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 20, 1998
BRANDYWINE REALTY TRUST
-----------------------
(Exact name of registrant as specified in its charter)
MARYLAND (1-9106) (23-2413352)
- -------- ------ ----------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) file number) Identification Number)
16 Campus Boulevard, Newtown Square, Pennsylvania 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
Page 1 of 8 pages
Item 5. Other Events
I. RREEF Portfolio
As of the date of this filing, the Company has determined that it is
probable that it will acquire, through Brandywine Operating Partnership, L.P.
(the "Operating Partnership"), a portfolio of 14 properties containing
approximately 941,471 net rentable square feet (collectively, the "RREEF
Properties"). Thirteen of these properties are located in King of Prussia, PA
and one is located in Middletown, PA. As part of this acquisition, the
Company will also acquire through the Operating Partnership approximately 19
acres of undeveloped land in King of Prussia, PA.
As of January 23, 1998, the RREEF Properties were fully leased to 20
tenants. Telespectrum Worldwide, Inc. and Lockheed Martin Corporation each
individually occupies more than 10% of the total net rentable area of the
portfolio under leases covering 178,635 and 158,000 net rentable square feet,
respectively.
The Company anticipates closing the purchase of the RREEF Properties on
or about February 6, 1998. The purchase price for the RREEF Properties
(including the undeveloped land) is anticipated to total approximately $55.5
million. The Operating Partnership expects to pay the purchase price and
closing expenses using borrowings under its existing revolving credit
facility.
The sellers of the RREEF Properties, RREEF MidAmerica/East Fund, RREEF
USA Fund-I and RREEF MidAmerica East-V Six, Inc., each are parties
unaffiliated with the Company and the Operating Partnership. The Company
based its determination of the purchase price of the RREEF Properties on the
expected cash flow, physical condition, location, competitive advantages,
existing tenancies and opportunities to retain and attract additional
tenants. The purchase price was determined by arm's-length negotiation
between the Company and the sellers.
The table set forth below shows certain information regarding rental
rates and lease expirations for the RREEF Properties.
2
SCHEDULED LEASE EXPIRATIONS
(RREEF Portfolio)
YEAR OF NUMBER OF LEASES RENTABLE SQUARE FINAL ANNUALIZED PERCENTAGE OF TOTAL
LEASE EXPIRING WITHIN FOOTAGE SUBJECT BASE RENT UNDER FINAL ANNUALIZED BASE RENT
EXPIRATION THE YEAR AT (1) TO EXPIRING LEASES EXPIRING LEASES (2) UNDER EXPIRING LEASES
- ----------------------- ----------------------- --------------------- ------------------ -------------------------
1998 8 107,439 $ 916,533 17.4%
1999 1 25,000 75,000 1.4%
2000 7 256,141 1,262,667 23.9%
2001 3 72,072 367,839 7.0%
2002 4 353,635 1,767,771 33.5%
2003 -- -- -- --
2004 -- -- -- --
2005 1 77,184 540,288 10.2%
2006 -- -- -- --
2007 and
Thereafter 1 50,000 350,000 6.6%
------ ------- ------------- -----
Total 25 941,471 $ 5,280,098 100.0%
------ ------- ------------- -----
------ ------- ------------- -----
(1) A lease is considered to expire if, and at any time, it is terminable by the
tenant without payment of penalty or premium.
(2) "Final Annualized Base Rent" for each lease scheduled to expire represents
the cash rental rate in the final month prior to expiration multiplied by
twelve.
3
II. Financial Statements
Financial statements for the RREEF Properties are included in this
Current Report under Item 7. After reasonable inquiry, the Company is not
aware of any material factors relating to the above mentioned properties that
would cause the reported financial information relating to such properties
not to be necessarily indicative of future operating results.
4
III. Four Tower Bridge Partnership
On January 20, 1998, Four Tower Bridge Associates ("Four Tower Bridge
Partnership"), a limited partnership in which a wholly-owned subsidiary of
the Operating Partnership is a general partner, obtained a $16.75 million
construction loan (the "Construction Loan") from PNC Bank, National
Association (the "Bank") to finance construction of an approximately 85,000
square foot office building (the "Four Tower Bridge Building") in West
Conshohocken, Montgomery County, Pennsylvania. Additional information
relating to this development project is contained in Item 5 of a Current
Report on Form 8-K filed with the Securities and Exchange Commission on
November 17, 1997.
In connection with the Construction Loan, the Operating Partnership
agreed to provide an equity contribution of $6.75 million to the Four Tower
Bridge Partnership upon the earlier of: (i) one year from the Construction
Loan closing; (ii) receipt of a certificate of occupancy for the Four Tower
Bridge Building; and (iii) a default under the Construction Loan. In
addition, the Operating Partnership agreed to provide a $10.0 million forward
commitment for the benefit of the Bank pursuant to which it would loan $10.0
million to Four Tower Bridge Partnership under certain circumstances to
provide Four Tower Bridge Partnership funds that would (together with the
$6.75 million equity contribution) enable it to repay the entire principal
amount of the Construction Loan. Four Tower Bridge Partnership expects,
however, that an unaffiliated third party, such as an insurance company or
pension fund, will provide the permanent loan to refinance the Construction
Loan upon completion of the Four Tower Bridge Building. The Operating
Partnership's equity contribution will be entitled to a 10% preferential
return, and advances, if any, made by the Operating Partnership under its
forward commitment would accrue interest at LIBOR plus 250 basis points,
would be repayable over ten years and would be secured by a first priority
mortgage on the Four Tower Bridge Building. A copy of the forward commitment
is attached as an exhibit under Item 7.
IV. Other
In a Current Report on Form 8-K filed by the Company with the Securities
and Exchange Commission on January 9, 1998, the Company reported under Item 2
its January 5, 1998 consummation of the acquisition of a portfolio of
properties. Management of the Company
5
expects that the Company will make approximately $2.0 million in capital
expenditures during 1998 with respect to the Park 80 West facility in Saddle
Brook, New Jersey acquired as part of this transaction. These expenditures
will be primarily to replace and upgrade the electrical and HVAC systems and
to make structural repairs to the parking garage and certain common areas.
6
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
The audited statement of revenue and certain operating expenses of
the RREEF Properties for the year ended December 31, 1996 and the
unaudited statement of revenue and certain operating expenses for the
nine months ended September 30, 1997 are included on pages F-17 to
F-20.
(b) Pro Forma Financial Information.
Pro forma financial information which reflects the Company's
acquisition of the RREEF Properties as of and for the nine months
ended September 30, 1997 and for the year ended December 31, 1996
are included on pages F-1 to F-16.
(c) Exhibits.
10.1--Forward Commitment.
10.2--Agreement of Purchase and Sale between Brandywine Operating
Partnership, L.P. and RREEF MidAmerica/East Fund-IV.
10.3--Agreement of Purchase and Sale between Brandywine Operating
Partnership, L.P. and RREEF MidAmerica East-V Six, Inc.
10.4--Agreement of Purchase and Sale between Brandywine Operating
Partnership, L.P. and RREEF USA Fund-I.
23.1--Consent of Arthur Andersen LLP
7
SIGNATURE
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.
BRANDYWINE REALTY TRUST
Date: January 27, 1998 By: /s/ Gerard H. Sweeney
------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
(Principal Executive Officer)
Date: January 27, 1998 By: /s/ Mark S. Kripke
------------------------
Mark S. Kripke, Chief
Financial Officer (Principal
Financial and Accounting
Officer)
8
BRANDYWINE REALTY TRUST
INDEX TO FINANCIAL STATEMENTS
I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
- - Pro Forma Condensed Consolidating Balance Sheet as of September 30, 1997...... F-4
- - Pro Forma Condensed Consolidating Statement of Operations for the Year Ended
December 31, 1996............................................................. F-5
- - Pro Forma Condensed Consolidating Statement of Operations for the Nine Months
Ended September 30, 1997...................................................... F-6
- - Notes and Management's Assumptions to Unaudited Pro Forma Condensed
Consolidating Financial Information........................................... F-7
II. RREEF PROPERTIES
- - Report of Independent Public Accountants...................................... F-17
- - Combined Statements of Revenue and Certain Expenses for the Year Ended
December 31, 1996 (audited) and for the Nine Month Period Ended
September 30, 1997 (unaudited)................................................ F-18
- - Notes to Statements of Revenue and Certain Expenses........................... F-19
F-1
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the pro forma condensed consolidating balance
sheet of Brandywine Realty Trust ("the Company") as of September 30, 1997 and
the pro forma condensed consolidating statements of operations for the nine
months ended September 30, 1997 and for the year ended December 31, 1996.
The pro forma condensed consolidating financial information should be
read in conjunction with the historical financial statements of the Company
and those acquisitions deemed significant pursuant to the rules and
regulations of the Securities and Exchange Commission.
The unaudited pro forma condensed consolidating financial information is
presented as if the following events occurred on September 30, 1997 for
balance sheet purposes, and at the beginning of the period presented for
purposes of the statements of operations:
- - The Company acquired the properties described in Note 1 to these pro forma
financial statements.
- - The Company acquired its partnership interests in Brandywine Operating
Partnership, L.P. (the "Operating Partnership").
- - The Company issued 4,600,000 Common Shares at $16.50 per share, of which
600,000 shares related to the underwriter's exercise of the over-allotment
option (the "1996 Offering").
- - The Company issued 636,363 Common Shares at $16.50 per share to a voting
trust established for the benefit of the Pennsylvania State Employees
Retirement System ("SERS"), in exchange for $10.5 million (the "SERS
Offering") and contributed such proceeds to the Operating Partnership in
exchange for 636,363 units of general partnership interest ("GP Units") in
the Operating Partnership.
- - The Company issued 709,090 Common Shares at $16.50 per share to two
investment funds managed by Morgan Stanley Asset Management Inc. (the "Morgan
Stanley Offering") and contributed the proceeds to the Operating Partnership
in exchange for 709,090 GP Units.
- - The Operating Partnership repaid $49,805,000 of mortgage indebtedness and
$764,000 of loans made by Safeguard Scientifics, Inc. and paid a $500,000
prepayment penalty with a portion of the proceeds of the 1996 Offering, the
SERS Offering and the Morgan Stanley Offering.
- - The Company issued 2,375,500 Common Shares at $20.625 per share, of which
175,500 shares related to the underwriter's exercise of the over-allotment
option (the "March 1997 Offering").
- - The Company issued 11,500,000 Common Shares at $20.75 per share, of which
1,500,000 shares related to the underwriter's exercise of the over-allotment
option (the "July 1997 Offering"). The net proceeds from the July 1997
Offering were contributed to the Operating Partnership in exchange for
11,500,000 GP Units.
- - The Operating Partnership repaid $160,775,000 of indebtedness under the
Company's revolving credit facility using proceeds from the July 1997
Offering.
- - The Company issued 786,840 Common Shares at $22.31 per share (the
"September 1997 Offering"). The net proceeds from the September 1997 Offering
were contributed to the Operating Partnership in exchange for 786,840 GP
Units.
- - The Company issued 751,269 Common Shares at $24.63 per share (the "December
1997 Offering"). The net proceeds from the December 1997 Offering were
contributed to the Operating Partnership in exchange for 751,269 GP Units.
F-2
The pro forma condensed consolidating financial information does not give
effect to the Company's pending underwritten equity offering of Common
Shares, as more fully described in a Prospectus Supplement and Prospectus
filed with the Securities and Exchange Commission on January 9, 1998.
The pro forma condensed consolidating financial information is unaudited
and is not necessarily indicative of what the actual financial position would
have been at September 30, 1997, nor does it purport to represent the future
financial position and the results of operations of the Company.
F-3
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 1997 (NOTES 1 AND 2)
(UNAUDITED)
(IN THOUSANDS)
BRANDYWINE
REALTY TRUST
HISTORICAL OTHER RECENT
CONSOLIDATED DECEMBER 1997 ACQUISITIONS RREEF PRO FORMA
(A) OFFERING (B) (C) PROPERTIES (D) CONSOLIDATED
------------ ------------- ----------- -------------- -------------
ASSETS:
Real estate investments, net... $ 462,772 $ -- $ 330,356 $ 56,680 $ 849,808
Cash and cash equivalents...... 19,965 -- -- -- 19,965
Escrowed cash.................. 348 -- -- -- 348
Accounts receivable............ 2,465 -- -- -- 2,465
Due from affiliates............ -- -- -- -- --
Investment in management
company...................... 318 -- -- -- 318
Deferred costs and other
assets....................... 8,470 -- -- -- 8,470
------------ ------------- ----------- -------------- ------------
Total assets................. 494,338 -- 330,356 56,680 881,374
------------ ------------- ----------- -------------- ------------
------------ ------------- ----------- -------------- ------------
LIABILITIES:
Mortgage notes payable......... 47,984 -- -- -- 47,984
Notes payable, Credit Facility. 14,000 (17,593) 320,848 56,680 373,935
Accrued interest............... 303 -- -- -- 303
Accounts payable and accrued
expenses..................... 4,128 -- -- -- 4,128
Distributions payable.......... 8,338 -- -- -- 8,338
Tenant security deposits
and deferred rents........... 3,960 -- -- -- 3,960
Tenant security deposits
and deferred rents........... 387 -- -- -- 387
------------ ------------- ----------- -------------- ------------
Total liabilities............ 79,100 (17,593) 320,848 56,680 439,035
------------ ------------- ----------- -------------- ------------
MINORITY INTEREST................ 4,894 -- 9,508 -- 14,402
------------ ------------- ----------- -------------- ------------
BENEFICIARIES' EQUITY:
Common shares of
beneficial interest.......... 234 8 -- -- 242
Additional paid-in capital..... 428,787 17,585 -- -- 446,372
Share warrants................. 962 -- -- -- 962
Cumulative earnings............ 5,209 -- -- -- 5,209
Cumulative distributions....... (24,848) -- -- -- (24,848)
------------ ------------- ----------- -------------- ------------
Total beneficiaries' equity.. 410,344 17,593 -- -- 427,937
------------ ------------- ----------- -------------- ------------
Total liabilities and
beneficiaries' equity...... $ 494,338 $ -- $ 330,356 $ 56,680 $ 881,374
------------ ------------- ----------- -------------- ------------
------------ ------------- ----------- -------------- ------------
F-4
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 (NOTES 1 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
BRANDYWINE 1997 EVENTS
REALTY -----------------------------
TRUST 1997 TOTAL
HISTORICAL 1996 OTHER RREEF PRO FORMA
CONSOLIDATED (A) EVENTS (B) SUBTOTAL EVENTS (C) PROPERTIES (E) CONSOLIDATED
---------------- ---------- -------- ---------- ---------------- ------------
REVENUE:
Base rents............................ $ 8,462 $12,646 $21,108 $75,395 $4,051 $ 100,554
Tenant reimbursements................. 1,372 2,838 4,210 9,754 643 14,607
Other................................. 196 100 296 683 -- 979
---------------- ---------- -------- ---------- ------ ------------
Total Revenue....................... 10,030 15,584 25,614 85,832 4,694 116,140
---------------- ---------- -------- ---------- ------ ------------
OPERATING EXPENSES:
Interest.............................. 2,751 513 3,264 25,478 4,251 32,993
Depreciation and amortization......... 2,836 4,687 7,523 20,447 1,814 29,784
Property expenses..................... 3,709 6,830 10,539 36,189 1,288 48,016
General and administrative............ 825 148 973 -- -- 973
---------------- ---------- -------- ---------- ------ ------------
Total operating expenses............ 10,121 12,178 22,299 82,114 7,353 111,766
---------------- ---------- -------- ---------- ------ ------------
Income (loss) before minority interest
and equity in income (loss) of
management company.................. (91) 3,406 3,315 3,718 (2,659) 4,374
Equity in income (loss) of management
company............................... (26) 66 40 1,194 97 1,331
---------------- ---------- -------- ---------- ------ ------------
Income (loss) before minority
interest.............................. (117) 3,472 3,355 4,912 (2,562) 5,705
Minority interest in (income) loss...... (45) (429) (474) 361 75 (38)
---------------- ---------- -------- ---------- ------ ------------
Net income (loss)....................... (162) 3,043 2,881 5,273 (2,487) 5,667
(Income) loss allocated to Preferred
Shares................................ (401) (1,847) (2,248) -- -- (2,248)
---------------- ---------- -------- ---------- ------ ------------
Income (loss) allocated to Common
Shares................................ $ (563) $ 1,196 $ 633 $ 5,273 $(2,487) $ 3,419
---------------- ---------- -------- ---------- ------ ------------
---------------- ---------- -------- ---------- ------ ------------
Earnings (loss) per Common Share........ $ (0.43) $ 0.15
---------------- ------------
---------------- ------------
Weighted average number of shares
outstanding including share
equivalents........................... 1,302,648 22,329,515
---------------- ------------
F-5
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (NOTES 1 AND 3)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1997 EVENTS
-----------------------------
BRANDYWINE
REALTY
TRUST 1997 RREEF TOTAL
HISTORICAL OTHER PROPERTIES PRO FORMA
CONSOLIDATED (A) EVENTS (D) (E) CONSOLIDATED
-------------------- ------------ --------------- ----------------
REVENUE:
Base rents............................. $ 32,290 $ 46,128 $ 3,120 $ 81,538
Tenant reimbursements.................. 5,731 5,272 529 11,532
Other.................................. 818 402 -- 1,220
---------- ------------ ------ ----------------
Total Revenue........................ 38,839 51,802 3,649 94,290
---------- ------------ ------ ----------------
OPERATING EXPENSES:
Interest............................... 4,899 16,531 3,180 24,610
Depreciation and amortization.......... 10,051 12,119 1,357 23,527
Property operating expenses............ 14,805 20,385 939 36,129
Other expenses......................... 705 -- -- 705
---------- ------------ ------ ----------------
Total operating expenses............. 30,460 49,035 5,476 84,971
---------- ------------ ------ ----------------
---------- ------------ ------ ----------------
Income (loss) before equity income of
management company and minority
interest............................... 8,379 2,767 (1,827) 9,319
Equity in income (loss) of management
company................................ 332 798 73 1,203
---------- ------------ ------ ----------------
Income (loss) before minority interest... 8,711 3,565 (1,754) 10,522
Minority interest in (income) loss....... (256) (105) 52 (309)
---------- ------------ ------ ----------------
Net income (loss)........................ 8,455 3,460 (1,702) 10,213
(Income) loss allocated to Preferred
Shares................................. (499) -- -- (499)
---------- ------------ ------ ----------------
Income (loss) allocated to Common
Shares................................. $ 7,956 $ 3,460 $ (1,702) $ 9,714
---------- ------------ ------ ----------------
---------- ------------ ------ ----------------
Earnings (loss) per Common Share......... $ 0.90 $ 0.40
---------- ----------------
---------- ----------------
Weighted average number of shares
outstanding including share
equivalents............................ 8,809,379 24,134,025
---------- ----------------
F-6
BRANDYWINE REALTY TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
BRANDYWINE REALTY TRUST
1. BASIS OF PRESENTATION:
Brandywine Realty Trust (the "Company") is a Maryland real estate investment
trust. As of January 27, 1998, the Company owned 139 properties. The Company's
interest in all of the Properties is held through Brandywine Operating
Partnership, L.P. (the "Operating Partnership"). The Company is the sole general
partner of the Operating Partnership and as of January 27, 1998, the Company
held a 98.2% interest in the Operating Partnership.
These pro forma financial statements should be read in conjunction with
the historical financial statements and notes thereto of the Company, the
SSI/TNC Properties, the LibertyView Building, the nine properties (the "SERS
Properties") acquired in November 1996 from SERS and its subsidiaries,
Delaware Corporate Center I, 700/800 Business Center Drive, the Columbia
Acquisition Properties, the Main Street Acquisition Properties, the TA
Properties, the Emmes Properties, the Greentree Executive Campus Acquisition
Properties, 748 & 855 Springdale Drive, the Green Hills Properties, the
Berwyn Park Properties, 500 & 501 Office Center Drive, Metropolitan
Industrial Center, Atrium 1, Bala Pointe Office Centre, the Scarborough
Properties, the GMH Properties and the RREEF Properties. In management's
opinion, all adjustments necessary to reflect the effects of the 1996
Offering, the SERS Offering, the Morgan Stanley Offering, the March 1997
Offering, the July 1997 Offering, the September 1997 Offering, the December
1997 Offering, the acquisitions of the SSI/TNC Properties, the LibertyView
Building, the 1996 Additional Acquisition Properties (consisting of the SERS
Properties, Delaware Corporate Center I, 700/800 Business Center Drive and
8000 Lincoln Drive), the Columbia Acquisition Properties, the Main Street
Acquisition Properties, 1336 Enterprise Drive, the Greentree Executive
Campus, Five Eves Drive, Kings Manor, the TA Properties, the Emmes
Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Green Hills
Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive,
Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus,
220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office
Centre, the Scarborough Properties, the GMH Properties and the RREEF
Properties by the Company have been made.
2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET:
(A) Reflects the Company's historical consolidated balance sheet as of
September 30, 1997.
(B) Reflects the December 1997 Offering and the use of the net proceeds to
repay $17.6 million of indebtedness under the Credit Facility.
F-7
(C) Reflects the Company's acquisiton of several property acquisitions as
follows:
Property Purchase Price Closing Costs Total
- ----------------------------------------------------------------------- -------------- ------------- ----------
Atrium I............................................................... $ 10,250 $ 45 $ 10,295
5 & 6 Cherry Hill Executive Campus..................................... 3,484 20 3,504
220 Commerce Drive..................................................... 5,300 129 5,429
Provident Place........................................................ 6,300 152 6,452
PECO Building.......................................................... 9,500 146 9,646
Bala Pointe Office Center.............................................. 26,750 403 27,153
Scarborough Properties................................................. 37,075 122 37,197
GMH Properties......................................................... 229,015 1,665 230,680
-------------- ------ ----------
Total................................................................ $ 327,674 $ 2,682 $ 330,356
-------------- ------ ----------
-------------- ------ ----------
(D) Reflects the Company's acquisition of the RREEF Properties as follows:
Purchase Price..................................................................... $ 55,500
Closing Costs...................................................................... 1,180
---------
$ 56,680
---------
---------
3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS:
(A) Reflects the historical consolidated operations of the Company.
(B) Reflects the historical operations of the SSI/TNC Properties,
LibertyView Building and the 1996 Additional Acquisition Properties from January
1, 1996 through the respective dates of acquisition, plus the pro forma 1996
Offering adjustments. The table below reflects the adjustments:
F-8
SSI/TNC
Properties and Delaware 700/800
LibertyView SERS Corporate Business Center
Building Properties Center Drive
-------------- ---------- --------- ---------------
Revenue:
Base rents................... $ 5,714 $4,008 $2,036 $651
Tenant reimbursements........ 2,511 249 -- 76
Other........................ 100 -- -- --
------- ---------- --------- -----
Total revenue.............. 8,325 4,257 2,036 727
Operating Expenses:
Interest..................... 3,783 194 -- --
Depreciation and
amortization............... 2,819 818 374 212
Property expenses............ 2,831 2,217 552 270
General and administrative... 715 -- -- --
------- ---------- --------- -----
Total operating expenses... 10,148 3,229 926 482
Income (loss) before management
company and minority
interest..................... (1,823) 1,028 1,110 245
Equity in income (loss) of
management company........... 75 -- -- --
------- ---------- --------- -----
Income (loss) before minority
interest..................... (1,748) 1,028 1,110 245
Minority interest in (income)
loss......................... 513 -- -- --
------- ---------- --------- -----
Net income (loss).............. (1,235) 1,028 1,110 245
Income allocated to Preferred
Shares....................... -- -- -- --
------- ---------- --------- -----
Income (loss) allocated to
Common Shares................ $(1,235) $1,028 $1,110 $245
------- ---------- --------- -----
1996 Pro
Forma Total Pro
& Other Forma
8000 Lincoln Offering 1996
Drive Adjustments Events
------------ ----------- ---------
Revenue:
Base rents................... $237 $-- $12,646
Tenant reimbursements........ 2 -- 2,838
Other........................ -- -- 100
----- ----------- ---------
Total revenue.............. 239 -- 15,584
Operating Expenses:
Interest..................... -- (3,464) 513
Depreciation and
amortization................. 89 375 4,687
Property expenses............ 231 729 6,830
General and administrative... -- (567) 148
----- ----------- ---------
Total operating expenses... 320 (2,927) 12,178
Income (loss) before management
company and minority
interest..................... (81) 2,927 3,406
Equity in income (loss) of
management company........... -- (9) 66
----- ----------- ---------
Income (loss) before minority
interest..................... (81) 2,918 3,472
Minority interest in (income)
loss......................... -- (942) (429)
----- ----------- ---------
Net income (loss).............. (81) 1,976 3,043
Income allocated to Preferred
Shares....................... -- (1,847) (1,847)
----- ----------- ---------
Income (loss) allocated to
Common Shares................ $(81) $ 129 $ 1,196
----- ----------- ---------
F-9
(C) Reflects the pro forma statements of operations of the Columbia
Acquisition Properties, the Main Street Acquisition Properties, 1336
Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive,
the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974
Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501
Office Center Drive, Christiana Corporate Center, Metropolitan Industrial
Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive,
Provident Place, the PECO Building, Bala Pointe Office Centre, the
Scarborough Properties and the GMH Properties for the year ended December 31,
1996 and other pro forma adjustments to reflect the March 1997 Offering, the
July 1997 Offering, the September 1997 Offering and the December 1997
Offering for the year ended December 31, 1996. The operating results
reflected below include the historical results and related pro forma
adjustments to reflect the period January 1, 1996 through the earlier of the
respective acquisition dates or December 31, 1996. Operating results from
those dates forward are included in the historical results of the Company.
Columbia Main Street 1336 Greentree
Acquisition Acquisition Enterprise Executive Five Eves
Properties Properties Drive Kings Manor Campus Drive
----------- ----------- ------------- --------------- ----------- -----------
Revenue:
Base rents................................... $ 5,146 $ 3,141 $ 437 $ 411 $ 1,862 $ 348
Tenant reimbursements........................ 359 347 75 107 175 39
Other........................................ 376 -- -- -- -- 1
----------- ----------- ----- ----- ----------- -----
Total revenue.............................. 5,881 3,488 512 518 2,037 388
----------- ----------- ----- ----- ----------- -----
Operating Expenses:
Interest (i)................................. 1,680 -- -- -- 841 254
Depreciation and amortization (ii)........... 1,007 629 117 114 359 108
Property expenses............................ 1,979 2,194 107 170 1,018 151
General and administrative................... -- -- -- -- -- --
----------- ----------- ----- ----- ----------- -----
Total operating expenses................... 4,666 2,823 224 284 2,218 513
----------- ----------- ----- ----- ----------- -----
Income (loss) before equity in income of
management company and minority interest..... 1,215 665 288 234 (181) (125)
Equity in income (loss) of management company
(iii)........................................ -- -- -- -- -- --
----------- ----------- ----- ----- ----------- -----
Income (loss) before minority interest......... 1,215 665 288 234 (181) (125)
Minority interest in (income) loss............. (36) (20) (8) (7) 5 4
Net income..................................... $ 1,179 $ 645 $ 280 $ 227 $ (176) $ (121)
----------- ----------- ----- ----- ----------- -----
----------- ----------- ----- ----- ----------- -----
748 & 855
Emmes Springdale 1974 Sproul MARCH 1997 JULY 1997
Ta Properties Properties Drive Road Offering Offering
------------- ----------- ------------- ----------- ------------- -----------
Revenue:
Base rents.................................. $ 5,102 $ 6,214 $ 940 $ 774 $ -- $ --
Tenant reimbursements....................... 735 2,681 -- 118 -- --
Other....................................... 9 10 -- -- -- --
------ ----------- ----- ----------- --- -----------
Total revenue............................. 5,846 8,905 940 892 -- --
------ ----------- ----- ----------- --- -----------
Operating Expenses:
Interest (i)................................ 3,168 4,987 400 -- (525) (12,058)
Depreciation and amortization (ii).......... 1,352 2,128 171 134 -- --
Property expenses........................... 1,962 3,482 250 492 -- --
General and administrative.................. -- -- -- -- -- --
------ ----------- ----- ----------- --- -----------
Total operating expenses.................. 6,482 10,597 821 626 (525) (12,058)
------ ----------- ----- ----------- --- -----------
Income (loss) before equity in income of
management company and minority interest.... (636) (1,692) 119 266 525 12,058
Equity in income (loss) of management company
(iii)....................................... 105 65 23 22 -- --
------ ----------- ----- ----------- --- -----------
Income (loss) before minority interest........ (531) (1,627) 142 288 525 12,058
Minority interest in (income) loss............ 16 48 (4) (8) 342 (293)
------ ----------- ----- ----------- --- -----------
Net income.................................... $ (515) $ (1,579) $ 138 $ 280 $ 867 $ 11,765
------ ----------- ----- ----------- --- -----------
------ ----------- ----- ----------- --- -----------
F-10
Green Hills 500/501 Christiana Metropolitan
Berwyn Park Properties Office Corporate Industrial
Properties (IV) Center Drive Center Center Atrium 1
------------- ------------- ------------- ------------- ------------- -----------
Revenue:
Base rents............................. $ 3,815 $ 7,700 $ 1,754 $ 768 $ 1,811 $ 1,226
Tenant reimbursements.................. 720 -- 1,358 61 406 33
Other.................................. 108 -- 43 2 9 26
------ ------ ------ ----- ------ -----------
Total revenue........................ 4,643 7,700 3,155 831 2,226 1,285
------ ------ ------ ----- ------ -----------
Operating Expenses:
Interest (i)........................... -- 1,200 1,125 430 1,238 772
Depreciation and amortization (ii)..... 1,205 1,294 547 183 528 329
Property expenses...................... 1,991 3,419 1,561 337 678 755
General and administrative............. -- -- -- -- -- --
------ ------ ------ ----- ------ -----------
Total operating expenses............. 3,196 5,913 3,233 950 2,444 1,856
------ ------ ------ ----- ------ -----------
Income (loss) before equity in income of
management company and minority
interest............................... 1,447 1,787 (78) (119) (218) (571)
Equity in income (loss) of management
company (iii).......................... 166 (115) 76 5 53 31
------ ------ ------ ----- ------ -----------
Income (loss) before minority interest... 1,613 1,672 (2) (114) (165) (540)
Minority interest in (income) loss....... (47) (49) -- 3 5 16
------ ------ ------ ----- ------ -----------
Net income............................... $ 1,566 $ 1,623 $ (2) $ (111) $ (160) $ (524)
------ ------ ------ ----- ------ -----------
------ ------ ------ ----- ------ -----------
5 & 6 Cherry Peco
September Hill Executive 220 Commerce Provident Building
1997 Offering Campus Drive Place (V)
----------------- --------------- --------------- ----------- -----------
Revenue:
Base rents............................... $ -- $ 152 $ 572 $ 756 $ 1,017
Tenant reimbursements.................... -- -- -- 105 --
Other.................................... -- -- -- 8 --
------- ------- ------- ----- -----------
Total revenue.......................... -- 152 572 869 1,017
------- ------- ------- ----- -----------
Operating Expenses:
Interest (i)............................. -- 263 407 484 723
Depreciation and amortization (ii)....... -- 112 174 206 309
Property expenses........................ -- 169 194 333 --
General and administrative............... -- -- -- -- --
------- ------- ------- ----- -----------
Total operating expenses............... -- 544 775 1,023 1,032
------- ------- ------- ----- -----------
Income (loss) before equity in income
of management company and minority
interest................................. -- (392) (203) (154) (15)
Equity in income (loss) of management
company (iii)............................ -- -- 12 18 --
------- ------- ------- ----- -----------
Income (loss) before minority interest..... -- (392) (191) (136) (15)
Minority interest in (income) loss......... 33 12 6 4 --
------- ------- ------- ----- -----------
Net income................................. $ 33 $ (380) $ (185) $ (132) $ (15)
------- ------- ------- ----- -----------
------- ------- ------- ----- -----------
F-11
December Bala Pointe Scarborough GMH Total Other
1997 Offering Office Centre Properties Properties 1997 Events
------------- ------------- ------------- ----------- -----------
Revenue:
Base rents................................. $ -- $ 3,572 $ 4,971 $ 22,906 $ 75,395
Tenant reimbursements...................... -- 21 239 2,175 9,754
Other...................................... -- 35 -- 56 683
------ ------ ------ ----------- -----------
Total revenue............................ -- 3,628 5,210 25,137 85,832
------ ------ ------ ----------- -----------
Operating Expenses:
Interest (i)............................... (1,319) 2,036 2,071 17,301 25,478
Depreciation and amortization (ii)......... -- 869 1,190 7,382 20,447
Property expenses.......................... -- 1,559 2,424 10,964 36,189
General and administrative................. -- -- -- -- --
------ ------ ------ ----------- -----------
Total operating expenses................. (1,319) 4,464 5,685 35,647 82,114
------ ------ ------ ----------- -----------
Income (loss) before equity in income of
management company and minority interest... 1,319 (836) (475) (10,510) 3,718
Equity in income (loss) of management company
(iii)...................................... -- 64 119 550 1,194
------ ------ ------ ----------- -----------
Income (loss) before minority interest....... 1,319 (772) (356) (9,960) 4,912
Minority interest in (income) loss........... (39) 23 10 293 361
------ ------ ------ ----------- -----------
Net income................................... $ 1,280 $ (749) $ (346) $ (9,667) $ 5,273
------ ------ ------ ----------- -----------
------ ------ ------ ----------- -----------
- ------------------------
(i) Pro forma interest expense is presented assuming an effective rate of
7.5% on borrowings under the Company's revolving credit facility. The
adjustment for the Columbia Acquisition Properties also reflects an
effective interest rate of 9.5% on assumed debt. The adjustments for
the March 1997 Offering, the July 1997 Offering and the December 1997
Offering represent interest savings related to the payoff of $7 million
and $160.8 million, respectively, of credit facility borrowings at an
effective rate of 7.5%.
(ii) Pro forma depreciation expense is presented assuming an 80% building
and 20% land allocation of the purchase price and capitalized closing
costs and assumes a useful life of 25 years.
(iii) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
(iv) Pro forma property expenses of the Green Hill Properties exclude $666,000
from historical amounts. Such amount represents expected salary savings.
(v) Pro forma base rents for the Peco Building are based on the lease in
place as of November 25, 1997 as historically the property was owner
occupied and was not an operating property. All property expenses are
paid directly by the tenant.
(D) Reflects the pro forma adjustments relating to the Columbia
Acquisition Properties, the Main Street Acquisition Properties, 1336
Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive,
the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974
Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501
Office Center Drive, Christiana Corporate Center, Metropolitan Industrial
Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive,
Provident Place, the PECO Building, Bala Pointe Office Centre, the
Scarborough Properties and the GMH Properties for the nine months ended
September 30, 1997 and other pro forma adjustments to reflect the March 1997
Offering, the July 1997 Offering, the September 1997 Offering and the
December 1997 Offering for the nine months ended September 30, 1997. The
operating results reflected below include the historical results and related
pro forma adjustments to reflect the period January 1, 1997 through the
earlier of the respective acquisition date or September 30, 1997.
F-12
COLUMBIA MAIN STREET 1336 GREENTREE
ACQUISITION ACQUISITION ENTERPRISE EXECUTIVE
PROPERTIES PROPERTIES DRIVE KINGS MANOR CAMPUS
----------- ----------- ---------- ----------- ---------
Revenue:
Base rents............................................. $338 $542 $78 $105 $602
Tenant reimbursements.................................. 24 60 13 27 17
Other.................................................. 25 -- -- -- --
----- ----- --- ----- ---------
Total revenue...................................... 387 602 91 132 619
----- ----- --- ----- ---------
Operating Expenses:
Interest (i)........................................... 110 -- -- -- 249
Depreciation and amortization (ii)..................... 66 109 21 29 106
Property expenses...................................... 130 379 19 43 272
General and administrative............................. -- -- -- -- --
----- ----- --- ----- ---------
Total operating expenses........................... 306 488 40 72 627
----- ----- --- ----- ---------
Income (loss) before equity in income of management company
and minority interest.................................... 81 114 51 60 (8)
Equity in income (loss) of management company (iii)........ -- -- -- -- --
----- ----- --- ----- ---------
Income (loss) before minority interest..................... 81 114 51 60 (8)
Minority interest in (income) loss......................... (2) (3) (1) (2) --
----- ----- --- ----- ---------
Net income................................................. $ 79 $111 $50 $ 58 $ (8)
----- ----- --- ----- ---------
----- ----- --- ----- ---------
FIVE EVES
DRIVE
---------
Revenue:
Base rents............................................. $103
Tenant reimbursements.................................. 12
Other.................................................. --
---------
Total revenue...................................... 115
---------
Operating Expenses:
Interest (i)........................................... 75
Depreciation and amortization (ii)..................... 32
Property expenses...................................... 45
General and administrative............................. --
---------
Total operating expenses........................... 152
---------
Income (loss) before equity in income of management company
and minority interest.................................... (37)
Equity in income (loss) of management company (iii)........ --
---------
Income (loss) before minority interest..................... (37)
Minority interest in (income) loss......................... 1
---------
Net income................................................. $(36)
---------
---------
748 & 855
TA EMMES SPRINGDALE 1974 SPROUL MARCH 1997
PROPERTIES PROPERTIES DRIVE ROAD OFFERING
--------- ---------- ---------- ----------- ----------
Revenue:
Base rents............................................ $2,053 $2,570 $414 $ 354 $--
Tenant reimbursements................................. 299 1,130 -- 54 --
Other................................................. 6 2 -- -- --
--------- ---------- ----- ----------- ---
Total revenue..................................... 2,358 3,702 414 408 --
--------- ---------- ----- ----------- ---
Operating Expenses:
Interest (i).......................................... 1,241 2,049 171 -- (91)
Depreciation and amortization (ii).................... 530 875 73 61 --
Property expenses..................................... 698 1,332 99 225 --
General and administrative............................ -- -- -- -- --
--------- ---------- ----- ----------- ---
Total operating expenses.......................... 2,469 4,256 343 286 (91)
--------- ---------- ----- ----------- ---
Income (loss) before equity in income of management
company and minority interest........................... (111) (554) 71 122 91
Equity in income (loss) of management company (iii)....... 41 27 10 10 --
--------- ---------- ----- ----------- ---
Income (loss) before minority interest.................... (70) (527) 81 132 91
Minority interest in (income) loss........................ 2 15 (2) (4) (52)
--------- ---------- ----- ----------- ---
Net income................................................ $(68) $ (512) $ 79 $ 128 $39
--------- ---------- ----- ----------- ---
--------- ---------- ----- ----------- ---
JULY 1997
OFFERING
---------
Revenue:
Base rents............................................ $ --
Tenant reimbursements................................. --
Other................................................. --
---------
Total revenue..................................... --
---------
Operating Expenses:
Interest (i).......................................... (6,904)
Depreciation and amortization (ii).................... --
Property expenses..................................... --
General and administrative............................ --
---------
Total operating expenses.......................... (6,904)
---------
Income (loss) before equity in income of management
company and minority interest........................... 6,904
Equity in income (loss) of management company (iii)....... --
---------
Income (loss) before minority interest.................... 6,904
Minority interest in (income) loss........................ (42)
---------
Net income................................................ $6,862
---------
---------
F-13
CHRISTIANA METROPOLITAN
BERWYN PARK GREEN HILLS 500/501 OFFICE CORPORATE INDUSTRIAL
PROPERTIES PROPERTIES (IV) CENTER DRIVE CENTER CENTER
----------- --------------- -------------- ---------- ------------
Revenue:
Base rents....................................... $2,492 $4,567 $1,106 $615 $1,395
Tenant reimbursements............................ 376 -- 919 22 306
Other............................................ 36 -- 48 45 33
----------- ------ ------ ----- ------
Total revenue................................ 2,904 4,567 2,073 682 1,734
----------- ------ ------ ----- ------
Operating Expenses:
Interest (i)..................................... -- 690 700 309 926
Depreciation and amortization (ii)............... 700 745 340 131 395
Property expenses................................ 1,073 2,059 971 218 472
General and administrative....................... -- -- -- -- --
----------- ------ ------ ----- ------
Total operating expenses..................... 1,773 3,494 2,011 658 1,793
----------- ------ ------ ----- ------
Income (loss) before equity in income of management
company and minority interest...................... 1,131 1,073 62 24 (59)
Equity in income (loss) of management company
(iii).............................................. 95 (66) 44 4 40
----------- ------ ------ ----- ------
Income (loss) before minority interest............... 1,226 1,007 106 28 (19)
Minority interest in (income) loss................... (36) (30) (3) (1) 1
----------- ------ ------ ----- ------
Net income........................................... $1,190 $ 977 $ 103 $ 27 $ (18)
----------- ------ ------ ----- ------
----------- ------ ------ ----- ------
ATRIUM 1
--------
Revenue:
Base rents....................................... $ 962
Tenant reimbursements............................ 33
Other............................................ 26
--------
Total revenue................................ 1,021
--------
Operating Expenses:
Interest (i)..................................... 577
Depreciation and amortization (ii)............... 246
Property expenses................................ 555
General and administrative....................... --
--------
Total operating expenses..................... 1,378
--------
Income (loss) before equity in income of management
company and minority interest...................... (357)
Equity in income (loss) of management company
(iii).............................................. 23
--------
Income (loss) before minority interest............... (334)
Minority interest in (income) loss................... 10
--------
Net income........................................... $(324)
--------
--------
5 & 6
CHERRY
HILL 220
SEPTEMBER EXECUTIVE COMMERCE PROVIDENT PECO
1997 OFFERING CAMPUS DRIVE PLACE BUILDING (V)
------------- ---------- -------- --------- ------------
Revenue:
Base rents..................................... $-- $114 52$5 $567 $762
Tenant reimbursements.......................... -- -- -- 79 --
Other.......................................... -- -- -- 6 --
--- ---------- -------- --------- -----
Total revenue.............................. -- 114 525 652 762
--- ---------- -------- --------- -----
Operating Expenses:
Interest (i)................................... -- 197 304 362 541
Depreciation and amortization (ii)............. -- 84 130 154 231
Property expenses.............................. -- 126 164 249 --
General and administrative..................... -- -- -- -- --
--- ---------- -------- --------- -----
Total operating expenses................... -- 407 598 765 772
--- ---------- -------- --------- -----
Income (loss) before equity in income of management
company and minority interest.................... -- (293 ) (73 ) (113) (10)
Equity in income (loss) of management company
(iii)............................................ -- -- 9 13 --
--- ---------- -------- --------- -----
Income (loss) before minority interest............. -- (293 ) (64 ) (100) (10)
Minority interest in (income) loss................. 26 9 2 3 --
--- ---------- -------- --------- -----
Net income......................................... $26 $(284 ) (6$2 ) $(97) $(10)
--- ---------- -------- --------- -----
--- ---------- -------- --------- -----
F-14
DECEMBER 1997 BALA POINTE SCARBOROUGH GMH TOTAL OTHER
OFFERING OFFICE CENTRE PROPERTIES PROPERTIES 1997 EVENTS
------------- ------------- ----------- ---------- -----------
Revenue:
Base rents.......................................... $ -- $2,837 $4,292 $18,735 $46,128
Tenant reimbursements............................... -- 27 425 1,449 5,272
Other............................................... -- 28 17 130 402
--- ------ ----------- ---------- -----------
Total revenue................................... -- 2,892 4,734 20,314 51,802
--- ------ ----------- ---------- -----------
Operating Expenses:
Interest (i)........................................ (987) 1,523 1,549 12,940 16,531
Depreciation and amortization (ii).................. -- 650 890 5,521 12,119
Property expenses................................... -- 1,243 1,834 8,179 20,385
General and administrative.......................... -- -- -- -- --
--- ------ ----------- ---------- -----------
Total operating expenses........................ (987) 3,416 4,273 26,640 49,035
--- ------ ----------- ---------- -----------
Income (loss) before equity in income of management
company and minority interest......................... 987 (524) 461 (6,326) 2,767
Equity in income (loss) of management company (iii)..... -- 48 89 411 798
--- ------ ----------- ---------- -----------
Income (loss) before minority interest.................. 987 (476) 550 (5,915) 3,565
Minority interest in (income) loss...................... (29) 14 (155) 174 (105)
--- ------ ----------- ---------- -----------
Net income.............................................. $958 $ (462) $ 395 $(5,741) $ 3,460
--- ------ ----------- ---------- -----------
--- ------ ----------- ---------- -----------
- ------------------------
(i) Pro forma interest expense is presented assuming an effective rate of 7.5%
on borrowings under the Company's revolving credit facility. The adjustment
for the Columbia Acquisition Properties also reflects an effective interest
rate of 9.5% on assumed debt. The adjustments for the March 1997 Offering,
the July 1997 Offering and the December 1997 Offering represent interest
savings related to the payoff of $7 million and $160.8 million,
respectively, of credit facility borrowings at an effective rate of 7.5%.
(ii) Pro forma depreciation expense is presented assuming an 80% building and
20% land allocation of the purchase price and capitalized closing costs and
assumes a useful life of 25 years.
(iii) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
(iv) Pro forma property expenses for the Green Hill Properties exclude $333,000
from historical amounts. Such amount represents expected salary savings.
(v) Pro forma base rents for the Peco Building are based on the lease in place
as of November 25, 1997 as historically the property was owner occupied and
was not an operating property. All property expenses are paid directly by
the tenant.
F-15
(E) Reflects the pro forma statements of operations of the RREEF
Properties for the nine months ended September 30, 1997 and for the year
ended December 31, 1996. All amounts represent historical operations except
for the pro forma adjustments noted:
- For the nine months ended September 30, 1997:
RREEF
Properties
-----------
Revenue:
Base rents............................................................ $ 3,120
Tenant reimbursements................................................. 529
Other................................................................. --
-----------
Total revenue....................................................... 3,649
-----------
Operating Expenses:
Interest (i).......................................................... 3,180
Depreciation and amortization (ii).................................... 1,357
Property expenses..................................................... 939
General and administrative............................................ --
-----------
Total operating expenses............................................ 5,476
-----------
Income (loss) before equity in income of management company and minority
interest.............................................................. (1,827)
Equity in income (loss) of management company (iii)..................... 73
-----------
Income (loss) before minority interest.................................. (1,754)
Minority interest in (income) loss...................................... 52
-----------
Net income $ (1,702)
-----------
-----------
-For the year ended December 31, 1996:
RREEF
PROPERTIES
-----------
Revenue:
Base rents............................................................ $ 4,051
Tenant reimbursements................................................. 643
Other................................................................. --
-----------
Total revenue....................................................... 4,694
-----------
Operating Expenses:
Interest (i).......................................................... 4,251
Depreciation and amortization (ii).................................... 1,814
Property expenses..................................................... 1,288
General and administrative............................................ --
-----------
Total operating expenses............................................ 7,353
-----------
Income (loss) before equity in income of management company and minority
interest.............................................................. (2,659)
Equity in income (loss) of management company (iii)..................... 97
-----------
Income (loss) before minority interest.................................. (2,562)
Minority interest in (income) loss...................................... 75
-----------
Net income $ (2,487)
-----------
-----------
- ------------------------
(i) Pro forma a interest expense is presented assuming an effective rate of
7.5% on borrowings under the Company's revolving credit facility.
(ii) Pro forma depreciation expense is presented assuming an 80% building and
20% land allocation of the purchase price and capitalized closing costs
and assumes a useful life of 25 years.
(iii) Pro forma equity in income of management company is presented based on
management fees less incremental costs estimated to be incurred.
F-16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brandywine Realty Trust:
We have audited the combined statement of revenue and certain expenses of
The RREEF Properties described in Note 1, for the year ended December 31, 1996.
This financial statement is the responsibility of the 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 accounting principles used and 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 combined statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a current report on Form 8-K of Brandywine
Realty Trust, as described in Note 1, and is not intended to be a complete
presentation of the The RREEF Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of The RREEF
Properties for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
January 22, 1998
F-17
THE RREEF PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
For the For the Nine
Year Ended Months Ended
December 31, September 30,
1996 1997
------------ -------------
(Unaudited)
REVENUE:
Minimum rent (Note 2)............................................................. $ 4,051,000 $ 3,120,000
Tenant reimbursements............................................................. 643,000 529,000
------------ -------------
Total revenue................................................................... 4,694,000 3,649,000
------------ -------------
CERTAIN EXPENSES:
Maintenance and other operating expenses.......................................... 625,000 403,000
Utilities......................................................................... 182,000 161,000
Real estate taxes................................................................. 481,000 375,000
------------ -------------
Total certain expenses.......................................................... 1,288,000 939,000
------------ -------------
REVENUE IN EXCESS OF CERTAIN EXPENSES............................................... $ 3,406,000 $ 2,710,000
------------ -------------
------------ -------------
The accompanying notes are an integral part of this financial statement.
F-18
THE RREEF PROPERTIES
NOTES TO THE COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
The combined statement of revenue and certain expenses reflects the
combined operations of The RREEF Properties (the "Properties"). The
Properties are expected to be acquired in February 1998 by Brandywine Realty
Trust (the "Company") under related sales agreement with RREEF USA Fund--I,
RREEF MidAmerica East-IV, and RREEF MidAmerica East-V (collectively the
"RREEF Funds"). The properties consist of the King of Prussia Industrial Park
(12 buildings and one plot of land behind 600 Allendale Road), King of
Prussia, PA, 741 First Avenue, King of Prussia, PA, and 180 Wheeler Court,
Middletown, PA. The Properties have an aggregate net rentable area of
approximately 940,213 square feet (90% leased as of December 31, 1996). The
expected purchase price is approximately $55.5 million. This combined
statement of revenue and certain expenses is to be included in the Company's
current report on Form 8-K, as the above described transaction has been
deemed significant pursuant to the rules and regulations of the Securities
and Exchange Commission.
The accounting records of the Property are maintained on an accrual
basis. Adjusting entries have been made to present the accompanying financial
statements in accordance with generally accepted accounting principles. The
accompanying financial statements exclude certain expenses such as interest,
depreciation and amortization, and other costs not directly related to the
future operations of the Properties.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. The ultimate results could differ from those estimates.
The statement of revenue and certain expenses for the nine months ended
September 30, 1997 is unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for
the fair presentation of the statement of revenue and certain expenses for
the interim period have been included. The results of the interim periods are
not necessarily indicative of the results for the full year.
F-19
2. OPERATING LEASES:
Base rents presented for the year ended December 31, 1996, include
straight-line adjustments for rental revenue increases in accordance with
generally accepted accounting principles. The aggregate rental revenue
decreases resulting from the straight-line adjustment for the year ended
December 31, 1996 and the nine months ended September 30, 1997 were $(52,000)
and $(95,000) (unaudited), respectively.
The following tenants had minimum rental payments greater than 10% of the
total minimum rent in 1996:
Smithkline Beecham Corporation............... $ 470,000
Tozour-Trane, Inc............................ $ 540,000
The Properties are leased to tenants under operating leases with
expiration dates extending to the year 2005. Future minimum rentals under
noncancelable operating leases, excluding tenant reimbursements of operating
expenses as of December 31, 1996, are as follows:
1997................................... $4,088,000
1998................................... 3,308,000
1999................................... 3,141,000
2000................................... 3,016,000
2001................................... 2,665,000
Thereafter............................. 3,026,000
-----------
$19,244,000
-----------
-----------
Certain leases also include provisions requiring tenants to reimburse the
Property for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY TRANSACTIONS:
The Properties paid management fees of $205,000 to RREEF Management
Company, a related party, based on percentages as defined in the management
agreement. These management fees are included within maintenance and other
operating expenses in the statement of revenue and certain expenses.
RREEF Management Company leases 3,344 square feet at a minimal annual
base rental of $24,000 and receives 1,530 square feet of free rental space at
one of the Properties. Per the lease agreement, the lease terminates on the
earlier of (1) one year after RREEF USA Fund-I sells its interest in the
building or (2) 30 days after RREEF Management Company notifies the landlord
of its election to terminate.
F-20