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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): November 17, 1997
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. The purpose of this filing is to set forth audited financial statements
of certain businesses recently acquired by Highwoods/Forsyth Limited
Partnership.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
WINNERS CIRCLE
--------------
Report of Independent Auditors
Statements of Revenue and Certain Expenses
Notes to Statement of Revenue and Certain Expenses
SHELTON PROPERTIES
------------------
Report of Independent Auditors
Combined Statement of Revenue and Certain Expenses
Notes to Combined Statement of Revenue and Certain Expenses
RIPARIUS PROPERTIES
-------------------
Report of Independent Auditors
Combined Statements of Revenue and Certain Expenses
Notes to Combined Statement of Revenue and Certain Expenses
(b) Pro Forma Information
NONE
(c) Exhibits
23 Consent of Independent Auditors
Audited Financial Statement
Winners Circle
Year ended December 31, 1996
with Report of Independent Auditors
Winners Circle
Audited Financial Statement
Year ended December 31, 1996
Contents
Report of Independent Auditors................................................1
Audited Financial Statement
Statements of Revenue and Certain Expenses....................................2
Notes to Statement of Revenue and Certain Expenses............................3
Report of Independent Auditors
To the Board of Directors and Stockholders
Highwoods Properties, Inc.
We have audited the accompanying Statement of Revenue and Certain Expenses of
Winners Circle as described in Note 1 for the year ended December 31, 1996. This
financial statement is the responsibility of Winners Circle's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the basis of accounting used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared using
the basis of accounting described in Note 1 for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to
be a complete presentation of Winners Circle's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses described in Note 1 of
Winners Circle for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
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Raleigh, North Carolina
January 16, 1998
Winners Circle
Statements of Revenue and Certain Expenses
Nine months ended Year ended
September 30, 1997 December 31, 1996
----------------------------------------
(Unaudited)
Rental income $ 956,650 $ 1,246,984
Expenses:
Utilities 99,842 144,760
Real estate taxes 68,708 91,611
Repairs and maintenance 109,365 135,967
Insurance 2,715 3,318
Other 2,596 5,278
----------------------------------------
Total expenses 283,226 380,934
========================================
Revenue in excess of certain expenses $ 673,424 $ 866,050
========================================
See accompanying notes.
2
Winners Circle
Notes To Statement of Revenue and Certain Expenses
December 31, 1996
1. Basis of Presentation
Presented herein is the Statement of Revenue and Certain Expenses related to the
operations of one commercial real estate property identified as the Winners
Circle. Winners Circle is wholly-owned by Financial Enterprise III, an entity
not affiliated with Highwoods Properties, Inc..
The accompanying financial statement is prepared in accordance with Rule 3-14 of
Regulation S-X and thus is not necessarily representative of the actual
operations for the year presented as certain expenses that may not be comparable
to the expenses expected to be incurred by Highwoods Properties, Inc. in the
proposed future operations of the aforementioned property have been excluded.
Expenses excluded consist of interest, depreciation and general and
administrative expenses not directly related to future operations.
2. Significant Accounting Policies
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the lease.
Certain lease agreements contain provisions which provide reimbursement of real
estate taxes, insurance, advertising and certain common area maintenance (CAM)
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.
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 amounts.
Interim Financial Data
The unaudited financial statements for the nine months ended September 30, 1997
include all adjustments (consisting of normal recurring adjustments) that are,
in the opinion of management, necessary for a fair presentation of the revenues
and certain operating expenses for such interim period. Operating results for
the nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the entire year ending December 31, 1997.
3
Winners Circle
Notes To Statement of Revenue and Certain Expenses (continued)
3. Leases
Winners Circle is being leased to tenants under operating leases that will
expire over the next 7 years. The minimum rental amounts under the leases are
either subject to scheduled fixed increases or adjustments based on the Consumer
Price Index. Generally, the leases also require that the tenants reimburse
Winners Circle for increases in certain costs above their 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, 1996 are as
follows:
Total
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1997 $ 1,259,855
1998 1,178,852
1999 979,860
2000 502,175
2001 604,048
Thereafter 835,922
====================
$ 5,360,712
====================
Two major tenants represented approximately 61% of the total rental income for
the year ended December 31, 1996.
4
Audited Combined Financial Statement
Shelton Properties
Year ended December 31, 1996
with Report of Independent Auditors
Shelton Properties
Audited Combined Financial Statement
Year ended December 31, 1996
Contents
Report of Independent Auditors................................................1
Audited Combined Financial Statement
Combined Statement of Revenue and Certain Expenses............................2
Notes to Combined Statement of Revenue and Certain Expenses...................3
Report of Independent Auditors
To the Board of Directors and Stockholders
Highwoods Properties, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of the Shelton Properties as described in Note 1 for the year ended
December 31, 1996. This financial statement is the responsibility of Shelton
Properties' management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the basis of accounting used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared using
the basis of accounting described in Note 1 for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to
be a complete presentation of the Shelton Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses described in Note 1 of
the Shelton Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Raleigh, North Carolina
January 16, 1998
Shelton Properties
Combined Statement of Revenue and Certain Expenses
Nine months ended Year ended
September 30, 1997 December 31, 1996
----------------------------------------
(Unaudited)
Rental income $ 4,131,589 $ 6,123,215
Expenses:
Utilities 171,611 209,627
Real estate taxes 313,522 454,447
Repairs and maintenance 240,826 353,554
Insurance 27,330 34,376
Other 15,010 19,986
----------------------------------------
Total expenses 768,299 1,071,990
========================================
Revenue in excess of certain expenses $ 3,363,290 $ 5,051,225
========================================
See accompanying notes.
2
Shelton Properties
Notes To Combined Statement of Revenue and Certain Expenses
December 31, 1996
1. Basis of Presentation
Presented herein is the Combined Statement of Revenue and Certain Expenses
related to the operations of eight commercial real estate properties under
common management and ownership by the Shelton Companies identified as the
Shelton Properties.
Shelton Properties is not a legal entity but rather a combination of the
operations of certain real estate properties acquired by Highwoods Properties,
Inc. The accompanying Combined Statement of Revenue and Certain Expenses
includes the accounts of the following commercial real estate properties, each
of which is under common management and ownership by the Shelton Companies.
These properties are not affiliated with Highwoods Properties, Inc.:
Number of
Property Properties Owner Location
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Consolidated Center I-II 2 Shelton Company Winston-Salem, NC
Consolidated Center III-IV 2 Chedren Company Winston-Salem, NC
Champion 1 Chedren Company Winston-Salem, NC
First Stratford 1 First Stratford Limited Partnership Winston-Salem, NC
First Associates 2 First Associates Limited Partnership Winston-Salem, NC
The owners listed in the table above all have a common partner or shareholder.
The accompanying financial statement is prepared in accordance with Rule 3-14 of
Regulation S-X and thus is not necessarily representative of the actual
operations for the year presented as certain expenses that may not be comparable
to the expenses expected to be incurred by Highwoods Properties, Inc. in the
proposed future operations of the aforementioned properties have been excluded.
Expenses excluded consist of interest, depreciation and general and
administrative expenses not directly related to future operations.
3
Shelton Properties
Notes To Combined Statement of Revenue and Certain Expenses (continued)
2. Significant Accounting Policies
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the lease.
Certain lease agreements contain provisions which provide reimbursement of real
estate taxes, insurance, advertising and certain common area maintenance (CAM)
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.
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 amounts.
Interim Financial Data
The unaudited financial statements for the nine months ended September 30, 1997
include all adjustments (consisting of normal recurring adjustments) that are,
in the opinion of management, necessary for a fair presentation of the revenues
and certain operating expenses for such interim period. Operating results for
the nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the entire year ending December 31, 1997.
3. Leases
The Shelton Properties are being leased to tenants under operating leases that
will expire over the next 12 years. The minimum rental amounts under the leases
are either subject to scheduled fixed increases or adjustments based on the
Consumer Price Index. Generally, the leases also require that the tenants
reimburse the Shelton Properties for increases in certain costs above their base
year costs.
4
Shelton Properties
Notes To Combined Statement of Revenue and Certain Expenses (continued)
3. Leases (continued)
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1996 are as
follows:
Total
--------------------
1997 $ 5,619,366
1998 5,057,993
1999 5,001,076
2000 4,927,647
2001 4,460,975
Thereafter 19,433,467
====================
$ 44,500,524
====================
Two major tenants represented approximately 50% of the total rental income for
the year ended December 31, 1996.
4. Related Parties
Two affiliates of the Shelton Properties provide repairs and maintenance
services for the properties. During 1996, approximately 40% of repairs and
maintenance expense was incurred as a result of services provided by these two
affiliates.
5
Audited Combined Financial Statement
Riparius Properties
Year ended December 31, 1996
with Report of Independent Auditors
Riparius Properties
Audited Combined Financial Statement
Year ended December 31, 1996
Contents
Report of Independent Auditors................................................1
Audited Combined Financial Statement
Combined Statements of Revenue and Certain Expenses...........................2
Notes to Combined Statement of Revenue and Certain Expenses...................3
Report of Independent Auditors
To the Board of Directors and Stockholders
Highwoods Properties, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of the Riparius Properties as described in Note 1 for the year ended
December 31, 1996. This financial statement is the responsibility of Riparius
Properties' management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the basis of accounting used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared using
the basis of accounting described in Note 1 for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to
be a complete presentation of the Riparius Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses described in Note 1 of
the Riparius Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Raleigh, North Carolina
January 16, 1998
Riparius Properties
Combined Statements of Revenue and Certain Expenses
Nine months ended Year ended
September 30, 1997 December 31, 1996
---------------------------------------
(Unaudited)
Rental income $ 4,410,755 $ 5,555,257
Expenses:
Utilities 292,613 413,486
Real estate taxes 262,151 356,676
Repairs and maintenance 233,745 477,000
Insurance 34,304 29,034
Other 19,897 26,246
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Total expenses 842,710 1,302,442
======================================
Revenue in excess of certain expenses $ 3,568,045 $ 4,252,815
======================================
See accompanying notes.
2
Riparius Properties
Notes To Combined Statement of Revenue and Certain Expenses
December 31, 1996
1. Basis of Presentation
Presented herein is the Combined Statement of Revenue and Certain Expenses
related to the operations of five commercial real estate properties under common
management and ownership by Riparius Development Corporation identified as the
Riparius Properties.
Riparius Properties is not a legal entity but rather a combination of the
operations of certain real estate properties acquired by Highwoods Properties,
Inc. The accompanying Combined Statement of Revenue and Certain Expenses
includes the accounts of the following commercial real estate properties, each
of which is wholly-owned by a party not affiliated with Highwoods Properties,
Inc.:
Number of
Property Properties Owner Location
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The Atrium Building 1 Riparius Development Corp. Baltimore, MD
9690 Deereco Road LP 1 Riparius Development Corp. Baltimore, MD
Seven Crondall Associates LP 1 Riparius Development Corp. Baltimore, MD
Eight Crondall Associated LP 1 Riparius Development Corp. Baltimore, MD
Nine Crondall Associates LP 1 Riparius Development Corp. Baltimore, MD
The accompanying financial statement is prepared in accordance with Rule 3-14 of
Regulation S-X and thus is not necessarily representative of the actual
operations for the year presented as certain expenses that may not be comparable
to the expenses expected to be incurred by Highwoods Properties, Inc. in the
proposed future operations of the aforementioned properties have been excluded.
Expenses excluded consist of interest, depreciation and general and
administrative expenses not directly related to future operations.
3
Riparius Properties
Notes To Combined Statement of Revenue and Certain Expenses (continued)
2. Significant Accounting Policies
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the lease.
Certain lease agreements contain provisions which provide reimbursement of real
estate taxes, insurance, advertising and certain common area maintenance (CAM)
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.
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 amounts.
Interim Financial Data
The unaudited financial statements for the nine months ended September 30, 1997
include all adjustments (consisting of normal recurring adjustments) that are,
in the opinion of management, necessary for a fair presentation of the revenues
and certain operating expenses for such interim period. Operating results for
the nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the entire year ending December 31, 1997.
3. Leases
The Riparius Properties are being leased to tenants under operating leases that
will expire over the next 12 years. The minimum rental amounts under the leases
are either subject to scheduled fixed increases or adjustments based on the
Consumer Price Index. Generally, the leases also require that the tenants
reimburse the Riparius Properties for increases in certain costs above their
base year costs.
4
Riparius Properties
Notes To Combined Statement of Revenue and Certain Expenses (continued)
3. Leases (continued)
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1996 are as
follows:
Total
--------------------
1997 $ 5,900,586
1998 5,184,637
1999 4,365,487
2000 2,524,810
2001 1,847,349
Thereafter 3,679,053
====================
$ 23,501,922
====================
Two major tenants represented approximately 37% of the total rental income for
the year ended December 31, 1996.
4. Related Parties
Two affiliates lease space in the buildings of the Riparius Properties. During
1996, approximately 13% of rental income was earned as a result of rents paid by
these two affiliates.
5