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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20543
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED June 30, 1998
COMMISSION FILE NO. 000-22741
CARRAMERICA REALTY, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 52-1976308
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1850 K Street, N.W., Washington, D.C. 20006
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(Address or principal executive office) (Zip code)
Registrant's telephone number, including area code (202) 729-7500
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Number of Partnership Units outstanding of each of the registrant's
classes of Partnership Units as of August 14, 1998:
14,295,029
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or such shorter period that the Registrant was
required to file such report) and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
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Index
Page
Part I: Financial Information
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Item 1. Financial Statements
Consolidated balance sheets of CarrAmerica Realty, L.P. as of June 30,
1998 (unaudited) and December 31, 1997 ................................................4
Consolidated statements of operations of CarrAmerica Realty, L.P.
for the three months ended June 30, 1998 and 1997 (unaudited) .........................5
Consolidated statements of operations of CarrAmerica Realty, L.P.
for the six months ended June 30, 1998 and 1997 (unaudited) ...........................6
Consolidated statements of cash flows of CarrAmerica Realty, L.P. for the six
months ended June 30, 1998 and 1997 (unaudited) .......................................7
Notes to consolidated financial statements (unaudited)...........................8 to 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................12 to 17
Part II: Other Information
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Item 1. Legal Proceedings.....................................................................18
Item 2. Changes in Securities.................................................................18
Item 3. Defaults Upon Senior Securities.......................................................18
Item 4. Submission of Matters to a Vote of Security Holders...................................18
Item 5. Other Information.....................................................................18
Item 6. Exhibits and Reports on Form 8-K......................................................18
2
Part I
Item 1. Financial Information
---------------------
The information furnished in the accompanying consolidated balance
sheets, consolidated statements of operations and consolidated statements of
cash flows of CarrAmerica Realty, L.P. (the "Partnership") reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to such financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
3
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Balance Sheets
As of June 30, 1998 and December 31, 1997
- --------------------------------------------------------------------------------
(In thousands)
June 30, December 31,
1998 1997
----------- ------------
(unaudited)
Assets
Rental property (note 2):
Land $ 99,291 91,347
Buildings 510,428 465,276
Tenant improvements 21,305 12,496
Furniture, fixtures, and equipment 270 96
--------- ---------
631,294 569,215
Less - accumulated depreciation (23,423) (13,360)
--------- ---------
Total rental property 607,871 555,855
Land held for development 12,409 10,526
Construction in progress 47,088 44,344
Cash and cash equivalents 4,682 3,584
Restricted cash and cash equivalents (note 2) 2,001 1,501
Accounts and notes receivable 12,113 11,757
Accrued straight-line rents 6,149 3,317
Tenant leasing costs, net 7,124 3,439
Deferred financing costs, net 4 --
Prepaid expenses and other assets, net 2,388 2,245
--------- ---------
$ 701,829 636,568
========= =========
Liabilities and Partners' Capital
Liabilities:
Mortgages and notes payable (note 2) $ 237,966 212,304
Note payable to affiliate (note 2) 29,208 29,411
Accounts payable and accrued expenses 16,356 12,608
Due to affiliates 7,371 1,386
Rent received in advance and security deposits 3,478 3,244
--------- ---------
Total liabilities 294,379 258,953
Partners' capital (note 3):
General partner 4,075 3,522
Limited partners 403,375 374,093
--------- ---------
Total partners' capital 407,450 377,615
Commitments and contingencies (note 4)
--------- ---------
$ 701,829 636,568
========= =========
See accompanying notes to consolidated financial statements.
4
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
(Unaudited and in thousands)
1998 1997
-------- --------
Real estate operating revenue:
Rental revenue:
Minimum base rent $ 21,744 10,740
Recoveries from tenants 3,668 1,783
Parking and Other tenant charges 189 1,017
-------- --------
Total rental revenue 25,601 13,540
Cost reimbursements 872 --
-------- --------
Total revenue 26,473 13,540
-------- --------
Real estate operating expenses:
Property operating expenses:
Operating expenses 6,266 4,395
Real estate taxes 2,501 1,319
Interest expense 4,301 1,515
General and administrative 1,127 693
Depreciation and amortization 5,609 2,928
-------- --------
Total operating expenses 19,804 10,850
-------- --------
Real estate operating income 6,669 2,690
-------- --------
Other operating income (expense):
Interest income 227 48
Loss on sale of assets (77) --
-------- --------
Total other operating income (expense) 150 48
-------- --------
Net income $ 6,819 2,738
======== ========
Net income attributable to general partner $ 68 27
======== ========
Net income attributable to limited partners $ 6,751 2,711
======== ========
See accompanying notes to consolidated financial statements.
5
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Operations
For the Six Months Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
(Unaudited and in thousands)
1998 1997
-------- --------
Real estate operating revenue:
Rental revenue:
Minimum base rent $ 41,842 18,821
Recoveries from tenants 6,740 2,956
Parking and Other tenant charges 781 1,242
-------- --------
Total rental revenue 49,363 23,019
Cost reimbursements 1,410 --
-------- --------
Total revenue 50,773 23,019
-------- --------
Real estate operating expenses:
Property operating expenses:
Operating expenses 11,499 7,811
Real estate taxes 4,739 2,175
Interest expense 7,752 2,346
General and administrative 2,268 1,130
Depreciation and amortization 10,726 5,118
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Total operating expenses 36,984 18,580
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Real estate operating income 13,789 4,439
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Other operating income (expense):
Interest income 474 56
Loss on sale of assets (493) --
-------- --------
Total other operating income (expense) (19) 56
-------- --------
Net income $ 13,770 4,495
======== ========
Net income attributable to general partner $ 138 45
======== ========
Net income attributable to limited partners $ 13,632 4,450
======== ========
See accompanying notes to consolidated financial statements.
6
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
(Unaudited and in thousands)
1998 1997
-------- --------
Cash flows from operating activities:
Net income $ 13,770 4,495
-------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 10,726 5,118
Loss on write off of assets 329 --
Increase in accounts and notes receivable (356) (914)
Increase in accrued straight-line rents (2,832) (899)
Additions to tenant leasing costs (1,429) (1,489)
Decrease (increase) in prepaid expenses and other assets 4 (122)
Increase (decrease) in accounts payable and accrued expenses 3,748 6,750
Increase in due to affiliates 5,985 605
Increase in rent received in advance and security deposits 234 1,322
-------- --------
Total adjustments 16,409 10,371
-------- --------
Net cash provided by operating activities 30,179 14,866
-------- --------
Cash flows from investing activities:
Additions to rental property (7,186) (2,249)
Acquisitions of rental property (17,390) (77,119)
Additions to land held for development (11,024) (1,448)
Additions to construction in process (34,499) (22,877)
Increase in restricted cash and cash equivalents (500) --
-------- --------
Net cash used by investing activities (70,599) (103,693)
-------- --------
Cash flows from financing activities:
Capital contributions 17,197 77,126
Capital distributions (1,132) (322)
Net borrowings on unsecured line of credit 40,500 14,000
Repayments on notes and mortgages payable (15,042) (552)
Additions to deferred financing costs (5) --
-------- --------
Net cash provided by financing activities 41,518 90,252
-------- --------
Increase in cash and cash equivalents 1,098 1,425
Unrestricted cash and cash equivalents, beginning of the period 3,584 2,478
-------- --------
Unrestricted cash and cash equivalents, end of the period $ 4,682 3,903
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest of $1,670 for
the six months ended June 30, 1998 and $1,253 for the six
months ended June 30, 1997 $ 7,728 1,983
======== ========
Supplemental disclosure of noncash investing and financing activities:
During the six months ended June 30, 1997, the Partnership funded
a portion of the aggregate purchase price of its property
acquisitions by assuming $53.0 million of debt and liabilities and
by issuing $17.4 million of Minority Units in the Partnership.
See accompanying notes to consolidated financial statements.
7
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
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(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
CarrAmerica Realty, L.P. (the "Partnership") is a Delaware
limited partnership formed on March 6, 1996 to own, acquire,
develop, and operate office buildings across the United
States. At June 30, 1998, the Partnership owned 55 operating
properties and 13 properties under development. At December
31, 1997, the Partnership owned 53 operating properties and
eight properties under development. The properties are located
in Austin, Texas, southeast Denver, suburban Dallas, suburban
Salt Lake City, suburban Chicago, suburban Phoenix, suburban
Seattle, San Francisco Bay Area and Orange County/Los Angeles.
The Partnership's general partner is CarrAmerica Realty GP
Holdings, Inc. (the "General Partner"), a wholly owned
subsidiary of CarrAmerica Realty Corporation ("CARC"), a
self-administered and self-managed real estate investment
trust. The General Partner owns a 1% interest in the
Partnership at June 30, 1998 and December 31, 1997. The
Partnership's limited partners are CarrAmerica Realty LP
Holdings, Inc., a wholly owned subsidiary of CARC, which owned
an approximate 87% interest in the Partnership at June 30,
1998 and December 31, 1997 and various other individuals and
entities which collectively own approximately 12% interest in
the Partnership at June 30, 1998 and December 31, 1997,
respectively.
(2) Mortgages and Note Payable
Mortgages payable generally are collateralized by certain rental
properties and generally require monthly principal and/or interest
payments. Following is a summary of the Partnership's mortgages and
notes payable as of the end of each period (in thousands):
June 30, December 31,
1998 1997
-------- ------------
Fixed rate mortgages $171,174 186,215
Unsecured credit facility 96,000 55,500
-------- -------
$267,174 241,715
======== =======
On May 24, 1996, the Partnership entered into a $30 million loan
agreement with CARC. The note payable bears interest at 8.5% and
requires monthly principal and interest payments of $242 thousand. The
loan matures on May 31, 2011. The note is secured by certain office
properties and other assets of the Partnership. The outstanding balance
of the note payable to affiliate was $29.2 million and $29.4 million,
at June 30, 1998 and December 31, 1997, respectively.
8
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
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The Partnership is party to a $450.0 million unsecured revolving credit
facility payable to Morgan Guaranty Trust Company of New York, as agent
for a group of banks ("Morgan"). This note is available to CARC, the
Partnership and Carr Realty, L.P., a partnership in which CARC is the
majority partner. The line of credit contains a number of financial and
other covenants, including, but not limited to, covenants relating to
ratios of annual EBITDA (Earnings Before Interest, Taxes, Depreciation
and Amortization) to interest expense, annual EBITDA to debt service,
and total debt to tangible fair market value of CARC's consolidated
assets and restrictions on the ability of CARC to make dividend
distributions in excess of 90% of funds from operations. Availability
under the line of credit is also limited to a specified percentage of
the Partnership's unencumbered properties. CARC and the Partnership are
jointly and severally liable for all obligations under the line of
credit. As of June 30, 1998 and December 31, 1997, availability under
the line of credit was $366.6 million and $312.0 million, respectively,
of which approximately $247.0 million and $159.5 million, respectively,
had been drawn under this facility.
As of June 30, 1998, the scheduled maturity of mortgages and notes
payable and the note payable to affiliate are as follows (in
thousands):
1998............................. $ 22,427
1999............................. 17,381
2000............................. 111,503(1)
2001............................. 31,724
2002............................. 8,796
Thereafter....................... 75,343(2)
--------
$267,174
========
(1) Includes $96.0 million outstanding as of June 30, 1998
under the Company's $450 million unsecured line of
credit.
(2) Includes approximately $26.9 million outstanding on
the Partnership's loan agreement with CARC.
Based on the borrowing rates available to the Partnership for mortgages
and notes payable with similar terms and average maturities, the
estimated fair value, as determined by management, of the Partnership's
mortgages and notes payable approximates the carrying amount.
Restricted cash and cash equivalents consist of an escrow deposit
required as collateral for a letter of credit.
(3) Partners' Capital Contributions, Distributions, and Participation
Percentages
The Second Amended and Restated Agreement of Limited Partnership of the
Partnership, as amended, (the "Partnership Agreement") details the
rights of ownership in the Partnership. Ownership in the Partnership is
expressed in partnership units ("Units"). Units currently are
designated as Class A, B,C,D or E Units. Class D Units have first
preference, Class A and Class E Units together have second preference
and Class B Units have third preference as to the allocation of
Available Cash, as defined in the Partnership Agreement. Class C Units
do not share in the allocation of Available Cash. Upon the third
anniversary of the date of issuance of Class C Units, they may be
9
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
converted to Class A Units based on a conversion factor described in
the Partnership Agreement. Class E Units have a special allocation of
Partnership losses.
Upon the first anniversary of the date of issuance (or two years from
the date of issuance, in the case of Class D Units), each holder of
Class A Units, Class D Units or Class E Units may, subject to certain
limitations, require that the Partnership redeem his or her Units. Upon
redemption, such holder will receive, at the option of the Partnership,
with respect to each Unit tendered, either (i) cash in an amount equal
to the market value of one share of CARC common stock (subject to
certain anti-dilution adjustments) or (ii) one share of CARC common
stock. In lieu of the Partnership redeeming Class A, Class D or Class E
Units for cash, CARC has the right to assume directly and satisfy the
redemption right of a Unit holder. Holders of Class B Units and Class C
Units are not entitled to exercise this redemption right.
The following Units were outstanding:
June 30, December 31,
1998 1997
---------- ------------
Class A Units 950,111 950,111
Class B Units 12,517,442 11,916,673
Class C Units 539,593 539,593
Class D Units 271,363 271,363
Class E Units 16,520 16,520
---------- ----------
14,295,029 13,694,260
========== ==========
(4) Commitments and Contingencies
At June 30, 1998, the Partnership is contingently liable on letters of
credit amounting to approximately $1.4 million for various completion
escrows.
In June 1997 and February 1998, the Partnership unconditionally
guaranteed unsecured notes sold by CARC to institutional investors. The
aggregate principal amount of the unsecured notes are $475.0 million of
long-term debt, in the form of $150 million aggregate principal amount
of 7.20% unsecured notes due 2004, $100 million aggregate principal
amount of 6.625% unsecured notes due 2005, $125 million aggregate
principal amount of 7.375% unsecured notes due 2007 and $100 million
aggregate principal amount of 6.875% unsecured notes due 2008.
(5) Acquisition and Development Activities
From January 1, 1998 to June 30, 1998 the Partnership acquired one
operating property totaling approximately 160,000 square feet and land
that will support the future development of approximately 545,000
square feet. The operating property and land were acquired through the
payment of $27.4 million in cash. In addition, in the six months ended
June 30, 1998, the Partnership has placed into service one operating
property previously under development containing approximately 101,000
square feet. As of June 30, 1998, the Partnership had 13 properties
under development and land expected to support the future development
of approximately 687,000 square feet. Costs incurred at
10
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
June 30, 1998 and December 31, 1997 for properties under construction
were $47.1 and $44.3 million, respectively.
All acquisitions have been accounted for as purchases. Operations of
acquired properties have been included in the accompanying financial
statements from their respective dates of acquisition.
11
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Partnership
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is based primarily on the Condensed
Consolidated Financial Statements of CarrAmerica Realty, L.P. and its subsidiary
(the Partnership) as of June 30, 1998 and December 31, 1997, and for the three
months ended June 30, 1998 and 1997. This information should be read in
conjunction with the accompanying condensed consolidated financial statements
and notes thereto. These financial statements include all adjustments which are,
in the opinion of management, necessary to reflect a fair presentation of the
results for the interim periods, and all such adjustments are of a normal,
recurring nature. The comparability of these periods is significantly impacted
by acquisitions and dispositions made during 1998 and 1997. As of June 30, 1997,
the Partnership owned 44 properties. Between July 1, 1997 and June 30, 1998, the
Partnership acquired 15 properties, placed into service two properties, and
disposed of six properties.
Results of Operations - Three Months Ended June 30, 1998 and 1997
Real Estate Operating Revenue. As of June 30, 1998, the Partnership
owned 55 operating properties, all of which, containing approximately 5.0
million square feet, were in service for the full three months ended June 30,
1998, as compared to 44 properties, 32 of which, containing approximately 2.9
million square feet, were in service for the full three months ended June 30,
1997. As a result, total real estate operating revenue increased $13.0 million,
or 95.5%, to $26.5 million for the three months ended June 30, 1998 as compared
to $13.5 million for the three months ended June 30, 1997. The increase in
revenue was primarily attributable to a $12.1 million and a $.9 million increase
in rental revenue and real estate service income, respectively. The Partnership
experienced net growth in its rental revenue as a result of its acquisitions
since the second quarter of 1997 which contributed approximately $11.2 million
of additional rental revenue in the three month period ended June 30, 1998.
Rental revenue from properties that were fully operating throughout both periods
increased $1.6 million. Real estate service income increased by $.9 million, for
the three months ended June 30, 1998 as compared to the three months ended June
30, 1997, primarily as a result of reimbursements from an affiliate related to
certain services the Partnership personnel provide to the affiliate.
Real Estate Operating Expenses. Total real estate operating expenses
increased $8.9 million for the three months ended June 30, 1998, or 82.5%, to
$19.8 million as compared to $10.9 million for the three months ended June 30,
1997. The net increase in operating expenses was attributable to a $3.0 million
increase in property operating expenses, a $2.8 million increase in interest
expense, a $.4 million increase in general and administrative expenses, and a
$2.7 million increase in depreciation and amortization. The increase in
operating expenses was primarily attributable to additional expenses associated
with new acquisitions since the second quarter of 1997. The increase in the
Partnership's interest expense is primarily related to borrowings for
acquisitions. The increase in general and administrative expenses is
predominately a result of the addition of staff to implement the Partnership's
business strategy and inflation. The increase in depreciation and amortization
is predominately a result of additional depreciation and amortization of the
Partnership's real estate acquisitions.
Other Operating Income (Expense). Other operating income increased $.1
million for the three months ended June 30, 1998 as compared to the same period
in 1997, primarily due to increases in interest income offset by costs relating
to asset sales.
Net Income. Net income of $6.8 million was earned for the three months
ended June 30, 1998 as compared to $2.7 million during the three months ended
June 30, 1997. The comparability of net income between the two periods is
impacted by the acquisitions the Partnership made and the other changes
described above.
12
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Partnership
- --------------------------------------------------------------------------------
Results of Operations - Six Months Ended June 30, 1998 and 1997
Real Estate Operating Revenue. As of June 30, 1998, the Partnership
owned 55 operating properties, 54 of which, containing approximately 4.8 million
square feet, were in service for the full six months ended June 30, 1998, as
compared to 44 properties, 25 of which, containing approximately 2.3 million
square feet, were in service for the full six months ended June 30, 1997. As a
result, total real estate operating revenue increased $27.8 million, or 120.6%,
to $50.8 million for the six months ended June 30, 1998 as compared to $23.0
million for the six months ended June 30, 1997. The increase in revenue was
primarily attributable to a $26.4 million and a $1.4 million increase in rental
revenue and real estate service income, respectively. The Partnership
experienced net growth in its rental revenue as a result of its acquisitions
since the second quarter of 1997 which contributed approximately $25.0 million
of additional rental revenue in the six month period ended June 30, 1998. Rental
revenue from properties that were fully operating throughout both periods
increased $1.4 million. Real estate service income increased by $1.4 million,
for the six months ended June 30, 1998 as compared to the six months ended June
30, 1997, primarily as a result of reimbursements from an affiliate related to
certain services the Partnership personnel provide to the affiliate.
Real Estate Operating Expenses. Total real estate operating expenses
increased $18.4 million for the six months ended June 30, 1998, or 99.1%, to
$37.0 million as compared to $18.6 million for the six months ended June 30,
1997. The net increase in operating expenses was attributable to a $6.3 million
increase in property operating expenses, a $5.4 million increase in interest
expense, a $1.1 million increase in general and administrative expenses, and a
$5.6 million increase in depreciation and amortization. The increase in
operating expenses was primarily attributable to additional expenses associated
with new acquisitions since the second quarter of 1997. The increase in the
Partnership's interest expense is primarily related to borrowings for
acquisitions. The increase in general and administrative expenses is
predominately a result of the addition of staff to implement the Partnership's
business strategy and inflation. The increase in depreciation and amortization
is predominately a result of additional depreciation and amortization of the
Partnership's real estate acquisitions.
Other Operating Income (Expense). Other operating income decreased $.1
million for the six months ended June 30, 1998 as compared to the same period in
1997, primarily due to costs relating to asset sales. These losses are offset by
an increase in interest income between the two periods.
Net Income. Net income of $13.8 million was earned for the six months
ended June 30, 1998 as compared to $4.5 million during the six months ended June
30, 1997. The comparability of net income between the two periods is impacted by
the acquisitions the Partnership made and the other changes described above.
Cash Flows
Net cash provided by operating activities increased $15.3 million, or
103.0%, to $30.2 million for the six months ended June 30, 1998 as compared to
$14.9 million for the six months ended, June 30, 1997, primarily as a result of
the acquisitions made by the Company. Net cash used by investing activities
decreased $33.1 million, to $70.6 million for the six months ended June 30, 1998
as compared to $103.7 million for the six months ended June 30, 1997, primarily
as a result of a reduction in acquisitions of rental property. Net cash provided
by financing activities decreased $48.8 million to $41.5 million provided for
the six months ended June 30, 1998 as compared to $90.3 million used for the six
months ended June 30, 1997, primarily as a result of a reduction in capital
contributions associated with the acquisition of rental properties, net of
borrowings on the unsecured credit facility.
13
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Partnership
- --------------------------------------------------------------------------------
Acquisitions
During the six months ended June 30, 1998, the Partnership acquired one
operating property totaling approximately 160,000 square feet and land that will
support the future development of approximately 545,000 square feet. The
operating property and land are located in suburban Dallas. The operating
property and land were acquired through the payment of $27.4 million in cash. In
addition, in the six months ended on June 30, 1998, the Partnership has placed
into service one operating property previously under development containing
approximately 101,000 square feet.
Liquidity and Capital Resources
The Partnership's total indebtedness at June 30, 1998 was $267.2
million, of which $96.0 million, or 35.9%, had a LIBOR-based floating interest
rate. The Partnership's fixed rate indebtedness had an effective weighted
average interest rate of 8.3% and had a weighted average term to maturity of 6.6
years. The Partnership is jointly and severally liable with CARC on a $450.0
million unsecured revolving line of credit. This line of credit bears interest
at 90 basis points above LIBOR. At June 30, 1998, on this line of credit, the
Partnership had $96.0 million outstanding directly and had a joint and several
guarantee on the remainder of the outstanding balance of $151.0 million. At June
30, 1998, CARC had total borrowing capacity under its unsecured line of credit
of $366.6 million, allowing CARC and the Partnership to borrow up to an
additional $119.6 million. At June 30, 1998, the total book value of the
Partnership's assets was $726.4 million. The Partnership's debt as a percentage
of total book value of its assets was 36.8%.
The Partnership will require capital to invest in its existing
portfolio of operating assets for major capital projects such as large-scale
renovations, routine capital expenditures and deferred maintenance on certain
properties recently acquired and tenant related capital expenditures, such as
tenant improvements and allowances and leasing commissions. The Partnership
expects such expenditures to decrease in subsequent years as deferred
maintenance activities are completed on recently acquired properties and as the
emphasis of the Partnership's growth shifts from acquiring existing office
properties to developing new properties. The Partnership anticipates that this
shift from acquiring properties to developing properties will increase its need
for short-term borrowings. The Partnership expects to meet these anticipated
additional borrowing needs through the use of its unsecured line of credit (as
described in the preceding paragraph). The Partnership's capital requirements
for tenant related capital expenditures are dependent upon a number of factors,
including square feet of expiring leases, tenant retention ratios and whether
the expiring leases are in central business district properties or suburban
properties. As of June 30, 1998, the Partnership has 372,000 square feet under
leases expiring on or before December 31, 1998, representing 7.7% of total
leased space. The Partnership intends to use cash flow from operations and its
unsecured revolving line of credit facility to meet its working capital needs
for its existing portfolio of operating assets.
The Partnership also will require a substantial amount of capital for
development projects currently underway and planned for the future. As of June
1998, the Partnership had 13 development projects underway, which are expected
to require a total investment by the Partnership of $155.0 million. The
Partnership intends to use cash flow from operations and its unsecured revolving
credit facility to meet its working capital needs for its existing portfolio of
operating assets. The Partnership anticipates that adequate cash will be
available to fund its operating and administrative expenses, continuing debt
service obligations and the payment of distributions in both the short term and
long term.
Building and Lease Information
The 55 properties contain a total of approximately 5.0 million rentable
square feet. Eleven properties are located in southeast Denver (representing
23.8% of the portfolio's net rentable square feet), eleven properties are
located in
14
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Partnership
- --------------------------------------------------------------------------------
suburban Dallas (representing 22.7%), nine properties are located in suburban
Austin (representing 12.8%), eight properties are located in suburban Salt Lake
City (representing 9.3%), five properties are located in the Orange County/Los
Angeles area (representing 8.3%), four properties are located in suburban
Phoenix (representing 10.7%), three properties are located in suburban Chicago
(representing 6.4%), three properties are located in the San Francisco Bay Area
(representing 4.1%) and one property is located in suburban Seattle
(representing 1.9%). Each of the properties is wholly owned by the Partnership.
The properties range in size from approximately 70,000 square feet to
approximately 189,000 square feet. The Partnership acquired each of the
properties at various times between May 1996 and June 30, 1998. All of the
properties are managed by CARSI. In addition, as of June 30, 1998, the
Partnership owns 13 properties under development that will contain approximately
1.3 million square feet and land that is expected to support the development of
up to .7 million square feet of office space.
15
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Partnership
- --------------------------------------------------------------------------------
Building And Lease Information
The following table sets forth certain information about each operating property
owned by the Company as of June 30, 1998:
Company's Net
Effective Rentable
Property Area Percent # of
Property Ownership (square feet)(1) Leased(2) Buildings
- -------- --------- ---------------- --------- ---------
Consolidated Properties
Southern California,
Orange County/Los Angeles:
South Coast Executive Center 100.0 160,301 92.9 2
2600 W. Olive 100.0 145,304 95.7 1
Bay Technology Center 100.0 107,480 100.0 2
Northern California,
San Francisco Bay Area:
San Mateo I 100.0 70,000 100.0 1
San Mateo II and III 100.0 135,353 99.5 2
Suburban Seattle:
Canyon Park Commons 100.0 95,290 100.0 1
Austin, Texas:
Great Hills Plaza 100.0% 135,333 100.0% 1
Balcones Center 100.0 75,761 64.5 1
Park North 100.0 128,023 98.1 2
City View Centre 100.0 135,104 100.0 3
Tower of the Hills 100.0 165,322 98.1 2
Suburban Chicago:
Bannockburn I & II 100.0 209,860 100.0 2
Bannockburn IV 100.0 108,469 100.0 1
Suburban Dallas:
Greyhound 100.0 92,890 100.0 1
Search Plaza 100.0 152,508 95.4 1
Quorum North 100.0 114,196 89.7 1
Quorum Place 100.0 180,422 95.2 1
Cedar Maple Plaza 100.0 112,968 95.5 3
Tollhill East & West 100.0 241,155 91.1 2
Two Mission Park 100.0 76,962 63.1 1
5000 Quorum 100.0 160,122 96.3 1
Southeast Denver:
Harlequin Plaza 100.0 329,126 90.6 2
Quebec Court I & II 100.0 287,294 100.0 2
Greenwood Center 100.0 75,866 97.1 1
Quebec Center 100.0 106,849 96.9 1
Panorama Corporate Center I 100.0 100,542 98.7 3
JD Edwards 100.0 189,087 100.0 1
Panorama II 100.0 100,916 96.7 1
Suburban Phoenix:
US West 100.0 532,506 100.0 4
Suburban Salt Lake City:
Sorenson Research Park 100.0 285,144 98.4 5
Wasatch Corporate Center 100.0 178,098 100.0 3
--------- ----- --
TOTAL CONSOLIDATED PROPERTIES: 4,988,251 55
========= ==
WEIGHTED AVERAGE 96.3%
=====
- -------------------
(1) Includes office and retail space but excludes storage space.
(2) Includes space for leases that have been executed and have commenced as
of June 30, 1998.
16
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Partnership
- --------------------------------------------------------------------------------
The following table sets out a schedule of the lease expirations for
leases in place at those Properties owned as of June 30, 1998:
Percent of
Net Rentable Leased Square
Area Subject to Footage
Expiring Leases Represented by
Year of Lease Expiration (square feet) (1) Expiring Leases
------------------------ ----------------- ---------------
1998....................... 372,000 7.7%
1999....................... 567,000 11.8
2000....................... 516,000 10.7
2001....................... 676,000 14.1
2002....................... 582,000 12.1
2003....................... 446,000 9.3
2004....................... 417,000 8.7
2005....................... 2,000 .1
2006....................... 180,000 3.7
2007 and thereafter 1,045,000 21.8
- -------------------
(1) Excludes 185,000 square feet of vacant space.
17
Part II
OTHER INFORMATION
- -----------------
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
18
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.
CARRAMERICA REALTY, L.P.
a Delaware Limited Partnership
By: CarrAmerica Realty GP Holdings, Inc.,
its general partner
/s/ Thomas A. Carr
- -----------------------------------------
Thomas A. Carr, President
/s/ Brian K. Fields
- -----------------------------------------
Brian K. Fields, Chief Financial Officer,
Treasurer and Vice President
Date: August 14, 1998
19
Exhibit Index
-------------
Exhibit Description Page
- ------- ----------- ----
Exhibits
--------
27 Financial Data Schedule
20