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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER: 1-13625
EOP OPERATING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE 36-4156801
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
TWO NORTH RIVERSIDE PLAZA, 60606
SUITE 2100, CHICAGO, ILLINOIS (Zip Code)
(Address of principal executive offices)
(312) 466-3300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest ("Units")
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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Units held by non-affiliates of the
registrant as of March 16, 2001 was $8,949,531,748.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Equity Office Properties Trust's proxy statement for the annual
shareholders' meeting to be held in 2001 are incorporated by reference into Part
III.
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EOP OPERATING LIMITED PARTNERSHIP
TABLE OF CONTENTS
PAGE
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PART I.
Item 1 Business.................................................... 3
Item 2 Properties.................................................. 9
Item 3 Legal Proceedings........................................... 21
Item 4 Submission of Matters to a Vote of Security Holders......... 21
PART II.
Item 5 Market for Registrant's Common Equity and Related
Shareholder Matters......................................... 22
Item 6 Selected Financial Data..................................... 23
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 26
Item 7A Quantitative and Qualitative Disclosure About Market Risk... 46
Item 8 Financial Statements and Supplementary Data................. 47
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 85
PART III.
Item 10 Directors and Executive Officers of the Registrant.......... 85
Item 11 Executive Compensation...................................... 85
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 85
Item 13 Certain Relationships and Related Transactions.............. 85
PART IV.
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 86
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PART I
ITEM 1. BUSINESS.
EOP PARTNERSHIP
As used herein, the terms "we," "us," "our," or "EOP Partnership" refer to
EOP Operating Limited Partnership, a Delaware limited partnership. EOP
Partnership is a subsidiary of Equity Office Properties Trust ("Equity Office")
which was formed on October 9, 1996 to continue and expand the national office
property business organized by Mr. Samuel Zell, Chairman of the Board of
Trustees of Equity Office and to complete the consolidation of our predecessors.
Equity Office completed its initial public offering, or "IPO", on July 11, 1997.
We are a fully integrated, self-managed real estate company engaged in
acquiring, owning, managing, developing and leasing office properties. Equity
Office's assets, which include investments in joint ventures, are owned by, and
substantially all of its operations are conducted through, EOP Partnership.
Equity Office is the general partner of EOP Partnership. Equity Office elected
to be taxed as a real estate investment trust, or REIT, for federal income tax
purposes and generally will not be subject to federal income tax if it
distributes 100% of its taxable income and complies with a number of
organizational and operational requirements.
As of December 31, 2000, we owned or had an interest in 381 office
properties containing approximately 99.0 million rentable square feet of office
space (the "Office Properties") and owned nine stand-alone parking facilities
containing approximately 14,244 parking spaces (the "Parking Facilities" and,
together with the Office Properties, the "Properties"). The weighted average
occupancy for the Office Properties at December 31, 2000 was approximately
94.6%. The Office Properties are located in 104 submarkets in 37 markets in 24
states and the District of Columbia. The Office Properties, by rentable square
feet, are located approximately 51.3% in central business districts ("CBDs") and
48.7% in suburban markets.
Our executive offices are located at Two North Riverside Plaza, Suite 2100,
Chicago, Illinois 60606, and our telephone number is (312) 466-3300.
ACQUISITION ACTIVITY
Since Equity Office's IPO, we have invested approximately $13.9 billion,
calculated on a cost basis, in acquisitions of institutional quality office
properties and parking facilities throughout the United States. During the year
ended December 31, 2000, we completed several acquisitions, including our merger
with Cornerstone Properties Limited Partnership, in which we acquired 85 office
properties containing an aggregate of approximately 21.0 million square feet of
rentable space and several vacant land parcels. The aggregate consideration we
paid for these acquisitions during 2000 was approximately $4.9 billion,
comprised of $1.5 billion in cash, $1.6 billion in Equity Office common shares
and units of limited partnership interest in EOP Partnership and $1.8 billion in
assumed liabilities.
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CORNERSTONE MERGER
On June 19, 2000, we completed the merger of Cornerstone Properties Limited
Partnership ("Cornerstone Partnership") with and into EOP Partnership and the
merger of Cornerstone Properties Inc. ("Cornerstone") with and into Equity
Office (collectively, the "Cornerstone Merger") at a total cost of approximately
$4.5 billion comprised of the issuance of Equity Office Common Shares and
options, EOP Partnership units, the assumption of debt and assumed liabilities
and cash. The cash portion of the Cornerstone Merger of approximately $1.2
billion was funded from EOP Partnership's credit facilities. As a result of the
Cornerstone Merger, EOP Partnership acquired an interest in 82 Office Properties
containing approximately 18.9 million square feet of office space.
PENDING SPIEKER MERGER
In February 2001, Equity Office and Spieker Properties, Inc. ("Spieker")
entered into a merger agreement in which Spieker will merge into Equity Office
and EOP Partnership will acquire Spieker Properties, L.P., Spieker's operating
partnership subsidiary (the "Spieker Merger"). The transaction values Spieker
(including the outside interests in Spieker Properties, L.P.) at approximately
$7.2 billion, which includes transaction costs and the assumption of
approximately $2.1 billion in debt and $431 million in preferred stock and
partnership units. EOP Partnership will pay approximately $1.085 billion in cash
and issue approximately 118.6 million new EOP Partnership units and 14.3 million
new EOP Partnership preferred units in the transaction. We intend to finance the
$1.085 billion cash portion of the purchase price using a combination of
available borrowing capacity under our existing credit facility, a new bridge
loan facility to be entered into before the closing of the merger and/or through
the issuance of senior unsecured notes.
Following the Spieker Merger, EOP Partnership is expected to own and
operate 616 office buildings consisting of 124 million square feet of office
space nationwide, including 25 million square feet of office space attributable
to Spieker. EOP Partnership will also own Spieker's industrial portfolio of
approximately 13.5 million square feet and its development properties totaling
1.7 million square feet.
Upon completion of the Spieker Merger, Equity Office will expand its Board
of Trustees from 13 to 16 members. The new members will be Warren E. Spieker,
Jr., chairman of Spieker, and Co-Chief Executive Officers Craig G. Vought and
John A. Foster.
The Spieker Merger, which will be accounted for using purchase accounting,
is subject to the approval of the shareholders of Equity Office and Spieker and
the partners of EOP Partnership and Spieker Partnership, as applicable, and to
other customary conditions.
BUSINESS AND GROWTH STRATEGIES
Our primary business objective is to achieve sustainable long-term growth
in cash flow and portfolio value in order to maximize unitholder value. We
intend to achieve this objective by owning and operating high-quality office
buildings and providing a superior level of service to tenants across the United
States. We plan on supplementing this strategy through Access, a strategic
business service unit that provides customers access to various business
products and services.
INTERNAL GROWTH. We believe that our future internal growth will come
from:
(a) tenant roll-over at increased rents where market conditions
permit;
(b) lease up of vacant space;
(c) completion and lease-up of development properties;
(d) recycling of capital through selective disposition of certain
assets and reinvestment in properties or other assets consistent with our
long term growth strategy;
(e) ancillary revenues generated from providing business products and
services to tenants through Access;
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(f) reduction of various expenses as a percentage of revenues; and
(g) increased capital market efficiencies.
As of December 31, 2000, 4.3 million rentable square feet of our office
property space was vacant. During the period from December 31, 2000 through
December 31, 2005, there are 6,088 leases for approximately 57.6 million
rentable square feet of space that are scheduled to expire. As of December 31,
2000, the average rent for this space was $26.83 per square foot. The actual
rental rates at which available space will be relet will depend on prevailing
market factors at the time.
As of December 31, 2000, we have more than 2.7 million square feet of
projects in our development pipeline. We have continued to prudently pursue
projects with local development experts where customer need is evident and
market conditions warrant.
In addition to our current development pipeline, we own various undeveloped
land parcels on which approximately seven million square feet of office space
could be developed, assuming our receipt of all-necessary permits, licenses and
approvals. Our policy is to develop land only when market conditions warrant.
Although we may develop some properties ourselves, a portion of this activity
may be conducted with joint venture partners.
EXTERNAL GROWTH. Assuming that capital is available to us on reasonable
terms, we expect to actively pursue, over the long term, acquisitions of
additional office properties. Properties may be acquired separately or as part
of a portfolio, and may be acquired for cash and/or in exchange for our equity
or debt securities. These acquisitions may be customary real estate
transactions, joint ventures, and/or mergers or other business combinations.
EMPLOYEES
As of December 31, 2000, we had approximately 2,061 employees providing
in-house expertise in:
- property management;
- Access and business development;
- leasing;
- finance;
- tax;
- acquisition;
- development;
- disposition;
- marketing;
- accounting;
- information systems; and
- law
The seven executive officers of Equity Office have an average tenure of
11.5 years with Equity Office or its affiliates and an average of 22 years
experience in the real estate industry.
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EXECUTIVE AND SENIOR OFFICERS OF EQUITY OFFICE
As of March 16, 2001, the following executive and senior officers of Equity
Office held the offices indicated.
NAME AGE OFFICE HELD
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Timothy H. Callahan............ 50 President and Chief Executive Officer
Richard D. Kincaid............. 39 Executive Vice President and Chief Financial Officer
Michael A. Steele.............. 54 Executive Vice President -- Real Estate Operations and
Chief Operating Officer
Stanley M. Stevens............. 52 Executive Vice President, Chief Legal Counsel and Secretary
David A. Helfand............... 37 Executive Vice President -- Business Development
Sybil J. Ellis................. 48 Executive Vice President -- Real Estate Investments
David H. Naus.................. 46 Executive Vice President -- Real Estate Investments
Peter H. Adams................. 54 Senior Vice President -- Strategic Planning and Operations
Christopher P. Mundy........... 39 Senior Vice President -- Strategic Planning and Operations
Thomas Q. Bakke................ 46 Senior Vice President -- New York/Washington D.C. Region
Stephen M. Briggs.............. 42 Senior Vice President -- Chief Accounting Officer
M. Patrick Callahan............ 40 Senior Vice President -- Seattle Region
Robert E. Dezzutti............. 40 Senior Vice President -- Los Angeles Region
Maureen O. Fear................ 44 Senior Vice President and Treasurer
Debra L. Ferruzzi.............. 41 Senior Vice President and Executive Advisor
Frank Frankini................. 46 Senior Vice President -- Engineering & Construction
Mark P. Geisreiter............. 39 Senior Vice President -- San Francisco Region
Donald J. Huffner, Jr. ........ 43 Senior Vice President -- Atlanta Region
Peter D. Johnston.............. 44 Senior Vice President -- Houston Region
Kim J. Koehn................... 45 Senior Vice President -- Denver Region
Lawrence J. Krema.............. 40 Senior Vice President -- Human Resources
Frances P. Lewis............... 47 Senior Vice President -- Corporate Communications
Diane M. Morefield............. 42 Senior Vice President -- Investor Relations
Scott T. Morey................. 36 Senior Vice President -- Chief Information Officer
Arvid A. Povilaitis............ 41 Senior Vice President -- Chicago Region
Ross G. Satterwhite............ 40 Senior Vice President -- Business Development Investments
John C. Schneider.............. 42 Senior Vice President -- Legal and Associate General
Counsel for Property Operations
Mark E. Scully................. 43 Senior Vice President -- Customer Solutions
Michael E. Sheinkop............ 38 Senior Vice President -- Business Development Access
David P. Spence................ 41 Senior Vice President -- Accounting
Maryann Gilligan Suydam........ 51 Senior Vice President -- Boston Region
Set forth below are biographical information for each of the executive
officers of Equity Office:
Timothy H. Callahan has been a trustee, President and Chief Executive
Officer of Equity Office since October 1996. Mr. Callahan also has held the
following positions:
- Served on the Board of Managers and was the Chief Executive Officer of
Equity Office Holdings, L.L.C ("EOH"), and Equity Office Properties,
L.L.C. ("EOP LLC"), predecessors of Equity Office, from August 1996 until
October 1997;
- Executive Vice President and Chief Financial Officer of Equity Group
Investments, Inc. ("EGI"), an owner, manager and financier of real estate
and corporate investments, from January 1995 until August 1996;
- Executive Vice President of EGI from November 1994 through January 1995;
- Senior Vice President of EGI from July 1992 until November 1994;
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- Vice President -- Finance of the Edward J. DeBartolo Corporation, a
developer, owner and operator of shopping centers, in Youngstown, Ohio,
from July 1988 until July 1992; and
- Employed by Chemical Bank, a commercial bank located in New York, New
York, from July 1973 until March 1987.
Richard D. Kincaid has been Executive Vice President and Chief Financial
Officer of Equity Office since March 1997 and has also held the following
positions:
- Senior Vice President and Chief Financial Officer of Equity Office from
October 1996 until March 1997;
- Senior Vice President and Chief Financial Officer of EOH from July 1995
until October 1997;
- Senior Vice President of EGI from February 1995 until July 1995;
- Senior Vice President of the Yarmouth Group, a real estate investment
company in New York, New York, from August 1994 until February 1995;
- Senior Vice President -- Finance for EGI from December 1993 until July
1994;
- Vice President -- Finance for EGI from August 1990 until December 1993;
and
- Vice President for Barclays Bank PLC, a commercial bank located in
Chicago, Illinois, from August 1987 until August 1990.
Michael A. Steele has been Executive Vice President -- Real Estate
Operations and Chief Operating Officer of Equity Office since March 1998 and has
also held the following positions:
- Executive Vice President -- Real Estate Operations of Equity Office from
October 1996 until February 1998;
- President and Chief Operating Officer of EOP LLC from July 1995 until
October 1997;
- Executive Vice President of EOH from July 1995 until October 1997;
- President and Chief Operating Officer of Equity Office Properties, Inc.,
a subsidiary of EGI, which provided real estate property management
services ("EOP, Inc."), from November 1993 through October 1995;
- President and Chief Executive Officer of First Office Management, a
former division of Equity Property Management, Inc., that provided real
estate property management services ("FOM"), from June 1992 until October
1993; and
- Senior Vice President and regional director for Rubloff, Inc., a full
service real estate company in Chicago, Illinois, from April 1987 until
June 1992.
Stanley M. Stevens has been Executive Vice President and Chief Legal
Counsel and Secretary of Equity Office since October 1996 and has also held the
following positions:
- Executive Vice President and General Counsel of EOH from September 1996
until October 1997;
- Vice President of Rosenberg & Liebentritt, P.C., a law firm in Chicago,
Illinois, that has since dissolved, from December 1993 until September
1996; and
- Partner at Rudnick & Wolfe, a national law firm based in Chicago,
Illinois, from October 1987 until December 1993.
David A. Helfand has been Executive Vice President -- Business Development
of Equity Office since February 2000 and has also held the following positions:
- Senior Vice President -- New Business Development from July 1998 to
February 2000;
- Managing Director of Equity International Properties, Ltd. a real estate
investment company from December 1997 until July 1998;
- Chief Executive Officer of Manufactured Home Communities, Inc. from
August 1996 until December 1997;
- President of Manufactured Home Communities, Inc. from January 1995 until
July 1996;
- Chief Financial Officer of Manufactured Home Communities, Inc. from
December 1992 until February 1995;
- Vice President of Manufactured Home Communities, Inc. from March 1994
until January 1995; and
- Member of the Board of Directors of Manufactured Home Communities, Inc.
since May 1995.
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Sybil J. Ellis has been Executive Vice President -- Real Estate Investments
of Equity Office since November 2000 and has also held the following positions:
- Senior Vice President -- Real Estate Investments from December 1999 to
November 2000;
- Senior Vice President -- Acquisitions from March 1997 to December 1999
- Senior Vice President -- Acquisitions of EOH from July 1995 until October
1997
- Senior Vice President -- Acquisitions of EOP, Inc. from July 1994 through
July 1995;
- Vice President -- Acquisitions of EOP, Inc. from November 1993 until July
1994; and
- Vice President -- Acquisitions of EAM from March 1990 until October 1993.
David H. Naus has been Executive Vice President -- Real Estate Investments
of Equity Office since November 2000 and has also held the following positions:
- Senior Vice President -- Real Estate Investments from December 1999 to
November 2000;
- Senior Vice President -- Acquisitions from March 1997 to December 1999;
- Senior Vice President -- Acquisitions for EOH from December 1995 until
October 1997;
- Vice President -- Acquisitions of EOH from July 1995 until December 1995;
- Vice President -- Acquisitions of EOP, Inc. from November 1993 until July
1995;
- Vice President -- Acquisitions of EAM from November 1992 until November
1993; and
- Vice President of EAM from October 1988 until November 1992.
COMPETITION
The leasing of real estate is highly competitive. EOP Partnership's
properties compete for tenants with similar properties located in its markets
primarily on the basis of location, rent charged, services provided and the
design and condition of improvements. EOP Partnership also experiences
competition when attempting to acquire interests in desirable real estate,
including competition from domestic and foreign financial institutions, other
REITs, life insurance companies, pension trusts, trust funds, partnerships and
individual investors. In addition, EOP Partnership competes for acquisition of
building sites or redevelopment opportunities with domestic and foreign
financial institutions, other REITs, life insurance companies, pension trusts,
trust funds, partnerships and individual investors.
INDUSTRY SEGMENTS
EOP Partnership's primary business is the ownership and operation of Office
Properties. EOP Partnership's long-term tenants are in a variety of businesses
and no single tenant is significant to EOP Partnership's business. Information
related to this segment for the years ended December 31, 2000, 1999 and 1998 is
set forth in note 18 to the consolidated financial statements that are part of
this report.
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ITEM 2. PROPERTIES.
All capitalized terms used herein and not otherwise defined shall have the
meaning given in the Financial Statements set forth in Item 8.
GENERAL
EOP Partnership's portfolio, based on revenue and square footage, is the
largest portfolio of office properties of any full-service office company in the
United States. As of December 31, 2000, EOP Partnership owned or had an interest
in 381 Office Properties containing approximately 99.0 million rentable square
feet of office space and owned nine stand-alone Parking Facilities containing
approximately 14,244 parking spaces. The Office Properties are located in 104
submarkets in 37 markets in 24 states and the District of Columbia. The Office
Properties, by rentable square feet, are located approximately 51.3% in CBDs and
approximately 48.7% in suburban markets. As of December 31, 2000, the Office
Properties were, on a weighted average basis, 94.6% occupied by a total of 7,153
tenants, with no single tenant accounting for more than 1.9% of EOP
Partnership's aggregate annualized rent or 1.5% of the aggregate occupied square
feet, except for the U.S. General Services Administration, which accounted for
2.2% of annualized rent and 2.5% of the occupied square feet.
All property data are as of December 31, 2000.
OFFICE PROPERTIES BY REGION
APPROXIMATE PERCENT OF TOTAL ANNUALIZED
NUMBER OF RENTABLE PORTFOLIO RENTABLE PERCENT RENT
BUILDINGS SQUARE FEET SQUARE FEET OCCUPIED (IN THOUSANDS)(A)
--------- ----------- -------------------- -------- -----------------
Chicago.............................. 40 17,170,192 17.3% 93.5% $ 405,439
Boston............................... 55 13,038,201 13.2% 99.2% 433,731
New York............................. 14 6,800,556 6.9% 98.4% 277,000
Washington........................... 38 8,296,962 8.4% 97.4% 220,297
Atlanta.............................. 50 10,060,933 10.2% 91.2% 193,934
Houston.............................. 34 11,599,431 11.7% 87.5% 208,494
Denver............................... 22 5,181.569 5.2% 92.7% 95,515
Seattle.............................. 24 8,133,094 8.2% 96.6% 211,874
Los Angeles.......................... 28 7,452,994 7.5% 92.2% 183,385
San Francisco........................ 76 11,262,062 11.4% 98.4% 372,361
--- ---------- ----- ---- ----------
Portfolio Total/Weighted Average..... 381 98,995,994 100.0% 94.6% $2,602,030
=== ========== ===== ==== ==========
PERCENT OF ANNUALIZED RENT
PORTFOLIO NUMBER OF PER OCCUPIED
ANNUALIZED RENT LEASES SQUARE FOOT(A)
--------------- --------- ---------------
Chicago.............................. 15.6% 1,214 $25.25
Boston............................... 16.7% 783 33.55
New York............................. 10.7% 254 41.40
Washington........................... 8.5% 577 27.26
Atlanta.............................. 7.5% 618 21.14
Houston.............................. 8.0% 1,056 20.53
Denver............................... 3.7% 487 19.88
Seattle.............................. 8.1% 656 26.97
Los Angeles.......................... 7.1% 672 26.69
San Francisco........................ 14.3% 836 33.61
----- ----- ------
Portfolio Total/Weighted Average..... 100.0% 7,153 $27.77
===== ===== ======
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(a) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 2000, multiplied by 12. This amount reflects total base rent
before any rent abatements, but includes expense reimbursements, which may
be estimates.
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OFFICE PROPERTY STATISTICS
Certain Properties are encumbered with mortgages. See Schedule III -- Real
Estate and Accumulated Depreciation as of December 31, 2000 in Item 14(a)(2) for
this information.
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
CHICAGO REGION
Chicago
Central Loop
161 North Clark........................... 1 1992 1,010,520 1.0% 100.0% 26,666
LaSalle Street
30 North LaSalle(b)....................... 1 1974/1990 909,245 0.9% 99.8% 22,172
West Loop
10 & 30 South Wacker Drive(d)............. 2 1983-1987 2,003,288 2.0% 98.9% 68,895
101 North Wacker.......................... 1 1980/1990 575,294 0.6% 100.0% 13,736
200 West Adams............................ 1 1985/1996 677,222 0.7% 90.0% 14,237
Civic Opera House......................... 1 1929/1996 841,778 0.9% 97.9% 16,358
One North Franklin........................ 1 1991 617,592 0.6% 98.8% 15,660
Lake County
Corporate 500 Centre...................... 4 1986/1990 655,872 0.7% 96.3% 17,831
Tri-State International................... 5 1986 546,263 0.6% 95.0% 12,402
O'Hare
1700 Higgins Centre....................... 1 1986 134,283 0.1% 94.5% 2,557
Presidents Plaza.......................... 4 1980-1982 818,712 0.8% 99.5% 19,172
Oak Brook
AT&T Plaza................................ 1 1984 224,847 0.2% 93.0% 4,686
Oakbrook Terrace Tower.................... 1 1988 772,928 0.8% 94.6% 18,217
One Lincoln Centre........................ 1 1986 294,972 0.3% 78.0% 6,669
Westbrook Corporate Center................ 5 1985-1996 1,107,372 1.1% 84.7% 27,454
Cleveland
Downtown
BP Tower.................................. 1 1985 1,270,204 1.3% 94.0% 21,248
Columbus
Suburban
Community Corporate Center................ 1 1987 250,169 0.3% 94.1% 4,759
One Crosswoods............................ 1 1984 129,583 0.1% 86.4% 1,711
Indianapolis
Downtown
Bank One Center(b)(d)..................... 2 1990 1,057,877 1.1% 94.9% 21,497
Minneapolis
I-494
Northland Plaza........................... 1 1985 296,967 0.3% 95.7% 7,899
Minneapolis CBD
LaSalle Plaza............................. 1 1991 588,908 0.6% 99.2% 16,161
Norwest Center(d)......................... 1 1988 1,117,439 1.1% 99.8% 28,838
U.S. Bancorp Center(e).................... 1 2000 929,694 0.9% 55.0% 9,389
St. Louis
Mid County
Interco Corporate Tower................... 1 1986 339,163 0.3% 88.5% 7,225
--- ---------- ----- ----- ---------
CHICAGO REGION TOTAL/WEIGHTED AVERAGE........ 40 17,170,192 17.3% 93.5% 405,439
--- ---------- ----- ----- ---------
BOSTON REGION
Boston
Back Bay
222 Berkeley Street(d).................... 1 1991 530,844 0.5% 97.9% 19,045
500 Boylston Street(d).................... 1 1988 714,513 0.7% 98.9% 30,795
East Cambridge
One Canal Park............................ 1 1987 98,607 0.1% 100.0% 3,271
One Memorial Drive........................ 1 1985 352,905 0.4% 99.8% 13,201
Riverview I & II.......................... 2 1985-1986 263,892 0.3% 97.6% 7,798
Ten Canal Park............................ 1 1987 110,843 0.1% 100.0% 2,638
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
CHICAGO REGION
Chicago
Central Loop
161 North Clark........................... 1.0% 46 $26.39
LaSalle Street
30 North LaSalle(b)....................... 0.9% 85 $24.43
West Loop
10 & 30 South Wacker Drive(d)............. 2.6% 112 $34.77
101 North Wacker.......................... 0.5% 29 $23.88
200 West Adams............................ 0.5% 63 $23.35
Civic Opera House......................... 0.6% 191 $19.85
One North Franklin........................ 0.6% 40 $25.67
Lake County
Corporate 500 Centre...................... 0.7% 37 $28.24
Tri-State International................... 0.5% 41 $23.90
O'Hare
1700 Higgins Centre....................... 0.1% 57 $20.16
Presidents Plaza.......................... 0.7% 13 $23.54
Oak Brook
AT&T Plaza................................ 0.2% 25 $22.40
Oakbrook Terrace Tower.................... 0.7% 51 $24.92
One Lincoln Centre........................ 0.3% 31 $28.98
Westbrook Corporate Center................ 1.1% 89 $29.27
Cleveland
Downtown
BP Tower.................................. 0.8% 39 $17.80
Columbus
Suburban
Community Corporate Center................ 0.2% 30 $20.22
One Crosswoods............................ 0.1% 14 $15.28
Indianapolis
Downtown
Bank One Center(b)(d)..................... 0.8% 67 $21.42
Minneapolis
I-494
Northland Plaza........................... 0.3% 51 $27.80
Minneapolis CBD
LaSalle Plaza............................. 0.6% 35 $27.67
Norwest Center(d)......................... 1.1% 24 $25.87
U.S. Bancorp Center(e).................... 0.4% 14 $18.36
St. Louis
Mid County
Interco Corporate Tower................... 0.3% 30 $24.06
----- ----- ------
CHICAGO REGION TOTAL/WEIGHTED AVERAGE........ 15.6% 1,214 $25.25
----- ----- ------
BOSTON REGION
Boston
Back Bay
222 Berkeley Street(d).................... 0.7% 26 $36.65
500 Boylston Street(d).................... 1.2% 12 $43.57
East Cambridge
One Canal Park............................ 0.1% 9 $33.17
One Memorial Drive........................ 0.5% 13 $37.47
Riverview I & II.......................... 0.3% 8 $30.27
Ten Canal Park............................ 0.1% 1 $23.80
10
11
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
Financial District
100 Summer Street......................... 1 1974/1990 1,034,605 1.0% 100.0% 35,056
125 Summer Street......................... 1 1989 463,603 0.5% 95.5% 17,777
150 Federal Street........................ 1 1988 529,730 0.5% 100.0% 17,760
175 Federal Street........................ 1 1977 207,366 0.2% 97.3% 6,486
2 Oliver Street-147 Milk Street........... 1 1988 270,302 0.3% 99.6% 6,955
225 Franklin Street....................... 1 1966/1996 916,722 0.9% 100.0% 38,320
28 State Street........................... 1 1968/1997 570,040 0.6% 100.0% 24,260
Sixty State Street(b)(j).................. 1 1979 824,305 0.8% 100.0% 29,953
75-101 Federal Street(c).................. 2 1988 813,195 0.8% 100.0% 29,796
One Post Office Square(d)................. 1 1981 765,296 0.8% 100.0% 26,054
Rowes Wharf(b)(d)(j)...................... 3 1987 344,698 0.3% 94.6% 12,453
Russia Wharf.............................. 1 1978-1982 313,333 0.3% 100.0% 7,531
South Station(b).......................... 1 1988 184,183 0.2% 99.9% 6,182
Government Center
Center Plaza.............................. 1 1969 650,406 0.7% 99.0% 20,193
Northeast
Crosby Corporate Center................... 6 1996 336,601 0.3% 100.0% 6,154
Crosby Corporate Center II(e)............. 3 1998 257,528 0.3% 100.0% 6,141
New England Executive Park................ 8 1970-1985 756,228 0.8% 96.4% 19,634
New England Executive Park 17............. 1 1979 56,890 0.1% 100.0% 1,516
The Tower at N.E.E.P...................... 1 1971/1999 199,860 0.2% 100.0% 5,299
West
175 Wyman................................. 3 1956-1982 335,203 0.3% 100.0% 5,305
Riverside Center(e)....................... 1 2000 494,710 0.5% 99.7% 15,321
Wellesley Office Park 1-4................. 4 1962-1970 216,420 0.2% 99.5% 6,576
Wellesley 5-7............................. 3 1972-1984 362,421 0.4% 100.0% 10,422
Wellesley 8............................... 1 1960/1996 62,952 0.1% 100.0% 1,841
--- ---------- ----- ----- ---------
BOSTON REGION TOTAL/WEIGHTED AVERAGE......... 55 13,038,201 13.2% 99.2% 433,731
--- ---------- ----- ----- ---------
NEW YORK REGION
New York
Columbus Circle
Worldwide Plaza(f)........................ 1 1989 1,704,624 1.7% 99.4% 74,073
Park/Lexington
Park Avenue Tower(d)...................... 1 1986 568,060 0.6% 100.0% 36,228
Tower 56.................................. 1 1983 163,830 0.2% 93.8% 7,334
Third Avenue
850 Third Avenue(d)....................... 1 1960/1996 568,867 0.6% 100.0% 18,788
Madison Avenue
527 Madison Avenue........................ 1 1986 215,332 0.2% 99.6% 12,059
Rockefeller Center
1301 Avenue of Americas(d)(j)............. 1 1963/1970 1,765,694 1.8% 98.4% 81,354
Stamford
Shelton
Shelton Pointe............................ 1 1985/1993 159,853 0.2% 98.0% 2,877
Stamford
One Stamford Plaza........................ 1 1986/1994 214,136 0.2% 100.0% 6,202
Two Stamford Plaza........................ 1 1986/1994 251,510 0.3% 98.2% 7,527
Three Stamford Plaza...................... 1 1980/1994 242,732 0.2% 100.0% 6,061
Four Stamford Plaza....................... 1 1979/1994 261,195 0.3% 100.0% 6,617
177 Broad Street.......................... 1 1989 188,029 0.2% 97.9% 4,561
300 Atlantic Street....................... 1 1987/1996 270,497 0.3% 100.0% 7,961
Canterbury Green(b)....................... 1 1987 226,197 0.2% 78.3% 5,355
--- ---------- ----- ----- ---------
NEW YORK REGION TOTAL/WEIGHTED AVERAGE....... 14 6,800,556 6.9% 98.4% 277,000
--- ---------- ----- ----- ---------
WASHINGTON, D.C. REGION
Philadelphia
Center City
1601 Market............................... 1 1970 681,289 0.7% 96.3% 12,343
1700 Market............................... 1 1969 841,172 0.8% 96.8% 17,283
Conshohocken
Four Falls................................ 1 1988 254,355 0.3% 100.0% 6,875
King of Prussia/Valley Forge
Oak Hill Plaza............................ 1 1982 164,360 0.2% 95.8% 3,066
Walnut Hill Plaza......................... 1 1985 150,571 0.2% 92.0% 3,118
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
Financial District
100 Summer Street......................... 1.3% 32 $33.88
125 Summer Street......................... 0.7% 29 $40.17
150 Federal Street........................ 0.7% 25 $33.53
175 Federal Street........................ 0.2% 23 $32.15
2 Oliver Street-147 Milk Street........... 0.3% 37 $25.84
225 Franklin Street....................... 1.5% 19 $41.80
28 State Street........................... 0.9% 25 $42.56
Sixty State Street(b)(j).................. 1.2% 28 $36.35
75-101 Federal Street(c).................. 1.1% 64 $36.64
One Post Office Square(d)................. 1.0% 49 $34.04
Rowes Wharf(b)(d)(j)...................... 0.5% 35 $38.18
Russia Wharf.............................. 0.3% 45 $24.04
South Station(b).......................... 0.2% 32 $33.60
Government Center
Center Plaza.............................. 0.8% 68 $31.35
Northeast
Crosby Corporate Center................... 0.2% 6 $18.28
Crosby Corporate Center II(e)............. 0.2% 11 $23.84
New England Executive Park................ 0.8% 76 $26.94
New England Executive Park 17............. 0.1% 3 $26.64
The Tower at N.E.E.P...................... 0.2% 17 $26.51
West
175 Wyman................................. 0.2% 1 $15.83
Riverside Center(e)....................... 0.6% 7 $31.06
Wellesley Office Park 1-4................. 0.3% 41 $30.55
Wellesley 5-7............................. 0.4% 40 $28.76
Wellesley 8............................... 0.1% 1 $29.24
----- ----- ------
BOSTON REGION TOTAL/WEIGHTED AVERAGE......... 16.7% 783 $33.55
----- ----- ------
NEW YORK REGION
New York
Columbus Circle
Worldwide Plaza(f)........................ 2.8% 24 $43.71
Park/Lexington
Park Avenue Tower(d)...................... 1.4% 20 $63.78
Tower 56.................................. 0.3% 41 $47.71
Third Avenue
850 Third Avenue(d)....................... 0.7% 22 $33.03
Madison Avenue
527 Madison Avenue........................ 0.5% 18 $56.22
Rockefeller Center
1301 Avenue of Americas(d)(j)............. 3.1% 16 $46.81
Stamford
Shelton
Shelton Pointe............................ 0.1% 13 $18.37
Stamford
One Stamford Plaza........................ 0.2% 13 $28.97
Two Stamford Plaza........................ 0.3% 21 $30.47
Three Stamford Plaza...................... 0.2% 11 $24.97
Four Stamford Plaza....................... 0.3% 9 $25.33
177 Broad Street.......................... 0.2% 14 $24.77
300 Atlantic Street....................... 0.3% 17 $29.43
Canterbury Green(b)....................... 0.2% 15 $30.24
----- ----- ------
NEW YORK REGION TOTAL/WEIGHTED AVERAGE....... 10.7% 254 $41.40
----- ----- ------
WASHINGTON, D.C. REGION
Philadelphia
Center City
1601 Market............................... 0.5% 59 $18.82
1700 Market............................... 0.7% 54 $21.23
Conshohocken
Four Falls................................ 0.3% 39 $27.04
King of Prussia/Valley Forge
Oak Hill Plaza............................ 0.1% 3 $19.47
Walnut Hill Plaza......................... 0.1% 21 $22.52
11
12
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
Main Line
One Devon Square(b)....................... 1 1984 73,267 0.1% 97.0% 1,441
Two Devon Square(b)....................... 1 1985 63,226 0.1% 100.0% 1,101
Three Devon Square(b)..................... 1 1985 6,000 0.0% 100.0% 181
Plymouth Meeting/Blue Bell
One Valley Square......................... 1 1982 70,290 0.1% 91.2% 1,294
Two Valley Square......................... 1 1990 70,622 0.1% 77.8% 1,119
Three Valley Square....................... 1 1984 84,605 0.1% 100.0% 1,702
Four & Five Valley Square................. 2 1988 68,321 0.1% 27.2% 398
Washington D.C
CBD
1111 19th Street.......................... 1 1979/1993 252,014 0.3% 98.1% 7,757
1620 L Street............................. 1 1989 156,272 0.2% 100.0% 4,540
One Lafayette Centre...................... 1 1980/1993 314,634 0.3% 100.0% 10,398
Two Lafayette Centre...................... 1 1985 130,704 0.1% 97.2% 4,138
East End
1333 H Street............................. 1 1982 244,585 0.2% 98.5% 7,480
Market Square(d).......................... 2 1990 681,051 0.7% 95.6% 29,543
Alexandria/Old Town
1600 Duke Street.......................... 1 1985 68,770 0.1% 100.0% 1,628
11 Canal Center........................... 1 1986 70,365 0.1% 98.4% 1,850
99 Canal Center........................... 1 1986 137,608 0.1% 100.0% 3,719
TransPotomac Plaza 5...................... 1 1983 96,392 0.1% 100.0% 2,360
Crystal City
Polk and Taylor Buildings................. 2 1970 902,322 0.9% 100.0% 24,957
Fairfax/Center
Centerpointe I & II....................... 2 1988-1990 407,186 0.4% 100.0% 8,460
Fair Oaks Plaza........................... 1 1986 177,557 0.2% 98.1% 3,918
Herndon/Dulles
Northridge I.............................. 1 1988 124,319 0.1% 100.0% 3,223
Reston
Reston Town Center........................ 3 1990 725,798 0.7% 98.0% 22,439
Rosslyn/Ballston
1300 North 17th Street.................... 1 1980 380,199 0.4% 99.7% 10,494
1616 North Fort Myer Drive(b)............. 1 1974 292,826 0.3% 99.1% 7,880
Tyson's Corner
E. J. Randolph............................ 1 1983 164,906 0.2% 95.8% 3,950
John Marshall I........................... 1 1981 261,376 0.3% 100.0% 6,047
John Marshall III(e)...................... 1 2000 180,000 0.2% 100.0% 5,598
--- ---------- ----- ----- ---------
WASHINGTON, D.C. REGION TOTAL/WEIGHTED
AVERAGE..................................... 38 8,296,962 8.4% 97.4% 220,297
--- ---------- ----- ----- ---------
ATLANTA REGION
Atlanta
Buckhead
Prominence in Buckhead(e)................. 1 1999 424,309 0.4% 77.7% 8,650
CBD
One Ninety One Peachtree Tower(b)(d)...... 1 1991 1,210,608 1.2% 97.9% 29,909
Central Perimeter
Central Park.............................. 2 1986 615,050 0.6% 80.8% 11,743
Lakeside Office Park...................... 5 1972-1978 390,721 0.4% 95.4% 6,699
Perimeter Center(b)....................... 32 1970-1989 3,333,266 3.4% 91.9% 60,092
Midtown
Promenade II(d)........................... 1 1990 774,385 0.8% 98.9% 18,911
Northwest
Paces West................................ 2 1988 646,471 0.7% 73.9% 9,967
200 Galleria.............................. 1 1985 438,273 0.4% 91.3% 8,863
Charlotte
Uptown
Wachovia Center........................... 1 1972/1994 583,424 0.6% 92.5% 6,667
Nashville
Downtown
Bank of America Plaza..................... 1 1977/1995 418,686 0.4% 89.3% 5,711
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
Main Line
One Devon Square(b)....................... 0.1% 7 $20.28
Two Devon Square(b)....................... 0.0% 6 $17.41
Three Devon Square(b)..................... 0.0% 1 $30.10
Plymouth Meeting/Blue Bell
One Valley Square......................... 0.0% 5 $20.20
Two Valley Square......................... 0.0% 7 $20.37
Three Valley Square....................... 0.1% 9 $20.11
Four & Five Valley Square................. 0.0% 4 $21.44
Washington D.C
CBD
1111 19th Street.......................... 0.3% 24 $31.38
1620 L Street............................. 0.2% 18 $29.05
One Lafayette Centre...................... 0.4% 25 $33.05
Two Lafayette Centre...................... 0.2% 16 $32.56
East End
1333 H Street............................. 0.3% 19 $31.04
Market Square(d).......................... 1.1% 49 $45.38
Alexandria/Old Town
1600 Duke Street.......................... 0.1% 9 $23.67
11 Canal Center........................... 0.1% 6 $26.71
99 Canal Center........................... 0.1% 17 $27.02
TransPotomac Plaza 5...................... 0.1% 13 $24.49
Crystal City
Polk and Taylor Buildings................. 1.0% 10 $27.66
Fairfax/Center
Centerpointe I & II....................... 0.3% 10 $20.78
Fair Oaks Plaza........................... 0.2% 25 $22.50
Herndon/Dulles
Northridge I.............................. 0.1% 1 $25.93
Reston
Reston Town Center........................ 0.9% 78 $31.53
Rosslyn/Ballston
1300 North 17th Street.................... 0.4% 18 $27.67
1616 North Fort Myer Drive(b)............. 0.3% 10 $27.15
Tyson's Corner
E. J. Randolph............................ 0.2% 11 $25.01
John Marshall I........................... 0.2% 2 $23.13
John Marshall III(e)...................... 0.2% 1 $31.10
----- ----- ------
WASHINGTON, D.C. REGION TOTAL/WEIGHTED
AVERAGE..................................... 8.5% 577 $27.26
----- ----- ------
ATLANTA REGION
Atlanta
Buckhead
Prominence in Buckhead(e)................. 0.3% 19 $26.22
CBD
One Ninety One Peachtree Tower(b)(d)...... 1.2% 20 $25.24
Central Perimeter
Central Park.............................. 0.5% 56 $23.64
Lakeside Office Park...................... 0.3% 35 $17.97
Perimeter Center(b)....................... 2.3% 223 $19.61
Midtown
Promenade II(d)........................... 0.7% 20 $24.68
Northwest
Paces West................................ 0.4% 37 $20.85
200 Galleria.............................. 0.3% 63 $22.14
Charlotte
Uptown
Wachovia Center........................... 0.3% 8 $12.36
Nashville
Downtown
Bank of America Plaza..................... 0.2% 21 $15.28
12
13
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
Norfolk
Norfolk
Dominion Tower(d)......................... 1 1987 403,276 0.4% 93.9% 6,854
Orlando
Central Business District
SunTrust Center(d)........................ 1 1988 640,741 0.6% 95.7% 16,009
Raleigh/Durham
South Durham
University Tower.......................... 1 1987/1992 181,723 0.2% 97.2% 3,859
--- ---------- ----- ----- ---------
ATLANTA REGION TOTAL/WEIGHTED AVERAGE........ 50 10,060,933 10.2% 91.2% 193,934
--- ---------- ----- ----- ---------
HOUSTON REGION
Austin
CBD
One American Center(b).................... 1 1984 505,770 0.5% 90.1% 11,681
One Congress Plaza........................ 1 1987 517,849 0.5% 95.1% 13,882
San Jacinto Center........................ 1 1987 403,329 0.4% 99.3% 10,625
Dallas
Far North Dallas
Colonnade I & II.......................... 2 1983-1985 606,615 0.6% 89.5% 13,611
Colonnade III............................. 1 1998 377,639 0.4% 45.5% 4,556
Las Colinas
Computer Associates Tower................. 1 1988 360,815 0.4% 98.3% 7,862
Texas Commerce Tower...................... 1 1985 369,134 0.4% 95.8% 8,840
LBJ/Quorum
Four Forest Plaza(d)...................... 1 1985 394,324 0.4% 85.2% 5,817
Lakeside Square........................... 1 1987 397,328 0.4% 91.1% 8,022
North Central Plaza Three................. 1 1986/1994 346,575 0.4% 76.0% 4,556
N. Central Expressway
9400 NCX.................................. 1 1981/1995 379,556 0.4% 83.2% 5,449
Eighty Eighty Central..................... 1 1984/1995 283,707 0.3% 80.0% 4,388
Preston Center
Preston Commons(d)........................ 3 1986 418,604 0.4% 83.9% 7,557
Sterling Plaza(d)......................... 1 1984/1994 302,747 0.3% 91.2% 5,702
Ft. Worth
W/SW Fort Worth
Summitt Office Park....................... 2 1974/1993 239,095 0.2% 94.3% 3,212
Houston
Galleria/West Loop
San Felipe Plaza(d)....................... 1 1984 959,466 1.0% 89.2% 16,616
North Loop/Northwest
Brookhollow Central....................... 3 1972-1981 797,971 0.8% 83.3% 12,020
North/North Belt
Intercontinental Center................... 1 1983/1991 194,801 0.2% 100.0% 3,468
Northborough Tower(d)..................... 1 1983/1990 207,908 0.2% 98.8% 3,474
West
2500 CityWest............................. 1 1982 574,216 0.6% 98.5% 13,022
New Orleans
CBD
LL&E Tower................................ 1 1987 545,157 0.6% 91.4% 8,862
Texaco Center............................. 1 1984 619,714 0.6% 71.7% 6,983
Metairie/ E. Jefferson
One Lakeway Center........................ 1 1981/1996 289,112 0.3% 94.9% 4,806
Two Lakeway Center........................ 1 1984/1996 440,826 0.4% 85.6% 6,948
Three Lakeway Center...................... 1 1987/1996 462,890 0.5% 91.3% 7,330
San Antonio
Northwest
Colonnade I............................... 1 1983 168,637 0.2% 91.9% 2,714
Northwest Center.......................... 1 1984/1994 241,248 0.2% 83.9% 3,377
Union Square.............................. 1 1986 194,398 0.2% 85.7% 3,113
--- ---------- ----- ----- ---------
HOUSTON REGION TOTAL/WEIGHTED AVERAGE........ 34 11,599,431 11.7% 87.5% 208,494
--- ---------- ----- ----- ---------
DENVER REGION
Albuquerque
Uptown
One Park Square........................... 4 1985 262,035 0.3% 78.2% 3,714
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
Norfolk
Norfolk
Dominion Tower(d)......................... 0.3% 49 $18.11
Orlando
Central Business District
SunTrust Center(d)........................ 0.6% 39 $26.12
Raleigh/Durham
South Durham
University Tower.......................... 0.1% 28 $21.84
----- ----- ------
ATLANTA REGION TOTAL/WEIGHTED AVERAGE........ 7.5% 618 $21.14
----- ----- ------
HOUSTON REGION
Austin
CBD
One American Center(b).................... 0.4% 26 $25.62
One Congress Plaza........................ 0.5% 41 $28.19
San Jacinto Center........................ 0.4% 33 $26.53
Dallas
Far North Dallas
Colonnade I & II.......................... 0.5% 67 $25.08
Colonnade III............................. 0.2% 14 $26.54
Las Colinas
Computer Associates Tower................. 0.3% 14 $22.17
Texas Commerce Tower...................... 0.3% 27 $25.01
LBJ/Quorum
Four Forest Plaza(d)...................... 0.2% 50 $17.32
Lakeside Square........................... 0.3% 18 $22.16
North Central Plaza Three................. 0.2% 31 $17.30
N. Central Expressway
9400 NCX.................................. 0.2% 61 $17.26
Eighty Eighty Central..................... 0.2% 31 $19.34
Preston Center
Preston Commons(d)........................ 0.3% 72 $21.51
Sterling Plaza(d)......................... 0.2% 66 $20.64
Ft. Worth
W/SW Fort Worth
Summitt Office Park....................... 0.1% 56 $14.25
Houston
Galleria/West Loop
San Felipe Plaza(d)....................... 0.6% 90 $19.42
North Loop/Northwest
Brookhollow Central....................... 0.5% 45 $18.08
North/North Belt
Intercontinental Center................... 0.1% 9 $17.80
Northborough Tower(d)..................... 0.1% 14 $16.92
West
2500 CityWest............................. 0.5% 24 $23.03
New Orleans
CBD
LL&E Tower................................ 0.3% 34 $17.78
Texaco Center............................. 0.3% 22 $15.71
Metairie/ E. Jefferson
One Lakeway Center........................ 0.2% 34 $17.51
Two Lakeway Center........................ 0.3% 61 $18.41
Three Lakeway Center...................... 0.3% 46 $17.34
San Antonio
Northwest
Colonnade I............................... 0.1% 23 $17.52
Northwest Center.......................... 0.1% 27 $16.69
Union Square.............................. 0.1% 20 $18.68
----- ----- ------
HOUSTON REGION TOTAL/WEIGHTED AVERAGE........ 8.0% 1,056 $20.53
----- ----- ------
DENVER REGION
Albuquerque
Uptown
One Park Square........................... 0.1% 38 $18.13
13
14
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
Denver
Downtown
410 17th Street........................... 1 1978 396,047 0.4% 90.9% 6,645
Denver Post Tower(b)...................... 1 1984 579,999 0.6% 93.3% 9,703
Dominion Plaza............................ 1 1983 571,468 0.6% 93.6% 9,297
Tabor Center.............................. 2 1985 679,281 0.7% 88.0% 14,569
Trinity Place............................. 1 1983 189,163 0.2% 87.6% 2,550
Southeast
4949 South Syracuse....................... 1 1982 62,633 0.1% 89.8% 1,298
Denver Corporate Center II & III.......... 2 1981/93-97 359,607 0.4% 95.3% 7,014
Metropoint I.............................. 1 1987 263,716 0.3% 94.4% 5,831
Metropoint II(e).......................... 1 1999 150,673 0.2% 100.0% 3,976
Millennium Plaza.......................... 1 1982 330,033 0.3% 100.0% 7,732
The Quadrant.............................. 1 1985 317,218 0.3% 97.9% 7,361
The Solarium.............................. 1 1982 162,817 0.2% 89.0% 3,157
Terrace Building.......................... 1 1982 115,408 0.1% 97.8% 2,351
Phoenix
Central Corridor
49 E. Thomas Road(i)...................... 1 1974/1993 18,892 0.0% 71.6% 137
One Phoenix Plaza(g)...................... 1 1989 586,403 0.6% 100.0% 8,116
Salt Lake City
Central Valley East
U.S. West Dex Center...................... 1 1985 136,176 0.1% 76.5% 2,064
--- ---------- ----- ----- ---------
DENVER REGION TOTAL/WEIGHTED AVERAGE......... 22 5,181,569 5.2% 92.7% 95,515
--- ---------- ----- ----- ---------
SEATTLE REGION
Anchorage
Midtown
Calais Office Center(b)................... 2 1975 190,599 0.2% 99.1% 3,781
Portland
Downtown
1001 Fifth Avenue(b)...................... 1 1980 376,159 0.4% 83.4% 6,480
Seattle
Bellevue CBD
110 Atrium Place.......................... 1 1981 214,081 0.2% 99.6% 5,512
City Center Bellevue...................... 1 1987 472,585 0.5% 96.3% 12,567
One Bellevue Center(b).................... 1 1983 360,729 0.4% 98.9% 9,067
Rainier Plaza(b).......................... 1 1986 410,855 0.4% 96.2% 11,606
Sunset North Corporate Campus(e).......... 3 1999 465,013 0.5% 99.7% 12,544
Key Center(d)(e).......................... 1 2000 472,649 0.5% 99.8% 14,498
1-90 Corridor
Island Corporate Center................... 1 1987 100,746 0.1% 98.3% 2,470
CBD
1111 Third Avenue......................... 1 1980 559,409 0.6% 98.9% 13,597
Bank of America Tower(d).................. 2 1985 1,537,932 1.6% 92.0% 40,427
Nordstrom Medical Tower................... 1 1986 98,382 0.1% 100.0% 2,753
Second and Seneca......................... 2 1991 480,272 0.5% 97.6% 11,779
Second and Spring Building................ 1 1906/1989 130,421 0.1% 98.1% 3,180
Washington Mutual Tower(b)(d)............. 3 1988 1,154,560 1.2% 98.8% 30,376
Wells Fargo Center........................ 1 1983 921,790 0.9% 98.4% 26,266
Waterfront
World Trade Center East................... 1 1999 186,912 0.2% 100.0% 4,971
--- ---------- ----- ----- ---------
SEATTLE REGION TOTAL/WEIGHTED AVERAGE........ 24 8,133,094 8.2% 96.6% 211,874
--- ---------- ----- ----- ---------
LOS ANGELES REGION
Los Angeles
Downtown
550 South Hope Street..................... 1 1991 566,434 0.6% 88.1% 10,936
Two California Plaza(b)................... 1 1992 1,329,810 1.3% 86.7% 30,159
Glendale
700 North Brand........................... 1 1981 202,531 0.2% 90.9% 5,246
Pasadena
Pasadena Towers(d)........................ 2 1990-91 439,366 0.4% 92.7% 11,330
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
Denver
Downtown
410 17th Street........................... 0.3% 63 $18.47
Denver Post Tower(b)...................... 0.4% 31 $17.93
Dominion Plaza............................ 0.4% 58 $17.37
Tabor Center.............................. 0.6% 98 $24.38
Trinity Place............................. 0.1% 36 $15.39
Southeast
4949 South Syracuse....................... 0.0% 9 $23.08
Denver Corporate Center II & III.......... 0.3% 13 $20.46
Metropoint I.............................. 0.2% 22 $23.41
Metropoint II(e).......................... 0.2% 9 $26.39
Millennium Plaza.......................... 0.3% 2 $23.43
The Quadrant.............................. 0.3% 33 $23.69
The Solarium.............................. 0.1% 29 $21.80
Terrace Building.......................... 0.1% 23 $20.84
Phoenix
Central Corridor
49 E. Thomas Road(i)...................... 0.0% 9 $10.16
One Phoenix Plaza(g)...................... 0.3% 1 $13.84
Salt Lake City
Central Valley East
U.S. West Dex Center...................... 0.1% 13 $19.81
----- ----- ------
DENVER REGION TOTAL/WEIGHTED AVERAGE......... 3.7% 487 $19.88
----- ----- ------
SEATTLE REGION
Anchorage
Midtown
Calais Office Center(b)................... 0.1% 34 $20.02
Portland
Downtown
1001 Fifth Avenue(b)...................... 0.2% 49 $20.65
Seattle
Bellevue CBD
110 Atrium Place.......................... 0.2% 26 $25.84
City Center Bellevue...................... 0.5% 67 $27.61
One Bellevue Center(b).................... 0.3% 27 $25.43
Rainier Plaza(b).......................... 0.4% 53 $29.37
Sunset North Corporate Campus(e).......... 0.5% 9 $27.04
Key Center(d)(e).......................... 0.6% 16 $30.74
1-90 Corridor
Island Corporate Center................... 0.1% 19 $24.94
CBD
1111 Third Avenue......................... 0.5% 40 $24.57
Bank of America Tower(d).................. 1.6% 129 $28.58
Nordstrom Medical Tower................... 0.1% 16 $27.99
Second and Seneca......................... 0.5% 23 $25.14
Second and Spring Building................ 0.1% 7 $24.86
Washington Mutual Tower(b)(d)............. 1.2% 77 $26.62
Wells Fargo Center........................ 1.0% 62 $28.95
Waterfront
World Trade Center East................... 0.2% 2 $26.60
----- ----- ------
SEATTLE REGION TOTAL/WEIGHTED AVERAGE........ 8.1% 656 $26.97
----- ----- ------
LOS ANGELES REGION
Los Angeles
Downtown
550 South Hope Street..................... 0.4% 40 $21.93
Two California Plaza(b)................... 1.2% 43 $26.15
Glendale
700 North Brand........................... 0.2% 16 $28.49
Pasadena
Pasadena Towers(d)........................ 0.4% 36 $27.81
14
15
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
Santa Monica
429 Santa Monica.......................... 1 1982 83,243 0.1% 79.2% 1,963
Commerce Park(b).......................... 1 1977 94,367 0.1% 74.4% 1,517
Janss Court............................... 1 1989 92,403 0.1% 97.5% 3,403
Searise Office Tower...................... 1 1975 122,296 0.1% 95.2% 3,653
Wilshire Palisades(b)..................... 1 1981 186,714 0.2% 99.5% 8,436
Westwood
10880 Wilshire Boulevard(b)............... 1 1970/1992 534,047 0.5% 96.8% 16,067
10960 Wilshire Boulevard.................. 1 1971/1992 543,804 0.5% 93.3% 15,729
West San Fernando Valley
Warner Park Center........................ 1 1986 58,183 0.1% 66.3% 914
Orange County
Irvine Bus Ctr/Tustin/N Irvine
1920 Main Plaza........................... 1 1988 305,662 0.3% 90.9% 7,329
2010 Main Plaza........................... 1 1988 280,882 0.3% 97.6% 8,002
Airport Complex
18301 Von Karman (Apple Building)......... 1 1991 219,537 0.2% 96.5% 5,537
Anaheim Stadium Area
500 Orange Tower(h)....................... 1 1988 290,765 0.3% 88.9% 5,268
Eastern Central County
1100 Executive Tower(b)................... 1 1987 366,747 0.4% 97.9% 7,350
Lincoln Town Center....................... 1 1987 215,003 0.2% 93.9% 4,280
Huntington-Seal Bchs/Westminst
Bixby Ranch............................... 1 1987 277,289 0.3% 86.6% 6,022
San Diego
Mission Valley
Centerside II............................. 1 1987 286,940 0.3% 92.9% 5,636
Crossroads................................ 1 1983 133,553 0.1% 100.0% 2,563
North University (UTC)
Plaza at La Jolla Village(d).............. 5 1987-1990 635,419 0.6% 98.3% 16,846
Smith Barney Tower........................ 1 1987 187,999 0.2% 99.3% 5,196
--- ---------- ----- ----- ---------
LOS ANGELES REGION TOTAL/WEIGHTED AVERAGE.... 28 7,452,994 7.5% 92.2% 183,385
--- ---------- ----- ----- ---------
SAN FRANCISCO REGION
San Francisco
Burlingame
Bay Park Plaza I & II(b).................. 2 1985-1998 257,058 0.3% 100.0% 12,086
One Bay Plaza............................. 1 1979 176,533 0.2% 95.7% 6,453
Financial District
120 Montgomery(d)......................... 1 1955 420,310 0.4% 93.5% 12,339
Bayside Plaza............................. 1 1985 85,432 0.1% 100.0% 3,421
201 Mission Street........................ 1 1981 483,289 0.5% 100.0% 14,103
150 California(e)......................... 1 2000 201,787 0.2% 100.0% 10,874
201 California............................ 1 1980 240,546 0.2% 94.6% 8,574
580 California............................ 1 1984 313,012 0.3% 98.6% 11,543
301 Howard Street......................... 1 1988 307,396 0.3% 92.3% 10,495
60 Spear Street........................... 1 1967/1987 133,782 0.1% 96.0% 3,887
Maritime Plaza............................ 1 1967/1990 534,874 0.5% 99.4% 18,494
One Market................................ 1 1976/1995 1,458,808 1.5% 98.6% 53,871
One Post(d)............................... 1 1969 391,450 0.4% 100.0% 11,241
Redwood City
Seaport Centre............................ 1 1988 465,955 0.5% 100.0% 18,066
Seaport Plaza(e).......................... 2 2000 159,350 0.2% 100.0% 4,876
San Bruno
Bayhill Office Center..................... 4 1982-1987 514,265 0.5% 99.3% 18,270
San Mateo
Peninsula Office Park..................... 7 1971-1998 491,589 0.5% 100.0% 19,438
Oakland
Berkeley
Golden Bear Center........................ 1 1986 160,587 0.2% 100.0% 4,206
Concord
One & Two Corporate Center................ 2 1985-1987 328,786 0.3% 94.9% 7,309
Pleasanton
PeopleSoft Plaza.......................... 1 1984 277,562 0.3% 100.0% 7,538
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
Santa Monica
429 Santa Monica.......................... 0.1% 26 $29.76
Commerce Park(b).......................... 0.1% 11 $21.61
Janss Court............................... 0.1% 17 $37.79
Searise Office Tower...................... 0.1% 25 $31.37
Wilshire Palisades(b)..................... 0.3% 13 $45.43
Westwood
10880 Wilshire Boulevard(b)............... 0.6% 45 $31.09
10960 Wilshire Boulevard.................. 0.6% 27 $30.99
West San Fernando Valley
Warner Park Center........................ 0.0% 7 $23.69
Orange County
Irvine Bus Ctr/Tustin/N Irvine
1920 Main Plaza........................... 0.3% 37 $26.37
2010 Main Plaza........................... 0.3% 30 $29.18
Airport Complex
18301 Von Karman (Apple Building)......... 0.2% 30 $26.14
Anaheim Stadium Area
500 Orange Tower(h)....................... 0.2% 42 $20.39
Eastern Central County
1100 Executive Tower(b)................... 0.3% 17 $20.47
Lincoln Town Center....................... 0.2% 20 $21.19
Huntington-Seal Bchs/Westminst
Bixby Ranch............................... 0.2% 40 $25.08
San Diego
Mission Valley
Centerside II............................. 0.2% 39 $21.15
Crossroads................................ 0.1% 10 $19.19
North University (UTC)
Plaza at La Jolla Village(d).............. 0.6% 78 $26.97
Smith Barney Tower........................ 0.2% 23 $27.83
----- ----- ------
LOS ANGELES REGION TOTAL/WEIGHTED AVERAGE.... 7.1% 672 $26.69
----- ----- ------
SAN FRANCISCO REGION
San Francisco
Burlingame
Bay Park Plaza I & II(b).................. 0.5% 13 $47.02
One Bay Plaza............................. 0.2% 46 $38.19
Financial District
120 Montgomery(d)......................... 0.5% 85 $31.38
Bayside Plaza............................. 0.1% 11 $40.04
201 Mission Street........................ 0.5% 18 $29.18
150 California(e)......................... 0.4% 11 $53.89
201 California............................ 0.3% 7 $37.69
580 California............................ 0.4% 15 $37.38
301 Howard Street......................... 0.4% 28 $36.98
60 Spear Street........................... 0.1% 5 $30.25
Maritime Plaza............................ 0.7% 31 $34.78
One Market................................ 2.1% 88 $37.45
One Post(d)............................... 0.4% 31 $28.72
Redwood City
Seaport Centre............................ 0.7% 11 $38.77
Seaport Plaza(e).......................... 0.2% 1 $30.60
San Bruno
Bayhill Office Center..................... 0.7% 43 $35.77
San Mateo
Peninsula Office Park..................... 0.7% 33 $39.54
Oakland
Berkeley
Golden Bear Center........................ 0.2% 17 $26.19
Concord
One & Two Corporate Center................ 0.3% 56 $23.43
Pleasanton
PeopleSoft Plaza.......................... 0.3% 4 $27.16
15
16
PERCENT OF
TOTAL
APPROXIMATE PORTFOLIO ANNUALIZED
PRIMARY MARKET NUMBER OF YEAR BUILT/ RENTABLE RENTABLE PERCENT RENT
SUB MARKET BUILDINGS RENOVATED SQUARE FEET SQUARE FEET OCCUPIED (000'S)(A)
- -------------- --------- ----------- ----------- ----------- -------- ----------
San Ramon
One & Two ADP Plaza....................... 2 1987-1989 300,249 0.3% 98.0% 7,037
Norris Tech Center........................ 3 1984-1990 260,513 0.3% 100.0% 5,325
Sacramento
CBD
Wells Fargo Center........................ 1 1992 502,365 0.5% 99.5% 15,213
Point West Tribute
Exposition Centre......................... 1 1984 72,985 0.1% 100.0% 1,524
San Jose
CBD
10 Almaden................................ 1 1989 299,685 0.3% 93.1% 9,037
Campbell
Pruneyard Office Towers................... 3 1971-1999 354,772 0.4% 99.9% 11,808
Pruneyard Shopping Center................. 1 1970s 251,903 0.3% 88.4% 5,275
Mountain View
Shoreline Technology Park................. 12 1985-1991 726,508 0.7% 100.0% 27,952
Palo Alto
Embarcadero Place......................... 4 1984 192,081 0.2% 100.0% 7,396
Palo Alto Square(b)....................... 6 1971/1985 322,228 0.3% 100.0% 12,138
Santa Clara
Lake Marriott Business Park............... 7 1981 401,402 0.4% 100.0% 9,046
Sunnyvale
Sunnyvale Business Center................. 3 1990 175,000 0.2% 100.0% 3,528
--- ---------- ----- ----- ---------
SAN FRANCISCO REGION TOTAL/WEIGHTED
AVERAGE..................................... 76 11,262,062 11.4% 98.4% 372,361
--- ---------- ----- ----- ---------
PORTFOLIO TOTAL/WEIGHTED AVERAGE............. 381 98,995,994 100.0% 94.6% 2,602,030
=== ========== ===== ===== =========
ANNUALIZED
PERCENT OF RENT PER
PORTFOLIO NUMBER OCCUPIED
PRIMARY MARKET ANNUALIZED OF SQUARE
SUB MARKET RENT LEASES FOOT(A)
- -------------- ---------- ------ ----------
San Ramon
One & Two ADP Plaza....................... 0.3% 26 $23.92
Norris Tech Center........................ 0.2% 7 $20.44
Sacramento
CBD
Wells Fargo Center........................ 0.6% 36 $30.45
Point West Tribute
Exposition Centre......................... 0.1% 16 $20.88
San Jose
CBD
10 Almaden................................ 0.3% 21 $32.39
Campbell
Pruneyard Office Towers................... 0.5% 73 $33.33
Pruneyard Shopping Center................. 0.2% 45 $23.70
Mountain View
Shoreline Technology Park................. 1.1% 12 $38.47
Palo Alto
Embarcadero Place......................... 0.3% 7 $38.50
Palo Alto Square(b)....................... 0.5% 22 $37.67
Santa Clara
Lake Marriott Business Park............... 0.3% 14 $22.54
Sunnyvale
Sunnyvale Business Center................. 0.1% 3 $20.16
----- ----- ------
SAN FRANCISCO REGION TOTAL/WEIGHTED
AVERAGE..................................... 14.3% 836 $33.61
----- ----- ------
PORTFOLIO TOTAL/WEIGHTED AVERAGE............. 100.0% 7,153 $27.77
===== ===== ======
- ---------------
(a) Annualized Rent per square foot is annualized rent divided by occupied
square feet at December 31, 2000. This amount reflects total base rent
before any rent abatements, but includes expense reimbursements, which may
be estimates.
(b) All or a portion of this Office Property is held subject to a ground lease
with the exception of Denver Post Tower which is subject to an air rights
lease.
(c) This Office Property is held in a private real estate investment trust in
which EOP Partnership and Equity Office own 51.6% of the outstanding
shares.
(d) This Office Property is held in a partnership with an unaffiliated third
party and, in the case of San Felipe Plaza, an affiliated party.
(e) The following development properties were placed in service as indicated
below:
AS OF DECEMBER 31, 2000
-----------------------
PLACE IN SERVICE % OCCUPIED % LEASED
---------------- ----------- ---------
Metropoint II................................... May 1999 100.0% 100.0%
Prominence in Buckhead.......................... July 1999 77.7% 98.4%
John Marshall III............................... January 2000 100.0% 100.0%
Sunset North.................................... December 1999 99.7% 99.7%
Riverside Center................................ May 2000 99.7% 99.7%
Key Center (F.K.A. Three Bellevue).............. May 2000 99.8% 99.8%
150 California.................................. May 2000 100.0% 100.0%
US Bancorp Center............................... June 2000 55.0% 90.2%
Seaport Plaza................................... December 2000 100.0% 100.0%
(f) EOP Partnership's interest in the amenities component of this Office
Property is primarily attributed to its ownership of mortgage indebtedness
encumbering the theatre/plaza, retail, health club and parking facilities
associated therewith.
(g) This Office Property is 100% leased to a single tenant on a triple net
basis, whereby the tenant pays for certain operating expenses directly
rather than reimbursing EOP Partnership. The amounts shown above
16
17
for annualized rent include the amounts of reimbursement of expenses paid
by EOP Partnership but do not make any adjustments for expenses paid
directly by the tenant.
(h) This Office Property is held subject to an interest in the improvements at
the Property held by an unaffiliated third party. In addition, EOP
Partnership has a mortgage interest in such improvements.
(i) This Office Property was purchased in conjunction with the purchase of One
Phoenix Plaza for the sole purpose of providing additional parking for the
tenants of One Phoenix Plaza.
(j) EOP Partnership's interest, or partial interest in certain cases, in these
Office Properties is primarily attributed to its ownership of indebtedness.
PARKING FACILITIES
NUMBER OF NUMBER OF MANAGEMENT
REGION PROPERTY NAME CITY STATE SPACES GARAGES COMPANY
- ------ -------------------------------------- ----------- ----- --------- --------- ----------------
Chicago Region
Adams-Wabash Garage(a) Chicago IL 670 1 Standard Parking
Theater District Garage(a) Chicago IL 1,020 1 Standard Parking
203 North LaSalle Garage(a) Chicago IL 1,196 1 Standard Parking
New York Region
MacArthur Airport(b) Islip NY 3,301 1 Standard Parking
Denver Region
517 Marquette Garage(a) Minneapolis MN 593 1 Standard Parking
St. Louis Parking Garages(a)(c) St. Louis MO 7,464 4 Central Parking
------- --
TOTAL EOP PARTNERSHIP STAND-ALONE 14,244 9
REMAINDER OF EOP PARTNERSHIP PORTFOLIO 160,649 --
------- --
GRAND TOTAL 174,893 9
======= ==
- ---------------
(a) Each of these Parking Facilities is operated by the designated third-party
service company (each a "Service Company") under a lease agreement whereby
EOP Partnership and the Service Company share the gross receipts from the
parking operation or EOP Partnership receives a fixed payment from the
Service Company, and EOP Partnership bears none of the operational
expenses.
(b) EOP Partnership owns an interest in this parking facility by assignment of
a concession agreement. Under the terms of the agreement, EOP Partnership
pays an annual fee based on a percentage of parking revenues.
(c) EOP Partnership has a 50% membership interest in a portfolio of four
Parking Facilities serving the St. Louis, Missouri area.
17
18
LEASE EXPIRATION
(AS OF 12/31/00)
2001 AND
MONTH TO
MONTH 2002 2003 2004 2005 2006 2007
------------ ------------ ------------ ------------ ------------ ------------ ------------
BOSTON
Square Feet(1)........... 1,313,959 1,465,425 1,618,016 1,183,704 1,619,992 647,696 1,178,641
% Square Feet(2)......... 10.1% 11.2% 12.4% 9.1% 12.4% 5.0% 9.0%
Annualized Rent(3)....... 43,464,097 45,827,450 58,210,458 40,339,380 54,112,876 17,912,753 40,289,520
Number of Leases......... 138 143 117 112 120 29 46
Rent Per Square Foot..... $ 33.08 $ 31.27 $ 35.98 $ 34.08 $ 33.40 $ 27.66 $ 34.18
CHICAGO
Square Feet(1)........... 800,488 1,026,776 2,014,652 1,212,961 1,426,991 763,016 454,207
% Square Feet(2)......... 7.2% 9.2% 18.0% 10.8% 12.8% 6.8% 4.1%
Annualized Rent(3)....... 19,343,185 28,941,912 62,872,108 31,898,641 34,129,006 19,253,691 11,421,425
Number of Leases......... 178 163 188 125 100 55 30
Rent Per Square Foot..... $ 24.16 $ 28.19 $ 31.21 $ 26.30 $ 23.92 $ 25.23 $ 25.15
SAN FRANCISCO
Square Feet(1)........... 773,668 718,681 576,704 858,104 1,057,248 486,603 801,140
% Square Feet(2)......... 11.7% 10.8% 8.7% 12.9% 15.9% 7.3% 12.1%
Annualized Rent(3)....... 23,525,209 23,624,482 19,389,706 33,470,315 41,318,539 18,790,444 29,678,153
Number of Leases......... 88 92 73 78 61 29 17
Rent Per Square Foot..... $ 30.41 $ 32.87 $ 33.62 $ 39.00 $ 39.08 $ 38.62 $ 37.04
NEW YORK
Square Feet(1)........... 502,462 245,954 212,367 114,731 230,667 443,441 72,780
% Square Feet(2)......... 10.1% 4.9% 4.3% 2.3% 4.6% 8.9% 1.5%
Annualized Rent(3)....... 29,674,755 8,824,363 9,187,635 5,615,145 9,091,024 19,862,074 2,940,619
Number of Leases......... 21 16 22 17 12 9 6
Rent Per Square Foot..... $ 59.06 $ 35.88 $ 43.26 $ 48.94 $ 39.41 $ 44.79 $ 40.40
SEATTLE
Square Feet(1)........... 688,574 651,875 1,737,403 940,811 1,134,784 370,279 262,367
% Square Feet(2)......... 9.1% 8.6% 23.0% 12.4% 15.0% 4.9% 3.5%
Annualized Rent(3)....... 16,959,720 16,680,118 46,025,855 26,547,456 35,062,082 8,940,842 7,057,774
Number of Leases......... 123 89 117 72 100 18 14
Rent Per Square Foot..... $ 24.63 $ 25.59 $ 26.49 $ 28.22 $ 30.90 $ 24.15 $ 26.90
WASHINGTON D.C.
Square Feet(1)........... 375,696 1,448,609 582,372 436,816 791,253 265,802 526,080
% Square Feet(2)......... 6.5% 25.1% 10.1% 7.6% 13.7% 4.6% 9.1%
Annualized Rent(3)....... 11,107,952 39,481,342 17,951,703 13,185,215 27,001,890 9,271,772 12,610,413
Number of Leases......... 60 63 47 38 60 26 17
Rent Per Square Foot..... $ 29.57 $ 27.25 $ 30.83 $ 30.18 $ 34.13 $ 34.88 $ 23.97
ATLANTA
Square Feet(1)........... 1,022,402 757,420 896,664 1,372,749 469,761 1,063,172 234,632
% Square Feet(2)......... 13.1% 9.7% 11.4% 17.5% 6.0% 13.6% 3.0%
Annualized Rent(3)....... 22,502,408 17,308,289 18,810,675 26,528,265 10,780,386 25,407,767 4,759,569
Number of Leases......... 125 98 81 61 58 17 10
Rent Per Square Foot..... $ 22.01 $ 22.85 $ 20.98 $ 19.32 $ 22.95 $ 23.90 $ 20.29
SAN JOSE
Square Feet(1)........... 475,865 129,951 194,313 254,556 689,884 69,538 415,378
% Square Feet(2)......... 17.5% 4.8% 7.1% 9.3% 25.3% 2.6% 15.3%
Annualized Rent(3)....... 10,867,898 4,332,264 7,555,396 9,385,323 19,075,046 2,187,500 19,453,743
Number of Leases......... 45 36 28 29 32 7 8
Rent Per Square Foot..... $ 22.84 $ 33.34 $ 38.88 $ 36.87 $ 27.65 $ 31.46 $ 46.83
LOS ANGELES
Square Feet(1)........... 357,836 253,795 380,261 293,188 369,763 430,377 596,757
% Square Feet(2)......... 8.4% 6.0% 8.9% 6.9% 8.7% 10.1% 14.0%
Annualized Rent(3)....... 11,964,619 7,504,059 10,213,477 8,738,858 10,382,751 12,475,110 20,564,657
Number of Leases......... 61 45 53 37 52 14 13
Rent Per Square Foot..... $ 33.44 $ 29.57 $ 26.86 $ 29.81 $ 28.08 $ 28.99 $ 34.46
DENVER
Square Feet(1)........... 750,472 576,871 408,095 336,540 503,148 264,915 484,851
% Square Feet(2)......... 18.0% 13.8% 9.8% 8.1% 12.0% 6.3% 11.6%
Annualized Rent(3)....... 15,283,072 12,073,126 8,238,072 7,507,760 11,881,401 5,830,241 8,668,756
Number of Leases......... 122 74 68 46 64 14 17
Rent Per Square Foot..... $ 20.36 $ 20.93 $ 20.19 $ 22.31 $ 23.61 $ 22.01 $ 17.88
ALL OTHERS
Square Feet(1)........... 3,681,978 4,151,788 4,014,267 4,081,499 3,413,738 2,607,557 1,156,936
% Square Feet(2)......... 11.9% 13.5% 13.0% 13.2% 11.1% 8.5% 3.8%
Annualized Rent(3)....... 79,620,573 92,679,080 87,400,267 84,277,711 77,789,692 54,639,973 28,648,144
Number of Leases......... 572 473 507 327 361 105 45
Rent Per Square Foot..... $ 21.62 $ 22.32 $ 21.77 $ 20.65 $ 22.79 $ 20.95 $ 24.76
TOTAL PORTFOLIO
Square Feet(1)........... 10,743,400 11,427,145 12,635,114 11,085,659 11,707,229 7,412,396 6,183,769
% Square Feet(2)......... 10.9% 11.5% 12.8% 11.2% 11.8% 7.5% 6.2%
Annualized Rent(3)....... 284,313,487 297,276,485 345,855,352 287,494,069 330,624,695 194,572,167 186,092,773
Number of Leases......... 1,533 1,292 1,301 942 1,020 323 223
Rent Per Square Foot..... $ 26.46 $ 26.01 $ 27.37 $ 25.93 $ 28.24 $ 26.25 $ 30.09
2011 AND
2008 2009 2010 BEYOND TOTALS
------------ ------------ ------------ ------------ --------------
BOSTON
Square Feet(1)........... 1,002,116 467,093 934,341 1,498,064 12,929,047
% Square Feet(2)......... 7.7% 3.6% 7.2% 11.5% 99.2%
Annualized Rent(3)....... 35,438,434 15,029,730 36,004,862 47,101,908 433,731,466
Number of Leases......... 22 18 21 17 783
Rent Per Square Foot..... $ 35.36 $ 32.18 $ 38.54 $ 31.44 $ 33.55
CHICAGO
Square Feet(1)........... 968,199 692,010 933,509 425,824 10,718,633
% Square Feet(2)......... 8.7% 6.2% 8.3% 3.8% 95.8%
Annualized Rent(3)....... 25,208,026 21,537,978 22,078,188 10,027,849 286,712,009
Number of Leases......... 28 15 21 7 910
Rent Per Square Foot..... $ 26.04 $ 31.12 $ 23.65 $ 23.55 $ 26.75
SAN FRANCISCO
Square Feet(1)........... 589,801 71,749 356,193 237,529 6,527,420
% Square Feet(2)......... 8.9% 1.1% 5.4% 3.6% 98.4%
Annualized Rent(3)....... 22,223,468 2,664,916 15,973,973 7,370,183 238,029,388
Number of Leases......... 16 6 12 5 477
Rent Per Square Foot..... $ 37.68 $ 37.14 $ 44.85 $ 31.03 $ 36.47
NEW YORK
Square Feet(1)........... 97,956 1,145,867 1,318,291 553,377 4,937,893
% Square Feet(2)......... 2.0% 23.0% 26.4% 11.1% 99.0%
Annualized Rent(3)....... 5,389,491 56,002,883 60,833,251 22,416,461 229,837,700
Number of Leases......... 9 7 9 13 141
Rent Per Square Foot..... $ 55.02 $ 48.87 $ 46.15 $ 40.51 $ 46.55
SEATTLE
Square Feet(1)........... 252,253 477,245 533,120 304,091 7,352,802
% Square Feet(2)......... 3.3% 6.3% 7.0% 4.0% 97.2%
Annualized Rent(3)....... 6,793,321 13,557,488 16,270,537 7,717,213 201,612,406
Number of Leases......... 9 9 18 4 573
Rent Per Square Foot..... $ 26.93 $ 28.41 $ 30.52 $ 25.38 $ 27.42
WASHINGTON D.C.
Square Feet(1)........... 238,582 109,086 551,223 371,749 5,697,268
% Square Feet(2)......... 4.1% 1.9% 9.6% 6.4% 98.8%
Annualized Rent(3)....... 6,687,446 3,251,736 18,659,584 11,168,565 170,377,618
Number of Leases......... 15 14 14 8 362
Rent Per Square Foot..... $ 28.03 $ 29.81 $ 33.85 $ 30.04 $ 29.91
ATLANTA
Square Feet(1)........... 91,056 406,601 678,184 100,819 7,093,460
% Square Feet(2)......... 1.2% 5.2% 8.7% 1.3% 90.6%
Annualized Rent(3)....... 2,728,155 9,079,495 16,285,123 643,273 154,833,407
Number of Leases......... 2 9 10 2 473
Rent Per Square Foot..... $ 29.96 $ 22.33 $ 24.01 $ 6.38 $ 21.83
SAN JOSE
Square Feet(1)........... 33,908 157,552 133,381 118,749 2,673,075
% Square Feet(2)......... 1.2% 5.8% 4.9% 4.4% 98.1%
Annualized Rent(3)....... 737,220 4,676,136 4,649,392 3,260,623 86,180,541
Number of Leases......... 4 3 2 3 197
Rent Per Square Foot..... $ 21.74 $ 29.68 $ 34.86 $ 27.46 $ 32.24
LOS ANGELES
Square Feet(1)........... 190,512 149,266 117,585 695,587 3,834,927
% Square Feet(2)......... 4.5% 3.5% 2.8% 16.4% 90.2%
Annualized Rent(3)....... 5,199,212 3,994,683 2,814,601 15,503,217 109,355,245
Number of Leases......... 9 8 7 7 306
Rent Per Square Foot..... $ 27.29 $ 26.76 $ 23.94 $ 22.29 $ 28.52
DENVER
Square Feet(1)........... 349,847 109,658 22,244 89,889 3,896,530
% Square Feet(2)......... 8.4% 2.6% 0.5% 2.2% 93.3%
Annualized Rent(3)....... 8,248,574 2,383,105 514,151 855,865 81,484,121
Number of Leases......... 6 8 4 3 426
Rent Per Square Foot..... $ 23.58 $ 21.73 $ 23.11 $ 9.52 $ 20.91
ALL OTHERS
Square Feet(1)........... 1,267,208 877,625 419,891 2,363,084 28,035,571
% Square Feet(2)......... 4.1% 2.8% 1.4% 7.7% 91.0%
Annualized Rent(3)....... 27,273,981 21,738,964 11,019,224 44,788,334 609,875,942
Number of Leases......... 40 28 29 18 2,505
Rent Per Square Foot..... $ 21.52 $ 24.77 $ 26.24 $ 18.95 $ 21.75
TOTAL PORTFOLIO
Square Feet(1)........... 5,081,438 4,663,752 5,997,962 6,758,762 93,696,626
% Square Feet(2)......... 5.1% 4.7% 6.1% 6.8% 94.6%
Annualized Rent(3)....... 145,927,327 153,917,113 205,102,887 170,853,490 2,602,029,845
Number of Leases......... 160 125 147 87 7,153
Rent Per Square Foot..... $ 28.72 $ 33.00 $ 34.20 $ 25.28 $ 27.77
- ---------------
(1) Total net rentable square feet represented by expiring leases.
(2) Percentage of total net rentable feet represented by expiring leases.
(3) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 2000 multiplied by 12. This amount reflects total base rent
before any rent abatements, but includes expense reimbursements.
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LEASE EXPIRATIONS -- TOTAL PORTFOLIO
The following table sets forth a summary schedule of the lease expirations
for the Office Properties for the leases in place as of December 31, 2000,
assuming that none of the tenants exercise renewal options or termination
rights, if any, at or prior to the scheduled expirations.
ANNUALIZED PERCENTAGE OF
SQUARE PERCENTAGE OF RENT OF ANNUALIZED
NUMBER OF FOOTAGE OF TOTAL EXPIRING RENT OF
YEAR OF LEASE LEASES EXPIRING OCCUPIED ANNUALIZED RENT OF LEASES PER EXPIRING
EXPIRATION EXPIRING LEASES SQUARE FEET EXPIRING LEASES SQUARE FOOT LEASES(1)
- ------------- --------- ---------- ------------- ------------------ ----------- -------------
2001(2)............... 1,533 10,743,400 11.5% $ 284,313,487 $26.46 10.9%
2002.................. 1,292 11,427,145 12.2% 297,276,485 26.01 11.4%
2003.................. 1,301 12,635,114 13.5% 345,855,352 27.37 13.3%
2004.................. 942 11,085,659 11.8% 287,494,069 25.93 11.0%
2005.................. 1,020 11,707,229 12.5% 330,624,695 28.24 12.7%
2006.................. 323 7,412,396 7.9% 194,572,167 26.25 7.5%
2007.................. 223 6,183,769 6.6% 186,092,773 30.09 7.2%
2008.................. 160 5,081,438 5.4% 145,927,327 28.72 5.6%
2009.................. 125 4,663,752 5.0% 153,917,113 33.00 5.9%
2010.................. 147 5,997,962 6.4% 205,102,887 34.20 7.9%
2011 and beyond....... 87 6,758,762 7.2% 170,853,490 25.28 6.6%
----- ---------- ----- -------------- ------ -----
7,153 93,696,626 100.0%(3) $2,602,029,845 $27.77 100.0%
===== ========== ===== ============== ====== =====
- ---------------
(1) Based on current payable rent.
(2) Represents lease expirations from January 1, 2001 to December 31, 2001 and
month-to-month leases.
(3) Reconciliation for total net rentable square footage is as follows:
PERCENT OF
SQUARE FOOTAGE TOTAL
-------------- ----------
Square footage occupied by tenants.......................... 92,989,573 93.9%
Square footage used for management offices, building use and
remeasurement adjustments................................. 707,053 0.7%
---------- -----
Total occupied square footage............................... 93,696,626 94.6%
Leased square footage....................................... 993,520 1.1%
Vacant square footage....................................... 4,305,848 4.3%
---------- -----
Total net rentable square footage........................... 98,995,994 100.0%
========== =====
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LEASE DISTRIBUTION
The following table sets forth information relating to the distribution of
the Office Property leases, based on rentable square feet under lease, as of
December 31, 2000.
PERCENTAGE OF PERCENTAGE OF
AGGREGATE AGGREGATE
PERCENT TOTAL PORTFOLIO ANNUALIZED PORTFOLIO
NUMBER OF ALL OCCUPIED OCCUPIED ANNUALIZED RENT PER ANNUALIZED
SQUARE FEET UNDER LEASE OF LEASES LEASES SQUARE FEET SQUARE FEET RENT SQUARE FOOT RENT
- ----------------------- --------- ------- ----------- ------------- -------------- ----------- -------------
2,500 or less......... 2,324 32.5% 3,175,008 3.4% $ 85,140,953 $26.82 3.3%
2,501-5,000........... 1,576 22.0% 5,672,270 6.1% 152,577,414 26.90 5.9%
5,001-7,500........... 830 11.6% 5,129,300 5.5% 139,496,629 27.20 5.4%
7,501-10,000.......... 444 6.2% 3,911,926 4.2% 110,001,591 28.12 4.2%
10,001-20,000......... 978 13.7% 13,861,255 14.9% 376,582,996 27.17 14.5%
20,001-40,000......... 553 7.7% 15,211,353 16.4% 429,104,788 28.21 16.5%
40,001-60,000......... 189 2.6% 9,125,291 9.8% 255,535,550 28.00 9.8%
60,001-100,000........ 122 1.7% 9,403,951 10.1% 263,026,621 27.97 10.1%
100,001 or Greater.... 137 1.9% 27,499,219 29.6% 790,563,303 28.75 30.4%
----- ----- ---------- ----- -------------- ------ -----
TOTAL/WEIGHTED
AVERAGE............. 7,153 100.0% 92,989,573 100.0% $2,602,029,845 $27.77 100.0%
===== ===== ========== ===== ============== ====== =====
OCCUPANCY
The table below sets forth weighted average occupancy rates, based on
square footage occupied, of the Office Properties owned by EOP Partnership at
the indicated date:
AGGREGATE RENTABLE SQUARE PERCENTAGE OF RENTABLE SQUARE
DATE FOOTAGE FEET OCCUPIED
- ---- ------------------------- -----------------------------
December 31, 1996.............................. 29,127,289 90%
December 31, 1997.............................. 65,291,790 94%
December 31, 1998.............................. 75,100,727 95%
December 31, 1999.............................. 77,015,610 94%
December 31, 2000.............................. 98,995,994 95%
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ITEM 3. LEGAL PROCEEDINGS.
Neither EOP Partnership nor any of its Properties is presently subject to
material litigation nor, to EOP Partnership's knowledge, is any litigation
threatened against EOP Partnership or any of the Properties, other than routine
actions for negligence and other claims and administrative proceedings arising
in the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the liquidity, results of operations, or business or
financial condition of EOP Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS.
There is no established public trading market for the Units. Equity
Office's common shares are traded on the New York Stock Exchange ("NYSE") under
the symbol "EOP." On March 16, 2001, there were approximately 489 holders of
record and 350,135,044 Units outstanding. The high and low sales prices of
Equity Office's Common Shares during 2000 and 1999 on the NYSE were as follows:
YEAR QUARTER HIGH LOW CLOSE DISTRIBUTIONS
- ---- ------- ------- ------- ------- -------------
2000....................................... Fourth $33.500 $28.875 $32.625 $0.45
Third $31.813 $27.813 $31.031 $0.45
Second $28.750 $25.000 $27.547 $0.42
First $26.250 $22.875 $25.125 $0.42
1999....................................... Fourth $24.750 $20.813 $24.625 $0.42
Third $25.813 $23.063 $23.250 $0.42
Second $29.375 $25.000 $25.625 $0.37
First $26.938 $23.750 $25.375 $0.37
ISSUANCE OF UNREGISTERED SECURITIES. In December 2000, EOP Partnership
issued 73,776 Units valued at $28.75 per Unit (the Units were recorded at a
value of $32.11 per Unit for a total of $2.4 million for accounting purposes)
for the remaining 11% interest in certain partnerships that collectively own 11
office buildings located in suburban Philadelphia, Pennsylvania. We acquired an
89% interest in the partnerships in 1997. In addition, in December 2000 EOP
Partnership issued 42,397 Units valued at $29.825 per Unit in connection with
the acquisition of rights to certain land located in San Francisco, California.
The Units issued in these transactions were issued as a private placement of
securities in reliance on an exemption from the registration requirements of the
Securities Act pursuant to Section 4(2) and Rule 506 of Regulation D promulgated
thereunder. Units issued by EOP Partnership generally are convertible into
common shares of Equity Office on a one-for-one basis, or the cash equivalent
thereof, at the election of Equity Office subject to certain restrictions.
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ITEM 6. SELECTED FINANCIAL DATA.(1)
The following sets forth selected consolidated and combined financial and
operating information on a historical basis for EOP Partnership and EOP
Partnership's predecessors ("EOP Partnership Predecessors"). The following
information should be read together with the consolidated financial statements
and notes thereto of EOP Partnership included elsewhere in this Form 10-K.
EOP PARTNERSHIP EOP PARTNERSHIP PREDECESSORS
----------------------------------------------------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
JULY 11, JANUARY 1, FOR THE YEAR
FOR THE YEARS ENDED DECEMBER 31, 1997 THROUGH 1997 THROUGH ENDED
------------------------------------------ DECEMBER 31, JULY 10, DECEMBER 31,
2000(2) 1999 1998 1997(3) 1997 1996
------------ ------------ ------------ -------------- -------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
OPERATING DATA:
Revenues:
Rental, parking and other......... $ 2,217,146 $ 1,919,056 $ 1,658,420 $ 406,713 $327,017 $493,396
------------ ------------ ------------ ------------ -------- --------
Total revenues.............. 2,264,243 1,942,243 1,679,699 412,968 339,104 508,124
------------ ------------ ------------ ------------ -------- --------
Expenses:
Interest.......................... 525,787 413,995 338,611 76,675 80,481 119,595
Depreciation and amortization..... 436,417 358,989 305,982 70,346 66,034 96,237
Property operating and ground
rent(4)......................... 764,007 669,763 600,367 155,679 127,285 201,067
General and administrative........ 91,415 80,927 63,564 17,690 17,201 23,145
------------ ------------ ------------ ------------ -------- --------
Total expenses.............. 1,817,626 1,523,674 1,308,524 320,390 291,001 440,044
------------ ------------ ------------ ------------ -------- --------
Income before allocation to minority
interests, income from investment
in unconsolidated joint ventures,
net gain (loss) on sales of real
estate and extraordinary items.... 446,617 418,569 371,175 92,578 48,103 68,080
Minority interests.................. (6,843) (1,981) (2,114) (789) (912) (2,086)
Income from investment in
unconsolidated joint ventures..... 56,251 13,824 11,267 3,173 1,982 2,093
Net gain (loss) on sales of real
estate and extraordinary items.... 34,211 49,113 4,927 (16,240) 12,236 5,338
------------ ------------ ------------ ------------ -------- --------
Net income.......................... 530,236 479,525 385,255 78,722 61,409 73,425
Put option settlement............... (2,576) (5,658) -- -- -- --
Preferred distributions............. (43,348) (43,603) (32,202) (649) -- --
------------ ------------ ------------ ------------ -------- --------
Net income available for Units...... $ 484,312 $ 430,264 $ 353,053 $ 78,073 $ 61,409 $ 73,425
============ ============ ============ ============ ======== ========
Net income available per weighted
average Unit
outstanding -- Basic.............. $ 1.53 $ 1.49 $ 1.25 $ 0.44
============ ============ ============ ============
Net income available per weighted
average Unit
outstanding -- Diluted............ $ 1.52 $ 1.48 $ 1.24 $ 0.43
============ ============ ============ ============
Weighted average Units outstanding--
Basic............................. 316,067,694 288,326,547 282,114,343 178,647,562
============ ============ ============ ============
Weighted average Units and Unit
equivalents
outstanding -- Diluted............ 318,997,407 291,157,204 283,974,532 180,014,027
============ ============ ============ ============
Cash distributions declared per
Unit.............................. $ 1.74 $ 1.58 $ 1.38 $ 0.56
============ ============ ============ ============
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EOP PARTNERSHIP EOP PARTNERSHIP PREDECESSORS
-------------------------------------------------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
JULY 11, JANUARY 1, FOR THE YEAR
FOR THE YEARS ENDED DECEMBER 31, 1997 THROUGH 1997 THROUGH ENDED
--------------------------------------- DECEMBER 31, JULY 10, DECEMBER 31,
2000(2) 1999 1998 1997(3) 1997 1996
----------- ----------- ----------- -------------- -------------- ------------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA (at end of
period):
Investment in real estate, net of
accumulated depreciation.......... $16,641,325 $12,572,153 $13,331,560 $10,976,319 -- $3,291,815
Total assets........................ $18,794,253 $14,046,058 $14,261,291 $11,751,672 -- $3,912,565
Mortgage debt, unsecured notes and
lines of credit................... $ 8,802,994 $ 5,851,918 $ 6,025,405 $ 4,284,317 -- $1,964,892
Total liabilities................... $ 9,508,784 $ 6,336,531 $ 6,472,613 $ 4,591,697 -- $2,174,483
Minority interests.................. $ 197,161 $ 39,027 $ 28,360 $ 29,612 -- $ 11,080
Preferred Units..................... $ 613,923 $ 615,000 $ 615,000 $ 200,000 -- --
Partners' Capital/Owners' equity.... $ 8,474,385 $ 7,055,500 $ 7,145,318 $ 6,930,363 -- $1,727,002
OTHER DATA:
General and administrative expenses
as a percentage of total
revenues.......................... 4.0% 4.2% 3.8% 4.3% 5.1% 4.6%
Number of Office Properties......... 381 294 284 258 -- 84
Net rentable square feet of Office
Properties (in millions).......... 99.0 77.0 75.1 65.3 -- 29.2
Occupancy of Office Properties...... 95% 94% 95% 94% -- 90%
Funds from Operations(5)............ $ 910,959 $ 749,641 $ 661,645 $ 160,929 $ 113,022 $ 160,460
=========== =========== =========== =========== ========= ==========
Property net operating income(6).... $ 1,463,151 $ 1,256,180 $ 1,065,714 $ 253,418 $ 202,108 $ 294,556
=========== =========== =========== =========== ========= ==========
Earnings before interest, taxes,
depreciation and
amortization(7)................... $ 1,544,098 $ 1,228,913 $ 1,049,577 $ 242,969 $ 197,489 $ 286,128
=========== =========== =========== =========== ========= ==========
Cash flow provided by operating
activities........................ $ 907,343 $ 720,711 $ 759,151 $ 190,754 $ 95,960 $ 165,975
=========== =========== =========== =========== ========= ==========
Cash flow (used for) investing
activities........................ $(1,311,778) $ (67,138) $(2,231,712) $(1,592,272) $(571,068) $ (924,227)
=========== =========== =========== =========== ========= ==========
Cash flow provided (used for) by
financing activities.............. $ 455,353 $ (718,315) $ 1,310,788 $ 1,630,346 $ 245,851 $1,057,551
=========== =========== =========== =========== ========= ==========
- ---------------
(1) The selected financial data has been derived from the historical
consolidated or combined financial statements of EOP Partnership and Equity
Office Predecessors, audited by Ernst & Young LLP, independent auditors.
(2) On June 19, 2000, EOP Partnership completed its acquisition of Cornerstone
Properties Limited Partnership. See Item 1. Business -- Cornerstone Merger
and Note 3 to EOP Partnership's consolidated financial statements included
elsewhere herein.
(3) On December 19, 1997, EOP Partnership completed its acquisition of Beacon
Partnership L.P. (the "Beacon Merger") at a cost of approximately $4.3
billion. As a result of the Beacon Merger, EOP Partnership acquired an
interest in 130 Properties containing approximately 20.9 million square
feet.
(4) Property operating expenses include real estate taxes, insurance, repairs
and maintenance and other property operating expenses.
(5) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 defines Funds from Operations as net income (loss), computed in
accordance with GAAP, excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. In November 1999, NAREIT issued a National Policy Bulletin
effective January 1, 2000 clarifying the definition of Funds from Operations
to include all operating results, both recurring and non-recurring, except
those defined as extraordinary under GAAP. In accordance with this NAREIT
Bulletin, EOP Partnership no longer adjusts for the amortization of
discounts and premiums on mortgages when calculating Funds from Operations.
24
25
Accordingly, EOP Partnership restated the prior period data for comparative
purposes. EOP Partnership believes that Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of EOP
Partnership to incur and service debt, to make capital expenditures and to
fund other cash needs. EOP Partnership computes Funds from Operations in
accordance with standards established by NAREIT, which may not be
comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than EOP Partnership.
Funds from Operations does not represent cash generated from operating
activities in accordance with GAAP, nor does it represent cash available to
pay distributions and should not be considered as an alternative to net
income, determined in accordance with GAAP, as an indication of EOP
Partnership's financial performance or to cash flow from operating
activities, determined in accordance with GAAP, as a measure of EOP
Partnership's liquidity, nor is it indicative of funds available to fund
EOP Partnership's cash needs, including its ability to make cash
distributions. For a reconciliation of net income to Funds from Operations,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Funds from Operations."
(6) Property net operating income is defined as rental income, including tenant
reimbursements, parking and other income less property operating expenses,
including real estate taxes, insurance, repairs and maintenance and other
property operating expenses.
(7) Earnings before interest, taxes, depreciation and amortization is defined as
net income excluding interest expense, taxes, depreciation and amortization,
net gain (loss) on sales of real estate, gains (losses) from extraordinary
items and income from investment in unconsolidated joint ventures plus EOP
Partnership's share of the earnings before interest, taxes, depreciation and
amortization for the unconsolidated joint ventures. Earnings before
interest, taxes, depreciation and amortization is presented because EOP
Partnership believes this data is used by some investors to evaluate EOP
Partnership's ability to meet debt service requirements. EOP Partnership
considers earnings before interest, taxes, depreciation and amortization to
be an indicative measure of its operating performance due to the
significance of EOP Partnership's long-lived assets and because this data
can be used to measure EOP Partnership's ability to service debt, fund
capital expenditures and expand its business. However, this data should not
be considered as an alternative to net income, operating profit, cash flows
from operations or any other operating or liquidity performance measure
prescribed by GAAP. In addition, earnings before interest, taxes,
depreciation and amortization as calculated by EOP Partnership may not be
comparable to similarly titled measures reported by other companies.
Interest expense, taxes, depreciation and amortization, which are not
reflected in the presentation of earnings before interest, taxes,
depreciation and amortization, have been, and will be, incurred by EOP
Partnership. Investors are cautioned that these excluded items are
significant components in understanding and assessing EOP Partnership's
financial performance.
25
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The following discussion and analysis of the consolidated financial
condition and consolidated results of operations should be read together with
the consolidated financial statements of EOP Partnership and notes thereto
contained in this Form 10-K. Terms employed herein as defined terms, but without
definition, shall have the meaning set forth in the financial statements.
Statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," including, without limitation, the "Market
Risk" and "Developments" disclosures, which are not historical fact may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected or anticipated. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of December 31, 2000.
Among the factors that EOP Partnership has made assumptions are the following:
- EOP Partnership's ability to successively integrate Cornerstone's
operations into those of EOP Partnership;
- Future economic conditions which may have an impact upon the demand for
office space and tenant ability to pay rent, either at current or at
increased levels;
- Prevailing interest rates;
- The extent of any inflation on operating expenses;
- EOP Partnership's ability to reduce various expenses as a percentage of
revenues;
- EOP Partnership's continuing ability to pay amounts due to its
noteholders and preferred Unitholders before any distribution to holders
of Units;
- The cost to complete and lease-up pending developments;
- EOP Partnership's continued access to adequate credit facilities or other
debt financing on acceptable terms, including amounts required for the
Spieker Merger; and
- The demand from EOP Partnership's customers for office-related services.
During the year ended December 31, 2000, EOP Partnership completed the
following key transactions:
- Acquired Cornerstone Properties Limited Partnership (see "Cornerstone
Merger" below for additional information);
- Acquired through a joint venture a 45% general partner equity interest
and a debt interest in a limited partnership that owns 1301 Avenue of the
Americas, a 1.77 million square foot office building located in Midtown
Manhattan in New York. EOP Partnership's share of this investment at
closing was approximately $163.2 million;
- Sold 11 parking facilities for approximately $180.0 million;
- Sold seven office properties and a development parcel for approximately
$146.4 million;
- Sold a 49.9% interest in Bank of America Tower in Seattle for
approximately $209.6 million;
- Issued approximately $2.2 billion of unsecured notes in four separate
offerings; and
- Invested approximately $75 million in convertible preferred stock of HQ
Global Workplaces, Inc. ("HQ"), a provider of temporary office suites.
CORNERSTONE MERGER
On June 19, 2000, we completed the merger of Cornerstone Partnership with
and into EOP Partnership and the merger of Cornerstone with and into Equity
Office at a total cost of approximately $4.5 billion. The purchase price
consisted of:
(a) Equity Office's issuance of approximately 51.2 million Common
Shares valued at $24.68 per share and the assumption of approximately 3.7
million share options, for a total of approximately $1,268.6 million, of
which EOP Partnership issued a corresponding number of Units to Equity
Office on a one-to-one basis;
26
27
(b) EOP Partnership's issuance of approximately 12.4 million Units to
third parties valued at $24.68 per Unit for a total of approximately $306.0
million;
(c) the cash redemption of approximately 58.5 million shares of
Cornerstone common stock valued at $18.00 per share for a total of
approximately $1,052.2 million;
(d) the cash redemption of approximately 3.0 million shares of
Cornerstone preferred stock valued at $18.00 per share, plus accrued but
unpaid dividends, for a total of approximately $57.6 million;
(e) the assumption of approximately $1,304.9 million of secured debt
and $415.5 million of unsecured debt;
(f) the payment of merger costs of approximately $82.9 million; and
(g) the assumption of net liabilities of approximately $19.8 million.
The cash portion of the Cornerstone Merger of approximately $1.2 billion
was funded from the $1.0 Billion Credit Facility and the Line of Credit. See
"Lines of Credit" for additional information.
SPIEKER MERGER
In February 2001, Equity Office and Spieker Properties, Inc. ("Spieker")
entered into a merger agreement in which Spieker will merge into Equity Office
and EOP Partnership will acquire Spieker Properties, L.P., Spieker's operating
partnership subsidiary (the "Spieker Merger"). The transaction values Spieker
(including the outside interests in Spieker Properties, L.P.) at approximately
$7.2 billion, which includes transaction costs and the assumption of
approximately $2.1 billion in debt and $431 million in preferred stock and
partnership units. EOP Partnership will pay approximately $1.085 billion in cash
and issue approximately 118.6 million new EOP Partnership units and 14.3 million
new EOP Partnership preferred units in the transaction. EOP Partnership intends
to finance the $1.085 billion cash portion of the purchase price using a
combination of available borrowing capacity under our existing credit facility,
a new bridge loan facility to be entered into before the closing of the merger
and/or through the issuance of senior unsecured notes.
Following the Spieker Merger, EOP Partnership is expected to own and
operate 616 office buildings consisting of 124 million square feet of office
space nationwide, which includes 25 million square feet of office space
attributable to Spieker. EOP Partnership will also own Spieker's industrial
portfolio of approximately 13.5 million square feet and its development
properties totaling 1.7 million square feet.
Upon completion of the Spieker Merger, Equity Office will expand its Board
of Trustees from 13 to 16 members. The new members will be Warren E. Spieker,
Jr., Chairman of Spieker, and Co-Chief Executive Officers Craig G. Vought and
John A. Foster.
The Spieker Merger, which will be accounted for using purchase accounting,
is subject to the approval of the shareholders of Equity Office and Spieker and
the partners of EOP Partnership and Spieker Partnership, as applicable, and to
other customary conditions.
RESULTS OF OPERATIONS
GENERAL
The following discussion is based primarily on the consolidated financial
statements of EOP Partnership as of December 31, 2000 and 1999, and for the
years ended December 31, 2000, 1999 and 1998.
EOP Partnership receives income primarily from rental revenue from the
Office Properties, including reimbursements from tenants for certain operating
costs, and from parking revenue from Office Properties and Parking Facilities.
Below is a summary of EOP Partnership's acquisition and disposition
activity since January 1, 1999. The buildings and total square feet shown
include Properties EOP Partnership owns in joint ventures with other partners
and reflects the total square footage of the Properties. Excluding the joint
venture partners' share of
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the square feet of these Properties, EOP Partnership effectively owned 92.7
million square feet of office space as of December 31, 2000.
OFFICE PROPERTIES PARKING FACILITIES
----------------------- ------------------
TOTAL
BUILDINGS SQUARE FEET GARAGES SPACES
--------- ----------- -------- -------
PROPERTIES OWNED AS OF:
January 1, 1999....................................... 284 75,100,727 19 18,059
Acquisitions........................................ 10 1,947,639 1 2,575
Developments placed in service...................... 4 610,810 1 589
Dispositions........................................ (4) (668,796) -- --
Building remeasurements............................. -- 25,230 -- 42
Reclassifications(1)................................ -- -- (1) (759)
--- ---------- --- ------
December 31, 1999..................................... 294 77,015,610 20 20,506
Acquisitions........................................ 85 20,980,290 -- --
Developments placed in service...................... 9 1,843,653 -- --
Dispositions........................................ (7) (964,136) (11) (6,992)
Building remeasurements............................. -- 120,577 -- 730
--- ---------- --- ------
December 31, 2000 ("Total Portfolio")................. 381 98,995,994 9 14,244
=== ========== === ======
- ---------------
(1) The 601 Tchoupitoulas garage previously was considered a stand-alone garage
and included in the number of Parking Facilities.
As a result of the acquisition and disposition of properties, the financial
data presented shows changes in revenues and expenses from period to period.
Therefore, EOP Partnership does not believe its period-to-period financial data
are necessarily comparable. The following analysis shows changes resulting from
Properties that were held during the entire period for the periods being
compared (the "Core Portfolio") and the changes in the Total Portfolio.
As reflected in the tables below, property revenues include rental
revenues, reimbursements from tenants for certain expenses, parking revenue,
Access services revenue and other property operating revenues. Property
operating expenses include real estate taxes, insurance, repairs and maintenance
and other property operating expenses.
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COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO DECEMBER 31, 1999
The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio consisting of 265 Office Properties and
seven Parking Facilities acquired or placed in service on or prior to January 1,
1999.
TOTAL PORTFOLIO CORE PORTFOLIO
--------------------------------------------- ---------------------------------------------
INCREASE/ % INCREASE/ %
2000 1999 (DECREASE) CHANGE 2000 1999 (DECREASE) CHANGE
---------- ---------- ---------- ------ ---------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
Property revenues............ $2,217,146 $1,919,056 $298,090 15.5% $1,753,463 $1,639,796 $113,667 6.9%
Fee income................... 10,931 8,939 1,992 22.3 -- -- -- --
Interest/dividend income..... 36,166 14,248 21,918 153.8 2,665 1,698 967 56.9
---------- ---------- -------- ----- ---------- ---------- -------- -----
Total revenues....... 2,264,243 1,942,243 322,000 16.6 1,756,128 1,641,494 114,634 7.0
---------- ---------- -------- ----- ---------- ---------- -------- -----
Interest expense............. 525,787 413,995 111,792 27.0 126,174 130,937 (4,763) (3.6)
Depreciation and
amortization............... 436,417 358,989 77,428 21.6 337,075 304,161 32,914 10.8
Property operating
expenses................... 753,995 662,876 91,119 13.7 602,206 568,621 33,585 5.9
Ground rent.................. 10,012 6,887 3,125 45.4 9,037 6,837 2,200 32.2
General and administrative... 91,415 80,927 10,488 13.0 1,609 369 1,240 336.0
---------- ---------- -------- ----- ---------- ---------- -------- -----
Total expenses....... 1,817,626 1,523,674 293,952 19.3 1,076,101 1,010,925 65,176 6.4
---------- ---------- -------- ----- ---------- ---------- -------- -----
Income before allocation to
minority interests, income
from investment in
unconsolidated joint
ventures, net gain on sales
of real estate and
extraordinary items........ 446,617 418,569 28,048 6.7 680,027 630,569 49,458 7.8
Minority interests........... (6,843) (1,981) (4,862) 245.4 (2,340) (1,509) (831) 55.1
Income from investment in
unconsolidated joint
ventures................... 56,251 13,824 42,427 306.9 13,591 10,651 2,940 27.6
Net gain on sales of real
estate..................... 36,013 59,661 (23,648) (39.6) -- -- -- --
Extraordinary items.......... (1,802) (10,548) 8,746 (82.9) (611) (9,527) 8,916 (93.6)
---------- ---------- -------- ----- ---------- ---------- -------- -----
Net income................... $ 530,236 $ 479,525 $ 50,711 10.6% $ 690,667 $ 630,184 $ 60,483 9.6%
========== ========== ======== ===== ========== ========== ======== =====
Property revenues less
property operating expenses
before depreciation and
amortization, general and
administrative, ground rent
and interest expense....... $1,463,151 $1,256,180 $206,971 16.5% $1,151,257 $1,071,175 $ 80,082 7.5%
========== ========== ======== ===== ========== ========== ======== =====
Straight-line rent
adjustment................. $ 69,822 $ 65,397 $ 4,425 6.8% $ 51,506 $ 56,428 $ (4,922) (8.7)%
========== ========== ======== ===== ========== ========== ======== =====
Lease termination fees....... $ 19,542 $ 15,877 $ 3,665 23.1% $ 16,148 $ 12,387 $ 3,761 30.4%
========== ========== ======== ===== ========== ========== ======== =====
Property Revenues
The increase in property revenues in the Core Portfolio resulted from an
increase in rental rates partially offset by a decrease in occupancy. The
weighted average occupancy of the Core Portfolio decreased from 95.3% at January
1, 1999 to 94.4% at December 31, 2000, mainly due to tenant rollover at various
Properties. Included in Property Revenues are lease termination fees. These fees
relate to specific tenants who have paid a fee to terminate their lease
obligations before the end of the contractual term of their lease. Although EOP
Partnership has historically experienced similar levels of such termination
fees, there is no way of predicting the timing or amounts of future lease
termination fees.
Interest/Dividend Income
Total Portfolio interest/dividend income increased primarily as a result of
a $75 million investment in May 2000 in Series A Convertible Cumulative
Preferred Stock (the "Series A Preferred Stock") of HQ Global Workplaces, Inc.
("HQ"). The Series A Preferred Stock has an initial dividend rate of 13.5% per
annum, which increases by 50 basis points each year through maturity in 2007.
Interest/dividend income also
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increased as a result of a $73.9 million investment in September 1999 in a
mezzanine-level debt position related to the SunAmerica Center office property.
EOP Partnership's share of the face amount of the note is approximately $136.0
million and bears interest at 7.25% and matures August 31, 2014. EOP Partnership
also earned interest from property disposition proceeds held in escrow accounts.
The amounts in escrow will be utilized for property acquisitions or returned to
EOP Partnership.
Interest Expense
Total Portfolio interest expense increased from the prior period as a
result of having a higher average outstanding debt balance as compared to the
prior period, mainly as a result of the Cornerstone Merger, and an increase in
the weighted average interest rate. In addition, the following statistics for
each period for the Total Portfolio are as follows:
- Total debt to total assets increased to 46.8% from 41.7%;
- Interest coverage ratio decreased to 2.7 times from 2.9 times; and
- Weighted average interest rate increased to 7.5% from 7.2%.
Core Portfolio interest expense decreased from the prior period due to the
paydown of mortgage debt on certain Properties partially offset by the financing
of Park Avenue Tower and 850 Third Avenue. Interest expense on unsecured notes
and the lines of credit are not reflected in the Core Portfolio.
Depreciation and Amortization
Total Portfolio depreciation and amortization expense increased from the
prior period as a result of Properties acquired and capital and tenant
improvements made during the periods. Core Portfolio depreciation and
amortization expense increased as a result of capital and tenant improvements
made during the periods.
Property Operating Expenses
Core Portfolio property operating expenses increased mainly as a result of
increases in real estate taxes and other operating expenses. Real estate taxes
increased approximately $11.9 million due to higher property tax assessments.
Other operating expenses increased approximately $21.7 million primarily due to
higher repairs and maintenance costs, increased utility costs and an increase in
expenses at certain properties that were under development.
General and Administrative Expenses
General and administrative expenses increased due to an increase in the
number of employees at the corporate office as a result of the establishment of
new revenue-producing business groups such as Access and the hiring of
additional personnel in other corporate groups, primarily the information
technology group. In addition, general and administrative expenses increased as
a result of hiring additional personnel due to the Cornerstone Merger, which was
anticipated. Although general and administrative expenses are expected to
increase along with any increase in the size of the portfolio, it is also
anticipated that economies of scale will be realized with future growth, should
it occur.
Income from Investment in Unconsolidated Joint Ventures
Income from investment in unconsolidated joint ventures increased for the
Total Portfolio due to the acquisition of an interest in 1301 Avenue of the
Americas office property in August 2000 and the partial sale of 12 Office
Properties in December 1999 and two Office Properties in June 2000. EOP
Partnership retained an equity interest in these Office Properties that were
partially sold and accounts for its remaining interests under the equity method
of accounting. Prior to the sale, the results of operations of such Office
Properties were consolidated.
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Net Gain on Sales of Real Estate
Net gain on sales of real estate decreased due to the combined gross sales
price in excess of book value at the time of disposition for the seven office
properties, 11 parking facilities and the partial sale of two Office Properties
in 2000 being less than the combined gross sales price in excess of book value
at the time of disposition for four office properties and the partial sale of 12
Office Properties in 1999.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO DECEMBER 31, 1998
The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio consisting of 236 Office Properties and 16
Parking Facilities acquired or placed in service prior to January 1, 1998.
TOTAL PORTFOLIO CORE PORTFOLIO
--------------------------------------------- ---------------------------------------------
INCREASE/ % INCREASE/ %
1999 1998 (DECREASE) CHANGE 1999 1998 (DECREASE) CHANGE
---------- ---------- ---------- ------ ---------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
Property revenues............. $1,919,056 $1,658,420 $260,636 15.7% $1,379,062 $1,314,411 $ 64,651 4.9%
Fee income.................... 8,939 9,571 (632) (6.6) -- -- -- --
Interest/dividend income...... 14,248 11,708 2,540 21.7 1,554 1,844 (290) (15.7)
---------- ---------- -------- ----- ---------- ---------- -------- -----
Total revenues........ 1,942,243 1,679,699 262,544 15.6 1,380,616 1,316,255 64,361 4.9
---------- ---------- -------- ----- ---------- ---------- -------- -----
Interest expense.............. 413,995 338,611 75,384 22.3 110,731 139,927 (29,196) (20.9)
Depreciation and
amortization................ 358,989 305,982 53,007 17.3 262,894 243,006 19,888 8.2
Property operating expenses... 662,876 592,706 70,170 11.8 477,623 469,771 7,852 1.7
Ground rent................... 6,887 7,661 (774) (10.1) 6,179 7,203 (1,024) (14.2)
General and administrative.... 80,927 63,564 17,363 27.3 468 403 65 16.1
---------- ---------- -------- ----- ---------- ---------- -------- -----
Total expenses........ 1,523,674 1,308,524 215,150 16.4 857,895 860,310 (2,415) (0.3)
---------- ---------- -------- ----- ---------- ---------- -------- -----
Income before allocation to
minority interests, income
from investment in
unconsolidated joint
ventures, net gain on sales
of real estate and
extraordinary items......... 418,569 371,175 47,394 12.8 522,721 455,945 66,776 14.6
Minority interests............ (1,981) (2,114) 133 (6.3) (1,972) (2,096) 124 (5.9)
Income from investment in
unconsolidated joint
ventures.................... 13,824 11,267 2,557 22.7 10,512 8,928 1,584 17.7
Net gain on sales of real
estate...................... 59,661 12,433 47,228 379.9 -- -- -- --
Extraordinary items........... (10,548) (7,506) (3,042) 40.5 (9,527) -- (9,527) --
---------- ---------- -------- ----- ---------- ---------- -------- -----
Net income.................... $ 479,525 $ 385,255 $ 94,270 24.5% $ 521,734 $ 462,777 $ 58,957 12.7%
========== ========== ======== ===== ========== ========== ======== =====
Property revenues less
property operating expenses
before depreciation and
amortization, general and
administrative, ground rent
and interest expense........ $1,256,180 $1,065,714 $190,466 17.9% $ 901,439 $ 844,640 $ 56,799 6.7%
========== ========== ======== ===== ========== ========== ======== =====
Property Revenues
The increase in property revenues in the Core Portfolio resulted from a
combination of occupancy and rental rate increases. The weighted average
occupancy of the Core Portfolio increased from 93.8% at January 1, 1998 to 94.6%
at December 31, 1999. This increase represents approximately .5 million square
feet of additional occupancy in the Core Portfolio.
Property revenues for the Total Portfolio include lease termination fees of
approximately $15.9 million and $15.5 million for the years ended December 31,
1999 and 1998, respectively, and property revenues for the Core Portfolio
include lease termination fees of approximately $12.8 million and $14.0 million
for the years ended December 31, 1999 and 1998, respectively (lease termination
fees are included in the "other revenue" category on the consolidated statements
of operations). These fees relate to specific tenants who have paid a
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fee to terminate their lease obligations before the end of the contractual term
of their lease. Although EOP Partnership has historically experienced similar
levels of such termination fees, there is no way of predicting the timing or
amounts of future lease termination fees.
Property revenues for the Total Portfolio also include straight-line rent
adjustments of approximately $65.4 million and $68.1 million for the years ended
December 31, 1999 and 1998, respectively. Property revenues for the Core
Portfolio include straight-line rent adjustments of approximately $44.7 million
and $58.0 million for the years ended December 31, 1999 and 1998, respectively.
Interest Expense
Total Portfolio interest expense increased from the prior period as a
result of having more debt outstanding primarily attributable to property
acquisitions. The following statistics for each period for the Total Portfolio
are as follows:
- Total debt to total assets decreased to 41.7% from 42.3%;
- Interest coverage ratio decreased to 2.9 times from 3.0 times; and
- Weighted average interest rate increased to 7.2% from 7.1%.
Core Portfolio interest expense decreased from the prior period due to the
paydown of mortgage debt with proceeds from various unsecured notes offerings
and borrowing on the lines of credit. Interest expense on the unsecured notes
and the lines of credit is not reflected in the Core Portfolio.
Depreciation and Amortization
Total Portfolio depreciation and amortization expense increased as a result
of Properties acquired and capital and tenant improvements made during 1999 and
1998. Core Portfolio depreciation and amortization expense increased as a result
of capital and tenant improvements made to the Properties.
Property Operating Expenses
Core Portfolio property operating expenses increased due to an increase in
real estate tax expense of approximately $10.1 million due to higher property
tax assessments in certain markets and an increase in insurance expense. These
increases were partially offset by decreases in repairs and maintenance and
other property operating expenses.
General and Administrative Expenses
General and administrative expenses increased due to increases in the size
of EOP Partnership's portfolio and additional expenses associated with being a
public company. During 1999, EOP Partnership made significant investments in its
information systems, including the hiring of additional personnel and
established a real estate services group. In addition, EOP Partnership incurred
severance costs during 1999 that were not incurred in 1998. While general and
administrative expenses are expected to continue to increase along with any
increase in the size of EOP Partnership's portfolio, it is also anticipated that
EOP Partnership will realize economies of scale with future growth, should it
occur.
Income from Investment in Unconsolidated Joint Ventures
Income from investment in unconsolidated joint ventures increased for the
Total Portfolio due to the partial sale of twelve Office Properties in December
1999. EOP Partnership retained an equity interest in the twelve Office
Properties and accounts for its remaining interest under the equity method of
accounting. Prior to the sale, EOP Partnership consolidated the results of
operations of such Office Properties.
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ACCESS INCOME
EOP Partnership generates income by providing its tenants with access to
services and by investments in companies that provide tenant services. Below is
a table summarizing this income:
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
2000 1999
---------- ---------
(DOLLARS IN THOUSANDS)
REVENUES:
OTHER INCOME
Access services(1)........................................ $11,538 $7,537
Amortization of deferred revenue(2)....................... 5,715 693
INTEREST/DIVIDEND INCOME
HQ Global Workplaces, Inc................................. 6,893 --
INCOME FROM UNCONSOLIDATED JOINT VENTURES
Regus Equity Business Centers(3).......................... 1,083 --
Access services........................................... 922 86
------- ------
Total Access Income......................................... $26,151 $8,316
======= ======
- ---------------
(1) Amounts reflected for Access services include income from the following:
Telecom, Adcom, ATMs, Book Fairs and Vending.
(2) EOP Partnership received common stock and/or warrants to purchase common
stock for allowing companies that provide telecommunication and other
services access to EOP Partnership properties. The securities received from
these companies were recorded as deferred revenue at fair value at the time
such securities were earned and are included in other liabilities on the
balance sheet. The deferred revenue is being amortized into other income
over the terms of the respective license agreements.
(3) EOP Partnership indirectly owns a 47.5% membership interest in this joint
venture. The joint venture provides fully furnished offices under
short-term, flexible rental agreements to prospective tenants seeking this
type of office space.
PARKING OPERATIONS
In May 2000 EOP Partnership disposed of 11 of its 20 Parking Facilities.
The financial condition and the results of operations of the remaining nine
Parking Facilities are not considered by management to be material to EOP
Partnership's consolidated results. Therefore, summary financial information for
the Parking Facilities for the year ended December 31, 2000 is not presented.
The Total Portfolio and Core Portfolio selected operating information for
1999 and 1998 presented above includes results of operations from the Parking
Facilities. Summarized information for the Parking Facilities is presented
below.
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COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO DECEMBER 31, 1998
The table below represents selected operating information for the Total
Portfolio and the Core Portfolio consisting of 16 Parking Facilities acquired
prior to January 1, 1998.
TOTAL PORTFOLIO CORE PORTFOLIO
--------------------------------------- ---------------------------------------
INCREASE/ % INCREASE/ %
1999 1998 (DECREASE) CHANGE 1999 1998 (DECREASE) CHANGE
------- ------- ---------- ------ ------- ------- ---------- ------
(DOLLARS IN THOUSANDS)
Property revenues.................... $37,236 $29,435 $7,801 26.5% $32,617 $29,295 $3,322 11.3%
Interest/dividend income............. 495 140 355 253.6 77 140 (63) (45.0)
------- ------- ------ ----- ------- ------- ------ -----
Total revenues............... 37,731 29,575 8,156 27.6 32,694 29,435 3,259 11.1
------- ------- ------ ----- ------- ------- ------ -----
Interest expense..................... 3,181 5,496 (2,315) (42.1) 3,014 5,490 (2,476) (45.1)
Depreciation and amortization........ 6,581 5,542 1,039 18.7 5,505 5,542 (37) (0.7)
Property operating expenses.......... 7,905 8,096 (191) (2.4) 7,716 8,093 (377) (4.7)
Ground rent.......................... 50 50 -- -- 50 50 -- --
General and administrative........... 105 72 33 45.8 105 72 33 45.8
------- ------- ------ ----- ------- ------- ------ -----
Total expenses............... 17,822 19,256 (1,434) (7.4) 16,390 19,247 (2,857) (14.8)
------- ------- ------ ----- ------- ------- ------ -----
Income before allocation to minority
interests and income from
investment in unconsolidated joint
ventures........................... 19,909 10,319 9,590 92.9 16,304 10,188 6,116 60.0
Minority interests................... (463) (360) (103) 28.6 (463) (360) (103) 28.6
Income from investment in
unconsolidated joint ventures...... 1,740 1,884 (144) (7.6) 1,740 1,884 (144) (7.6)
------- ------- ------ ----- ------- ------- ------ -----
Net income........................... $21,186 $11,843 $9,343 78.9% $17,581 $11,712 $5,869 50.1%
======= ======= ====== ===== ======= ======= ====== =====
Property revenues less property
operating expenses before
depreciation and amortization,
general and administrative, ground
rent and interest expense.......... $29,331 $21,339 $7,992 37.5% $24,901 $21,202 $3,699 17.4%
======= ======= ====== ===== ======= ======= ====== =====
PROPERTY DISPOSITIONS
EOP Partnership has disposed or partially disposed of the following office
properties and parking facilities since January 1, 1998:
YEAR OFFICE PROPERTIES PARKING FACILITIES(2)
- ---- ------------------------------------------------------ ------------------------------------------------------
2000... Bank of America Tower(1) Agoura Hills Business Park 1111 Sansom Street Garage Capital Commons Garage
Sarasota City Center Westlake Spectrum Center 15th & Sansom Street Forbes and Allies
Media Center(3) I & II 1602-34 Chancellor Garage Garage(4)
Park Plaza Westwood Business Centre 1616 Sansom Street Garage Juniper/Locust Garage
500 Marquette Building Boston Harbor Garage Milwaukee Center Garage
Riverfront Center
1999... Atrium Towers SunTrust Center(1)
5100 Brookline Promenade II(1)
215 Fremont Street Pasadena Towers(1)
One Columbus Building Preston Commons(1)
10 and 30 South Wacker(1) Sterling Plaza(1)
Bank One Center(1)
1998... First Union Center Westshore Center
One Clearlake Centre Walker Building
Tampa Commons
(1) These Office Properties were partially sold. EOP Partnership accounts for
its remaining interest in these Office Properties under the equity method of
accounting.
(2) These 11 parking facilities were disposed of on May 17, 2000.
(3) Media Center was a development site.
(4) Consists of two parking facilities.
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Below is a summary of the results of operations of these properties through
their respective disposition dates:
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- --------- ---------
(DOLLARS IN THOUSANDS)
Property revenues..................................... $37,593 $241,932 $237,279
Interest income....................................... 93 303 121
------- -------- --------
Total revenues.............................. 37,686 242,235 237,400
------- -------- --------
Interest expense...................................... 419 11,462 14,208
Depreciation and amortization......................... 6,490 42,088 40,137
Property operating expenses........................... 11,329 80,585 85,004
Ground rent........................................... -- 50 315
General and administrative............................ 156 150 153
------- -------- --------
Total expenses.............................. 18,394 134,335 139,817
------- -------- --------
Income before allocation to minority interests, net
gain on sales of real estate and extraordinary
items............................................... 19,292 107,900 97,583
Minority interest -- partially owned properties....... (1,457) (472) (378)
Net gain on sales of real estate and extraordinary
items............................................... 35,749 58,869 12,433
------- -------- --------
Net income............................................ $53,584 $166,297 $109,638
======= ======== ========
Property revenues less property operating expenses
before depreciation and amortization, general and
administrative, ground rent and interest expense.... $26,264 $161,347 $152,275
======= ======== ========
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Net cash from operations represents the primary source of liquidity to fund
distributions, debt service, recurring capital costs and non-revenue enhancing
tenant improvements. EOP Partnership's partnership agreement generally requires
EOP Partnership to distribute substantially all of the net cash from operations
each quarter and to make reasonable efforts to distribute to Equity Office
enough cash for it to meet the 95% distribution requirement. EOP Partnership
expects that its Line of Credit will provide for temporary working capital, the
funding of capital improvements and revenue enhancing tenant improvements,
unanticipated cash needs and funding of acquisitions and development costs. EOP
Partnership currently intends to continue to make, but has not contractually
bound itself to make, regular quarterly distributions to holders of Units and
preferred units. Subject to the foregoing, EOP Partnership has established
annual distribution rates as follows:
- $1.80 per annum per Unit;
- 8.98% per annum ($2.245 per unit) for each Series A Preferred Unit;
- 5.25% per annum ($2.625 per unit) for each Series B Preferred Unit; and
- 8.625% per annum ($2.15625 per unit) for each Series C Preferred Unit.
Since EOP Partnership's anticipated distributions will not allow EOP
Partnership, using only cash from operations, to retire all of its debt as it
comes due, EOP Partnership will be required to repay maturing debt with funds
from debt and/or equity financing. There can be no assurance that such financing
will be available on acceptable terms or at all.
Debt Financing
The table below summarizes the mortgage debt, unsecured notes and lines of
credit indebtedness at December 31, 2000 and 1999, including a net unamortized
(discount)/premium on mortgage debt of $(17,825) and $10,574, respectively, and
a net unamortized (discount)/premium on unsecured notes of
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$(3,807) and $47, respectively, recorded in connection with property
acquisitions, mergers and the issuance of unsecured notes.
DECEMBER 31, DECEMBER 31,
2000 1999
(DOLLARS IN THOUSANDS) ------------ ------------
DEBT SUMMARY:
Balance
Fixed rate................................................ $8,618,517 $5,272,608
Variable rate............................................. 184,477 579,310
---------- ----------
Total.................................................. $8,802,994 $5,851,918
========== ==========
Percent of total debt:
Fixed rate................................................ 97.9% 90.1%
Variable rate............................................. 2.1% 9.9%
---------- ----------
Total.................................................. 100.0% 100.0%
========== ==========
Effective interest rate at end of period:
Fixed rate................................................ 7.5% 7.1%
Variable rate............................................. 7.7% 7.4%
---------- ----------
Effective interest rate................................ 7.5% 7.2%
========== ==========
The variable rate debt bears interest at an interest rate based on various
spreads over LIBOR.
MORTGAGE DEBT
As of December 31, 2000, total mortgage debt (excluding EOP Partnership's
share of unconsolidated debt of approximately $834.1 million) consisted of
approximately $2.8 billion of fixed-rate debt with a weighted average interest
rate of approximately 7.8% and $133.5 million of variable rate debt based on
various spreads over LIBOR. EOP Partnership's mortgage debt at December 31, 2000
will mature as follows:
(DOLLARS IN THOUSANDS)
2001........................................................ $ 158,653
2002........................................................ 177,692
2003........................................................ 200,261
2004........................................................ 325,714
2005........................................................ 529,706
Thereafter.................................................. 1,541,600
----------
Subtotal.................................................... 2,933,626
Net discount (net of accumulated amortization of $1.0
million).................................................. (17,825)
----------
Total............................................. $2,915,801
==========
The instruments encumbering the Properties restrict transfer of the
respective Properties subject to the terms of the mortgage, prohibit additional
liens and require payment of real estate taxes on the Properties, maintenance of
the Properties in good condition, maintenance of insurance on the Properties and
obtaining lender consent to material tenant leases.
LINES OF CREDIT
During 1999, EOP Partnership had a $1.0 billion revolving credit facility
(the "$1.0 Billion Credit Facility"). The interest rate was based on EOP
Partnership's investment grade rating on its unsecured debt and was at LIBOR
plus 60 basis points with a facility fee, based on the aggregate amount of the
facility, equal to 20 basis points per annum.
When the Cornerstone Merger was completed, the cash portion of the merger
consideration of approximately $1.2 billion was funded from the $1.0 Billion
Credit Facility and a new $1.0 billion revolving credit facility obtained in May
2000 (the "Line of Credit"). Concurrently with the Cornerstone Merger, EOP
Partnership borrowed $1.0 billion under the $1.0 Billion Credit Facility and
amended this facility into a term
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loan (the "Term Loan"). Interest on the Term Loan was based on LIBOR plus 80
basis points and was scheduled to mature on May 29, 2001. In November 2000, EOP
Partnership repaid the Term Loan and terminated the loan agreement. As a result,
EOP Partnership incurred an extraordinary loss of $.9 million representing
unamortized deferred loan costs.
The remaining cash consideration in the Cornerstone Merger was funded under
the Line of Credit, which bears interest at LIBOR plus 60 basis points and
matures on June 19, 2003. There is also an annual facility fee of $2.0 million
payable quarterly. In addition, a competitive bid option, whereby the lenders
participating in the credit facility bid on the interest rate to be charged, is
available for up to $350 million of the borrowings under the credit facility. In
addition, as part of the Cornerstone Merger, EOP Partnership assumed interest
rate protection agreements in the notional amount of $250 million ($185 million
terminated in December 2000 and the remaining interest rate protection
agreements terminated in January 2001). These interest rate protection
agreements effectively converted a portion of the Line of Credit to a
fixed-blended interest rate of 4.6% during the term of the protection
agreements. As of March 16, 2001, there was $76.0 million outstanding on the
Line of Credit.
In January 2000, EOP Partnership obtained an additional unsecured borrowing
facility from the Chase Manhattan Bank for short-term borrowings not to exceed
$300 million in the aggregate. Upon request of EOP Partnership, and at the
lender's option, the lender may offer to lend funds at mutually agreed upon
interest rates and terms, as determined by current market condition. In April
2000, this term loan was repaid in the amount of $100 million with proceeds from
the $1.0 Billion Credit Facility and the agreement was terminated.
Equity Office has guaranteed the outstanding obligations under the Line of
Credit and the Term Loan.
UNSECURED NOTES
The table below summarizes EOP Partnership's unsecured notes outstanding as
of December 31, 2000:
NET STATED EFFECTIVE
TERM MATURITY DATE AMOUNT PROCEEDS RATE RATE (1)
- ---- ------------- ------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
3 Years......................... 1/15/02 $ 200,000 $ 198,593 6.38% 6.62%
4 Years......................... 2/15/02 250,000(2) 252,225 6.38% 6.30%
5 Years......................... 2/15/03 300,000 294,120 6.38% 6.76%
3 Years......................... 11/15/03 400,000 397,874 7.38% 7.55%
5 Years......................... 1/15/04 300,000 297,034 6.50% 6.71%
6 Years......................... 6/15/04 250,000 247,269 6.50% 6.68%
7 Years......................... 9/1/04 30,000 29,960 7.24% 7.26%
7 Years......................... 2/15/05 400,000 388,089 6.63% 7.02%
8 Years......................... 9/1/05 50,000 48,705 7.36% 7.69%
6 Years......................... 3/15/06 500,000 493,531 8.38% 8.59%
9 Years......................... 9/1/06 50,000 48,624 7.44% 7.74%
9 Years......................... 6/15/07 300,000 299,957 6.76% 6.76%
10 Years........................ 9/1/07 50,000 48,584 7.41% 7.70%
7 Years......................... 11/15/07 600,000 593,374 7.75% 7.91%
10 Years........................ 2/15/08 300,000 291,655 6.75% 7.01%
8 Years......................... 11/15/08 325,000(3) 314,594 7.25% 7.64%
10 Years........................ 1/15/09 500,000 493,942 6.80% 6.94%
10 Years........................ 8/1/10 360,000 356,213 8.10% 8.22%
20 Years........................ 2/15/18 250,000 234,881 7.25% 7.54%
30 Years........................ 6/15/28 225,000 221,138 7.25% 7.31%
30 Years........................ 4/19/29 200,000 196,842 7.50% 7.55%
---------- ---------- ---- ----
Subtotal................... 5,840,000 $5,747,204 7.16% 7.35%
========== ==== ====
Net discount (net of accumulated
amortization of $.2
million)...................... (3,807)
----------
Total...................... $5,836,193
==========
37
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- ---------------
(1) Includes the cost of terminated interest rate protection agreements,
offering and transaction costs and premiums and discounts on certain
unsecured notes.
(2) The notes are subject to mandatory redemption and a remarketing agreement in
2002 but do not mature until 2012.
(3) These notes are exchangeable into Equity Office Common Shares at an exchange
price of $34.00 per share, which is equal to an exchange rate of 29.4118
Common Shares per $1,000 principal amount of notes. If the closing price of
a Common Share on the NYSE at the time a holder exercises its exchange right
is less than the exchange price of $34.00, the holder will receive, in lieu
of Common Shares, cash in an amount equal to 97% of the product of: (a) the
number of Common Shares into which the principal amount of notes subject to
such exercise would otherwise be exchangeable; and (b) such closing price
per Common Share. The notes were issued by EOP Partnership and are
guaranteed by Equity Office. Upon exchange of a $1,000 note for Common
Shares of Equity Office, EOP Partnership would issue a corresponding number
of Units to Equity Office on a one-to-one basis.
EOP Partnership previously filed a shelf registration statement, which was
declared effective on July 22, 1998, relating to the issuance from time to time
of up to $2.0 billion of unsecured debt securities and warrants exercisable for
debt securities in amounts, at initial prices and on terms to be determined at
the time of the offering. In August 2000, EOP Partnership registered an
additional $60 million of unsecured notes under this registration statement in
connection with the issuance of $360 million of senior exchangeable notes
guaranteed as to principal and interest by Equity Office. EOP Partnership has
issued a total of $2.06 billion of unsecured notes under the registration
statement, of which $860 million were issued in 2000. Net proceeds from the
issuance and sale of notes in 2000 were used to pay down balances from time to
time outstanding under the Term Loan.
EOP Partnership filed a shelf registration statement, which was declared
effective by the SEC on August 31, 2000, relating to the issuance from time to
time of up to an additional $2.0 billion of unsecured debt securities and
warrants exercisable for debt securities in amounts, at initial prices and on
terms to be determined at the time of the offering. In November 2000, EOP
Partnership issued $1.0 billion of unsecured notes under this registration
statement. The net proceeds from this offering were used to pay down the Term
Loan and the Line of Credit.
RESTRICTIONS AND COVENANTS
Agreements or instruments relating to the unsecured notes and lines of
credit contain certain restrictions and requirements regarding total
debt-to-assets ratios, secured debt-to-total assets ratios, debt service
coverage ratios, minimum ratio of unencumbered assets to unsecured debt and
other limitations.
EQUITY SECURITIES
A summary of the activity of Equity Office's Common Shares and EOP
Partnership's Units during 2000 is as follows:
COMMON SHARES UNITS TOTAL
------------- ---------- -----------
Balance at December 31, 1999................. 251,582,434 34,203,912 285,786,346
Issued for property acquisitions........... -- 436,303 436,303
Units redeemed for Common Shares........... 4,825,210 (4,825,210) --
Restricted Shares issued/cancelled, net.... 528,300 -- 528,300
Issued through exercise of options......... 3,592,769 -- 3,592,769
Issued in the Cornerstone Merger........... 51,168,041 12,398,805 63,566,846
Common Shares issued through the Dividend
Reinvestment Program.................... 4,695 -- 4,695
Common Shares issued for payment of Board
of Trustees fees........................ 7,647 -- 7,647
Units converted to cash.................... -- (152,919) (152,919)
Repurchases(a)............................. (4,742,500) -- (4,742,500)
----------- ---------- -----------
Balance at December 31, 2000................. 306,966,596 42,060,891 349,027,487
=========== ========== ===========
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39
- ---------------
(a) As part of the share repurchase plan, 4,742,500 Common Shares were
repurchased and retired in January and February 2000 at an average share
price of $25.27 for approximately $119.8 million in the aggregate,
including commissions of approximately $.2 million. The share repurchase
plan was suspended in February 2000.
MARKET RISK
QUALITATIVE INFORMATION ABOUT MARKET RISK
EOP Partnership's future earnings, cash flows and fair values relevant to
financial instruments are dependent upon prevalent market rates. Market risk is
the risk of loss from adverse changes in market prices and interest rates. EOP
Partnership manages its market risk by matching projected cash inflows from
operating, investing and financing activities with projected cash outflows to
fund debt service, acquisitions, capital expenditures, distributions to
shareholders and unitholders and other cash requirements. The majority of EOP
Partnership's outstanding debt (maturing at various times through 2029) has a
fixed interest rate, which minimizes the risk of fluctuating interest rates. EOP
Partnership utilizes certain derivative financial instruments at times to limit
interest rate risk. Interest rate protection agreements are used to convert
variable rate debt to a fixed rate basis or to hedge anticipated financing
transactions. Derivatives are used for hedging purposes rather than speculation.
EOP Partnership does not enter into financial instruments for trading purposes.
QUANTITATIVE INFORMATION ABOUT MARKET RISK
Interest Rate Risk
As of December 31, 2000, total outstanding debt was approximately $8.8
billion, of which approximately $184.5 million, or 2.1%, is variable rate debt.
If market rates of interest on the variable rate debt increase by 10% (or
approximately 76 basis points), the increase in interest expense on the variable
rate debt would decrease future earnings and cash flows by approximately $1.4
million annually. If market rates of interest increased by 10%, the fair value
of the total outstanding debt would decrease by approximately $84.1 million. If
market rates of interest on the variable rate debt decrease by 10% (or
approximately 76 basis points), the decrease in interest expense on the variable
rate debt would increase future earnings and cash flows by approximately $1.4
million annually. If market rates of interest decrease by 10%, the fair value of
the total outstanding debt would increase by approximately $85.8 million.
As of December 31, 1999, total outstanding debt was approximately $5.9
billion, of which approximately $.6 billion, or 10%, was variable rate debt. If
market rates of interest on the variable rate debt increased by 10% (or
approximately 74 basis points), the increase in interest expense on the variable
rate debt would have decreased future earnings and cash flows by approximately
$4.3 million. If market rates of interest increased by 10%, the fair value of
the total outstanding debt would have decreased by approximately $157.1 million.
If market rates of interest on the variable rate debt decreased by 10% (or
approximately 74 basis points), the decrease in interest expense on the variable
rate debt would have increased future earnings and cash flows by approximately
$4.3 million. If market rates of interest decreased by 10%, the fair value of
the total outstanding debt would have increased by approximately $166.2 million.
Market Rate Risk
At December 31, 2000, Equity Office had put option agreements outstanding
in connection with the acquisition of certain properties in 1997 from Wright
Runstad & Company. On August 12, 1999, Equity Office and the holders of the
Wright Runstad & Company options (the "WR Holders") amended their put option
agreement to defer to August 13, 2000 (or to August 13, 2001 at the option of
the WR Holders) the exercise date for 1,717,844 of the 3,435,688 Common Shares
affected by the put option agreement (a maximum exposure to Equity Office of
approximately $54.1 million when and if this put option is exercised). Equity
Office and the WR Holders also agreed to cancel the put option on the remaining
1,717,844 Common Shares in exchange for payment to the WR Holders of
approximately $11.3 million on September 13, 1999. Any amounts paid by Equity
Office resulted in EOP Partnership making an equal payment to Equity Office. The
payment represented the excess of $31.50 over $24.90 (the average price of a
Common Share calculated over the five trading days immediately prior to August
13, 1999), for each of the 1,717,844 Common Shares
39
40
affected by the put option agreement. The portion of the amounts paid in excess
of $29.10625 per Common Share totaling approximately $4.1 million was reflected
as a preferred distribution. The remaining $7.2 million of the payment was
recorded as a reduction to partners' equity.
The WR Holders exercised their option to extend the date to August 13,
2001, at which time the WR Holders can require Equity Office to purchase all or
a portion of the remaining 1,717,844 Common Shares issued to them at a price
equal to $31.50 per Common Share. Prior to such date, if the WR Holders sell all
or a portion of their Common Shares to a third party for a price less than
$29.10625, then Equity Office is obligated to pay to the WR Holders for each
Common Share sold at such lower price an amount equal to the difference between
$29.10625 and such lower price, not to exceed $3.00 per Common Share. Any
amounts paid by Equity Office as a result of such sales will result in EOP
Partnership making an equal payment to Equity Office and will be recorded as a
reduction in partners' capital. For put options exercised on August 13, 2001,
any amounts paid up to $29.10625 per Common Share would be reflected as a
reduction in partners' capital and the portion of any amounts paid in excess of
$29.10625 per Common Shares (not to exceed $2.39375 per Common Share up to an
aggregate of approximately $4.1 million) will be reflected as a put option
settlement. The $4.1 million portion of the total potential payment has been
reflected as a put option settlement on a straight-line basis over the period
between August 13, 1999 and August 13, 2000.
EOP Partnership's cash flows could decrease by up to $5.2 million if, prior
to August 13, 2001, the WR Holders sell all their Common Shares to third
parties. Cash flows may decrease by up to approximately $54.1 million if the WR
Holders exercise their rights under the put option agreement on August 13, 2001.
There will be no impact on cash flows from this transaction if the put option is
not exercised.
EOP Partnership has several investments in marketable securities. If the
market price of these securities increases or decreases by 10%, EOP
Partnership's investment in the securities would increase or decrease by
approximately $.7 million. Changes in the market prices of these securities are
required to be reflected as a corresponding adjustment to accumulated other
comprehensive income. At December 31, 2000, EOP Partnership had an unrealized
holding loss on these investments totaling approximately $28.3 million, which is
reflected as accumulated other comprehensive (loss) income. This compares to an
unrealized holding gain of $10.9 million at December 31, 1999. There will be no
impact on earnings or cash flows of EOP Partnership from market price
fluctuations unless EOP Partnership disposes of these investments or writes-down
the investments upon the determination that these investments have suffered a
permanent impairment.
Interest and market risk amounts were determined by considering the impact
of hypothetical interest rates and equity prices on EOP Partnership's financial
instruments. These analyses do not consider the effect of the reduced level of
overall economic activity that could exist in such an environment. Further, in
the event of a change of such magnitude, management would likely take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, these
analyses assume no changes in EOP Partnership's financial structure.
40
41
CAPITAL EXPENDITURES AND TENANT IMPROVEMENTS
Capital expenditures are categorized as follows:
- Non-recurring capital improvements -- capital improvements completed
in the year of acquisition and the following two years (which were planned
at the time of acquisition) and major renovations that enhance the value of
the property;
- Recurring capital expenditures -- capital improvements incurred that
enhance the value of the Property that are not classified as non-recurring
capital improvements;
- Development costs -- all hard and soft costs associated with the
development or redevelopment of a Property, including tenant improvements,
leasing commissions and capitalized interest and operating costs until the
Property is substantially complete and ready for its intended use;
- Revenue enhancing tenant improvements and leasing
commissions -- tenant improvements and leasing commissions incurred on
space which is vacant at the time of acquisition or has been vacant for
nine months or more; and
- Non-revenue enhancing tenant improvements and leasing
commissions -- tenant improvements and leasing commissions incurred in
connection with the renewal or retenanting of currently leased space to
maintain the revenue being generated by such space.
The table below details the amounts incurred for each type of expenditure:
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
2000 1999 1998
---------- ---------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER
SQUARE FOOT AMOUNTS)
CAPITAL EXPENDITURES:
Development costs..................................... $115,792 $133,243 $70,040
Non-recurring capital improvements.................... $ 34,636 $ 64,882 $44,058
Recurring capital expenditures........................ $ 25,467 $ 16,773 $12,767
Recurring capital expenditures per weighted average
square foot......................................... $ 0.29 $ 0.22 $ 0.18
TENANT IMPROVEMENTS AND LEASING COMMISSIONS:
(The amounts shown below represent the total tenant improvement and leasing commissions for
leases which commenced during the respective year, regardless of when such costs were
actually paid).
Revenue enhancing..................................... $ 45,131 $ 23,873 $42,817
Per square foot leased................................ $ 28.71 $ 20.25 $ 16.33
Non-revenue enhancing:
Non-revenue enhancing -- renewals................... $ 39,974 $ 31,638 $27,176
Per square foot leased.............................. $ 6.88 $ 7.30 $ 7.74
Non-revenue enhancing -- retenanted................. $ 90,706 $ 52,056 $33,324
Per square foot leased.............................. $ 13.71 $ 13.88 $ 16.97
-------- -------- -------
Total non-revenue enhancing........................... $130,680 $ 83,694 $60,500
Per square foot leased................................ $ 10.52 $ 10.35 $ 11.05
41
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DEVELOPMENTS
EOP Partnership currently owns several Properties in various stages of
development or pre-development. These developments are funded with proceeds from
working capital and the credit facility. Specifically identifiable direct
acquisition, development and construction costs are capitalized including, where
applicable, salaries and related costs, real estate taxes, interest and certain
pre-construction costs essential to the development of a property. The
Properties under development as of December 31, 2000 are as follows:
EOP PARTNERSHIP'S
------------------------
ESTIMATED COSTS
PLACED EFFECTIVE INCURRED
IN SERVICE NUMBER OF SQUARE OWNERSHIP AS OF
DATE(1) LOCATION BUILDINGS FEET PERCENTAGE 12/31/00
--------------- ----------------- --------- --------- ---------- -----------
(DOLLARS IN THOUSANDS)
WHOLLY-OWNED
- -------------------------
Parkside Towers.......... 4Q/2001 Foster City, CA 2 398,000 100% $ 64,172
EJ Randolph II........... 2Q/2002 McLean, VA 1 122,000 100% 6,250
-- --------- --------
3 520,000 70,422
-- --------- --------
EOP PARTNERSHIP'S
---------------------
TOTAL
TOTAL PROJECT CURRENT
ESTIMATED ESTIMATED PERCENTAGE
COSTS(1) COST LEASED
--------- --------- ----------
(DOLLARS IN THOUSANDS)
WHOLLY-OWNED
- -------------------------
Parkside Towers.......... $132,100 $132,100 96%
EJ Randolph II........... 35,700 35,700 100%
-------- -------- ---
167,800 167,800 97%
-------- -------- ---
ESTIMATED
PLACED
WILSON/EQUITY OFFICE IN SERVICE NUMBER OF SQUARE
DEVELOPMENTS(2) DATE(3) LOCATION BUILDINGS FEET
- -------------------- --------------- ----------------- --------- ---------
(DOLLARS IN THOUSANDS)
San Rafael Corporate
Center.................. 4Q/01 and 3Q/03 San Rafael, CA 5 382,000
Foundry Square (f/k/a
First and Howard)(5).... 2Q/02 - 3Q/03 San Francisco, CA 4 1,260,000
Ferry Building(6)........ 3Q/2002 San Francisco, CA 1 244,000
Concar(7)................ 4Q/2002 San Mateo, CA 2 207,000
Larkspur Landing(8)...... 3Q/2003 Larkspur, CA 2 168,000
-- ---------
14 2,261,000
-- ---------
GRAND TOTAL/WEIGHTED AVERAGE.................................. 17 2,781,000
== =========
EOP PARTNERSHIP'S
------------------------------------
EFFECTIVE COSTS TOTAL
OWNERSHIP INCURRED TOTAL PROJECT CURRENT
WILSON/EQUITY OFFICE PERCENTAGE AS OF ESTIMATED ESTIMATED PERCENTAGE
DEVELOPMENTS(2) (3) 12/31/00(3) COSTS(3) COSTS(4) LEASED
- -------------------- ---------- ----------- --------- --------- ----------
(DOLLARS IN THOUSANDS)
San Rafael Corporate
Center.................. 80% 27,654 113,200 141,500 0%
Foundry Square (f/k/a
First and Howard)(5).... (5) 26,061 249,000 436,200 42%
Ferry Building(6)........ 80% 6,742 66,000 82,400 0%
Concar(7)................ 80% 4,245 52,100 65,100 99%
Larkspur Landing(8)...... (8) -- -- 45,000 0%
-------- -------- -------- ---
64,702 480,300 770,200 33%
-------- -------- -------- ---
GRAND TOTAL/WEIGHTED AVER $135,124 $648,100 $938,000 45%
======== ======== ======== ===
- ---------------
(1) The Estimated Placed in Service Date represents the date the certificate of
occupancy has been or is currently anticipated to be obtained. Subsequent to
obtaining the certificate of occupancy, the Property is expected to undergo
a lease-up period. The Total Estimated Costs represent current estimates of
total development costs, including amounts required to tenant the Property.
These costs are estimates and are subject to change upon or prior to
completion of the development.
(2) EOP Partnership and Wilson Investors ("WI") entered into a joint venture
agreement to form Wilson/ Equity Office, LLC ("W/EO") for the purpose of
developing, constructing, leasing and managing developments. W/EO is owned
49.9% by EOP Partnership and 50.1% by WI. William Wilson III, a trustee of
Equity Office, through his ownership of WI, owns approximately 22% of W/EO
(and approximately 30% of any promote to which WI is entitled under the
joint venture agreement). EOP Partnership will loan up to $25 million to WI
for their required contribution to W/EO at a 15% return per annum. The
current outstanding balance of this loan as of December 31, 2000, is
approximately $4.1 million.
EOP Partnership has created or anticipates creating joint ventures with
W/EO, and, in certain cases, unaffiliated third parties, for the development
properties included herein. The costs for these developments generally will
be funded by EOP Partnership and W/EO in a 60%/40% ratio and in some cases
by third parties as described within each development's respective operating
agreement. The Board of Trustees of Equity Office has also authorized Equity
Office to negotiate and enter into an agreement with W/EO providing for the
extension of first mortgage financing to the ownership entities of each of
these developments at LIBOR plus 2.4642%, generally maturing 36 months after
initial funding, or earlier at the option of Equity Office in the event
alternative financing sources are available on terms reasonably acceptable
to WI and any unrelated third-party investors. The aggregate amount of any
such financing would be generally capped at 70% of budgeted construction
costs. In accordance with the W/EO
42
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Operating Agreement, EOP Partnership is entitled to purchase the W/EO
interest in each development subsequent to project stabilization.
(3) The Estimated Placed in Service Date represents the date the certificate of
occupancy has been or is currently anticipated to be obtained. Effective
Ownership Percentage represents EOP Partnership's direct interest in the
development and its 49.9% interest in W/EO. Costs Incurred as of December
31, 2000, and Total Estimated Costs are based on EOP Partnership's Effective
Ownership Percentage. The remaining ownership interest/costs are
owned/funded by WI through its investment in W/EO and on certain
developments unaffiliated third parties.
(4) Total Project Estimated Costs represents 100% of the estimated costs
including EOP Partnership's, WI's and any unaffiliated third party's
portions. These costs are subject to change upon or prior to the completion
of the development and include amounts required to tenant the Property.
(5) Foundry Square is a project with four sites, each of which has a separate
joint venture structure. EOP Partnership's Effective Ownership Percentages
are approximately 68%, 64%, 40% and 40%.
(6) Under the terms of the lease for the property, the lessor is entitled to
share, in addition to base rent, in 50% of proceeds from the operation and
ownership of this development after a preferred 11% cumulative return to the
lessee (8% prior to project stabilization). Other partners may share in
excess cash flow, if any.
(7) Under the terms of the ground lease, the ground lessor is entitled to share,
in addition to ground rent, in proceeds from the operation and ownership of
this development after a 10% return to lessee, calculated at 25.7% of
proceeds prior to a 14% cumulative return (18% after 2018) and 20.7%
thereafter.
(8) Larkspur Landing is a potential development currently being evaluated by
W/EO.
In addition to the developments described above, EOP Partnership owns
various land parcels available for development. These sites represent possible
future development of up to approximately seven million square feet of office
space. The development of these sites will be impacted by the timing and
likelihood of success of the entitlement process, which is uncertain. These
various sites include, among others: Reston Town Center, Reston, VA; Prominence
in Buckhead, Atlanta, GA; Perimeter Center, Atlanta, GA; Tabor Center, Denver,
CO; Orange Center, Orange, CA; and City Center Bellevue, Bellevue, WA.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The statement requires recording all
derivative instruments as assets or liabilities, measured at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The standard's effective date was deferred
by FASB Statement No. 137 to all fiscal years beginning after June 15, 2000. EOP
Partnership adopted the standard on January 1, 2001 and recorded a cumulative
effect of a change in accounting principle resulting in a loss of approximately
$1.1 million. Management does not anticipate that the adoption will have a
material impact on EOP Partnership's financial condition and results of
operations.
INFLATION
Substantially all of the office leases require the tenant to pay, as
additional rent, a portion of any increases in real estate taxes (except, in the
case of certain California leases, which limit the ability of the landlord to
pass through to the tenants the effect of increased real estate taxes
attributable to a sale of real property interests) and operating expenses over a
base amount. In addition, many of the office leases provide for fixed increases
in base rent or indexed escalations (based on the Consumer Price Index or other
measures). EOP Partnership believes that the majority of inflationary increases
in expenses will be offset, in part, by the expense reimbursements and
contractual rent increases described above.
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44
FUNDS FROM OPERATIONS
Management of EOP Partnership believes Funds from Operations, as defined by
the Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT") to be an appropriate measure of performance for an equity
REIT. While Funds from Operations is a relevant and widely used measure of
operating performance of equity REITs, it does not represent cash flow from
operations or net income as defined by GAAP, and it should not be considered as
an alternative to these indicators in evaluating liquidity or operating
performance of EOP Partnership.
The following table reflects the calculation of Funds from Operations for
the years ended December 31, 2000, 1999 and 1998:
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2000 1999 1998
----------- --------- -----------
(DOLLARS IN THOUSANDS)
Income before allocation to minority interests,
income from investment in unconsolidated
joint ventures, net gain on sales of real
estate and extraordinary items............... $ 446,617 $ 418,569 $ 371,175
Add (deduct):
Income allocated to minority interests for
partially owned properties................ (5,370) (1,981) (2,114)
Income from investment in unconsolidated
joint ventures............................ 56,251 13,824 11,267
Depreciation and amortization (real estate
related) (including share of
unconsolidated joint ventures)............ 459,385 368,490 313,519
Put option settlement........................ (2,576) (5,658) --
Preferred distributions...................... (43,348) (43,603) (32,202)
----------- --------- -----------
Funds from Operations(1)....................... 910,959 749,641 661,645
Less deferred rental revenue................. (69,822) (65,397) (68,107)
Plus deferred rental expense................. 2,477 2,083 2,613
----------- --------- -----------
Adjusted Funds from Operations................. $ 843,614 $ 686,327 $ 596,151
=========== ========= ===========
Cash Flow provided by (used for):
Operating Activities......................... $ 907,343 $ 720,711 $ 759,151
Investing Activities......................... $(1,311,778) $ (67,138) $(2,231,712)
Financing Activities......................... $ 455,353 $(718,315) $ 1,310,788
- ---------------
(1) The White Paper on Funds from Operations approved by NAREIT in March 1995
defines Funds from Operations as net income (loss), computed in accordance
with GAAP, excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. In November
1999, NAREIT issued a National Policy Bulletin effective January 1, 2000
clarifying the definition of Funds from Operations to include all operating
results, both recurring and non-recurring, except those defined as
extraordinary under GAAP. In accordance with this NAREIT Bulletin, EOP
Partnership no longer adjusts for the amortization of discounts and premiums
on mortgages when calculating Funds from Operations. Accordingly, EOP
Partnership restated the prior period data for comparative purposes. EOP
Partnership believes that Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of EOP Partnership to
incur and service debt, to make capital expenditures and to fund other cash
needs. EOP Partnership computes Funds from Operations in accordance with
standards established by NAREIT, which may not be comparable to Funds from
Operations reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current NAREIT
definition differently than EOP
44
45
Partnership. Funds from Operations does not represent cash generated from
operating activities in accordance with GAAP, nor does it represent cash
available to pay distributions and should not be considered as an
alternative to net income, determined in accordance with GAAP, as an
indication of EOP Partnership's financial performance or to cash flow from
operating activities, determined in accordance with GAAP, as a measure of
EOP Partnership's liquidity, nor is it indicative of funds available to fund
EOP Partnership's cash needs, including its ability to make cash
distributions.
45
46
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information about quantitative and qualitative disclosures about market
risk is incorporated herein by reference from Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Market Risk
section.
46
47
ITEM 8. FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT AUDITORS
The Partners of EOP Operating Limited Partnership
We have audited the accompanying consolidated balance sheets of EOP
Operating Limited Partnership ("EOP Partnership") as of December 31, 2000 and
1999, and the related consolidated statements of operations, partners' capital
and comprehensive income and cash flows for each of the three years in the
period ended December 31, 2000. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of EOP Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of EOP Partnership
at December 31, 2000 and 1999, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
February 5, 2001, except for Note 25,
as to which the date is February 23, 2001
47
48
EOP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-----------------------------
2000 1999
------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT
PER UNIT AMOUNTS)
ASSETS:
Investment in real estate................................. $17,460,534 $12,847,389
Developments in process................................... 70,422 229,225
Land available for development............................ 88,424 125,926
Accumulated depreciation.................................. (978,055) (630,387)
----------- -----------
Investment in real estate, net of accumulated
depreciation........................................... 16,641,325 12,572,153
Cash and cash equivalents................................. 53,256 2,338
Tenant and other receivables (net of allowance for
doubtful accounts of $1,873 and $1,244, respectively)... 101,784 54,497
Deferred rent receivable.................................. 207,088 138,697
Escrow deposits and restricted cash....................... 39,832 19,754
Investment in unconsolidated joint ventures............... 1,164,613 865,863
Deferred financing costs (net of accumulated amortization
of $21,756 and $14,863, respectively)................... 81,854 55,196
Deferred leasing costs (net of accumulated amortization of
$39,906 and $22,461, respectively)...................... 151,178 97,743
Prepaid expenses and other assets (net of discounts of
$78,871 and $63,787, respectively)...................... 353,323 239,817
----------- -----------
Total Assets............................................ $18,794,253 $14,046,058
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Mortgage debt (including a net (discount)/premium of
$(17,825) and $10,574, respectively).................... $ 2,915,801 $ 1,743,871
Unsecured notes (including a net (discount)/premium of
$(3,807) and $47, respectively)......................... 5,836,193 3,655,047
Lines of credit........................................... 51,000 453,000
Accounts payable and accrued expenses..................... 497,811 318,003
Distribution payable...................................... 3,681 5,446
Other liabilities......................................... 204,298 161,164
----------- -----------
Total Liabilities....................................... 9,508,784 6,336,531
----------- -----------
Commitments and contingencies.............................
Minority Interests: -- partially owned properties......... 197,161 39,027
----------- -----------
Preferred Units, 100,000,000 authorized:
8.98% Series A Cumulative Redeemable Preferred Units,
liquidation preference $25.00 per unit, 7,994,000 and
8,000,000 issued and outstanding....................... 199,850 200,000
5.25% Series B Convertible, Cumulative Redeemable
Preferred Units, liquidation preference $50.00 per
unit, 6,000,000 issued and outstanding................. 300,000 300,000
8.625% Series C Cumulative Redeemable Preferred Units,
liquidation preference $25.00 per unit, 4,562,900 and
4,600,000 issued and outstanding, respectively......... 114,073 115,000
General Partners Capital.................................. 70,490 58,482
Limited Partners Capital.................................. 8,447,021 6,996,144
Deferred compensation..................................... (14,871) (10,064)
Accumulated other comprehensive (loss) income............. (28,255) 10,938
----------- -----------
Total Partners' Capital................................. 9,088,308 7,670,500
----------- -----------
Total Liabilities and Partners' Capital................. $18,794,253 $14,046,058
=========== ===========
See accompanying notes.
48
49
EOP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
2000 1999 1998
-------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
REVENUES:
Rental........................................... $ 1,732,799 $ 1,493,196 $ 1,299,044
Tenant reimbursements............................ 324,193 281,358 239,390
Parking.......................................... 112,107 112,204 94,241
Other............................................ 48,047 32,298 25,745
Fee income....................................... 10,931 8,939 9,571
Interest/dividends............................... 36,166 14,248 11,708
------------ ------------ ------------
Total revenues........................... 2,264,243 1,942,243 1,679,699
------------ ------------ ------------
EXPENSES:
Interest:
Expense incurred.............................. 525,787 413,995 338,611
Amortization of deferred financing costs...... 9,746 4,693 6,404
Depreciation..................................... 399,768 339,751 291,213
Amortization..................................... 26,903 14,545 8,365
Real estate taxes................................ 268,305 243,778 203,805
Insurance........................................ 12,214 9,589 7,736
Repairs and maintenance.......................... 234,986 209,630 191,588
Property operating............................... 238,490 199,879 189,577
Ground rent...................................... 10,012 6,887 7,661
General and administrative....................... 91,415 80,927 63,564
------------ ------------ ------------
Total expenses........................... 1,817,626 1,523,674 1,308,524
------------ ------------ ------------
Income before allocation to minority interests,
income from investment in unconsolidated joint
ventures, net gain on sales of real estate and
extraordinary items.............................. 446,617 418,569 371,175
Minority Interests: -- partially owned
properties....................................... (6,843) (1,981) (2,114)
Income from investment in unconsolidated joint
ventures......................................... 56,251 13,824 11,267
Net gain on sales of real estate................... 36,013 59,661 12,433
------------ ------------ ------------
Income before extraordinary items.................. 532,038 490,073 392,761
Extraordinary items................................ (1,802) (10,548) (7,506)
------------ ------------ ------------
Net income......................................... 530,236 479,525 385,255
Put option settlement.............................. (2,576) (5,658) --
Preferred distributions............................ (43,348) (43,603) (32,202)
------------ ------------ ------------
Net income available for Units..................... $ 484,312 $ 430,264 $ 353,053
============ ============ ============
Net income available per weighted average Unit
outstanding -- Basic............................. $ 1.53 $ 1.49 $ 1.25
============ ============ ============
Weighted average Units outstanding -- Basic........ 316,067,694 288,326,547 282,114,343
============ ============ ============
Net income available per weighted average Unit and
unit equivalent outstanding -- Diluted........... $ 1.52 $ 1.48 $ 1.24
============ ============ ============
Weighted average Units and unit equivalents
outstanding -- Diluted........................... 318,997,407 291,157,204 283,974,532
============ ============ ============
See accompanying notes.
49
50
EOP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND
COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
PARTNERS' CAPITAL:
Balance, beginning of period................................ $7,680,564 $7,775,315 $7,139,849
Issuance of Units for Cornerstone Merger.................. 1,574,625 -- --
Redemption of Units for cash.............................. (3,780) -- --
Issuance of Units for acquisitions........................ 9,685 24,476 204,008
Issuance of Units through exercise of share options....... 81,956 2,681 15,435
Issuance of preferred units............................... -- -- 415,000
Preferred units and other offering costs.................. (28) (827) (14,630)
Sale of Units, net........................................ -- -- 43,983
Units issued for restricted units, trustee fees and for
the dividend reinvestment plan, net of restricted units
retired................................................. 12,917 -- 8,640
Common Shares and Units repurchased by EOP Partnership.... (119,633) (51,381) --
Preferred units repurchased............................... (1,077) -- --
Put option settlement..................................... (2,576) (61,459) --
Preferred distributions................................... (43,348) (43,603) (32,202)
Distributions declared to partners........................ (577,169) (455,101) (390,023)
---------- ---------- ----------
Total..................................................... 8,612,136 7,190,101 7,390,060
---------- ---------- ----------
Comprehensive Income:
Net income.............................................. 530,236 479,525 385,255
Other comprehensive income:
Unrealized holding gains arising during the period.... (39,193) 10,938 --
---------- ---------- ----------
Comprehensive Income...................................... 491,043 490,463 385,255
---------- ---------- ----------
Balance, end of period...................................... $9,103,179 $7,680,564 $7,775,315
========== ========== ==========
DEFERRED COMPENSATION:
Balance, beginning of period................................ $ (10,064) $ (14,997) $ (9,486)
Units granted............................................. (13,274) -- (8,640)
Units retired............................................. 757 -- --
Amortization of restricted units.......................... 7,710 4,933 3,129
---------- ---------- ----------
Balance, end of period...................................... $ (14,871) $ (10,064) $ (14,997)
========== ========== ==========
See accompanying notes.
50
51
EOP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES:
Net income.......................................... $ 530,236 $ 479,525 $ 385,255
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 436,417 358,989 305,982
Amortization of discounts included in
interest/dividend income....................... (958) -- --
Amortization of premiums/discounts on unsecured
notes and terminated interest rate protection
agreements..................................... 3,980 3,690 2,898
Amortization of deferred revenue included in
other income................................... (5,715) (693) --
Compensation related to restricted shares issued
to employees by Equity Office.................. 7,710 4,933 2,829
Units issued to Equity Office related to Common
Shares issued to Trustees for fees included in
general and administrative expense............. 232 -- --
Income from unconsolidated joint ventures........ (56,251) (13,824) (11,267)
Net gain on sales of real estate................. (36,013) (59,661) (12,433)
Extraordinary items.............................. 1,802 10,548 7,506
Provision for doubtful accounts.................. 2,389 1,585 890
Allocation to minority interests................. 6,843 1,981 2,114
Changes in assets and liabilities:
(Increase) in rents receivable................. (41,517) (19,889) (4,552)
(Increase) in deferred rent receivables........ (68,391) (51,582) (67,065)
Decrease in prepaid expenses and other
assets...................................... 6,653 429 10,756
Increase (decrease) in accounts payable and
accrued expenses............................ 119,470 (29,186) 87,569
(Decrease) increase in due to affiliates....... -- (1,136) 403
Increase in other liabilities.................. 456 35,002 48,266
----------- ----------- -----------
Net cash provided by operating activities... 907,343 720,711 759,151
----------- ----------- -----------
INVESTING ACTIVITIES:
Property acquisitions............................... (69,914) (122,419) (1,930,172)
Acquisition of Cornerstone Properties
Limited Partnership.............................. (1,159,440) -- --
Property dispositions............................... 352,375 452,659 10,175
Payments for capital and tenant improvements........ (293,711) (297,496) (207,093)
Distributions from unconsolidated joint ventures.... 174,817 45,536 46,122
Investments in unconsolidated joint ventures........ (228,924) (32,110) (42,019)
Payments of lease acquisition costs................. (79,440) (55,065) (46,337)
Contributions from minority interest partner in
partially owned properties....................... 204 11,000 --
Investments in securities........................... (87,075) (2,000)
Investments in notes receivable..................... (39,056) (110,594) --
Investment in preferred securities of Capital
Trust............................................ -- -- (48,532)
Decrease (increase) in escrow deposits and
restricted cash.................................. 118,386 43,351 (13,856)
----------- ----------- -----------
Net cash (used for) investing activities.... (1,311,778) (67,138) (2,231,712)
----------- ----------- -----------
51
52
EOP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
FINANCING ACTIVITIES:
Proceeds from Units, net of offering costs.......... $ -- $ -- $ 43,983
Repurchase of Units................................. (119,633) (51,381) --
Proceeds from exercise of share options............. 81,956 2,681 15,435
Redemption of Units for cash........................ (3,780) -- --
Distributions to unitholders........................ (578,893) (454,516) (388,954)
Put option settlement............................... -- (59,913) --
Payment of preferred distributions.................. (43,535) (43,822) (29,581)
Repurchase of preferred units, including transaction
costs............................................ (890) -- --
Proceeds from sale of preferred units, net of
offering costs................................... -- 400,487
Payment of offering costs........................... (28) (854) (117)
Distributions to minority interest in partially
owned properties................................. (13,732) (2,138) (3,366)
Proceeds from mortgage debt......................... 270,000 3,374 10,865
Proceeds from unsecured notes....................... 2,180,785 1,195,587 2,279,572
Proceeds from lines of credit....................... 5,168,975 1,814,500 4,922,500
Principal payments on mortgage debt................. (460,111) (519,671) (38,370)
Principal payments on lines of credit............... (5,986,516) (2,577,500) (5,841,197)
Payments of loan costs.............................. (39,245) (11,096) (22,192)
Termination of interest rate protection
agreements....................................... -- -- (38,277)
Prepayment penalties on early extinguishment of
debt............................................. -- (13,566) --
----------- ----------- -----------
Net cash provided by (used for) financing
activities................................ 455,353 (718,315) 1,310,788
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents...................................... 50,918 (64,742) (161,773)
Cash and cash equivalents at the beginning of the
period........................................... 2,338 67,080 228,853
----------- ----------- -----------
Cash and cash equivalents at the end of the
period........................................... $ 53,256 $ 2,338 $ 67,080
=========== =========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid during the period, including
capitalized interest of $14,764, $18,030 and
$15,077, respectively............................ $ 498,012 $ 402,683 $ 302,415
=========== =========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Mortgage loans and line of credit assumed through
Cornerstone Merger............................... $ 1,720,449 $ -- $ --
=========== =========== ===========
Net liabilities assumed through Cornerstone
Merger........................................... $ 19,792 $ -- $ --
=========== =========== ===========
Minority interest in partially owned properties
assumed through Cornerstone Merger............... $ 174,470 $ -- $ --
=========== =========== ===========
Units and options issued through Cornerstone
Merger........................................... $ 1,574,625 $ -- $ --
=========== =========== ===========
Units and put options issued through property
acquisitions..................................... $ 9,685 $ 24,476 $ 204,008
=========== =========== ===========
Escrow deposits used for property acquisitions...... $ 37,105 $ 192,427 $ --
=========== =========== ===========
Escrow deposits provided by property dispositions... $ (167,922) $ (95,956) $ (119,948)
=========== =========== ===========
Mortgage loan assumed/promissory notes issued
through property acquisitions.................... $ 65,661 $ 52,550 $ 406,837
=========== =========== ===========
Mortgage loan assumed by purchaser through property
disposition...................................... $ (11,369) $ (81,400) $ --
=========== =========== ===========
Deferred revenue recorded in connection with receipt
of securities.................................... $ 11,317 $ 32,276 $ --
=========== =========== ===========
See accompanying notes.
52
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND FORMATION OF EOP PARTNERSHIP
As used herein, "EOP Partnership" means EOP Operating Limited Partnership,
a Delaware limited partnership, together with its subsidiaries, and the
predecessors thereof ("Equity Office Predecessors"). EOP Partnership is a
subsidiary of Equity Office Properties Trust ("Equity Office"), a Maryland real
estate investment trust, which was formed on October 9, 1996 to continue and
expand the national office property business organized by Mr. Samuel Zell,
Chairman of the Board of Trustees of Equity Office, and to complete the
consolidation of the Equity Office Predecessors (the "Consolidation"). Equity
Office completed its initial public offering (the "IPO") on July 11, 1997 having
sold its common shares of beneficial interest, $0.01 par value per share
("Common Shares"). The net proceeds from the IPO were contributed to EOP
Partnership in exchange for units of partnership interest ("Units"). EOP
Partnership is a fully integrated, self-administered and self-managed real
estate company engaged in acquiring, owning, managing, developing, leasing and
renovating office properties and parking facilities. Equity Office's assets,
which include investments in joint ventures, are owned by, and substantially all
of its operations are conducted through EOP Partnership. Equity Office is the
general partner of EOP Partnership. Equity Office has elected to be taxed as a
real estate investment trust ("REIT") for federal income tax purposes and
generally will not be subject to federal income tax if it distributes 100% of
its taxable income and complies with a number of organizational and operational
requirements. As of December 31, 2000, EOP Partnership owned or had an interest
in 381 office properties (the "Office Properties") containing approximately 99.0
million rentable square feet of office space and owned nine stand-alone parking
facilities (the "Parking Facilities" and, together with the Office Properties,
the "Properties") containing approximately 14,244 parking spaces. The weighted
average occupancy for the Office Properties at December 31, 2000 was
approximately 94.6%. The Office Properties are located in 104 submarkets in 37
markets in 24 states and the District of Columbia. The Office Properties, by
rentable square feet, are located approximately 51.3% in central business
districts ("CBDs") and 48.7% in suburban markets.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements represent the financial condition and
results of EOP Partnership and its subsidiaries. All intercompany transactions
and balances have been eliminated in consolidation.
The Consolidation, the Beacon Merger and the Cornerstone Merger were
accounted for as purchases in accordance with Accounting Principles Board
Opinion No. 16. Accordingly, the fair value of the consideration given by EOP
Partnership was used as the valuation basis for these transactions. The assets
acquired and liabilities assumed by EOP Partnership were recorded at their fair
values as of the closing dates of the Consolidation, the Beacon Merger and the
Cornerstone Merger, as applicable, and the excess of the purchase price over the
related historical basis of the net assets acquired was allocated primarily to
investment in real estate.
Investment in Real Estate
Rental property and improvements, including interest and other costs
capitalized during construction, are included in investment in real estate and
are stated at cost. Expenditures for ordinary maintenance and repairs are
expensed to operations as they are incurred. Significant renovations and
improvements, which improve or extend the useful life of the assets are
capitalized. Except for amounts attributed to land, rental property and
53
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
improvements are depreciated over their estimated useful lives using the
straight-line method. The estimated useful lives by asset category are:
ASSET CATEGORY ESTIMATED USEFUL LIFE
- -------------- ---------------------
Building.................................................... 40 years
Building improvements....................................... 4-40 years
Tenant improvements......................................... Term of lease
Furniture and fixtures...................................... 3-12 years
Deferred Leasing and Financing Costs
Deferred leasing and financing costs are recorded at cost. The deferred
leasing costs are amortized over the terms of the respective leases and the
deferred financing costs are amortized over the terms of the respective
financings on a straight-line basis, which approximates the effective yield
method.
Rental Income
Certain leases provide for tenant occupancy during periods for which no
rent is due or where minimum rent payments increase during the term of the
lease. EOP Partnership records rental income for the full term of each lease on
a straight-line basis. Accordingly, a receivable is recorded from tenants for
the amount that is expected to be collected over the remaining lease term rather
than currently ("Deferred Rent Receivable"). When a property is acquired the
term of existing leases is considered to commence as of the acquisition date for
purposes of this calculation. The amounts included in rental income for the
years ended December 31, 2000, 1999 and 1998, which were not currently
collectible as of such dates, were approximately $69.8 million, $65.4 million
and $68.1 million, respectively. Deferred Rent Receivable is not recognized for
income tax purposes.
Cash Equivalents
Cash equivalents are considered to be all highly liquid investments
purchased with a maturity of three months or less at the date of purchase.
Escrow Deposits and Restricted Cash
Escrow deposits primarily consist of amounts held by lenders to provide for
future real estate tax expenditures and tenant improvements, earnest money
deposits on acquisitions and net proceeds from tax-exempt dispositions.
Restricted cash represents amounts committed for various utility deposits and
security deposits. Certain of these amounts may be reduced upon the fulfillment
of certain obligations.
Fair Value of Financial Instruments
Investments in marketable equity securities and investments in notes
receivable are reported at fair value and included in other assets. All
marketable equity securities held at December 31, 2000 were designated as
available for sale, with unrealized holding gains and losses included in
shareholders' equity as accumulated other comprehensive (loss) income.
Management believes that the carrying basis of the long-term debt
consisting of secured and unsecured borrowings and interest rate protection
agreements approximate their respective fair market values as of December 31,
2000 and 1999, respectively. The current value of debt was computed by
discounting the projected debt service payments for each loan based on the
spread between the market rate and the effective rate, including the
amortization of loan origination costs, for each year. In addition, the carrying
values of cash equivalents, restricted cash, escrow deposits, tenant and other
rents receivable, accounts payable and accrued expenses are reasonable estimates
of their fair value.
54
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Interest Rate Protection Agreements
EOP Partnership periodically enters into certain interest rate protection
agreements to effectively convert or cap floating rate debt to a fixed rate
basis, as well as to hedge anticipated future financing transactions. Net
amounts paid or received under these agreements are recognized as an adjustment
to interest expense when such amounts are incurred or earned. Settlement amounts
paid or received in connection with terminated interest rate protection
agreements are deferred and amortized as an adjustment to interest expense over
the term of the related financing transaction on a straight-line basis, which
approximates the effective yield method.
Derivatives and Hedging Activities
In June 1998, the FASB issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The statement requires recording all
derivative instruments as assets or liabilities, measured at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The standard's effective date was deferred
by FASB Statement No. 137 to all fiscal years beginning after June 15, 2000. EOP
Partnership adopted the standard on January 1, 2001 and recorded a cumulative
effect of a change in accounting principle resulting in a loss of approximately
$1.1 million. Management does not anticipate that the adoption will have a
material impact on EOP Partnership's financial condition and results of
operations.
Deferred Revenue
During 2000 and 1999, EOP Partnership received common stock and/or warrants
to purchase common stock for allowing companies that provide telecommunication
and other services access to the Properties. The securities received from these
companies were recorded as deferred revenue at fair value at the time such
securities were earned and are included in other liabilities on the balance
sheet. The deferred revenue will be amortized into other income over the terms
of the respective license agreements. As of December 31, 2000 and 1999,
approximately $37.2 million and $31.6 million is recorded as deferred revenue
relating to these agreements and is being amortized over a five-year period.
Approximately $5.7 million and $.7 million was recorded as other income during
2000 and 1999, respectively.
Income Taxes
EOP Partnership is not liable for federal taxes as the partners recognize
their proportionate share of EOP Partnership's income or loss in their tax
returns. The Office Properties and Parking Facilities primarily are owned by
limited partnerships or limited liability companies, which are substantially
pass-through entities. Some of the pass-through entities have corporate general
partners or members, which are subject to federal and state income and franchise
taxes. In addition, the management business is owned by a corporation and is
subject to federal and state income taxes. EOP Partnership incurred federal and
state income and franchise taxes of approximately $2.7 million, $0.7 million and
$1.7 million for the years ended December 31, 2000, 1999 and 1998, respectively,
which are included in general and administrative expenses.
Equity Office has elected to be taxed as a REIT, under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT,
Equity Office generally will not be subject to federal income tax if it
distributes 100% of its taxable income for each tax year to its shareholders.
REITs are subject to a number of organizational and operational requirements. If
Equity Office fails to qualify as a REIT in any taxable year, it will be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate tax rates. Even if Equity Office qualifies
for taxation as a REIT, Equity Office may be subject to state and local income
taxes and to federal income tax and excise tax on its
55
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
undistributed income. The aggregate cost of land and depreciable property for
federal income tax purposes as of December 31, 2000 and 1999 was approximately
$12.2 billion and $10.3 billion, respectively.
Minority Interests -- partially owned properties
Minority interests in partially owned properties is reflected on the
balance sheet for the portion of properties consolidated that are not wholly
owned. The earnings or losses from these properties attributable to the minority
interests are reflected as minority interests in partially owned properties in
the statements of operations.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States 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 revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been made to the previously reported 1999
and 1998 statements in order to provide comparability with the 2000 statements
reported herein. These reclassifications have not changed the 1999 or 1998
results or partners' capital.
NOTE 3 -- CORNERSTONE MERGER
On June 19, 2000, Equity Office, EOP Partnership, Cornerstone Properties
Inc. ("Cornerstone") and Cornerstone Properties Limited Partnership
("Cornerstone Partnership") completed the merger of Cornerstone Partnership with
and into EOP Partnership and the merger of Cornerstone with and into Equity
Office (collectively, the "Cornerstone Merger") at a total cost of approximately
$4.5 billion. The purchase price consisted of:
(1) the issuance by Equity Office of approximately 51.2 million Common
Shares valued at $24.68 per share and the issuance of approximately 3.7
million share options for a total of approximately $1,268.6 million, of
which EOP Partnership issued a corresponding number of Units to Equity
Office on a one-for-one basis;
(2) the issuance by EOP Partnership of approximately 12.4 million Units
to third parties valued at $24.68 per Unit for a total of approximately
$306.0 million;
(3) the cash redemption of approximately 58.5 million shares of
Cornerstone common stock valued at $18.00 per share for a total of
approximately $1,052.2 million;
(4) the cash redemption of approximately 3.0 million shares of
Cornerstone preferred stock valued at $18.00 per share, plus accrued but
unpaid dividends, for a total of approximately $57.6 million;
(5) the assumption of approximately $1,304.9 million of secured debt and
$415.5 million of unsecured debt;
(6) the payment of merger costs of approximately $82.9 million; and
(7) the assumption of net liabilities of approximately $19.8 million.
Certain of the amounts stated above related to the Cornerstone Merger are based
on management's current best estimates, which are subject to adjustment within
one year of the closing date of June 19, 2000.
The cash portion of the Cornerstone Merger of approximately $1.2 billion
was funded from various credit facilities (see Note 10 -- Lines of Credit and
Term Loans for more information). As a result of the
56
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- CORNERSTONE MERGER -- (CONTINUED)
Cornerstone Merger, EOP Partnership acquired an interest in 82 Office Properties
containing approximately 18.9 million square feet of office space.
NOTE 4 -- INVESTMENT IN REAL ESTATE
Investment in real estate, including Office Properties, Parking Facilities,
properties under development and vacant land was as follows:
DECEMBER 31,
-------------------------
2000 1999
----------- -----------
(DOLLARS IN THOUSANDS)
Land....................................................... $ 1,931,487 $ 1,278,310
Land available for development............................. 88,424 125,926
Building................................................... 14,790,576 11,123,181
Building improvements...................................... 276,793 162,628
Tenant improvements........................................ 417,661 261,121
Furniture and fixtures..................................... 44,017 22,149
Developments in process.................................... 70,422 229,225
----------- -----------
Gross investment in real estate.......................... 17,619,380 13,202,540
Accumulated depreciation................................... (978,055) (630,387)
----------- -----------
Net investment in real estate............................ $16,641,325 $12,572,153
=========== ===========
During the year ended December 31, 2000, in addition to the 82 Office
Properties acquired in the Cornerstone Merger, EOP Partnership acquired the
Properties, or remaining interests therein, listed below. Each Property was
purchased from an unaffiliated party, except for Sunset North Corporate Campus
and World Trade Center (see footnote (3) and (5) below), and was funded from
working capital, credit facilities, assumption of mortgage debt, and/or issuance
of Units. During 1999, EOP Partnership acquired ten Office Properties and one
Parking Facility for a total cost of approximately $393.2 million.
DATE RENTABLE TOTAL
ACQUIRED PROPERTY LOCATION SQUARE FEET ACQUISITION COST(1)
- -------- -------- -------- ----------- ----------------------
(DOLLARS IN THOUSANDS)
4/10/00 Metropoint II Denver, CO (2) $ 8,320(2)
5/23/00 Centerpointe III vacant land Fairfax, VA -- 8,168
6/30/00 Sunset North Corporate Campus Bellevue, WA (3) 27,999(3)
7/11/00 Two Lafayette Centre Washington, DC 130,704 29,317
8/21/00 203 North LaSalle and Theater Chicago, IL -- 15,134(4)
District Garage
9/8/00 World Trade Center East Seattle, WA 186,912 38,567(5)
12/22/00 Acorn Properties Various (6) 2,723(6)
------- --------
Total 317,616 $130,228
======= ========
- ---------------
(1) Total acquisition cost includes the purchase price specified in the purchase
contract, closing costs, acquisition costs and accounting adjustments
recorded in accordance with GAAP.
(2) The total acquisition cost of Metropoint II represents the cost to acquire
the remaining 30% limited partnership interest in the Property.
(3) The total acquisition cost of Sunset North Corporate Campus represents the
cost to acquire the remaining interest in the Property from Wright Runstad
Associates Limited Partnership ("WRALP"), a related party at the time of
acquisition (See Note 21 -- Related Party Transactions, subfootnote (3)) and
consisted of the assumption of debt and the remainder in cash.
57
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- INVESTMENT IN REAL ESTATE -- (CONTINUED)
(4) The total acquisition cost of 203 North LaSalle and the Theater District
Garage represents the cost to acquire the remaining interests in the
Property. The purchase price consisted of $12.5 million in cash and 91,406
Units valued at $28.81 per Unit.
(5) World Trade Center East was acquired from WRALP, a related party of EOP
Partnership. The acquisition was funded primarily through the repayment of a
$31.3 million mortgage note, the issuance of 227,011 Units recorded at
$27.89 per Unit for a total of approximately $6.3 million and the remainder
in cash.
(6) The total acquisition cost represents the cost to acquire the remaining 11%
interest in these Properties and consisted of the issuance of 73,776 Units
recorded at a weighted average cost of $32.11 per Unit and the remainder in
cash.
NOTE 5 -- DISPOSITIONS
During 2000, EOP Partnership disposed of the following office properties
and parking facilities:
DISPOSITION RENTABLE SALES GAIN/LOSS ON
DATE PROPERTY LOCATION SQUARE FEET PRICE SALE
- ----------- -------- -------- ----------- -------- ------------
(Dollars in thousands)
2/10/00 Sarasota City Center Sarasota, FL 247,891 $ 27,700 $ 4,098
3/10/00 Media Center (development site) Burbank, CA -- 20,000 (363)
5/17/00 Various parking facilities Various -- 180,000 22,353
6/2/00 Bank of America Tower Seattle, WA --(1) 209,580 13,344(1)
6/30/00 Park Plaza Pleasanton, CA 87,040 17,500 --
8/17/00 Agoura Hills Business Park Agoura Hills, CA 115,208 17,430 --
8/17/00 Westlake Spectrum Center I & II Westlake Village, CA 118,990 18,100 --
9/29/00 Westwood Business Centre Westwood, MA 164,985 24,000 (3,616)
12/22/00 500 Marquette Albuquerque, NM 230,022 21,700 (16)
Adjustment to gain on properties -- -- 213
disposed of in 1999
------- -------- -------
964,136 $536,010 $36,013
======= ======== =======
- ---------------
(1) A 49.9% interest in this 1,537,932 square foot Office Property was sold to
an unaffiliated party. The remaining 50.1% interest is accounted for using
the equity method of accounting.
During 1999, EOP Partnership disposed of four office properties totaling
668,796 square feet, a redevelopment property and partial interests in 12 Office
Properties in various transactions for approximately $631.9 million and
recognized a total net gain on sale of real estate of approximately $59.7
million.
During 1998, EOP Partnership disposed of four office properties located in
Florida and one office property located in Washington, D.C. The combined square
footage of these office properties was approximately 986,391 square feet. These
office properties were sold for approximately $132.6 million generating a gain
on sale of approximately $12.4 million.
NOTE 6 -- INVESTMENT IN NOTES RECEIVABLE
EOP Partnership has notes receivable that are included in Other Assets on
the Consolidated Balance Sheets consisting primarily of the following:
In 1999, EOP Partnership acquired a 67% share of a $202.2 million
mezzanine-level debt position for approximately $73.9 million as part of a debt
restructuring related to the SunAmerica Center office property. The discount to
the face amount of the note of approximately $64.2 million will be amortized to
interest income based on the estimated yield of the investment. The note accrues
interest at 7.25% per annum and matures on August 31, 2014. In addition, EOP
Partnership previously had entered into two forward rate interest protection
agreements effectively hedging the investment. These agreements were terminated
prior to
58
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- INVESTMENT IN NOTES RECEIVABLE -- (CONTINUED)
the investment in the mezzanine-level debt position for proceeds of
approximately $1.1 million. The proceeds are being amortized to interest income
over the term of the debt. In addition, EOP Partnership has the option to
acquire 67% of the aggregate face amount of two other subordinate notes from the
current holder, an affiliate of the property owner. The aggregate face amount of
these notes is $15.0 million at December 31, 2000 and 1999.
In December 2000, EOP Partnership loaned approximately $21.5 million to
Maguire Partners, a commercial real estate developer. The note matures on
December 14, 2001 and accrues interest at 20% per annum. The note is
collateralized by improvements to a 6.5-acre land parcel in Playa Vista,
California, on which a 426,000 square foot office complex will be developed. In
a separate agreement with the same party, EOP Partnership has the option to
enter into a joint venture agreement with Maguire Partners to acquire an equity
interest in the development. The option originally expired on March 15, 2001,
but was extended to May 1, 2001.
NOTE 7 -- INVESTMENT IN SECURITIES
EOP Partnership owns equity interests in several companies that provide
communication services or amenities to tenants. The equity interests are in the
form of common or preferred stock, vested and unvested warrants to acquire
common stock and an interest in a limited liability company. These investments
are included in Other Assets on the Consolidated Balance Sheets. Below is a
summary of these investments as of December 31, 2000:
SQUARE FEET TICKER CAPITAL SHARES WARRANTS BOOK
COMPANY (IN MILLIONS)(1) SYMBOL INVESTMENT RECEIVED(2) RECEIVED(2) VALUE(3)
- ------- ---------------- -------------- ----------- ----------- ----------- -----------
(DOLLARS IN (DOLLARS IN
THOUSANDS) THOUSANDS)
Allied Riser
Corporation............ 94 ARCC $ 2,253 885,941 1,927,226 $ 5,797
Broadband Office......... 58 Privately Held 3,517 2,656,609 -- 5,013
Captivate................ 72 Privately Held 10,015 2,253,836 2,406,781 20,388
Cypress.................. 17 CYCO 829 828,950 919,581 754
HQ Global Workplaces,
Inc. ("HQ")(4)......... -- Privately Held 82,097 1,839,497 555,911 82,097
Constellation Real
Technologies(5)........ -- Privately Held 2,742 -- -- 2,742
OnSite(6)................ 22 Privately Held -- -- -- --
-------- --------- --------- --------
Total.......... $101,453 8,464,833 5,809,499 $116,791
======== ========= ========= ========
- ---------------
(1) The Square Feet (in millions) represents the portion of EOP Partnership's
portfolio that is anticipated to be wired by each company in accordance with
their respective agreements. These approximate square footage amounts are
subject to change upon the signing of additional licensing agreements. As of
December 31, 2000, approximately 70% of EOP Partnership's portfolio was
wired and operational by at least one of EOP Partnership's strategic
telecommunications providers. The majority of the portfolio is currently
scheduled to be wired and operational by mid 2001.
(2) Common/preferred shares and warrants received may include amounts allocable
to joint venture partners. EOP Partnership may earn additional
common/preferred shares or warrants based upon achieving certain thresholds
in accordance with the respective investment agreements or upon the signing
of additional license agreements for properties.
(3) EOP Partnership's investments in publicly traded companies are adjusted to
reflect their current market values. EOP Partnership's investments in
privately held entities were recorded at estimated fair values when the
investment was made and are valued at the lower of cost or market.
59
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INVESTMENT IN SECURITIES -- (CONTINUED)
(4) EOP Partnership invested approximately $75 million in Series A Convertible
Cumulative Preferred Stock of HQ. The Series A Convertible Cumulative
Preferred Stock has an initial dividend rate of 13.5% per annum and
increases by 50 basis points each year. The accrued unpaid dividend, which
is included in the above value, was approximately $5.9 million at December
31, 2000. This dividend may be paid in shares of additional preferred stock.
The preferred stock is redeemable in 2004, matures in 2007, and may be
converted to HQ's common stock upon a qualifying merger or initial public
offering of HQ. In connection with the investment, EOP Partnership and HQ
entered into a joint venture agreement to own and develop full service
business centers in the EOP Partnership buildings. As of December 31, 2000,
no amounts have been funded by EOP Partnership to this joint venture.
(5) Constellation Real Technologies, LLC ("Constellation") is a real estate
technology company created by 11 of the nation's largest owners, managers
and developers of real estate. Constellation was created to sponsor real
estate-related Internet, e-commerce and telecommunications enterprises;
acquire interests in existing "best of breed" companies on a synergistic
basis; and act as an opportunistic consolidator across property sectors in
the real estate technology area. The 11 members have committed to contribute
a total of $135 million, with EOP Partnership committing up to $15 million.
EOP Partnership has contributed $2.7 million as of December 31, 2000.
(6) EOP Partnership entered into an agreement with OnSite Access, Inc.
("OnSite"), a facilities-based provider of broadband data, video and voice
communications services, delivered over fiber optic networks designed,
constructed and owned by OnSite in large- and medium-sized office buildings.
OnSite will provide its services to tenants in certain Office Properties. In
return for access to the Office Properties, OnSite is obligated to grant EOP
Partnership warrants to acquire common shares of OnSite for $2.36 per share.
In July 1998, EOP Partnership purchased 50,000 shares of Capital Trust
8.25% Preferred Securities, $1,000 liquidation preference per share, for $48.5
million. The discount of $1.5 million is being amortized as additional dividend
revenue over the term of 20 years. The preferred shares are convertible at any
time into common shares of Capital Trust at a conversion price of $11.70 and are
non-callable for five years. The dividend is payable each quarter and commencing
in year seven, the dividend will increase by 75 basis points per annum. Mr. Zell
is Chairman of the Board of Capital Trust. During 2000, the terms were amended
as follows:
(1) 60% of the investment, or approximately $30 million of the
preferred securities were amended as follows:
- The coupon rate of 8.25% remains fixed for two more years. Thereafter,
the rate will increase to the greater of:
- 10%, increasing by 75 basis points per annum commencing October 1,
2004, or
- a rate equal to Capital Trust's then dividend per common share
divided by $7.00;
- The conversion price decreased from $11.70 to $7.00 per share;
- The common share equivalent was fixed at 4,285,714 shares; and
- The call date was extended one year to September 30, 2004;
(2) 40% of the investment, or approximately $20 million of the
preferred securities were amended as follows:
- The coupon rate of 8.25% increased to 13.0% and remained fixed until
October 1, 2004 when it will increase by 75 basis points per annum;
- The conversion feature is eliminated; and
- The preferred securities may be called at any time; and
(3) The co-investment right was terminated.
60
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The following is a summary of EOP Partnership's economic ownership in
unconsolidated joint ventures:
ECONOMIC INTEREST AS OF
DECEMBER 31,
------------------------
2000(1) 1999(1)
-------- --------
PROPERTY
500 Orange Tower............................................ 100% 100%
St. Louis Parking Garages................................... 50% 50%
One Post Office Square...................................... 50% 50%
75-101 Federal Street....................................... 52% 52%
Rowes Wharf................................................. 39% 39%
Four Oaks Place............................................. 2.55% 2.55%
Key Center.................................................. 80% 80%
10 & 30 South Wacker........................................ 75% 75%
Bank One Center............................................. 25% 25%
Pasadena Towers............................................. 25% 25%
Promenade II................................................ 50% 50%
SunTrust Center............................................. 25% 25%
Preston Commons............................................. 50% 50%
Sterling Plaza.............................................. 50% 50%
1301 Avenue of the Americas(2).............................. 84.45% --
One Post(3)................................................. 50% --
Bank of America Tower(4).................................... 50.1% --
PROPERTIES UNDER DEVELOPMENT
Ferry Building(5)........................................... 80% --
Foundry Square(5)........................................... (5) --
800-900 Concar(5)........................................... 80% --
San Rafael(5)............................................... 80% --
OTHER
Wright Runstad Associates Limited Partnership............... 28.5% 28.5%
Regus Equity Business Centers, LLC.......................... 47.5% 47.5%
Wilson/Equity Office, LLC(5)................................ 49.9% --
- ---------------
(1) The amounts shown above approximate EOP Partnership's economic ownership
interest for the periods presented. Cash flow from operations, capital
transactions and net income are allocated to the joint venture partners in
accordance with their respective partnership agreements. EOP Partnership's
share of these items is subject to change based on, among other things, the
operations of the Property and the timing and amount of capital
transactions. EOP Partnership's legal ownership may differ.
(2) On August 2, 2000, a joint venture between EOP Partnership and an
unaffiliated party acquired a 45% general partner equity interest and a debt
interest in a limited partnership that owns 1301 Avenue of the Americas, a
1.77 million square foot office building located in Midtown Manhattan in New
York. EOP Partnership's share of the investment at closing was approximately
$163.2 million. In addition, EOP Partnership and its joint venture partner
purchased options to acquire the remaining 55% equity interest over a period
of three and one-half to eight years at a value described in the option
agreements.
(3) The interest in One Post was acquired as part of the Cornerstone Merger.
(4) On June 2, 2000, EOP Partnership entered into a joint venture agreement with
an unaffiliated party and sold a 49.9% interest in Bank of America Tower for
approximately $209.6 million. See Note 5 -- Dispositions.
61
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES -- (CONTINUED)
(5) See Note 21 -- Related Party Transactions, subfootnote (6). Foundry Square
is a project with four sites, each of which has a separate joint venture
structure. EOP Partnership's economic ownership interests are approximately
68%, 64%, 40% and 40%.
These investments are accounted for using the equity method of accounting
except for the investment in Four Oaks Place, which is accounted for utilizing
the cost method of accounting. Under the equity method of accounting, the net
equity investment of EOP Partnership is reflected on the consolidated balance
sheets, and the consolidated statements of operations include EOP Partnership's
share of net income or loss from the unconsolidated joint ventures. Any
difference between the carrying amount of these investments on the balance
sheets of EOP Partnership and the underlying equity in net assets is depreciated
as an adjustment to income from unconsolidated joint ventures over 40 years.
Combined summarized financial information of the unconsolidated joint
ventures is as follows:
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
(DOLLARS IN THOUSANDS)
Balance Sheets:
Real estate, net.......................................... $2,928,225 $1,719,417
Other assets.............................................. 239,267 106,211
---------- ----------
Total Assets........................................... $3,167,492 $1,825,628
========== ==========
Mortgage debt............................................. $1,333,304 $ 559,344
Other liabilities......................................... 138,210 58,793
Partners' and shareholders' equity........................ 1,695,978 1,207,491
---------- ----------
Total Liabilities and Partners' and Shareholders'
Equity................................................ $3,167,492 $1,825,628
========== ==========
EOP Partnership's share of equity........................... $1,016,213 $ 696,502
Net excess of cost of investments over/under the net book
value of underlying net assets, net of accumulated
depreciation of $16,905 and $11,679, respectively......... 148,400 169,361
---------- ----------
Carrying value of investments in unconsolidated joint
ventures.................................................. $1,164,613 $ 865,863
========== ==========
EOP Partnership's share of unconsolidated mortgage debt..... $ 834,093 $ 264,751
========== ==========
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Statements of Operations:
Revenues.................................................. $383,526 $119,566 $107,617
-------- -------- --------
Expenses:
Interest expense....................................... 74,376 18,787 17,004
Depreciation and amortization.......................... 63,376 19,968 18,916
Operating expenses..................................... 143,575 44,002 37,489
-------- -------- --------
Total expenses....................................... 281,327 82,757 73,409
-------- -------- --------
Net income before gain on sale of real estate............. 102,199 36,809 34,208
Gain on sale of real estate............................... 17,915 -- --
-------- -------- --------
Net income................................................ $120,114 $ 36,809 $ 34,208
======== ======== ========
EOP Partnership's share of net income....................... $ 56,251 $ 13,824 $ 11,267
======== ======== ========
EOP Partnership's share of interest expense................. $ 41,467 $ 9,116 $ 8,580
======== ======== ========
EOP Partnership's share of depreciation and amortization
(real estate related)..................................... $ 39,370 $ 15,741 $ 14,412
======== ======== ========
62
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- MORTGAGE DEBT
EOP Partnership had outstanding mortgage indebtedness of approximately $2.9
billion and $1.7 billion as of December 31, 2000 and 1999, respectively. The
historical cost, net of accumulated depreciation of encumbered properties at
December 31, 2000 and 1999 was approximately $6.3 billion and $3.8 billion,
respectively. During the years ended December 31, 2000 and 1999, the following
transactions occurred:
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
(DOLLARS IN THOUSANDS)
Balance at beginning of year(1)............................. $1,733,297 $2,336,571
Assumed through Cornerstone Merger........................ 1,336,148 --
Proceeds from financings.................................. 270,000 --
Assumed through property acquisitions..................... 65,661 52,550
Repaid or assumed by buyer upon sale of property.......... (11,369) (81,400)
Consolidated debt reclassed to investment in
unconsolidated joint ventures.......................... -- (58,127)
Proceeds from draws....................................... -- 3,374
Repayments/principal amortization......................... (460,111) (519,671)
---------- ----------
Balance at end of year(1)................................... $2,933,626 $1,733,297
========== ==========
- ---------------
(1) Excludes net (discount)/premium on mortgage debt of approximately $(17,825),
$10,574 and $13,517 as of December 31, 2000, 1999 and 1998, respectively.
Fixed Rate Mortgage Debt
As of December 31, 2000 and 1999, EOP Partnership had outstanding fixed
rate mortgage indebtedness of approximately $2.8 billion and $1.6 billion,
respectively. Payments on fixed rate mortgage debt are generally due in monthly
installments of principal and interest or interest only. As of December 31, 2000
and 1999, the effective interest rates ranged from 6.9% to 8.6% for both years,
respectively. The weighted average fixed effective interest rate was
approximately 7.8% and 7.5% as of December 2000 and 1999, respectively.
Variable Rate Mortgage Debt
As of December 31, 2000 and 1999, EOP Partnership had outstanding variable
rate mortgage indebtedness of approximately $133.5 million and $126.3 million,
respectively. Payments on variable rate mortgage debt are generally due in
monthly installments of principal and interest or interest only. The variable
interest rates are based on various spreads over LIBOR. As of December 31, 2000
and 1999, the weighted average variable effective interest rate was 7.7% and
7.2%, respectively.
63
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- MORTGAGE DEBT -- (CONTINUED)
Repayment Schedule
Scheduled payments of principal on mortgage debt for each of the next five
years and thereafter as of December 31, 2000 are as follows:
(DOLLARS IN THOUSANDS)
2001........................................................ $ 158,653
2002........................................................ 177,692
2003........................................................ 200,261
2004........................................................ 325,714
2005........................................................ 529,706
Thereafter.................................................. 1,541,600
----------
Subtotal.................................................... 2,933,626
Net discount (net of accumulated amortization of $1.0
million).................................................. (17,825)
----------
Total............................................. $2,915,801
==========
NOTE 10 -- LINES OF CREDIT AND TERM LOANS
On August 14, 1998, EOP Partnership completed a term loan agreement with
various financial institutions to provide EOP Partnership with a $328 million
unsecured term loan facility (the "$328 Million Credit Facility"). The $328
Million Credit Facility was priced at 90-day LIBOR plus 80 basis points and was
prepayable on any interest payment date. The term loan had a maturity date of
August 15, 2000. On August 9, 1999, EOP Partnership prepaid the $328 Million
Credit Facility with proceeds from a line of credit and approximately $.2
million of unamortized loan costs were written-off and accounted for as an
extraordinary loss.
During 1999, EOP Partnership had a $1.0 billion credit facility (the "$1.0
Billion Credit Facility"). EOP Partnership incurred fees of approximately $2.5
million at the closing for the facility, which, along with approximately $1.0
million of unamortized deferred financing costs from a previous line of credit,
were amortized over the term of the $1.0 Billion Credit Facility. The interest
rate was based on EOP Partnership's investment grade rating on its unsecured
debt and was at LIBOR plus 60 basis points with a facility fee, based on the
aggregate amount of the facility, equal to 20 basis points per annum.
When the Cornerstone Merger was completed, the cash portion of the merger
consideration of approximately $1.2 billion was funded from the $1.0 Billion
Credit Facility and a new $1.0 billion credit facility (the "Line of Credit"),
which was obtained in May 2000. Concurrently with the Cornerstone Merger, EOP
Partnership borrowed $1.0 billion from the $1.0 Billion Credit Facility and
amended the facility into a term loan (the "Term Loan"). Interest on the Term
Loan was based on LIBOR plus 80 basis points and was scheduled to mature on May
29, 2001. The Term Loan was repaid in full using proceeds from several debt
offerings completed during the latter part of 2000. As a result, EOP Partnership
incurred an extraordinary loss of $.9 million representing unamortized deferred
loan costs.
The remaining cash consideration in the Cornerstone Merger was funded from
the Line of Credit, which bears interest at LIBOR plus 60 basis points and
matures on June 19, 2003. There is also an annual facility fee of $2.0 million
payable quarterly. In addition, a competitive bid option, whereby the lenders
participating in the credit facility bid on the interest rate to be charged is
available for up to $350 million of the borrowings under the Line of Credit. In
addition, as part of the Cornerstone Merger, EOP Partnership assumed interest
rate protection agreements in the notional amount of $250 million ($185 million
terminated in December 2000 and the remaining interest rate protection
agreements terminated in January 2001). These interest rate protection
agreements effectively converted a portion of the Line of Credit to a
fixed-blended interest rate of 4.6% during the term of the protection
agreements.
64
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- LINES OF CREDIT AND TERM LOANS -- (CONTINUED)
In January 2000, EOP Partnership obtained an additional unsecured borrowing
facility from Chase Manhattan bank for short-term borrowings not to exceed $300
million in the aggregate. Upon request of EOP Partnership, and at the lender's
option, the lender could offer to lend funds at mutually agreed upon interest
rates and terms, as determined by current market conditions. In April 2000,
borrowings under this facility in the amount of $100 million were repaid with
proceeds from the $1.0 Billion Credit Facility and the agreement was terminated.
NOTE 11 -- UNSECURED NOTES
The table below summarizes EOP Partnership's unsecured notes outstanding as
of December 31, 2000:
NET STATED EFFECTIVE
TERM MATURITY DATE AMOUNT PROCEEDS RATE RATE(1)
- ---- ------------- ---------------------- ---------- ------ ---------
(DOLLARS IN THOUSANDS)
3 Years................ 1/15/02 $ 200,000 $ 198,593 6.38% 6.62%
4 Years................ 2/15/02 250,000(2) 252,225 6.38% 6.30%
5 Years................ 2/15/03 300,000 294,120 6.38% 6.76%
3 Years................ 11/15/03 400,000 397,874 7.38% 7.55%
5 Years................ 1/15/04 300,000 297,034 6.50% 6.71%
6 Years................ 6/15/04 250,000 247,269 6.50% 6.68%
7 Years................ 9/1/04 30,000 29,960 7.24% 7.26%
7 Years................ 2/15/05 400,000 388,089 6.63% 7.02%
8 Years................ 9/1/05 50,000 48,705 7.36% 7.69%
6 Years................ 3/15/06 500,000 493,531 8.38% 8.59%
9 Years................ 9/1/06 50,000 48,624 7.44% 7.74%
9 Years................ 6/15/07 300,000 299,957 6.76% 6.76%
10 Years................ 9/1/07 50,000 48,584 7.41% 7.70%
7 Years................ 11/15/07 600,000 593,374 7.75% 7.91%
10 Years................ 2/15/08 300,000 291,655 6.75% 7.01%
8 Years................ 11/15/08 325,000(3) 314,594 7.25% 7.64%
10 Years................ 1/15/09 500,000 493,942 6.80% 6.94%
10 Years................ 8/1/10 360,000 356,213 8.10% 8.22%
20 Years................ 2/15/18 250,000 234,881 7.25% 7.54%
30 Years................ 6/15/28 225,000 221,138 7.25% 7.31%
30 Years................ 4/19/29 200,000 196,842 7.50% 7.55%
---------- ---------- ----- -----
Subtotal..................... 5,840,000 $5,747,204 7.16% 7.35%
========== ===== =====
Net discount (net of accumulated
amortization of $.2 million)......... (3,807)
----------
Total........................ $5,836,193
==========
- ---------------
(1) Includes the cost of terminated interest rate protection agreements,
offering and transaction costs and premiums and discounts on certain
unsecured notes.
(2) These notes are subject to mandatory redemption and a remarketing agreement
in 2002 but does not mature until 2012.
(3) These notes are exchangeable into Common Shares of Equity Office at an
exchange price of $34.00 per share, which is equal to an exchange rate of
29.4118 Common Shares per $1,000 principal amount of notes. If the closing
price of a Common Share on the NYSE at the time a holder exercises its
exchange right is less than the exchange price of $34.00, the holder will
receive, in lieu of Common Shares, cash in
65
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- UNSECURED NOTES -- (CONTINUED)
an amount equal to 97% of the product of: (a) the number of Common Shares into
which the principal amount of notes subject to such exercise would otherwise be
exchangeable; and (b) such closing price per Common Share. Upon exchange of
a $1,000 note for Common Shares of Equity Office, EOP Partnership would
issue a corresponding number of Units to Equity Office on a one-for-one
basis. The notes were issued by EOP Partnership and are guaranteed by
Equity Office.
EOP Partnership previously filed a shelf registration statement, which was
declared effective on July 22, 1998, relating to the issuance from time to time
of up to $2.0 billion of unsecured debt securities and warrants exercisable for
debt securities in amounts, at initial prices and on terms to be determined at
the time of the offering. In August 2000, EOP Partnership registered an
additional $60 million of unsecured notes under this registration statement in
connection with the issuance of $360 million of senior exchangeable notes
guaranteed as to principal and interest by Equity Office. EOP Partnership has
issued a total of $2.06 billion of unsecured notes under the registration
statement, of which $860 million were issued in 2000. Net proceeds from the
issuance and sale of notes in 2000 were used to pay down balances from time to
time outstanding under the Term Loan.
EOP Partnership filed a shelf registration statement, which was declared
effective by the SEC on August 31, 2000, relating to the issuance from time to
time of up to an additional $2.0 billion of unsecured debt securities and
warrants exercisable for debt securities in amounts, at initial prices and on
terms to be determined at the time of the offering. In November 2000, EOP
Partnership issued $1.0 billion of unsecured notes under this registration
statement. The net proceeds from this offering were used to pay down the Term
Loan and the Line of Credit.
Restrictions and Covenants
Agreements or instruments relating to the unsecured notes and lines of
credit contain certain restrictions and requirements regarding total
debt-to-assets ratios, secured debt-to-total assets ratios, debt service
coverage ratios, minimum ratio of unencumbered assets to unsecured debt and
other limitations.
NOTE 12 -- MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES
The following Properties are controlled and partially owned by EOP
Partnership but have partners with minority interests. EOP Partnership has
included 100% of the financial condition and results of operations of these
properties in the consolidated financial statements and made an allocation to
the minority interests. The equity interests of the unaffiliated partners are
reflected as minority interests.
The amounts shown below approximate EOP Partnership's economic ownership
interest for the period presented. Cash flow from operations, capital
transactions and net income are allocated to the joint venture partners in
accordance with their respective partnership agreements. EOP Partnership's share
of these items
66
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES -- (CONTINUED)
are subject to change based on, among other things, the operations of the
Property and the timing and amount of capital transactions. EOP Partnership's
legal ownership may differ.
ECONOMIC
INTEREST AS OF
DECEMBER 31,
--------------
PROPERTY 2000 1999
- -------- ----- -----
The Plaza at La Jolla Village............................... 66.7% 66.7%
Park Avenue Tower(1)........................................ 94% 100%
850 Third Avenue(1)......................................... 94% 100%
Acorn Properties(2)......................................... 100% 89%
Capitol Commons Garage(3)................................... -- 50%
203 North LaSalle and Theater District Garages(2)........... 100% 50%
222 Berkley(4).............................................. 91.5% --
500 Boylston(4)............................................. 91.5% --
120 Montgomery(4)........................................... 66.7% --
Washington Mutual(4)........................................ 75% --
Norwest(4).................................................. 75% --
- ---------------
(1) In 2000, EOP Partnership and an unaffiliated party formed a partnership,
which owns Park Avenue Tower and 850 Third Avenue.
(2) EOP Partnership acquired the minority interest partners' interest in 2000.
See Note (4) -- Investment in Real Estate for additional information.
(3) EOP Partnership sold this Property in 2000.
(4) These Office Properties were acquired in the Cornerstone Merger.
EOP Partnership has additional Properties that are partially owned by
unaffiliated parties where EOP Partnership's approximate economic ownership is
100% and have not been presented above.
NOTE 13 -- PARTNERS' CAPITAL
Units
The following table presents the changes in the issued and outstanding
Units since January 1, 1999:
2000 1999
----------- -----------
Outstanding at January 1,................................. 285,786,346 288,547,356
Restricted Units issued/cancelled, net.................. 528,300 (20,000)
Issued to Equity Office related to Common Shares issued
for share option exercises........................... 3,592,769 128,287
Units issued in the Cornerstone Merger.................. 63,566,846 --
Units issued to Equity Office for Common Shares issued
through the Dividend Reinvestment Program............ 4,695 --
Units issued to Equity Office for Common Shares issued
for payment of Board of Trustees fees................ 7,647 --
Put options exercised................................... -- (1,675,000)
Issued for property acquisitions........................ 436,303 1,035,389
Repurchases(1).......................................... (4,742,500) (2,229,686)
Units converted to cash................................. (152,919) --
----------- -----------
Outstanding at December 31,............................... 349,027,487 285,786,346
=========== ===========
67
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- PARTNERS' CAPITAL -- (CONTINUED)
- ---------------
(1) In 1999, Equity Office announced a share repurchase plan. During 1999,
715,600 Common Shares were repurchased at an average share price of $23.14
for approximately $16.6 million in the aggregate and were retired along with
a corresponding number of Units. An additional 4,742,500 Common Shares were
repurchased and retired, along with a corresponding number of Units, between
January and February 2000 at an average share price of $25.27 for
approximately $119.8 million in the aggregate. In February 2000, Equity
Office suspended its share repurchase plan in anticipation of the
Cornerstone Merger. Prior to the implementation of Equity Office's share
repurchase plan, Equity Office repurchased 324,434 Common Shares, which
resulted in EOP Partnership repurchasing an equivalent number of Units from
Equity Office, and EOP Partnership repurchased approximately 1.2 million
Units in a private transaction.
Ownership of EOP Partnership
As of December 31, 2000 and 1999, Equity Office had a 1% general
partnership interest and an approximate 86.9% and 87.0% limited partnership
interest in EOP Partnership, respectively. The remaining limited partners had an
approximate 12.1% and 12.0% interest in EOP Partnership, respectively, and
consist of various individuals and entities that contributed their properties to
EOP Partnership in exchange for partnership interests and are represented by
42,060,891 Units and 34,203,912 Units, respectively, which are exchangeable on a
one-for-one basis into Equity Office's Common Shares.
In regards to Equity Office, net proceeds from the various offerings of
Equity Office have been contributed by Equity Office to EOP Partnership in
return for Units, which results in an increased ownership percentage that Equity
Office has in EOP Partnership.
Preferred Units
Equity Office has several series of preferred shares outstanding of which
EOP Partnership issued a corresponding number of preferred units to Equity
Office. Listed below is a summary of EOP Partnership's Preferred Units. The
Preferred Unit holders are entitled to receive, when and as authorized by EOP
Partnership, cumulative preferential cash distributions. EOP Partnership may
redeem the Preferred Units at certain dates in whole or in part at a cash
redemption price equal to the redemption preference plus all accrued unpaid
distributions to the date fixed for redemption.
QUARTERLY
ANNUAL LIQUIDATION CURRENT DISTRIBUTION EOP PARTNERSHIP'S
DISTRIBUTION PREFERENCE BALANCE AMOUNT PER DISTRIBUTION VOLUNTARY
SERIES RATE PER UNIT OUTSTANDING UNIT FREQUENCY REDEMPTION DATE
- ------ ------------ ----------- ----------- ------------ ------------ -----------------
A.................... 8.98% $25.00 $199,850 $ .56125 Quarterly on or after 6/15/2002
B(1)................. 5.25% $50.00 $300,000 $ .65625 Quarterly 2/15/2003 through 2/15/2008
C.................... 8.625% $25.00 $114,073 $.5390625 Quarterly on or after 12/8/2003
MATURITY
SERIES DATE
- ------ ---------
A.................... Perpetual
B(1)................. 2/15/08
C.................... Perpetual
- ---------------
(1) The Series B Preferred Shares are convertible at any time by the holder into
Equity Office Common Shares at a conversion price of $35.70 per Common
Share. Such conversion would require EOP Partnership to issue Units on a
one-for-one basis to Equity Office. These shares are non-callable for five
years with a mandatory call on February 15, 2008.
In January 2000, EOP Partnership repurchased 6,000 Series A Cumulative
Redeemable Preferred Units and 37,100 Series C Cumulative Redeemable Preferred
Units at an average unit price of $20.66 for approximately $.9 million in the
aggregate and the units were retired. The difference between the unit repurchase
amount and the carrying amount of the preferred units was classified as a
preferred distribution in the statement of operations for the year ended
December 31, 2000.
68
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- PARTNERS' CAPITAL -- (CONTINUED)
Distributions
The following tables summarize the distributions paid to unitholders and
preferred unitholders during the years ended December 31, 2000 and 1999:
DISTRIBUTION
AMOUNT PER DATE RECORD
UNIT PAID DATE
------------ ---- ------
Units.............................................. $ 0.45 12-29-00 12-15-00
$ 0.45 10-13-00 9-29-00
$ 0.42 7-17-00 6-30-00
$ 0.42 4-14-00 3-31-00
$ 0.42 12-29-99 12-15-99
$ 0.42 10-13-99 9-30-99
$ 0.37 7-12-99 6-30-99
$ 0.37 4-12-99 3-31-99
Series A Preferred Units........................... $ 0.56125 12-15-00 12-1-00
$ 0.56125 9-15-00 9-1-00
$ 0.56125 6-15-00 6-1-00
$ 0.56125 3-15-00 3-1-00
$ 0.56125 12-15-99 12-1-99
$ 0.56125 9-15-99 9-1-99
$ 0.56125 6-15-99 6-1-99
$ 0.56125 3-15-99 3-1-99
Series B Preferred Units........................... $ 0.65625 11-15-00 11-1-00
$ 0.65625 8-15-00 8-1-00
$ 0.65625 5-15-00 5-1-00
$ 0.65625 2-15-00 2-1-00
$ 0.65625 11-15-99 11-1-99
$ 0.65625 8-16-99 8-2-99
$ 0.65625 5-17-99 5-3-99
$ 0.65625 2-16-99 2-1-99
Series C Preferred Units........................... $0.5390625 12-15-00 12-1-00
$0.5390625 9-15-00 9-1-00
$0.5390625 6-15-00 6-1-00
$0.5390625 3-15-00 3-1-00
$0.5390625 12-15-99 12-1-99
$0.5390625 9-15-99 9-1-99
$0.5390625 6-15-99 6-1-99
$ 0.58099(1) 3-15-99 3-1-99
- ---------------
(1) The distribution represents a prorated distribution from December 8, 1998
(the date the Series C Preferred Units were issued) through March 14, 1999.
69
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- FUTURE MINIMUM RENTS
Future minimum rental receipts due on noncancelable operating leases at the
Office Properties and Parking Facilities as of December 31, 2000 were as
follows:
(DOLLARS IN THOUSANDS)
2001............................................. $ 1,922,734
2002............................................. 1,764,390
2003............................................. 1,536,945
2004............................................. 1,301,187
2005............................................. 1,063,946
Thereafter....................................... 3,460,407
-----------
Total............................................ $11,049,609
===========
EOP Partnership is subject to the usual business risks associated with the
collection of the above scheduled rents. The future minimum rents from EOP
Partnership's investment in unconsolidated joint ventures have not been included
in the above schedule.
NOTE 15 -- FUTURE MINIMUM LEASE PAYMENTS
As of December 31, 2000, there are certain Office Properties and Parking
Facilities that are subject to ground leases. Certain of these leases are
subject to rental increases based upon the appraised value of the Property at
specified dates or certain financial calculations based on the operations of the
respective Property. As disclosed in Note 21, EOP Partnership leases its office
space from an affiliate. Future minimum lease obligations under these
noncancelable leases as of December 31, 2000 were as follows:
(DOLLARS IN THOUSANDS)
2001............................................. $ 11,303
2002............................................. 11,285
2003............................................. 11,281
2004............................................. 8,782
2005............................................. 8,424
Thereafter....................................... 610,391
--------
Total............................................ $661,466
========
Rental expense for the years-ended December 31, 2000, 1999 and 1998 was
approximately $12.8 million $10.6 million and $11.1 million, respectively.
NOTE 16 -- EXTRAORDINARY ITEMS
EOP Partnership incurred extraordinary losses of approximately $1.8
million, $10.5 million and $7.5 million during the years ended December 31,
2000, 1999 and 1998, respectively. These extraordinary losses related to the
write-off of unamortized deferred loan costs and unamortized discounts and
premiums and pre-payment penalties related to the early extinguishment of debt
in those years. Approximately $7.0 million of the extraordinary loss in 1998 was
related to fees charged upon the termination of $300 million of interest rate
protection agreements in connection with the issuance of the Series B Preferred
Units.
70
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- EARNINGS PER UNIT
The following table sets forth the computation of basic and diluted
earnings per Unit:
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
2000 1999 1998
------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
NUMERATOR:
Net income available for Units before net gain
on sales of real estate and extraordinary
items....................................... $ 451,574 $ 381,151 $ 348,126
Net gain on sales of real estate (excluding
allocation to minority interests in
partially owned properties of $1,473 for the
year ended December 31, 2000)............... 34,540 59,661 12,433
Extraordinary items............................ (1,802) (10,548) (7,506)
------------- ------------- -------------
Numerator for basic and diluted earnings per
Unit -- net income available for Units and
unit equivalents............................ $ 484,312 $ 430,264 $ 353,053
============= ============= =============
DENOMINATOR:
Denominator for basic earnings per
Unit -- weighted average Units
outstanding................................. 316,067,694 288,326,547 282,114,343
Effect of dilutive securities:
Units issuable upon exercise of Equity
Office share options, put options and
restricted shares......................... 2,929,713 2,830,657 1,860,189
------------- ------------- -------------
Denominator for diluted earnings per
Unit -- adjusted weighted average Units and
unit equivalents outstanding................ 318,997,407 291,157,204 283,974,532
============= ============= =============
BASIC EARNINGS AVAILABLE FOR UNITS PER WEIGHTED
AVERAGE UNIT:
Net income before net gain on sales of real
estate and extraordinary items.............. $ 1.43 $ 1.32 $ 1.23
Net gain on sales of real estate............... 0.11 0.21 0.05
Extraordinary items............................ (0.01) (0.04) (0.03)
------------- ------------- -------------
Net income..................................... $ 1.53 $ 1.49 $ 1.25
============= ============= =============
DILUTED EARNINGS AVAILABLE FOR UNITS AND UNIT
EQUIVALENTS PER WEIGHTED AVERAGE UNIT AND UNIT
EQUIVALENT:
Net income before net gain on sales of real
estate and extraordinary items.............. $ 1.42 $ 1.31 $ 1.23
Net gain on sales of real estate............... 0.11 0.20 0.04
Extraordinary items............................ (0.01) (0.03) (0.03)
------------- ------------- -------------
Net income..................................... $ 1.52 $ 1.48 $ 1.24
============= ============= =============
71
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- EARNINGS PER UNIT -- (CONTINUED)
The following securities were not included in the computation of diluted
earnings per Unit and unit equivalents since they would have an antidilutive
effect:
FOR THE YEAR ENDED DECEMBER 31,
WEIGHTED AVERAGE ------------------------------------
ANTIDILUTIVE SECURITIES EXERCISE PRICE 2000 1999 1998
- ----------------------- ---------------- ---------- ---------- ----------
Share options............................ $30.250 3,019,089 -- --
Share options............................ $30.040 -- 3,435,762 --
Share options............................ $30.270 -- -- 2,969,608
Series B Preferred Shares................ $35.700 6,000,000 6,000,000 6,000,000
Warrants................................. $39.375 5,000,000 5,000,000 5,000,000
---------- ---------- ----------
Total.......................... 14,019,089 14,435,762 13,969,608
========== ========== ==========
Upon exercise of the above antidilutive securities, EOP Partnership would
issue a corresponding number of Units to Equity Office on a one-for one basis.
For additional disclosures regarding the employee stock options and the
restricted shares see Note 22 -- Share Option Plan and Share Award Plan.
NOTE 18 -- SEGMENT INFORMATION
As discussed in Note 1, EOP Partnership's primary business is the ownership
and operation of Office Properties. EOP Partnership's long-term tenants are in a
variety of businesses and no single tenant is significant to EOP Partnership's
business. Information related to this segment for the years ended December 31,
2000, 1999 and 1998 is below:
FOR THE YEAR ENDED DECEMBER 31, 2000
--------------------------------------------
OFFICE CORPORATE
PROPERTIES AND OTHER CONSOLIDATED
----------------- --------- ------------
(DOLLARS IN THOUSANDS)
Property Operating Revenues........................... $ 2,190,903 $ 26,243 $ 2,217,146
Property Operating Expenses........................... (746,217) (7,778) (753,995)
----------- --------- -----------
Net operating income................................ 1,444,686 18,465 1,463,151
----------- --------- -----------
Adjustments to arrive at net income:
Other revenues...................................... 3,615 43,482 47,097
Interest expense(1)................................. (166,730) (359,057) (525,787)
Depreciation and amortization....................... (415,531) (20,886) (436,417)
Ground rent......................................... (9,994) (18) (10,012)
General and administrative.......................... (1,873) (89,542) (91,415)
----------- --------- -----------
Total adjustments to arrive at net income........... (590,513) (426,021) (1,016,534)
----------- --------- -----------
Income before allocation to minority interests, income
from investment in unconsolidated joint ventures,
net gain on sales of real estate and extraordinary
items............................................... 854,173 (407,556) 446,617
Minority interests.................................... (5,385) (1,458) (6,843)
Income from investment in unconsolidated joint
ventures............................................ 53,189 3,062 56,251
Net gain on sales of real estate and extraordinary
items............................................... 13,049 21,162 34,211
----------- --------- -----------
Net income............................................ $ 915,026 $(384,790) $ 530,236
=========== ========= ===========
Capital and tenant improvements....................... $ 270,259 $ 23,452 $ 293,711
=========== ========= ===========
Total Assets........................................ $18,182,977 $ 611,276 $18,794,253
=========== ========= ===========
72
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18 -- SEGMENT INFORMATION -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
--------------------------------------------
OFFICE CORPORATE
PROPERTIES AND OTHER CONSOLIDATED
----------------- --------- ------------
(DOLLARS IN THOUSANDS)
Property Operating Revenues............................ $ 1,881,820 $ 37,236 $ 1,919,056
Property Operating Expenses............................ (654,971) (7,905) (662,876)
----------- --------- -----------
Net operating income................................. 1,226,849 29,331 1,256,180
----------- --------- -----------
Adjustments to arrive at net income:
Other revenues....................................... 5,282 17,905 23,187
Interest expense(1).................................. (129,021) (284,974) (413,995)
Depreciation and amortization........................ (345,458) (13,531) (358,989)
Ground rent.......................................... (6,836) (51) (6,887)
General and administrative........................... (415) (80,512) (80,927)
----------- --------- -----------
Total adjustments to arrive at net income......... (476,448) (361,163) (837,611)
----------- --------- -----------
Income before allocation to minority interests, income
from investment in unconsolidated joint ventures, net
gain on sales of real estate and extraordinary
items................................................ 750,401 (331,832) 418,569
Minority interests..................................... (1,518) (463) (1,981)
Income from investment in unconsolidated joint
ventures............................................. 11,779 2,045 13,824
Net gain on sales of real estate and extraordinary
items................................................ 49,343 (230) 49,113
----------- --------- -----------
Net income............................................. $ 810,005 $(330,480) $ 479,525
=========== ========= ===========
Capital and tenant improvements........................ $ 267,637 $ 29,859 $ 297,496
=========== ========= ===========
Total Assets...................................... $13,490,266 $ 555,792 $14,046,058
=========== ========= ===========
FOR THE YEAR ENDED DECEMBER 31, 1998
-------------------------------------
OFFICE CORPORATE
PROPERTIES AND OTHER CONSOLIDATED
---------- --------- ------------
(DOLLARS IN THOUSANDS)
Property Operating Revenues.............................. $1,628,985 $ 29,435 $1,658,420
Property Operating Expenses.............................. (584,610) (8,096) (592,706)
---------- --------- ----------
Net operating income................................... 1,044,375 21,339 1,065,714
---------- --------- ----------
Adjustments to arrive at net income:
Other revenues......................................... 1,879 19,400 21,279
Interest expense(1).................................... (144,987) (193,624) (338,611)
Depreciation and amortization.......................... (294,574) (11,408) (305,982)
Ground rent............................................ (7,611) (50) (7,661)
General and administrative............................. (417) (63,147) (63,564)
---------- --------- ----------
Total adjustments to arrive at net income........... (445,710) (248,829) (694,539)
---------- --------- ----------
Income before allocation to minority interests, income
from investment in unconsolidated joint ventures, gain
on sales of real estate and extraordinary items........ 598,665 (227,490) 371,175
Minority interests....................................... (1,755) (359) (2,114)
Income from investment in unconsolidated joint
ventures............................................... 7,653 3,614 11,267
Gain on sales of real estate and extraordinary items..... 12,433 (7,506) 4,927
---------- --------- ----------
Net income............................................... $ 616,996 $(231,741) $ 385,255
========== ========= ==========
Capital and tenant improvements.......................... $ 200,033 $ 7,060 $ 207,093
========== ========= ==========
- ---------------
(1) Interest expense for the Office Properties does not include allocation of
interest expense on corporate unsecured debt.
73
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19 -- PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
The pro forma data presented below is included to illustrate the effect on
EOP Partnership's operations as a result of the Cornerstone Merger as if it
occurred on January 1, 2000 and 1999, respectively. The pro forma condensed
consolidated financial statements have been prepared by management and do not
purport to be indicative of the results which would actually have been obtained
had the Cornerstone Merger been completed on January 1, 2000 and 1999,
respectively, or which may be obtained in the future.
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999
--------------- ---------------
Total Revenues.............................................. $ 2,546,657 $ 2,563,842
============ ============
Net income available for Units.............................. $ 553,687 $ 622,605
============ ============
Net income per Unit -- Basic................................ $ 1.60 $ 1.77
============ ============
Units outstanding -- Basic.................................. 345,536,101 351,114,475
============ ============
Net income per weighted average Unit and unit equivalent
outstanding -- Diluted.................................... $ 1.58 $ 1.76
============ ============
Units and unit equivalents outstanding -- Diluted........... 349,081,912 354,965,413
============ ============
74
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20 -- QUARTERLY DATA (UNAUDITED)
Quarterly data for the last two years are presented in the tables below:
FOR THE THREE MONTHS ENDED
---------------------------------------------------------
12/31/00 9/30/00 6/30/00 3/31/00
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Total Revenues............... $ 657,215 $ 641,301 $ 496,852 $ 468,875
============ ============ ============ ============
Income before allocation to
minority interests, income
from investment in
unconsolidated joint
ventures, net gain on sales
of real estate and
extraordinary items........ $ 120,577 $ 119,451 $ 104,910 $ 101,679
============ ============ ============ ============
Extraordinary items.......... $ (927) $ -- $ (264) $ (611)
============ ============ ============ ============
Net income................... $ 130,999 $ 130,384 $ 153,102 $ 115,751
============ ============ ============ ============
Net income available for
Units...................... $ 120,115 $ 118,985 $ 141,188 $ 104,024
============ ============ ============ ============
Net income available per
weighted average Unit
outstanding -- Basic....... $ 0.35 $ 0.34 $ 0.49 $ 0.37
============ ============ ============ ============
Net income available per
weighted average Unit and
unit equivalent
outstanding -- Diluted..... $ 0.35 $ 0.34 $ 0.48 $ 0.37
============ ============ ============ ============
Weighted average Units
outstanding -- Basic....... 347,341,457 346,087,554 288,805,951 281,380,638
============ ============ ============ ============
Weighted average Units and
unit equivalents
outstanding -- Diluted..... 350,738,516 349,494,261 291,674,501 283,568,648
============ ============ ============ ============
75
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20 -- QUARTERLY DATA (UNAUDITED) -- (CONTINUED)
FOR THE THREE MONTHS ENDED
---------------------------------------------------------
12/31/99 9/30/99 6/30/99 3/31/99
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Total Revenues............... $ 494,473 $ 491,357 $ 481,279 $ 475,134
============ ============ ============ ============
Income before allocation to
minority interests, income
from investment in
unconsolidated joint
ventures, net gain on sales
of real estate and
extraordinary items........ $ 107,596 $ 106,153 $ 104,536 $ 100,284
============ ============ ============ ============
Extraordinary items.......... $ -- $ (230) $ (7,135) $ (3,183)
============ ============ ============ ============
Net income................... $ 164,332 $ 108,454 $ 108,348 $ 98,391
============ ============ ============ ============
Net income available for
Units...................... $ 152,393 $ 92,920 $ 97,441 $ 87,510
============ ============ ============ ============
Net income available per
weighted average Unit
outstanding -- Basic....... $ 0.53 $ 0.32 $ 0.34 $ 0.30
============ ============ ============ ============
Net income available per
weighted average Unit and
unit equivalent
outstanding -- Diluted..... $ 0.52 $ 0.32 $ 0.33 $ 0.30
============ ============ ============ ============
Weighted average Units
outstanding -- Basic....... 287,540,407 288,620,341 288,598,492 288,554,860
============ ============ ============ ============
Weighted average Units and
unit equivalents
outstanding -- Diluted..... 290,549,547 291,592,245 290,946,853 291,433,553
============ ============ ============ ============
NOTE 21 -- RELATED PARTY TRANSACTIONS
Related parties provide various services to EOP Partnership. Fees and
reimbursements paid by EOP Partnership to affiliates for the years ended
December 31, 2000, 1999 and 1998 were as follows (there were no amounts payable
to affiliates as of December 31, 2000 and 1999, respectively):
PAID IN YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Legal fees and expenses(1).............................. $ -- $ 2,330 $ 3,507
Insurance reimbursements and brokerage fees(2).......... -- 3,494 3,323
Development, management and leasing fees(3)............. 8,090 5,102 4,405
Office rent(4).......................................... 2,601 2,820 1,792
Administrative, accounting and consulting services(5)... -- 715 750
Development fees(6)..................................... 3,770 -- --
Interest on mortgage notes(7)........................... 7,183 -- --
------- ------- -------
Total......................................... $21,644 $14,461 $13,777
======= ======= =======
- ---------------
(1) Represents amounts primarily paid to Rosenberg & Liebentritt, P.C., a law
firm, for legal fees and expenses incurred in connection with acquisition,
corporate and leasing activity. A trustee of Equity Office was a principal
of this law firm until September 1, 1997. In 1999, Rosenberg & Liebentritt,
P.C. dissolved and, as a result, no longer provides legal services to EOP
Partnership.
76
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 21 -- RELATED PARTY TRANSACTIONS -- (CONTINUED)
(2) Represents amounts paid to EGI Risk Services Inc. for reimbursement of
property insurance premiums to an affiliated company and fees for risk
management services including reviewing, obtaining and/or researching
various insurance policies. EGI Risk Services, Inc. was a wholly owned
subsidiary of the Equity Group, of which Mr. Samuel Zell is the Chairman of
the Board. Effective October 1, 1999, EOP Partnership no longer utilizes the
services provided by EGI Risk Services Inc., and its employees have become
employees of EOP Partnership.
(3) H. Jon Runstad, a former trustee of Equity Office who resigned in July 2000,
is a principal of Wright Runstad & Company, the general partner of Wright
Runstad Associates Limited Partnership ("WRALP") which provides property
management, leasing and development services. EOP Partnership and an
affiliate together own a 30% limited partnership interest in WRALP. During
2000, 1999 and 1998, EOP Partnership received distributions of approximately
$9.7 million, $2.7 million and $1.4 million, respectively from WRALP. Since
December 1997, WRALP served as the co-property manager with EOP Partnership
and leasing agent for certain Office Properties acquired in December 1997
from WRALP and for several other Office Properties. In addition to the
amounts paid above to WRALP for development and management fees, leasing
commissions and related expense reimbursements with respect to some of our
Properties, an additional $5.0 million, $4.7 million and $3.8 million was
paid during 2000, 1999 and 1998, respectively, to WRALP for the
reimbursement of salaries of personnel in connection with such management
services.
WRALP owned a 20% interest and EOP Partnership owned an 80% interest in
Sunset North Corporate Campus, a three-building office complex located in
Bellevue, Washington. WRALP served as the developer of the project. On June
30, 2000, EOP Partnership acquired the interest held by WRALP at a price
based on a formula set forth in the joint venture agreement. See Note 4 for
additional information.
WRALP owns a 20% interest and EOP Partnership owns an 80% interest in Key
Center, an Office Property located in Bellevue, Washington. WRALP served as
the developer of the project and currently serves as the co-property
manager with EOP Partnership and the leasing agent.
On September 8, 2000, EOP Partnership obtained the World Trade Center East
located in Seattle, Washington, from WRALP. WRALP served as the developer
of the project. See Note 4 for additional information.
In accordance with the agreement governing the investment in WRALP, EOP
Partnership agreed to make available to WRALP up to $20.0 million in
additional financing or credit support for future development. As of
December 31, 2000, no amounts have been funded pursuant to this agreement.
However, EOP Partnership has guaranteed WRALP's line of credit, which has
an outstanding balance of approximately $18.1 million as of December 31,
2000.
Wright Runstad & Company leases space in certain Office Properties. The
terms of the leases are consistent with terms of unaffiliated tenant's
leases. Total rents and other amounts paid by Wright Runstad & Company
under its lease were approximately $.5 million, $.3 million and $.3 million
for the years ended December 31, 2000, 1999 and 1998, respectively.
As mentioned above, Mr. Runstad resigned as a trustee of Equity Office in
July 2000. Transactions with WRALP will no longer be considered related
party transactions.
(4) EOP Partnership leases its corporate office space from an affiliate of the
Equity Group.
(5) During 1999, fees were paid to the Equity Group for miscellaneous consulting
services. In 1998 administrative services also included fees paid to Equity
Group for centralized services, such as real estate tax consulting, payroll
processing, employee benefits and telecommunications, all of which are now
performed by EOP Partnership.
(6) EOP Partnership and Wilson Investors ("WI") entered into a joint venture
agreement to form Wilson/ Equity Office, LLC ("W/EO") for the purpose of
developing, constructing, leasing and managing
77
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 21 -- RELATED PARTY TRANSACTIONS -- (CONTINUED)
developments. W/EO is owned 49.9% by EOP Partnership and 50.1% by WI.
William Wilson III, a trustee of Equity Office, through his ownership of WI,
owns approximately 22% of W/EO (and approximately 30% of any promote to
which WI is entitled under the joint venture agreement). EOP Partnership
will loan up to $25 million to WI for their required contribution to W/EO at
a 15% return per annum. The current outstanding balance of this loan as of
December 31, 2000, is approximately $4.1 million. EOP Partnership's
investment in W/EO as of December 31, 2000 is approximately $15.5 million,
which is net of a net loss allocation of approximately $.7 million.
As of December 31, 2000, EOP Partnership has created or anticipates
creating joint ventures with W/ EO, certain of which have unaffiliated
parties, for the purpose of developing office properties. The total square
footage that may be developed is approximately 2.3 million and the total
projected estimated cost, including EOP Partnership's, WI's and any
unaffiliated party's share, to complete the developments is approximately
$770.2 million. EOP Partnership's share of the cost incurred to date for
the properties under development with W/EO is approximately $480.3 million.
William Wilson III did not, in his capacity as trustee, approve the
foregoing arrangements with EOP Partnership.
(7) In connection with the Cornerstone Merger, $250 million of mortgage debt was
assumed on certain properties payable to Stichting Pensioenfonds voor de
Gezondheid, Gaestelijke en Meatshappelljke Belangen ("PGGM"), of which Jan
H.W.R. van der Vlist, a trustee of Equity Office, is a director of real
estate. In October 2000, EOP Partnership repaid $65 million encumbering one
of the Properties, TransPotomac Plaza, upon its maturity. At December 31,
2000, $185 million of principal and approximately $3.5 million of accrued
interest was payable to PGGM.
In connection with the Cornerstone Merger, EOP Partnership paid $5.0
million to John S. Moody to enter into a non-compete agreement. Mr. Moody became
a trustee of Equity Office at the time of the Cornerstone Merger and is the
former president and chief executive officer of Cornerstone.
EOP Partnership acquired Palo Alto Square, an Office Property located in
Palo Alto, California, on October 1, 1999, from a private investment partnership
controlled by Mr. Samuel Zell. The acquisition was funded primarily through the
issuance of 1,035,389 Units valued at $23.64 per Unit for a total of
approximately $24.5 million and the assumption of $53.2 million in debt.
EOP Partnership has an investment in Allied Riser Corporation ("ARC") (See
Note 7 -- Investment in Securities for additional information). A private
investment entity controlled by Mr. Zell also has a substantial investment in
ARC.
As disclosed in Note 7 -- Investment in Securities, EOP Partnership owns
preferred shares of Capital Trust. Mr. Zell is Chairman of the Board of Capital
Trust.
Amounts Received from Related Parties
Related parties of EOP Partnership, including WRALP, leased space in
certain Office Properties. Total rents and other amounts paid by these related
parties under the terms of their respective leases were approximately $1.2
million, $1.2 million and $0.3 million for the years ended December 31, 2000,
1999 and 1998, respectively. In addition, in 2000 and 1999 EOP Partnership
provided real estate tax consulting and risk management services to related
parties for which it received approximately $1.4 million and $1.2 million,
respectively.
NOTE 22 -- SHARE OPTION PLAN AND SHARE AWARD PLAN
The following is a description of Equity Office's 1997 Share Option and
Share Award Plan, as amended, (the "Employee Plan"), which is included in the
financial statements because any Common Shares issued pursuant to the Employee
Plan will result in EOP Partnership issuing Units to Equity Office, on a
one-for-one basis.
78
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 22 -- SHARE OPTION PLAN AND SHARE AWARD PLAN -- (CONTINUED)
Equity Office has established the 1997 Share Option and Share Award Plan,
as amended (the "Employee Plan"). The purpose of the Employee Plan is to attract
and retain highly qualified executive officers, trustees, employees and
consultants. Through the Employee Plan, certain officers, trustees, employees
and consultants of Equity Office are offered the opportunity to acquire Common
Shares pursuant to grants of (i) options to purchase Common Shares ("Options")
and (ii) Share Awards (defined below). The Employee Plan is administered by the
Compensation and Option Committee (the "Compensation Committee"), which is
appointed by the Board of Trustees of Equity Office. The Compensation Committee
determines those officers, trustees, key employees and consultants to whom, and
the time or times of which, grants of Options and Share Awards will be made. The
Compensation Committee interprets the Employee Plan, adopts rules relating
thereto and determines the terms and provisions of Options. In 2000, 1999 and
1998 the Common Shares subject to Options and Share Awards under the Employee
Plan were limited to 20,873,729, 19,433,472 and 11,121,786, respectively. The
maximum aggregate number of Common Shares that may be granted for all rights
under the Plan may not exceed 6.8% of the outstanding shares, calculated on a
fully diluted basis and determined annually on the first day of each calendar
year. No more than one-half of the maximum aggregate number of Common Shares
shall be granted as Share Awards. To the extent that Options expire unexercised
or are terminated, surrendered or canceled, the Common Shares allocated to such
Options shall become available for future grants under the Plan, unless the Plan
has terminated. The Employee Plan will terminate at such times as it issues all
of the unissued Common Shares reserved for the Plan. The Board of Trustees may
at any time amend or terminate the Employee Plan, but termination will not
affect Options and Share Awards previously granted. Any Options or Share Awards,
which vest prior to any such termination, will continue to be exercisable by the
holder thereof.
The Compensation Committee determines the vesting schedule of each Option
and the term, which shall not exceed ten years from the date of the grant. As to
the Options that have been granted through December 31, 2000, the vesting
schedules range from the entire option grant being exercisable as of the grant
date, to one-third of the Options being exercisable as of the first anniversary
of the grant date, an additional one-third being exercisable as of the second
anniversary of the grant date and the remaining one-third of the Options being
exercisable as of the third anniversary of the grant date. The exercise price
for all Options under the Employee Plan shall not be less than the fair market
value of the underlying Common Shares at the time the Option is granted.
Each member of the Board of Trustees of Equity Office receives an annual
grant of an Option to purchase 10,000 common shares on the date of each annual
meeting of shareholders. If an individual becomes a member of the board other
than at an annual meeting, he or she is entitled to a prorated Option grant
based upon the number of days until the next annual meeting of shareholders. In
addition, the Employee Plan permits the issuance of Share Awards to executive
officers, trustees and key employees upon such terms and conditions as are
determined by the Compensation Committee in its sole discretion. A share award
is an award of Common Shares, which (i) may be fully vested upon issuance
("Share Awards") or (ii) may be subject to risk of forfeiture under Section 83
of the Internal Revenue Code ("Restricted Share Award"). Generally, members of
the Board of Trustees of Equity Office have been granted Share Awards pursuant
to the Employee Plan as payment of their board fees. In addition, certain senior
officers were issued Share Awards as part of their bonus for fiscal year 2000
and 1999. In each case, the number of Share Awards granted to trustees and
senior officers was equal to the dollar value of the fees or bonus earned
divided by the fair market value of the shares on the date the fee or bonus
would have been paid. In addition to these Share Awards, Restricted Share Awards
were granted to certain officers and employees in 2000, 1999 and 1998. The
Restricted Share Awards vest over a five year period as follows: (a) 50% on the
third anniversary of the initial grant date; (b) 25% on the fourth anniversary
of the initial grant date; and (c) the remaining 25% on the fifth anniversary of
the initial grant date.
79
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 22 -- SHARE OPTION PLAN AND SHARE AWARD PLAN -- (CONTINUED)
Equity Office has elected to apply the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25")
in the computation of compensation expense. Under APB No. 25's intrinsic value
method, compensation expense is determined by computing the excess of the market
price of the shares over the exercise price on the measurement date. For
Options, there is no intrinsic value on the measurement date (or grant date),
and no compensation expense is recognized. Financial Accounting Standards Board
No. 123 ("FASB No. 123") requires the disclosure of pro forma net income and net
income per share as if a fair value based accounting method had been used in the
computation of compensation expense. The fair value of the Options computer
under FASB No. 123 would be recognized over the vesting period of the Options.
The fair value for Options granted in 2000, 1999, and 1998 was estimated at the
time the Options were granted using the Black-Scholes option-pricing model with
the following weighted average assumptions for 2000, 1999, and 1998,
respectively:
ASSUMPTIONS: 2000 1999 1998
- ------------ ----- ------- -----
Risk-free interest rate............................... 5.1% 6.4% 5.4%
Dividend yield........................................ 5.5% 6.8% 5.8%
Volatility factors of the expected market price of the
Common Shares....................................... 0.33 0.19 0.30
Weighted average expected life of the Options each
year................................................ 5 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of trade options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Options have characteristics significantly different
from those traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its Options and may not be representative of the
effects on reported net income for future years. For purposes of pro forma
disclosures, the estimated fair value of the Options is amortized to expense
during the Options' vesting period. The following is the unaudited pro forma
information for the years ended December 31, 2000, 1999 and 1998.
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Pro forma net income available to Units before net gain on
sales of real estate and extraordinary items.............. $450,707 $378,810 $346,277
Net gain on sales of real estate and extraordinary items.... 32,738 49,113 4,927
-------- -------- --------
Pro forma net income available to Units..................... $483,445 $427,923 $351,204
======== ======== ========
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
--------------- --------------- ---------------
EARNINGS PER UNIT BASIC DILUTED BASIC DILUTED BASIC DILUTED
- ----------------- ----- ------- ----- ------- ----- -------
Pro forma net income available to Units before
net gain on sales of real estate and
extraordinary items......................... $1.43 $1.41 $1.29 $1.30 $1.22 $1.22
Net gain on sales of real estate and
extraordinary items......................... .10 .10 .19 .17 .02 .02
----- ----- ----- ----- ----- -----
Pro forma net income per weighted average Unit
and unit equivalents (for diluted)
outstanding................................. $1.53 $1.51 $1.48 $1.47 $1.24 $1.24
===== ===== ===== ===== ===== =====
80
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 22 -- SHARE OPTION PLAN AND SHARE AWARD PLAN -- (CONTINUED)
The table below summarizes the Option activity of the Employee Plan for the
years ended December 31, 2000, 1999 and 1998:
COMMON SHARES WEIGHTED AVERAGE
SUBJECT TO OPTIONS EXERCISE PRICE PER
OR AWARDS COMMON SHARE
------------------ ------------------
Balance at December 31, 1997......................... 5,747,308 $22.23
Options granted.................................... 4,695,072 26.38
Options canceled................................... (93,145) 25.54
Options exercised.................................. (916,451) 19.74
---------- ------
Balance at December 31, 1998......................... 9,432,784 24.50
Options granted.................................... 4,677,971 24.88
Options canceled................................... (520,314) 24.78
Options exercised.................................. (128,287) 20.90
---------- ------
Balance at December 31, 1999......................... 13,462,154 24.66
Options granted.................................... 3,916,460 23.63
Options canceled................................... (572,114) 24.78
Options exercised.................................. (3,585,129) 22.81
---------- ------
Balance at December 31, 2000......................... 13,221,371 $24.82
========== ======
As of December 31, 2000, there were 9,146,993 Options under the Employee
Plan that were exercisable and 4,074,378 Options that were not exercisable.
Exercise prices for the 13,221,371 Options outstanding as of December 31, 2000
ranged from $12.09 to $33.00, with a weighted average exercise price of $24.82.
Expiration dates ranged from July 11, 2007 to August 2010. The remaining
weighted average contractual life of Options was 7.8 years. The weighted average
grant date fair value of Options granted during 2000, 1999 and 1998 was $5.63,
$2.91 and $4.88, respectively.
In addition, there were 555,100 Restricted Shares issued during 2000 and
380,000 Restricted Shares issued during 1998. The Restricted Shares vest over
three to five years. The Restricted Shares were valued at an average of $23.91
per share. The restricted shares vest 50% on the third anniversary of the grant
date, 25% on the fourth anniversary of the grant date and 25% on the fifth
anniversary of the grant date. The value of the Restricted Shares is amortized
to compensation expense on a straight-line basis and included in general and
administrative expenses.
NOTE 23 -- 401(K) PLAN
Equity Office established the Equity Office Properties Trust Section 401(k)
Savings/Retirement Plan (the "401(k) Plan") was established to cover eligible
employees of EOP Partnership and employees of any designated affiliate. The
401(k) Plan permits eligible persons to defer up to 16% of their annual
compensation, subject to certain limitations imposed by the Internal Revenue
Code. The employees' elective deferrals are immediately vested and
nonforfeitable upon contribution to the 401(k) Plan. EOP Partnership matches
dollar for dollar employee contributions to the 401(k) Plan up to 4% of the
employees' annual salary. In addition, EOP Partnership may elect to make a
discretionary profit sharing contribution. EOP Partnership incurred expense of
approximately $3.6 million, $2.9 million and $2.4 million in each of the three
years ended December 31, 2000, 1999 and 1998, respectively, related to the
401(k) Plan.
81
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 24 -- COMMITMENTS AND CONTINGENCIES
Concentration of Credit Risk
EOP Partnership maintains its cash and cash equivalents at financial
institutions. The combined account balances at each institution typically exceed
FDIC insurance coverage and, as a result, there is a concentration of credit
risk related to amounts on deposit in excess of FDIC insurance coverage.
Management of EOP Partnership believes that the risk is not significant.
Environmental
EOP Partnership, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by EOP
Partnership with existing laws has not had a material adverse effect on EOP
Partnership's financial condition and results of operations, and management does
not believe it will have such an impact in the future. However, EOP Partnership
cannot predict the impact of new or changed laws or regulations on its current
Properties or on properties that it may acquire in the future.
Litigation
Neither EOP Partnership nor any of its Properties is presently subject to
material litigation nor, to EOP Partnership's knowledge, is any litigation
threatened against EOP Partnership or any of the Properties, other than routine
actions for negligence and other claims and administrative proceedings arising
in the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the liquidity, results of operations, or business or
financial condition of EOP Partnership.
Insurance
EOP Partnership is self-insured for certain amounts related to losses that
may be incurred at the Properties and has third party insurance coverage for
specified amounts above the deductible amounts. However, management does not
believe that this exposure will have a material adverse effect on EOP
Partnership.
EOP Partnership carries earthquake insurance on all of the Properties,
including those located in California, subject to coverage limitations which EOP
Partnership believes are commercially reasonable. In light of the California
earthquake risk, California building codes since the early 1970s have
established construction standards for all new buildings. The current and
strictest construction standards were adopted in 1987. Of the 104 Properties
located in California, 19 have been built since January 1, 1988, and EOP
Partnership believes that all of the Properties were constructed in full
compliance with the applicable standards existing at the time of construction.
No assurance can be given that material losses in excess of insurance proceeds
will not occur in the future.
Commitments
In accordance with the agreement governing the investment in WRALP, EOP
Partnership agreed to make available to WRALP up to $20.0 million in additional
financing or credit support for future development. As of December 31, 2000, no
amounts have been funded pursuant to this agreement. However, EOP Partnership
has guaranteed WRALP's line of credit, which has an outstanding balance of
approximately $18.1 million as of December 31, 2000.
82
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 24 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Contingencies
Certain Properties owned in joint ventures with unaffiliated parties have
buy/sell options that may be exercised to acquire the other venturer's interest
by either EOP Partnership or its joint venture partner if certain conditions are
met as defined in the respective joint venture agreement.
In connection with the acquisition of certain Properties, EOP Partnership
has agreed not to sell such Properties in a taxable transaction for a period of
time as defined in their respective agreements, or EOP Partnership may be
obligated to make additional payments to the respective sellers.
The holders of the Wright Runstad & Company options (the "WR Holders")
exercised their option to extend the date to August 13, 2001 at which time the
WR Holders can require Equity Office to purchase all or a portion of the
remaining 1,717,844 Common Shares issued to them at a price equal to $31.50 per
Common Share. Prior to such date, if the WR Holders sell all or a portion of
their Common Shares to a third party for a price less than $29.10625, then
Equity Office is obligated to pay to the WR Holders for each Common Share sold
at such lower price an amount equal to the difference between $29.10625 and such
lower price, not to exceed $3.00 per Common Share. Any amounts paid by Equity
Office as a result of such sales will result in EOP Partnership making an equal
payment to Equity Office and will be recorded as a reduction in partners'
capital. For put options exercised on August 13, 2001, any amounts paid up to
$29.10625 per Common Share would be reflected as a reduction in partners'
capital and the portion of any amounts paid in excess of $29.10625 per Common
Share (not to exceed $2.39375 per Common Share up to an aggregate of
approximately $4.1 million) will be reflected as a put option settlement. The
$4.1 million portion of the total potential payment has been reflected as a put
option settlement on a straight-line basis over the period between August 13,
1999 and August 13, 2000.
In connection with the acquisition of Worldwide Plaza on October 1, 1998,
EOP Partnership issued a transferable put option on the 6,861,166 Units issued
in the transaction, which is exercisable only on the third anniversary of
closing with an estimated fair value of approximately $27.4 million. This option
entitles its holder to additional Common Shares, the number of which shall be
determined using a formula based on the extent, if any, that the Common Shares
are then trading at less than $29.05 per share.
NOTE 25 -- SUBSEQUENT EVENTS
1. On January 19, 2001, the mortgage note encumbering Palo Alto Square was
prepaid. The total payoff was approximately $50.2 million which included accrued
interest of approximately $.2 million.
2. On January 25, 2001, Warner Park Center in Woodland Hills, CA was
disposed of for approximately $8.95 million to Adler Realty Advisors, Inc. and
its investors. The building consisted of 57,366 square feet and was 66.3%
occupied.
3. In February 2001, EOP Partnership and Booz Allen & Hamilton, a
management and technology-consulting firm, entered into a 12-year lease for
122,000 square feet of office space in an office building to be developed by EOP
Partnership. The office building, named EJ Randolph II, will be located in
McLean, Virginia, and is expected to be completed in 2002 at a cost of
approximately $35.7 million.
4. On February 15, 2001, the mortgage note encumbering Community Corporate
Center was prepaid. The total payoff amount was approximately $16.5 million.
5. On February 22, 2001, Equity Office and Spieker Properties, Inc.
("Spieker") entered into a merger agreement in which Spieker will merge into
Equity Office and EOP Partnership will acquire Spieker Properties, L.P.,
Spieker's operating partnership subsidiary (the "Spieker Merger"). The
transaction values Spieker (including the outside interests in Spieker
Properties, L.P.) at approximately $7.2 billion, which includes transaction
costs and the assumption of approximately $2.1 billion in debt and $431 million
in
83
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 25 -- SUBSEQUENT EVENTS -- (CONTINUED)
preferred stock and partnership units. EOP Partnership will pay approximately
$1.085 billion in cash and issue approximately 118.6 million new EOP Partnership
Units and 14.3 million new EOP Partnership preferred units in the transaction.
EOP Partnership intends to finance the $1.085 billion cash portion of the
purchase price using a combination of available borrowing capacity under our
existing credit facility, new bridge loan facility to be entered into before the
closing of the merger and/or through the issuance of senior unsecured notes.
Following the Spieker Merger, EOP Partnership is expected to own and
operate 616 office buildings consisting of 124 million square feet of office
space nationwide, which includes 25 million square feet of office space
attributable to Spieker. EOP Partnership will also own Spieker's industrial
portfolio of approximately 13.5 million square feet and its development
properties totaling 1.7 million square feet.
Upon completion of the Spieker Merger, Equity Office will expand its Board
of Trustees from 13 to 16 members. The new members will be Warren E. Spieker,
Jr., chairman of Spieker, and Co-Chief Executive Officers Craig G. Vought and
John A. Foster.
The Spieker Merger, which will be accounted for using purchase accounting,
is subject to the approval of the shareholders of Equity Office and Spieker and
the partners of EOP Partnership and Spieker Partnership, as applicable, and to
other customary conditions.
6. On February 23, 2001, the mortgage note encumbering Wachovia was
prepaid. The total payoff was approximately $25.3 million.
84
85
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information about Trustees of Equity Office is incorporated by reference
from the discussion under Proposal 1 in Equity Office's Proxy Statement for the
2001 Annual Meeting of Shareholders. The balance of the response to this item is
contained in the discussion entitled "Executive and Senior Officers of Equity
Office" under Item 1 of Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION.
Information about executive compensation is incorporated by reference from
the discussion under the heading "Executive Compensation" in Equity Office's
Proxy Statement for the 2001 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information about security ownership of certain beneficial owners and
management is incorporated by reference from the discussion under the heading
"Common Share and Unit Ownership by Trustees and Executive Officer" in Proxy
Statement for the 2001 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information about certain relationships and transactions with related
parties is incorporated herein by reference from the discussion under the
heading "Certain Relationships and Related Transactions" in Equity Office's
Proxy Statement for the 2001 Annual Meeting of Shareholders.
85
86
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Operations for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Partners' Capital and Comprehensive Income
for the years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Schedule III -- Real Estate and Accumulated Depreciation
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(a)(3) Exhibits:
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement and Plan of Merger, dated February 11, 2000, among
Equity Office, EOP Partnership, Cornerstone and Cornerstone
Partnership (incorporated herein by reference to Exhibit 2.1
to Equity Office's Current Report on Form 8-K filed with the
SEC on February 16, 2000). The registrant agrees to furnish
supplementally a copy of the exhibits to the Merger
Agreement to the SEC upon request.
2.2 First Amendment to Agreement and Plan of Merger, dated May
11, 2000, by and among Equity Office, EOP Partnership,
Cornerstone and Cornerstone Partnership (incorporated herein
by reference to Exhibit 2.1 to Equity Office's Current
Report on Form 8-K filed with the SEC on May 12, 2000)
2.3 Agreement and Plan of Merger, dated February 23, 2000, among
Equity Office, EOP Partnership, Spieker Properties, Inc. and
Spieker, L.P. (incorporated herein by reference to Exhibit
2.1 to Equity Office's Current Report on Form 8-K filed with
the SEC on March 9, 2001), including Exhibits D-I and K
thereto. The registrant agrees to furnish supplementally a
copy of exhibits A-C and J to the SEC upon request.
3.1 Second Amended and Restated Agreement of Limited Partnership
of EOP Partnership (incorporated herein by reference to
Exhibit 99.6 to Equity Office's Current Report on Form 8-K
filed with the SEC on July 5, 2000)
3.2 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.3 to Equity Office's Form 10-Q
for the quarterly period ended September 30, 2000)
3.3 Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.4 to Equity Office's Form 10-Q
for the quarterly period ended September 30, 2000)
3.4 Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
to reference by Exhibit 10.4 to Equity Office's Annual
Report on Form 10-K for the year ended December 31, 2000)
3.5 Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.5 to Equity Office's Annual
Report on Form 10-K for the year ended December 31, 2000)
86
87
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1* Indenture, dated as of September 2, 1997, between EOP
Partnership and State Street Bank and Trust Company
4.2* First Supplemental Indenture, dated as of February 9, 1998,
between EOP Partnership and State Street Bank and Trust
Company
4.3* $200,000,000 6.375% Note due 2003. A $100,000,000 6.375%
Note due 2003, identical in all material respects other than
principal amount to the Note filed as Exhibit 4.3 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, has not been filed.
4.4* $200,000,000 6.625% Note due 2005. Another $200,000,000
6.625% Note due 2005, identical in all material respects to
the Note filed as Exhibit 4.4 to Equity Office's Annual
Report on Form 10- K for the year ended December 31, 1997,
as amended, has not been filed.
4.5* $200,000,000 6.750% Note due 2008. A $100,000,000 6.750%
Note due 2008, identical in all material respects other than
principal amount to the Note filed as Exhibit 4.5 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, has not been filed.
4.6* $200,000,000 7.250% Note due 2018. A $50,000,000 7.250% Note
due 2018, identical in all material respects other than
principal amount to the Note filed as Exhibit 4.6 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, has not been filed.
4.7* $200,000,000 6.376% MandatOry Par Put Remarketed
Securities(sm) due 2012. A $50,000,000 6.376% MandatOry Par
Put Remarketed Securities(sm) due 2012, identical in all
material respects other than principal amount to the Note
filed as Exhibit 4.7 to Equity Office's Annual Report on
Form 10-K for the year ended December 31, 1997, as amended,
has not been filed.
4.8* $30,000,000 7.24% Senior Note due 2004
4.9* $50,000,000 7.36% Senior Note due 2005
4.10* $50,000,000 7.44% Senior Note due 2006
4.11* $50,000,000 7.41% Senior Note due 2007
4.12 $250,000,000 6.50% Notes due 2004 (incorporated herein by
reference to Exhibit 4.12 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.13 $300,000,000 6.763% Notes due 2007 (incorporated herein by
reference to Exhibit 4.13 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.14 $225,000,000 7.25% Notes due 2028 (incorporated herein by
reference to Exhibit 4.14 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.15 $200,000,000 6.375% Notes due 2002 (incorporated herein by
reference to Exhibit 4.15 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.16 $300,000,000 6.5% Notes due 2004 (incorporated herein by
reference to Exhibit 4.16 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.17 $500,000,000 6.8% Notes due 2009 (incorporated herein by
reference to Exhibit 4.17 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
87
88
EXHIBIT NO. DESCRIPTION
----------- -----------
4.18 $200,000,000 7.5% Notes due April 19, 2029 (incorporated
herein by reference to Exhibit 4.23 to EOP Partnership's
Current Report on Form 8-K filed with the SEC on April 19,
1999)
4.19 $400,000,000 8.375% Note due March 15, 2006 (incorporated
herein by reference to Exhibit 4.24 to EOP Partnership's
Current Report on Form 8-K filed with the SEC on March 24,
2000)
4.20 $100,000,000 8.375% Note due March 15, 2006 (incorporated
herein by reference to Exhibit 4.25 to EOP Partnership's
Current Report on Form 8-K filed with the SEC on March 24,
2000)
4.21 $360,000,000 8.10% Note due August 1, 2010 of EOP
Partnership (incorporated herein by reference to Exhibit 4.1
to EOP Partnership's Current Report on Form 8-K filed with
the SEC on August 8, 2000)
4.22 Indenture, dated August 23, 2000, by and among EOP
Partnership, Equity Office and State Street Bank and Trust
Company (incorporated herein by reference to Exhibit 4.1 to
Equity Office's Registration Statement on Form S-3 (SEC File
No. 333-47754))
4.23 Registration Rights Agreement, dated as of August 23, 2000,
among Equity Office, EOP Partnership and Salomon Smith
Barney Inc. (incorporated herein by reference to Exhibit 4.2
to Equity Office's Registration Statement on Form S-3 (SEC
File No. 333-47754))
4.24 Form of Senior Exchangeable Note due November 15, 2008
(incorporated herein by reference to Exhibit 4.3 to Equity
Office's Registration Statement on Form S-3 (SEC File No.
333-47754))
4.25 Indenture, dated August 29, 2000, by and between EOP
Partnership and U.S. Bank Trust National Association
(incorporated herein by reference to Exhibit 4.1 to EOP
Partnership's Registration Statement on Form S-3, as amended
(SEC File No. 333-43530))
4.26 $400,000,000 7 3/8% Note due 2003 (incorporated herein by
reference to Exhibit 4.4 to EOP Partnership's Current Report
on Form 8-K filed with the SEC on November 20, 2000)
4.27 $400,000,000 7 3/4% Note due 2007 (incorporated herein by
reference to Exhibit 4.5 to EOP Partnership's Current Report
on Form 8-K filed with the SEC on November 20, 2000)
4.28 $200,000,000 7 3/4% Note due 2007 (incorporated herein by
reference to Exhibit 4.6 to EOP Partnership's Current Report
on Form 8-K filed with the SEC on November 20, 2000)
4.29 Second Amended and Restated Revolving Credit Agreement for
$1,000,000,000 Revolving Credit Facility dated as of May 29,
1998 (incorporated herein by reference to Exhibit 4.23 to
Equity Office's Annual Report on Form 10-K for the year
ended December 31, 1999, as amended)
4.30 First Amendment to Second Amended and Restated Revolving
Credit Agreement for $1,000,000,000 Revolving Credit
Facility dated as of June 18, 1998 (incorporated herein by
reference to Exhibit 4.21 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 1999, as
amended)
4.31 Third Amended and Restated Credit Agreement for
$1,000,000,000 Credit Facility dated as of May 12, 2000
among EOP Partnership and the Banks listed therein
(incorporated herein by reference to Exhibit 99.8.1 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
88
89
EXHIBIT NO. DESCRIPTION
----------- -----------
4.32 Second Amended and Restated Guaranty of Payment, made as of
May 12, 2000, between Equity Office and Bank of America,
N.A. (incorporated herein by reference to Exhibit 99.8.2 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
4.33 Revolving Credit Agreement for $1,000,000,000 Revolving
Credit Facility, dated as of May 12, 2000, among EOP
Partnership and the Banks listed therein (incorporated
herein by reference to Exhibit 99.7.1 of Equity Office's
Current Report on Form 8-K filed with the SEC on July 5,
2000)
4.34 Guaranty of Payment -- No. 1, made as of May 12, 2000,
between Equity Office and Bank of America, N.A.
(incorporated herein by reference to Exhibit 99.7.2 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
4.35 Guaranty of Payment -- No. 2, made as of May 12, 2000,
between Equity Office and Bank of America, N.A.
(incorporated herein by reference to Exhibit 99.7.3 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
4.36 Fixed Rate Promissory Note with The Chase Manhattan Bank
(incorporated herein by reference to Exhibit 4.22 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1999, as amended)
10.1 Amended and Restated Operating Agreement No. 1 of
Wilson/Equity Office, LLC (incorporated herein by reference
to Exhibit 10.13 to Equity Office's Form 10-K for the year
ended December 31, 2000)
10.2 $25,000,000 Note dated June 20, 2000 between Equity Office
Properties Management Corp. as lender and Wilson
Investors -- California, LLC as borrower (incorporated
herein by reference to Exhibit 10.14 to Equity Office's Form
10-K for the year ended December 31, 2000)
10.3 Security Agreement dated June 20, 2000 between Wilson
Investors -- California, LLC as pledgor and Equity Office
Properties Management Corp. as lender (incorporated herein
by reference to Exhibit 10.15 to Equity Office's Form 10-K
for the year ended December 31, 2000)
10.4 Loan Agreement dated June 20, 2000 between Wilson
Investors -- California, LLC as borrower and Equity Office
Properties Management Corp. as lender (incorporated herein
by reference to Exhibit 10.16 to Equity Office's Form 10-K
for the year ended December 31, 2000)
23.1 Consent of Independent Auditors
- ---------------
* Incorporated herein by reference to the same-numbered exhibit to Equity
Office's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
None.
89
90
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Chicago, Illinois, as of the 15th day of March, 2001.
EOP OPERATING LIMITED PARTNERSHIP
By: EQUITY OFFICE PROPERTIES TRUST
its general partner
By: /s/ TIMOTHY H. CALLAHAN
------------------------------------
Timothy H. Callahan
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated as of the 15th day of March 2001.
SIGNATURE TITLE
--------- -----
/s/ TIMOTHY H. CALLAHAN President, Chief Executive Officer and Trustee
- ------------------------------------------------ (principal executive officer)
Timothy H. Callahan
/s/ RICHARD D. KINCAID Chief Financial Officer (principal financial
- ------------------------------------------------ officer)
Richard D. Kincaid
/s/ STEPHEN M. BRIGGS Senior Vice President -- Chief Accounting Officer
- ------------------------------------------------ (principal accounting officer)
Stephen M. Briggs
/s/ SAMUEL ZELL Chairman of the Board of Trustees
- ------------------------------------------------
Samuel Zell
/s/ D.J. ANDRE DE BOCK Trustee
- ------------------------------------------------
D.J. Andre de Bock
/s/ THOMAS E. DOBROWSKI Trustee
- ------------------------------------------------
Thomas E. Dobrowski
/s/ WILLIAM M. GOODYEAR Trustee
- ------------------------------------------------
William M. Goodyear
/s/ JAMES D. HARPER, JR. Trustee
- ------------------------------------------------
James D. Harper, Jr.
/s/ DAVID K. MCKOWN Trustee
- ------------------------------------------------
David K. McKown
90
91
SIGNATURE TITLE
--------- -----
/s/ JERRY M. REINSDORF Trustee
- ------------------------------------------------
Jerry M. Reinsdorf
/s/ SHELI Z. ROSENBERG Trustee
- ------------------------------------------------
Sheli Z. Rosenberg
/s/ EDWIN N. SIDMAN Trustee
- ------------------------------------------------
Edwin N. Sidman
/s/ WILLIAM WILSON III Trustee
- ------------------------------------------------
William Wilson III
/s/ JOHN S. MOODY Trustee
- ------------------------------------------------
John S. Moody
/s/ JAN H.W.R. VAN DER VLIST Trustee
- ------------------------------------------------
Jan H.W.R. van der Vlist
91
92
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement and Plan of Merger, dated February 11, 2000, among
Equity Office, EOP Partnership, Cornerstone and Cornerstone
Partnership (incorporated herein by reference to Exhibit 2.1
to Equity Office's Current Report on Form 8-K filed with the
SEC on February 16, 2000). The registrant agrees to furnish
supplementally a copy of the exhibits to the Merger
Agreement to the SEC upon request.
2.2 First Amendment to Agreement and Plan of Merger, dated May
11, 2000, by and among Equity Office, EOP Partnership,
Cornerstone and Cornerstone Partnership (incorporated herein
by reference to Exhibit 2.1 to Equity Office's Current
Report on Form 8-K filed with the SEC on May 12, 2000)
2.3 Agreement and Plan of Merger, dated February 23, 2000, among
Equity Office, EOP Partnership, Spieker Properties, Inc. and
Spieker, L.P. (incorporated herein by reference to Exhibit
2.1 to Equity Office's Current Report on Form 8-K filed with
the SEC on March 9, 2001), including Exhibits D-I and K
thereto. The registrant agrees to furnish supplementally a
copy of Exhibits A-C and J to the SEC upon request.
3.1 Second Amended and Restated Agreement of Limited Partnership
of EOP Partnership (incorporated herein by reference to
Exhibit 99.6 to Equity Office's Current Report on Form 8-K
filed with the SEC on July 5, 2000)
3.2 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.3 to Equity Office's Form 10-Q
for the quarterly period ended September 30, 2000)
3.3 Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.4 to Equity Office's Form 10-Q
for the quarterly period ended September 30, 2000)
3.4 Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.4 to Equity Office's Annual
Report on Form 10-K for the year ended December 31, 2000)
3.5 Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of EOP Partnership (incorporated herein
by reference to Exhibit 10.5 to Equity Office's Annual
Report on Form 10-K for the year ended December 31, 2000)
4.1* Indenture, dated as of September 2, 1997, between EOP
Partnership and State Street Bank and Trust Company
4.2* First Supplemental Indenture, dated as of February 9, 1998,
between EOP Partnership and State Street Bank and Trust
Company
4.3* $200,000,000 6.375% Note due 2003. A $100,000,000 6.375%
Note due 2003, identical in all material respects other than
principal amount to the Note filed as Exhibit 4.3 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, has not been filed.
4.4* $200,000,000 6.625% Note due 2005. Another $200,000,000
6.625% Note due 2005, identical in all material respects to
the Note filed as Exhibit 4.4 to Equity Office's Annual
Report on Form 10- K for the year ended December 31, 1997,
as amended, has not been filed.
4.5* $200,000,000 6.750% Note due 2008. A $100,000,000 6.750%
Note due 2008, identical in all material respects other than
principal amount to the Note filed as Exhibit 4.5 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, has not been filed.
93
EXHIBIT NO. DESCRIPTION
----------- -----------
4.6* $200,000,000 7.250% Note due 2018. A $50,000,000 7.250% Note
due 2018, identical in all material respects other than
principal amount to the Note filed as Exhibit 4.6 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, has not been filed.
4.7* $200,000,000 6.376% MandatOry Par Put Remarketed
Securities(sm) due 2012. A $50,000,000 6.376% MandatOry Par
Put Remarketed Securities(sm) due 2012, identical in all
material respects other than principal amount to the Note
filed as Exhibit 4.7 to Equity Office's Annual Report on
Form 10-K for the year ended December 31, 1997, as amended,
has not been filed.
4.8* $30,000,000 7.24% Senior Note due 2004
4.9* $50,000,000 7.36% Senior Note due 2005
4.10* $50,000,000 7.44% Senior Note due 2006
4.11* $50,000,000 7.41% Senior Note due 2007
4.12 $250,000,000 6.5% Notes due 2004 (incorporated herein by
reference to Exhibit 4.12 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.13 $300,000,000 6.763% Notes due 2007 (incorporated herein by
reference to Exhibit 4.13 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.14 $225,000,000 7.25% Notes due 2028 (incorporated herein by
reference to Exhibit 4.14 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.15 $200,000,000 6.375% Notes due 2002 (incorporated herein by
reference to Exhibit 4.15 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.16 $300,000,000 6.5% Notes due 2004 (incorporated herein by
reference to Exhibit 4.16 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.17 $500,000,000 6.8% Notes due 2009 (incorporated herein by
reference to Exhibit 4.17 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 2000)
4.18 $200,000,000 7.5% Notes due April 19, 2029 (incorporated
herein by reference to Exhibit 4.23 to EOP Partnership's
Current Report on Form 8-K filed with the SEC on April 19,
1999)
4.19 $400,000,000 8.375% Note due March 15, 2006 (incorporated
herein by reference to Exhibit 4.24 to EOP Partnership's
Current Report on Form 8-K filed with the SEC on March 24,
2000)
4.20 $100,000,000 8.375% Note due March 15, 2006 (incorporated
herein by reference to Exhibit 4.25 to EOP Partnership's
Current Report on Form 8-K filed with the SEC on March 24,
2000)
4.21 $360,000,000 8.10% Note due August 1, 2010 of EOP
Partnership (incorporated herein by reference to Exhibit 4.1
to EOP Partnership's Current Report on Form 8-K filed with
the SEC on August 8, 2000)
4.22 Indenture, dated August 23, 2000, by and among EOP
Partnership, Equity Office and State Street Bank and Trust
Company (incorporated herein by reference to Exhibit 4.1 to
Equity Office's Registration Statement on Form S-3 (SEC File
No. 333-47754))
94
EXHIBIT NO. DESCRIPTION
----------- -----------
4.23 Registration Rights Agreement, dated as of August 23, 2000,
among Equity Office, EOP Partnership and Salomon Smith
Barney Inc. (incorporated herein by reference to Exhibit 4.2
to Equity Office's Registration Statement on Form S-3 (SEC
File No. 333-47754))
4.24 Form of Senior Exchangeable Note due November 15, 2008
(incorporated herein by reference to Exhibit 4.3 to Equity
Office's Registration Statement on Form S-3 (SEC File No.
333-47754))
4.25 Indenture, dated August 29, 2000, by and between EOP
Partnership and U.S. Bank Trust National Association
(incorporated herein by reference to Exhibit 4.1 to EOP
Partnership's Registration Statement on Form S-3, as amended
(SEC File No. 333-43530))
4.26 $400,000,000 7 3/8% Note due 2003 (incorporated herein by
reference to Exhibit 4.4 to EOP Partnership's Current Report
on Form 8-K filed with the SEC on November 20, 2000)
4.27 $400,000,000 7 3/4% Note due 2007 (incorporated herein by
reference to Exhibit 4.5 to EOP Partnership's Current Report
on Form 8-K filed with the SEC on November 20, 2000)
4.28 $200,000,000 7 3/4% Note due 2007 (incorporated herein by
reference to Exhibit 4.6 to EOP Partnership's Current Report
on Form 8-K filed with the SEC on November 20, 2000)
4.29 Second Amended and Restated Revolving Credit Agreement for
$1,000,000,000 Revolving Credit Facility dated as of May 29,
1998 (incorporated herein by reference to Exhibit 4.23 to
Equity Office's Annual Report on Form 10-K for the year
ended December 31, 1999, as amended)
4.30 First Amendment to Second Amended and Restated Revolving
Credit Agreement for $1,000,000,000 Revolving Credit
Facility dated as of June 18, 1998 (incorporated herein by
reference to Exhibit 4.21 to Equity Office's Annual Report
on Form 10-K for the year ended December 31, 1999, as
amended)
4.31 Third Amended and Restated Credit Agreement for
$1,000,000,000 Credit Facility dated as of May 12, 2000
among EOP Partnership and the Banks listed therein
(incorporated herein by reference to Exhibit 99.8.1 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
4.32 Second Amended and Restated Guaranty of Payment, made as of
May 12, 2000, between Equity Office and Bank of America,
N.A. (incorporated herein by reference to Exhibit 99.8.2 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
4.33 Revolving Credit Agreement for $1,000,000,000 Revolving
Credit Facility, dated as of May 12, 2000, among EOP
Partnership and the Banks listed therein (incorporated
herein by reference to Exhibit 99.7.1 of Equity Office's
Current Report on Form 8-K filed with the SEC on July 5,
2000)
4.34 Guaranty of Payment -- No. 1, made as of May 12, 2000,
between Equity Office and Bank of America, N.A.
(incorporated herein by reference to Exhibit 99.7.2 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
4.35 Guaranty of Payment -- No. 2, made as of May 12, 2000,
between Equity Office and Bank of America, N.A.
(incorporated herein by reference to Exhibit 99.7.3 to
Equity Office's Current Report on Form 8-K filed with the
SEC on July 5, 2000)
95
EXHIBIT NO. DESCRIPTION
----------- -----------
4.36 Fixed Rate Promissory Note with The Chase Manhattan Bank
(incorporated herein by reference to Exhibit 4.22 to Equity
Office's Annual Report on Form 10-K for the year ended
December 31, 1999, as amended)
10.1 Amended and Restated Operating Agreement No. 1 of
Wilson/Equity Office, LLC (incorporated herein by reference
to Exhibit 10.13 to Equity Office's Form 10-K for the year
ended December 31, 2000)
10.2 $25,000,000 Note dated June 20, 2000 between Equity Office
Properties Management Corp. as lender and Wilson
Investors -- California, LLC as borrower (incorporated
herein by reference to Exhibit 10.14 to Equity Office's Form
10-K for the year ended December 31, 2000)
10.3 Security Agreement dated June 20, 2000 between Wilson
Investors -- California, LLC as pledgor and Equity Office
Properties Management Corp. as lender (incorporated herein
by reference to Exhibit 10.15 to Equity Office's Form 10-K
for the year ended December 31, 2000)
10.4 Loan Agreement dated June 20, 2000 between Wilson
Investors -- California, LLC as borrower and Equity Office
Properties Management Corp. as lender (incorporated herein
by reference to Exhibit 10.16 to Equity Office's Form 10-K
for the year ended December 31, 2000)
23.1 Consent of Independent Auditors
- ---------------
* Incorporated herein by reference to the same-numbered exhibit to Equity
Office's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended.
96
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2000
ENCUMBRANCES
DESCRIPTION NOTES LOCATION AT 12/31/00 NOTES
- ----------- ------ -------- --------------- ------
1 60 Spear Street Building............................ (3) San Francisco, CA $ --
2 San Felipe Plaza.................................... (3) Houston, TX (50,528,200)
3 Summit Office Park.................................. (3) Ft. Worth, TX --
4 Intercontinental Center............................. (3) Houston, TX --
5 Four Forest Plaza................................... (3) Dallas, TX --
6 Dominion Tower...................................... (3) Norfolk, VA --
7 Northborough Tower.................................. (3) Houston, TX --
8 Community Corporate Center.......................... (3) Columbus, OH (16,541,700)
9 Denver Corporate Center II & III.................... (3) Denver, CO --
10 University Tower................................... (3) Durham, NC --
11 Shelton Pointe..................................... (3) Shelton, CT --
12 San Jacinto Center................................. (3) Austin, TX --
13 1111 19th Street................................... (3) Washington, D.C. --
14 North Central Plaza Three.......................... (3) Dallas, TX --
15 The Quadrant....................................... (3) Englewood, CO --
16 Canterbury Green................................... (3)(4) Stamford, CT (19,143,600)
17 Three Stamford Plaza............................... (3) Stamford, CT (16,657,700)
18 Union Square....................................... (3) San Antonio, TX --
19 One North Franklin................................. (3) Chicago, IL --
20 1620 L Street...................................... (3) Washington, D.C. --
21 300 Atlantic Street................................ (3) Stamford, CT --
22 One and Two Stamford Plaza......................... (3) Stamford, CT --
23 1700 Higgins....................................... (3) Des Plaines, IL --
24 One Congress Plaza................................. (3) Austin, TX --
25 Northwest Center................................... (3) San Antonio, TX --
26 One Crosswoods Center.............................. (3) Columbus, OH --
27 One Lakeway Center................................. (3) Metairie, LA --
28 Three Lakeway Center............................... (3) Metairie, LA --
29 Two Lakeway Center................................. (3) Metairie, LA --
30 Bank of America Plaza.............................. (3) Nashville, TN --
31 The Plaza at LaJolla Village....................... (3) San Diego, CA (80,000,000)
32 Interco Corporate Tower............................ (3) Clayton, MO (21,297,100)
33 9400 NCX........................................... (3) Dallas, TX --
34 Four Stamford Plaza................................ (3) Stamford, CT (15,916,400)
35 1920 Main Plaza.................................... (3) Irvine, CA --
36 Paces West......................................... (3) Atlanta, GA --
37 One Market......................................... (3) San Francisco, CA (145,220,200)
38 2010 Main Plaza.................................... (3) Irvine, CA --
39 1100 Executive Tower............................... (3) Orange, CA --
40 28 State Street.................................... (3) Boston, MA --
41 850 Third Avenue................................... (3) New York, NY -- (10)
42 161 N. Clark....................................... (3) Chicago, IL --
43 Wachovia Center.................................... (3) Charlotte, NC (25,360,400)
44 Central Park....................................... (3) Atlanta, GA (55,786,600)
45 One American Center................................ (3) Austin, TX --
46 580 California..................................... (3) San Francisco, CA (28,663,100)
47 1601 Market Street................................. (3) Philadelphia, PA --
48 Two California Plaza............................... (3) Los Angeles, CA --
49 BP Tower........................................... (3) Cleveland, OH (85,575,900)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
-------------------------------- -------------------------
BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS
- ----------- -------------- --------------- ---------- ------------
1 60 Spear Street Building............................ $ 2,125,200 $ 19,126,500 $ 14,500 $ 389,700
2 San Felipe Plaza.................................... 13,471,300 117,984,000 19,600 5,498,200
3 Summit Office Park.................................. 1,421,100 12,789,700 -- 1,586,800
4 Intercontinental Center............................. 1,752,200 14,420,200 69,800 1,292,700
5 Four Forest Plaza................................... 4,767,900 42,911,400 -- 1,869,300
6 Dominion Tower...................................... 4,643,700 41,100,100 -- 1,857,900
7 Northborough Tower.................................. 1,705,400 12,198,900 37,000 1,159,300
8 Community Corporate Center.......................... 3,018,900 27,169,800 -- 1,476,100
9 Denver Corporate Center II & III.................... 6,059,400 36,534,300 -- 1,347,000
10 University Tower................................... 2,085,100 18,766,100 -- 1,004,800
11 Shelton Pointe..................................... 1,513,900 13,625,200 -- 775,000
12 San Jacinto Center................................. 5,074,500 45,670,600 -- 3,080,100
13 1111 19th Street................................... 5,024,000 45,216,000 -- 871,900
14 North Central Plaza Three.......................... 3,612,400 32,689,300 -- 1,218,000
15 The Quadrant....................................... 4,357,300 39,215,300 -- 1,665,300
16 Canterbury Green................................... -- 41,987,100 91,900 1,305,800
17 Three Stamford Plaza............................... 3,956,600 35,609,800 -- 601,200
18 Union Square....................................... 2,368,500 14,236,000 8,600 1,982,700
19 One North Franklin................................. 9,830,500 88,474,400 -- --
20 1620 L Street...................................... 2,708,200 24,374,000 -- 1,045,400
21 300 Atlantic Street................................ 4,632,300 41,690,900 -- 1,838,100
22 One and Two Stamford Plaza......................... 8,267,700 74,409,300 -- 2,538,000
23 1700 Higgins....................................... 1,323,100 11,907,900 63,800 528,900
24 One Congress Plaza................................. 6,502,400 58,521,300 -- 3,429,500
25 Northwest Center................................... 1,948,000 17,531,900 -- 1,010,000
26 One Crosswoods Center.............................. 1,058,900 9,529,800 -- 711,700
27 One Lakeway Center................................. 2,803,900 25,235,500 -- 2,211,600
28 Three Lakeway Center............................... 4,695,000 43,517,200 59,300 1,914,000
29 Two Lakeway Center................................. 4,643,500 41,791,800 49,200 2,166,800
30 Bank of America Plaza.............................. 3,049,200 27,443,100 -- 1,136,800
31 The Plaza at LaJolla Village....................... 11,838,900 98,243,100 19,300 2,425,500
32 Interco Corporate Tower............................ 4,688,400 42,195,200 83,900 3,275,900
33 9400 NCX........................................... 3,570,000 32,129,700 -- 4,958,500
34 Four Stamford Plaza................................ 4,470,900 40,237,900 24,500 1,105,300
35 1920 Main Plaza.................................... 5,480,600 47,525,800 -- 2,658,800
36 Paces West......................................... 12,833,700 75,024,500 -- 1,888,000
37 One Market......................................... 34,814,400 313,329,700 -- 28,045,000
38 2010 Main Plaza.................................... 5,197,100 46,773,700 -- 1,235,700
39 1100 Executive Tower............................... 10,121,800 41,598,600 -- 954,200
40 28 State Street.................................... 9,512,600 85,622,900 -- 40,189,800
41 850 Third Avenue................................... 9,605,900 86,453,200 30,000 3,144,200
42 161 N. Clark....................................... 15,881,800 142,936,100 -- 18,047,100
43 Wachovia Center.................................... 5,061,000 45,548,900 -- 1,100,000
44 Central Park....................................... 9,162,600 82,463,000 -- 2,625,000
45 One American Center................................ -- 70,811,600 -- 4,471,600
46 580 California..................................... 7,491,200 67,420,900 8,400 3,386,600
47 1601 Market Street................................. 5,780,800 52,027,500 -- 5,465,600
48 Two California Plaza............................... -- 156,197,000 -- 43,465,700
49 BP Tower........................................... 17,402,500 157,260,200 -- 3,900,600
GROSS AMOUNT CARRIED AT CLOSE
OF PERIOD 12/31/2000
--------------------------------
BUILDING AND
DESCRIPTION LAND IMPROVEMENTS TOTAL(1)
- ----------- -------------- --------------- ---------------
1 60 Spear Street Building............................ $ 2,139,700 $ 19,516,200 $ 21,655,900
2 San Felipe Plaza.................................... 13,490,900 123,482,200 136,973,100
3 Summit Office Park.................................. 1,421,100 14,376,500 15,797,600
4 Intercontinental Center............................. 1,822,000 15,712,900 17,534,900
5 Four Forest Plaza................................... 4,767,900 44,780,700 49,548,600
6 Dominion Tower...................................... 4,643,700 42,958,000 47,601,700
7 Northborough Tower.................................. 1,742,400 13,358,200 15,100,600
8 Community Corporate Center.......................... 3,018,900 28,645,900 31,664,800
9 Denver Corporate Center II & III.................... 6,059,400 37,881,300 43,940,700
10 University Tower................................... 2,085,100 19,770,900 21,856,000
11 Shelton Pointe..................................... 1,513,900 14,400,200 15,914,100
12 San Jacinto Center................................. 5,074,500 48,750,700 53,825,200
13 1111 19th Street................................... 5,024,000 46,087,900 51,111,900
14 North Central Plaza Three.......................... 3,612,400 33,907,300 37,519,700
15 The Quadrant....................................... 4,357,300 40,880,600 45,237,900
16 Canterbury Green................................... 91,900 43,292,900 43,384,800
17 Three Stamford Plaza............................... 3,956,600 36,211,000 40,167,600
18 Union Square....................................... 2,377,100 16,218,700 18,595,800
19 One North Franklin................................. 9,830,500 88,474,400 98,304,900
20 1620 L Street...................................... 2,708,200 25,419,400 28,127,600
21 300 Atlantic Street................................ 4,632,300 43,529,000 48,161,300
22 One and Two Stamford Plaza......................... 8,267,700 76,947,300 85,215,000
23 1700 Higgins....................................... 1,386,900 12,436,800 13,823,700
24 One Congress Plaza................................. 6,502,400 61,950,800 68,453,200
25 Northwest Center................................... 1,948,000 18,541,900 20,489,900
26 One Crosswoods Center.............................. 1,058,900 10,241,500 11,300,400
27 One Lakeway Center................................. 2,803,900 27,447,100 30,251,000
28 Three Lakeway Center............................... 4,754,300 45,431,200 50,185,500
29 Two Lakeway Center................................. 4,692,700 43,958,600 48,651,300
30 Bank of America Plaza.............................. 3,049,200 28,579,900 31,629,100
31 The Plaza at LaJolla Village....................... 11,858,200 100,668,600 112,526,800
32 Interco Corporate Tower............................ 4,772,300 45,471,100 50,243,400
33 9400 NCX........................................... 3,570,000 37,088,200 40,658,200
34 Four Stamford Plaza................................ 4,495,400 41,343,200 45,838,600
35 1920 Main Plaza.................................... 5,480,600 50,184,600 55,665,200
36 Paces West......................................... 12,833,700 76,912,500 89,746,200
37 One Market......................................... 34,814,400 341,374,700 376,189,100
38 2010 Main Plaza.................................... 5,197,100 48,009,400 53,206,500
39 1100 Executive Tower............................... 10,121,800 42,552,800 52,674,600
40 28 State Street.................................... 9,512,600 125,812,700 135,325,300
41 850 Third Avenue................................... 9,635,900 89,597,400 99,233,300
42 161 N. Clark....................................... 15,881,800 160,983,200 176,865,000
43 Wachovia Center.................................... 5,061,000 46,648,900 51,709,900
44 Central Park....................................... 9,162,600 85,088,000 94,250,600
45 One American Center................................ -- 75,283,200 75,283,200
46 580 California..................................... 7,499,600 70,807,500 78,307,100
47 1601 Market Street................................. 5,780,800 57,493,100 63,273,900
48 Two California Plaza............................... -- 199,662,700 199,662,700
49 BP Tower........................................... 17,402,500 161,160,800 178,563,300
DATE OF
ACCUMULATED CONSTRUCTION/ DATE DEPRECIABLE
DESCRIPTION DEPRECIATION RENOVATION ACQUIRED LIVES(2)
- ----------- ------------- ------------- ------------------ -----------
1 60 Spear Street Building............................ $ (1,771,300) 1967/1987 09/29/87 40
2 San Felipe Plaza.................................... (11,344,900) 1984 09/29/87 40
3 Summit Office Park.................................. (1,495,900) 1974/1993 03/01/89 40
4 Intercontinental Center............................. (1,439,400) 1983/1991 06/28/89 40
5 Four Forest Plaza................................... (4,224,800) 1985 06/29/89 40
6 Dominion Tower...................................... (3,987,300) 1987 07/25/89 40
7 Northborough Tower.................................. (1,308,800) 1983/1990 08/03/89 40
8 Community Corporate Center.......................... (2,794,700) 1987 06/14/90 40
9 Denver Corporate Center II & III.................... (3,377,200) 1981/93-97 12/20/90 40
10 University Tower................................... (1,912,400) 1987/1992 10/16/91 40
11 Shelton Pointe..................................... (1,383,200) 1985/1993 11/26/91 40
12 San Jacinto Center................................. (4,685,600) 1987 12/13/91 40
13 1111 19th Street................................... (4,117,600) 1979/1993 12/18/91 40
14 North Central Plaza Three.......................... (3,131,000) 1986/1994 04/21/92 40
15 The Quadrant....................................... (3,975,900) 1985 12/01/92 40
16 Canterbury Green................................... (3,795,600) 1987 12/15/92 40
17 Three Stamford Plaza............................... (3,304,800) 1980/1994 12/15/92 40
18 Union Square....................................... (1,698,700) 1986 12/23/92 40
19 One North Franklin................................. (5,454,300) 1991 12/31/92 40
20 1620 L Street...................................... (2,641,500) 1989 02/05/93 40
21 300 Atlantic Street................................ (3,939,000) 1987/1996 03/30/93 40
22 One and Two Stamford Plaza......................... (6,644,000) 1986/1994 03/30/93 40
23 1700 Higgins....................................... (1,139,700) 1986 11/12/93 40
24 One Congress Plaza................................. (6,073,900) 1987 11/12/93 40
25 Northwest Center................................... (1,789,100) 1984/1994 11/12/93 40
26 One Crosswoods Center.............................. (1,106,100) 1984 11/12/93 40
27 One Lakeway Center................................. (2,783,800) 1981/1996 11/12/93 40
28 Three Lakeway Center............................... (4,478,900) 1987/1996 11/12/93 40
29 Two Lakeway Center................................. (4,050,000) 1984/1996 11/12/93 40
30 Bank of America Plaza.............................. (2,644,900) 1977/1995 12/01/93 40
31 The Plaza at LaJolla Village....................... (8,825,900) 1987-1990 03/10/94 40
32 Interco Corporate Tower............................ (4,715,000) 1986 05/27/94 40
33 9400 NCX........................................... (3,999,400) 1981/1995 06/24/94 40
34 Four Stamford Plaza................................ (3,769,000) 1979/1994 08/31/94 40
35 1920 Main Plaza.................................... (5,089,000) 1988 09/29/94 40
36 Paces West......................................... (6,671,400) 1988 10/31/94 40
37 One Market......................................... (32,400,500) 1976/1995 11/22/94 40
38 2010 Main Plaza.................................... (4,511,000) 1988 12/13/94 40
39 1100 Executive Tower............................... (4,008,500) 1987 12/15/94 40
40 28 State Street.................................... (15,431,300) 1968/1997 01/23/95 40
41 850 Third Avenue................................... (8,537,000) 1960/1996 03/20/95 40
42 161 N. Clark....................................... (17,347,800) 1992 07/26/95 40
43 Wachovia Center.................................... (4,051,000) 1972/1994 09/01/95 40
44 Central Park....................................... (7,934,700) 1986 10/17/95 40
45 One American Center................................ (7,046,400) 1984 11/01/95 40
46 580 California..................................... (7,081,800) 1984 12/21/95 40
47 1601 Market Street................................. (5,351,500) 1970 01/18/96 40
48 Two California Plaza............................... (22,474,400) 1992 08/23/96 40
49 BP Tower........................................... (14,336,400) 1985 09/04/96, 01/29/98 40
97
ENCUMBRANCES
DESCRIPTION NOTES LOCATION AT 12/31/00 NOTES
- ----------- ------ -------- --------------- ------
50 Reston Town Center................................. (3) Reston, VA (88,768,800)
51 Reston Town Center Garage.......................... (3) Reston, VA --
52 Colonnade I........................................ (3) San Antonio, TX --
53 One Phoenix Plaza.................................. (3) Phoenix, AZ --
54 49 East Thomas Road................................ (3) Phoenix, AZ --
55 177 Broad Street................................... (3)(5) Stamford, CT --
56 Oakbrook Terrace Tower............................. (3) Oakbrook Terrace, IL --
57 One Maritime Plaza................................. (3) San Francisco, CA --
58 Smith Barney Tower................................. (3) San Diego, CA --
59 201 Mission Street................................. (3) San Francisco, CA --
60 30 N. LaSalle Street............................... (3) Chicago, IL --
61 LL&E Tower......................................... New Orleans, LA (37,500,000) (7)
62 Texaco Center...................................... New Orleans, LA (42,500,000) (7)
63 601 Tchoupitoulas Garage........................... New Orleans, LA -- (7)
64 Prudential Portfolio............................... (8) Various --
65 550 S. Hope........................................ Los Angeles, CA --
66 Four and Five Valley Square........................ Blue Bell, PA --
67 Four Falls Corporate Center........................ Conshohocken, PA --
68 Oak Hill Plaza..................................... King of Prussia, PA --
69 One Devon Square................................... Wayne, PA --
70 Three Devon Square................................. Wayne, PA --
71 Two Devon Square................................... Wayne, PA --
72 Two Valley Square.................................. Blue Bell, PA --
73 Walnut Hill Plaza.................................. King of Prussia, PA (14,238,700)
74 One Lafayette Centre............................... Washington, D.C. --
75 One Valley Square.................................. Blue Bell, PA --
76 Three Valley Square................................ Blue Bell, PA --
77 1600 Duke Street................................... Alexandria, VA --
78 Fair Oaks Plaza.................................... Fairfax, VA --
79 Lakeside Square.................................... Dallas, TX --
80 LaSalle Plaza...................................... Minneapolis, MN --
81 1001 Fifth Avenue.................................. Portland, OR --
82 1111 Third Avenue.................................. Seattle, WA --
83 Calais Office Center............................... Anchorage, AK --
84 Wells Fargo Center................................. Seattle, WA --
85 Nordstrom Medical Tower............................ Seattle, WA --
86 One Bellevue Center................................ Bellevue, WA --
87 Rainier Plaza...................................... Bellevue, WA --
88 Second and Seneca Buildings........................ Seattle, WA --
89 101 N. Wacker...................................... Chicago, IL --
90 175 Wyman Street................................... Walthan, MA --
91 10880 Wilshire Boulevard........................... Los Angeles, CA --
92 10960 Wilshire Boulevard........................... Los Angeles, CA --
93 1300 North 17th Street............................. Rosslyn, VA --
94 1333 H Street...................................... Washington, DC --
95 150 Federal Street................................. Boston, MA --
96 1616 N. Fort Myer Drive............................ Rosslyn, VA --
97 175 Federal Street................................. Boston, MA --
98 2 Oliver Street-147 Milk Street.................... Boston, MA --
99 200 West Adams..................................... Chicago, IL --
100 225 Franklin Street................................ Boston, MA --
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
-------------------------------- -------------------------
BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS
- ----------- -------------- --------------- ---------- ------------
50 Reston Town Center................................. 21,482,600 154,576,300 82,700 2,649,200
51 Reston Town Center Garage.......................... 1,942,500 9,791,900 -- 578,200
52 Colonnade I........................................ 1,413,600 12,725,200 81,000 1,305,500
53 One Phoenix Plaza.................................. 6,191,900 55,726,900 -- --
54 49 East Thomas Road................................ 65,300 587,900 -- 22,100
55 177 Broad Street................................... 3,941,200 35,470,800 -- 780,000
56 Oakbrook Terrace Tower............................. 11,950,200 107,551,700 485,700 4,686,100
57 One Maritime Plaza................................. 11,530,700 103,776,000 -- 9,376,900
58 Smith Barney Tower................................. 2,657,700 23,919,400 -- 3,054,000
59 201 Mission Street................................. 8,870,700 79,836,500 -- 2,680,300
60 30 N. LaSalle Street............................... 12,489,000 112,400,700 -- 5,154,100
61 LL&E Tower......................................... 6,185,800 55,672,200 46,000 5,405,100
62 Texaco Center...................................... 6,686,300 60,177,000 9,500 2,954,700
63 601 Tchoupitoulas Garage........................... 1,180,000 10,619,800 -- 297,600
64 Prudential Portfolio............................... 28,463,400 256,216,100 -- 25,215,500
65 550 S. Hope........................................ 10,016,200 90,146,000 -- 2,637,900
66 Four and Five Valley Square........................ 865,700 7,793,200 -- 441,900
67 Four Falls Corporate Center........................ 4,938,900 44,458,300 55,000 2,053,000
68 Oak Hill Plaza..................................... 2,208,200 19,878,500 -- 357,400
69 One Devon Square................................... 1,024,900 9,226,700 -- 1,341,600
70 Three Devon Square................................. 412,500 3,712,600 -- 21,800
71 Two Devon Square................................... 659,200 5,935,000 -- 267,300
72 Two Valley Square.................................. 879,000 7,913,300 -- 601,300
73 Walnut Hill Plaza.................................. 2,045,000 18,409,900 -- 878,900
74 One Lafayette Centre............................... 8,262,400 74,362,000 -- 1,679,100
75 One Valley Square.................................. 717,200 6,456,900 -- 715,100
76 Three Valley Square................................ 1,012,100 9,111,300 -- 1,210,200
77 1600 Duke Street................................... 1,105,600 9,950,000 -- 460,200
78 Fair Oaks Plaza.................................... 2,412,000 21,711,500 35,400 807,200
79 Lakeside Square.................................... 8,262,200 47,368,800 24,200 3,762,900
80 LaSalle Plaza...................................... 9,680,800 87,126,800 -- 3,159,500
81 1001 Fifth Avenue.................................. 5,383,300 48,633,700 -- 2,663,600
82 1111 Third Avenue.................................. 9,899,900 89,570,700 -- 3,547,400
83 Calais Office Center............................... -- 16,630,800 -- 1,650,500
84 Wells Fargo Center................................. 21,360,700 193,528,600 -- 3,564,600
85 Nordstrom Medical Tower............................ 1,699,600 15,450,400 -- 379,500
86 One Bellevue Center................................ -- 56,223,100 -- 1,266,700
87 Rainier Plaza...................................... -- 79,928,100 -- 1,538,400
88 Second and Seneca Buildings........................ 10,922,500 98,927,300 -- 1,204,300
89 101 N. Wacker...................................... 10,035,500 90,319,400 -- 2,689,900
90 175 Wyman Street................................... 14,600,000 5,400,400 -- 1,250,000
91 10880 Wilshire Boulevard........................... -- 149,841,200 142,600 4,540,800
92 10960 Wilshire Boulevard........................... 16,841,300 151,573,900 -- 4,590,700
93 1300 North 17th Street............................. 9,810,700 88,295,900 -- 462,900
94 1333 H Street...................................... 6,715,400 60,438,200 -- 2,255,300
95 150 Federal Street................................. 14,131,400 127,182,200 -- 10,489,800
96 1616 N. Fort Myer Drive............................ 6,960,700 62,646,300 -- 1,888,800
97 175 Federal Street................................. 4,893,900 44,045,200 -- 1,345,100
98 2 Oliver Street-147 Milk Street.................... 5,017,400 45,157,000 -- 3,085,700
99 200 West Adams..................................... 11,654,100 104,887,100 -- 5,018,900
100 225 Franklin Street................................ 34,607,800 311,470,600 -- 5,668,800
GROSS AMOUNT CARRIED AT CLOSE
OF PERIOD 12/31/2000
--------------------------------
BUILDING AND
DESCRIPTION LAND IMPROVEMENTS TOTAL(1)
- ----------- -------------- --------------- ---------------
50 Reston Town Center................................. 21,565,300 157,225,500 178,790,800
51 Reston Town Center Garage.......................... 1,942,500 10,370,100 12,312,600
52 Colonnade I........................................ 1,494,600 14,030,700 15,525,300
53 One Phoenix Plaza.................................. 6,191,900 55,726,900 61,918,800
54 49 East Thomas Road................................ 65,300 610,000 675,300
55 177 Broad Street................................... 3,941,200 36,250,800 40,192,000
56 Oakbrook Terrace Tower............................. 12,435,900 112,237,800 124,673,700
57 One Maritime Plaza................................. 11,530,700 113,152,900 124,683,600
58 Smith Barney Tower................................. 2,657,700 26,973,400 29,631,100
59 201 Mission Street................................. 8,870,700 82,516,800 91,387,500
60 30 N. LaSalle Street............................... 12,489,000 117,554,800 130,043,800
61 LL&E Tower......................................... 6,231,800 61,077,300 67,309,100
62 Texaco Center...................................... 6,695,800 63,131,700 69,827,500
63 601 Tchoupitoulas Garage........................... 1,180,000 10,917,400 12,097,400
64 Prudential Portfolio............................... 28,463,400 281,431,600 309,895,000
65 550 S. Hope........................................ 10,016,200 92,783,900 102,800,100
66 Four and Five Valley Square........................ 865,700 8,235,100 9,100,800
67 Four Falls Corporate Center........................ 4,993,900 46,511,300 51,505,200
68 Oak Hill Plaza..................................... 2,208,200 20,235,900 22,444,100
69 One Devon Square................................... 1,024,900 10,568,300 11,593,200
70 Three Devon Square................................. 412,500 3,734,400 4,146,900
71 Two Devon Square................................... 659,200 6,202,300 6,861,500
72 Two Valley Square.................................. 879,000 8,514,600 9,393,600
73 Walnut Hill Plaza.................................. 2,045,000 19,288,800 21,333,800
74 One Lafayette Centre............................... 8,262,400 76,041,100 84,303,500
75 One Valley Square.................................. 717,200 7,172,000 7,889,200
76 Three Valley Square................................ 1,012,100 10,321,500 11,333,600
77 1600 Duke Street................................... 1,105,600 10,410,200 11,515,800
78 Fair Oaks Plaza.................................... 2,447,400 22,518,700 24,966,100
79 Lakeside Square.................................... 8,286,400 51,131,700 59,418,100
80 LaSalle Plaza...................................... 9,680,800 90,286,300 99,967,100
81 1001 Fifth Avenue.................................. 5,383,300 51,297,300 56,680,600
82 1111 Third Avenue.................................. 9,899,900 93,118,100 103,018,000
83 Calais Office Center............................... -- 18,281,300 18,281,300
84 Wells Fargo Center................................. 21,360,700 197,093,200 218,453,900
85 Nordstrom Medical Tower............................ 1,699,600 15,829,900 17,529,500
86 One Bellevue Center................................ -- 57,489,800 57,489,800
87 Rainier Plaza...................................... -- 81,466,500 81,466,500
88 Second and Seneca Buildings........................ 10,922,500 100,131,600 111,054,100
89 101 N. Wacker...................................... 10,035,500 93,009,300 103,044,800
90 175 Wyman Street................................... 14,600,000 6,650,400 21,250,400
91 10880 Wilshire Boulevard........................... 142,600 154,382,000 154,524,600
92 10960 Wilshire Boulevard........................... 16,841,300 156,164,600 173,005,900
93 1300 North 17th Street............................. 9,810,700 88,758,800 98,569,500
94 1333 H Street...................................... 6,715,400 62,693,500 69,408,900
95 150 Federal Street................................. 14,131,400 137,672,000 151,803,400
96 1616 N. Fort Myer Drive............................ 6,960,700 64,535,100 71,495,800
97 175 Federal Street................................. 4,893,900 45,390,300 50,284,200
98 2 Oliver Street-147 Milk Street.................... 5,017,400 48,242,700 53,260,100
99 200 West Adams..................................... 11,654,100 109,906,000 121,560,100
100 225 Franklin Street................................ 34,607,800 317,139,400 351,747,200
DATE OF
ACCUMULATED CONSTRUCTION/ DATE DEPRECIABLE
DESCRIPTION DEPRECIATION RENOVATION ACQUIRED LIVES(2)
- ----------- ------------- ------------- ------------------ -----------
50 Reston Town Center................................. (13,716,900) 1990 10/22/96 40
51 Reston Town Center Garage.......................... (283,400) 1999 10/22/96 40
52 Colonnade I........................................ (1,522,300) 1983 12/04/96 40
53 One Phoenix Plaza.................................. (4,815,700) 1989 12/04/96 40
54 49 East Thomas Road................................ (53,800) 1974/1993 12/11/96 40
55 177 Broad Street................................... (3,781,000) 1989 01/29/97 40
56 Oakbrook Terrace Tower............................. (10,477,600) 1988 04/16/97 40
57 One Maritime Plaza................................. (10,474,700) 1967/1990 04/21/97 40
58 Smith Barney Tower................................. (3,303,100) 1987 04/28/97 40
59 201 Mission Street................................. (7,584,500) 1981 04/30/97 40
60 30 N. LaSalle Street............................... (10,735,400) 1974/1990 06/13/97 40
61 LL&E Tower......................................... (5,514,300) 1987 09/03/97 40
62 Texaco Center...................................... (5,615,100) 1984 09/03/97 40
63 601 Tchoupitoulas Garage........................... (898,400) 1982 09/03/97 40
64 Prudential Portfolio............................... (25,362,900) Various 10/06/97 40
65 550 S. Hope........................................ (7,563,500) 1991 10/06/97 40
66 Four and Five Valley Square........................ (691,700) 1988 10/07/97 40
67 Four Falls Corporate Center........................ (3,941,500) 1988 10/07/97 40
68 Oak Hill Plaza..................................... (1,666,300) 1982 10/07/97 40
69 One Devon Square................................... (903,400) 1984 10/07/97 40
70 Three Devon Square................................. (297,600) 1985 10/07/97 40
71 Two Devon Square................................... (623,000) 1985 10/07/97 40
72 Two Valley Square.................................. (739,900) 1990 10/07/97 40
73 Walnut Hill Plaza.................................. (1,566,500) 1985 10/07/97 40
74 One Lafayette Centre............................... (6,140,900) 1980/1993 10/17/97 40
75 One Valley Square.................................. (699,300) 1982 11/21/97 40
76 Three Valley Square................................ (883,300) 1984 11/21/97 40
77 1600 Duke Street................................... (849,700) 1985 11/24/97 40
78 Fair Oaks Plaza.................................... (1,815,900) 1986 11/24/97 40
79 Lakeside Square.................................... (4,444,200) 1987 11/24/97 40
80 LaSalle Plaza...................................... (7,344,000) 1991 11/25/97 40
81 1001 Fifth Avenue.................................. (4,037,800) 1980 12/17/97 40
82 1111 Third Avenue.................................. (7,850,500) 1980 12/17/97 40
83 Calais Office Center............................... (1,722,800) 1975 12/17/97 40
84 Wells Fargo Center................................. (15,455,100) 1983 12/17/97 40
85 Nordstrom Medical Tower............................ (1,264,700) 1986 12/17/97 40
86 One Bellevue Center................................ (4,603,900) 1983 12/17/97 40
87 Rainier Plaza...................................... (6,362,800) 1986 12/17/97 40
88 Second and Seneca Buildings........................ (8,045,300) 1991 12/17/97 40
89 101 N. Wacker...................................... (7,448,300) 1980/1990 12/19/97 40
90 175 Wyman Street................................... (68,400) 1999 12/19/97 40
91 10880 Wilshire Boulevard........................... (12,393,200) 1970/1992 12/19/97 40
92 10960 Wilshire Boulevard........................... (12,715,700) 1971/1992 12/19/97 40
93 1300 North 17th Street............................. (6,843,600) 1980 12/19/97 40
94 1333 H Street...................................... (4,690,300) 1982 12/19/97 40
95 150 Federal Street................................. (12,012,200) 1988 12/19/97 40
96 1616 N. Fort Myer Drive............................ (4,956,800) 1974 12/19/97 40
97 175 Federal Street................................. (3,572,500) 1977 12/19/97 40
98 2 Oliver Street-147 Milk Street.................... (4,007,400) 1988 12/19/97 40
99 200 West Adams..................................... (8,931,900) 1985/1996 12/19/97 40
100 225 Franklin Street................................ (24,540,600) 1966/1996 12/19/97 40
98
ENCUMBRANCES
DESCRIPTION NOTES LOCATION AT 12/31/00 NOTES
- ----------- ------ -------- --------------- ------
101 AT&T Plaza......................................... Oak Brook, IL --
102 Center Plaza....................................... Boston, MA (58,613,300)
103 Centerpointe I & II................................ Fairfax, VA (29,101,000)
104 Civic Opera House.................................. Chicago, IL --
105 Crosby Corporate Center............................ Bedford, MA --
106 Crosby Corporate Center II......................... Bedford, MA --
107 E.J. Randolph...................................... McLean, VA (15,307,600) (9)
108 John Marshall I.................................... McLean, VA (19,363,000)
109 Lake Marriott Business Park........................ Santa Clara, CA --
110 Lakeside Office Park............................... Atlanta, GA --
111 New England Executive Park......................... Burlington, MA --
112 Northridge I....................................... Herndon, VA (13,881,600) (9)
113 One Canal Park..................................... Cambridge, MA --
114 Perimeter Center................................... Atlanta, GA (208,588,300)
115 Presidents Plaza................................... Chicago, IL --
116 Riverview I & II................................... Cambridge, MA --
117 Russia Wharf....................................... Boston, MA --
118 Shoreline Technology Park.......................... Mountain View, CA --
119 South Station...................................... Boston, MA --
120 Sunnyvale Business Center.......................... Sunnyvale, CA --
121 Ten Canal Park..................................... Cambridge, MA --
122 Tri-State International............................ Lincolnshire, IL --
123 Wellesley Office Park.............................. Wellesley, MA (53,773,300)
124 Westbrook Corporate Center......................... Westchester, IL (105,313,400)
125 150 California..................................... (6) San Francisco, CA --
126 John Marshall III.................................. (6) McLean, VA --
127 Riverside.......................................... (6) Newton, MA --
128 100 Summer Street.................................. Boston, MA --
129 The Tower at New England Executive Park............ Burlington, MA --
130 Westbrook Corporate Center vacant land............. Westchester, IL --
131 Denver Post Tower.................................. Denver, CO --
132 301 Howard Building................................ San Francisco, CA --
133 410 17th Street.................................... Denver, CO --
134 Tabor Center....................................... Denver, CO --
135 Trinity Place...................................... Denver, CO --
136 Dominion Plaza..................................... Denver, CO --
137 Millennium Plaza................................... Englewood, CO --
138 Polk and Taylor Buildings.......................... Arlington, VA --
139 Northland Plaza.................................... Bloomington, MN --
140 4949 S. Syracuse................................... Denver, CO --
141 Metropoint......................................... Denver, CO --
142 Metropoint III vacant land......................... Denver, CO --
143 One Park Square.................................... Albuquerque, NM --
144 Park Avenue Tower.................................. New York, NY (189,412,700) (10)
145 Terrace Building................................... Englewood, CO --
146 The Solarium....................................... Englewood, CO --
147 Second and Spring Building......................... Seattle, WA --
148 Colonnade I & II................................... Dallas, TX --
149 Colonnade III...................................... Dallas, TX --
150 Worldwide Plaza.................................... New York, NY (245,713,400)
151 Central Park vacant land........................... Atlanta, GA --
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
-------------------------------- -------------------------
BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS
- ----------- -------------- --------------- ---------- ------------
101 AT&T Plaza......................................... 4,834,200 43,507,900 48,100 1,710,700
102 Center Plaza....................................... 18,942,300 170,480,400 -- 4,605,800
103 Centerpointe I & II................................ 8,837,800 79,540,200 366,900 992,500
104 Civic Opera House.................................. 12,771,300 114,941,900 -- 5,569,700
105 Crosby Corporate Center............................ 5,957,800 53,620,400 70,100 1,425,500
106 Crosby Corporate Center II......................... 9,384,600 27,584,300 8,700 5,310,000
107 E.J. Randolph...................................... 3,936,600 35,429,100 7,000 316,900
108 John Marshall I.................................... 5,216,400 46,814,100 23,600 132,500
109 Lake Marriott Business Park........................ 9,090,800 84,967,100 231,600 2,302,000
110 Lakeside Office Park............................... 4,792,500 43,132,300 -- 1,771,500
111 New England Executive Park......................... 15,636,600 140,729,200 182,000 9,057,800
112 Northridge I....................................... 3,224,900 29,024,400 -- 1,627,700
113 One Canal Park..................................... 2,006,000 18,054,000 -- 450,200
114 Perimeter Center................................... 65,860,200 429,130,700 314,100 20,020,500
115 Presidents Plaza................................... 13,435,500 120,919,200 -- 2,300,700
116 Riverview I & II................................... 5,937,600 53,438,100 6,300 1,494,300
117 Russia Wharf....................................... 3,891,400 35,022,800 -- 2,716,900
118 Shoreline Technology Park.......................... 31,575,200 190,894,500 -- 1,409,400
119 South Station...................................... -- 31,073,800 -- 960,700
120 Sunnyvale Business Center.......................... 4,890,000 44,010,000 -- 43,700
121 Ten Canal Park..................................... 2,383,100 21,447,900 -- 61,900
122 Tri-State International............................ 10,925,300 98,327,300 290,500 1,890,000
123 Wellesley Office Park.............................. 16,492,700 148,434,200 20,300 3,652,500
124 Westbrook Corporate Center......................... 24,874,900 223,874,100 30,100 5,750,500
125 150 California..................................... 12,566,800 45,900,000 -- 7,192,400
126 John Marshall III.................................. 9,950,000 35,759,100 -- 8,500
127 Riverside.......................................... 24,000,000 418,200 -- 88,319,600
128 100 Summer Street.................................. 22,271,000 200,439,300 -- 17,573,700
129 The Tower at New England Executive Park............ 2,792,900 31,462,500 -- 10,598,500
130 Westbrook Corporate Center vacant land............. 3,972,800 -- -- --
131 Denver Post Tower.................................. -- 52,937,200 -- 5,311,400
132 301 Howard Building................................ 7,050,800 58,920,400 -- 3,116,500
133 410 17th Street.................................... 4,473,700 40,263,700 -- 3,019,400
134 Tabor Center....................................... 27,948,500 116,536,200 -- 5,758,800
135 Trinity Place...................................... 1,898,400 17,085,400 -- 1,466,300
136 Dominion Plaza..................................... 5,990,100 53,911,200 -- 4,694,300
137 Millennium Plaza................................... 7,757,100 38,313,800 -- 29,100
138 Polk and Taylor Buildings.......................... 16,942,500 152,482,800 -- 6,680,600
139 Northland Plaza.................................... 4,705,100 42,346,000 -- 1,050,100
140 4949 S. Syracuse................................... 822,300 7,400,800 22,400 551,000
141 Metropoint......................................... 4,374,900 39,374,500 -- 1,158,800
142 Metropoint III vacant land......................... 2,000,000 -- -- --
143 One Park Square.................................... 3,634,300 32,708,700 -- 1,841,200
144 Park Avenue Tower.................................. 48,976,000 195,903,900 718,700 4,759,000
145 Terrace Building................................... 1,546,400 13,864,800 29,100 578,700
146 The Solarium....................................... 1,951,100 17,560,100 -- 861,100
147 Second and Spring Building......................... 1,968,400 17,715,700 -- 2,437,900
148 Colonnade I & II................................... 9,043,800 81,394,100 -- 3,651,400
149 Colonnade III...................................... 6,152,000 55,367,700 -- 3,439,900
150 Worldwide Plaza.................................... 124,919,000 499,676,100 -- 1,201,200
151 Central Park vacant land........................... 3,975,400 -- -- 45,900
GROSS AMOUNT CARRIED AT CLOSE
OF PERIOD 12/31/2000
--------------------------------
BUILDING AND
DESCRIPTION LAND IMPROVEMENTS TOTAL(1)
- ----------- -------------- --------------- ---------------
101 AT&T Plaza......................................... 4,882,300 45,218,600 50,100,900
102 Center Plaza....................................... 18,942,300 175,086,200 194,028,500
103 Centerpointe I & II................................ 9,204,700 80,532,700 89,737,400
104 Civic Opera House.................................. 12,771,300 120,511,600 133,282,900
105 Crosby Corporate Center............................ 6,027,900 55,045,900 61,073,800
106 Crosby Corporate Center II......................... 9,393,300 32,894,300 42,287,600
107 E.J. Randolph...................................... 3,943,600 35,746,000 39,689,600
108 John Marshall I.................................... 5,240,000 46,946,600 52,186,600
109 Lake Marriott Business Park........................ 9,322,400 87,269,100 96,591,500
110 Lakeside Office Park............................... 4,792,500 44,903,800 49,696,300
111 New England Executive Park......................... 15,818,600 149,787,000 165,605,600
112 Northridge I....................................... 3,224,900 30,652,100 33,877,000
113 One Canal Park..................................... 2,006,000 18,504,200 20,510,200
114 Perimeter Center................................... 66,174,300 449,151,200 515,325,500
115 Presidents Plaza................................... 13,435,500 123,219,900 136,655,400
116 Riverview I & II................................... 5,943,900 54,932,400 60,876,300
117 Russia Wharf....................................... 3,891,400 37,739,700 41,631,100
118 Shoreline Technology Park.......................... 31,575,200 192,303,900 223,879,100
119 South Station...................................... -- 32,034,500 32,034,500
120 Sunnyvale Business Center.......................... 4,890,000 44,053,700 48,943,700
121 Ten Canal Park..................................... 2,383,100 21,509,800 23,892,900
122 Tri-State International............................ 11,215,800 100,217,300 111,433,100
123 Wellesley Office Park.............................. 16,513,000 152,086,700 168,599,700
124 Westbrook Corporate Center......................... 24,905,000 229,624,600 254,529,600
125 150 California..................................... 12,566,800 53,092,400 65,659,200
126 John Marshall III.................................. 9,950,000 35,767,600 45,717,600
127 Riverside.......................................... 24,000,000 88,737,800 112,737,800
128 100 Summer Street.................................. 22,271,000 218,013,000 240,284,000
129 The Tower at New England Executive Park............ 2,792,900 42,061,000 44,853,900
130 Westbrook Corporate Center vacant land............. 3,972,800 -- 3,972,800
131 Denver Post Tower.................................. -- 58,248,600 58,248,600
132 301 Howard Building................................ 7,050,800 62,036,900 69,087,700
133 410 17th Street.................................... 4,473,700 43,283,100 47,756,800
134 Tabor Center....................................... 27,948,500 122,295,000 150,243,500
135 Trinity Place...................................... 1,898,400 18,551,700 20,450,100
136 Dominion Plaza..................................... 5,990,100 58,605,500 64,595,600
137 Millennium Plaza................................... 7,757,100 38,342,900 46,100,000
138 Polk and Taylor Buildings.......................... 16,942,500 159,163,400 176,105,900
139 Northland Plaza.................................... 4,705,100 43,396,100 48,101,200
140 4949 S. Syracuse................................... 844,700 7,951,800 8,796,500
141 Metropoint......................................... 4,374,900 40,533,300 44,908,200
142 Metropoint III vacant land......................... 2,000,000 -- 2,000,000
143 One Park Square.................................... 3,634,300 34,549,900 38,184,200
144 Park Avenue Tower.................................. 49,694,700 200,662,900 250,357,600
145 Terrace Building................................... 1,575,500 14,443,500 16,019,000
146 The Solarium....................................... 1,951,100 18,421,200 20,372,300
147 Second and Spring Building......................... 1,968,400 20,153,600 22,122,000
148 Colonnade I & II................................... 9,043,800 85,045,500 94,089,300
149 Colonnade III...................................... 6,152,000 58,807,600 64,959,600
150 Worldwide Plaza.................................... 124,919,000 500,877,300 625,796,300
151 Central Park vacant land........................... 3,975,400 45,900 4,021,300
DATE OF
ACCUMULATED CONSTRUCTION/ DATE DEPRECIABLE
DESCRIPTION DEPRECIATION RENOVATION ACQUIRED LIVES(2)
- ----------- ------------- ------------- ------------------ -----------
101 AT&T Plaza......................................... (3,769,700) 1984 12/19/97 40
102 Center Plaza....................................... (13,659,700) 1969 12/19/97 40
103 Centerpointe I & II................................ (6,230,800) 1998-1990 12/19/97 40
104 Civic Opera House.................................. (9,922,900) 1929/1996 12/19/97 40
105 Crosby Corporate Center............................ (4,222,100) 1996 12/19/97 40
106 Crosby Corporate Center II......................... (2,149,400) 1998 12/19/97 40
107 E.J. Randolph...................................... (2,732,900) 1983 12/19/97 40
108 John Marshall I.................................... (3,583,400) 1981 12/19/97 40
109 Lake Marriott Business Park........................ (6,396,400) 1981 12/19/97 40
110 Lakeside Office Park............................... (3,602,700) 1972-1978 12/19/97 40
111 New England Executive Park......................... (12,041,300) 1970-1985 12/19/97 40
112 Northridge I....................................... (2,331,900) 1988 12/19/97 40
113 One Canal Park..................................... (1,528,600) 1987 12/19/97 40
114 Perimeter Center................................... (35,759,300) 1970-1989 12/19/97 40
115 Presidents Plaza................................... (9,752,300) 1980-1982 12/19/97 40
116 Riverview I & II................................... (4,197,400) 1985-1986 12/19/97 40
117 Russia Wharf....................................... (3,526,300) 1978-1982 12/19/97 40
118 Shoreline Technology Park.......................... (14,301,800) 1985-1991 12/19/97 40
119 South Station...................................... (2,445,700) 1988 12/19/97 40
120 Sunnyvale Business Center.......................... (3,348,100) 1990 12/19/97 40
121 Ten Canal Park..................................... (1,634,900) 1987 12/19/97 40
122 Tri-State International............................ (8,030,000) 1986 12/19/97 40
123 Wellesley Office Park.............................. (11,880,800) 1963-1984 12/19/97 40
124 Westbrook Corporate Center......................... (18,496,600) 1985-1996 12/19/97 40
125 150 California..................................... (947,800) 2000 12/19/97 40
126 John Marshall III.................................. (1,199,400) 2000 12/19/97 40
127 Riverside.......................................... (1,823,300) 2000 12/19/97 40
128 100 Summer Street.................................. (15,481,500) 1974/1990 03/18/98 40
129 The Tower at New England Executive Park............ (2,109,300) 1971/1999 03/31/98 40
130 Westbrook Corporate Center vacant land............. -- N/A 04/02/98 N/A
131 Denver Post Tower.................................. (4,532,500) 1984 04/21/98 40
132 301 Howard Building................................ (4,656,300) 1988 04/29/98 40
133 410 17th Street.................................... (3,183,800) 1978 04/30/98 40
134 Tabor Center....................................... (8,315,700) 1985 04/30/98 40
135 Trinity Place...................................... (1,393,300) 1983 04/30/98 40
136 Dominion Plaza..................................... (4,300,300) 1983 05/14/98 40
137 Millennium Plaza................................... (2,530,500) 1982 05/19/98 40
138 Polk and Taylor Buildings.......................... (13,894,800) 1970 05/22/98 40
139 Northland Plaza.................................... (2,871,300) 1985 07/02/98 40
140 4949 S. Syracuse................................... (526,400) 1982 07/15/98 40
141 Metropoint......................................... (2,575,000) 1987 07/15/98 40
142 Metropoint III vacant land......................... -- N/A 07/15/98 N/A
143 One Park Square.................................... (2,241,500) 1985 07/15/98 40
144 Park Avenue Tower.................................. (12,467,400) 1986 07/15/98 40
145 Terrace Building................................... (942,500) 1982 07/15/98 40
146 The Solarium....................................... (1,107,700) 1982 07/15/98 40
147 Second and Spring Building......................... (1,243,300) 1906/1989 07/29/98 40
148 Colonnade I & II................................... (5,234,200) 1983-1985 09/30/98 40
149 Colonnade III...................................... (3,393,600) 1998 09/30/98 40
150 Worldwide Plaza.................................... (27,640,300) 1989 10/01/98 40
151 Central Park vacant land........................... -- N/A 11/03/98 N/A
99
ENCUMBRANCES
DESCRIPTION NOTES LOCATION AT 12/31/00 NOTES
- ----------- ------ -------- --------------- ------
152 Computer Associates Tower.......................... Irving, TX --
153 Texas Commerce Tower............................... Irving, TX --
154 City Center Bellevue............................... Bellevue, WA --
155 Prominence in Buckhead............................. (6) Atlanta, GA --
156 Prominence vacant land............................. Atlanta, GA --
157 Palo Alto Square................................... Palo Alto, CA (49,950,000)
158 Metropoint II...................................... Denver, CO --
159 Centerpointe III vacant land....................... Fairfax, VA --
160 10 Almaden......................................... San Jose, CA --
161 11 Canal Center.................................... Alexandria, VA --
162 110 Atrium Place................................... Bellevue, WA (20,596,500)
163 120 Montgomery..................................... San Francisco, CA (47,528,900)
164 125 Summer Street.................................. Boston, MA (71,558,100)
165 18301 Von Karman (Apple Building).................. Irvine, CA --
166 200 Galleria....................................... Atlanta, GA (116,405,900) (11)
167 201 California..................................... San Francisco, CA (40,934,900)
168 222 Berkley Street................................. Boston, MA --
169 429 Santa Monica................................... Santa Monica, CA --
170 500 Boylston Street................................ Boston, MA --
171 527 Madison Avenue................................. New York, NY (64,214,900) (11)
172 700 North Brand.................................... Glendale, CA (25,118,100)
173 99 Canal Center.................................... Alexandria, VA --
174 Bay Park Plaza I & II.............................. Burlingame, CA --
175 Bayhill Office Center.............................. San Bruno, CA (54,211,400)
176 Bayside Plaza...................................... San Francisco, CA (14,894,400)
177 Bixby Ranch........................................ Seal Beach, CA (27,224,000)
178 Centerside II...................................... San Diego, CA (22,944,600)
179 Commerce Park...................................... Los Angeles, CA --
180 Corporate 500 Centre............................... Deerfield, IL (78,364,800)
181 Crossroads......................................... San Diego, CA --
182 Embarcadero Place.................................. Palo Alto, CA (35,757,000)
183 Exposition Centre.................................. Sacramento, CA (4,843,900)
184 Golden Bear Center................................. Berkeley, CA (19,371,300)
185 Island Corporate Center............................ Mercer Island, WA (12,379,300)
186 Janss Court........................................ Santa Monica, CA (17,107,300)
187 Lincoln Town Center................................ Santa Ana, CA --
188 Market Square...................................... (11) Washington, DC --
189 Norris Tech Center................................. San Ramon, CA --
190 Norwest Center..................................... Minneapolis, MN (115,039,700)
191 One & Two ADP Plaza................................ San Ramon, CA --
192 One & Two Corporate Center......................... Concord, CA --
193 One Bay Plaza...................................... Burlingame, CA --
194 One Lincoln Centre................................. Oakbrook, IL --
195 One Memorial Drive................................. Cambridge, MA (58,856,200)
196 One Ninety One Peachtree Tower..................... Atlanta, GA --
197 Peninsula Office Park.............................. San Mateo, CA (82,601,500)
198 PeopleSoft Plaza................................... Pleasanton, CA --
199 Pruneyard Office Towers............................ Campbell, CA --
200 Seaport Centre..................................... Redwood City, CA --
201 Seaport Plaza...................................... Redwood City, CA --
202 Searise Office Tower............................... Santa Monica, CA (11,203,600)
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
-------------------------------- -------------------------
BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS
- ----------- -------------- --------------- ---------- ------------
152 Computer Associates Tower.......................... 5,129,400 46,164,300 12,800 216,300
153 Texas Commerce Tower............................... 5,525,400 49,728,500 -- 796,900
154 City Center Bellevue............................... 22,794,100 93,141,500 -- 875,700
155 Prominence in Buckhead............................. 7,456,300 63,163,800 -- 9,313,500
156 Prominence vacant land............................. 7,861,700 -- -- 271,600
157 Palo Alto Square................................... -- 78,143,200 99,800 2,057,700
158 Metropoint II...................................... 1,777,000 17,864,800 -- 3,721,300
159 Centerpointe III vacant land....................... 8,168,100 -- -- 16,200
160 10 Almaden......................................... 12,582,800 71,302,500 -- 60,100
161 11 Canal Center.................................... 1,950,000 11,050,000 -- 1,500
162 110 Atrium Place................................... 6,333,300 35,888,500 -- 70,000
163 120 Montgomery..................................... 17,400,000 98,600,000 -- 490,800
164 125 Summer Street.................................. 18,000,000 102,000,000 -- 1,983,700
165 18301 Von Karman (Apple Building).................. 6,026,800 34,152,100 -- 306,600
166 200 Galleria....................................... 10,282,300 58,266,300 -- 106,700
167 201 California..................................... 10,519,700 59,611,400 -- 200,200
168 222 Berkley Street................................. 25,593,300 145,028,900 -- 256,000
169 429 Santa Monica................................... 2,523,200 14,298,300 -- 16,200
170 500 Boylston Street................................ 39,000,000 221,000,000 -- 5,800
171 527 Madison Avenue................................. 9,154,700 51,876,500 -- 769,700
172 700 North Brand.................................... 5,969,700 33,828,000 -- 364,400
173 99 Canal Center.................................... 3,997,700 22,653,600 -- 88,800
174 Bay Park Plaza I & II.............................. 12,905,800 73,133,000 -- 260,900
175 Bayhill Office Center.............................. 24,009,700 136,054,800 -- --
176 Bayside Plaza...................................... 4,108,200 23,279,900 -- 144,500
177 Bixby Ranch........................................ 6,450,000 36,550,000 -- 105,800
178 Centerside II...................................... 5,777,200 32,737,300 -- 320,200
179 Commerce Park...................................... -- 14,700,000 -- 155,700
180 Corporate 500 Centre............................... 20,100,000 113,900,000 -- 945,400
181 Crossroads......................................... 2,400,000 13,600,000 -- 31,000
182 Embarcadero Place.................................. 10,500,000 59,500,000 -- --
183 Exposition Centre.................................. 1,200,000 6,800,000 -- 28,200
184 Golden Bear Center................................. 4,500,000 25,500,000 -- 47,700
185 Island Corporate Center............................ 2,700,000 15,300,000 -- 93,000
186 Janss Court........................................ 4,350,000 24,650,000 -- --
187 Lincoln Town Center................................ 4,402,900 24,950,000 -- 53,000
188 Market Square...................................... 33,077,100 187,436,900 -- 214,900
189 Norris Tech Center................................. 5,700,000 32,300,000 -- 284,400
190 Norwest Center..................................... 39,045,000 221,255,000 -- --
191 One & Two ADP Plaza................................ 7,459,900 42,272,500 -- 138,900
192 One & Two Corporate Center......................... 6,378,700 36,146,200 -- 273,000
193 One Bay Plaza...................................... 8,642,400 48,973,300 -- 311,100
194 One Lincoln Centre................................. 7,350,000 41,650,000 -- 261,400
195 One Memorial Drive................................. 14,861,700 84,216,400 -- --
196 One Ninety One Peachtree Tower..................... 46,500,000 263,500,000 -- 106,100
197 Peninsula Office Park.............................. 27,275,500 154,560,900 -- 446,800
198 PeopleSoft Plaza................................... 7,038,800 39,886,600 -- 113,100
199 Pruneyard Office Towers............................ 16,502,200 154,783,300 -- 1,113,900
200 Seaport Centre..................................... 24,000,000 136,000,000 -- 75,200
201 Seaport Plaza...................................... 10,132,000 16,825,300 -- 15,069,700
202 Searise Office Tower............................... 4,379,700 24,818,500 -- 27,800
GROSS AMOUNT CARRIED AT CLOSE
OF PERIOD 12/31/2000
--------------------------------
BUILDING AND
DESCRIPTION LAND IMPROVEMENTS TOTAL(1)
- ----------- -------------- --------------- ---------------
152 Computer Associates Tower.......................... 5,142,200 46,380,600 51,522,800
153 Texas Commerce Tower............................... 5,525,400 50,525,400 56,050,800
154 City Center Bellevue............................... 22,794,100 94,017,200 116,811,300
155 Prominence in Buckhead............................. 7,456,300 72,477,300 79,933,600
156 Prominence vacant land............................. 7,861,700 271,600 8,133,300
157 Palo Alto Square................................... 99,800 80,200,900 80,300,700
158 Metropoint II...................................... 1,777,000 21,586,100 23,363,100
159 Centerpointe III vacant land....................... 8,168,100 16,200 8,184,300
160 10 Almaden......................................... 12,582,800 71,362,600 83,945,400
161 11 Canal Center.................................... 1,950,000 11,051,500 13,001,500
162 110 Atrium Place................................... 6,333,300 35,958,500 42,291,800
163 120 Montgomery..................................... 17,400,000 99,090,800 116,490,800
164 125 Summer Street.................................. 18,000,000 103,983,700 121,983,700
165 18301 Von Karman (Apple Building).................. 6,026,800 34,458,700 40,485,500
166 200 Galleria....................................... 10,282,300 58,373,000 68,655,300
167 201 California..................................... 10,519,700 59,811,600 70,331,300
168 222 Berkley Street................................. 25,593,300 145,284,900 170,878,200
169 429 Santa Monica................................... 2,523,200 14,314,500 16,837,700
170 500 Boylston Street................................ 39,000,000 221,005,800 260,005,800
171 527 Madison Avenue................................. 9,154,700 52,646,200 61,800,900
172 700 North Brand.................................... 5,969,700 34,192,400 40,162,100
173 99 Canal Center.................................... 3,997,700 22,742,400 26,740,100
174 Bay Park Plaza I & II.............................. 12,905,800 73,393,900 86,299,700
175 Bayhill Office Center.............................. 24,009,700 136,054,800 160,064,500
176 Bayside Plaza...................................... 4,108,200 23,424,400 27,532,600
177 Bixby Ranch........................................ 6,450,000 36,655,800 43,105,800
178 Centerside II...................................... 5,777,200 33,057,500 38,834,700
179 Commerce Park...................................... -- 14,855,700 14,855,700
180 Corporate 500 Centre............................... 20,100,000 114,845,400 134,945,400
181 Crossroads......................................... 2,400,000 13,631,000 16,031,000
182 Embarcadero Place.................................. 10,500,000 59,500,000 70,000,000
183 Exposition Centre.................................. 1,200,000 6,828,200 8,028,200
184 Golden Bear Center................................. 4,500,000 25,547,700 30,047,700
185 Island Corporate Center............................ 2,700,000 15,393,000 18,093,000
186 Janss Court........................................ 4,350,000 24,650,000 29,000,000
187 Lincoln Town Center................................ 4,402,900 25,003,000 29,405,900
188 Market Square...................................... 33,077,100 187,651,800 220,728,900
189 Norris Tech Center................................. 5,700,000 32,584,400 38,284,400
190 Norwest Center..................................... 39,045,000 221,255,000 260,300,000
191 One & Two ADP Plaza................................ 7,459,900 42,411,400 49,871,300
192 One & Two Corporate Center......................... 6,378,700 36,419,200 42,797,900
193 One Bay Plaza...................................... 8,642,400 49,284,400 57,926,800
194 One Lincoln Centre................................. 7,350,000 41,911,400 49,261,400
195 One Memorial Drive................................. 14,861,700 84,216,400 99,078,100
196 One Ninety One Peachtree Tower..................... 46,500,000 263,606,100 310,106,100
197 Peninsula Office Park.............................. 27,275,500 155,007,700 182,283,200
198 PeopleSoft Plaza................................... 7,038,800 39,999,700 47,038,500
199 Pruneyard Office Towers............................ 16,502,200 155,897,200 172,399,400
200 Seaport Centre..................................... 24,000,000 136,075,200 160,075,200
201 Seaport Plaza...................................... 10,132,000 31,895,000 42,027,000
202 Searise Office Tower............................... 4,379,700 24,846,300 29,226,000
DATE OF
ACCUMULATED CONSTRUCTION/ DATE DEPRECIABLE
DESCRIPTION DEPRECIATION RENOVATION ACQUIRED LIVES(2)
- ----------- ------------- ------------- ------------------ -----------
152 Computer Associates Tower.......................... (2,292,700) 1988 01/07/99 40
153 Texas Commerce Tower............................... (2,526,400) 1985 01/07/99 40
154 City Center Bellevue............................... (4,664,700) 1987 01/28/99 40
155 Prominence in Buckhead............................. (2,034,300) 1999 07/13/99 40
156 Prominence vacant land............................. -- N/A 07/13/99 N/A
157 Palo Alto Square................................... (2,603,200) 1971/1985 10/01/99 40
158 Metropoint II...................................... (837,300) 1999 04/10/00 40
159 Centerpointe III vacant land....................... -- N/A 05/23/00 N/A
160 10 Almaden......................................... (965,800) 1989 06/19/00 40
161 11 Canal Center.................................... (149,800) 1986 06/19/00 40
162 110 Atrium Place................................... (489,200) 1981 06/19/00 40
163 120 Montgomery..................................... (1,336,300) 1955 06/19/00 40
164 125 Summer Street.................................. (1,413,400) 1989 06/19/00 40
165 18301 Von Karman (Apple Building).................. (478,900) 1991 06/19/00 40
166 200 Galleria....................................... (792,100) 1985 06/19/00 40
167 201 California..................................... (812,700) 1980 06/19/00 40
168 222 Berkley Street................................. (1,963,900) 1991 06/19/00 40
169 429 Santa Monica................................... (193,500) 1982 06/19/00 40
170 500 Boylston Street................................ (2,992,700) 1988 06/19/00 40
171 527 Madison Avenue................................. (705,700) 1986 06/19/00 40
172 700 North Brand.................................... (481,800) 1981 06/19/00 40
173 99 Canal Center.................................... (313,600) 1986 06/19/00 40
174 Bay Park Plaza I & II.............................. (999,900) 1985-1998 06/19/00 40
175 Bayhill Office Center.............................. (1,842,400) 1982-1987 06/19/00 40
176 Bayside Plaza...................................... (315,300) 1985 06/19/00 40
177 Bixby Ranch........................................ (499,900) 1987 06/19/00 40
178 Centerside II...................................... (456,500) 1987 06/19/00 40
179 Commerce Park...................................... (203,600) 1977 06/19/00 40
180 Corporate 500 Centre............................... (1,506,300) 1986/1990 06/19/00 40
181 Crossroads......................................... (184,200) 1983 06/19/00 40
182 Embarcadero Place.................................. (805,700) 1984 06/19/00 40
183 Exposition Centre.................................. (93,300) 1984 06/19/00 40
184 Golden Bear Center................................. (345,400) 1986 06/19/00 40
185 Island Corporate Center............................ (209,900) 1987 06/19/00 40
186 Janss Court........................................ (333,800) 1989 06/19/00 40
187 Lincoln Town Center................................ (337,900) 1987 06/19/00 40
188 Market Square...................................... (2,539,000) 1990 06/19/00 40
189 Norris Tech Center................................. (450,700) 1984-1990 06/19/00 40
190 Norwest Center..................................... (2,996,200) 1988 06/19/00 40
191 One & Two ADP Plaza................................ (574,800) 1987-1989 06/19/00 40
192 One & Two Corporate Center......................... (499,600) 1985-1987 06/19/00 40
193 One Bay Plaza...................................... (676,100) 1979 06/19/00 40
194 One Lincoln Centre................................. (571,600) 1986 06/19/00 40
195 One Memorial Drive................................. (1,140,400) 1985 06/19/00 40
196 One Ninety One Peachtree Tower..................... (3,568,200) 1991 06/19/00 40
197 Peninsula Office Park.............................. (2,094,600) 1971-1998 06/19/00 40
198 PeopleSoft Plaza................................... (543,100) 1984 06/19/00 40
199 Pruneyard Office Towers............................ (2,100,100) 1971-1999 06/19/00 40
200 Seaport Centre..................................... (1,842,000) 1988 06/19/00 40
201 Seaport Plaza...................................... -- 2000 06/19/00 40
202 Searise Office Tower............................... (336,400) 1975 06/19/00 40
100
ENCUMBRANCES
DESCRIPTION NOTES LOCATION AT 12/31/00 NOTES
- ----------- ------ -------- --------------- ------
203 Sixty State Street................................. Boston, MA (80,586,000)
204 Tower 56........................................... New York, NY (23,249,600)
205 TransPotomac Plaza 5............................... Alexandria, VA --
206 U.S. Bancorp Center................................ Minneapolis, MN --
207 U.S. West Dex Center............................... Murray, UT --
208 Warner Park Center................................. Woodland Hills, CA --
209 Washington Mutual Tower............................ Seattle, WA (78,192,200)
210 Wells Fargo Center................................. Sacramento, CA --
211 Wilshire Palisades................................. Santa Monica, CA (27,724,500)
212 Sunset North....................................... Bellevue, WA --
213 Two Lafayette Centre............................... Washington, DC --
214 World Trade Center East............................ (6) Seattle, WA --
---------------
Subtotal Office Properties........................... $(2,883,624,600)
---------------
215 Parkside Tower..................................... (12) Foster City, CA $ --
216 E.J. Randolph II................................... (12) McLean, VA --
---------------
Subtotal Development Properties...................... $ --
---------------
Parking Facilities:
1 203 North LaSalle Garage............................ (3) Chicago, IL (17,053,300) (13)
2 Theatre District Garage............................. (3) Chicago, IL (15,122,700) (13)
3 Adams-Wabash Garage................................. Chicago, IL --
4 517 Marquette Garage................................ Minneapolis, MN --
---------------
Subtotal -- Parking Facilities....................... $ (32,176,000)
---------------
Management Business -- Furniture, Fixtures and
Equipment........................................... $ --
---------------
Investment in Real Estate............................ $(2,915,800,600) (14)
===============
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
-------------------------------- -------------------------
BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS
- ----------- -------------- --------------- ---------- ------------
203 Sixty State Street................................. -- 256,000,000 -- 1,002,100
204 Tower 56........................................... 6,852,700 38,831,700 -- 276,100
205 TransPotomac Plaza 5............................... 2,325,000 13,175,000 -- 193,100
206 U.S. Bancorp Center................................ 16,500,000 93,514,400 -- 4,150,300
207 U.S. West Dex Center............................... 1,725,000 9,775,000 -- 2,000
208 Warner Park Center................................. 1,305,000 7,395,000 -- 5,800
209 Washington Mutual Tower............................ 51,000,000 289,000,000 -- 163,100
210 Wells Fargo Center................................. -- 123,794,600 -- 124,400
211 Wilshire Palisades................................. 9,762,900 55,323,300 -- 13,700
212 Sunset North....................................... 16,949,900 78,674,700 -- 11,851,500
213 Two Lafayette Centre............................... 2,641,700 26,675,600 -- 155,300
214 World Trade Center East............................ -- 38,567,100 -- 173,000
-------------- --------------- ---------- ------------
Subtotal Office Properties........................... $2,000,856,800 $14,698,144,800 $4,024,000 $675,153,000
-------------- --------------- ---------- ------------
215 Parkside Tower..................................... $ 36,000,000 $ 8,406,300 $ -- $19,765,600
216 E.J. Randolph II................................... 5,770,000 -- -- 480,100
-------------- --------------- ---------- ------------
Subtotal Development Properties...................... $ 41,770,000 $ 8,406,300 $ -- $20,245,700
-------------- --------------- ---------- ------------
Parking Facilities:
1 203 North LaSalle Garage............................ 4,213,800 37,924,000 -- 1,192,700
2 Theatre District Garage............................. 3,752,900 33,751,600 -- 441,700
3 Adams-Wabash Garage................................. 2,525,000 22,725,300 -- 315,600
4 517 Marquette Garage................................ 4,538,000 14,862,100 -- 6,600
-------------- --------------- ---------- ------------
Subtotal -- Parking Facilities....................... $ 15,029,700 $ 109,263,000 $ -- $ 1,956,600
-------------- --------------- ---------- ------------
Management Business -- Furniture, Fixtures and
Equipment........................................... $ -- $ -- $ -- $44,529,700
-------------- --------------- ---------- ------------
Investment in Real Estate............................ $2,057,656,500 $14,815,814,100 $4,024,000 $741,885,000
============== =============== ========== ============
GROSS AMOUNT CARRIED AT CLOSE
OF PERIOD 12/31/2000
--------------------------------
BUILDING AND
DESCRIPTION LAND IMPROVEMENTS TOTAL(1)
- ----------- -------------- --------------- ---------------
203 Sixty State Street................................. -- 257,002,100 257,002,100
204 Tower 56........................................... 6,852,700 39,107,800 45,960,500
205 TransPotomac Plaza 5............................... 2,325,000 13,368,100 15,693,100
206 U.S. Bancorp Center................................ 16,500,000 97,664,700 114,164,700
207 U.S. West Dex Center............................... 1,725,000 9,777,000 11,502,000
208 Warner Park Center................................. 1,305,000 7,400,800 8,705,800
209 Washington Mutual Tower............................ 51,000,000 289,163,100 340,163,100
210 Wells Fargo Center................................. -- 123,919,000 123,919,000
211 Wilshire Palisades................................. 9,762,900 55,337,000 65,099,900
212 Sunset North....................................... 16,949,900 90,526,200 107,476,100
213 Two Lafayette Centre............................... 2,641,700 26,830,900 29,472,600
214 World Trade Center East............................ -- 38,740,100 38,740,100
-------------- --------------- ---------------
Subtotal Office Properties........................... $2,004,880,800 $15,373,297,800 $17,378,178,600
-------------- --------------- ---------------
215 Parkside Tower..................................... $ 36,000,000 $ 28,171,900 $ 64,171,900
216 E.J. Randolph II................................... 5,770,000 480,100 6,250,100
-------------- --------------- ---------------
Subtotal Development Properties...................... $ 41,770,000 $ 28,652,000 $ 70,422,000
-------------- --------------- ---------------
Parking Facilities:
1 203 North LaSalle Garage............................ 4,213,800 39,116,700 43,330,500
2 Theatre District Garage............................. 3,752,900 34,193,300 37,946,200
3 Adams-Wabash Garage................................. 2,525,000 23,040,900 25,565,900
4 517 Marquette Garage................................ 4,538,000 14,868,700 19,406,700
-------------- --------------- ---------------
Subtotal -- Parking Facilities....................... $ 15,029,700 $ 111,219,600 $ 126,249,300
-------------- --------------- ---------------
Management Business -- Furniture, Fixtures and
Equipment........................................... $ -- $ 44,529,700 $ 44,529,700
-------------- --------------- ---------------
Investment in Real Estate............................ $2,061,680,500 $15,557,699,100 $17,619,379,600
============== =============== ===============
DATE OF
ACCUMULATED CONSTRUCTION/ DATE DEPRECIABLE
DESCRIPTION DEPRECIATION RENOVATION ACQUIRED LIVES(2)
- ----------- ------------- ------------- ------------------ -----------
203 Sixty State Street................................. (3,468,900) 1979 06/19/00 40
204 Tower 56........................................... (530,700) 1983 06/19/00 40
205 TransPotomac Plaza 5............................... (179,100) 1983 06/19/00 40
206 U.S. Bancorp Center................................ (1,467,500) 2000 06/19/00 40
207 U.S. West Dex Center............................... (132,400) 1985 06/19/00 40
208 Warner Park Center................................. (100,400) 1986 06/19/00 40
209 Washington Mutual Tower............................ (3,916,500) 1988 06/19/00 40
210 Wells Fargo Center................................. (1,683,400) 1987 06/19/00 40
211 Wilshire Palisades................................. (749,200) 1981 06/19/00 40
212 Sunset North....................................... (1,801,800) 1999 06/30/00 40
213 Two Lafayette Centre............................... (308,500) 1985 07/11/00 40
214 World Trade Center East............................ (282,500) 2000 09/08/00 40
-------------
Subtotal Office Properties........................... $(962,802,400)
-------------
215 Parkside Tower..................................... $ -- N/A 06/19/00 N/A
216 E.J. Randolph II................................... -- N/A 12/19/97 N/A
-------------
Subtotal Development Properties...................... $ --
-------------
Parking Facilities:
1 203 North LaSalle Garage............................ (3,388,600) 1985 06/09/95 40
2 Theatre District Garage............................. (2,770,200) 1987 06/09/95 40
3 Adams-Wabash Garage................................. (1,967,800) 1990 08/11/97 40
4 517 Marquette Garage................................ (603,800) 1999 04/01/99 40
-------------
Subtotal -- Parking Facilities....................... $ (8,730,400)
-------------
Management Business -- Furniture, Fixtures and
Equipment........................................... $ (6,522,200)
-------------
Investment in Real Estate............................ $(978,055,000)
=============
101
- ---------------
(1) The aggregate cost for Federal Income Tax purposes as of December 31, 2000
was approximately $12.2 billion.
(2) The life to compute depreciation on building is 40 years. The life to
compute depreciation on building improvements is 4-40 years.
(3) The date acquired represents the date these Properties were acquired by
Equity Office Predecessors. The acquisition of the Properties, or interest
therein, by EOP Partnership from Equity Office Predecessors in connection
with the Consolidation on July 11, 1997, was accounted for using the
purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16. Accordingly, the assets were recorded by EOP
Partnership at their fair values.
(4) This Property contains 106 residential units in addition to 224,405 square
feet of office space.
(5) This Property contains 161 residential units in addition to 187,573 square
feet of office space.
(6) These properties were previously under development and have been placed
into service during 2000.
(7) These loans are subject to cross default and collateralization provisions.
(8) The Prudential Portfolio consists of six Office Buildings located in
Philadelphia, PA, Dallas, TX, and Houston, TX. These Office Buildings were
constructed between 1969 and 1984.
(9) These loans are subject to cross default and collateralization provisions.
(10) These loans are subject to cross default and collateralization provisions.
(11) These loans are payable to Stichting Pensioenfonds voor de Gezondheid,
Gaestelijke en Meatschappelljke Belangen and are subject to cross
collateralization and cross default provisions.
(12) These properties are in various development stages. During the development
period certain operating costs, including real estate taxes together with
interest incurred during the development stages will be capitalized.
(13) The encumbrance on the 203 North LaSalle Garage is also secured by a first
lien on the Theatre District Garage.
(14) The encumbrances at December 31, 2000 include a net discount (net of
accumulated amortization of approximately $1.0 million) of approximately
$17.8 million.
A SUMMARY OF ACTIVITY OF INVESTMENT IN REAL ESTATE AND ACCUMULATED
DEPRECIATION IS AS FOLLOWS:
The changes in investment in real estate for the years ended December 31,
2000, 1999 and 1998, are as follows:
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Balance, beginning of the period........... $13,202,539,900 $13,683,819,300 $11,041,014,100
Additions during period:
Acquisitions........................ 4,864,975,300 391,917,800 2,556,978,300
Improvements........................ 293,710,600 297,495,500 207,093,000
Deductions during period:
Properties disposed of (1).......... (722,827,600) (1,170,692,700) (121,266,100)
Write-off of fully depreciated
assets which are no longer in
service.......................... (19,018,600)
--------------- --------------- ---------------
Balance, end of period................... $17,619,379,600 $13,202,539,900 $13,683,819,300
=============== =============== ===============
102
The changes in accumulated depreciation for the years ended December 31,
2000, 1999 and 1998, are as follows:
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------- -----------------
Balance, beginning of the period............ $(630,386,600) $(352,258,800) $ (64,695,100)
Additions during period:
Depreciation......................... (399,768,100) (339,751,400) (291,213,400)
Deductions during period:
Properties disposed of (1)........... 33,081,100 61,623,600 3,649,700
Write-off of fully depreciated assets
which are no longer in service.... 19,018,600
------------- ------------- -------------
Balance, end of period.................... $(978,055,000) $(630,386,600) $(352,258,800)
============= ============= =============
(1) The 2000 and 1999 Properties disposed of amounts include approximately $.4
billion and $1.1 billion, respectively, of disposed assets related to the
partial sale of interests in various Properties. The related accumulated
depreciation on the partially sold Properties was approximately $18.7
million and $58.5 million, respectively.