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): January 22, 1998
HIGHWOODS PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND
(State of Incorporation)
1-13100 56-1871668
(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
The purpose of this filing is to report certain pro forma financial
information of Highwoods Properties, Inc. (the "Company") as of and for the nine
months ended September 30, 1997 and for the year ended December 31, 1996 and to
set forth certain exhibits in connection with (i) an agreement of the Company
dated January 22, 1998 to sell 2,000,000 shares of common stock (2,300,000
shares of common stock if the over-allotment option is exercised in full) in an
underwritten public offering for net proceeds of approximately $68.2 million
(approximately $78.5 million if the over-allotment option is exercised in full)
and (ii) an offering by Highwoods/Forsyth Limited Partnership (the "Operating
Partnership") of $100 million of % MandatOry Par Put Remarketed Securities
SM("MOPPRSSM") due January , 2013 and $100 million of % Notes due January
, .
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Following is a list of the financial statements, pro forma financial
information and exhibits filed as a part of this report:
(b) Pro Forma Financial Information
Pro Forma Condensed Combining Financial Statements
Pro Forma Condensed Combining Balance Sheet (unaudited) as of
September 30, 1997
Pro Forma Condensed Combining Statement of Operations (unaudited) for
the nine months ended September 30, 1997
Pro Forma Condensed Combining Statements of Operations (unaudited) for
the year ended December 31, 1996
Notes to Pro Forma Condensed Combining Financial Statements
(c) The following exhibits are filed as part of this report:
8 Opinion of Alston & Bird LAP regarding certain federal tax matters
12 Statement of computation of ratios
1
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 PROPERTIES, INC.
/S/ CARMAN J. LIUZZO
Carman J. Liuzzo
Vice President and Chief Financial
Officer
Date: January 22, 1998
2
INDEX TO THE FINANCIAL STATEMENTS
HIGHWOODS PROPERTIES, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Condensed Combining Balance Sheet (unaudited) as of September 30, 1997....................................... F-2
Notes to Pro Forma Condensed Combining Balance Sheet................................................................... F-3
Pro Forma Condensed Combining Statement of Operations (unaudited) for the nine months ended September 30, 1997......... F-5
Notes to Pro Forma Condensed Combining Statement of Operations......................................................... F-6
Pro Forma Condensed Combining Statement of Operations (unaudited) for the year ended December 31, 1996................. F-8
Notes to Pro Forma Condensed Combining Statement of Operations......................................................... F-9
F-1
HIGHWOODS PROPERTIES, INC.
PRO FORMA CONDENSED COMBINING BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
(IN THOUSANDS)
USE OF COMMON
PREFERRED STOCK STOCK
HISTORICAL (A) ACP, INC. (B) OFFERING PROCEEDS (C) OFFERING (D)
ASSETS
Real estate assets, net...................................... $1,730,906 $ 617,000 $ -- $ --
Cash and cash equivalents.................................... 184,230 (25,465) (166,916) 9,192
Accounts and notes receivables............................... 16,798 -- -- --
Accrued straight line rent receivable........................ 10,024 -- -- --
Other assets................................................. 38,220 -- -- --
$1,980,178 $ 591,535 $(166,916) $ 9,192
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages and notes payable.................................. $ 649,188 $ 481,171 $(166,916) $ (273,050)
Accounts payable, accrued expenses and other................. 41,565 10,500 -- --
Total liabilities............................................ 690,753 491,671 (166,916) (273,050)
Minority interest............................................ 174,913 96,041 -- --
Preferred stock:
Series A.................................................. 125,000 -- -- --
Series B.................................................. 172,500 -- -- --
Stockholders' equity:
Common stock.............................................. 379 1 -- 85
Additional paid in capital................................ 839,912 3,822 282,157
Distributions in excess of net
earnings................................................ (23,279) -- -- --
Total Stockholders' equity................................... 1,114,512 3,823 -- 282,242
$1,980,178 $ 591,535 $(166,916) $ 9,192
MOPPRS
ACQUIRED OTHER ACQUIRED AND DEBT 1998 COMMON
PROPERTIES (E) PROPERTIES (F) OFFERING (G) STOCK OFFERING (H)
ASSETS
Real estate assets, net...................................... $106,936 $155,801 $ -- $ --
Cash and cash equivalents.................................... -- -- -- 37,442
Accounts and notes receivables............................... -- -- -- --
Accrued straight line rent receivable........................ -- -- -- --
Other assets................................................. -- -- 1,600 --
$106,936 $155,801 $1,600 $ 37,442
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages and notes payable.................................. $105,184 $145,191 $1,600 $(30,807)
Accounts payable, accrued expenses and other................. 1,752 640 -- --
Total liabilities............................................ 106,936 145,831 1,600 (30,807)
Minority interest............................................ -- 9,970 -- --
Preferred stock:
Series A.................................................. -- -- -- --
Series B.................................................. -- -- -- --
Stockholders' equity:
Common stock.............................................. -- -- -- 20
Additional paid in capital................................ -- -- -- 68,229
Distributions in excess of net
earnings................................................ -- -- -- --
Total Stockholders' equity................................... -- -- -- 68,249
$106,936 $155,801 $1,600 $ 37,442
PRO FORMA
ASSETS
Real estate assets, net...................................... $2,610,643
Cash and cash equivalents.................................... 38,483
Accounts and notes receivables............................... 16,798
Accrued straight line rent receivable........................ 10,024
Other assets................................................. 39,820
$2,715,768
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages and notes payable.................................. $ 911,561
Accounts payable, accrued expenses and other................. 54,457
Total liabilities............................................ 966,018
Minority interest............................................ 280,924
Preferred stock:
Series A.................................................. 125,000
Series B.................................................. 172,500
Stockholders' equity:
Common stock.............................................. 485
Additional paid in capital................................ 1,194,120
Distributions in excess of net
earnings................................................ (23,279)
Total Stockholders' equity................................... 1,468,826
$2,715,768
F-2
HIGHWOODS PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINING BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combining balance sheet is
presented as if the following transactions had been consummated on September 30,
1997: (a) the completion of the Company's business combination with Associated
Capital Properties, Inc. (together with its affiliates, "ACP") and the
acquisition of an affiliated property portfolio (collectively, the "ACP
Portfolio") (the "Merger"), (b) the completion of the acquisition of the seven
properties that ACP had under contract to purchase (the "1997 Pending
Acquisitions"), (c) the issuance of 8.5 million shares of the Company's common
stock, $.01 par value (the "Common Stock"), at a price of $35 per share (the
"Common Stock Offering"), (d) the completion of the business combination with
Riparius Development Corporation and the acquisitions of seven properties in
Winston-Salem, NC and one property in Nashville, TN (collectively, the "Acquired
Properties"), (e) the completion of the pending Garcia acquisition consisting of
fourteen properties, six service center properties and 66 acres of development
land and the completion of four other acquisitions of seven properties
(collectively, the "Other Acquired Properties"), (f) the issuance of $100
million of MandatOry Par Put Remarketed Securities ("MOPPRSSM") due 2013 at an
assumed interest rate of 6.6% and $100 million in debt securities, due 2008, at
an assumed interest rate of 6.92% (the "MOPPRS and Debt Offering") and (g) the
issuance of 2.0 million shares of the Company's Common Stock, at a price of $36
per share (the "1998 Common Stock Offering").
The acquisitions have been accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values, which may be subject to further
refinement, including appraisals and other analyses.
This unaudited pro forma condensed combining balance sheet should be read
in conjunction with the pro forma condensed combining statement of operations of
the Company for the nine months ended September 30, 1997 and for the year ended
December 31, 1996, the consolidated financial statements and related notes of
the Company included in its Annual Report on Form 10-K for the year ended
December 31, 1996, the unaudited financial statements and related notes of the
Company included in its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997, and the financial
statements and related notes of Associated Capital Properties Portfolio and 1997
Pending Acquisitions included in the Company's Current Report on Form 8-K dated
October 1, 1997 (as filed with the Securities and Exchange Commission on October
16, 1997).
The pro forma condensed combining balance sheet is unaudited and not
necessarily indicative of what the actual financial position would have been had
the aforementioned transactions actually occurred on September 30, 1997, nor
does it purport to represent the future financial position of the Company.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
(a.) Represents the Company's historical balance sheet contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
(b.) Reflects the allocation of the $617 million purchase price to the fair
value of the net assets acquired in the Merger and the 1997 Pending
Acquisitions (collectively, the "ACP Transaction"). The purchase price
consisted of the issuance of 2,955,238 Common Units (valued at $32.50
per Common Unit), the assumption of $481 million of mortgage debt, the
issuance of 117,617 shares of Common Stock (valued at $32.50 per
share), a cash payment of approximately $24 million and an $11
million capital expenditure reserve.
(c.) Reflects the use of the net proceeds from the issuance of 6.9 million
8% Series B Cumulative Redeemable Preferred Shares (the "Series B
Preferred Shares") to pay off $166.9 million of debt assumed in the
ACP Transaction.
(d.) Reflects the issuance of 8.5 million shares of Common Stock in the
Common Stock Offering at an offering price of $35 per share and the
use of the net proceeds to pay off $273.1 million of debt assumed in
the ACP Transaction. Underwriting discounts and other offering costs
equaled approximately $15.3 million.
F-3
HIGHWOODS PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINING BALANCE SHEET (UNAUDITED) -- CONTINUED
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE
SHEET -- Continued
(e.) Reflects the allocation of the $106.9 million purchase price to the
fair value of the net assets acquired in the Acquired Properties. The
purchase price consisted of a draw on the Company's $430 million
unsecured revolving lines of credit (the "Lines of Credit") of $105.2
million and a capital expenditure reserve of $1.7 million.
(f.) Reflects the allocation of the $155.8 million purchase price to the
fair value of the net assets acquired in the Other Acquired
Properties. The purchase price consisted of the issuance of 299,810
Class A Units (215,863 of which were valued at $32.50 per Class A Unit
and 83,947 of which were valued at $35.20), the assumption of $31.0
million of mortgage debt, a draw on the Lines of Credit of $114.2
million and a capital expenditure reserve of $.6 million.
(g.) Reflects the issuance of $100 million of MOPPRS due 2013 at an assumed
interest rate of 6.6% and $100 million in debt securities, due 2008,
at an assumed interest rate of 6.92% and the use of the net proceeds
to pay off approximately $201.4 million of debt drawn on the Lines of
Credit. In determining net proceeds from the MOPPRS and Debt Offering,
the amount paid to the Company by the remarketing dealer for the right
to remarket the securities was assumed to equal $3.0 million and the
underwriting discounts and other offering costs to be paid by the
Company have been assumed to equal $1.6 million.
(h.) Reflects the issuance of 2.0 million shares of Common Stock in the
1998 Common Stock Offering at an offering price of $36 per share and
the use of a portion of the net proceeds to pay off debt drawn on the
Lines of Credit. Underwriting discounts and other offering costs have
been assumed to equal $3.8 million.
F-4
HIGHWOODS PROPERTIES, INC.
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
USE OF
PREFERRED
CENTURY CENTER 1997 STOCK
AND ANDERSON OTHER ACP PENDING OFFERING
HISTORICAL (A) TRANSACTIONS (B) OFFERINGS (C) PORTFOLIO (D) ACQUISITIONS (E) PROCEEDS
REVENUE:
Rental property.................... $177,246 $ 1,047 $ -- $52,411 $ 10,560 $ --
Other Income....................... 5,968 -- -- 1,880 123 --
183,214 1,047 -- 54,291 10,683 --
OPERATING EXPENSES:
Rental property.................... 48,995 317 -- 23,956 4,396 --
Depreciation and amortization...... 31,051 715 -- 9,019 -- --
INTEREST EXPENSE:
Contractual....................... 33,082 1,358 (1,077) 25,746 -- (8,604)(f)
Amortization of deferred financing
costs............................ 1,689 -- -- -- -- --
34,771 1,358 (1,077) 25,746 -- (8,604)
General and administrative......... 6,694 -- -- -- -- --
Income before minority interest.... 61,703 (1,343) 1,077 (4,430) 6,287 8,604
Minority interest.................. (9,872) -- -- -- -- (1,540)(g)
Income before extraordinary item
and dividends on preferred
shares............................ 51,831 (1,343) 1,077 (4,430) 6,287 7,064
Dividends on preferred shares...... (6,972) -- (1,289) -- -- (10,175)(h)
Net income available for common
shareholders before extraordinary
item.............................. $ 44,859 $ (1,343) $ (212) $(4,430) $ 6,287 $ (3,111)
Net income per common share........ $ 1.25
Weighted average shares............ 35,777
MOPPRS
COMMON AND
STOCK ACQUIRED OTHER ACQUIRED DEBT 1998 COMMON PRO FORMA
OFFERING PROPERTIES (J) PROPERTIES (K) OFFERING STOCK OFFERING ADJUSTMENTS PRO FORMA
REVENUE:
Rental property.................... $ -- $9,332 $ 13,255 $ -- $ -- $ -- $263,851
Other Income....................... -- -- -- -- -- -- 7,971
-- 9,332 13,255 -- -- -- 271,822
OPERATING EXPENSES:
Rental property.................... -- 1,727 6,474 -- -- 188(o) 86,053
Depreciation and amortization...... -- -- -- -- -- 3,369(p) 44,154
INTEREST EXPENSE:
Contractual....................... (14,075)(i) -- -- (685 ) (1,588)(n) 13,245(q) 47,4
02
Amortization of deferred financing
costs............................ -- -- -- 178(m) -- -- 1,867
(14,075) -- -- (507) (1,588) 13,245 49,269
General and administrative......... -- -- -- -- -- -- 6,694
Income before minority interest.... 14,075 7,605 6,781 507 1,588 (16,802) 85,652
Minority interest.................. (2,519)(g) -- -- (91 (g) (284)(g) (1,026) (15,332 )
Income before extraordinary item
and dividends on preferred
shares............................ 11,556 7,605 6,781 416 1,304 (17,828) 70,320
Dividends on preferred shares...... -- -- -- -- -- -- (18,436 )
Net income available for common
shareholders before extraordinary
item.............................. $ 11,556 $7,605 $ 6,781 $ 416 $ 1,304 $ (17,828) $ 51,884
Net income per common share........ $ 1.07
Weighted average shares............ 48,566
F-5
HIGHWOODS PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combining statement of
operations is presented as if the following transactions had been consummated on
January 1, 1996: (a) the completion of the business combination with Anderson
Properties, Inc. ("Anderson Properties") and the purchase of a portfolio of
properties from affiliates of Anderson Properties (the "Anderson Transaction")
and the purchase of Century Center Office Park and an affiliated property
portfolio (the "Century Center Transaction"), (b) the completion of the issuance
of 125,000 8 5/8% Series A Cumulative Redeemable Preferred Shares (the "Series A
Preferred Shares") and of $100,000,000 of Exercisable Put Option Notes
(collectively the "Other Offerings"), (c) the completion of the Merger (d) the
completion of the 1997 Pending Acquisitions, (e) the issuance of 6.9 million
Series B Preferred Shares at a price of $25 per share (the "Preferred Stock
Offering"), (f) the completion of the Common Stock Offering, (g) the completion
of the Acquired Properties, (h) the completion of the Other Acquired Properties,
(i) the completion of the MOPPRS and Debt Offering and (j) the completion of the
1998 Common Stock Offering.
This unaudited pro forma condensed combining statement of operations should
be read in conjunction with the pro forma condensed combining balance sheet of
the Company as of September 30, 1997, the consolidated financial statements and
related notes of the Company included in its Annual Report on Form 10-K for the
year ended December 31, 1996, the unaudited financial statements and related
notes of the Company included in its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and the
financial statements and related notes of Associated Capital Properties
Portfolio and 1997 Pending Acquisitions included in the Company's Current Report
on Form 8-K dated October 1, 1997 (as filed with the Securities and Exchange
Commission on October 16, 1997).
The pro forma condensed combining statement of operations is unaudited and
is not necessarily indicative of what the Company's actual results would have
been had the aforementioned transactions actually occurred on January 1, 1996
nor does it purport to represent the future operating results of the Company.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF
OPERATIONS
(a.) Represents the Company's historical statement of operations contained
in its Quarterly Report on Form 10-Q for the nine months ended
September 30, 1997.
(b.) Reflects the historical statement of operations of Century Center
Office Park and an affiliated portfolio ("Century Center") and the
properties acquired in the Anderson Transaction for the period from
January 1, 1997 through the respective dates of their acquisition,
adjusted on a pro forma basis for interest expense and depreciation
expense.
(c.) Reflects the estimated interest expense savings on $127.5 million of
the Lines of Credit and $63.1 million of other loans repaid with the
proceeds of the Other Offerings and the dividends incurred on the
Company's Series A Cumulative Redeemable Preferred Shares from January
1, 1997 through the date of the offering of the Series A Cumulative
Redeemable Preferred Shares.
(d.) Represents the historical revenues and operating expenses of the ACP
Portfolio for the nine months ended September 30, 1997 and the
historical operations of properties acquired by ACP during 1997 from
January 1, 1997 to the respective dates of their acquisition adjusted
on a pro forma basis for incremental revenue related to owner-occupied
buildings, interest expense and depreciation expense related to the
ACP Portfolio and the 1997 Pending Acquisitions.
(e.) Reflects the historical revenues and operating expenses of the 1997
Pending Acquisitions for the nine months ended September 30, 1997.
F-6
HIGHWOODS PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
(UNAUDITED) -- CONTINUED
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF
OPERATIONS -- Continued
(f.) Reflects the estimated interest expense savings on $166.9 million of
the Lines of Credit repaid with the proceeds of the Preferred Stock
Offering.
(g.) Represents the net adjustment to minority interest to reflect the pro
forma minority interest percentage of 17.9%.
(h.) Represents the 8% dividend on the Series B Preferred Shares issued in
the Preferred Stock Offering.
(i.) Represents the estimated interest expense savings on $273.1 million of
the Lines of Credit repaid with the proceeds of the Common Stock
Offering.
(j.) Reflects the historical revenues and operating expenses of Acquired
Properties for the nine months ended September 30, 1997
(k.) Reflects the historical revenues and operating expenses of Other
Acquired Properties for the nine months ended September 30, 1997.
(l.) Represents the estimated interest expense on $100 million of MOPPRS
due 2013 at an assumed interest rate of 6.6% and $100 million in debt
securities, due 2008 (at an assumed rate of 6.92%) offset by the
interest expense savings on the $201.4 million of the Lines of Credit
repaid with the proceeds of the MOPPRS and Debt Offering.
(m.) Represents the amortization of the deferred financing costs associated
with the MOPPRS and Debt Offering, straight-line over the terms of the
securities offset by the amortization of the $3.0 million MOPPRS
premium paid by the remarketing dealer, using the effective interest
method over the term of the securities.
(n.) Represents the estimated interest expense savings on $30.8 million of
the Lines of Credit repaid with a portion of the net proceeds of the
1998 Common Stock Offering.
(o.) Represents the incremental operating expenses to be incurred by the
Company upon completion of the Acquired Properties and the Other
Acquired Properties.
(p.) Represents the net adjustment of depreciation expense for Acquired
Properties and the Other Acquired Properties based upon an assumed
allocation of the purchase price to land, buildings and development in
process. Building depreciation is computed on a straight-line basis
using an estimated life of 40 years.
(q.) Represents the net adjustment to interest expense to reflect interest
costs on $219.4 million in borrowings under the Lines of Credit at an
assumed rate of 6.87% (the capped interest rate based on a 30-day
LIBOR rate of 5.87% plus 100 basis points) and $31.0 million in
assumed debt at a weighted average interest rate of 8.33%.
F-7
HIGHWOODS PROPERTIES, INC
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE)
CENTURY CENTER ACP
CROCKER EAKIN & 1996 AND ANDERSON OTHER PORTFOLIO
HISTORICAL (A) TRANSACTION (B) SMITH (C) OFFERINGS (D) TRANSACTIONS(E) OFFERINGS (F) HISTORICAL (G)
REVENUE:
Rental property.... $130,848 $47,892 $ 3,000 $ -- $ 27,128 $ -- $ 63,118
Other Income....... 7,078 (1,424) 512 -- -- -- 1,615
137,926 46,468 3,512 -- 27,128 64,733
OPERATING EXPENSES:
Rental property.... 35,313 15,709 957 -- 18,218 -- 32,195
Depreciation and
amortization..... 22,095 9,048 453 -- 5,722 -- 12,025
INTEREST EXPENSE
Contractual...... 24,699 13,048 1,207 (4,504) 10,861 (7,421) 34,328
Amortization of
deferred
financing
costs.......... 1,911 374 -- 1,059 -- -- --
26,610 13,422 1,207 (3,445) 10,861 (7,421) 34,328
General and
administrative... 5,666 271 200 -- -- -- --
Income before
minority
interest....... 48,242 8,018 695 3,445 (7,673) 7,421 (13,815)
Minority
interest......... (6,782) -- -- -- -- -- --
Income before
extraordinary
item and
dividends on
preferred
shares........... 41,460 8,018 695 3,445 (7,673) 7,421 (13,815)
Dividends on
preferred
shares........... -- -- -- -- -- (10,781) --
Net Income
available for
common
shareholders
before
extraordinary
item............. $ 41,460 $ 8,018 $ 695 $ 3,445 $ (7,673) $(3,360) $(13,815)
Net income per
common share..... $ 1.59
Weighed average
shares........... 26,111
USE OF
PREFERRED MOPPRS 1998
1997 STOCK COMMON OTHER AND COMMON
PENDING OFFERING STOCK ACQUIRED ACQUIRED DEBT STOCK PRO FORMA
ACQUISITIONS (H) PROCEEDS OFFERING PROPERTIES (M) PROPERTIES (N) OFFERING OFFERING ADJUSTMENTS
REVENUE:
Rental property.... $ 13,689 $ -- $ -- $ 12,925 $ 13,996 $ -- $ -- $ --
Other Income....... 300 -- -- -- -- -- -- --
13,989 -- -- 12,925 13,996 --
OPERATING EXPENSES:
Rental property.... 6,388 -- -- 2,755 7,989 -- -- 250(r)
Depreciation and
amortization..... -- -- -- -- -- -- -- 4,492(s)
INTEREST EXPENSE
Contractual...... -- (11,472 )(i) (18,767 (l) -- -- (914 )(o) (2,117 ) 17,660
(t)
Amortization of
deferred
financing
costs.......... -- -- -- -- -- 238 (p) -- --
-- (11,472 ) (18,767 ) -- -- (676 ) (2,117 ) 17,660
General and
administrative... -- -- -- -- -- -- -- --
Income before
minority
interest....... 7,601 11,472 18,767 10,170 6,007 676 2,117 (22,402)
Minority
interest......... -- (2,053 )(j) (3,359 (j) -- -- (121 )(j) (379 ) (1,759)(
j)
Income before
extraordinary
item and
dividends on
preferred
shares........... 7,601 9,419 15,408 10,170 6,007 555 1,738 (24,161)
Dividends on
preferred
shares........... -- (13,800 )(k) -- -- -- -- -- --
Net Income
available for
common
shareholders
before
extraordinary
item............. $ 7,601 $ (4,381 ) $15,408 $ 10,170 $ 6,007 $ 555 $1,738 $ (24,161)
Net income per
common share.....
Weighed average
shares...........
PRO FORMA
REVENUE:
Rental property.... $312,596
Other Income....... 8,081
320,677
OPERATING EXPENSES:
Rental property.... 119,774
Depreciation and
amortization..... 53,835
INTEREST EXPENSE
Contractual...... 56,608
Amortization of
deferred
financing
costs.......... 3,582
60,190
General and
administrative... 6,137
Income before
minority
interest....... 80,741
Minority
interest......... (14,453 )
Income before
extraordinary
item and
dividends on
preferred
shares........... 66,288
Dividends on
preferred
shares........... (24,581 )
Net Income
available for
common
shareholders
before
extraordinary
item............. $ 41,707
Net income per
common share..... $ 0.86
Weighed average
shares........... 48,566
F-8
HIGHWOODS PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combining statement of
operations is presented as if the following transactions had been consummated on
January 1, 1996:
(a.) the acquisition of 70 properties and the business operations of
Crocker Realty Trust, Inc. and its affiliates (the "Crocker
Transaction");
(b.) the acquisition of seven properties and 18 acres of development land,
a 103,000-square foot suburban office development project and the
business operations of Eakin & Smith, Inc. (collectively, the "Eakin &
Smith Transaction");
(c.) the Company's 1996 offerings including: (i) $100 million of 6 3/4%
Notes due December 1, 2003 and $110 million of 7% Notes due December
1, 2006, (ii) $125 million of 8 5/8% Series A Cumulative Redeemable
Preferred Shares, (iii) 2,250,000 shares of Common Stock at $29.50 per
share and (iv) 1,093,577 shares of Common Stock at prices of $29.16,
$29.01, and $28.86 for 137,198, 344,753 and 611,626 shares,
respectively (collectively, the "1996 Offerings");
(d.) the completion of the Anderson and Century Center Transactions,
(e.) the completion of the Other Offerings;
(f.) the completion of the Merger;
(g.) the completion of the 1997 Pending Acquisitions;
(h.) the completion of the Preferred Stock Offering;
(i.) the completion of the Common Stock Offering;
(j.) the completion of the Acquired Properties;
(k.) the completion of the Other Acquired Properties;
(l.) the completion of the MOPPRS and Debt Offering; and
(m.) the completion of the 1998 Common Stock Offering.
This unaudited pro forma condensed combining statement of operations should
be read in conjunction with the pro forma condensed combining balance sheet of
the Company as of September 30, 1997, the consolidated financial statements and
related notes of the Company included in its Annual Report on Form 10-K for the
year ended December 31, 1996, the unaudited financial statements and related
notes of the Company included in its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 and the
financial statements and related notes of Associated Capital Properties
Portfolio and 1997 Pending Acquisitions included in the Company's Current Report
on Form 8-K dated October 1, 1997 (as filed with the Securities and Exchange
Commission on October 16, 1997).
The pro forma condensed combining statement of operations is unaudited and
is not necessarily indicative of what the Company's actual results would have
been had the aforementioned transactions actually occurred on January 1, 1996
nor does it purport to represent the future operating results of the Company.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF
OPERATIONS
(a.) Represents the Company's historical statement of operations contained
in its Annual Report on Form 10-K for the year ended December 31,
1996.
(b.) Reflects the historical operations of Crocker Realty Trust, Inc.
adjusted on a pro forma basis for interest expense, depreciation
expense and other items, for the period of time during 1996 prior to
its acquisition by the Company.
(c.) Reflects the historical operations of Eakin & Smith, adjusted on a pro
forma basis for interest expense, depreciation expense and other
items, for the period of time during 1996 prior to its acquisition by
the Company.
(d.) Reflects the pro forma effects of the 1996 Offerings.
(e.) Reflects the historical statement of operations of Century Center and
Anderson Properties for the year ended December 31, 1996, adjusted on
a pro forma basis for interest expense, depreciation expense and other
items.
F-9
HIGHWOODS PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
(UNAUDITED) -- CONTINUED
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF
OPERATIONS -- Continued
(f.) Reflects the estimated interest expense savings on $127.5 million of
the Lines of Credit and $63.1 million of other loans repaid with the
proceeds of the Other Offerings and the dividends incurred on the
Company's Series A Preferred Shares.
(g.) Represents the historical revenues and operating expenses of the ACP
Portfolio, for the year ended December 31, 1996, the historical
statement of operations from January 1, 1996 to the date of
acquisition of the properties that were acquired by ACP in 1996 and
the historical statement of operations for the 12 months ended
December 31, 1996 of the properties that were acquired by ACP in 1997.
These amounts have been adjusted on a pro forma basis for incremental
revenue related to owner-occupied buildings, interest expense and
depreciation expense related to the ACP Portfolio and the 1997 Pending
Acquisitions.
(h.) Reflects the historical revenues and operating expenses of 1997
Pending Acquisitions for the year ended December 1996.
(i.) Represents the estimated interest expense savings on $166.9 million of
the Lines of Credit repaid with the proceeds of the Preferred Stock
Offering.
(j.) Represents the net adjustment to minority interest to reflect the pro
forma minority interest percentage of 17.9%.
(k.) Represents the 8% dividend on Series B Cumulative Redeemable Preferred
Shares sold by the Company in the Preferred Stock Offering.
(l.) Represents the estimated interest expense savings on $273.1 million of
the Lines of Credit repaid with the proceeds of the Common Stock
Offering.
(m.) Reflects the historical revenues and operating expenses of Acquired
Properties for the year ended December 31, 1996.
(n.) Reflects the historical revenues and operating expenses of the Other
Acquired Properties for the year ended December 31, 1996.
(o.) Represents the estimated interest expense on the $100 million of
MOPPRS due 2013 at an assumed interest rate of 6.6% and $100 million
in debt securities, due 2008 (at an assumed rate of 6.92%) offset by
the interest expense savings on the $201.4 million of the Lines of
Credit repaid with the proceeds of the MOPPRS and Debt Offering.
(p.) Represents the amortization of the deferred financing costs associated
with the MOPPRS and Debt Offering, straight-line over the terms of the
securities offset by the amortization of the $3.0 million premium paid
by the remarketing dealer, using the effective interest method over
the term of the securities.
(q.) Represents the estimated interest expense savings on $30.8 million of
the Lines of Credit repaid with a portion of the net proceeds of the
1998 Common Stock Offering.
(r.) Represents the incremental operating expenses to be incurred by the
Company upon completion of the Acquired Properties and the Other
Acquired Properties.
(s.) Represents the net adjustment of depreciation expense for Acquired
Properties and Other Acquired Properties based upon an assumed
allocation of the purchase price to land, buildings and development in
process. Building depreciation is computed on a straight-line basis
using an estimated life of 40 years.
(t.) Represents the net adjustment to interest expense to reflect interest
costs on $219.4 million in borrowings under the Lines of Credit at an
assumed rate of 6.87% capped (the effective interest rate based on a
30-day LIBOR rate of 5.87% plus 100 basis points) and $31.0 million in
assumed debt at a weighted average interest rate of 8.33%.
F-10