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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/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)
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ITEM 5. OTHER EVENTS.
The purpose of this filing is to report certain pro forma financial
information of Highwoods/Forsyth Limited Partnership (the "Operating
Partnership") 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 Highwoods Properties, Inc. (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 the Operating Partnership of $100 million of %
MandatOry Par Put Remarketed SecuritiesSM ("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 LLP 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/FORSYTH LIMITED PARTNERSHIP
By: HIGHWOODS PROPERTIES, INC., ITS
GENERAL PARTNER
/S/ _________CARMAN J. LIUZZO________
CARMAN J. LIUZZO
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
Date: January 22, 1998
2
INDEX TO THE FINANCIAL STATEMENTS
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP 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/FORSYTH LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINING BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
(IN THOUSANDS)
USE OF
PREFERRED STOCK COMMON STOCK ACQUIRED
HISTORICAL (A) ACP, INC. (B) OFFERING PROCEEDS (C) OFFERING (D) PROPERTIES (E)
-------------- ------------- --------------------- ---------------- --------------
ASSETS
Real estate assets, net.............. $1,717,404 $ 617,000 $ -- $ -- $106,936
Cash and cash equivalents............ 183,189 (25,465) (166,916) 9,192 --
Accounts and notes receivables....... 16,379 -- -- -- --
Accrued straight line rent
receivable......................... 10,024 -- -- -- --
Other assets......................... 37,893 -- -- -- --
-------------- ------------- --------------------- ---------------- --------------
$1,964,889 $ 591,535 $(166,916) $ 9,192 $106,936
-------------- ------------- --------------------- ---------------- --------------
-------------- ------------- --------------------- ---------------- --------------
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable.......... $ 649,188 $ 481,171 $(166,916) $ (273,050) $105,184
Accounts payable, accrued expenses
and other.......................... 40,368 10,500 -- -- 1,752
-------------- ------------- --------------------- ---------------- --------------
Total liabilities.............. 689,556 491,671 (166,916) (273,050) 106,936
Redeemable operating units:
Class A............................ 239,913 96,041 -- -- --
Class B............................ 6,615 -- -- -- --
Partners' capital:
Series A preferred units........... 121,809 -- -- -- --
Series B preferred units........... 167,066 -- -- -- --
Class A units:
General partner.................. 8,341 38 -- 2,822 --
Limited partner.................. 731,589 3,785 -- 279,420 --
-------------- ------------- --------------------- ---------------- --------------
Total partners' equity............... 1,275,333 99,864 -- 282,242 --
-------------- ------------- --------------------- ---------------- --------------
$1,964,889 $ 591,535 $(166,916) $ 9,192 $106,936
-------------- ------------- --------------------- ---------------- --------------
-------------- ------------- --------------------- ---------------- --------------
MOPPRS
AND
OTHER ACQUIRED DEBT 1998 COMMON
PROPERTIES (F) OFFERING (G) STOCK OFFERING (H) PRO FORMA
-------------- ------------ ------------------ ----------
ASSETS
Real estate assets, net.............. $155,801 $ -- $ -- $2,597,141
Cash and cash equivalents............ -- -- 37,442 37,442
Accounts and notes receivables....... -- -- -- 16,379
Accrued straight line rent
receivable......................... -- -- -- 10,024
Other assets......................... -- 1,600 -- 39,493
-------------- ------------ -------- ----------
$155,801 $1,600 $ 37,442 $2,700,479
-------------- ------------ -------- ----------
-------------- ------------ -------- ----------
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable.......... $145,191 $1,600 $(30,807) $ 911,561
Accounts payable, accrued expenses
and other.......................... 640 -- -- 53,260
-------------- ------------ -------- ----------
Total liabilities.............. 145,831 1,600 (30,807) 964,821
Redeemable operating units:
Class A............................ 9,970 -- -- 345,924
Class B............................ -- -- -- 6,615
Partners' capital:
Series A preferred units........... -- -- -- 121,809
Series B preferred units........... -- -- -- 167,066
Class A units:
General partner.................. -- -- 682 11,883
Limited partner.................. -- -- 67,567 1,082,361
-------------- ------------ -------- ----------
Total partners' equity............... 9,970 -- 68,249 1,735,658
-------------- ------------ -------- ----------
$155,801 $1,600 $ 37,442 $2,700,479
-------------- ------------ -------- ----------
-------------- ------------ -------- ----------
F-2
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
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 Operating Partnership'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 common partnership interests
("Common Units") to Highwoods Properties, Inc. (the "Company") in exchange for
net proceeds of approximately $282.2 million received upon the sale by the
Company 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 Operating Partnership's business combination with Riparius
Development Corporation and the acquisition of seven properties in Winston-
Salem, NC and one property in Nashville, TN (collectively, the "Acquired
Properties"), (e) the completion of the pending acquisition of the Garcia
portfolio in Tampa, FL 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 Common Units to
Highwoods Properties, Inc. in exchange for net proceeds of $68.2 million
received upon the sale by the Company 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating
Partnership'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 Operating
Partnership.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
(a.) Represents the Operating Partnership's historical balance sheet
contained in the Operating Partnership'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
Series B Preferred Units to the Company in exchange for net proceeds
of approximately $166.9 million received upon the sale by the Company
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 Common Units to the Company in
exchange for net proceeds of approximately $282.2 million received
upon the sale by the Company 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
F-3
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED COMBINING BALANCE SHEET (UNAUDITED) -- CONTINUED
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE
SHEET -- continued
assumed in the ACP Transaction. Underwriting discounts and other offering
costs equaled approximately $15.3 million.
(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 Operating Partnership'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 Operating Partnership 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 Operating Partnership have been assumed to equal $1.6
million.
(h.) Reflects the issuance of 2.0 million Common Units to the Company in
exchange for net proceeds of approximately $68.2 million received upon
the sale by the Company 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 $30.8 million 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/FORSYTH LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER UNIT DATA)
USE OF
PREFERRED
CENTURY CENTER 1997 STOCK COMMON
AND ANDERSON OTHER ACP PENDING OFFERING STOCK
HISTORICAL (A) TRANSACTIONS (B) OFFERINGS (C) PORTFOLIO (D) ACQUISITIONS (E) PROCEEDS OFFERING
-------------- ---------------- ------------- ------------- ---------------- --------- --------
REVENUE:
Rental
property... $177,246 $ 1,047 $ -- $52,411 $ 10,560 $ -- $ --
Other
Income.... 4,705 -- -- 1,880 123 -- --
-------------- ------- ------------- ------------- ------- --------- --------
181,951 1,047 -- 54,291 10,683 -- --
OPERATING
EXPENSES:
Rental
property... 48,995 317 -- 23,956 4,396 -- --
Depreciation
and
amortization.. 30,915 715 -- 9,019 -- -- --
INTEREST
EXPENSE:
Contractual... 33,082 1,358 (1,077) 25,746 -- (8,604 )(f) (14,075)(h)
Amortization
of
deferred
financing
costs..... 1,689 -- -- -- -- -- --
-------------- ------- ------------- ------------- ------- --------- --------
34,771 1,358 (1,077) 25,746 -- (8,604 ) (14,075)
General and
adminis-
trative... 6,694 -- -- -- -- -- --
-------------- ------- ------------- ------------- ------- --------- --------
Income
before
extraordinary
item and
dividends
on
preferred
units..... 60,576 (1,343) 1,077 (4,430) 6,287 8,604 14,075
Dividends
on
preferred
units... (6,972) -- (1,289) -- -- (10,175 )(g) --
-------------- ------- ------------- ------------- ------- --------- --------
Net income
before
extraordinary
item...... $ 53,604 $ (1,343) $ (212) $(4,430) $ 6,287 $ (1,571 ) $ 14,075
-------------- ------- ------------- ------------- ------- --------- --------
-------------- ------- ------------- ------------- ------- --------- --------
Income per
Class A
unit...... $ 1.28
--------------
--------------
Weighted
average
Class A
units..... 42,025
--------------
--------------
MOPPRS 1998
AND COMMON
ACQUIRED OTHER ACQUIRED DEBT STOCK PRO FORMA
PROPERTIES(I) PROPERTIES(J) OFFERING OFFERING ADJUSTMENTS PRO FORMA
------------- -------------- ------ ------- ----------- ---------
REVENUE:
Rental
property... $ 9,332 $ 13,255 $ -- $ -- $ -- $263,851
Other
Income.... -- -- -- -- -- 6,708
------------- -------------- ------ ------- ----------- ---------
9,332 13,255 -- -- 270,559
OPERATING
EXPENSES:
Rental
property... 1,727 6,474 -- -- 188(n) 86,053
Depreciation
and
amortizati -- -- -- -- 3,369(o) 44,018
INTEREST
EXPENSE:
Contractual. -- -- (685 ) (1,588 13,245(p) 47,402
Amortization
of
deferred
financing
costs..... -- -- 178 (l) -- -- 1,867
------------- -------------- ------ ------- ----------- ---------
-- -- (507 ) (1,588 ) 13,245 49,269
General and
adminis-
trative... -- -- -- -- -- 6,694
------------- -------------- ------ ------- ----------- ---------
Income
before
extraordin
item and
dividends
on
preferred
units..... 7,605 6,781 507 1,588 (16,802) 84,525
Dividends
on
preferred
units... -- -- -- -- -- (18,436 )
------------- -------------- ------ ------- ----------- ---------
Net income
before
extraordin
item...... $ 7,605 $ 6,781 $ 507 $1,588 $ (16,802) $ 66,089
------------- -------------- ------ ------- ----------- ---------
------------- -------------- ------ ------- ----------- ---------
Income per
Class A
unit...... $ 1.12
---------
---------
Weighted
average
Class A
units..... 59,117
---------
---------
F-5
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
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 Series A Preferred Units issued to the Company in exchange for net
proceeds of approximately $121.9 million received by the Company upon the sale
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 Units to the Company in exchange for net proceeds of
approximately $166.9 million received upon the sale by the Company 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 Operating Partnership as of September 30, 1997, the consolidated financial
statements and related notes of the Operating Partnership 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 Operating Partnership 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 Operating Partnership'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 Operating Partnership'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
Operating Partnership.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF
OPERATIONS
(a.) Represents the Operating Partnership'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
Operating Partnership's Series A Preferred Units from January 1, 1997
through the date of the offering of the Series A Preferred Units.
(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/FORSYTH LIMITED PARTNERSHIP
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.) Represents 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 8% dividend on the Series B Preferred Units issued to
the Company in exchange for the net proceeds of the Preferred Stock
Offering.
(h.) Represents the estimated interest expense savings on $273.1 million
of the Lines of Credit repaid with the net proceeds of the Common
Stock Offering.
(i.) Reflects the historical revenues and operating expenses of Acquired
Properties for the nine months ended September 30, 1997.
(j.) Reflects the historical revenues and operating expenses of Other
Acquired Properties for the nine months ended September 30, 1997.
(k.) 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.
(l.) 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.
(m.) 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.
(n.) Represents the incremental operating expenses to be incurred by the
Operating Partnership upon completion of the Acquired Properties and
the Other Acquired Properties.
(o.) Represents the net adjustment to 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.
(p.) 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/FORSYTH LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER UNIT DATA)
CROCKER
TRANSACTION CENTURY CENTER
AND EAKIN & 1996 AND ANDERSON OTHER ACP
HISTORICAL(A) MERGER(B) SMITH(C) OFFERINGS(D) TRANSACTIONS(E) OFFERINGS(F) PORTFOLIO(G)
------------- ------------- -------- ------------ --------------- ------------ ------------
REVENUE:
Rental property........ $ 125,987 $47,892 $3,000 $ -- $27,128 $ -- $ 63,118
Other Income........... 6,315 (1,424) 512 -- -- -- 1,615
------------- ------------- -------- ------------ --------------- ------------ ------------
132,302 46,468 3,512 -- 27,128 -- 64,733
OPERATING EXPENSES:
Rental property........ 33,657 15,709 957 -- 18,218 -- 32,195
Depreciation and
amortization.......... 21,105 9,048 453 -- 5,722 -- 12,025
INTEREST EXPENSE:
Contractual............ 23,360 13,048 1,207 (4,504) 10,861 (7,421) 34,328
Amortization of
deferred financing
costs................. 1,870 374 -- 1,059 -- -- --
------------- ------------- -------- ------------ --------------- ------------ ------------
25,230 13,422 1,207 (3,445) 10,861 (7,421) 34,328
General and
administrative........ 5,636 271 200 -- -- -- --
------------- ------------- -------- ------------ --------------- ------------ ------------
Income before
extraordinary items
and dividends on
preferred units....... 46,674 8,018 695 3,445 (7,673) 7,421 (13,815)
Dividends on preferred
units................. -- -- -- -- -- (10,781) --
------------- ------------- -------- ------------ --------------- ------------ ------------
Net Income before
extraordinary items... $ 46,674 $ 8,018 $ 695 $3,445 $(7,673) $ (3,360) $(13,815)
------------- ------------- -------- ------------ --------------- ------------ ------------
------------- ------------- -------- ------------ --------------- ------------ ------------
Income per Class A
unit.................. $ 1.56
-------------
-------------
Weighed average Class A
units................. 29,852
-------------
-------------
USE OF MOPPRS 1998
1997 PREFERRED STOCK COMMON OTHER AND COMMON
PENDING OFFERING STOCK ACQUIRED ACQUIRED DEBT STOCK PRO FORMA
ACQUISITIONS(H) PROCEEDS OFFERING PROPERTIES(L) PROPERTIES(M) 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(q)
Depreciation and
amortization.......... -- -- -- -- -- -- -- 4,492(r)
INTEREST EXPENSE:
Contractual............ -- (11,472)(i) (18,767 ) -- -- (914 (n) (2,117 )(p) 17,66
0(s)
Amortization of
deferred financing
costs................. -- -- -- -- -- 238 (o) -- --
--------------- --------------- -------- ------------- ------------- ------- ------- -----------
-- (11,472) (18,767 ) -- -- (676 ) (2,117 ) 17,660
General and
administrative........ -- -- -- -- -- -- -- --
--------------- --------------- -------- ------------- ------------- ------- ------- -----------
Income before
extraordinary items
and dividends on
preferred units....... 7,601 11,472 18,767 10,170 6,007 676 2,117 (22,402)
Dividends on preferred
units................. -- -- (13,800)(j) -- -- -- -- -- --
--------------- --------------- -------- ------------- ------------- ------- ------- -----------
Net Income before
extraordinary items... $ 7,601 $ (2,328) $18,767 $10,170 $ 6,007 $ 676 $2,117 $ (22,402)
--------------- --------------- -------- ------------- ------------- ------- ------- -----------
--------------- --------------- -------- ------------- ------------- ------- ------- -----------
Income per Class A
unit..................
Weighed average Class A
units.................
PRO
FORMA
--------
REVENUE:
Rental property........ $307,735
Other Income........... 7,318
--------
315,053
OPERATING EXPENSES:
Rental property........ 118,118
Depreciation and
amortization.......... 52,845
INTEREST EXPENSE:
Contractual............ 55,269
Amortization of
deferred financing
costs................. 3,541
--------
58,810
General and
administrative........ 6,107
--------
Income before
extraordinary items
and dividends on
preferred units....... 79,173
Dividends on preferred
units................. (24,581)
--------
Net Income before
extraordinary items... $ 54,592
--------
--------
Income per Class A
unit.................. $ .92
--------
--------
Weighed average Class A
units................. 59,117
--------
--------
F-8
HIGHWOODS /FORSYTH LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED COMBINING STATEMENT 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 Operating Partnership'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) 2,250,000 Common Units issued to the Company in
exchange for the net proceeds received by the Company upon the sale of
2,250,000 shares of Common Stock at $29.50 per share and (iii)
1,093,577 Common Units issued to the Company in exchange for the net
proceeds received by the Company upon the sale of 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 Operating Partnership as of September 30, 1997, the consolidated financial
statements and related notes of the Operating Partnership 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 Operating Partnership 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 Operating Partnership'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 Operating Partnership'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
Operating Partnership.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF
OPERATIONS
(a.) Represents the Operating Partnership'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 Operating Partnership.
(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 Operating Partnership.
(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/FORSYTH LIMITED PARTNERSHIP
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 Operating Partnership's
Series A Preferred Units.
(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 8% dividend on the Series B Preferred Units issued to
the Company in exchange for the net proceeds of the Preferred Stock Offering.
(k.) Represents the estimated interest expense savings on $273.1 million of
the Lines of Credit repaid with the net proceeds of the Common Stock Offering.
(l) Reflects the historical revenues and operating expenses of Acquired
Properties for the year ended December 31, 1996.
(m) Reflects the historical revenues and operating expenses of the Other
Acquired Properties for the year ended December 31, 1996.
(n.) 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.
(o.) 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.
(p.) 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.
(q.) Represents the incremental operating expenses to be incurred by the
Operating Partnership upon completion of the Acquired Properties and the Other
Acquired Properties.
(r.) 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.
(s.) 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