SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 27, 1996
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
North Carolina
(State of Organization)
333-3890-01 56-1869557
(COMMISSION FILE NUMBER) (IRS Employer Identification No.)
3100 Smoketree Court, Suite 600 27604
Raleigh, North Carolina (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(919) 872-4924
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
ITEM 5. OTHER EVENTS.
On September 27, 1996, Highwoods Properties, Inc. (the "Company"),
which is the general partner of Highwoods/Forsyth Limited Partnership (the
"Registrant"), completed the acquisition of Crocker Realty Trust, Inc.
("Crocker") and the related restructuring of the Company.
As previously reported by the Company and the Registrant in
Registration Statements (Nos. 333-3890 and 333-3890-01) dated June 20, 1996 and
by the Company under item 2 in an 8-K dated April 29, 1996 (as amended on Form
8-K/A on June 3, 1996 and June 18, 1996), the Company and Cedar Acquisition
Corporation ("Cedar"), which was then a wholly owned subsidiary of the Company,
entered into a Stock Purchase Agreement on April 29, 1996, with AP CRTI
Holdings, L.P., AEW Partners, L.P., Thomas J. Crocker, Barbara F. Crocker,
Richard S. Ackerman and Robert E. Onisko (the "Sellers") to purchase all of the
Sellers' shares of Common Stock of Crocker (the "Shares"). The Company and Cedar
also entered into an Agreement and Plan of Merger with Crocker on April 29, 1996
(the "Merger Agreement"). The Merger Agreement provided that Cedar would be
merged into Crocker, with Crocker as the surviving entity (the "Merger").
On September 6, 1996, the Company closed the acquisition of the Shares.
The purchase price was $249.1 million ($11.05 per Share) and included, as
contemplated by the Stock Purchase Agreement, the $1.1 million purchase of
1,056,000 options to purchase shares of Crocker owned by the Sellers. The
acquisition was primarily funded ($189 million) from a portion of the net
proceeds raised by the Company in its recent 11.5 million share public offering.
The remaining $60 million of the purchase price was funded from a draw from the
Registrant's $140 million credit facility with NationsBank, N.A., First Union
National Bank of North Carolina and Wachovia Bank of North Carolina.
On September 20, 1996, the Merger was approved at a special meeting of
the shareholders of Crocker. At 11:59 p.m. on September 20, 1996, the effective
time of the Merger, each share of Crocker Common Stock held by Cedar and the
Company (including the Shares) was canceled, each share of common stock of Cedar
became a share of Common Stock of Crocker, and all other shares of Common Stock
of Crocker were converted into and represented a right to receive $11.05243 per
share. Following the Merger, the Company entered into various restructuring
transactions culminating in the merger of Crocker into the Company on September
26, 1996 and the subsequent contribution by the Company of Crocker's assets and
liabilities to the Registrant. As a result of the Merger and subsequent
transactions, substantially all of the assets and liabilities of Crocker at the
time of the Merger are the assets and liabilities of the Registrant. The Company
is the sole general partner of the Registrant and as of October 11, 1996, owned
87.9% of the partnership interests in the Registrant.
The cost of acquiring the remaining shares of Crocker in the Merger was
$73.7 million, which was funded through a draw on the Registrant's $140 million
credit facility. The total cost of the acquisition of all of the outstanding
shares of Crocker was approximately $565.8 million, which includes the
assumption of $243 million of Crocker debt discussed below. The effective
purchase price was substantially the same as that estimated in the Company's
April 29, 1996 8-K. The $25.8 million increase in the purchase price was largely
offset by the additional $21 million in cash held by Crocker at the time of the
Merger. The increase in the purchase price was due to an increase of
approximately 2.1 million in the number of outstanding shares of Crocker from
April 29, 1996. The additional shares were issued upon the exercise of
outstanding warrants to purchase the shares of Crocker Common Stock (the
"Warrants"). The increased cash held by Crocker was due to the $10.00 exercise
price of the Warrants. As of October 11, approximately 182,680 Warrants were
outstanding, representing a $192,000 obligation of the Company.
The Crocker portfolio obtained through the Merger consists of 58
suburban office properties and 12 service center properties (collectively, the
"Crocker Properties"), totaling 5.7 million square feet. The Crocker Properties
are located in 15 southeastern markets, of which four are existing Company
markets and 11 represent new markets for the Company (including Greenville, SC;
Tampa, FL; Memphis, TN; and Atlanta, GA). At September 30, 1996, the Crocker
Properties were 94% leased. As previously disclosed, Crocker's undeveloped land
(approximately 257.5 acres) and certain other assets and liabilities were
distributed by Crocker to another entity prior to the Merger and therefore were
not acquired in the Merger.
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Following the Merger, the Company's portfolio is comprised of 70%
suburban office space, 17% industrial space and 13% service center space and
includes 168 suburban office properties, 36 industrial properties and 74 service
center properties.
On September 27, 1996, the Registrant obtained a $280 million revolving
line of credit (the "Revolving Loan") from NationsBank, N.A., First Union
National Bank of North Carolina and other lenders. The Revolving Loan includes a
$10 million letter of credit facility and replaces the Registrant's $140 million
credit facility.
The Revolving Loan will bear interest at a rate of the Applicable
Percentage (defined below) plus (i) LIBOR or (ii) the higher of (x)
NationsBank's prime rate or (y) the federal funds rate plus 1/2 of 1%. The
Applicable Percentage varies with the Company's average unsecured long-term debt
rating as follows:
AVERAGE APPLICABLE
UNSECURED APPLICABLE APPLICABLE PERCENTAGE
LONG-TERM PERCENTAGE FOR PERCENTAGE FOR LETTER
LEVEL DEBT RATING EURODOLLAR LOANS BASE RATE LOANS OF CREDIT FEE
- ----- ----------- ---------------- --------------- --------------
I The equivalent of A- or 1.00% 0% 1.00%
better from S&P
II Less than the equivalent 1.20% 0% 1.20%
of A- from S&P but
greater than or equal to
the equivalent of BBB+
from S&P
III Less than the equivalent 1.35% .10% 1.35%
of BBB+ from S&P but
greater than or equal to
the equivalent of BBB
from S&P
IV Less than the equivalent 1.50% .15% 1.50%
of BBB from S&P but
greater than or equal to
the equivalent of BBB-
from S&P
V Worse than the 1.75% .30% 1.75%
equivalent of BBB-
from S&P or unrated by
either S&P or Moody's
The initial Applicable Percentage is based on Level IV and will remain at Level
IV until the earlier of (i) January 25, 1997 or (ii) the date the Company
receives an average unsecured long-term debt rating from S&P and Moody's.
Thereafter, the Applicable Percentage will be determined in accordance with the
schedule above and will be adjusted after an applicable rating change.
The Revolving Loan requires monthly payments of accrued and unpaid
interest. The Registrant is permitted to prepay the principal amount of the
revolving loans under the facility. Unless accelerated sooner due to an event of
default, the entire outstanding principal balance under the Revolving Loan and
all accrued and unpaid interest will be due on October 31, 1999.
In addition to the interest charges set forth above, the Registrant
pays to NationsBank, N.A., as agent, (i) for the account of the lenders a
commitment fee on the unused portion of the revolver at a rate ranging from .15%
to .25%
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per year depending on the size of the unused commitment, (ii) for the account of
the lenders a letter of credit fee on the aggregate amount then available for
drawing under all letters of credit at a rate equal to the Applicable Percentage
set forth above, and (iii) for the account of any issuing lender a letter of
credit fee on the aggregate amount of all letters of credit issued by such
lender at a rate per annum equal to 0.25%.
The obligations of the Registrant under the Revolving Loan are
guaranteed by the Company and certain of its subsidiaries.
The Revolving Loan contains customary representations, warranties and
events of default and requires the Registrant to comply with certain affirmative
and negative covenants, including the following financial covenants: (i)
adjusted net operating income divided by total liabilities of not less than
16.5%; (ii) total liabilities not greater than 45% of market capitalization;
(iii) tangible net worth not less than $700 million, which amount shall be
increased by not less than 85% of the net proceeds of any future offerings of
the Company's capital stock; (iv) a ratio of total liabilities to total assets
at a cost of no more than .50 to 1.0; (v) a ratio of earnings before interest,
income tax, depreciation and amortization to interest expense plus capital
expenditures of not less than 2.0 to 1.0, which increases to 2.2 and 2.5 to 1.0
on December 31, 1996 and June 30, 1997, respectively; (vi) a ratio of
unencumbered assets to unsecured debt of not less than 2.25 to 1.0; (vii) a
ratio of secured debt to total assets of not more than .40 to 1.0, which
decreases to .3 and .25 to 1.0 on April 1, 1997 and April 1, 1998, respectively;
(viii) a ratio of adjusted net operating income as derived from unencumbered
assets to interest expense paid on unsecured debt of not less than 2.25 to 1.0;
(ix) a ratio of adjusted net operating income derived from unencumbered assets
to unsecured debt of not less than .18 to 1.0; and (x) a ratio of the value of
speculative land acquired after September 27, 1996 to the value of improved
properties of not less than .02 to 1.0.
In connection with the Merger, the Registrant assumed approximately
$243 million of indebtedness at an average rate of 8.6%. This indebtedness
included: (i) a $140 million mortgage note (the "Mortgage Note") with a fixed
rate of 7.9%, (ii) variable rate mortgage loans in the aggregate amount of $76
million and (iii) fixed rate mortgage loans in the amount of $27 million.
Substantially all of such debt, other than the Mortgage Note, was repaid by the
Registrant following the Merger using funds available under the Revolving Loan.
ITEM 7(C). EXHIBITS
Item Description
10.1 Credit Agreement among Highwoods/Forsyth Limited Partnership, Highwoods
Properties, Inc., the Subsidiaries named therein and the Lenders named
therein, dated as of September 27, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., its general partner
By: /s/ Carman J. Liuzzo
Carman J. Liuzzo
Vice President and Chief Financial Officer
Date: October 15, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., its general partner
By: /s/ Carman J. Liuzzo
Carman J. Liuzzo
Vice President and Chief Financial Officer
Date: October 15, 1996
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Exhibits
Item Description
10.1 Credit Agreement among Highwoods/Forsyth Limited Partnership, Highwoods
Properties, Inc., the Subsidiaries named therein and the Lenders named
therein, dated as of September 27, 1996.
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