage
loan.
The aggregate cost for Federal Income tax purposes was approximately
$3,117,840,000.
F-41
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTE TO SCHEDULE III
As of December 31, 2000, 1999, and 1998
(In thousands)
A summary of activity for Real estate and accumulated depreciation is as
follows:
December 31,
-----------------------------------------------
2000 1999 1998
-------------- -------------- -------------
Real Estate:
Balance at beginning of year ....................... $3,743,934 $3,992,428 $2,589,531
Additions:
Acquisitions, Development and Improvments ......... 411,057 515,946 1,428,472
Cost of real estate sold ........................... (733,608) (764,440) (25,575)
---------- ---------- ----------
Balance at close of year (a) ......................... $3,421,383 $3,743,934 $3,992,428
========== ========== ==========
Accumulated Depreciaition:
Balance at beginning of year ....................... $ 237,959 $ 167,225 $ 85,602
Depreciation expense ............................... 108,752 100,130 83,158
Real estate sold ................................... (63,908) (29,396) (1,535)
---------- ---------- ----------
Balance at close of year (b) ......................... $ 282,803 $ 237,959 $ 167,225
========== ========== ==========
- ----------
(a) Reconciliation of total cost to balance sheet caption at December 31, 2000,
1999, and 1998 (in Thousands):
2000 1999 1998
------------- ------------- -------------
Total per schedule III .............................. $3,421,383 $3,743,934 $3,992,428
Constuction in progress exclusive of land included in
schedule III ...................................... 87,622 186,925 189,465
Furniture, fixtures and equipment ................... 11,433 7,917 7,665
Property held for sale .............................. (135,335) (51,602) --
---------- ---------- ----------
Total real estate assets at cost .................... $3,385,103 $3,887,174 $4,189,558
========== ========== ==========
(b) Reconciliation of total Accumulated Depreciation to balance sheet caption
at December 31, 2000, 1999, and 1998 (in Thousands)
2000 1999 1998
----------- ----------- -----------
Total per Schedule III ........................................... $282,803 $237,959 $167,225
Accumulated Depreciation -- furniture, fixtures and equipment..... 5,317 3,439 3,953
Property held for sale ........................................... (7,511) (3,283) (2,670)
-------- -------- --------
Total accumulated depreciation ................................... $280,609 $238,115 $168,508
======== ======== ========
F-42